2/7/2012. City Council City Hall Wilmington, North Carolina Dear Mayor and Councilmembers:

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1 ITEM R2 OFFICE OF THE CITY MANAGER (910) FAX(910) TDD (910) /7/2012 City Council City Hall Wilmington, North Carolina Dear Mayor and Councilmembers: The attached resolution authorizes the City Manager to execute a Memorandum of Understanding (MOU) with Harmony Hospitality, Inc. This pertains to the eventual sale of City-owned real property adjacent to the Downtown Convention Center for the construction of a privately funded hotel by Harmony Hospitality. In August 2011, the City Council authorized exclusive negotiations with Harmony Hospitality, Inc. who were deemed the most responsive to the City s public solicitation of offers to purchase the site. Harmony represents in this MOU the construction and operation of a 194 room, full service, "Sheraton", "Embassy Suites", or other similar brand Hotel as mutually agreed upon by Harmony and the City with appropriate amenities. The MOU also outlines the project scope, the timeline for completion of all due diligence (seven months) for the property transaction, the requirements for finalizing financing and various other requirements. The business provisions in the attached MOU have been reviewed and endorsed by the business consultant (Strategic Advisory Group (SAG)) retained by the City for this purpose and City staff. The appropriateness of the language included has been approved by the City Attorney. However, our outside counsel s comments are forthcoming and any changes to the language will be shared with you before our meeting. Subsequent to the Council s approval of the execution of the MOU with Harmony, we will work with them and SAG to prepare a mutually agreeable Purchase and Development Agreement that will contain all things necessary for execution of the property sale and commencement of construction. Passage of the attached Resolution is recommended. Respectfully submitted, Sterling B. Cheatham, City Manager R2-1

2 Resolution City Council City of Wilmington North Carolina Introduced By: Sterling B. Cheatham, City Manager Date: 2/7/2012 Resolution Authorizing the execution of a Memorandum of Understanding with Harmony Hospitality, Inc. LEGISLATIVE INTENT/PURPOSE: WHEREAS, City has publicly solicited proposals for the purchase of City-owned land adjacent to the Downtown Wilmington Convention Center; and WHEREAS, Harmony Hospitality, Inc. was determined to be the most responsive responder; and WHEREAS, City staff and the consultant have been working with Harmony Hospitality, Inc. to further outline the details associated with a property sale and the private development and operation of a full service hotel on the site adjacent to the Downtown Convention Center; and WHEREAS, the attached Memorandum of Understanding details the required details and is ready for adoption. THEREFORE, BE IT RESOLVED: THAT, City Council authorizes the City Manager to execute a Memorandum of Understanding (MOU) with Harmony Hospitality, Inc. related to the eventual sale of City-owned real property adjacent to the Downtown Convention Center for the construction of a privately funded hotel. Adopted at a meeting on 2012 ATTEST: Bill Saffo, Mayor APPROVED AS TO FORM: Penelope Spicer-Sidbury, City Clerk City Attorney R2-2

3 MEMORANDUM OF UNDERSTANDING: W ILMINGTON C ONVENTION C ENTER H OTEL This MEMORANDUM OF UNDERSTANDING ( MOU ), executed as of the 8th day of February, 2012, by and between the CITY OF WILMINGTON, NORTH CAROLINA, a public body corporate and politic ( City ) and HARMONY Hospitality, INC., a Virginia corporation ( Developer or Harmony ), for the development of an approximate 194 room convention hotel ( Project or Hotel as further described in Paragraph D below) in response to the City s Request for Qualifications/Proposals No. S1 031: Solicitation for Development, Construction and Operation of a New Convention Center Hotel dated March 7, The following terms and conditions are intended as an outline of the material issues regarding the proposed development and operation of the Project. A. GENERAL CONDITIONS 1. This MOU is expressly conditioned upon and subject to the parties hereto finalizing and entering into a mutually satisfactory understanding and definitive written agreement as to all aspects of the proposed transaction. Accordingly, except for Paragraph F.6, F.7, Paragraph K., and the last sentence of this Paragraph A.1, this MOU shall not be binding upon the parties hereto in any way except to the extent it reflects the intent to proceed with and negotiate in good faith a definitive written agreement (the Purchase and Development Agreement or Development Agreement or PDA ) with respect to the business terms and conditions herein contained, or as otherwise agreed to by the parties. This MOU shall give Harmony (as later defined) the exclusive seven (7) month right from the date hereof to negotiate and attempt to finalize the Purchase and Development Agreement among Harmony and the City addressing the purchase of land from the City and construction of a convention center hotel. 2. This MOU identifies the current understanding of the parties, and all parties agree that time is of the essence. B. PURPOSE 1. This MOU is entered into with the understanding by all parties that the primary reason for City s participation in the Project is to meet the public purpose of maximizing the community benefit of the Wilmington Convention Center ( Center ). The community benefit can be maximized in part by the development of an adjacent, full service convention hotel which will enhance the marketability and I Page 1 of 18 R2-3

4 utilization of the Center, generate additional hotel occupancy taxes, and increase the economic benefits generated by a strong visitor industry in and around Wilmington. C. PARTIES 1. Developer. The Project Developer will include Harmony Hospitality, Inc. and/or any affiliate or parent company thereof, comprising an integrated development and operating organization that specializes in real estate assets including hotels and resorts ( Developer ). Developer s headquarters are located at 1300 Diamond Springs Road, Suite #204, Virginia Beach, Virginia, The City recognizes and agrees that obligations and/or agreements of the Harmony may be entered into or fulfilled by a single purpose hotel ownership entity ( Hotel Owner ) to be wholly or partly owned by Harmony Hospitality, Inc. or Harmony Investments Inc. and /or the principals thereof, but Harmony or an affiliate thereof will be the Manager of such Hotel Owner and manage development of the Project. Harmony, along with the following, shall be hereafter known together Project Team: a. Developer/Owner: Harmony Hospitality, Inc. b. Architect: Becker Morgan Group c. General Contractor: Clancy & Theys d. Construction Consultant: Galloway Corporation e. Hotel Operator: Harmony Hospitality, Inc. f. Franchisor: Starwood Hotels and Resorts or Hilton Hotels and Resorts Harmony will have the right to substitute members of the Project Team provided Harmony remains the Developer and Operator for the Project and any change in Franchisor is subject to mutual approval as provided below. 2. City. The City of Wilmington, North Carolina, with all authority and decisions made via the City Council. D. THE PROJECT 1. The Project. The Project shall consist of a full service Hotel contemplated to include not less than 194 rooms and suites, approximately 6,000 square feet of conference and banquet space, a three meal restaurant, a pool and an exercise room, grass rooftop areas, pool bar and sundeck, large expanses of glass at the appropriate hotel levels to capture panoramic views of the riverwalk and river, as well as other facilities and amenities consistent with similar full service convention center hotels. The Hotel shall initially be branded and operated as a I Page 2 of 18 R2-4

5 Sheraton, Embassy Suites or other similar brand as mutually agreed upon by Harmony and the City. The Project shall be designed and constructed in accordance with the City s Land Development Code ( LDC ) regulations, reasonably consistent with the architecture, streetscape and the historic character of the adjacent area and downtown Wilmington, and shall be in accordance with the Declaration of Covenants, Conditions and Restrictions dated September 29, 2005 as described and attached as Appendix A., the Declaration of Covenants, Conditions and Restrictions for Wilmington Convention Center Subdivision dated March 6, 2009 as described and attached as Appendix B, and the Consent Judgment dated August 7, 2006 as attached as Appendix C. 2. Parking. Approximately 250 parking spaces at the existing and adjacent Convention Center Parking deck will be reserved for Hotel use and made available to Hotel via a garage parking agreement ( Garage Parking Agreement ) as described herein below. Such Garage Parking Agreement will address use by the City of surplus parking spaces not required by the Hotel from time to time and will also include provisions addressing the possible relocation of some or all of such parking spaces to another City parking facility that may be constructed in the future that offers similarly convenient access and parking for hotel guests and is approved by the Hotel Owner in its reasonable business discretion. E. PROJECT SITE 1. The Site. The project site for the Hotel ( Site ) is approximately 33,000 square feet and is owned and controlled by the City. The approximate boundaries of the Site are presented in Appendix D. 2. Known Site Conditions; Brownfields. To the best of the City s knowledge and belief, the Site requires no active environmental remediation. The Site is a designated Brownsfields site, and therefore, subject to such applicable laws, rules, regulations, and tax considerations. The relevant Brownsfields agreements are on record with the New Hanover County Registry at Book 5231, Page 634 for examination and review. F. PROJECT DEVELOPMENT 1. Development Schedule. As a condition precedent to the execution of a Development Agreement, Harmony will finalize or substantially complete a development schedule [ Development Schedule ] for the Project, subject to the approval of the City. The Development Schedule will include milestones, timelines or such other targeted measures to assure that the Project will be constructed and opened in a timely manner in accordance with the approved Development Schedule. The Development Schedule will address all project components, including but not I Page 3 of 18 R2-5

6 limited to those set forth below, reasonably necessary to complete the Project as agreed upon by the parties. a. Development Budget and Financing b. Franchise Commitment/Agreement and City Approval c. Project Design and City Approval d. Execution of Construction Contract e. Construction Schedule f. Management Agreement (as required) 2. Development Budget. Prior to the execution of a Development Agreement, Harmony will provide a development budget ( Development Budget ) that shall be categorized by (i) Land, Construction and FF&E Costs, (ii) Operations Costs, (iii) Legal, Financing and Closing Cost and will include without limitation, the cost of labor, equipment, supplies, materials, transportation, services, travel, furnishings, fixtures and equipment, insurance, taxes, permit fees, financing costs, pre opening costs, attorneys fees, developer s general overhead and all other costs of development within the categories set forth in the Development Budget (hereafter collectively referred to as Project Costs ). 3. Financing Plan. Hotel Owner will commit the financial resources necessary to construct and operate the Project, including but not limited to private equity and/or private debt guaranties to fund Project Costs so that delivery of the Project is in accordance with the Development Schedule. Prior to the Closing of the Land Conveyance, Harmony will provide the City with evidence of sufficient financing (which may be provided through a combination of traditional private debt financing, private equity/mezzanine financing and owner equity from the members of Hotel Owner) to fund all Project Costs. In executing this MOU, Harmony represents its understanding of the current debt capital markets and the typical lender requirements related to guarantees. Harmony hereby acknowledges and agrees, and it and its principals are willing and able to provide a personal guarantee of the Private Debt Financing and agree to provide such guarantees if required by the Hotel Construction Lender. The City acknowledges that Hotel Owner s lenders will require lender protection agreements that include the right to cure any nonperformance by the Hotel Owner and other protections, and the City agrees to reasonably cooperate with Harmony and the Hotel Owner in order to satisfy the reasonable requirements of such lenders. I Page 4 of 18 R2-6

7 4. Franchise Commitment/Agreement. Prior to the Closing of the Land Conveyance, Hotel Owner will enter into and provide the City with a copy of a Franchise Agreement with a Hotel Franchisor as described in Section D.1 of this MOU. The Franchise Agreement shall state that Hotel Owner shall maintain the Project in full compliance with the brand standards required by the Hotel Franchisor. 5. Project Design. Harmony and City acknowledge that design of the Project has not been completed. Harmony agrees to work with City to develop and implement a design review process that will provide City and its professional staff input into the design process, including roundtable meetings at the schematic phase, at 50% design development, at 100% design development, at 90% construction document stage, and at 98% construction document stage. City shall have the right to review and approve the plans and specifications for the Project, said approval by City not to be unreasonably withheld or delayed. 6. Development Costs Escrow. Promptly following execution of this MOU, Harmony will deposit with a mutually approved escrow agent ( Escrow Agent ) the sum of One Hundred Fifty Thousand & 00/100 Dollars ($150,000.00) (the Escrowed Funds ) to be held in accordance with the terms of a mutually approved escrow agreement (the Escrow Agreement ) between Harmony, the City and such Escrow Agent. The Escrow Agreement will provide that the Escrowed Funds may be used for payment of all costs incurred by Harmony in connection with the Project, including due diligence costs, architects, engineers, attorneys and other professional fees, costs, fees and expenses incurred in connection with securing financing for the Project and other similar costs. The Escrow Agreement will provide for submission of invoices by Harmony to the Escrow Agent and City and disbursement by Escrow Agent in the absence of reasonable objection by the City. Harmony anticipates that Escrowed Funds will be sufficient to cover such predevelopment costs, but Harmony acknowledges and agrees that Harmony will be responsible for any costs incurred by Harmony for such pre development costs in excess of the Escrowed Funds. 7. Surety. Promptly following execution of this MOU, Harmony will deposit with a mutually approved escrow agent (who shall deposit same with a North Carolina based bank) the sum of One Hundred Thousand & 00/100 Dollars ($100,000.00) (the Surety ). The parties acknowledge that Harmony s ability to proceed with the Project is contingent upon obtaining Franchisor approval for a full service hotel franchise for the Hotel and securing third party financing (through a combination of a traditional first deed of trust bank loan and secondary financing, such as equity financing through the EB5 U.S. Investment VISA Program or other sources) in an amount equal to approximately seventy five percent (75%) of the Project Costs. The Surety shall be refunded to Harmony in the event that Harmony, after good faith efforts within the seven month exclusive period granted by this MOU, is (i) unable to obtain Franchisor approval after attempting to obtain such I Page 5 of 18 R2-7

8 approval from no less than two full service hotel franchisors, or (ii) unable to secure the necessary third party financing for the Project. In the event that Harmony gains Franchisor approval and is able to secure the necessary third party financing for the Project but does not deliver a completed financing and development package for the Hotel to the City by the end of the seven month period, the Surety shall be paid to the City as liquidated damages. G. FORCE MAJEURE For purposes of this MOU, Force Majeure shall mean and refer to strikes, lockouts, labor trouble, labor shortages, inability to procure materials, unforeseen restrictive governmental laws or regulation or other causes without fault and beyond the control of Harmony. If a party asserts Force Majeure as a reason for failure to perform the party s obligation, then the nonperforming party must prove that the party took reasonable steps to minimize delay or damages caused by forseeable events, that the party substantially fulfilled all non excused obligations, and that the other party was timely notified of the likelihood or actual occurrence of an event described in this section. H. EXECUTION OF CONSTRUCTION CONTRACT Hotel Owner, prior to Closing, agrees to enter into a construction contract providing for the construction of the Project diligently and without interruption to completion in a good and workmanlike manner, free and clear of all liens in accordance with the Development Schedule, subject only to events of Force Majeure. Hotel Owner shall obtain and maintain, or cause to be maintained, at all times, insurance with respect to the construction and development of the Project. I. LAND CONVEYANCE 1. Price. Subject to the terms and conditions of the Purchase and Development Agreement, Hotel Owner shall purchase the aforementioned Site from the City at a cost of $17.54 per square foot. 2. Timing. The parties will consummate the land conveyance in accordance with the Development Schedule; provided that all conditions precedent to Closing have been fulfilled. 3. Buy Back. The Closing documents will provide that in the event the Project is terminated for any reason after the transfer of Site ownership to Hotel Owner, the City will have the right at its sole discretion to re purchase the Site and all existing improvements, subject to the rights of the Project lenders. The method for determining the purchase price to be paid will be agreed upon by the parties and I Page 6 of 18 R2-8

9 set forth in the Closing documents; however, the parties agree that the component of the purchase price attributable to the Site will be the same price for the Site paid by Hotel Owner to City pursuant to Paragraph I.1 above. J. OTHER MATERIAL TERMS AND CONDITIONS The parties agree to identify and negotiate all other material terms and conditions of the proposed transaction between the parties in the period between the execution of this MOU and the Development Agreement. Such terms and conditions may include, without limitation, Closing Conditions for the Land Conveyance, Events of Default and Remedies, Insurance Requirements, Representations and Warranties, and Miscellaneous Terms and Conditions. K. SCHEDULE OF MILESTONE TARGETS Following execution of this MOU by all parties, the parties shall pursue completion and opening of the Project in accordance with the following: 1. Franchise Application. Harmony shall submit a completed application to begin the Franchise approval process within sixty (60) days following execution of this MOU. 2. Due Diligence/Financing. As described in Paragraph F. above, Harmony will have seven (7) months to obtain commitments for the financing necessary for the Project. During this seven (7) month period, Harmony shall conduct its title, survey, environmental and other due diligence investigations with respect to the Project, work in conjunction with the City on the design of the Project and pursue all necessary permits and approvals for the Project, as well as Franchise approval. In addition, during this seven (7) month period, Harmony and City will negotiate and finalize the Purchase and Development Agreement and any easements or other agreements required in connection with the construction and operation of the Project. 3. Purchase and Development Agreement. Upon conclusion of the seven (7) month due diligence/financing period, the parties will execute the mutually agreed upon Purchase and Development Agreement. 4. Closing. The Closing on the Land Acquisition will occur within approximately two (2) months after expiration of the seven (7) month Due Diligence/Financing period and execution of the Purchase and Development Agreement. I Page 7 of 18 R2-9

10 5. Construction. Construction will begin promptly after the Closing and Harmony anticipates a construction schedule for the Project of nineteen (19) months after Closing based on estimates from its contractors. 6. Project Completion. Harmony anticipates the Project to open on or before nineteen (19) months after Closing. L. GENERAL DEVELOPER OBLIGATIONS 1. Hotel Owner will finance, develop, construct, own, maintain and operate the Hotel on the Site at its cost and expense, and the Hotel will be operated as a Sheraton, Embassy Suites or similar full service brand, consistent with all applicable brand standards ( Standard of Operation ) and in accordance with the Declaration of Covenants, Conditions and Restriction for Wilmington Convention Center Subdivision, as described and attached in Appendix B. 2. Hotel Owner will be responsible for all construction and development costs for any physical connections to the Center and/or Center parking deck. 3. Harmony will be responsible for securing all permits, including environmental, building or other such regulatory permits, as required for construction of the Project. City will be responsible for any subdivision necessary to convey the Site to Hotel Owner, and City represents that the Site is currently zoned to allow construction and operation of the Project thereon. 4. Harmony and City will enter into a Garage Parking Agreement incorporating the terms outlined in Paragraph B.2. above. Such Garage Parking Agreement will provide for the Hotel Owner to pay City for parking used at the prevailing market rate at the time, escalated with future increases consistent with market pricing. The City represents that the current prevailing market rate is $9.00 per space used per day. 5. The Hotel will be subject to all usual property, occupancy, and other taxes applicable to other hotel properties in Wilmington, North Carolina. 6. Harmony will not assign any rights or obligations under this MOU or the Development Agreement to any party other than Hotel Owner, nor shall Hotel Owner sell or otherwise transfer the Hotel prior to completion and opening thereof without prior City approval, not to be unreasonably delayed, conditioned or withheld. Subsequent to completion and opening of the Hotel, the Hotel may only be sold to an experienced full service hotel operator who will operate the Hotel for the same Franchise then in effect or other comparable full service hotel brand. The City I Page 8 of 18 R2-10

11 will work with Project lenders to reach mutually agreeable terms for the applicability of such restrictions to any foreclosure or any sale to or by any first mortgagee lender for the Project. 7. Harmony will throughout the design, construction and operation of the Project seek to minimize the impact on the stormwater system installed by the City during the construction of the Center. Harmony will be responsible for securing and the cost of securing any modifications required to existing stormwater permits required for the Project but in no event shall jeopardize the City s existing permit. Harmony will pay to the City the Project s share of capacity and annual maintenance costs of City sand filters based on its percentage of impervious surface area. 8. Harmony will be responsible for all costs of private and public roadways and other improvements required for the Project. 9. Harmony will be responsible for securing agreements and compensating any parties adjacent to the Site in the event that any encroachments, easements or other like access is required for the construction and operation of the Project. City will cooperate in all legal and customary ways with Harmony in connection with Harmony s obligations under the foregoing Paragraphs 8 and Harmony will enter into a Room Block Agreement ( RBA ) as proposed in Appendix E or as otherwise agreed upon by the Parties. M. GENERAL CITY OBLIGATIONS 1. The City will commit to the Harmony s right to use 250 parking spaces in the Center s parking deck or any other City parking facility that may be constructed in the future that offers similarly convenient access and parking for hotel guests in accordance with terms and conditions of the Garage Parking Agreement. 2. City will provide a timely review of Developer s plans, drawings, and other related submissions, and will provide cooperation to implement a timely design and construction period for the Project. 3. City will cooperate with Harmony to provide easements for connection access to the Riverwalk, the Center parking deck, the north entry to the Site, the service driveway, and other areas as reasonably required for the Project. 4. The City will cooperate with Harmony to assure compliance with the City s LDC as required for the Project. I Page 9 of 18 R2-11

12 5. City will assist Harmony in all legal and customary ways with any regulatory permits for the Project if required, to the extent practical or possible. 6. The City will provide reasonable and lawful cooperation with Harmony and Hotel Owner to satisfy the reasonable requirements of the Project lender, including entering into a lender protection agreement as provided above. 7. The City will be responsible for any subdivision necessary to convey the Site to Hotel Owner as a separate legal parcel. N. STATEMENT OF INTENT The undersigned acknowledge and agree that the Project terms described in this MOU are preliminary statements of the intent of the parties and are subject to any and all necessary City approval procedures, and definitive documents setting forth the complete agreement and understanding of the parties in form and content satisfactory to the City and Developer. O. RELEASE OF INFORMATION The parties acknowledge the information relating to this Project is subject to disclosure under the North Carolina Public Records Act, Chapter 132 of the North Carolina General Statutes, excepting any such information that is deemed to be confidential or proprietary as defined in NCGS It is understood, however, that nothing in this Agreement shall preclude either party from discussing the substance or any relevant details of the transactions contemplated in this Agreement with any of its attorneys, accountants, professional consultants or potential lenders, as the case may be, or prevent the holding of public City Council meetings in compliance with applicable laws. This Memorandum of Understanding is entered into by the parties through their duly and respective authorized agents and/or representatives. I Page 10 of 18 R2-12

13 STATE OF NORTH CAROLINA COUNTY OF NEW HANOVER DEVELOPER HARMONY HOSPITALITY, INC. By: Page S. Johnson, II, President I,, a Notary Public, for said County and State do hereby certify that, President of Harmony Hospitality, Inc, a Virginia Corporation, personally came before me this day and acknowledged that the due execution of the foregoing instrument. Witness my hand and official seal, this the day of, 20. My Commission Expires: Notary Public CITY OF WILMINGTON By: Bill Saffo, Mayor STATE OF NORTH CAROLINA COUNTY OF NEW HANOVER I,, a Notary Public for said County and State, do hereby certify that Bill Saffo, Mayor personally appeared before me this day and acknowledged the due execution of the foregoing instrument. Witness my hand and official seal, this the day of, 20. My Commission Expires: Notary Public I Page 11 of 18 R2-13

14 APPROVED AS TO FORM: WILLIAM E. WOLAK INTERIM CITY ATTORNEY FINANCE OFFICER S CERTIFICATION STATEMENT THIS INSTRUMENT HAS BEEN PRE AUDITED IN THE MANNER REQUIRED BY THE LOCAL GOVERNMENT BUDGET AND FISCAL CONTROL ACT. DEBRA H. MACK, CLGFO FINANCE DIRECTOR DATE: I Page 12 of 18 R2-14

15 APPENDIX A: DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR CONVENTION CENTER TRACT (SEE ATTACHMENT) I Page 13 of 18 R2-15

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29 APPENDIX B: DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR CONVENTION CENTER SUBDIVISION (SEE ATTACHMENT) I Page 14 of 18 R2-29

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36 APPENDIX C: CONSENT JUDGMENT (SEE ATTACHMENT) I Page 15 of 18 R2-36

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41 APPENDIX D: SITE MAP 33,000+/- SF (footprint to be verified) I Page 16 of 18 R2-41

42 APPENDIX E: ROOM BLOCK AGREEMENT (TO BE NEGOTIATED) I Page 17 of 18 R2-42

43 Example - How Room Block Would Work: HOW FAR IN ADVANCE IS EVENT REQUESTING TO BOOK? More than 24 mos. 12 to 24 mos. Public s Rights (City, Center, and/or CVB or its assigns) Less than 12 mos. Public can require Hotel to provide the greater of 77% of all rooms and suites or 150 rooms or suites subject to attrition. A Public can request from Hotel an increase in rooms subject to Hotel s sole discretion. Public has this right 14 days per month or more if the last group booked for the month under this agreement increases the total to more than 14. Hotel may require a room rate for any rooms blocked that is not greater than the Hotel s average room rate for the same month of the prior year plus 5% per year. B Public may ask for lower rates and Hotel may approve at its sole discretion. Public can require Hotel to provide 60% of all rooms and suites subject to attrition. A Public can request from Hotel an increase in rooms subject to Hotel s sole discretion. Public has this right 10 days per month. Hotel may require a room rate for any rooms blocked that is not greater than the Hotel s average room rate for the same month of the prior year plus 5% per year. B Public may ask for lower rates and Hotel may approve at its sole discretion. Can require Hotel to provide 50% of all rooms and suites or subject to attrition A, but only to the extent that rooms are available. Hotel room rates for any rooms blocked will be established by the Hotel Owner based on existing market conditions. Hotel Owner s Rights (Harmony and/or its approved assigns) Will hold rooms available for qualified City-Wide event block. [City-Wide defined as an event demonstrated to use 300 or more peak-night rooms in the market area]. Timing: Hotel and Public have ability to utilize the terms of the RBA on a firstcome, first-served basis. Must hold rooms available for any Citywide event block. Timing: Can book up to 20 nights per month for Hotel Events, provided Public does not have a City-Wide Event booked on a definite or tentative basis for which it may require a block. Must provide room block if rooms are available. Timing: Hotel does not have to hold rooms available for any Public requested block. A) If blocked rooms are not guaranteed 30 days prior to arrival, all rooms will be released and available on a first come first served basis. Bookings will be governed by hotel contract including industry-reasonable attrition clauses. B) The initial Hotel room rate for this RBA shall be based upon the Hotel pro forma projections for the first year of operations. In periods of rapidly changing industry room rates, the parties will cooperate in adjusting the base rates. I Page 18 of 18 R2-43