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HomeMy WebLinkAbout7/7/2004 - STAFF REPORTS (26) DATE: July 7, 2004 MEMO TO: City Council FROM: Director of Finance & Treasurer RE: Assignment of Wyndham Hotel Land Lease RECOMMENDATION: It is recommended that the Agency approve the assignment of the land sublease underlying the Wyndham Hotel to Capital Lodging Palm Springs, LLC, including the related guarantee of sublease BACKGROUND: The Wyndham Hotel is built on Indian land subleased by the City of Palm Springs to the eleven limited partnerships which own the hotel. The City bought the Master Lease from SENCA Corporation in 1989. The hotel is in the process of being sold to Capital Lodging Palm Springs, a limited partnership. The attached resolution consents to the assignment of the land lease to the new owner. We believe all of the terms of the original lease will continue, and there is no financial impact to the City The sellers have agreed to pay for the City's legal and administrative expenses. Capital Lodging Palm Springs LLC is a wholly owned subsidiary of Capital Lodging, a Real Estate Investment Trust (REIT) currently being formed. The company has 34 hotels in 14 states, with a total of 6829 rooms. In 2003, it had gross operating revenue of over $163 million. The City's primary concern is that the annual land rent, approximately $730,000, is paid to the City each year on time. Capital Lodging is guaranteeing the payment. We had asked Calvin Hollis of Keyser Marston Associates, Inc. to review the financial reports of Capital Lodging. His conclusion is that the company has substantial real estate assets to support the guarantee, and that the REIT offering, by reducing debt, will provide additional liquidity The attached resolution and assignment of sublease, including the guarantee of sublease, were prepared by the City Attorney's office.Thomas M. Kanarr Director of Finance & Treasurer Approved David H. Ready City Manager Attachment: - Assignment of sublease UNITED STATES DEPARTMENT OF THE INTERIOR BUREAU OF INDIAN AFFAIRS PALM SPRINGS FIELD OFFICE APPROVAL OF ASSIGNMENT OF SUBLEASE The within Assignment of Sublease between AP/APH PALM SPRINGS, L.P., a Delaware limited partnership and Capital Lodging Palm Springs, LLC, a Delaware limited liability company, consisting of 6 pages and attached Exhibits A and B, together with aclutowledgement pages, and including the Pledge as described in Recital E. thereto, is hereby approved. Dated: Superintendent Palm Springs Field Office Bureau of Indian Affairs Pursuant to the authority delegated by 209 DM S, Secretary's Order Nos. 3150 and 3177,and 10 BIAM Bulletin 13, as amended,and Sacramento Area Office Redelegation Order No. 1 (43 F.R. 30131). I-LA/764576.6 -7/71�� Assignment of Sublease This ASSIGNMENT OF SUBLEASE (this "Agreement" is made as of the 7 h day of July 2004, by and among AP/APH PALM SPRINGS, L.P., a Delaware limited partnership ("Assi nor"), Capital Lodging Palm Springs, LLC, a Delaware limited liability company ("Assi nee") and THE CITY OF PALM SPRINGS, a municipal corporation (the"City"). Recitals A. The City is the current holder of the lessee's interest under that certain Business Lease No. PSL-315 dated February .29, 1984 between the 18 individuals named therein as lessor (collectively, the "Ground Lessor") and Shale Energy Corporation of America, a Texas corporation, as lessee, a memorandum of which lease was recorded on December 30, 1985 as Instrument No. 293741 in the Official Public Records of Riverside County, California, together with that certain activation letter dated May 1, 1984, executed by Shale Energy Corporation of America (as approved by the United States Department of the Interior, Bureau of Indian Affairs (the "BIA') pursuant to an approval dated July 23, 1984, which approval was modified by a Modification of Approval of Option dated August 20, 1984) and that certain Amendment to Lease dated as of October 28, 1998 between The United States Secretary of the Interior (the "Secretary"), as administrator for Ground Lessor, and the City, a memorandum of which was recorded on November 9, 1998 as Instrument No. 487614 in the Official Public Records of Riverside County, California and approved by the BIA pursuant to an approval dated as of October 29, 1998 and that certain Amendment to Lease dated April 7, 2004 between the Ground Lessor, and/or their successors in interest, and the City, which was recorded oil June 3, 2004 as Instrument No. 2004-0422989 in the Official Public Records of Riverside County (collectively, the"Master Lease"). B. A portion of the property covered by the Master Lease is subleased to the Assignor pursuant to that certain Sublease (Hotels I-XI) dated December 31, 1984 (the "Sublease"), by and between SENCA Palm Springs, Inc,, a California corporation, a predecessor-in-interest of the City, as sublandlord, and the Community Redevelopment Agency of the City of Palm Springs, California, a predecessor-in-interest of Assignor, as subtenant, a memorandum of which was recorded on December 30, 1985 as Instrument No. 293742 of the Official Public Records of Riverside County, California, as supplemented by the certain Supplement (For Purpose of Conforming Legal Description) to Sublease recorded on December 20, 1993 as Instrument No. 504374 of said Official Public Records, as amended by that certain Amendment to Sublease, a memorandum of which was recorded on November 5, 1998 as Instrument No. 487613 of said Official Records and approved by the BIA pursuant to an approval dated as of October 29, 1998, as assigned to Assignor by Assignment to Sublease dated as of November 5, 1998 recorded November 9, 1998 as Instrument No. 487612 of said Official Records and approved by the BIA pursuant to an approval dated as of October 29, 1998, covering the real property described on Exhibit A attached hereto and incorporated herein by this reference (the "Leased Premises"). C. Assignee is purchasing all of the interest of Assignor in and to, among other �9 f things, the leasehold estate in the Leased Premises and the hotel known as "Wyndham Palm Springs" and the other improvements (collectively, the "Improvements") located on the Leased Premises, D. Assignee is transferring all of its interest in the personal property included within the Improvements to Capital Lodging TRS Operations II, Inc., a Delaware corporation ("Operator"), and will enter into a sublease of the Leased Premises and all of the real property included within the Improvements to Operator (the "Operator Sublease"). E. Capital Lodging Operating Partnership, L.P. ("Borrower") will enter into a Credit Agreement (as may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Credit Agreement") with Bank of America, N.A., as Administrative Agent ("Agent") for the ratable benefit of lenders and other financial institutions from time to time party thereto (collectively, the "Lenders"), pursuant to which the Lenders have agreed, from time to time to make revolving loans and issue letters of credit to and for the account of Borrower in the aggregate maximum amount of $100,000,000 (subject to a $50,000,000 increase upon the satisfaction of certain conditions described in the Credit Agreement); Assignee and Operator, as subsidiaries of Borrower, are required pursuant to the Credit Agreement to grant to Agent as security for the full payment of the principal amount from time to time outstanding under the Credit Agreement and for all other obligations due to Lenders under the Credit Agreement and other related loan documents, a valid and enforceable, first-priority lien on the Assignee's and Operator's right, title and interest in the Leased Premises and the Improvements (the"Pledge"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Assignment by Assignor. Assignor hereby assigns and transfers to Assignee all of Assignor's right, title and interest in and to the Sublease and the leasehold estate created thereby and hereby quitclaims, conveys, transfers and assigns to Assignee all of the Assignor's right, title and interest in and to the Improvements. 2. Acceptance by Assignee. Assignee hereby accepts the foregoing assignment and transfer of the Sublease and promises and agrees to pay all rent and to faithfully assume and perform all covenants, stipulations, agreements and obligations under the Sublease accruing on and after the date hereof or otherwise attributable to the period commencing on said date and continuing thereafter. Assignee hereby acknowledges that (a) this Agreement is subject and subordinate to all the terms, covenants and conditions in the Master Lease and the Sublease; and (b) except for the transfers and subleases to the Operator as set forth in Recital D above, Assignee shall not have any right to further assign its interest under the Sublease or sub-lease any property subject thereto except in accordance with the terms and provisions of the Sublease and the Master Lease. 3. Consent by the City. The City hereby consents to the assignment of Assignor's interest in the Sublease and the leasehold estate created thereby to Assignee and further consents to Assignee effecting the transfers and entering into the Operator Sublease with Operator as set forth in Recital D above and to the Pledge to be made by Assignee and Operator as set forth in Recital E above, conditioned on the Approval of the Assignment and the Pledge by the Department of the Interior Bureau of Indian Affairs as required by Article 44 of the Master Lease. The City and Assignee agree that transfer and entry into the Operator Sublease with the Operator shall not relieve Assignee of its promise to pay all rents and to faithfully assume and perform all covenants, stipulations, agreements and obligations under the Sublease accruing on and after the date hereof or otherwise attributable to the period commencing on said date and continuing thereafter. The City further agrees to send to Agent a copy of any notice to Assignee/Operator of a default by Assignee/Operator under the Sublease whenever any such notice of default shall be given by the City to Assignee/Operator, addressed to Agent (at the address set forth below or, if different, the address, if any, last furnished to the City by Agent), provided, however, that failure by the City to provide such notice shall not in any way impair or effect the rights or remedies of the City with respect to any default in the obligations of Assignee/Operator under the Sublease. Any notices required or permitted hereunder or under the Sublease shall be in writing and shall be given via first-class mail, postage prepaid, and addressed as follows: Bank of America, N.A. TX1-492-64-01 901 Main Street, 64t'Floor Dallas, TX 75202 Attn: Steven P. Renwick Fax: 214.209.93§0 4. Performance Under Master Lease. Assignee covenants and warrants that it has received, read and approved a fully executed copy of the Master Lease, it fully understands and agrees to be subject to and bound by all of the covenants, agreements, terms, provisions and conditions of the Master Lease to the extent applicable to the Leased Premises, and further covenants not to take any action or do or perform any act or fail to perform any act that would result in the failure or breach of any of the covenants, agreement, terms, provisions or conditions of the Master Lease on the part of the"Lessee" thereunder. 5. Operator Sublease. Assignee agrees that pursuant to the Operator Sublease, Operator will be required to assume the same obligations to perform under the Sublease and the Master Lease that Assignee has agreed to assume pursuant to paragraphs 2 and 4 hereunder. The Assignee and City agree that the Operator shall not have any right to further assign its interest under the Operator Sublease or sublease any property subject thereto except in accordance with the terms and provisions of the Sublease and Master Lease, 6. Guaranty. Attached hereto as Exhibit B is the form of Guaranty to be executed by Capital Lodging Operating Partnership, L.P. in favor of the City and delivered concurrently herewith. 7. Liability. Assignee acknowledges and agrees that the assignment and transfer releases and relieves Assignor from all liability under the Sublease and the Master Lease and that Assignor shall not remain liable under any of the terms, conditions, and covenants of the Sublease or the Master Lease. 8. Counterparts, This Agreement,may be executed in counterparts, each of which shall be deemed to be a duplicate original, but all of which together shall constitute one and the same instrument. 9. Severability. If any provision in this Agreement is held by a Court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way. 10. Governing Law. This Agreement shall be governed and construed in accordance with the Act of August 9, 1955, 69 Stat 539, as amended 25 U.S. C. 415 and as supplemented by Part 131 -Leasing and Permitting, of the Code of Federal Regulations, Title 25 - INDIANS, and any amendments thereto relative to Business Leases on restricted Indian lands, all of which by reference are made a part hereof(the "Act") and applicable Federal law, except to the extent that state law is applicable to any matter not covered by the Act, in which case the laws of the State of California shall be applied. The parties hereto consent to jurisdiction by Federal and State courts located in the County of Riverside, California, with respect to this Agreement and the transactions contemplated thereby. 11. Binding Effect, All of the terms of this Agreement shall be binding upon and inure to the benefit of and be enforceable by each party hereto and their respective successors, executors, administrators or heirs, and all persons claiming by and through them. 12. Attorneys' Fees. In the event that any party hereto brings an action or proceeding for a declaration of the rights of the parties under this Agreement for injunctive relief, for an alleged breach or default of, or any other action arising out of this Agreement or the transactions contemplated hereby, or in the event any party is in default of its obligations pursuant hereto, whether or not suit is filed or prosecuted to final judgment, the non-defaulting party (or, in the event of litigation, prevailing party) shall be entitled to reasonable attorneys' fees, in addition to any court costs incurred and in addition to any other damages or relief awarded. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. ASSIGNOR: AP/APH PALM SPRINGS, L.P., a Delaware limited partnership By: AP/APMC-G.P, INC., a Delaware corporation, its general partner By: Name: Title: STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public, personally appeared personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public [Signatures Continued on Following Pages] [Signatures Continued from Preceding Page] ASSIGNEE: Capital Lodging Palm Springs, LLC, a Delaware limited liability company By: Capital Lodging Operating Partnership, L.P., a Delaware limited partnership Its: Member By: Capital Lodging General Partner, LLC, a Delaware limited liability company Its: General Partner By: Capital Lodging, a Maryland real estate investment trust Its: Manager By: Name: Edward J. Rohling Title: President and Chief Executive Officer STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public [Signatures Continued on Following Page] [Signatures Continued from Preceding Page] THE CITY: THE CITY OF PALM SPRINGS, a municipal corporation By: Name: Title: STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public, personally appeared personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public EXHIBIT A TO ASSIGNMENT OF SUBLEASE Lots 1, D and E inclusive of Amended Tract No. 20485, in the City of Palm Springs, County of Riverside, State of California, as per map recorded in Book 200, Pages 47 and 48 of Maps, in the Office of the County Recorder of said County. c EXHIBIT B TO ASSIGNMENT OF SUBLEASE Form of Guaranty UNITED STATES DEPARTMENT OF THE INTERIOR BUREAU OF INDIAN AFFAIRS PALM SPRINGS FIELD OFFICE APPROVAL OF ASSIGNMENT OF SUBLEASE The within Assignment of Sublease between AP/APH PALM SPRINGS, L.P., a Delaware limited partnership and Capital Lodging Palm Springs, LLC, a Delaware limited liability company, consisting of 6 pages and attached Exhibits A and B, together with acknowledgement pages, and including the Pledge as described in Recital E thereto, is hereby approved. Dated: Superintendent Palm Springs Field Office Bureau of Indian Affairs Pursuant to the authority delegated by 209 DM 8, Secretary's Order Nos. 3150 and 3177, and 10 BIAM Bulletin 13, as arneuded,and Sacramento Area Office Redelegation Order No. 1 (43 F.R. 30131). Assilznment of Sublease This ASSIGNMENT OF SUBLEASE (this "Agreement" is made as of the 7"' day of July 2004, by and among AP/APH PALM SPRINGS, L.P., a Delaware limited partnership ("Assignor"), Capital Lodging Palm Springs, LLC, a Delaware limited liability company ("Assignee") and THE CITY OF PALM SPRINGS, a municipal corporation(the "City"). Recitals A. The City is the current holder of the lessee's interest under that certain Business Lease No. PSL-315 dated February 28, 1984 between the 18 individuals named therein as lessor (collectively, the "Ground Lessor") and Shale Energy Corporation of America, a Texas corporation, as lessee, a memorandum of which lease was recorded on December 30, 1985 as Instrument No. 293741 in the Official Public Records of Riverside County, California, together with that certain activation letter dated May 1, 1984, executed by Shale Energy Corporation of America (as approved by the United States Department of the Interior, Bureau of Indian Affairs (the "BIA") pursuant to an approval dated July 23, 1984, which approval was modified by a Modification of Approval of Option dated August 20, 1984) and that certain Amendment to Lease dated as of October 28, 1998 between The United States Secretary of the Interior (the "Secretary"), as administrator for Ground Lessor, and the City, a memorandum of which was recorded on November 9, 1998 as Instrument No. 487614 in the Official Public Records of Riverside County, California and approved by the BIA pursuant to an approval dated as of October 29, 1998 and that certain Amendment to Lease dated April 7, 2004 between the Ground Lessor, and/or their successors in interest, and the City, which was recorded on June 3, 2004 as Instrument No. 2004-0422989 in the Official Public Records of Riverside County (collectively, the "Master Lease")- B. A portion of the property covered by the Master Lease is subleased to the Assignor pursuant to that certain Sublease (Hotels I-XI) dated December 31, 1984 (the "Sublease"), by and between SENCA Palm Springs, Inc., a California corporation, a predecessor-in-interest of the City, as sublandlord, and the Community Redevelopment Agency of the City of Palm Springs, California, a predecessor-in-interest of Assignor, as subtenant, a memorandum of which was recorded on December 30, 1985 as Instrument No. 293742 of the Official Public Records of Riverside Comity, California, as supplemented by the certain Supplement (For Purpose of Conforming Legal Description) to Sublease recorded on December 20, 1993 as Instrument No. 504374 of said Official Public Records, as amended by that certain Amendment to Sublease, a memorandum of which was recorded on November 5, 1998 as Instrument No. 487613 of said Official Records and approved by the BIA pursuant to an approval dated as of October 29, 1998, as assigned to Assignor by Assignment to Sublease dated as of November 5, 1998 recorded November 9, 1998 as Instrument No. 487612 of said Official Records and approved by the BIA pursuant to an approval dated as of October 29, 1998, covering the real property described on Exhibit A attached hereto and incorporated herein by this reference (the "Leased Premises"). C. Assignee is purchasing all of the interest of Assignor in and to, among other things, the leasehold estate in the Leased Premises and the hotel known as "Wyndham Palm 1-LA/764576.6 1 Springs" and the other improvements (collectively, the "Improvements") located on the Leased Premises. D. Assignee is transferring all of its interest in the personal property included within the Improvements to Capital Lodging TRS Operations II, Inc., a Delaware corporation ("Operator') and will enter into a sublease of the Leased Premises and all of the real property included within the Improvements to Operator(the "Operator Sublease"). E. Assignee, Operator and/or certain of their affiliates will enter into a Credit Agreement with Bank of America, N.A. in the total amount of $100,000,000, which will be secured by certain property related to eight hotels, including a pledge of Assignee's and Operator's interest in the Leased Premises and the Improvements (the "Pledge"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Assignment by Assignor. Assignor hereby assigns and transfers to Assignee all of Assignor's right, title and interest in and to the Sublease and the leasehold estate created thereby and hereby quitclaims, conveys, transfers and assigns to Assignee all of the Assignor's right, title and interest in and to the Improvements. 2. Acceptance by Assignee. Assignee hereby accepts the foregoing assignment and transfer of the Sublease and promises and agrees to pay all rent and to faithfully assume and perform all covenants, stipulations, agreements and obligations under the Sublease accruing on and after the date hereof or otherwise attributable to the period commencing on said date and continuing thereafter. Assignee hereby acknowledges that (a) this Agreement is subject and subordinate to all the terms, covenants and conditions in the Master Lease and the Sublease; and (b) except for the transfers and subleases to the Operator as set forth in Recital D above, Assignee shall not have any right to further assign its interest under the Sublease or sub-lease any property subject thereto except in accordance with the terms and provisions of the Sublease and the Master Lease. 3. Consent by the City. The City hereby consents to the assignment of Assignor's interest in the Sublease and the leasehold estate created thereby to Assignee and further consents to Assignee effecting the transfers and entering into the Operator Sublease with Operator as set forth in Recital D above and to the Pledge to be made by Assignee and Operator as set forth in Recital E above, conditioned on the Approval of the Assignment and the Pledge by the Department of the Interior Bureau of Indian Affairs as required by Article 44 of the Master Lease. The City and Assignee agree that transfer and entry into the Operator Sublease with the Operator shall not relieve Assignee of its promise to pay all rents and to faithfully assume and perform all covenants, stipulations, agreements and obligations under the Sublease accruing on and after the date hereof or otherwise attributable to the period commencing on said date and continuing thereafter. 4. Performance Under Master Lease. Assignee covenants and warrants that it has received, read and approved a fully executed copy of the Master Lease, it fully understands and agrees to be subject to and bound by all of the covenants, agreements, terms, provisions and 1-LA/764576.6 2 ZZ 19 conditions of the Master Lease to the extent applicable to the Leased Premises, and further covenants not to take any action or do or perform any act or fail to perform any act that would result in the failure or breach of any of the covenants, agreement, terms, provisions or conditions of the Master Lease on the part of the "Lessee"theremider. 5. Operator Sublease. Assignee agrees that pursuant to the Operator Sublease, Operator will be required to assume the same obligations to perform under the Sublease and the Master Lease that Assignee has agreed to assume pursuant to paragraphs 2 and 4 hereunder. The Assignee and City agree that the Operator shall not have any right to further assign its interest under the Operator Sublease or sublease any property subject thereto except in accordance with the terms and provisions of the Sublease and Master Lease. 6. Guaranty. Attached hereto as Exhibit B is the form of Guaranty to be executed by Capital Lodging Operating Partnership, L.P. in favor of the City and delivered concurrently herewith. 7. Liability. Assignee acknowledges and agrees that the assignment and transfer releases and relieves Assignor from all liability under the Sublease and the Master Lease and that Assignor shall not remain liable under any of the terms, conditions, and covenants of the Sublease or the Master Lease. S. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be a duplicate original, but all of which together shall constitute one and the same instrument. 9. Severability. If any provision in this Agreement is held by a Court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way. 10. Governing Law. This Agreement shall be governed and construed in accordance with the Act of August 9, 1955, 69 Star 539, as amended 25 U.S. C. 415 and as supplemented by Part 131 - Leasing and Permitting, of the Code of Federal Regulations, Title 25 - INDIANS, and any amendments thereto relative to Business Leases on restricted Indian kinds, all of which by reference are made a part hereof(the "Act") and applicable Federal law, except to the extent that state law is applicable to any matter not covered by the Act, in which case the laws of the State of California shall be applied. The parties hereto consent to jurisdiction by Federal and State courts located in the County of Riverside, California, with respect to this Agreement and the transactions contemplated thereby. 11. BindingEffect.ffect. All of the terms of this Agreement shall be binding upon and inure to the benefit of and be enforceable by each party hereto and their respective successors, executors, administrators or heirs, and all persons claiming by and through them. 12. Attorneys' Fees. In the event that any party hereto brings an action or proceeding for a declaration of the rights of the parties under this Agreement for injunctive relief, for an alleged breach or default of, or any other action arising out of this Agreement or the transactions contemplated hereby, or in the event any party is in default of its obligations pursuant hereto, whether or not suit is filed or prosecuted to final judgment, the non-defaulting 1-LA/764576.6 3 � F� party (or, in the event of litigation, prevailing party) shall be entitled to reasonable attorneys' fees, in addition to any court costs incurred and in addition to any other damages or relief awarded. [Remainder of Page Intentionally Left Blank] 1-LA/764576.6 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. ASSIGNOR: AP/APH PALM SPRINGS, L.P., a Delaware limited partnership By: AP/APMC-G.P., INC., a Delaware corporation, its general partner By: Name: Title: STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public,personally appeared personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public [Signatures Continued on Following Pages] 1-LAR764576.6 5 [Signatures Continued from Preceding Page] ASSIGNEE: Capital Lodging Palm Springs, LLC, a Delaware limited liability company By: Capital Lodging, L.P., a Delaware limited partnership, its sole member By: Name: Title: STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public, personally appeared personally la-town to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public [Signatures Continued on Following Page] 1-LAV764576.6 6 [Signatures Continued from Preceding Page] THE CITY: THE CITY OF PALM SPRINGS, a municipal corporation By: Name: Title: STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public, personally appeared ,personally Imown to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acluiowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public 4 1-LA/764576 6 7 EXI3IBIT A TO ASSIGNMENT OF SUBLEASE Lots 1, D and E inclusive of Amended Tract No. 20485, in the City of Palm Springs, County of Riverside, State of California, as per map recorded in Book 200, Pages 47 and 48 of Maps, in the Office of the County Recorder of said County. 1-LA/764576.6 EXHIBIT B TO ASSIGNMENT OF SUBLEASE Form of Guaranty 1-LA/764576.6 UNITED STATES DEPARTMENT OF THE INTERIOR BUREAU OF INDIAN AFFAIRS PALM SPRINGS FIELD OFFICE APPROVAL OF ASSIGNMENT OF SUBLEASE The within Assigmnent of Sublease between AP/APH PALM SPRINGS, L.P., a Delaware limited partnership and Capital Lodging Palm Springs, LLC, a Delaware limited liability company, consisting of 6 pages and attached Exhibits A and B, together with aclulowledgement pages, and including the Pledge as described in Recital E. thereto, is hereby approved. Dated: Superintendent Palm Springs Field Office Bureau of Indian Affairs Pursuant to the authority delegated by 209 DM S, Secretary's Order Nos. 3150 and 3177, and 10 BIAM Bulletin 13, as amended, and Sacramento Area Office Redelegation Order No. 1 (43 F.R. 30131). 1-LA1764376..3]764576 6 Assignment of Sublease This ASSIGNMENT OF SUBLEASE (thus "Agreement" is made as of the 7"' day of July 2004, by and among AP/APH PALM SPRINGS, L.P., a Delaware limited partnership ("Assi ig for"), Capital Lodging Palm Springs, LLC, a Delaware limited liability company ("Assignee") and THE CITY OF PALM SPRINGS, a municipal corporation(the "City"). Recitals A. The City is the current holder of the lessee's interest under that certain Business Lease No. PSL-315 dated February 28, 1984 between the 18 individuals named therein as lessor (collectively, the "Ground Lessor") and Shale Energy Corporation of America, a Texas corporation, as lessee, a memorandum of which lease was recorded on December 30, 1985 as Instrument No. 293741 in the Official Public Records of Riverside County, California, together with that certain activation letter dated May 1, 1984, executed by Shale Energy Corporation of America (as approved by the United States Department of the Interior, Bureau of Indian Affairs (the "BIA") pursuant to an approval dated July 23, 1984, which approval was modified by a Modification of Approval of Option dated August 20, 1984) and that certain Amendment to Lease dated as of October 28, 1998 between The United States Secretary of the Interior (the "Secretary"), as administrator for Ground Lessor, and the City, a memorandum of which was recorded on November 9, 1998 as Instrument No. 487614 in the Official Public Records of Riverside County, California and approved by the BIA pursuant to an approval dated as of October 29, 1998 and that certain Amendment to Lease dated April 7, 2004 between the Ground Lessor, and/or their successors in interest, and the City, which was recorded on June 3, 2004 as Instrument No. 2004-0422989 in the Official Public Records of Riverside County (collectively, the "Master Lease"). B. A portion of the property covered by the Master Lease is subleased to the Assignor pursuant to that certain Sublease (Hotels I-XI) dated December 31, 1984 (the "Sublease '), by and between SENCA Palm Springs, Inc., a California corporation, a predecessor-in-interest of the City, as sublandlord, and the Community Redevelopment Agency of the City of Palm Springs, California, a predecessor-in-interest of Assignor, as subtenant, a memorandum of which was recorded on December 30, 1985 as Instrument No. 293742 of the Official Public Records of Riverside County, California, as supplemented by the certain Supplement (For Purpose of Conforming Legal Description) to Sublease recorded on December 20, 1993 as Instrument No. 504374 of said Official Public Records, as amended by that certain Amendment to Sublease, a memoranduun of which was recorded on November 5, 1998 as Instrument No. 487613 of said Official Records and approved by the BIA pursuant to an approval dated as of October 29, 1998, as assigned to Assignor by Assignment to Sublease dated as of November 5, 1998 recorded November 9, 1998 as Instrument No. 487612 of said Official Records and approved by the BIA pursuant to an approval dated as of October 29, 1998, covering the real property described on Exhibit A attached hereto and incorporated herein by this reference (the "Leased Premises"). C. Assignee is purchasing all of the interest of Assignor in and to, among other things, the leasehold estate in the Leased Premises and the hotel known as "Wyndham Palm rA 1-LA/[7645753]764576.6 1 � � 1 Springs" and the other improvements (collectively, the "Improvements") located on the Leased Premises. D. Assignee is transferring all of its interest in the personal property included within the Improvements to Capital Lodging TRS Operations II, Inc., a Delaware corporation ("O ep rator"), and will enter into a sublease of the Leased Premises and all of the real property included within the Improvements to Operator(the "Operator Sublease"). E. Assignee Operator and/or certain of their affiliates will enter into a Credit Agreement with Bank of America. N.A. in the total amount of$100,000,000 which will be secured by certain property related to eight hotels, including a pledge of Assignee's and Operator's interest in the Leased Premises and the Improvements (the "Pledge"1. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby aclulowledged, the parties hereto hereby agree as follows: 1. Assignment by Assignor. Assignor hereby assigns and transfers to Assignee all of Assignor's right, title and interest in and to the Sublease and the leasehold estate created thereby and hereby quitclaims, conveys, transfers and assigns to Assignee all of the Assignor's right, title and interest in and to the Improvements. 2. Acceptance by Assignee. Assignee hereby accepts the foregoing assignment and transfer of the Sublease and promises and agrees to pay all rent and to faithfully assume and perform all covenants, stipulations, agreements and obligations under the Sublease accruing on and after the date hereof or otherwise attributable to the period commencing on said date and continuing thereafter. Assignee hereby acknowledges that (a) this Agreement is subject and subordinate to all the terms, covenants and conditions in the Master Lease and the Sublease; and (b) except for the transfers and subleases to the Operator as set forth in Recital D above, Assignee shall not have any right to further assign its interest under the Sublease or sub-lease any property subject thereto except in accordance with the terms and provisions of the Sublease and the Master Lease. 3. Consent by the City. The City hereby consents to the assignment of Assignor's interest in the Sublease and the leasehold estate created thereby to Assignee and further consents to Assignee effecting the transfers and entering into the Operator Sublease with Operator as set forth in Recital D above and to the Pledge to be made by Assignee and Operator as set forth in Recital E above, conditioned on the Approval of the Assignment and the Pledge by the Department of the Interior Bureau of Indian Affairs as required by Article 44 of the Master Lease. The City and Assignee agree that transfer and entry into the Operator Sublease with the Operator shall not relieve Assignee of its promise to pay all rents and to faithfully assume and perform all covenants, stipulations, agreements and obligations under the Sublease accruing on and after the date hereof or otherwise attributable to the period commencing on said date and continuing thereafter. 4. Performance Under Master Lease. Assignee covenants and warrants that it has received, read and approved a fiilly executed copy of the Master Lease, it fidly understands and agrees to be subject to and bound by all of the covenants, agreements, terms, provisions and 1-LA/[7645763]7fi457fi.(, 2 rJ 16 ® Y conditions of the Master Lease to the extent applicable to the Leased Premises, and further covenants not to take any action or do or perfonn any act or fail to perform any act that would result in the failure or breach of any of the covenants, agreement, terms, provisions or conditions of the Master Lease on the part of the "Lessee"thereunder. 5. Operator Sublease. Assignee agrees that pursuant to the Operator Sublease, Operator will be required to assume the same obligations to perform under the Sublease and the Master Lease that Assignee has agreed to assume pursuant to paragraphs 2 and 4 hereunder. The Assignee and City agree that the Operator shall not have any right to further assign its interest wider the Operator Sublease or sublease any property subject thereto except in accordance with the terns and provisions of the Sublease and Master Lease. 6. Guaranty. Attached hereto as Exhibit B is the form of Guaranty to be executed by Capital Lodging Operating Partnership, L.P. in favor of the City and delivered concurrently herewith. 7. Liability. Assignee acknowledges and agrees that the assignment and transfer releases and relieves Assignor from all liability under the Sublease and the Master Lease and that Assignor shall not remain liable under any of the terms, conditions, and covenants of the Sublease or the Master Lease. 8. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be a duplicate original, but all of which together shall constitute one and the same instrument. 9. Severability. If any provision in this Agreement is held by a Court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way. 10. Governing Law. This Agreement shall be governed and construed in accordance with the Act of August 9, 1955, 69 Stat 539, as amended 25 U.S. C. 415 and as supplemented by Part 131 - Leasing and Permitting, of the Code of Federal Regulations, Title 25 - INDIANS, and any amendments thereto relative to Business Leases on restricted Indian lands, all of which by reference are made a part hereof(the "Act") and applicable Federal law, except to the extent that state law is applicable to any matter not covered by the Act, in which case the laws of the State of California shall be applied. The parties hereto consent to jurisdiction by Federal and State courts located in the County of Riverside, California, with respect to this Agreement and the transactions contemplated thereby. 11. Binding Effect. All of the terms of this Agreement shall be binding upon and inure to the benefit of and be enforceable by each party hereto and their respective successors, executors, administrators or heirs, and all persons claiming by and through them. 12. Attorneys' Fees. In the event that any party hereto brings an action or proceeding for a declaration of the rights of the parties under this Agreement for injunctive relief, for an alleged breach or default of, or any other action arising out of this Agreement or the transactions contemplated hereby, or in the event any party is in default of its obligations pursuant hereto, whether or not suit is filed or prosecuted to final judgment, the non--defaulting J-ifvf-7645 s17fi457(f, 3 A J party (or, in the event of litigation, prevailing party) shall be entitled to reasonable attorneys' fees, in addition to any court costs incurred and in addition to any other damages or relief • awarded. [Remainder of Page Intentionally Left Blank] i-LMa64-57 s]7(457(( 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. ASSIGNOR: AP/APH PALM SPRINGS, L.P., a Delaware • limited partnership By: AP/APMC-G.P., INC., a Delaware corporation, its general partner By: Name: Title: STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public, personally appeared , personally laiown to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public [Signatures Continued on Following Pages] 1-LA/[764376.5]764576(. 5 [Signatures Continued from Preceding Page] ASSIGNEE: Capital Lodging Palm Springs, LLC, a Delaware limited liability company By: Capital Lodging, L.P., a Delaware limited partnership, its sole member By: Name: Title: STATE OF ) ss. COUNTY OF ) On 2004 before me, Notary Public, personally appeared personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public [Signatures Continued on Following Page] -LFv[¢64576 5 764576 r 6 [Signatures Continued from Preceding Page] THE CITY: THE CITY OF PALM SPRINGS, a municipal corporation ' By: Name: ' Title: STATE OF ) ss. ' COUNTY OF ) On 2004 before me, Notary Public, personally appeared ,personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acluiowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. (Seal) Notary Public 1-LAl[W4574 17645766 7 EXHIBIT A TO ASSIGNMENT OF SUBLEASE Lots 1, D and E inclusive of Amended Tract No. 20485, in the City of Palm Springs, County of Riverside, State of California, as per map recorded in Book 200, Pages 47 and 48 of Maps, in the Office of the County Recorder of said County. i-Lw[761576317f,457( EXIHBIT B TO ASSIGNMENT OF SUBLEASE Form of Guaranty I-LA/[764376r5]764576,6 MINUTE ORDER NO. APPROVING ASSIGNMENT OF LEASE AGREEMENT 111C WITH AP/APH PALM SPRINGS TO CAPITAL LODGING PALM SPRINGS. I HEREBY CERTIFY that this Minute Order, approving assignment of Lease Agreement 111C with AP/APH Palm Springs to Capital Lodging Palm Springs, was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 7th day of July, 2004. PATRICIA A. SANDERS City Clerk mac. 1 �, '