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WHEN RECORDED RETURN TO:
City Clerk’s Office
City of Chandler
MS 606
P. O. Box 4008
Chandler, Arizona 85244-4008
DEVELOPMENT AGREEMENT
This development agreement (the “Agreement”) is entered into effective as of
___________, 2024, (the “Effective Date”), by and between the City of Chandler, an Arizona
municipal corporation (“City”), and CPUS West Frye Road, LP, a Delaware limited
partnership (“Developer”). City and Developer are each a “Party” to this Agreement and may
be referred to collectively in this Agreement as “Parties.”
1.
Recitals. As background to this Agreement, the Parties recite, acknowledge
and confirm the following, each of which shall be a material term and provision of this
Agreement:
1.1
Developer owns real property generally located on the northwest corner
of Frye Road and Ellis Street, which property is legally described in Exhibit A attached hereto
(the “Property”).
1.2
Within the Property is an existing data center structure and operation
(“Existing Data Center”) that uses Water-Based Cooling Systems (defined in Section 9.1
herein) to cool the electronic computer servers operating within the data center.
1.3
The Chandler City Council has, in conjunction with the approval of this
Agreement, approved Developer’s request to rezone the Property from Light Industrial (I-1) to
Planned Area Development (PAD) with a Mid-Rise Overlay (“Rezoning Approval”), which
allows the continued operation of the Existing Data Center and the addition of a new
approximately 243,000 square-foot, three-story data center structure, with associated electrical
equipment and operation, within the Property, as conceptually shown on Exhibit B (“Data
Center Expansion”).
1.4
Stipulations were added to the Rezoning Approval related to the use of
Water-Based Cooling Systems and Mechanical Cooling Systems (defined in Section 9.2
herein) on the Property (the “Cooling Stipulations”). With this Agreement, the Parties intend
to reduce water consumption on site by ensuring the transition of all existing Water-Based
Cooling Systems to Mechanical Cooling Systems that do not rely on evaporative cooling or
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otherwise consume water as part of the process of cooling electronic computer servers housed
within the Property.
1.5
Section 35-2214 of the City Code of the City of Chandler (“City Code”)
contains certain requirements related to the development of new data centers and Sections
35-2214(3) through 35-2214(7) of the City Code contains requirements related to the
measuring and containment of sound generated by those data centers (“Data Center Sound
Requirements”).
1.6
The Parties desire to execute this Agreement following approval of the
Rezoning Request by the Chandler City Council to provide another enforcement mechanism
for the Cooling Stipulations and the Data Center Sound Requirements, to agree on the
application of an element of the Data Center Sound Requirements as it relates to the Property,
and to govern the replacement of the Water-Based Cooling Systems currently operating within
the Existing Data Center.
1.7
City and Developer are entering into this Agreement under
A.R.S. § 9-500.05 to facilitate development within the City of Chandler.
1.8
City, by Resolution No. _______, adopted on __________, has
authorized the execution and performance of this Agreement and has otherwise taken all action
required by law to enter into this Agreement and make it binding upon City.
2.
Performance Obligations. City and Developer agree as follows:
2.1
The Data Center Expansion may not incorporate or use any Water-
Based Cooling Systems and no Water-Based Cooling Systems may be added to the operation
of the Existing Data Center. Moreover, each existing Water-Based Cooling Systems within the
Existing Data Center may only be replaced with Mechanical Cooling Systems that do not rely
on evaporative cooling. In addition to the foregoing, all Water-Based Cooling Systems
operating at the Existing Data Center must be removed or replaced with Mechanical Cooling
Systems before the City will issue a certificate of occupancy for the Data Center Expansion.
Developer understands that time is of the essence for removal of the Water-Based Cooling
Systems on the Property pursuant to this Agreement. The City will not issue a temporary
certificate of occupancy for the Data Center Expansion if the Water-Based Cooling Systems
have not been fully removed, regardless of circumstances that may arise that are outside the
control of Developer. Upon issuance of the certificate of occupancy for the Data Center
Expansion and during the remaining Term of this Agreement, Developer may not use any
Water-Based Cooling Systems within the Property.
2.2
Upon Developer’s request for a certificate of occupancy for the
Data Center Expansion, and thereafter during the remainder of the duration of this Agreement,
Developer will allow City reasonable access to inspect the Property to verify that there are no
Water-Based Cooling Systems in operation. City will follow reasonable security protocols
during such access visits and will provide Developer with reasonable advanced notice of the
date and time of such access visits.
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2.3
A violation of the City’s Data Center Sound Requirements will be
deemed a violation of this Agreement.
2.4
Section 35-2214(4) of the City Code (“Baseline Study Section”)
details requirements for a property owner proposing to build a data center related to studying
and documenting ambient sound levels in the area surrounding the proposed site of the new
data center, and the Parties acknowledge Developer has complied with this Baseline Study
Section. Given the potential for future changes in the immediate area that may affect ambient
sound volumes, Developer shall have the right in the future, but not the obligation, to again
study and document the baseline ambient sound levels in the area surrounding the Property
and to submit the results of this updated study to the City (“Updated Baseline Study”). The
Updated Baseline Study must be performed: consistent with the requirements of the Baseline
Study Section, except as it relates to any references to the timing of the study and the
submission of the study, and prior to commencing operation of, and issuance of a certificate of
occupancy for, the Data Center Expansion. Following submission to the City’s Zoning
Administrator of an Updated Baseline Study, the City shall replace the baseline sound study
previously submitted by the Developer with the Updated Baseline Study and shall use the
Updated Baseline Study in applying the requirements of the Data Center Sound Requirements
as if the Updated Baseline Study had been the sound study originally submitted in compliance
with the Baseline Study Section.
2.5
In the sound studies required in subsequent years after the
commencement of operation of the Data Center Expansion, per the Data Center Sound
Requirements, if ambient sound levels have increased because of factors external to the
Property, the City shall allow Developer to document these increases in the study and the City
and the Developer shall work together in good faith to adjust the baseline sound levels to
account for and discount such increases that are not attributable to the Developer when
evaluating compliance of the Data Center Expansion under Section 35-2214(5) and Section
35-2214(6) of the City Code.
2.6
This Agreement and its terms become effective if, and only if, the
City approves Developer’s request to rezone the Property from Light Industrial (I-1) to Planned
Area Development (PAD) with a Mid-Rise Overlay in a manner that allows the development
and operation of the Data Center Expansion.
3.
Term. The term of this Agreement shall begin on the Effective Date and shall
continue in full force and effect in perpetuity, unless terminated earlier by written agreement
of the Parties. Provided, however, that if the perpetual term of this Agreement is deemed to
violate the “rule against perpetuities,” the Parties agree to amend the Agreement to the extent
necessary to comply with applicable law while maintaining the original intent of the Parties to
the fullest extent possible.
4.
Notices. Unless otherwise specifically provided herein, or unless written notice
of a change of address has been previously given pursuant hereto, all notices, demands or other
communication given hereunder shall be in writing and shall be deemed to have been duly
delivered upon (i) personal delivery, (ii) delivery by a recognized overnight courier
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(e.g., FedEx, UPS) for next business day delivery, or (iii) as of the fifth (5th) business day after
mailing by United States certified mail, postage prepaid, addressed as follows:
To Developer:
Ray Young
Senior Director – Logistics Asset Management
CBRE Investment Management | Americas
601 S Figueroa St, 49th Floor
Los Angeles, CA 90017
With a copy to:
Taylor C. Earl
Earl & Curley, P.C.
3101 N. Central Ave., Suite 1000
Phoenix, AZ 85012
To City:
Development Services Director
City of Chandler
Mail Stop 405
P.O. Box 4008
Chandler, AZ 85244-4008
With a copy to:
Chandler City Attorney
Mail Stop 602
P.O. Box 4008
Chandler, AZ 85244-4008
Phone: (480) 782-4640
5.
Events of Default. Failure by either Party to duly perform, comply with, or
observe any of the conditions, terms, or covenants of this Agreement beyond applicable notice
and cure periods shall be a default hereunder, subject to the terms set forth in this
Section 5. The Party who so fails or delays must immediately commence to cure, correct, or
remedy such failure or delay, and shall complete such cure, correction, or remedy with
reasonable diligence, and during any period of curing shall not be in default. The objecting
Party shall give written notice of default to the Party in default, specifying the default
complained of by the objecting Party. If the default is not commenced to be cured within thirty
(30) days after service of such notice of default and is not cured promptly in a continuous
diligent manner in a reasonable period of time after commencement (which shall in no
circumstance exceed one hundred twenty days (120) days), the objecting Party shall have the
right to pursue all legal and equitable remedies available to it at law or under this Agreement.
6.
Assignment. Developer shall not assign any obligation in this Agreement (an
“Assignment”) other than to a Permitted Assignee without City’s express written consent,
which shall not be unreasonably withheld, conditioned, or delayed. As used herein, a
“Permitted Assignee” is defined as: (i) a subsidiary or affiliate of Developer, (ii) a party that
results from a Change of Control of Developer, (iii) a party that acquires fee simple title to the
Property, and/or (iv) a party providing financing with respect to the property (where, for the
avoidance of doubt, Developer shall be permitted to collaterally assign this Agreement to such
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party). The City’s consent shall not be required in connection with an Assignment to any
Permitted Assignee. In order to be effective, any such assignment must contain an express
written agreement and assumption by the assignee agreeing to be liable for the assigning
Party’s obligations contained herein. “Change of Control” means (a) any transaction or series
of related transactions as a result of which any person or group of persons within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934 becomes the beneficial owner,
directly or indirectly, of 50% or more of the outstanding common stock (measured by either
voting power or economic interests) of Developer, (b) any sale or lease or exchange, transfer,
license or disposition of a business, deposits or assets that constitute 50% or more of the
consolidated assets, business, revenues, net income or assets of Developer or (c) a merger,
consolidation, recapitalization or reorganization of Developer with or into a third party that
results in the inability of the stockholders of Developer prior to such transaction to designate
or elect a majority of the board of directors (or its equivalent) of the resulting entity or its parent
company.
7.
Recordation. Upon execution of the Agreement by the City, the City will
promptly cause this Agreement to be recorded in its entirety in the Official Records of
Maricopa County, Arizona and shall thereafter promptly provide a recorded copy of this
Agreement to Developer. Promptly following the Expiration Date, if requested by either Party,
the Parties will execute and record a commercially reasonable form of termination of this
Agreement, which the requesting Party will cause to be recorded in the Official Records of
Maricopa County, Arizona (the “Recorded Termination”). Notwithstanding the foregoing,
upon the Expiration Date, this Agreement shall automatically be null, void, and terminated
without the need for further action by the Parties, it being acknowledged and agreed that the
Recorded Termination is not a prerequisite to the termination of this Agreement.
8.
Additional Matters.
8.1
Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Arizona. This Agreement is subject to the provisions of
A.R.S. § 38-511. This Agreement shall be deemed made and entered into in Maricopa County,
Arizona.
8.2
No Waiver. The failure of any Party to exercise any right, power, or
remedy given to it under this Agreement, or to insist upon strict compliance with it, shall not
constitute a waiver of the terms and conditions of this Agreement with respect to any other or
subsequent breach, nor a waiver by either Party of its rights at any time to require exact and
strict compliance with all of the terms of this Agreement. The rights or remedies under this
Agreement are exclusive of any other rights or remedies which may be granted by law.
8.3
Entire Agreement, Amendment, and Execution. This Agreement
constitutes the entire Agreement between City and Developer with respect to its subject matter,
and all agreements, oral or written, entered into prior to this Agreement are revoked and
superseded by this Agreement. This Agreement may not be changed, modified, or amended,
except in writing, signed by all Parties, and recorded in the office of the Maricopa County
Recorder and any attempt at oral modification of this Agreement shall be void and of no effect.
This Agreement may be executed in any number of counterparts, each of which shall be
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deemed an original, and all of which, when taken together, shall constitute one and the same
instrument.
8.4
No Partnership. It is not intended by this Agreement to, and nothing
contained in this Agreement shall, create any partnership, joint venture or other arrangement
between Developer and City. No term or provision of this Agreement is intended to, or shall,
be for the benefit of any person, firm, organization, or corporation not a party hereto, and no
such other person, firm, organization, or corporation shall have any right or cause of action
hereunder.
8.5
Authorization. Each of the Parties hereto represents and warrants to
the other that the individual executing this Agreement on behalf of their respective Party is
authorized and empowered to bind the Party on whose behalf such individual is signing, and
that this Agreement shall be binding upon such Party.
8.6
Estoppel. Each Party, upon the request of another Party, shall issue to
such requesting Party (and, as applicable, such Party’s prospective or current purchaser, equity
investor, mortgagee or other parties designated by such requesting Party), within twenty (20)
business days of receipt of any such request, an estoppel certificate (each, an “Estoppel
Certificate”), made to the knowledge of the responding Party, stating: (i) whether any known
default exists under this Agreement, and if there are known defaults, specifying the nature
thereof; (ii) that this Agreement has not been modified or amended in any way, except as
disclosed in such Estoppel Certificate; (iii) that this Agreement as of that date is in full force
and effect; (iv) the status of the Annual Report(s); (v) whether an Updated Baseline Study was
submitted to the City; and (vi) such other certifications as may be reasonably requested by such
requesting Party, subject to reasonable requests for edits or other clarification by the
responding Party.
8.7
Mortgagee Protections. Developer shall have the right, from time to
time, to assign, collaterally or otherwise, its interest in this Agreement and to encumber all or
any portion of its interest in the Property by deed of trust, mortgage or other security instrument
(each, a “Developer Mortgage”) to a third-party lender (each, a “Mortgagee”), without the
necessity of obtaining the consent of the City. So long as any Developer Mortgage held by a
Mortgagee remains a lien on all or part of Developer’s interest in this Agreement and/or the
Property, such Mortgagee shall be afforded the following rights: (i) the right to simultaneously
receive any notices of any default by Developer hereunder (provided that Developer and/or
Mortgagee first provide the City with written notice as to the identity of and notice address for
Mortgagee), (ii) the right to cure any default of Developer (where Mortgagee shall have ten
(10) days to cure any monetary default and an additional thirty (30) days to cure any
non-monetary default, in additional to the time period afforded to Developer to cure); (iii) in
the event of any termination of this Agreement, the right to enter into a new agreement with
the City on materially the same terms; and (iv) the right to assume Developer’s interest under
this Agreement in the event of a foreclosure by Mortgagee of the Developer Mortgage.
9.
Definitions. As used in this Agreement, the terms below are defined as
follows:
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9.1
“Water-Based Cooling Systems” are open-circuit cooling towers that
reject heat from the refrigeration process to the atmosphere by means of water evaporation or
other water-based methods that use and discard water as part of the process of transferring
heat away from the electronic computer servers that are generating heat on the Property.
9.2
“Mechanical Cooling Systems” are those cooling systems that transfer
heat from the data center to achieve a cooler air temperature inside the data center and which
do not utilize the evaporation of water in the cooling process or other water-based methods
that use and discard water as part of the process.
[SIGNATURES FOLLOW ON NEXT PAGES]
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IN WITNESS WHEREOF, the Parties have executed this Agreement through their
representatives duly authorized to execute this Agreement and to bind their respective entities
to the terms and obligations of same.
ATTEST:
CITY OF CHANDLER, an Arizona
municipal corporation
_________________________________
By______________________________
City Clerk
Mayor Kevin Hartke
APPROVED AS TO FORM:
_________________________________
City Attorney
STATE OF ARIZONA
)
) ss.
County of Maricopa
)
The foregoing instrument was acknowledged before me this ____ day of _________,
2024, by Kevin Hartke, Mayor of the City of Chandler, an Arizona municipal corporation.
_________________________________
Notary Public
[SEAL]
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CPUS West Frye Road, LP, a Delaware
limited partnership
By:
Name:
Title:
STATE OF ______________)
) ss.
County of _______________)
The foregoing Development Agreement was acknowledged before me this ___ day of
__________, 2024, by ____________________, as _________________________________
of CPUS West Frye Road, LP, a Delaware limited partnership.
_________________________________
Notary Public
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PROPOSED
EQUIPMENT YARD
PROPOSED
EXPANSION TO EXISTING
SUBSTATION
(Diagonal hatch and new
screen wall boundaries
shown dashed)
Stories: 3
Bldg Height: 60'-0"
Rooftop Screen:
+30'-0" (for acoustics)
Area:
+/- 241,000 SF
Stories: 1
Area:
+/- 191,000 SF
EXISTING
DATA
CENTER
PROPOSED
DATA CENTER
EXPANSION
PROPOSED
EQUIPMENT YARD
5/30/2024
EXISTING
EQUIPMENT
YARD
EXISTING
ELECTRICAL
BUILDING
& YARD
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This Exhibit B is for illustrative purposes only and not intended to
indicate City’s formal approval of Developer’s site plan
EXHIBIT B