title
Consideration of Amendment to the Burleigh Triangle Phase 2 Term Sheet and TID #7 Budget Amendment
body
Submitted by:
John Ruggini
Department:
Finance
A. Issue
Due to rising interest rates and flat rents, the developer of the Burleigh Phase 2 project (Whole Foods complex) in Tax Increment District 7 is out of agreement with their bank for the loan outstanding for this phase and is requesting advance payment for an obligation the City has.
B. Background/Options
In 2015 the City and HSA agreed to terms for the development of the Whole Foods retail building which currently also includes Home Goods, Bob's Discount Furniture and Verlo Mattress. This phase was successfully constructed and is currently 100% occupied. The Developer has outstanding debt with a private bank from this development that financed infrastructure improvements expected to be reimbursed sometime in the future, as outlined below. However, rising interest rates and flat rents have caused the Developer's debt coverage ratio (annual lease payments divided by annual debt service) to fall below the bank's required 1.25 coverage ratio. Technically, the HSA partnership, Burleigh 45, LLC is in default although the Bank has not taken any action at this point.
The phase three term sheet for the construction of the Synergy residential project agreed to in 2016 included terms to reimburse HSA for $2,320,000 in infrastructure costs incurred in Phase 2. However, as there was not sufficient cash flow in Tax Increment 7 at the time, this amount was agreed to be reimbursed in the future at an amount of $3,100 per housing unit for a maximum of $2,320,000. An additional $500 per unit was added to this incentive for a maximum of $369,400. The chart below depicts the agreement.
Over the past month, City staff have worked with an external financial consultant to review the loan documents and Burleigh 45, LLC financial statements and have verified the facts as presented by HSA. We also have negot...
Click here for full text