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The South Bend Redevelopment Authority <br />June 5, 2008 Meeting Minutes <br />of the lease. Kito will maintain ownership of the ground, they will lease the <br />ground to the Redevelopment Authority who builds the parking garage and <br />sublease the parking garage and the ground to the Redevelopment Commission <br />(by means of the financing lease which is already in place). The Commission will <br />sub-sublease the garage to a Kite entity that will operate the garage. The City, the <br />Authority or the Commission will not be in the business of operating the garage. <br />The Redevelopment Commission is going through the process of disposing of the <br />garage to that Kite entity at the end of the financing, but during the twenty five <br />years of the financing the Kite entity will lease the garage from the <br />Redevelopment Commission. The sub-sublease will provide, at the end of the <br />lease, for the Kite entity to become the titled owner. There are a lot of obligations <br />in the lease that, as you read it, you would wonder why the Authority is obligated <br />to do them. Most of the obligations will pass through the Authority to the <br />Commission to the Kite entity. The Kite entity is expected to operate the garage <br />with due maintenance, etc. The Authority's responsibility is to build the garage <br />and finance it. <br />The Authority members asked how the lease had changed from the document they <br />had before them to what Mr. Rampola had. Mr. Rampola said the part that has <br />changed instill in negotiation so it does not merit discussion at this point. Mr. <br />Alvarez asked for some clarification on some issues. Mr. Rampola said that Kite <br />will appear to own the garage even during the lease. They will be responsible for <br />maintenance, security, payment of taxes, insurance, everything related to the <br />operation of the garage. The only reason Kite cannot be the owner now is because <br />of the bond financing. Ms. Pfotenhauer asked what the issues were with the <br />casualty insurance. Mr. Rampola said the issue is in relation to how the bond <br />documents are written. If the garage collapses and is destroyed, the obligation is to <br />have an architect tell the Authority how long it would take to rebuild the garage. <br />There is rental interruption insurance for two years provided in the financing lease <br />between the Authority and the Commission. If the architect says it can be rebuilt <br />in two years then the Authority would apply the casualty insurance proceeds to <br />rebuilding the garage. If the architect says it will take longer than the two years <br />then the bond documents require that the casualty proceeds would be used to pay <br />off the bond holders as much as is possible. The bond documents do require that <br />the casualty insurance be maintained in an amount that equals 1.00% of the <br />replacement cost or the cost of paying off the bond holders, which ever is more. <br />Kite's concern is that if there is no parking garage the whole development would <br />collapse. The hotel can't operate without a parking garage. Kite never wants to see <br />a situation where there is not a parking garage. Kite is not comfortable with a <br />potential that bond holders could be paid off. We are looking at lengthening the <br />time that rental value insurance would be provided. Two years is standard for the <br />insurance and the garage construction presently should be completed in about nine <br />H:\WPDATAWUTHORTY\060508. MIN.DOC 2 <br />