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HomeMy WebLinkAbout6E145pUTH 6F O ,1t11j111�1�1� �� Department of Community 1865 Investment Memorandum December 12, 2013 TO: South Bend Redevelopment Commission FROM: David Relos, Economic Resourcesot- SUBJECT: Second Amendment to Development Agreement - Eddy Street Commons On February 15, 2008, the Redevelopment Commission, Redevelopment Authority, City of South Bend, and Kite Realty Group LP entered in to a Development Agreement for the construction of Eddy Street Commons. A First Amendment to this Development Agreement was signed on May 2, 2008, which finalized streets and alleys to be included in the development. In light of the economic conditions that took place as this project began, a Second Amendment (Amendment) has been planned since early 2009, but put on hold until there was a better understanding of project completion and its impact on property values and the community at large. This project has had dramatic cumulative impacts. From 2010 - 2013, they are estimated to be: • Direct construction impact (ongoing): 2,600 workers on site since 2009, creating $43.5 million in household earnings and an output (economic activity generated) of $139.4 million • Indirect construction impact (snowball effect): 606 jobs with household earnings of $56 million and output of $187.6 million • Fiscal impact (taxes including state sales, state and county income, innkeepers, and property) of $17.6 million • Direct economic impact: 140 new jobs with household earnings of $9.7 million and output of $36.2 million • Indirect economic impact: 149 new jobs with household earnings of $13.7 million and output of $121.5 million This Amendment will facilitate ongoing Eddy Street development and its next construction phases, in turn continuing and increasing the impacts mentioned above. 227 W. JEFFERSON BLVD. SOUTH BEND, IN 46601 1 P: 574 - 235 -9371 1 FAX: 574 - 235 -9021 1 SOUTHBENDIN.GOV Page 2 A summary of the Amendment is: • Current limited service hotel room count revised from 139 to 119 • Remove condos above the full service hotel; room count revised from 255 to 160 • Exhibit G construction completion dates updated to actual and expected • Adjusted various goals for assessed values and private investment as shown on Exhibit L • Clarifies how the delay fee associated with Exhibit M is filed and potentially utilized • Right of Way value set and its payment outlined • Remaining public infrastructure completion defined (certain items delayed for construction completion; Kite will complete when construction ends) Staff requests approval of this Amendment, which clarifies roles and responsibilities, adjusts schedules and exhibits to reflect current conditions, and builds upon the impacts this project has had on our entire community. 227 W. JEFFERSON BLVD. SOUTH BEND, IN 46601 1 P: 574 - 235 -9371 1 FAX: 574 - 235 -9021 1 SOUTHBENDIN.GOV SECOND AMENDMENT TO DEVELOPMENT AGREEMENT THIS SECOND AMENDMENT TO DEVELOPMENT AGREEMENT (this "Amendment ") is made and entered into on this day of , 2013 (the "Effective Date "), by and among the South Bend Redevelopment Commission, governing body of the South Bend Department of Redevelopment (the "Commission "); the South Bend Redevelopment Authority, a separate body corporate and politic and instrumentality of the City (as hereinafter defined) (the "Redevelopment Authority "); the City of South Bend, Indiana, a political subdivision and municipal corporation of the State of Indiana (the "City "); and Kite Realty Group, L.P., a Delaware limited partnership ( "Developer ") (collectively the "Parties "). RECITALS A. The Parties entered into that. certain Development Agreement, dated as of February 15, 2008 (the "Original Development Agreement "), as amended by that certain First Amendment to Development Agreement with an effective date of May 2, 2008 ( "First Amendment ") (the Original Development Agreement as amended by the First Amendment shall be referred to as the "Development Agreement "). B. The Parties desire to amend the Development Agreement in order to address the matters described in this Amendment. AGREEMENT NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 1. The Recitals set forth above are hereby incorporated into this Agreement and made a part hereof as though set forth herein verbatim. Capitalized terms used herein but not otherwise defined shall have the meaning set forth in the Development Agreement. 2. All references in the Development Agreement to a "139 room limited service hotel" or "a limited service hotel with 139 rooms" or any variation thereof, including but not limited to such reference in the ninth "Whereas" clause in the Original Development Agreement, shall be amended to reference 119 limited service hotel rooms. 3. All references in the Development Agreement to a "255 room full service hotel' or "a full service hotel with 255 rooms" or any variation thereof, including but not limited to such reference in the ninth "Whereas" clause in the Original Development Agreement, shall be amended to reference 160 full service hotel rooms. 4. All references in the Development Agreement to residential condominiums being a part of the full service hotel component of the Eddy Street Commons Hotel Area, including but not limited to such references in Sections 4.4(a) and 4.4 b of the Original Development Agreement, shall be amended to delete any such reference as the Parties have agreed that the full service hotel shall not be developed to include residential condominiums as a component. dms.us.52644204.08 5. All references in the Development Agreement to $157,000,000 with respect to Assessed Valuation including but not limited to those references in the Original Development Agreement in Section 2.3(b) in relation to the expiration of the Term, in Section 4.6 and in Section 4.11, shall be amended to substitute the amount of $143,352,215. 6. The first sentence of Section 4.6 of the Original Development Agreement shall be deleted and replaced with the following: Developer agrees to a Private Investment goal for the Project of approximately $161,925,702, which amount shall consist of approximately $122,640,702 of Private Investment with respect to the commercial and multi - family components of the Project and $39,285,000 of Private Investment with respect to the residential components of the Project. 7. Section 4.10 of the Original Development Agreement is hereby deleted and replaced with the following: 4.10 Development Delay Fees. (a) The Redevelopment Authority is financing the Public Infrastructure Improvements based on Developer's covenants in Exhibit L attached hereto and incorporated herein concerning the timing of completion and the amount of development that will occur on the Development Site. The Redevelopment Authority's financing relies on Developer's covenants set forth in Exhibit L concerning the timing of completion and the amount of development that will occur on the Development Site. Accordingly, if the timing of completion and the amount of development does not occur as so covenanted by Developer, then Developer agrees to pay a fee to the City as determined in this Section 4.10. (b) The commercial and residential components of the Project are scheduled to be partially or substantially completed on or before the March 1, 2010, assessment date, and running through the March 1, 2013, assessment date. Accordingly, the commercial and residential components of the Project shall be annually evaluated to determine if any fee is due the City by Developer under this Section 4.10. Exhibit L details the "Estimated Assessed Value" and the "Estimated Private Investment" and the construction and assessment schedules for the residential and commercial components of the Project. (c) It is anticipated that the commercial and residential components of the Project will be assessed annually as of March 1 (beginning in 2009). Official notice of the assessed value of such components shall be received on a date on or after such March 1, which March 1 shall be deemed the "Determination Date." In the event the construction schedules on Exhibit L are met, no fee shall be due and owing from Developer to the City. Developer will pay a fee to the City, which shall be used to pay debt service on the Bonds or reimburse the City for Alternative Source Proceeds applied by the City to the Public Infrastructure Improvements in accordance with scheduled payments, in the event the -2- construction schedules in Exhibit L are not met, as follows (the "Development Delay Fee "): (i) A fee will be due for the commercial component in an amount equal to the lesser of (A) the Estimated Assessed Value as of the Determination Date, less the Actual Assessed Value as the Determination Date, multiplied by 3 %, or (B) the Estimated Private Investment as of the Determination Date, less the Actual Private Investment as of the Determination Date, multiplied by 3 %. Any such fee due the City shall be paid in two equal installments by July 5 and January 5 of the year following the applicable Determination Date (which payments shall be tolled for the period of time from the Determination Date until official notice of the applicable assessed valuation is received). (ii) A fee will be due for the multifamily component in an amount equal to the lesser of (A) the Estimated Assessed Value as of the Determination Date, less the Actual Assessed Value as of the Determination Date, multiplied by 2 %, or (B) the Estimated Private Investment as of the Determination Date, less the Actual Private Investment as of the Determination Date, multiplied by 2 %. Any such fee due the City shall be paid in two equal installments by July 5 and January 5 of the year following the applicable Determination Date (which payments shall be tolled for the period of time from the Determination Date until official notice of the applicable assessed valuation is received). (iii) A fee will be due for the residential component in an amount equal to the lesser of (A) the Estimated Assessed Value as of the Determination Date, less the Actual Assessed Value as of the Determination Date, multiplied by 1%, or (B) the Estimated Private Investment as of the Determination Date, less the Actual Private Investment as of the Determination Date, multiplied by 1%. Any such fee due the City shall be paid in two equal installments by July 5 and January 5 of the year following the applicable Determination Date (which payments shall be tolled for the period of time from the Determination Date until official notice of the applicable assessed valuation is received). (d). Exhibit M attached hereto and incorporated herein provides a form to be used in calculating fees due the City under this Section 4. 10, and shall be filed annually by Developer with the City no later than each April 15 in the year following the applicable Determination Date beginning April 15, 2014, and continuing annually thereafter until one year after the Project is substantially complete. The City and the Developer acknowledge that the Developer has provided to the City a completed form of Exhibit M satisfying the April 15, 2014 filing requirement which shows an amount potentially accrued of $826,885, subject to the other provisions of this Agreement and to future changes in the collection of taxes. The City will provide written notice to the Developer by ONE April 30 of each year, beginning April 30, 2014, of any Development Delay Fee due on the next following July 5 and January 5. (e) Notwithstanding any provision in this Agreement to the contrary, in no event shall (i) the total Development Delay Fee to be paid by Developer under this Agreement exceed the lesser of $1,000,000 or that amount, if exceeded, which would result in the loss of exclusion from gross income for federal tax purposes of interest on the Bonds pursuant to Section 103 of the Internal Revenue Code of 1986 (as amended), (ii) Developer be obligated to pay any fees under this Agreement if the covenants in Exhibit L are not met as a result of Force Majeure or (iii) any Development Delay Fee be due so long as there are funds remaining and unapplied in the Remaining Amount (as later defined), any TIF Revenues are on deposit in the Allocation Fund or there are otherwise adequate TIF Revenues available or reasonably forecasted by the City to be available to service the Bonds and reimburse the City for the Alternative Source Proceeds in accordance with scheduled payments. (f) Subject to applicable law, the City shall refund to Developer any Development Delay Fee paid by Developer pursuant to this Section 4.10 without interest subject to the satisfaction of the following: (i) the TIF Revenues must exceed the amount necessary to (A) pay the debt service on the Bonds; (B) fund the required reserves on the Bonds; (C) reimburse the City for the Alternative Source Proceeds in accordance with scheduled payments; and (D) reimburse the City for any payments of debt service on the Bonds previously made by the City from sources other than TIF Revenues, excess unspent Bond proceeds, the Remaining Amount or any Development Delay Fee; (ii) the City shall have received a report from its financial consultant (which it shall obtain upon the reasonable request of Developer) (the "TIF Report") projecting that the Assessed Valuation will be sufficient going forward to generate TIF Revenues in amounts equal to or in excess of the amount necessary to pay debt service on the Bonds; and (iii) the Developer shall have satisfied its obligations with respect to the Private Investment under this Agreement. 8. Notwithstanding anything contained in the Development Agreement to the contrary, including anything contained in Article V thereof, the Parties hereby agree that Developer shall undertake the completion of those certain remaining Public Infrastructure Improvements set forth on Exhibit C -1 attached hereto and made a part hereof (the "Remaining Infrastructure Improvements ") subject to the following terms and conditions: a. The Parties acknowledge that in connection with certain construction activities relating to the Public Infrastructure Improvements performed on behalf of the Redevelopment Authority, Developer has received insurance settlement proceeds in the amount of $223,908.58 (the "Insurance Funds ") and the Dedication Funds (as later defined) amounting to $214,573.09 (the Insurance Funds and the Dedication Funds collectively referred to as the "Infrastructure Funds "). In consideration of Developer's agreement to undertake the completion of the Remaining Infrastructure Improvements, the Insurance Funds are hereby assigned to Developer. Developer shall have the right to -4- use the total amount of the Infrastructure Funds in order to complete the Remaining Infrastructure Improvements in accordance with Exhibit C -1 hereof (the "Cost Schedule "). The Parties hereby agree that the total amount necessary to complete the Remaining Infrastructure Improvements is $260,095.79 after Draw #1 and Draw #2 per the Cost Schedule. b. The Developer agrees to undertake the completion of the Remaining Infrastructure Improvements and hereby agrees to utilize the Infrastructure Funds to do so. Subject to Developer's prior expenditure of all of the Insurance Funds in accordance with the Cost Schedule, Developer shall draw upon the Dedication Funds for the completion of the Remaining Infrastructure Improvements. Until final completion of the Remaining Infrastructure Improvements, Developer shall provide the City with a semi- annual report detailing the components of the Remaining Infrastructure Improvements completed since the last report and the amounts of the Insurance Funds and the Dedication Funds used in connection with such completion and requesting the right to apply the Infrastructure Funds to defray the cost of completing such components, which request the City shall not unreasonably withhold or delay. If Developer does not receive notice of a denial of such request within fifteen (15) days after the delivery of the report, the request shall be deemed approved. The Developer agrees to complete the Remaining Infrastructure Improvements by December 31, 2015. C. The Parties hereby agree that from and after the Effective Date, the Construction Management Agreement shall be terminated and of no further force and effect. d. Subject to the Parties execution and delivery of this Amendment and the compliance therewith by the City and the Redevelopment Authority, the Redevelopment Authority shall be relieved from any and all further obligations under the Development Agreement to complete the remaining Public Infrastructure Improvements. 9. Notwithstanding anything contained in the Development Agreement to the contrary, if annual TIF Revenues for any year during the Term exceed the amount necessary to (hereinafter, "Excess TIF Revenues "): (i) pay the annual debt service and related paying agent fees on the Bonds; (ii) fund the required reserves on the Bonds; and (iii) reimburse the City for the Alternative Source Proceeds in accordance with scheduled payments for the applicable year, such Excess TIF Revenues shall be held by the Commission on deposit in the Allocation Fund for Allocation Area No. 2 and used solely (until receipt of the TIF Report) when necessary to make debt service payments to compensate for any TIF Revenue shortfalls, if any, which may occur in any subsequent year of the Term. The Parties agree that the Allocation Fund has a balance as of October 31, 2013, of $1,416,139 (which is net of the amount of $214,573.09 to be paid by the Commission pursuant to Section 9 hereof). Upon receipt of the TIF Report, the Commission may use Excess TIF Revenues for any purpose permitted by law after the Commission has refunded to the Developer any Development Delay Fee paid by the Developer as set forth in Section 4.10(f) of the Development Agreement as amended hereby. 10. Developer agrees that the consideration referenced in Section 6.4 of the Original Development Agreement to be paid to Developer or its affiliate for dedication of right -of -way -5- shall equal the amount of $792,575.00 payable as follows: (i) $214,573.09 (the "Dedication Funds ") will be paid by the Commission to Developer within thirty (30) days of the execution of this Amendment and such amount will be used by Developer for the purpose of completing the Remaining Infrastructure Improvements; and (ii) the balance of such consideration (the "Remaining Amount ") shall be applied as a credit to any Development Delay Fee due from time to time from the Developer to the City until such Remaining Amount is exhausted, it being agreed and understood that the first source of payment of any Development Delay Fee shall be a credit against the Remaining Amount. In the event that no Development Delay Fee is due pursuant to the terms of the Original Development Agreement as amended hereby, the City shall pay Developer the Remaining Amount upon the satisfaction of the requirements set forth in items (i) and (ii) of Section 4.10(f) of the Development Agreement as amended hereby. It is further agreed and understood that the Developer shall not otherwise seek or be entitled to payment of such consideration. 11. Exhibit G and Exhibit L to the Original Development Agreement are hereby deleted and replaced with the corresponding exhibits attached to this Amendment. 12. Exhibit M to the Original Development Agreement is hereby amended as follows: (i) references to the "M' fee percentage are hereby changed to "2 %" to be consistent with the modifications to Section 4.10(c)(ii) set forth in this Amendment, and (ii) references to the "2 %" fee percentage are hereby changed to "M' to be consistent with the modifications to Section 4.10(c)(iii) set forth in this Amendment. 13. Exhibit P to the Original Development Agreement is amended only as to the "Hotels" component as reflected on the amended Exhibit P attached to this Amendment. 14. The Parties acknowledge and agree that, to the knowledge of any signatory, no party is in default. The Parties further acknowledge and agree that the Development Agreement, as modified by this Amendment, is hereby reaffirmed, ratified and confirmed in its entirety to be in full force and effect. Except as specifically amended or modified by this Amendment, all terms and conditions contained in the Development Agreement shall remain in full force and effect. 15. This Amendment may be executed in several counterparts by the Parties, and all such counterparts, when taken together, shall constitute this Amendment. 16. This Amendment shall be governed by and construed and enforced in accordance with the law of the State of Indiana. [The signature pages follow.] IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the Effective Date. COMMISSION: SOUTH BEND REDEVELOPMENT COMMISSION Marcia I. Jones, President ATTEST: Valerie Schey, Secretary CITY: CITY OF SOUTH BEND, INDIANA Pete Buttigieg, Mayor ATTEST: John Voorde, Clerk REDEVELOPMENT AUTHORITY: SOUTH BEND REDEVELOPMENT AUTHORITY Raphael Thomas, President ATTEST: Jose Alvarez, Secretary (Signature Page to Second Amendment To Development Agreement) DEVELOPER: KITE REALTY GROUP, L.P. John A. Kite, Chief Executive Officer (Signature Page to Second Amendment To Development Agreement) Exhibit C -1 Cost Schedule Remaining Infrastructure Improvements: Site improvements relating to Building 1 through 9 (Champions Way, Cityhome and Courtyard Townhomes), the Flats and the Pond area. Insurance Funds with Kite to be drawn upon Dedication Funds with Kite to be drawn upon Total Infrastructure Funds $223,908.58 $214,573.09 $438,481.67 DRAW #1- ACTUAL COSTS $90,764.00 Site improvements associated with Building 4 $57,290.80 Sanitary work associated with Building 4 $12,565.20 Pond Area Improvements $20,908.00 Remaining Insurance Funds with Kite to be drawn upon $133,144.58 Remaining Dedication Funds with Kite to be drawn upon $214,573.09 DRAW #2 $87,621.88 Site improvements associated with Building 5 $20,917.50 Sanitary work associated with Building 5 $10,471.00 Site improvements associated with Building 7 $17,979.78 Sanitary work associated with Building 7 $16,753.60 S/I re: alley between Buildings 6/7 and 8/9 $21,500.00 Remaining Insurance Funds with Kite to be drawn upon Remaining Dedication Funds with Kite to be drawn upon Total Infrastructure Funds Remaining $45,522.70 $214,573.09 $260,095.79 Exhibit G Schedule of Substantial Completion COMMERCIAL AREA Retail /Office: Apartments: HOTEL AREA Full Service Hotel: Limited Service Hotel: RESIDENTIAL AREA Garage Wrap Condos: City homes (14): February 28, 2011 February 28, 2011 February 28, 2016 February 28, 2011 February 28, 2014 February 28, 2012 EXHIBIT L ESTIMATED ASSESSED VALUE, ESTIMATED PRIVATE INV ESTMENT AND DEVELOP M ENT SC HE DULE Exhibit P Hotel Drawings HOTELS (PFVS Drawings) A -101: Full Service Hotel Ground Floor A -102: Full Service Hotel Guestroom Floors 2 -6 (CSO Drawings) A201: Limited Service Hotel Ground floor dated 2/9/09 A202: Limited Service Hotel Guestroom floors 2 -5 dated 2/9/09