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HomeMy WebLinkAbout2008-06-05 Redevelopment Authority Minutes• June 5, 2008 1:30 p.m. Presiding: Jose Alvarez SOUTH BEND REDEVELOPMENT AUTHORITY SPECIAL MEETING 1308 County-City Building 227 West Jefferson Boulevard South Bend, IN 46601 The June 5, 2008 Special Meeting of the Redevelopment Authority was called to order at 1:34 p.m. by its President, Jose Alvarez. There was a quorum present.. 1. ROLL CALL Members Present: Mr. Jose Alvarez, President Ms. Carolyn V. Pfotenhauer, Vice President Member Absent: Mr. Ray Thomas, Secretary Redevelopment Staff: Ms. Cheryl Greene, Legal Counsel Mrs. Jenny Hullinger, Recording Secretary Ms. Jennifer Laurent, Economic Development Specialist Others Present: Mr. Larry Metiever, Legal Counsel Mr. Randy Rampola, Baker & Daniels • 2. APPROVAL OF MINUTES a. Approval of the minutes of May 21, 2008 Upon a motion by Carolyn Pfotenhauer, seconded by Jose Alvarez, and unanimously carried, the Authority approved the Minutes of the Regular Meeting of May 21, 2008. 3. NEW BUSINESS a. Authority approval requested for Parking Garage Lease with Kite Realty Construction, LLC Mr. Rampola said they have discussed the lease with Kite's attorneys and there is one large issue that is not settled yet: the Casualty insurance and how the casualty insurance proceeds will be used. Although they had a lengthy discussion. this morning the issue is not settled so no action can be taken on this until that issue is settled. Mr. Rampola said he could tell the Authority what the lease is meant to do. The financing that was done for Eddy Street Commons was between the Authority and the Commission. The primary use of the bond proceeds will be to build a parking garage, approximately $17M of the net $36M. The remainder of the proceeds will be used for traditional public improvements in and around Eddy Street Commons: the roadways, sidewalks; etc. The parking garage is the subject The South Bend Redevelopment Authority June 5, 2008 Meeting Minutes of the lease. Kito will maintain ownership of the ground, they will lease the ground to the Redevelopment Authority who builds the parking garage and sublease the parking garage and the ground to the Redevelopment Commission (by means of the financing lease which is already in place). The Commission will sub-sublease the garage to a Kite entity that will operate the garage. The City, the Authority or the Commission will not be in the business of operating the garage. The Redevelopment Commission is going through the process of disposing of the garage to that Kite entity at the end of the financing, but during the twenty five years of the financing the Kite entity will lease the garage from the Redevelopment Commission. The sub-sublease will provide, at the end of the lease, for the Kite entity to become the titled owner. There are a lot of obligations in the lease that, as you read it, you would wonder why the Authority is obligated to do them. Most of the obligations will pass through the Authority to the Commission to the Kite entity. The Kite entity is expected to operate the garage with due maintenance, etc. The Authority's responsibility is to build the garage and finance it. The Authority members asked how the lease had changed from the document they had before them to what Mr. Rampola had. Mr. Rampola said the part that has changed instill in negotiation so it does not merit discussion at this point. Mr. Alvarez asked for some clarification on some issues. Mr. Rampola said that Kite will appear to own the garage even during the lease. They will be responsible for maintenance, security, payment of taxes, insurance, everything related to the operation of the garage. The only reason Kite cannot be the owner now is because of the bond financing. Ms. Pfotenhauer asked what the issues were with the casualty insurance. Mr. Rampola said the issue is in relation to how the bond documents are written. If the garage collapses and is destroyed, the obligation is to have an architect tell the Authority how long it would take to rebuild the garage. There is rental interruption insurance for two years provided in the financing lease between the Authority and the Commission. If the architect says it can be rebuilt in two years then the Authority would apply the casualty insurance proceeds to rebuilding the garage. If the architect says it will take longer than the two years then the bond documents require that the casualty proceeds would be used to pay off the bond holders as much as is possible. The bond documents do require that the casualty insurance be maintained in an amount that equals 1.00% of the replacement cost or the cost of paying off the bond holders, which ever is more. Kite's concern is that if there is no parking garage the whole development would collapse. The hotel can't operate without a parking garage. Kite never wants to see a situation where there is not a parking garage. Kite is not comfortable with a potential that bond holders could be paid off. We are looking at lengthening the time that rental value insurance would be provided. Two years is standard for the insurance and the garage construction presently should be completed in about nine H:\WPDATAWUTHORTY\060508. MIN.DOC 2 The South Bend Redevelopment Authority June 5, 2008 Meeting Minutes months. If we lengthen the insurance to five years we could almost guarantee a garage could be rebuilt. Ms. Pfotenhauer asked the cost of the insurance. Mr. Rampola said insurance for two years is a little over $3,000 and would be double that for four years. He would have to ask the insurer what five years would cost. Mr. Alvarez expressed concern that the Kite entity that. we would be working with won't have any assets. Mr. Rampola said none of the Eddy Street Commons project involves the Kite parent company. There are three or more separate Kite entities. Mr. Rampola said the University of Notre Dame has similar agreements with Kite, as do all of the lenders. There are a number of lenders who are all making the same value judgments about the project. Mr. Rampola said the responsibilities of the landlord are minimal under the lease. With the University right there, Kite won't fail. The University would not let them fail. The University seems to be very conservative in their agreements. The University did not sign their agreement with Kite until Kite could bring in their hotel agreement. Ms. Greene asked the status of the sublease. Mr. Rampola said the thought is to have the sublease mirror the lease as much as possible so that all of the obligations would just. flow down to the sublease. Ms. Greene said that as part of this project the Board of Public Works has gone through the bidding process,. and is waiting to award the bids when the lease has been approved by the Authority. Ms. Pfotenhauer asked, since this project is more complicated than any other projects we have done in the past, was Mr. Rampola aware of anything substantially different in the lease at this point, that the Authority should be made aware of. Mr. Rampola said the lease is a pretty typical real estate lease. The interesting thing is that the Authority has no ability to carry out these obligations, but this is probably no different than a commercial lease that has multiple parties with a subleasee that is ultimately responsible. The most difficult situation is where the bonds intersect with Kite's expectations. Kite wants to act like the owner of the garage, and they should be responsible for the garage, but if there is a casualty, who gets the casualty proceeds? The sub-sublease should be able to be written quickly to mirror this lease as soon as it is done. The Authority- Commission lease, which has already been signed, will need to be modified to match this lease after the lease is finished. Mr. Alvarez asked what would happen if the Kite entity that we are making the lease with would choose to sublease the garage to another Kite entity. Mr. Rampola said they would have to come back to the Authority because of the terms of our lease. Mr. Alvarez stated that he did not think that they would be able to transfer the lease to a non-Kite entity, and Mr. Rampola said that was correct. Ms. Greene asked if there is protection in case Kite transfers the lease to an entity that is not as cooperative as the Kite entity we enter into an agreement with. Mr. H:\WPDATAWUTHORTY\060508. MIN.DOC The South Bend Redevelopment Authority June 5, 2008 Meeting Minutes Rampola said the development agreement that the Authority has entered into with the Redevelopment Commission and Kite has tougher assignment language in it than this lease agreement. Mr. Rampola also pointed out that the Development Agreement was only in force for a couple of years while the project is being built. The lease that we are working on will last twenty five years. It seems reasonable, if ten or more years down the road after everything is built, that the Kite entity has the ability to sell out to another developer more easily since everything is built. The Authority will still be the one to give their approval as it relates to their ability to operate the facility. Mr. Alvarez said section two of the lease gives the landlord the right to mortgage the property. The tenant would have the second claim on that. Mr. Rampola said .that situation was fine since by statute the Authority does not have the right to mortgage a property. The Authority only needs to know that they can continue to receive the lease rental payments from the Redevelopment Commission. The Authority cannot assign any interest in the ground. Upon a motion by Ms. Pfotenhauer, seconded by Mr. Alvarez, the Authority agreed to table this item until the next meeting. b. Redevelopment Authority approval requested for Resolution No. 168. authorizing the issuance of the South Bend Redevelopment Authority Lease Rental Revenue Bonds of 2008 (Century Center Project) .and regarding other related matters. Mr. Rampola said the difficult part of this transaction is that. the County issued bonds in 1992 for improvements at Century Center as well as parking for the Studebaker Museum, and these bonds need to be paid off. The 1992 bonds should be paid in part by a pledge of Hotel-Motel tax revenues, which occurred yesterday at the Hotel Motel Tax Board meeting. The portion of the old bonds that are not paid by the Hotel-Motel tax revenues will be paid off by the new bond proceeds. Upon a motion by Ms. Pfotenhauer, seconded by Mr. Alvarez, the Authority approved Resolution No. 168 authorizing the issuance of the South Bend Redevelopment Authority Lease Rental Revenue Bonds of 2008 (Century Center Project) and regarding other related matters. 4. STAFF REPORT Ms. Jennifer Laurent updated the Authority on the proposed hotel development, the REI - White Lodging partnership for the Saint Joseph and Jefferson Boulevard site. This project is basically the same as the Gameday project. The site, which is owned by the Redevelopment Commission, is not particularly conducive to a parking garage and getting circulation to be efficient. So, once again, we are looking to expanding the site a H:\WPDATA4IUTHORTY\060508. MIN.DOC The South Bend Redevelopment Authority June 5, 2008 Meeting Minutes little to the west and to the north. The property to the north is most pertinent to the Authority. Ms. Laurent said there is a sewer line that runs through there, so the maximum additional feet would be 22'. This would also require taking the southern most row of parking at the College Football Hall of Fame, but would still allow good circulation in that parking lot. Ms. Laurent said the. process requires transferring property from the Authority to the Commission, who would turn it over to the developer. To be able to transfer the property, from Ms. Laurent's understanding, is to prove that we are not taking more than 10% of the overall property to satisfy the bond requirements. This process has been done previously for the South Bend Chocolate Cafe. Ms. Greene said there are a couple of other points that need to be made. When we did the Chocolate Cafe project, one other issue has to be with the Fire Department getting through the two streets and the second was a clear easement issue that was to be maintained from Century Center to the Courthouse. This site easement does not exist, but we had to deal with that when the South Bend Chocolate property expanded. There is a small distinction between this project and Gameday's. Gameday had extensive conversations with the Hall of Fame about some shared parking and Ms. Greene was not sure how it all ended up. She wanted the Authority to be aware of these issues. Ms. Laurent said we have been in communication with the College Football Hall of Fame's Executive Director through this and tried to be as communicative as possible as information.. comes from the developer. What we are looking at doing, since we will loose the one row of parking is to create on- streetparking on St. Joseph. There will be a few spaces in front of the Hall of Fame and across the street. The lanes are wide enough to be able to add on-street parking on both sides of the street. Ms. Laurent said one day St. Joe may be two-way traffic and we are trying not to do anything to preclude that. Ms. Laurent said we are bringing in traffic calming measures to slow the traffic down, and are working with INDOT and our city engineers. This issue of traffic calming on St. Joseph Street and uniting the art center with the rest of downtown has been discussed for five years. Ms. Laurent wanted to let the Authority know that we are working on this and official action will be .coming. On June 6 the Redevelopment Commission will look at the development agreement with the developer. The hotel. with be a Courtyard by Marriott and be at least eleven floors high. 5. NEXT MEETING DATE: June 18, 2008 6. ADJOURNMENT There being no further business to come before the Redevelopment Authority the meeting was adjourned at 2:15 p.m. Jos Alv z, President H:\WPDATAWUTHORTY\060508. MIN.DOC Donald I s, Director