05/03/11 Work Session - Laserfiche WebLink

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HRA BUSINESS Case #1: Consider Flaherty and Collins Financing Options Development Manager Lazan reviewed the staff report. He indicated there is some appeal to assisting in the financing to help the deal go through. He reviewed the history of the project and highlighted the vertical size of the building, the architecture, and the fact that it is needed to support the rail stop. He noted the elevation is four stories tall and it will be visible from Highway 10. Executive Director Nelson commented there was overwhelming feedback at the Business Expo the previous weekend that residents are happy that something is happening. The community supports the efforts of the City and supports the push to bring projects forward. Development Manager Lazan reviewed the timeline of the project and the milestones that need to be reached. He said if the HRA can create a package, the other entities that are involved would be interested in moving ahead. He reviewed the finance challenges as well. One of the most difficult challenges is finding a comparable value. The uncertainty of the rail station is a factor as well. The lending banks want to know the answers to these situations. If the HRA decides to not go forward with helping the Flaherty & Collins project, it must decide what type of project would work. There was discussion regarding the feasibility of subsidized housing. Discussion regarding the exterior and architectural standards also took place. Commissioner Backous offered his opinion that if the project cannot float on its own, then it should not be built. A good project is good whether that is now, or in six months. The HRA has already heavily participated in this project, and it should be very careful about going further. Development Manager Lazan explained the second option to helping the developer is to become the mezzanine lender. This is someone who comes in after the first lending and provides gap financing. He noted the HRA would become the LLC ownership. It means that the HRA would take the lead in the project if something unforeseen happens. He explained this is well accepted in real estate lending. If the HRA acts as a lender, it would be in the form of a general obligation TIF bond in the new district. It would be backed by TIF revenue and then a tax levy. The bank suggested the HRA become a mezzanine lender rather than offer a second mortgage. Development Manager Lazan explained another option is the 3 -year term diminishing note. The PNC Bank would extend their note and pay the HRA directly as the lease thresholds are met. The HRA would be taken out as a lender as the thresholds are met, and then removed completely at permanent financing. The rate and time structure is yet to be negotiated. The bank did agree with this option. The agreement would be with the HRA and not the bank. Commissioner Elvig questioned what the next step would be if the TIF financing didn't go through. Housing and Redevelopment Authority / May 3, 2011 Page 2 of 4