Item B: West Broadway Financing Plan

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Financial Plan for Property Acquisition The financial plan for the acquisition of the three properties is set out in the chart below. The Centre Court and Washburne buildings would be purchased using a combination of a HUD Section 108 Loan, BEDI grant and urban renewal tax increment funds. The Diamond property would be purchased using tax increment funds. Finance Plan for Property Acquisition Sources of Funds Uses of Funds HUD Section 108 Loan $ 2,731,000 Acquire CC & Washburne $ 4,700,000 BEDI Grant 691,000 Acquire Diamond 291,000 Urban Renewal Cash 2,295,000 Costs of Acquisition 126,000 Debt Service Reserve* 600,000 Total Sources $ 5,717,000 Total Uses $ 5,717,000 *Only if needed. The URA is proposing to sell the Centre Court and Washburne properties to Beam and to finance Beam’s acquisition of the property. Repayment of the HUD Section 108 Loan is proposed to come from proceeds of a note associated with Beam’s purchase of the properties. Under this approach, HUD’s security from the City for the Section 108 loan would be provided primarily from a lien on the real estate, payments from Beam and additional guarantees from Beam. If necessary for HUD approval, the Agency could also provide a debt service reserve account from tax increment funds as security for the loan. (The chart above includes a placeholder for a $600,000 debt service reserve.) In the worst case, HUD may require even more security for the loan. At that point, it might be necessary to pledge tax increment funds to repay the loan. Until HUD receives the application and considers the finance plan, the Agency will not know what is needed to secure HUD approval. This finance plan allows for the Agency to use tax increment funds, if needed, to secure HUD approval. The finance plan includes additional costs of acquiring the properties and negotiating a development agreement with Beam. Costs of acquisition include a HUD fee for the Section 108 Loan, bank fees for the Section 108 Loan, real estate closing costs and City Attorney fees. Agreement with Beam Prior to purchasing the properties, the Agency expects to enter into a purchase and sale agreement with Beam. The agreement will set out the terms and conditions for redevelopment of the Centre Court and Washburne properties. Simultaneously with, or shortly after the Agency purchases the property, the Agency will sell the property on a note to Beam. Beam’s payments will cover repayment of the City’s HUD Section 108 Loan and possibly the BEDI grant. Because the terms of the agreement with Beam have not yet been determined, any estimates of the financial impact of the agreement are preliminary. Additionally, preliminary negotiations with Beam indicate a need for construction financing that could come from the remaining HUD Section 108 and BEDI funds. HUD 108/BEDI Grant Requirements The proposed use of HUD Section 108 and BEDI grant funds will qualify for compliance with HUD’s national objective to address slums and blight on an area basis. In accordance with HUD regulations, no more than $3,422,000 (30%) of the combined annual CDBG expenditures and HUD Section 108/BEDI funds may be spent on activities which aid in the elimination of slums or blight. The 30% limitation F:\CMO\2008 Council Agendas\M080227\S080227B.doc