Item D: Downtown Development Update - ORI

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The most recent cost estimate for the project is $24.6 million, which is an increase from previous cost estimates in the $22-$23 million range. The most recent cost estimate includes some value-engineering to cut project costs. However, ORI is hoping to value-engineer another $1 million from the project budget. The project is being developed by Portland-based Gerding/Edlen Development, and designed by Portland-based Soderstrom Architects. The general contractor for the building construction is Portland- based Skanska Construction. Financing Update ORI is continuing work with its financing consultant, Seattle Northwest Securities, to package the project financing. The primary financing for the project would be provided through a New Market Tax Credit (NMTC) financing structure. The NMTCs have been made available through Baltimore-based CBO Financial. Seattle-based Home Street Bank (“investor”) is proposing to utilize the tax credits through its financing investment in the ORI project. The investor is positioned to make two financing contributions to the project, the first of which is a conventionally-structured real estate loan at 80% loan- to-value. A second appraisal for the new ORI building is pending review, with the value expected to be approximately $15.5 million. This would generate an investor loan of $12.4 million (80% loan-to- value). The investor equity provided by the NMTCs will support a second investor loan in the amount of approximately $5.5 million. In addition to the investor financing, ORI has secured $1.4 million through its fundraising campaign. Based on a current project cost of $24.6 million, ORI is looking to fill a financing gap of approximately $5.2 million. ORI has ongoing discussions with the investor regarding a short-term loan that would bridge ORI’s fundraising campaign efforts. However, the investor’s willingness to provide this bridge loan is unclear at this time. ORI has requested that the City consider providing financing to help it address the current gap. Although no specific financing offers have been made, staff has discussed providing subordinate financing in the range of $2 million. Although the ORI project lacks equity for collateral purposes, its grant awards include indirect cost recovery for occupancy costs. This cash flow, along with grant provisions that allow for reimbursement of depreciation expenses, provides strong cash flow that can be used for debt retirement. A summary of potential financing options that could be considered is included in Attachment A. Based on the most recent Purchase and Sale Agreement terms, the URA subsidy to the ORI project is approximately $800,000. This includes discounted land cost of approximately $682,000, credits towards environmental investigation and basement removal cost of approximately $68,500, and waiver of the alley vacation assessment valued at approximately $46,500. RELATED CITY POLICIES The proposed ORI project is consistent with the policies and implementation strategies included in the Eugene Downtown Plan, including: Downtown development shall support the urban qualities of density, vitality, livability and diversity ? to create a downtown, urban environment. Help employers locate, remain and expand downtown by targeted use of economic tools and ? incentives. L:\CMO\2006 Council Agendas\M060213\S060213D.doc