Item B: Beam Development Project Update

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currently working on hazardous materials abatement and interior clean-up. Beam expects to submit an application for a demolition permit in early February, 2010. In addition to the request for additional time, Beam requests that the project proceed in phases, beginning with the rehabilitation of the Centre Court as Phase I. Phase II would be new construction in the adjacent vacant parcel. Beam is working with a private party on the possibility of new construction for either office with ground floor retail, or a mix of office, retail and housing. The financial picture for either Phase II scenario is extremely challenging; the income generated by the project will not cover the cost of financing the construction. At this time, Beam is not able to move forward with the new construction, but continues to seek a viable development scenario for this site. In the original PSA, the City committed to lease a maximum of 50,000 square feet in the new building for City office use, if Beam were unable to secure adequate leases by private tenants. In the attached outline of terms, the City’s commitment to lease space for City offices in the proposed new construction is removed. The removal of the lease commitment does not preclude the City from leasing space in the new construction in the future. The City did not have a commitment to lease space in the Centre Court Building; the use of the HUD 108 financing precludes City offices in that building. Private Financial Investment Due to the changes in the financial and real estate markets, the amount of equity available to and required for the project has been reduced. Specifically, in the original project, Beam estimated that $3,000,000 would be available from New Market Tax Credits; these funds are no longer available for this project. In addition, Beam had assumed that $2,000,000 would be available in Historic Tax Credits. Due to multiple alterations of the structure and exterior façade of the building, the State Historic Preservation Office (SHPO) has determined that rehabilitation of the Center Court cannot meet the federal standards required for the 20% tax credit, and is instead eligible only for a lesser tax credit, providing an estimated $300,000 for the project. The project can proceed with the intent of capturing the historic design and character of the building, but the rehabilitation will not be at the higher standard of historic reconstruction that would have been required by SHPO. Attachment C illustrates the difference in the sources of funds for the original and revised projects; Attachment D provides an image of the exterior of the building after the proposed rehabilitation. Distribution of Net Proceeds In the original agreement, the loan to Beam made from the BEDI grant was to be repaid when Beam reached a 13% return on investment. In this proposed amendment, repayment of BEDI funds will be from the distribution of net proceeds (net project revenues after related expenses have been deducted). Net proceeds will be allocated between the URA and Beam based on the percentage of financial investment, which is approximately 60% City and 40% Beam. Based on the project’s current financial plan, net proceeds are anticipated to occur starting in year three. In the original agreement and in this proposed amendment, repayment of Beam’s deferred developer fee will only occur after the BEDI has been repaid in full. No change is proposed to the interest-only payments due during construction with principal and interest payments beginning after two years. The proposed amendment would adjust the term of the Z:\CMO\2009 Council Agendas\M091214\S091214B.doc