HomeMy WebLinkAboutItem 6: Beam Development
EURA
UGENE RBAN ENEWAL GENCY
AIS
GENDA TEM UMMARY
Public Hearing: Beam Development
Meeting Date: May 19, 2008 Agenda Item Number: 6
Department: Planning and Development Staff Contact: Denny Braud
www.eugene-or.gov Contact Telephone Number: 682-5536
ISSUE STATEMENT
The Urban Renewal Agency (URA) Board provided direction to pursue a development agreement for
the downtown Beam Development project. The public is asked to comment on terms to be included in a
purchase and sales agreement (PSA) between Beam Development and the URA.
BACKGROUND
On December 10, 2007, the URA provided direction to pursue a development agreement for the Beam
Development project and to proceed with acquisition or assignment of the purchase options on the
Washburne Building, Centre Court building and adjacent lot, within the financial constraints of the
current $33 million urban renewal district spending limit. On March 10, 2008, council approved the
supplemental budget action necessary to move forward with the purchase of the Centre Court building
and adjacent lot ($2.8 million) and the Washburne building ($1.9 million). Also on March 10, the URA
approved the supplemental budget action necessary to acquire the Diamond property ($290,360).
On March 24, 2008 (the purchase option expiration date), the Agency provided exercise notice of intent
to purchase the Centre Court and Washburne Building properties. Consistent with the terms of the
purchase option agreements, the URA paid a deposit equal to 10% of the purchase prices ($470,000).
On April 16, 2008, the URA considered next steps related to the scheduled end to the due diligence
period (May 8). The URA provided direction to “1) work with Beam and the property owner to extend
the timeline for the purchase option agreements on the Centre Court building and adjacent lot, and the
Washburne Building, 2) work towards an assignment of the purchase options to Beam, and 3) continue
to work with Beam on elements of acquisition and redevelopment financing consistent with the amounts
and terms outlined in this agenda item. If an extension of the option agreement timeline is not approved
prior to May 7, then the Agency Director shall inform the property owners and the escrow agent that the
URA will not be acquiring the property and the deposit should be returned. If a satisfactory extension is
approved, the Agency Director shall bring back terms to be included in the assignment of the purchase
options to Beam as soon as practicable.” In the discussion, the URA clarified that Beam would be
responsible for providing any needed extension money payments.
Due to considerations for the use of federal Department of Housing and Urban Development (HUD)
Section 108 Loan Guarantee and Brownfield Economic Development Initiative (BEDI) grant funds,
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staff has determined that it is in the best interest of the Agency to purchase the properties and sell them
to Beam rather than to assign the purchase options to Beam.
On May 7, 2008, the Agency and the properties owners extended the due diligence period to May 23,
2008, reduced the purchase prices. In consideration for this extension, Beam is set to provide $50,000
on May 23. The required 10% deposit and the additional $50,000 from Beam will become non-
refundable after May 23.
Prior to May 23, the URA and Beam will sign a binding PSA. The URA and Beam are in the process of
negotiating terms to be included in the PSA. Below is an outline of key terms that the URA has pursued
for inclusion in the PSA.
1. PSA Signing Date: Beam will be required to sign a binding PSA no later than May 22, 2008.
2. Deposit: Upon the signing of the PSA, Beam will be required to provide a non-refundable deposit
equal to $50,000 plus a guarantee to pay the City $470,000 if the purchase is not completed by
July 7, 2008, or shortly thereafter.
3. Closing: City shall purchase the property prior to July 7, 2008. Beam shall purchase the property
from the URA immediately thereafter.
4. City Occupancy: Oregon Research Institute (ORI) announced on May 5 that they would locate in
the Research Riverfront and not in the Beam project. Beam’s ability to finance the project is
contingent on their pre-leasing a portion of the new development. Subsequent to the ORI
announcement, Beam has engaged with a local broker to secure an anchor tenant. Should Beam be
unable to sufficiently pre-lease to secure conventional financing, the City will be prepared to fill a
limited amount of space for a specified rate. It is not the City’s or Beam’s intention to have the City
tenant the project. However, the PSA will contain language indicating the back-up plan.
5. URA Loan #1: The URA shall provide financing for Beam’s purchase of the properties in an
amount equal to the purchase prices of $3.6 million (less Beam’s $50,000). The financing terms
would likely include a 20-year amortization schedule (interest-only during construction) with a 10-
year balloon payment and an interest rate equal to the rate paid on the City’s HUD Section 108 loan.
6. URA Loan #2: The URA shall provide gap financing for Beam’s renovation of the Centre Court
building and new construction on the vacant parcel in an amount equal to approximately $6.5
million. The financing terms would include a 20-year amortization schedule (interest-only during
construction) with a 10-year balloon payment and an interest rate equal to the rate paid on the City’s
HUD Section 108 loan. The URA is unable to commit to Loan #2 until City Council and HUD have
approved the project-specific use of the borrowed HUD Section 108 funds. (The approval process
takes approximately two and a half months.) If HUD approval is not granted, the City will agree to
buy back the property.
7. Contingent Repayment of BEDI Proceeds: The portions of Loan #1 and Loan #2 derived from
BEDI grant proceeds will be repaid on a contingent basis, only if Beam reaches its target return on
investment.
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8. Project Description: The PSA shall include a commitment from Beam to move forward with a
project consistent with their proposal, including rehabilitation of the Centre Court building and a
newly constructed building of approximately 75,000 square feet on the adjacent parcel. The Centre
Court building will be designed for retail, office, and sub-surface parking consistent with the design
elevations submitted in Beam’s February 2007 RFQ response. The adjacent building will also be
designed for retail, office, and sub-surface parking.
9. Project Timing: Beam shall commence construction of the project no later than spring 2009, and
complete construction no later than two years after the signing of the PSA.
10. Reversionary Clause: In the event that Beam does not meet the construction and completion
timeline included in the PSA, the URA would have the right to re-purchase the property.
Beam has estimated the total construction costs for the renovation of the Centre Court building and the
new adjacent building to be approximately $33 million. Beam will likely defer improvements to the
Washburne Building until after the Centre Court renovation and new construction on the adjacent lot are
completed.
The URA’s financial participation in the project would be limited to approximately $10 million in
financing provided to Beam for acquisition of property and renovation/construction, plus transaction
costs and funding of a debt service reserve account for the HUD Section 108 loan. The Beam financing
would be structured as interest bearing, secured loans that would be repaid from income derived from
the completed project. The proposed source of funding includes proceeds from the HUD Section 108
loan ($8 million) and the BEDI grant ($2 million). The HUD Section 108 program includes stringent
loan underwriting criteria that will require the project to include adequate collateral and debt service
coverage. The project would also have to meet a HUD national objective (elimination of slums and
blight or job creation).
On July 23, 2007, City Council approved the use of HUD Section 108 and BEDI funds for acquisition of
the properties. This action was preceded by a July 16 public hearing at council. The proposed
construction loan (URA Loan #2) would require a separate HUD application request including a public
hearing and council resolution prior to HUD review and approval.
The total cost of the Beam project (both Centre Court and Washburne) is approximately $38 million.
The following are summaries of sources and uses for the acquisition of property and renovation/
construction:
Property Acquisition
SOURCES USES
HUD Section 108 Loan $ 2,510,000 Acquire Centre Court Property $ 2,400,000
BEDI Grant 636,000 Acquire Washburne Bldg 1,200,000
Downtown Loan Program 454,000
Total Sources $ 3,600,000 Total Uses $ 3,600,000
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Project Construction
SOURCES USES
HUD Section 108 Loan $ 5,187,000 Renovation of Centre Court Bldg $ 16,700,000
BEDI Grant Loan 1,313,000 New Construction 16,300,000
Bank Loan 15,500,000
Beam Equity 4,000,000
Historic Tax Credit Equity 2,000,000
New Mkt Tax Credit Equity 5,000,000
Total Sources $33,000,000 Total Uses $ 33,000,000
RELATED CITY POLICIES
The proposed redevelopment along West Broadway is consistent with the policies and implementation
strategies included in the Downtown Plan, including:
·Downtown development shall support the urban qualities of density, vitality, livability and diversity
to create a downtown, urban environment.
·Actively pursue public/private development opportunities to achieve the vision for an active, vital,
growing downtown.
·Use downtown development tools and incentives to encourage development that provides character
and density downtown.
·Promote multi-story, mixed-use structures downtown through financial incentives or code
amendments.
·Stimulate multi-unit housing in the downtown core and on the edges of downtown for a variety of
income levels and ownership opportunities.
·Provide and promote development and community events that reinforce downtown’s role as the
cultural center for the city and region.
·Reinforce the creative, distinctive culture of downtown as the arts and entertainment center of the
city.
In addition, future development along West Broadway is responsive to the following Growth
Management policies:
Policy 1: Support the existing Eugene Urban Growth Boundary by taking actions to increase
density and use existing vacant and under-used land within the boundary more
efficiently.
Policy 2: Encourage in-fill, mixed-use, redevelopment, and higher density development.
Policy 3: Encourage a mix of business and residential uses downtown using incentives and
zoning.
Policy 10: Encourage the creation of transportation-efficient land use patterns and
implementation of nodal development concepts.
Policy 14: Development shall be required to pay the full cost of extending infrastructure and
services, except that the City will examine ways to subsidize the costs of providing
infrastructure or offer other incentives that support higher-density infill, mixed use,
and redevelopment.
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–
This item is also related to one of the 2007-2008 Council Goals: Downtown InitiativeFacilitate
significant revitalization of downtown core.
AGENCY OPTIONS
The URA may consider the following options:
1. Approve the terms outlined above to be included in a PSA between Beam Development and the URA.
2. Amend the terms to be included in a PSA between Beam Development and the URA.
3. Determine not to move forward with a PSA between Beam Development and the URA.
AGENCY DIRECTOR’S RECOMMENDATION
This is scheduled for a public hearing only. Following testimony, the Agency Director will make a
recommendation to be included in the council packet for action on May 21, 2008.
SUGGESTED MOTION
No motion is proposed.
ATTACHMENTS
None.
FOR MORE INFORMATION
Staff Contact: Denny Braud
Telephone: 682-5536
Staff E-Mail: denny.braud@ci.eugene.or.us
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