Stallings, Kristy. Kristy,

Transcription

1 Stallings, Kristy From: Sent: To: Cc: Subject: Attachments: Keith Copaken Wednesday, February 08, :18 AM Stallings, Kristy 'Snyder, John L.'; 'Jeff DeGasperi'; MSchlup TDD Exec Summary for FAED Submittal Executive Summary - Corbin Park (TDD) Kristy, For your review and inclusion in the Council packet is a TDD Executive Summary (drafted by John Snyder) of the issues we want to discuss at FAED and get a positive direction on from FEAD. The summary contains a short history, but mainly focuses on our recent progress and issues to approve as we look forward. Let me know if you have any questions. Also, lets touch base Monday to go over the meeting sequence and any last minute details that come up. Thanks. Keith Keith Copaken Copaken Brooks Town Pavilion 1100 Walnut, Suite 2000 Kansas City, MO Please note our new e mail and web site addresses. 1

2 EXECUTIVE SUMMARY Corbin Park, 135 th & Metcalf, Overland Park, Kansas - Transportation Development District A. Background - Project History On June 2, 2008, the Governing Body of the City of Overland Park, Kansas (the City ) passed Ordinance No. TDD-2753 to create a transportation development district at the southeast corner of 135 th Street and Metcalf Avenue in Overland Park, Kansas (the TDD or the Corbin Park TDD ) for the Corbin Park shopping center (the Project ). The underlying Petition Requesting the Creation of a Transportation Development District (the Petition ) was filed with the City Clerk on April 2, Following the creation of the Corbin Park TDD, a certain Development Agreement dated September 8, 2008 was executed by 135 Metcalf, L.L.C. and State Line, LLC (collectively, the Original Developer ) and the City. In Article V, Section A, the Development Agreement contemplated and approved the further assignment of the Development Agreement, and all rights thereunder, to Corbin Park, L.P. (the Developer ), as well as a collateral assignment of Developer s rights under the Development Agreement to Bank of America, N.A., as agent (the Developer s Lender ) in connection with the construction loan for the Project. The Developer assumed the obligations of the Original Developer under the Development Agreement pursuant to a certain Assignment and Assumption of Development Agreement executed October 8, Developer further executed a certain Collateral Assignment of Development Agreement and Related Rights in favor of Developer s Lender. The Corbin Park TDD provided for the creation of a TDD sales tax within the Project (the TDD Sales Tax ), which was to originally commence on July 1, 2009 or any other effective date the City may approve by ordinance if a change in the effective date outlined herein is requested in writing by all owners of record in the district (see Ordinance No. TDD-2753). On May 4, 2009, the City received a Request for the Delay of the Effective Date of the TDD Sales Tax from July 1, 2009 to October 1, The Request for Delay was not filed in time with the City to delay the commencement of the TDD Sales Tax on July 1, On June 1, 2009, the City adopted Ordinance No. TDD-2815 which provided that the TDD Sales Tax would be collected from July 1, 2009 to October 1, 2009 and would thereafter be discontinued and delayed until October 1, The City received another Request for Delay of the Recommencement of the TDD Sales Tax from October 1, 2010 to October 1, On June 21, 2010, the City adopted Ordinance TDD-2878 to approve such extension of the TDD Sales Tax to October 1, On January 5, 2010, Developer filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Bankruptcy Code (the Bankruptcy Code ) pending in the United States Bankruptcy Court (the Bankruptcy Court ) for the District of Kansas (Case No ) (the Bankruptcy Case ). Developer, as debtor under the Bankruptcy Case, was ultimately unsuccessful in a restructuring of the Project and Developer (with approval of Developer s Lender) marketed the Project for sale. B. Recent Events - Aspen Square Aspen Square, Inc. (Aspen Square ), a Kansas corporation owned solely by Michel L. Schlup, executed a certain Agreement of Purchase and Sale and Joint Escrow Instructions on June 30, 2011 (the

3 Stalking Horse Contract ) with the Developer. Aspen Square, through its authorized agents and representatives (Michael G. Schlup ( Mr. Schlup ) and John L. Snyder of the SNR Denton law firm) had various informal meetings with the City, as well as a meeting with the FAED committee in July Based upon timing and due diligence issues under the Stalking Horse Contract, Aspen Square ultimately terminated such Stalking Horse Contract. Following termination of the Stalking Horse Contract, the Developer (with approval of Developer s Lender) held an auction for the sale of the Project within the Bankruptcy Court. Aspen Square was the successful bidder at such auction and executed a certain Agreement of Purchase and Sale and Joint Escrow Instructions dated October 24, 2011 (the Final Purchase Contract ) which was approved by the Bankruptcy Court pursuant to a certain Order Approving Sale of Property Free and Clear of Claims, Liens, Encumbrances and Interests (the 363 Order ) on November 15, On November 30, 2011, Aspen Square closed on its purchase of the Project from the Developer. At Closing, the Developer assigned all its rights in the Corbin Park TDD, and the Development Agreement (and all rights thereunder) to Aspen Square. Further, at Closing, the Developer s Lender released its lien and any interest in the Corbin Park TDD and the Development Agreement (and all rights thereunder). Pursuant to the Final Purchase Contract, more than 50% of the purchase price was allocated to the assignment of the Corbin Park TDD and the assignment of the Corbin Park TDD to Aspen Square was consideration under the Final Purchase Contract. On or around Closing, Aspen Square executed a certain development agreement with Carson Development, Inc. ( Carson Development ) owned by Mr. Schlup to act as the developer of the project. Further, Aspen Square executed a certain development services and consulting agreement with Copaken Brooks, LLC ( Copaken ) to act as the development consulting on the Project. Following Closing, Carson and Copaken have had various meetings with the City in connection with the Project, which included consideration of a new site plan for the Project and assignment of the Corbin Park TDD to Aspen Square. C. Existing Development Agreement - Corbin Park Pursuant to the Development Agreement, the Developer is to undertake certain improvements to the Project, such as: (i) improvements to 135 th Street from Metcalf Avenue to Nall Avenue; (ii) improvements to 138 th Street, Lamar Street and the interior Loop Road of the shopping center (including paving, storm improvements and lighting); (iii) signal improvements at 135 th Street and Riley Street, 138 th Street and Metcalf, 135 th Street and Glenwood Street, 138 th Street and Lamar Avenue, and 139 th Street and Metcalf Avenue; and (iv) mass grading and erosion control (collectively, the TDD Improvements ). The original estimated cost of such TDD Improvements was $33,304, The Development Agreement further provides that the TDD Improvements must be in conformance with the Revised Preliminary Development Plan, Final Development Plan and with all zoning ordinances, building codes, etc. adopted by the City with respect to the Project. Pursuant to the authorizing ordinance (TDD-2753) adopted by the City, the City approved a maximum cost of the TDD Improvements incurred under the Corbin Park TDD of $30,000,000. To date, the City has approved and certified that $22,439, has incurred at the Project

4 Under the existing Development Agreement, such agreement contemplates the issuance of TDD bonds (the TDD Bonds ) to finance such TDD Improvements, which would be issued upon the occurrence of the following: (i) completion of TDD Improvements; (ii) adequate documentation showing that TDD Sales Tax revenue sufficient to pay debt service on the TDD Bonds with a coverage factor acceptable to the underwriter (with a maximum principal amount of the TDD Bonds shall be $30,000,000), (iii) Kansas Attorney General approves transcript of proceedings relating to the TDD Bonds pursuant to KSA and (iv) bond counsel opinion received. Pursuant to Article V, Section A of the Development Agreement, the Development Agreement cannot be transferred without the prior written approval of the City (which will not be unreasonably withheld), except as to certain pre-approved transfers (as noted above) and except for affiliate transfers. D. Requested Changes to Development Agreement Aspen Square has requested the City approve certain modifications and revisions to the Development Agreement as follows: (1) Approve the assignment and assumption of the Development Agreement to Aspen Square. As noted above, the Developer has assigned all of its rights under the Development Agreement to Aspen Square at Closing under the 363 Order and the Developer s Lender has released its interest in the Corbin Park TDD (and in the Development Agreement). Such an assignment was contemplated in the Final Purchase Agreement and in the 363 Order and was a major consideration for the transaction. Based upon the approval of the Final Purchase Contract on November 15, 2011 (based upon the 363 Order) and the required closing on November 30, 2011 (15 days later), Aspen Square did not have time to obtain such City approval prior to Closing. Pursuant to the standard set forth in the Development Agreement, the City will not unreasonably withhold approval to a transfer of the Development Agreement (or any rights thereunder). Acknowledgment that Aspen Square is credited for entire $22,439, of certified TDD Improvements performed at the Project and eligibility of up to $30,000,000 in the aggregate for such TDD Improvements (as originally approved by the City). Development Agreement runs with the land and provides for an assignment mechanism to obtain City approval (not to be unreasonably withheld). The original Developer, the Developer s Lender and the Bankruptcy Court all approved such assignment to Aspen Square in the Final Purchase Contract, the 363 Order and the closing documents. Such assignment was consideration under the transaction and contemplated by all parties involved. Such an assignment is a condition to Aspen Square s current construction financing. Aspen Square is expected to comply with the City s requirements and is reasonably expected to obtain the same in return from the City in connection with the Project. The City, the Project and all tenants and customers of the Project have benefited from the existing TDD Improvements (certified at over $22 million in cost)

5 (2) Approval of the collateral assignment of the Development Agreement and corresponding TDD rights to Aspen Square s lender(s), which is currently Great Southern Bank, but may include other lender(s). (3) Pre-approval by the City of further assignment of the Development Agreement to a subsequent purchaser of the Project without City approval if the potential purchaser meets city requirements for retail shopping center experience and financial capability to complete the Project. (4) Approval of the revised site plan proposed by Aspen Square (a copy of which is attached hereto and will be incorporated into the revised Development Agreement). (5) Approval of an alternative pay-as-you-go structure, so that Aspen Square may either be paid over time based upon a pay-as-you-go mechanism or under the issuance of TDD Bonds (as originally contemplated). Under either structure, the City would not guarantee the TDD Bonds or payment under the pay-as-you-go structure. When the Development Agreement was originally adopted, the pay-as-you-go mechanism was not available by state statute. The current TDD agreement typically used by the City contains a pay-as-you-go alternative. Aspen Square intends to work with the City finance and legal department to use the current version of the City s standard TDD development agreement as a basis to document these and other mutually agreeable changes and the assignment of the Corbin Park TDD to Aspen Square. The addition of the pay-as-you-go mechanism does not create any added risk or cost to the City. (6) Approval to postpone the commencement of the TDD Sales Tax for two (2) years until October 1, Such postponement allows for more time for Aspen Square to lease vacant space at the Project, which will create more TDD Sales Tax and help ensure the Project s success. (7) Acknowledgment of the full term of the TDD Sales Tax for a period of twenty-two (22) years after the commencement date of October 1, 2014 (through September 30, 2036)