The City Council approved the Eastland Center Redevelopment Agreement (the “TIF Agreement”) and chose Eastland Center Associates LLC (“Eastland”) to act as the Developer. Pursuant to the TIF Agreement, Eastland assigned all of its rights, duties, interests and obligations as they are related to Parcel 13 to Avenida Partners, LLC (“Avenida”).
On July 21, 2009, Avenida and the City entered into an Agreement For TIF Obligations Under Assignment (the “Original Agreement”), which set forth provisions regarding the reimbursement of Avenida. The Original Agreement was assigned by Avenida to Eastland Senior Apartments, Inc. (the “Developer Assignee”) pursuant to that certain TIF Assignment Agreement dated July 21, 2009 (the “TIF Assignment”). The Original Agreement was then amended on December 21, 2011, to extend the original deadline for performance.
Pursuant to the Original Agreement, Developer Assignee’s acquisition costs for Parcel 13 in the amount of $990,300 were approved by the City for reimbursement from TIF revenues under the Eastland TIF Plan as Developer Reimbursable Project Costs under the TIF Agreement and were reimbursed by the City. The City’s reimbursement from TIF revenues was subject to (1) Developer Assignee submitting certification requests in accordance with the TIF Agreement for the costs associated with sitework on Parcel 13 incurred by Developer Assignee while developing senior residential housing on the property, and (2) repaying to the City the difference between $990,300 and the amount of sitework costs that were certified by the City as Developer Reimbursable Project Costs for the completed project. No City General Fund revenues were used for the reimbursement, and only TIF revenues were provided under this arrangement.
Additionally, Developer Assignee executed a Promissory Note and a Deed of Trust in order to provide the City with a method of securing the repayment of the funds paid to Developer Assignee in the event Developer Assignee failed to timely commence and complete construction on Parcel 13. Developer Assignee did not timely undertake the project in accordance with the terms of the Original Agreement, as amended. To date, Developer Assignee has made Interest payments in the total amount of $52,921.37 and Principal payments in the total amount of $85,654.82 (the “Paid Principal”) in accordance with the terms of the Promissory Note and Deed of Trust. To date, the amount of $114,360.02 for Interest payments (the “Outstanding Interest”) and the amount of $245,938.12 for Principal payments (the “Outstanding Principal”), for a combined balance of $360,298.14, remains outstanding and unpaid for payments calculated through January 2017 in accordance with the terms and conditions of the Promissory Note and Original Agreement. The City presently has the right to foreclose on the Deed of Trust in order to obtain funds to fully reimburse the City (for deposit in the Special Allocation Fund for the Eastland TIF Plan) for the amounts owed and due under the terms of the Promissory Note and Deed of Trust.
Developer Assignee has requested relief from the Promissory Note and the Deed of Trust in order to proceed with construction of the project, and wishes to amend and restate the Original Agreement to facilitate a restructuring of the Original Agreement in order to proceed. Developer Assignee has indicated to the City that it will be unable to proceed with construction while the Deed of Trust remains in effect.
This Amended and Restated Agreement will allow for a restructuring of the Original Agreement and provide the City with a better form of security. The Deed of Trust will be released by the City when Developer Assignee provides a letter of credit to the City which gives the City the ability to draw on the letter of credit in the event that (1) construction has not commenced by March 15, 2017, or (2) construction has timely commenced but construction is later halted for any reason and remains suspended for a period of 90 days, and construction has not re-commenced within 45 days after the City delivers written notice to re-commence construction.
The letter of credit is a better form of security for the City because, under the Deed of Trust, the City currently only has the right to force a foreclosure which can be a lengthy process and does not provide a guaranteed source of funds for the City. The letter of credit will allow the City to immediately access funds in the event that construction is not timely commenced by March 15 in accordance with the Agreement. The letter of credit includes a provision which allows the amount of the letter of credit to decrease as construction is completed. All funds obtained under the letter of credit would be credited to the Special Allocation Fund for the Eastland TIF Plan.