Title
University Corners Transformational Incentive Program Application Addendum (B)
Explanation
University Corners, a project by University Development of Gainesville, LLC, is a mixed-use development proposed for the northwest corner of University Avenue and Northwest 13th Street. The project covers three City blocks extending northward towards Northwest 3rd Avenue and westward towards Northwest 14th Street. The project was originally proposed as 157 condominium units, 238 condo hotel units, 115,630 square feet of retail space, an 8-level parking garage with 1,146 parking spaces, part of which was beneath existing grade, and a new church building to replace the building currently on site.
The first two floors within the first two blocks are designated for retail and commercial. The third block will contain commercial space at street level. Floors three through seven on the first two blocks are scheduled for upscale condominiums of varying sizes. Parts of floors two, three and four, as well as all of floors five, six, and seven on the second block are scheduled for a condo hotel. The third block will have condominiums on floors two through eight, retail on floor one, and a nine story parking structure. Parking for approximately 950 spaces is provided for the complex.
The original application was reviewed in October 2005, by the CRA's consultant PMG Associates, Inc. (PMG) to provide an independent analysis of the application. PMG has extensive experience in this type work, and the principal of PMG is a certified public accountant. PMG found that a gap existed in the project, the "but for" test had been met, the project was eligible for incentives under the Transformational Incentive Program, and the City and the CRA would experience a positive cash flow from the project. PMG had determined the "but for" gap to be $39,441,000. A significant portion of the "but for" gap was created by the $19 million in land assembly costs associated with the project. This $19 million was created by a range of costs including land costs, demolition costs, buy out of tenant leases, relocation expenses, and commitments to the church in order to acquire the bulk of the land. The challenges associated with acquiring the land would be a factor in any project of this scope at this location.
The CRA, on November 15, 2005 approved the following recommendations, conditions made by the College Park University Heights Board with the addition of a modification incorporated by the Executive Director to read that the "but for" gap be changed to $37 million as reflected in the original application.
The "but for" gap for the project be established at $37 million as requested in the August 12, 2005 application and the incentive be capped at that amount.
The $37 million is the net present value of the projected incentive payment stream under the stated assumptions, utilizing the developer's cost of capital of 7.75 % as the discount rate.
The gross incentive payment under these assumptions is $98,160,438. The payments of 90% of the actual increment generated by the project be paid annually.
No change be permitted to building materials without CRA approval. If there are any changes, the CRA could reopen the incentive agreement.
The CRA reserve the right to bond the increment at a point in the future and pay the developer the net present value of the gap early.
The developer provides proof of ownership of the property required to build the project prior to the execution of the development agreement.
The development agreement allow that if those items the CRA provides incentives for fall into disrepair the CRA can use the annual increment payments to make repairs as needed.
The Executive Director and the CRA Attorney be authorized to prepare and execute any and all required documents necessary conditioned on the negotiation of an agreement, which in the Executive Director's opinion, provides suitable guarantees that the project will be built and maintained in the project plans.
Since then, nearly 18 months since the CRA approved University Corners for tax increment recapture under the Transformational Projects Incentive Program, the development has taken steps toward redevelopment of the site including demolition of the existing structures and relocations of tenants. On March 27, 2007 the developers of University Corners submitted, as required by the CRA if the project changed materially, an addendum to the application, and associated fee sent previous to that date, of the approval by the CRA on November 15, 2005 to keep existing funding as originally approved and to describe those elements that have been altered since then. There exist elements, in the latest submission of the development, that are different from the original. (No new funding is requested with the submission of the addendum.) Underground parking will be moved to the top level of the elevated parking structure and the number of residential units increases from 400 to 450, accomplished by making the larger units smaller. The overall square feet of the units will not change. First and second floor retail will be reduced 17,630 square feet to 98,000 square feet, from 115,630 square feet. Partly this is needed to make up for lost space in the underground parking facility now moving above ground, for uses such as back-of-house, security and janitorial.
The March 27, 2007 addendum to the original application was reviewed by the consultant, PMG Associates. The conclusion of the review was similar to PMG's October 2005 report. The scoring remained consistent with the original report and PMG's gap analysis indicates that the "but for" gap still is valid based upon PMG's review of the developer's new documentation.
The development agreement is the final document that encompasses the approval and terms agreed to by the CRA and the developer. In the development agreement discussions, the developer, through its counsel, has requested items that are not part of any formal document submitted to the CRA now or at the time of the original application. Some of the items requested as part of this development agreement will be rejected as inconsistent with the terms of this transformational program, i.e., the possibility of more than 90% of the increment from the Project. Similarly rejected will be the developer's request that the City of Gainesville be a party to the agreement as, in effect, a guarantor of the amount of the incentive should actions by the legislature or the City be deemed to have adversely affected the amount of incentives the developer would receive. It should be pointed out that there exist some slight and significant disagreements with the developer on items proposed to staff in a draft of the development agreement. Staff recommends that the following items are dealt with as part of any potential new condition(s) of approval and includes those recommendations below.
Staff therefore recommends that the University Corners application for incentives under the Transformational Incentive Program be approved with the same conditions that were set forth in the November 15, 2005 CRA approval with the following additions and changes, so that any issues raised in the developer drafts of the development agreements are clarified in the CRA's terms of approval.
To clarify that this conditioned approval of tax increment recapture disbursements be based solely upon the program guidelines in place at the time of the original application filed.
The City not be a party to the development agreement. The payment of increment to the developer or its representatives be clearly limited to that of the project, for the then existing duration of the CPUH Redevelopment Trust Fund/Area.
That the borrowing/lending ability of the CPUH Area/Trust Fund not be significantly negatively impacted.
Fiscal Note
Any incentives paid under this program are paid and limited by the tax increment generated by the project and no other increment from the CPUH Community Redevelopment Area.
Recommendation
Executive Director to the CRA: The CRA (1) confirm approval of incentives for the Project as described in the Addendum Application dated March 27, 2007, including the façade and specific physical improvements discussed and described in the initial application as approved November 15, 2005 and subsequently amended; (2) The Transformational Program guidelines in effect at the time of initial approval apply to this approval, including limitations on percentage of TIF available and limits on amount and duration of payments (being limited to the current life of the district, now November 28, 2035); (3) That the same limits and conditions approved on November 15, 2005, including but not limited to the $37,000,000 present value, $98,160,438 gross payments cap and a 7.75% discount rate apply to this approval, except that construction must commence within one year from the date of the approval; (4) That the CRA and Developer are the only parties to this Development Agreement; (5) That the increment reimbursed be clearly limited to that generated by the project and that the funding or bonding power of the CRA not be significantly negatively affected; and (6) Authorize the Executive Director and CRA Attorney to prepare and execute any and all documents necessary, consistent with the foregoing.