ACTION REQUESTED:
TITLE
Communication from the City Manager with a Request to ADOPT an ORDINANCE Amending Ordinance 17,628 Approving the 725 WASHINGTON LLC REDEVELOPMENT AGREEMENT. (Council District 1)
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BACKGROUND:
RDA Amendment Request
Larry Winkler (Redeveloper) is requesting an amendment to his Redevelopment Agreement (RDA) for 725 WASHINGTON LLC approved by Council November 13, 2018 (Agenda Item 18-339). His concept plan for “Winkler Place” at 709 to 725 SW Washington has been adjusted in favor of more residential and less commercial. The revised concept includes the addition of nine (9) additional residential units on the first floor in place or instead of 9,500 sf of commercial space. In total, the revised concept includes 35 residential units and 8,500 sf of commercial space, rather than 26 units and 18,000 sf of commercial space in the original plan. The overall cost redevelopment would increase from $3.94 million to $4.20 million, or an increase of 6.5%. The proposed financing has change to include historical tax credits. The amendments to the RDA (attached) include: a) revised language of Section 2.1 and 2.2.2; and b) update of Schedule - 1 Project Cost. The original RDA is also attached
When the RDA was approved in November 2018, it was understood bank financing was contingent on securing a commercial lease of 6,000 sf. It was also understood a six-month extension could be provided if both the Redeveloper and City agreed it was merited. Rather than request an extension, the Redeveloper has proposed a revised and more financially, feasible concept plan to secure financing without the need of a large commercial lease. Over the past six (6) months, the Redeveloper has invested over $200,000 in demolition, preparation, tuck-pointing, and marketing his building to potential tenants. Having difficulty finding a suitable commercial tenant, the Redeveloper believes his best option is to revise his concept to obtain financing approval and start his project.
Original RDA
Larry Winkler, of 725 WASHINGTON LLC, is seeking to redevelop 709 to 725 SW Washington Street (formerly Ingersoll Building Products) and an adjacent parking lot (which includes two City owned lots of 0.17 acre) on the northwest corner of State and Washington. The Project known as Winkler Place will convert the Ingersoll Building into a mixed-use facility of approximately 34,500 sf, consisting of 26 residential apartment units and 18,000 sf of commercial leasable space.
The Project’s budget is estimated at $3.9 million and will predominantly be financed with debt and secured through other assets owned by Mr. Winkler. In order for Winkler Place to proceed two critical issues need to be resolved, which are: a) a tenancy of at least 33% to obtain the required financing, and b) sufficient parking in close proximity to attract commercial and residential tenants. To address these challenges a Redevelopment Agreement (RDA) was drafted to a) allow the landlord at least 6 months, but no more than a year to secure commercial tenants (Section 2.2.1) and b) provide for an expanded parking lot by adding City owned lots (Section 2.2.2) with conditions subject to project completion.
FINANCIAL IMPACT: Generally, developments in TIF districts are presented with a 50% rebate of incremental property taxes for the remaining life of the TIF, but can request more if they can demonstrate a need to close a financial gap.
725 Washington LLC presented their financials and while no funds where needed upfront, they did request City contribution of two adjacent parcels (Schedule 2). Those parcels were purchased by the City October 28, 2015 for $39,500. They also requested a 50% TIF rebate for the life of the TIF ending in 2030, shown in Schedule 3 of the RDA. City staff reviewed the Developer’s proposal and agree the incentive packet is warranted, since the project would not move forward, otherwise.
The economic impacts of Winkler Place would not only include the net gain from property taxes generated over the incentive provided, but also the retail sales tax generated from area retailers and restaurants serving those occupying the residential units of Winkler Place.
NEIGHBORHOOD CONCERNS: Redevelopment of buildings in the Warehouse District is a widely held community goal.
IMPACT IF APPROVED: The Redevelopment Agreement will be approved and the project will proceed adding more residential and commercial units to our Downtown.
IMPACT IF DENIED: The Redevelopment Agreement will not be approved and the project may be delayed or cancelled.
ALTERNATIVES: Council could direct staff to adjust the terms of the Redevelopment Agreement.
EEO CERTIFICATION NUMBER: Not applicable.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Vibrant Downtown: Riverfront/ Central Business District/ Warehouse District
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Reinvest in neighborhoods.
DEPARTMENT: City Manager's Office