REDEVELOPMENT AGENCY OF SALT LAKE CITY

Transcription

1 JACKIE BISKUPSKI CHIEF ADMINISTRATIVE OFFICER REDEVELOPMENT AGENCY OF SALT LAKE CITY JUSTIN BELLIVEAU INTERIM EXECUTIVE DIRECTOR REDEVELOPMENT AGENCY STAFF MEMO DATE: March 15, 2016 ITEM #: 6.A PREPARED BY: Edward Butterfield RE: Loan Request from Fielding Group, LLC c/o Cicero Group REQUESTED ACTION: Consideration and adoption of a resolution of the Board of Directors of the Redevelopment Agency of Salt Lake City approving a $2,010,000 loan to Fielding Group, LLC c/o Cicero Group. POLICY ITEM: Depot District Strategic Plan - Foster transit-oriented development by incentivizing building renovations and new construction near transit facilities. BUDGET IMPACTS: $2,010,000 allocated from the Agency s Revolving Loan Fund. EXECUTIVE SUMMARY: Fielding Group, LLC c/o Cicero Group (the Applicant ) is applying for a $2,010,000 Loan for tenant improvements. The Applicant is purchasing the Gateway North building at 35 North Rio Grande Street for $10 million as its new corporate headquarters. The loan will be used to transform a vacant retail store space in the building into updated office space. Improvements will include additional windows on the ground floor, HVAC upgrades, façade improvements, a built-out patio on the roof, and new bathroom/shower facilities. These improvements will add to the activation of 500 West. The Applicant plans to occupy approximately 30,000 square feet and move into the building towards the end of this summer. The remaining space will be leased to existing tenants with the long-term plan of the Applicant eventually using all of the office space as the company expands. Cicero Group ( is a global data-driven strategy consulting firm headquartered in Salt Lake City. Cicero specializes in helping companies leverage data to develop and implement the most effective, evidence-based strategies. The firm works with a host of multi-national firms including Cisco, Wal-Mart, Republic, and Myriad Genetics. LOAN COMMITTEE RECOMMENDATIONS: The RDA Loan Committee reviewed the Applicant s loan application on March 2, The Committee recommends approval of the loan: 451 South State Street, Room 418 // Salt Lake City, UT // //

2 ANALYSIS & ISSUES: ALIGNMENT WITH RDA STRATEGIC PLANS The Applicant's loan request aligns with the RDA Depot District's Strategic Plan objective to encourage economic development activities through job retention and creation. The Applicant s decision to keep its Salt Lake City office will result in job retention as well as increase employment opportunities. The Applicant plans to grow its Salt Lake City staff from 60 to 113 employees by Cicero s decision to make Salt Lake City its global headquarters will have a positive and significant impact. Cicero would not just be locating in Salt Lake City - it would be purchasing its building, thus solidifying Cicero's long-term commitment to Salt Lake City. Cicero's internal estimates are that Cicero's decision to purchase the Gateway building and locate staff here (vs. an out-of-utah headquarters or satellite offices) will have an average annual impact of $115 million on Salt Lake County over the next 10 years. APPLICANT S ABILITY TO REPAY THE LOAN The Applicant has submitted a project budget and proforma which staff has analyzed. The source of repayment is from the leases of the office space. The RDA, Zions Bank, and the Applicant equity contribution are the only sources of financing for the project. a. Sources and Uses Statement SOURCES OF CASH: Equity Contributions $ 2,186,900 Zions Bank Loan 8,000,000 RDA Loan 2,010,000 TOTAL SOURCES OF CASH $ 12,196,900 USES OF CASH: Building Purchase $ 10,000,000 Tenant Improvements 2,000,000 Fees and Closing Costs 196,900 TOTAL SOURCES OF CASH $ 12,196,900 b. Operating Projection Summary In addition, the Applicant has submitted three years of personal income tax filings, sales projection, and a 15-year proforma. An analysis of the proforma is attached for review. Based on these documents, the Applicant is in a good position to repay the RDA loan.

3 c. Ratio Analysis Overview: Loan-to-Value Ratio: 95% 95% Maximum *Appraised Value : $10,536,942 1st Mortgage Amount: $8,000,000 RDA Loan Amount: $2,010,000 Debt Coverage Ratio: Minimum RDA Loan Percentage of Debt: N/A *The Applicant is in the process of acquiring an appraisal based on the property and proposed improvement value. The appraisal will need to have a minimum value of $10,536,942 to meet the RDA LTV ratio of 95%. A complete appraisal will be required prior to closing. APPLICANTS BACKGROUND AND EXPERIENCE Randy Shumway is the founder and CEO of the Cicero Group. Prior to starting the Cicero Group in 2001, Randy was a Managing Direct at Answerthink, a 2,500-person global consulting firm. He has also worked for Bain and Company, and Dow. He is a graduate of BYU and received his MBA from Harvard Business School. Trent Kaufman is Founder and Executive Vice President of the Cicero Group. He is responsible for sales, research and analytics, keynote speaking and group facilitation. Prior to founding Education Direction, a wholly-owned subsidiary of Cicero, Trent worked at the Buck Institute as a Senior Consultant, leading content development and national workshops for economicsfocused initiatives. He received an M.Ed. and Ph.D. from Harvard University, and an M.S. from UC Berkeley. Trent currently holds Expert Status in the Marketing Research Association's Profession Research Certification. ATTACHMENTS: A. Resolution B. Loan Term Sheet C. Site Map

4 ATTACHMENT A RESOLUTION NO March 15, 2016 RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING THE TERM SHEET FOR A LOAN REQUEST FROM FIELDING GROUP, LLC TO FUND RENOVATIONS AT 35 NORTH RIO GRANDE STREET, SALT LAKE CITY, UTAH IN THE DEPOT DISTRICT PROJECT AREA. WHEREAS, the Redevelopment Agency of Salt Lake City ( RDA ) was created to transact the business and exercise the powers provided for in the Utah Community Development and Renewal Agencies Act; and WHEREAS, the Agency adopted a redevelopment plan effective October 15, 1998 entitled Depot District Redevelopment Project Area Plan; and WHEREAS, the RDA has established a revolving loan fund to provide loans in its project areas; and WHEREAS, the RDA adopted the Depot District Strategic Plan; and WHEREAS, Fielding Group, LLC has requested a loan in the amount of $2,010,000 from the RDA to execute building renovations to property located at 35 North Rio Grande Street, Salt Lake City UT ("Property"); and WHEREAS, the RDA staff has negotiated the attached set of terms for a potential RDA loan to f Fielding Group, LLC or the Project ( Term Sheet ); and WHEREAS, the RDA is willing to provide a loan to Fielding Group, LLC to facilitate redevelopment of the Property. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY, that we do hereby approve the loan outlined in the Term Sheet attached hereto. BE IT FURTHER RESOLVED THAT we do hereby authorize the Chief Administrative Officer and the Executive Director to negotiate and execute the legal documents attendant to such loan between the Redevelopment Agency of Salt Lake City and Fielding Group, LLC c/o Cicero Group, in accordance with the Term Sheet attached hereto. The documents shall also incorporate such other terms as recommended by RDA legal counsel.

5 Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this 15 th day of March, ATTEST: Justin Belliveau, Acting Executive Director Lisa Adams, Chairperson Transmitted to the Chief Administrative Officer on. The Chief Administrative Officer does not request reconsideration requests reconsideration at the next regular Agency meeting. Jacqueline Biskupski, Chief Administrative Officer Approved as to legal form:

6 ATTACHMENT B RDA LOAN TERM SHEET March 15, 2016 BORROWER NAME: Fielding Group, LLC c/o Cicero Group 1. PROPOSED LOAN AMOUNT: $2,010,000 RATE: *2.75% TERM: 5 years - 60 months (balloon payment due). ESTIMATED PAYMENTS: CONSTRUCTION INTEREST: PROPOSED DRAWDOWNS: COMMITMENT FEE/ BORROWER S DEPOSIT: $10,897 Amortizing monthly payment of Principal over a 20-year period Construction interest will be charged as draw requests are funded. Construction interest will be added to outstanding principal balance at end of construction period and amortized. Interest shall begin to accrue with the first draw of funds. Maximum of one per month None RDA LEGAL: Hourly bill, payable at closing, may be paid from loan proceeds. PREPAYMENT PENALTIES: ELIGIBLE USES OF FUNDS: None Tenant Improvements for the Gateway North building at 35 North Rio Grande Street. Interest Rate Calculation: The newly adopted RDA loan policy sets the fixed interest rate at 300 basis points plus the 5- year United States Treasury rate at loan closing. Loans are eligible for interest rate reduction in accordance with Public Benefit Incentives. The interest rate calculation for this loan started with the Treasury Rate of 1.25%, as of February 22, 2015, plus 300 basis points (3%). The 4.25% interest rate was reduced by 150 basis points to 2.75% based on three Public Benefit Incentives that include economic impact, permanent job

7 creation, and sustainability. COLLATERAL AND GUARANTEES (a) A second mortgage lien on commercial property located at 35 North Rio Grande Street, Salt Lake City, Utah; and (b) Corporate Guarantor from Cicero Group, LP and all affiliated companies and subsidiaries and personal guarantors from corporate officers; and (c) The company officers, Randy Shumway and Trent Kaufman, will provide personal guarantees as a condition of the loan. ADDITIONAL RECOMMENDATIONS: If the loan is approved, Staff recommends the following conditions be addressed prior to closing: (a) Staff will have determined that the loan meets all lending criteria established by the RDA and the RDA s Loan Committee. (b) Verification of purchase of the Gateway North building at 35 North Rio Grande Street by the Applicant. (c) Review and final approval of final construction plans and verification of permits. (d) Installation of shower/locker facilities and bike racks to receive the sustainability basis points reduction. (e) Submit yearly report on economic impact and permanent job creation. (f) Final construction budget. (g) Signed construction contract. (h) Executed lease between Fielding Group, LLC and Cicero Group, LP. (i) Appraisal Report for Gateway North building at 35 North Rio Grande Street, Salt Lake City, Utah with a minimum value of $10,536,942. (j) The execution of loan documents (e.g. promissory notes, loan agreements, security documents, and guarantees) as deemed necessary by the RDA and its legal counsel. (k) Applicant shall provide evidence of insurance in such amounts and with such coverage as deemed necessary by the RDA for the Property.

8 (l) The RDA and its legal counsel s review and approval of all matters pertaining to title, legality of the loan, and the legality, sufficiency, and the form and substance of all documents that are deemed reasonably necessary for the loan transaction. (m) The Applicant must provide the Contractor Agreement for RDA approval. (n) The Applicant must receive all necessary approvals from the City, as further defined in the loan agreement. (o) Such other terms as recommended by the Agency s legal counsel. If the Loan Committee approves the Applicant s loan request, the Applicant will have 120 days following the date of approval to meet the above conditions or the Agency s approval shall expire. Any funds not disbursed 24 months after closing will be used to pay all outstanding principal from the Agency s loan.

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