WHEREAS, the City is committed to supporting enhanced economic development

Transcription

1 OUNL HAMBER No? rrii lo, 21 WHEREAS, the ity is committed to supporting enhanced economic development opportunities for low-income communities within the ity and to low-income persons residing within those communities; and WHEREAS, the United States Department of Treasury has established the New Markets Tax redit (NMT) program to stimulate investments in predominately low-income communities; and WHEREAS, the goals and purposes of the NMT program are consistent with and complementary to the economic development programs previously established by the ity to support expanded economic development opportunities for low-income communities within the ity and to low-income persons residing within those communities; and WHEREAS, under the NMT program, tax credits are competitively awarded annually by the Treasury Department through its ommunity Development Financial nstitutions (F) Fund to qualified ommunity Development Entities (Es) after review and evaluation of applications submitted by ODEs, which are then made available to investors; and WHEREAS, the ity of Dallas created the Dallas Development Fund (DDF) as a non-profit Texas corporation in order to apply for an award under the NMT program; and WHEREAS, the DDE was awarded a $55 million NMT allocation under the 29 NMT program; and WHEREAS, the DDE board has approved awarding of up to $18.5 million in allocation to the Boutique Hotel project located at 1325 S. Lamar Street. NMT NOW, THEREFORE, BE T RESOLVED BY THE TY OUNL OF THE TY OF DALLAS: Section 1. That the ity ouncil hereby authorizes a NMT transaction between the DDE and its subsidiaries, US Bank, N.A. and its subsidiaries, and Matthews Southwest and its partners for the restoration and development of historic property located at 1325 South Lamar Street into a boutique hotel as further described in Attachment A.

2 OUNL HAMBER p Q 1 JJL 7 November 1, 21 Section 2. That this resolution shall take effect immediately from and after its passage in accordance with the provisions of the harter of the ity, and it is accordingly so resolved. Distribution: Office of Economic Development Tenna Kirk, 5S Office of Economic Development Sajid Safdar, 2N Office of Economic Development Heather Lepeska, 5S ity Attorney s Office Barbara Martinez ity Attorney s Office Sarah Hasib i.ty O Li (LilLy Secret;

3 S DALLAS DEvELoPMENT FuND DATE: October 19, 21 SUBjET: Southside Boutique Hotel Project Description Applicant Matthews Southwest is a full-service private real estate development company headquartered in Lewisville, Texas with offices in Dallas, Texas; algary, Alberta; and Mississauga, Ontario. Matthews Southwest has been active in the US, anada, and Mexico, and has worked closely over the last ten years with the ity of Dallas to redevelop parts of the South Side community. Their previous work in Dallas includes South Side on Lamar, the redevelopment of the former Sears Merchandising enter, as well as the Omni Dallas onvention enter Hotel. Related/Sponsoring Entities The Southside Boutique Hotel project is sponsored by H Lamar Partners, LP, which is a partnership of Matthews Southwest and the Dallas Police and Fire Pension Fund. The Project is anticipated to receive an equity contribution from a fund established by the ity of Dallas Regional enter (R) for investors participating in the EB-5 immigrant visa program. The proposed structure also includes a small equity contribution from a Dallas Development Fund subsidiary entity to facilitate federal Historic Tax redit financing. it is anticipated that this funding would flow through a special-purpose Master Tenant entity that is primarily or wholly owned by a Dallas Development Fund Sub-allocatee. The Qualified Active Low-ncome ommunity Business (QALB) receiving the financing from Dallas Development Fund s subsidiary is expected to be a special-purpose entity owned by H Lamar Partners, LP and/or its individual members, the Master Tenant, and the EB-5 investor fund. This entity s sole purpose will be to develop, own, and operate of the real estate related to this project. Project Description The project is the redevelopment of an historic 55, square foot building at 1325 S. Lamar Ave into an approximately 76-room boutique hotel. The Developer is in the process of finalizing selection of an operator, which will likely be retained via a management contract. The hotel is anticipated to include a 2,1 square foot restaurant, 1,5 square foot lobby bar/lounge, and a 5, square foot rooftop pool lounge and bar area. The project is part of the 42-acre South Side Master Plan transit-oriented development project that includes South Side on Lamar. t is located within three blocks of the Dallas onvention enter and one block from the edars Rail DART station. The project will be designed to achieve LEED Silver certification. The hotel will also be restored with historical accuracy to qualify for federal Historic 1

4 Proposed Dallas Development Fund South Side Boutique Hotel Project Summary Rehabilitation Tax redits. Total project costs are estimated to be about $191 million, subject to final refinement. Financing Terms NMT Allocation Proposed Up to $18,5, NMT nvestor The Dallas Development Fund has been in negotiations with US Bancorp ommunity Development orporation (USB) to purchase the NMTs and Historic Tax redits generated by the project. Anticipated losing osts and Fees The Dallas Development Fund will charge a Sub-allocation Fee of 3% of the QE, (estimated at $555, based on current deal size). n addition, the DDF will charge an annual Asset Management Fee of.25% of the QE, (estimated at $46, based on current deal size). DDF will seek to separately secure reimbursement for costs associated with closing this transaction, as well as costs associated with maintaining the financing structure during the 7-year NMT compliance period. Financing Structure The financing sources for this project are summarized in the table below. Sources for NMT Structure - Amount R EB-5 Fund Equity $3,9, Senior Leverage Bank Loan $4,, NMT Equity (USB) $4,978,35 Sponsor Equity (H Lamar Partners, LP) $5,621,65 Total $18,5, H Lamar Partners, LP will form a Special Purpose Leverage Lender Entity to pool the EB-5 Equity, the H Lamar Partners, LP Equity, and the Senior Leverage Bank Loan. This Leverage Lender Entity will then make a Leverage Loan of approximately $13.5 million to an nvestment Fund owned by USB. USB will contribute the NMT Equity to this fund for a total QE of approximately $18.5 million. The QE will be made to a Sub-allocatee of the Dallas Development Fund (anticipated to be DDF Alpha, LL), which will in turn make one or more Qualified Low-ncome ommunity nvestment (QL) Loans to a special purpose entity designated as the Qualified Active Low-ncome ommunity Business (QALB). These loans will are estimated at $17.9 million. n addition, the DDF Sub-allocatee will make a small (approximately $1,) Equity QL to a special purpose Master Tenant entity, owned 1% by the DDF Sub-allocatee. The Master Tenant will in turn make a $1, Equity QL to the QALB.

5 making up the balance of the project sources. capitalization of the QALB is estimated at approximately $18.2 million, with deferred developer fees the R EB-5 Fund will contribute approximately $1, equity to the QALB. The total Finally, H Lamar Partners 1, LP will make a projected $2, equity contribution to the QALB, and Dallas Development Fund South Side Boutique Hotel Project Summary projects is extremely scarce in the current credit environment. The project has limited debt capacity, this historic structure on a conventional financing basis. n addition, traditional financing for hotel the annual cash flow necessary to support the capital costs associated with renovating and preserving This project would not be financially feasible without NMT assistance. The project does not generate Need For NMT Assistance green/sustainable development. including the preservation of threatened historic buildings, transit-oriented development, and The Southside Boutique Hotel project fulfills many expressed policy goals within the ity of Dallas, on Lamar, the Dallas onvention enter Hotel, the Dallas Police Headquarters, the Beat condominiums, overall sustainability of the South Side Master Plan development. The Southside Boutique Hotel project will complement and enhance the ongoing revitalization work of The project will pursue LEED Silver certification, which will reduce future energy usage and enhance the forward during difficult economic times, and will fill needed gaps in the overall project programming. mprovement Project. The Southside Boutique Hotel will keep the South Side Master Plan moving the Dallas ommunity ollege District entral Office, and a $5.5 million S. Lamar Pedestrian the South Side Master Plan Transit-Oriented Development. The master plan already includes South Side and/or low-income residents. The project also plans to pursue 25-3% M/WBE participation. n wages, including benefits. Per the Developer, a minimum of 75% of the jobs will be available to local addition, the project will preserve and restore a presently vacant historic structure. The Southside Boutique Hotel is estimated to create 35-4 permanent full-time positions at competitive ommunity Benefits ommunity Benefits and Need for Assistance This project is expected to close in 1st Quarter 211. losing Timeline None Additional Sources of NMT Allocation down the Senior Leverage Loan. Loan from the Leverage Lender Entity. The Leverage Lender Entity will in turn use the funds to pay the nvestment Fund. The nvestment Fund will use the HT Equity to pay down the Junior Leverage Tenant/nvestment Fund structure, USB will contribute approximately $1.4 million in HT Equity to Once the project is placed in service and HTs are available to USB through the Master..tJ-.j 3

6 Dallas Development Fund )317 South Side Boutique Hotel Project Summary and without NMT assistance would not be able to generate strong enough returns to attract private equity investment. The NMT structure also allows mutual leveraging with the Historic Tax redits and the EB-5 Program funds. This provides for more powerful gap financing and is consistent with DDF s stated goal of using EB-5 equity as a complementary source for NMT transactions. Other Public Assistance The Southside Boutique Hotel project anticipates participating in the programs mentioned above, including the R EB-5 Program and federal Historic Tax redits. n addition, Matthews Southwest is pursuing a ity of Dallas Historic Tax Exemption. The project has the support of the ity s Office of Economic Development. 4

7 Dallas Development Fund South Side Boutique Hotel Project Summary Project mages Existing Building S

8 -- J 1, 5c: * Q Q -ø 3 = (D, /4 1 ia / / J F. w4o *4t Project Rendering Front Elevation

9 Dallas Development Fund South Side Boutique Hotel Project Summary ii hr ldi h txl V ii a L : 4-. u > ) w ) F - a) ) 4-. U zr 4 i t1 ii ii [ A i o q o o - o n s g 7

10 317 Dallas Development Fund South Side Boutique Hotel Project Summary L i!l i lu ii 1 h h (lilt J1x1 ii $ Li : > ) w ) J a ii k e ) ) 4-. U a) L, 1 8 A ioq, pns 99 8

11 Q 3 -n x oq. aco, South Side Master Plan and Dallas onvention enter Rendering As seen from South Side on Lamar development!