Loading...
892-Acquest/Benchmark Devel MEMORANDUM OF UNDERSTANDING FOR THE POTENTIAL DEVELOPMENT OF PROPOSED HOTEL AND CONFERENCE CENTER LOCATED AT THE FORT MELLON PARK SITE ON LAKE MONROEIN THE CITY OFSANFORD A. INTRODUCTION/PARTIES: The experienced real estate development, investment and conference center management team of Acquest Realty Advisors, Inc, ("Acquest") and Benchmark Hospitality proposes to work together (together referred to as the "Acquest/Benchmark Development Team" or the "Development Team") with the City of Sanford, Florida (the "City") to Park site in Sanford, Florida (the "Project"). ,~rti The Development Team shall have the following firms acting as its consultants: Walbridge Aldinger, construction manager; Rabun, Hogan, Ota & Rasche, design amhitects; and Burke, Bales & Mills, local architects. The Development Team approach envisions the creation of a public-private partnership between the Development Team and the City of Sanford whereby the Development Team will make available its technicel services, programming, design, estimating resources as well as its considerable financing expertise to the City for the purposes of creating design, cost and financing models sufficient to allow the City and the officials of Seminole County government to make a determination as to the ultimate feasibility of the Project. The Development Team's proposal anticipates the creation of a Special Purpose Ownership Entity (SPOE), or use of an existing non-profit entity, qualified to issue tax-exempt revenue bonds. The Development Team's funding approach is set forth herein. The Development Team is careful to choose projects that have, in its opinion, a high degree of community commitment and that have at least initial market verification that supports the proposed project. The Development Team believes that significant support exists within the City and Seminole County for the Project and assume that this support extends to the tax-exempt funding mechanism proposed for the Project. The Development Team is optimistic that its development approach has a high probability of success if all pertinent parties commit to investing sufficient time and resources to the effort. B. DEVELOPMENT TEAM'S RESPONSIBILITIES AND TIMING: It has been the Development Team's experience that projects similar to the Project require leadership and hands-on, day-to-day, attention in the form of single source of responsibility in order to move the Project forward from conceptual consideration to feasibility testing and on to launching the Project. The Development Team will provide the Project management required for: · coordination of the Development Team's activities; · coordination of cemmunication and activities with City staff and other stake holders; and · creation of realistic time lines that provide clear "next step" direction. The Development Team agrees to provide to the City during the "Designation Phase" of the Project the below listed activities and deliverables: · Assist the City in organizing and facilitating a Project Task Force of City and Seminole County officials, with the goal of creating an articulate vision for the Project by consensus building; · With input from the Task Force and the City's Downtown Urban Design professionals, begin conceptual programming and site planning for the Project; · Review all land use and site studies; · Review required permitting, approvals and entitlements; · Explore a variety of opportunities for participatory funding, grants and ancillary programs that will enhance the resources available for the Project; · Develop conceptual site plan, programs, design, cost estimates and schedules acceptable to the City and Seminole County which are consistent with the financial feasibility of the Project; · Work with the City and Seminole County to identify and quantify sources of bond enhancements and other publicly sponsored sources of funding available to the Project; · Structure tax-exempt financing including, but not limited to, identifying applicable enhancements that may be available for the Project; · Consult with underwriters regarding rate and market assumptions; and · Consult with legal counsel, (including bond counsel), regarding establishing a SPOE and the terms of a land lease and a management agreement pertaining to the Project. The Designation Period is anticipated to take five (5) months, (September 1, 2001 to January 31, 2002), and culminate in a "go/no go" decision by the City and Seminole County relative to the Project. 2 C. DEVELOPMENT TEAM EXPECTATIONS OF THE CITY: · The City will assist the Development Team in facilitation meetings with public sector funding sources; · The City agrees to commission an update of Hunter Interests' Market Study; · The City will make available all completed land use and site studies for the site to the Development Team; · The City has and will acknowledge the Development Team's active participation in the Downtown Urban Design and Waterfront Development process; and · The City will identify a source of pre-development funding for all or a portion of costs outlined below. D. PRE-DEVELOPMENT COSTS: The Development Team requires that its third-party expenses and time be covered, at cost, during the proposed Designation Period as set forth herein. The Development Team and the City agree to establish a Pre-Development Cost Budget that will include the Development Team's reasonable costs in an agreed upon schedule of costs for the Designation Period. During the Designation Period the City will fund its Pre-Development Costs and the the Development Team will fund its Pre-Development Costs. All Pre-Development costs due in accordance with the established fee schedule are assumed to be fully reimbursable from bond financing proceeds as capitalized costs of the Project. The total costs allowed for activities occurdng by the Development Team within the Designation Period shall be as established in the City appreved Pre-Development Cost Budget, which will be, provided to the City for concurrence prior to the beginning of the Designation Period. In the event the Development Team develops a financially feasible finance and operations plan for the Project and the City or Seminole County do not move forward to allow the capitalization of Pre-Development costs, the Development Team will be entitled to compensation for its costs in accordance with the fee schedule and estimate of costs as set forth herein that were incurred by the Development Team during the Designation Period. A financially feasible "finance and operations" plan, for the purpose of this agreement, shall be defined as a plan that reconciles an all inclusive development budget ("the Costs") for a 200-room conference center and hotel meeting the specifications of the International Association of Conference Centers CIACC") with estimated cash flow from the conference center hotel (excluding any other pledged revenues) sufficient to fully amortize the Costs over a 35-year amortization period at an average tax-exempt cost of capital not to exceed 6-1/2%. Estimated cash flow shall be consistent with the Feasibility Analysis as prepared by Hunter Interests, Inc. 3 E, DEVELOPMENT AGREEMENT: Within a reasonable period of time after the conclusion of the Designation Period, and in order to implement a successful and funded plan for the Project, that is approved by the City as being an operationally satisfactory plan, it is anticipated that a formal development agreement for the Project will be entered detailing such future actions as may be necessary to implement the City's approved plan resulting from the cellaborative efforts of the City, Seminole County, and the Development Team during the Designation Pedod. F. DEVELOPMENT TEAM APPROACH: It is the Development Team's belief that the Project must be structured so as to be eligible to be funded with tax-exempt debt. Given the magnitude of the cost to develop a high-quality conference center and hotel as envisioned by the City, the Development Team has concluded that it is virtually impossible to fund the Project in the traditional private debt/equity markets. Given the same pro forrna operating results for a 200-room hotel and conference center, these same numbers would produce at least 30% to 40% more development dollars using tax exempt financing as opposed to the traditional private markets. The Development Team believes that there will be the requirement for significant "equity" contribution or guaranties in one form or another from the City and/or Seminole County. This "equity" contribution or guaranties results in the ability to tap what amounts to a huge subsidy from the Federal government through the issuance of tax exempt bonds and is critical to the success of the Project and basic to the Development Team's proposal. The Development Team has as much experience at developing hotels in a tax-exempt and public/private partnership mode as anyone in the United States. A $40,000,000 hotel and conference center and parking garage development by Acquest in and for the Trenton, New Jersey, is currently under construction using funding mechanisms similar to that proposed herein. Acquest is involved in projects with similar tax-exempt funding strategies in Albany and Glen Cove, New York, Fort Baker (Marin County), California, and Fort Myers, Florida. The ability to use taxiexempt bonds for projects such as that proposed in the City requires significant cooperation and commitment form both the City and Seminole County. The underlying bond issue proposed to fund the conference center and hotel does not necessarily contemplate the credit of either the City or Seminole County, but does require cooperation in the formation of a special-purpose, not-for-profit entity structured in such a fashion to eligible to issue fax exempt bonds. The City or Seminole County must sponsor the formation of the special-purpose entity and agree to take title to the facility at such time as the long-term bonds are fully retired. Further, in order to sell these bonds to inventors with less than the full faith and credit of the City or Seminole County, bond 4 purchasers will look to certain "enhancements" to supplement the market studies and operating pro formas. The market studies and operating pro formas must, by themselves, demonstrate the ability to service the debt service on the bonds by a coverage ratio of 1.2 times to 1.5 times. The more guarantees or other enhancement available, the lower the interest rate would be and the lower would be the required coverage ration. On the other side of the spectrum, the less debt service coverage and the fewer enhancements, the higher the interest rate would be. Minimally, however, absent full faith and credit guarantees from the public sector, a bond purchaser is going to be looking to coverage of approximately 1.5 to 1 or the equivalent of the ratio. Lower interest rates, and hence more bonding capacity for the Project, would be a function of more guarantees or enhancements; in which case interest rates could go as low as 5% in today's market, which level would assume a full guarantee from either the City or Seminole County, or both. The $40,000,000 hotel and conference center earlier referenced in Trenton, New Jersey was, in fact, ultimately funded with such a guarantee in order to maximize funds available. As noted, the creation of such a funding structure requires intimate cooperation between the City, Seminole County, the Development Team and the not-for-profit entity developing and operating the conference center and hotel. The key to the success of such a structure lies in the fact that all of the net operating income after payment on the bonds inures to the City and Seminole County. None of the Development Team members can have a direct, or indirect, interest in profits. All of the remuneration to the Development Team members is in the form of fees for professional services, which fees must be fully disclosed and meet market tests for reasonableness. IN WITNESS WHEREOF, the parties to this Memorandum of Understanding and have caused their names to be affixed hereto by the proper officers thereof for the purposes herein expressed on the dates below written. 5 ATTEST: BENCHMARK HOSPITALITY, INC. Date: //~//~// ~°'~entPresident