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.
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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.
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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
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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.
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ATTEST: BENCHMARK HOSPITALITY, INC.
Date: //~//~// ~°'~entPresident