MUNICIPAL CENTER O FFICE OF THE C ITY M ANAGER BUILDING 1 O FFICE - - PDF document

March 4, 2016 June 10, 2016 The Honorable William D. Sessoms, Jr. Members of City Council Dear Council Members: RE: Cityview Two Development Attached is the June 14 Cityview Two Development presentation. It includes the summary

• f developer proposal, review of proposed term sheet, and financial analysis.

Please do not hesitate to contact me or Doug Smith with any questions. We can be reached at 385-4242. Respectfully, David L. Hansen City Manager DLH:pam Attachment

Virginia Beach City Council Douglas L. Smith, Deputy City Manager Patricia A. Phillips, Director of Finance June 14, 2016

Presentation Overview

 Summary of Developer Proposal  Review of Proposed Term Sheet  Financial Analysis  City Council Discussion and Direction

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Layout of Proposed Project

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Hotel

Summary of Developer Proposal

 Three Phase Mixed-Use Development  $62.0MM anticipated private investment  Request City to dedicate incremental real estate tax revenues

from this specific Project.

 $10.2MM maximum City dedication  Payable from incremental real estate taxes over 25 years  Developer to:

 Make parking available to public  Sell City needed easements over Developer property for Thalia

Greenway ($300,000)

 Six years to complete  Property included within CBD-TIF since TIF inception  Not part of the SSD

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Term Sheet Summary

 Three Phase Development-

 Phase 1

 6 Level Mixed Use Tower: 13,500 s.f. office/ 64 apartments  8 Level Apartment Tower- 138 Units  7 Level Parking Structure- 481 Spaces

 Phase 2

 3 Level Commercial Tower: 24,000 s.f.

 Phase 3

 TBD Level Mixed Use Hotel Tower

110-120 Key Limited Service Hotel 4,000-5,000 s.f. of Commercial (office or retail)

 Construction to commence within 36 months of the agreement

approval

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Term Sheet Summary- Continued Anticipated Developer Investment

 Phase 1

 Mixed Use Tower: $14.0MM  Apartment Tower: $22.1MM  Parking Garage: $ 8.3MM

Total Phase 1 $44.4MM

 Phase 2

 Office Tower:

$ 5.0MM

 Phase 3

 Mixed Use Hotel Tower:

$12.6MM

 Total Anticipated Investment: $62.0 MM

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Term Sheet Summary-Continued City Participation

 Beginning with completion of Phase 1

 City (via VBDA) to make semi-annual payments equal to

incremental real estate taxes paid by Project.

 Baseline is real estate taxes owed as of June 5, 2016  A Certificate of Occupancy has been issued  Real estate taxes have been paid

 Maximum total payment $10.2MM  Maximum term 25 years  VBDA has right to terminate further payments if:

 A construction of hotel phase has not commenced within 36 months  All elements of Project not complete 72 months after first payment

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Term Sheet Summary- Continued Parking Garage Operations

 Developer to own Parking Garage  Parking open to public  Developer entitled to enact rules and regulations to

ensure adequate access to parking by its patrons

 Developer responsible for all maintenance, operation,

and other costs associated with Parking Garage

 Failure to maintain public parking terminates

incentive payments

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Parking Structure Estimated Debt Service ~ Garage construction cost (excludes amenity) $8.1 million ~ Garage debt service ~ Term 20 years ~ Interest rate 4.75% ~ Annual payment $633,000 ~ Total Estimated P&I $12.7 million ~ City of Virginia Beach ~ 100% real estate tax dedication (NTE) $10.2 million ~ Dedication to debt service ratio 80% ~ Baseline date determination June 5, 2016 ~ Approximate baseline value $2.6 million ~ Term not to exceed 25 years

Source: Strategic Growth Areas Office

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25 YR

BPOL Tax Personal Property Sales Tax Utility Tax Meals Hotel Residential Indirect Total Additional Revenues $ 1.2 .4 2.6 .4 4.3 7.5 15.1 .9 $32.4 $24.7 $ 7.7

Municipal Costs/Real Estate displacement* Marginal Revenues

Source: Department of Budget and Management Services * includes a 50% displacement on sales based revenues

In Millions

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Central Business District – South Tax Increment Financing District

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~ The City of Virginia Beach incurs no debt or maintenance obligation ~ Additional general fund revenues are generated ~ Additional shared parking and new development supports Pembroke SGA and the CBD ~ Project should generate 165 employment opportunities during construction and sustain 38 ongoing jobs annually plus additional hotel inventory in CBD ~ Thalia Creek Greenway Project able to proceed ~ The project is compliant with Comprehensive and SGA Plans ~ Advances opportunities for CBD TIF District to grow around the core area ~ Ripley Heatwole consolidates operations and brings HQ to the SGA supporting Economic Development’s strategy (headquarter industries)

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Questions/ Discussion

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