Irish Twins pact has many facets
The proposed transaction has three letters of credit, one joint and multiple personal guarantees, a 10-year payment plan developers have to make, a minimum taxable value for the development, and a minimum investment that has to be made in the project.
But the key provision of the proposed agreement is for the Irish Twins Group to secure $750,000 in financing for the project from the Pioneer Construction Co., which would then manage the renovation of the former Imperial Metals building at 801 Ionia Ave. NW into modern office and retail space.
Jack Buchanan and Greg Lanker, partners in the development firm, expressed confidence they’ll secure the financing from the general contractor and the project will go forward. They have until March 10 to do that, as that’s the day city commissioners are set to vote on the development agreement.
Pioneer Construction has had an interest in the renovation project. A company official joined Buchanan at a Parking Commission meeting in 2007 when the Irish Twins Group asked commissioners to build a ramp on the Imperial Metals property.
“This is a complex financial deal,” said Mayor George Heartwell, a former mortgage broker.
“We need an agreement in hand. We need the agreement. I’ve met with the developers and they’re prepared to go with that,” he added.
The mayor sees getting everything in writing as vital to the city because Parking Services plans to spend $2.6 million on two lots with a total of 139 spaces around the building. The department would pay the developer $1.6 million for the land and spend another $1 million to build the parking spaces.
Parking Services would use $2 million from bond proceeds and spend roughly $625,000 of its own capital. The bonds would be for 20 years, carry an interest rate of 5.5 percent and cost the department $185,700 in yearly payments.
Here are some key provisions in the development agreement:
- The developer has to secure $750,000 in financing from Pioneer Construction.
- The developer has to make annual payments of $50,000 to the city for 10 years starting in 2010 that will go to the lots’ construction.
- The developer has to provide the city with a letter of credit for $100,000 that the city can draw on if the developer fails to make the $50,000 annual payments.
- The developer has to provide the city with a letter of credit for $115,000 that the city can access for the design of the lots in case the deal doesn’t close.
- Buchanan and Lanker have to provide “joint and several personal guarantees” during the 10-year annual $50,000 payment period.
- The developer has to provide the city with a letter of credit to cover any shortfall between the projected tax-increment financing revenue and the actual revenue collected.
- The cost of construction has to be at least $1.04 million and the project’s taxable value has to be at least $2.86 million.
“We added an additional letter of credit. We also requested a personal guarantee from the developers of the project. We now have three letters of credit,” said Pam Ritsema, Parking Services director, to commissioners last week.
But even if the Irish Twins Group meets the demands by the March 10 deadline, the partners could still have a few more hurdles to clear.
First Ward City Commissioner Walt Gutowski said the property’s price tag, $32.79 per square foot for 48,787 square feet, is too high. Parking Commissioner Monica Sekulich said the public lots may sit mostly idle and lose revenue for up to two years before the building’s occupancy reaches one-third.
The agreement calls for the city to start constructing the lots within 60 days of closing, which is set for June 15, and be open in December. The development has to be a third full by the end of 2011.
“They reported all the other conditions are ready to fall in place once they sign the agreement,” said Heartwell last week. “All they have at this point is a commitment from Pioneer, but we need a signed agreement. If they can’t get a financing agreement, then there is no deal.”