Meeting Date: May 9, 2017 COUNCIL COMMUNICATION Agenda Item: Agenda Location: Action Items Work Plan # Legal Review: 1 st Reading 2 nd Reading Subject: A resolution approving the First Amendment to the Public Finance Agreement between the City of Thornton and Denver Premium Outlets, LLC. Recommended by: John Cody Approved by: Jeff Coder Ordinance previously Presenter(s): John Cody, Economic Development Director Julie Jacoby, Retail Administrator introduced by: SYNOPSIS: This resolution approves the First Amendment to the Public Finance Agreement (PFA) between the City of Thornton and Denver Premium Outlets, LLC related to the development of a Retail Outlet Center at the northeast corner of I-25 and 136 th Avenue. The amendment revises the definition of the Phase 1 Cap Amount, which is the amount the Developer is eligible to be reimbursed for the construction of public improvements, to confirm that the cap is reduced from $20 million to $17.5 million as provided in the PFA if certain conditions were not met as of November 1, 2016. It also reduces the minimum gross building area (GBA) that must be constructed in Phase 1 to be eligible to receive for reimbursement of the cost of public improvements. The amendment includes new language to establish a cap on the amount of eligible accrued interest paid by the Developer to finance eligible public improvements that may be reimbursed. In addition, the amendment also adds language to clarify that interest on Developer Advances made to acquire the land starts on the date that Completion of Construction has occurred. The amendment also approves the assignment of the Public Finance Agreement from Simon Acquisition II, LLC to Denver Premium Outlets, LLC, both of which are under the common ownership of Simon Property Group, L.P. RECOMMENDATION: Staff recommends Alternative No. 1, approval of the amendment. The changes to the Public Finance Agreement are not substantial and the slight reduction in the overall scale of the project in Phase 1 will ensure that the project is successful. ALTERNATIVES: 1. Approve the resolution amending the Public Finance Agreement in order to ensure that the first phase of the project will be successful and serve to attract further mixed-use development to this site. The amendment includes changes that are beneficial to both the City and the Developer. 2. Do not approve the resolution and take the risk that the Developer will move forward and construct the Outlet without the economic development incentive for public improvements. BUDGET/STAFF IMPLICATIONS: The reduction in the Phase 1 Cap Amount reduces the amount of the costs for public improvements that are eligible for reimbursement to the Developer. The Amendment does not change any of the other provisions related to issuance of bonds, public improvement fee, or term of the agreement.
COUNCIL COMMUNICATION PAGE 2 BACKGROUND (ANALYSIS/NEXT STEPS/HISTORY): (includes previous City Council action) On September 22, 2015, the City of Thornton approved a public finance agreement (Agreement) with Simon Acquisition II, LLC for the development of a mixed-use project consisting of roughly 450,000+ sq. ft. of leasable, premium outlet retail space, restaurants, and hotels located on approximately 94 acres of property at the northeast corner of East 136 th Avenue and Interstate 25. Simon Acquisition II, LLC, Inc. (Simon) is an American commercial real estate company, ranked #1 in the United States as the largest real estate investment trust. Simon is a fully integrated real estate company, which operates from five retail real estate platforms: regional malls, Premium Outlet Centers, The Mills, community/lifestyle centers, and international properties. It currently owns or has an interest in more than 325 properties comprising approximately 241,000,000 square feet of gross leasable area in North America and Asia. The company is headquartered in Indianapolis, Indiana and employs more than 5,000 people worldwide. It is publicly traded on the New York Stock Exchange under the symbol SPG and is part of the S&P 10. The Premium Outlets would be a new-to-market retail center for the Denver area. There are currently 88 Premium Outlets worldwide. This would be the first in the state of Colorado and the surrounding states (i.e.: New Mexico, Utah, Wyoming, Nebraska, Kansas, and Oklahoma). The developer intends to construct an initial 325,000 sq. ft. outlet mall with over 80 in-line retail stores on approximately 94 acres of property located at the northeast corner of East 136 th Avenue and Interstate 25. In addition, the mixed-use project will consist of outparcels for restaurants and hotels with a potential expansion of roughly 50,000 sq. ft. of outlet center retail in phase 2 of the project. The City s financial participation in the project is focused on public improvements necessary to allow the proposed development to be constructed and opened to the public. The incentive for this project is based on a credit against sales taxes generated by retail sales at the Denver Premium Outlets. This project meets City Council goals of expansion of retail development to preserve and grow jobs, business investment, and funding for City services.
R E S O L U T I O N A RESOLUTION APPROVING THE FIRST AMENDMENT TO THE PUBLIC FINANCE AGREEMENT BETWEEN THE CITY OF THORNTON AND DENVER PREMIUM OUTLETS, LLC. WHEREAS, the City, the Districts, and Simon Acquisition II, LLC (Simon) entered into a certain Public Finance Agreement, as approved by resolution of the City Council dated September 22, 2015 (Agreement), with respect to the property located at the northeast corner of I-25 and 136 th Avenue in Thornton (Property); and WHEREAS, Denver Premium Outlets, LLC and Simon Acquisition II, LLC are under the common ownership of Simon Property Group, L.P., a Delaware limited partnership as provided in the Assistant Secretary s Certificate dated March 28, 2017 attached hereto as Exhibit A; and WHEREAS, Simon assigned its interests in, and rights and obligations under, the Agreement to Denver Premium Outlets, LLC (Developer) when Developer acquired the Property pursuant to the Assignment and Assumption of Public Finance Agreement dated April 15, 2016 attached hereto as Exhibit B; and WHEREAS, the Parties desire to amend the Agreement on the terms and conditions set forth below. Initially capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF THORNTON, COLORADO, AS FOLLOWS: The First Amendment to the Public Finance Agreement attached hereto and marked Attachment A is hereby approved and the Acting City Manager is hereby authorized and directed to execute, and the City Clerk to attest, the Agreement and any amendment thereto. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Thornton, Colorado, on, 2017.
CITY OF THORNTON, COLORADO Heidi K. Williams, Mayor ATTEST: Kristen N. Rosenbaum, City Clerk 2
Attachment A FIRST AMENDMENT TO PUBLIC FINANCE AGREEMENT THIS FIRST AMENDMENT TO PUBLIC FINANCE AGREEMENT (this Amendment ) dated as of May, 2017 ( Amendment Date ), is made by and among Denver Premium Outlets, LLC, a Delaware limited liability company ( Developer ), the City of Thornton, Colorado, a home rule municipal corporation (the City ), Village at Dry Creek District No. 1 ( District No. 1 ), Village at Dry Creek District No. 2 ( District No. 2 ), Village at Dry Creek District No. 3 ( District No. 3 ) and Village at Dry Creek District No. 4 ( District No. 4 ). District No. 1, District No. 2, District No. 3, and District No. 4 shall be hereinafter, collectively referred to as the Districts. Developer, City and Districts are sometimes collectively called the Parties, and individually, a Party. RECITALS WHEREAS, the City, the District, and Simon Acquisition II, LLC ( Simon ) entered into that certain Public Finance Agreement, as approved by Resolution of the City Council of the City dated September 22, 2015 (the Agreement ), with respect to the Property and the Project more specifically described in the Agreement; and WHEREAS, Denver Premium Outlets, LLC and Simon Acquisition II, LLC are under the common ownership of Simon Property Group, L.P., a Delaware limited partnership as provided in the Assistant Secretary s Certificate dated March 28, 2017 attached hereto as Exhibit A; and WHEREAS, Simon assigned its interests in, and rights and obligations under, the Agreement to Developer when Developer acquired the Property pursuant to the Assignment and Assumption of Public Finance Agreement dated April 15, 2016 attached hereto as Exhibit B; and; WHEREAS, the Parties desire to amend the Agreement on the terms and conditions set forth below. Initially capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. NOW, THEREFORE, in consideration of the mutual covenants and promises of the Parties contained in this Agreement, and other valuable consideration, the receipt and adequacy of which are acknowledged, the Parties agree to the terms and conditions of this Amendment. AGREEMENT 1. Approval of Assignment. The City and Districts acknowledge that Simon assigned its interests in, and rights and obligations under, the Agreement to Developer when Developer acquired the Property, and the City and Districts hereby approve of such assignment. 2. Definition of Phase 1 Cap Amount. The definition for Phase 1 Cap Amount in Section 1 of the Agreement is hereby deleted in its entirety and replaced with the following:
Phase 1 Cap Amount means, except as hereinafter provided, the maximum amount to be paid or reimbursed to the Developer or the Districts for Eligible Costs allocated to the acquisition and construction of Phase 1, which amount shall be calculated as follows: (i) In the event that Phase 1 is at least 397,000 GBA, the Phase 1 Cap Amount shall be $17,500,000. (ii) In the event that Phase 1 is less than 397,000 GBA but at least 325,000 GBA, the Phase 1 Cap Amount shall be an amount equal to the product of (a) $17,500,000 multiplied by (b) a fraction, the numerator of which is the Phase 1 GBA and the denominator of which is 397,000. (iii) In the event that Phase 1 is less than 325,000 GBA, the Phase 1 Cap Amount shall be $0 and there shall be no obligation to pay or reimburse the Developer or the Districts for Eligible Costs allocated to Phase 1. The amount of GBA that shall be counted as being included in Phase 1 for the purposes of determining the Phase 1 Cap Amount shall be determined on the earlier of: (a) six months after the Grand Opening of Phase 1, or (b) the date of issuance of the first series of Phase 1 District Bonds. The following Eligible Costs shall be included in and shall count against the Phase 1 Cap Amount to the extent paid or reimbursed pursuant to Section 4.7 hereof from District Pledged Revenue on deposit with the Escrow Agent, or to the extent paid or reimbursed from the proceeds of Phase 1 District Bonds: (a) City Costs up to the City Costs Cap, (b) Additional Inspection Costs allocated to Phase 1, (c) Excess Pre-Financing Costs, and (d) Excess Costs of Issuance allocated to the Phase 1 District Bonds. The following Eligible Costs shall not be included in and shall be in addition to the Phase 1 Cap Amount: (a) Eligible Accrued Interest on Developer Advances up to the Phase 1 Cap Amount, (b) Pre-Financing Costs allocated to Phase 1 up to the Pre-Financing Costs Cap, (c) Costs of Issuance related to the Phase 1 District Bonds up to the applicable Costs of Issuance Cap, and (d) Excess City Costs allocated to Phase 1. Subject to the provisions of Section 4.8 hereof, the Phase 1 Cap Amount shall be reduced in an amount equal to any City Contribution paid to the Developer or any of the Districts. 3. Definition of Eligible Accrued Interest. The definition for Eligible Accrued Interest in Section 1 of the Agreement is hereby deleted in its entirety and replaced with the following: Eligible Accrued Interest means an amount not to exceed the Eligible Accrued Interest Cap Amount: (a) for the first Developer Advances in an amount not
exceeding the Phase 1 Cap Amount, simple per annum interest accrued on such Developer Advances at a rate equal to 6.25%, and (b) for Developer Advances in excess of the Phase 1 Cap Amount, simple per annum interest accrued on such Developer Advances at a rate equal to Prime plus 3% with a maximum interest rate of 9%. Eligible Accrued Interest shall begin to accrue: (i) for Developer Advances made to finance Eligible Costs for Eligible Improvements, on the date that Completion of Construction has occurred with respect to the Eligible Improvement for which such Developer Advances were made, or (ii) for Developer Advances made to finance Eligible Costs for Land Acquisition Costs or Easement Acquisition Costs, on the date that Completion of Construction has occurred with respect to the last Eligible Improvement on the land or easements that is the subject of such Land Acquisition Costs or Easement Acquisition Costs. In connection with the Completion of Construction of any such Eligible Improvement that was financed by Developer Advances, the Developer shall notify the City of the aggregate amount of Developer Advances allocable to such Eligible Improvement. Such allocation may include a prorata portion of necessary and reasonable soft costs related to such Eligible Improvement, including, without limitation, costs related to the engineering and design work for such Eligible Improvement. 4. Eligible Accrued Interest Cap Amount. The following definition is hereby added to Section 1 of the Agreement: Eligible Accrued Interest Cap Amount means an amount of Eligible Accrued Interest equal to $17,500,000 multiplied by a fraction, the numerator of which is the Phase 1 GBA and the denominator of which is 397,000. Notwithstanding anything in the Agreement to the contrary, the Developer and the District shall not be entitled to receive payment of or reimbursement for Eligible Accrued Interest in excess of the Eligible Accrued Interest Cap Amount. 5. General Provisions. The following provisions shall apply with respect to this Amendment: (a) Agreement in Full Force and Effect. Except as modified herein, the Agreement is in full force and effect and is hereby ratified by the Parties. In the event of any conflict between the Agreement and this Amendment, the terms and conditions of this Amendment shall control. (b) Counterparts. This Amendment may be executed in multiple counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement. This Amendment may be executed by.pdf signatures which shall be binding on the Parties, with original signatures to be delivered as soon as reasonably practical thereafter. (c) Successors and Assigns. This Amendment will inure to the benefit of and be binding upon the Parties and their respective legal representatives, successors, heirs, and assigns, provided that nothing in this subparagraph permits the assignment of this Amendment except as set forth in Section 17 of the Agreement.
(d) Applicable Law and Venue. The laws of the State of Colorado govern this Amendment. The District Court of Adams County will be the exclusive venue for any litigation. [SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, this Amendment is executed by the Parties as of the Amendment Date. CITY OF THORNTON, a municipal corporation in the County of Adams, State of Colorado ATTEST: By: Jeffrey B. Coder, Acting City Manager Kristen N. Rosenbaum, City Clerk APPROVED AS TO FORM: Luis A. Corchado, City Attorney Notice Address: With a copy to: City of Thornton 9500 Civic Center Drive Thornton, Colorado 80229 Attn: City Clerk City of Thornton 9500 Civic Center Drive Thornton, Colorado 80229 Attn: Luis Corchado, City Attorney
VILLAGE AT DRY CREEK DISTRICT NO. 1 ATTEST: President Secretary Notice Address: White Bear and Ankele The Streets at Southglenn 2154 E. Commons Avenue, Suite 2000 Centennial, CO 80122 Attention: Bill Ankele Email: wpankele@wbapc.com VILLAGE AT DRY CREEK DISTRICT NO. 2 ATTEST: President Secretary Notice Address: White Bear and Ankele The Streets at Southglenn 2154 E. Commons Avenue, Suite 2000 Centennial, CO 80122 Attention: Bill Ankele Email: wpankele@wbapc.com VILLAGE AT DRY CREEK DISTRICT NO. 3 ATTEST: President
Secretary Notice Address: White Bear and Ankele The Streets at Southglenn 2154 E. Commons Avenue, Suite 2000 Centennial, CO 80122 Attention: Bill Ankele Email: wpankele@wbapc.com VILLAGE AT DRY CREEK DISTRICT NO. 4 ATTEST: President Secretary Notice Address: White Bear and Ankele The Streets at Southglenn 2154 E. Commons Avenue, Suite 2000 Centennial, CO 80122 Attention: Bill Ankele Email: wpankele@wbapc.com
DENVER PREMIUM OUTLETS, LLC, a Delaware limited liability company By: Name: Title: Notice Address: 60 Columbia Road, Building B, 3 rd Floor Morristown, NJ 07960 Attn: Darryl Gugig, Deputy General Counsel Email: dgugig@simon.com With a copy to: Brownstein Hyatt Farber Schreck, LLP 410 Seventeenth Street, Suite 2200 Denver, CO 80202 Attention: Carolynne C. White, Esq. Email: cwhite@bhfs.com
EXHIBIT A TO FIRST AMENDMENT TO PUBLIC FINANCE AGREEMENT ASSISTANT SECRETARY S CERTIFICATE [See Attached]
EXHIBIT B TO FIRST AMENDMENT TO PUBLIC FINANCE AGREEMENT ASSIGNMENT AND ASSUMPTION OF PUBLIC FINANCE AGREEMENT [See Attached]