HomeMy WebLinkAboutItem 01 Blue McKenzie Predevelopment Loan AuthorizationAGENDA ITEM SUMMARY Meeting Date: 4/26/2021
Meeting Type: Regular Meeting
Department: CMO/CAO
Staff Contact: Courtney Griesel/CMO
Kristina Kraaz/CAO
S P R I N G F I E L D ECONOMIC Staff Phone No: 541-726-3700
DEVELOPMENT AGENCY Estimated Time: 30 Minutes
ITEM TITLE: BLUE MCKENZIE PREDEVELOPMENT LOAN AUTHORIZATION
ACTION
REQUESTED:
Authorize the City Manager to negotiate and execute a Loan Agreement to loan
$2,000,000 to Blue McKenzie LLC for acquisition and predevelopment work for
the “Springfield Motors” development according to the terms herein, and whatever
additional agreements or documents are required to give effect to the Loan
Agreement.
ISSUE
STATEMENT:
The Springfield Economic Development Agency (SEDA) Board is asked to
authorize the City Manager to negotiate and execute a Loan Agreement to loan
$2,000,000 to Blue McKenzie LLC for acquisition and predevelopment work for
the “Springfield Motors” development.
ATTACHMENTS: Attachment 1 – Blue McKenzie Project and Loan Details Board Memorandum
Attachment 2 – Executed SEDA/Blue McKenzie LLC Memorandum of
Understanding
Attachment 3 – Loan Budget, Tasks, Timeline and Disbursement Request Template
DISCUSSION/
FINANCIAL
IMPACT:
SEDA has been working over the past two years to support and outline a
partnership for redevelopment of the Downtown Springfield ‘Motors’ site, now
referred to as Blue McKenzie.
This partnership has outlined a goal and plan for constructing a $27M, 8-story,
mixed-use, market-rate residential, mass timber building to be constructed by 2023
in Downtown Springfield.
Ongoing Board review and direction has resulted in a signed memorandum of
understanding (Attachment 2) outlining a lending partnership between SEDA and
the development owner, Blue McKenzie LLC for up to $10 million in SEDA funds.
Staff is proposing a structure of two loans as discussed in Attachment 1 and
detailed in the signed MOU (Attachment 2, Section D) and listed below:
1. Acquisition and Pre-Development Loan - SEDA Loan of up to $2 million
for predevelopment costs, including $400,000 for Owner’s acquisition of
the property.
2. Long Term Loan - SEDA Loan of up to $10 million for construction costs
and including mandatory repayment of the $2 million pre-development
loan ($8 million net).
These goals, plans and loan details are discussed in Attachment 1 to this packet.
The SEDA Board is asked at this time to authorize the City Manager to negotiate
and execute a Loan Agreement for up to $2,000,000 to Blue McKenzie LLC for the
first of the two loans listed above and detailed in the attachments to this packet.
ATTACHMENT 1, PAGE 1 OF 4
M E M O R A N D U M Springfield Economic Development Agency
Date: 4/26/2021
To: Nancy Newton BOARD
From: Courtney Griesel, CMO
Kristina Kraaz, CAO
BRIEFING
Subject: Blue McKenzie Predevelopment Loan
Authorization
MEMORANDUM
ISSUE: The SEDA Board is asked to authorize the City Manager to negotiate and execute a Loan
Agreement to loan $2,000,000 to Blue McKenzie LLC for acquisition and predevelopment work for the
“Springfield Motors” development.
BACKGROUND:
During the summer of 2019 the Scherer family, owner/operator of the Downtown Springfield Motors
(Buick) Site located at 702 A Street, approached the City to share their upcoming plans for closing of the
business. In operation on the site since 1948, the Scherer’s were looking forward to retiring but felt a
strong desire to move the property quickly into a future, new, active use that would continue the legacy of
the site as a positive and vibrant corner in Downtown. Staff worked with the Scherer family to understand
their areas of interest and goals and make introduction to Oregon based developer, Northwest Sustainable
Properties (NWSP). The partnership between members of the Scherer family and NWSP is now referred
to as Blue McKenzie LLC.
Under a SEDA grant, NWSP assisted with assessment, feasibility, massing, and project sizing over the
past 13 months. This grant work led to the conceptualized 8-story, mixed-use mass timber building, with
an estimated $27M development cost. This project includes a SEDA lending partnership as part of the
financing structure.
The below timeline reflects the progress and Board engagement on the project over the past two years:
ATTACHMENT 1, PAGE 2 OF 4
Project Assessment, Feasibility and Description
In March of 2020, members of Blue McKenzie LLC approached the SEDA Board to request support in
completing massing and financial feasibility assessments of developing the site. The Board authorized
$85,000.00 to support the work. $35,000 of this amount utilized existing EPA Brownfield grant funds to
complete environmental assessments.
Despite the unanticipated emergence of the COVID19 global pandemic, Blue McKenzie and SEDA
continued to keep pace on the project and assessment work. By early Fall of 2020, final environmental
assessments showed a clean site and the shape and scope of a market sized concept was presented to the
Board in October 2020.
The project, as guided by detailed assessment and market research, reflects:
• Use of taxlot 2300
• 8-story, mixed-use building
o 7 Stories Market Rate Residential (approximately 85 units)
o 1 Story Ground Floor Commercial (approximately 5,000 SF)
• Mass Timber Construction
• Estimated Project Cost of $27M
• 2022 Construction and 2023 Completion
• Taxable in Year 1
Project Funding and SEDA Partnership
The estimated project cost to construct is $27M and introduces a new construction type and residential
product to the Springfield market, setting a new pattern for property values and comparables in Downtown
and the broader community. This positive first step requires SEDA partnership to mitigate the below
factors, which contribute to perceptions of investment risk by developers, and more importantly, by
lenders:
• A lack of comparables to prove long-term performance
• Lagging rent rates and population growth
• Availability of opportunities in adjacent communities with comparables that demonstrate higher
rents
In December of 2020, the SEDA Board directed staff to focus efforts on a partnership which focuses
SEDA financial contribution away from a public subsidy model and towards participation with an
ATTACHMENT 1, PAGE 3 OF 4
expectation of direct recoup of SEDA funds. In March of 2021, the Board authorized the signing of a
memorandum of understanding (MOU) outlining a $10M loan partnership between SEDA and the
developer, Blue McKenzie LLC.
LOAN TERMS
The signed MOU between Blue McKenzie LLC and SEDA (Attachment 2) includes lending of up to
$10M from SEDA to Blue McKenzie LLC. Staff is proposing a structure of two loans as outlined in the
MOU (Section D) and listed below:
1. Acquisition and Pre-Development Loan - SEDA Loan of up to $2 million for predevelopment
costs, including $400,000 for Owner’s acquisition of the property.
2. Long Term Loan - SEDA Loan of up to $10 million for construction costs and including
mandatory repayment of the $2 million pre-development loan ($8 million net).
The SEDA Board is asked at this time to authorize the City Manager to negotiate and execute a Loan
Agreement for up to $2,000,000 to Blue McKenzie LLC for the first of the two loans listed above. This
Loan Agreement includes lending for costs associated with property acquisition and pre-development
activities.
Terms of this loan are outlined below:
Borrower Blue McKenzie, LLC
Property Location Site located east of 7th Street and north of A Street in Springfield, Map
Number 17-03-35-42, Tax lot 2300
Loan Amount Up to $400,000 for property acquisition and $1,600,000 for
predevelopment costs; not to exceed $2,000,000 total.
Interest Rate 0% per annum
Loan Fee 1% of loan amount ($20,000), financed
Predevelopment Period Not to exceed 18 months
Repayment Term Entire loan due and payable at 18 months
Loan Security Deed of trust in the acquired property; assignment of all predevelopment
contracts and work product.
Loan Forgiveness Loan is forgivable by SEDA if both parties determine not financially
feasible to construct the development, and if Borrower voluntarily
surrenders the security at no cost to SEDA.
Loan Priority Loan will be primary during predevelopment work. Loan will be required
to be repaid at time of construction loan.
Disbursement Based on disbursement requests from Borrower documenting work to date
using form in Attachment 3.
Project Budget See Attachment 3
Project Timeline See Attachment 3
Misc. Terms Parties obligated to work together in good faith to negotiate construction
loan agreement for full $10 million loan. Parties will agree to major terms
of loan agreement within 6 months, unless extended by mutual agreement.
ATTACHMENT 1, PAGE 4 OF 4
RECOMMENDED ACTION: Authorize the City Manager to negotiate and execute a Loan Agreement
to loan $2,000,000 to Blue McKenzie LLC for acquisition and predevelopment work for the “Springfield
Motors” development according to the terms herein, and whatever additional agreements or documents are
required to give effect to the Loan Agreement.
Attachment 2, Page 1 of 11
Attachment 2, Page 2 of 11
Attachment 2, Page 3 of 11
Attachment 2, Page 4 of 11
Attachment 2, Page 5 of 11
Attachment 2, Page 6 of 11
Attachment 2, Page 7 of 11
Attachment 2, Page 8 of 11
Attachment 2, Page 9 of 11
Attachment 2, Page 10 of 11
Attachment 2, Page 11 of 11
{00019345:1}
BLUE MCKENZIE LLC PROJECT BUDGET, TASKS, TIMELINE & DISBURSEMENT
REQUEST TEMPLATE
Project Budget – Predevelopment Loan
Predevelopment Activity Amount
Development Management $409,000
Architectural Design $739,250
Structural Engineering $116,250
Civil Engineering $31,500
Mechanical Engineering $148,600
Surveying & Geotechnical $17,000
Cost Estimating $75,000
Loan Fee $20,000
Contingency $43,400
Predevelopment Total $1,600,000
Acquisition Activity Amount
Property Acquisition $400,000
Acquisition Total $400,000
LOAN TOTAL $1,600,000
Project Tasks & Timeline
The Project timeline is intended to inform estimated timing and relationship of tasks and
predevelopment phases to be funded during the initial pre-development and property acquisition loan
($2M) phase. SEDA will disburse loan funds to Owner on a monthly basis according to the
Predevelopment & Acquisition Loan Agreement.
1. Property Acquisition. Owner will acquire fee simple title to the Property no later than June
30,2021
2. Survey & Geotechnical. Owner will complete surveying and geotechnical work needed to
complete the schematic design in four to six weeks, no later than June 30, 2021
3. Development of Project Concept and Scope. Owner agrees to refine the Project concept and
scope for a mixed-use development that is consistent with the following attributes
(“Schematic Design”): (a) eight-story mixed-use building; (b) seven stories of market rate
residential development providing approximately 84 units; (c) approximately 5,000 square
feet of ground floor commercial retail; and (c) CLT construction. Owner's Conceptual Design
will include at least the following: (i) a site plan that shows the location of the structure,
ATTACHMENT 3, PAGE 1 OF 4DRAFT
{00019345:1}
streets, any parking areas and open spaces; (ii) a program showing all proposed uses for the
Project; (iii) the location of uses within the Project; (iv) the approximate square footage of
each use; (v) building envelopes that show the approximate scale and massing of the
proposed buildings; and (vi) illustrative sketches depicting the character of the overall Project,
including public spaces. SEDA will have the right to review and approve or disapprove of the
Schematic Design, which approval shall not be unreasonably withheld. The Schematic Design
will be completed within 12 weeks of Survey no later than September 1 2021
4. Schematic Design. Owner will prepare schematic level architectural design drawings
(“Schematic Design”) and engineering drawings and specifications of the Project, which shall
be consistent with the Conceptual Design approved by SEDA. The drawings will include a site
plan, floor plans, elevation views and renderings, and SEDA will have the right to review and
approve or disapprove of the Schematic Design, which approval shall not be unreasonably
withheld. Upon completion of Schematic Design, Owner will prepare and provide to SEDA a
preliminary cost estimate and construction schedule for the Project, which cost estimate and
schedule shall be subject to SEDA’s review and approval. Owner will provide SEDA with the
Schematic Design for review no later than [date 12-weeks out.]
5. Design Development Drawings and Specifications. Owner will prepare the design development
level architectural and engineering drawings and specifications of the structures (“Design
Development Drawings”). The dimensioned drawings, details and the specifications will be
sufficiently detailed to allow subcontractor pricing and for the contractor to prepare cost
estimates, a schedule, construction contract, and to obtain a building permit. SEDA will have
the right to review and approve or disapprove of the 50% and 90% Design Development
Drawings, which approval shall not be unreasonably withheld. Upon completion of Design
Development Drawings, Owner will prepare and provide to SEDA an updated cost estimate
and construction schedule for the Project, which updated cost estimate and schedule shall be
subject to SEDA’s reasonable review and approval.
6. Construction Documents. Owner will prepare construction documents for the Project sufficient
to allow the City to review and issue a building permit for all vertical construction other than
site work (“Construction Documents”). SEDA will have the right to review and approve or
disapprove of 50% and 100% Construction Documents, which approval shall not be
unreasonably withheld. The 50% Construction Documents must be provided to SEDA no later
than and the 100% Construction Documents must be provided to SEDA no later than March 1
2022
7. Final Cost Estimate. Upon completion of Construction Documents and no later than May 15
2022 Owner will prepare and provide to SEDA an updated cost estimate and construction
schedule for the Project, which updated cost estimate and schedules shall be subject to
SEDA’s reasonable review and approval. After completion of a competitive subcontractor bid
process for the construction of the Project, Owner shall provide to SEDA an updated project
budget and timeline. The final project budget and timeline is subject to reasonable review and
approval by the SEDA.
ATTACHMENT 3, PAGE 2 OF 4DRAFT
BLUE MCKENZIE
Tranch 1 Performance Schedule
May3 2021 -May 27, 2022
Project Duration 13 months May June July Aug Sept Oct Nov Dec Jan Feb Mar April May
Tasks
Development Mangament
Property Acquisition
Survey/ Geo Tech
Architecture
Schematic Design
Design Development
Construction Documentation
Permit Documentation and issuance
Tranche 2
Construction Taget Start is July 2022
Constrution Duration estimated at 24 months
Senior Debit closes June 2021
SEDA 2nd Tanche June 2022
Blue Mckenzie investment June 2022
ATTACHMENT 3, PAGE 3 OF 4DRAFT
Steps At set‐up of this form, please complete steps below for pre‐development phases
1 List Contractors in Column C
2 Insert Estimated Total Budget by Task in Column G
Do Not Modify Column L
TASK
Prime Hours
This Period
Sub Fixed Costs
This Period
Total Estimated
Task Budget
Total Spent By End
of Last Period
Total Spent
this Period
Total Spent to
Date
Percent Task
Complete to Date
Percent of Total Task
Budget Spent
TASK 1 SCHEMATIC DESIGN
1 A Development Administration
Prime: [FIRM NAME]
1 B Architectural Design
Prime: [FIRM NAME]
1 C Architectural Design
[FIRM NAME]
1 D STRUCTURAL Engineering
[FIRM NAME]
1 E Mechanical, Electrical, Plumbing and Fire
[FIRM NAME]
1 F Civil Engineering
[FIRM NAME]
1 G Cost Estimating
[FIRM NAME]
1 H Other/TBD
[FIRM NAME]
1 J Other/TBD
[FIRM NAME]
SCHEMATIC DESIGN TOTAL 0 0 ‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
Total
Estimated
Prime Hours
for Task 1
TASK 2 DESIGN DEVELOPMENT
2 A Development Administration
Prime: [FIRM NAME]
2 B Architectural Design
Prime: [FIRM NAME]
2 C Architectural Design
[FIRM NAME]
2 D STRUCTURAL Engineering
[FIRM NAME]
2 E Mechanical, Electrical, Plumbing and Fire
[FIRM NAME]
2 F Civil Engineering
[FIRM NAME]
2 G Cost Estimating
[FIRM NAME]
2 H Other/TBD
[FIRM NAME]
2 J Other/TBD
[FIRM NAME]
DESIGN DEVELOPMENT TOTAL 0 0 ‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
Total
Estimated
Prime Hours
for Task 2
TASK 3 CONSTRUCTION DOCUMENTS
3 A Development Administration
Prime: [FIRM NAME]
3 B Architectural Design
Prime: [FIRM NAME]
3 C Architectural Design
[FIRM NAME]
3 D STRUCTURAL Engineering
[FIRM NAME]
3 E Mechanical, Electrical, Plumbing and Fire
[FIRM NAME]
3 F Civil Engineering
[FIRM NAME]
3 G Cost Estimating
[FIRM NAME]
3 H Other/TBD
[FIRM NAME]
3 J Other/TBD
[FIRM NAME]
CONSTRUCTION DOCUMENTS TOTAL 0 0 ‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
Total
Estimated
Prime Hours
for Task 3
Reimburseables ‐$ ‐$ ‐$ ‐$
CONTRACT TOTAL 0‐$ ‐$ ‐$ ‐$ ‐$
Invoiced
Amount this
Period
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$
‐$
‐$
‐$
‐$
‐$
‐$
‐$ ‐$
‐$
‐$
‐$
‐$
‐$
‐$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
‐$
‐$
‐$
‐$ ‐$
‐$
‐$
‐$
‐$
‐$
‐$ ‐$ ‐$
#DIV/0!
#DIV/0!
‐$ ‐$ #DIV/0!
‐$
‐$
‐$
‐$
‐$
‐$
‐$
‐$
‐$
‐$
‐$
#DIV/0!
‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$
‐$ ‐$ ‐$
‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$
‐$ #DIV/0!‐$ ‐$ ‐$ ‐$
‐$ #DIV/0!
‐$ ‐$ ‐$ ‐$ ‐$ #DIV/0!
‐$
ATTACHMENT 3, PAGE 4 OF 4DRAFT