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New solar panel project to be unveiled at McKinley Foundation

University President Killeen and Champaign Mayor Feinen will join ceremony at facility which already includes U of I’s first “green” housing option

An on-campus foundation which serves U of I students, Presbyterian worshipers and members of the local community is the latest Champaign-Urbana facility turning to renewable energy to build a more sustainable environment and cut utility costs.

Leaders of the McKinley Foundation will formally unveil their new rooftop solar array during a ceremony on Tuesday, June 27 at 10:00 A.M. 

University President Timothy Killeen and Champaign Mayor Deborah Frank Feinen, will participate in the ceremony.

The new array includes 68 separate panels that will offset more than 19.5 tons of carbon each year. The McKinley Foundation has long been a leader in environmental stewardship.  Presby Hall, which is located at the Foundation and which houses more than 200 students, was the first certified “green” residence option for U of I students, earning LEED Gold Certification when it was built in 2008.

Recently enacted legislation in Illinois, the Future Energy Jobs Act (FEJA), will encourage more houses of worship, non-profit and educational institutions in Illinois to make the switch to solar energy.  The new law went into effect June 1.

The project was the result of discussions held by the McKinley Foundation and Faith in Place, a statewide interfaith group that engages with religious congregations on environmental issues.

WHO:   University President Killeen, Champaign Mayor Feinen, leaders of the McKinley Foundation, Faith in Place

WHAT: Ceremony to unveil new solar array

WHERE:  McKinley Presbyterian Foundation, 5th and Daniel St. Champaign

WHEN:   Tuesday, June 27, 10:00 A.M.

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Support One People’s Summer Arts Camp at Guido’s June 30th

Guido's is already known for it's trivia nights, but on June 30th you get the chance to show off what you know, and support a good cause. One People's Summer Arts Camp is a youth-centered and community-based arts education camp for kids ages 9-14. 

All the money raised on the 30th will go towards the camp, happening July 10-14.

For the event, it's $10 a person and teams up to 8 are allowed, or you can be placed in a team upon arrival. To register your team in advance and learn more about One People's Summer Arts Camp, click here.

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1st Annual Steam Threshing Show taking place July 21st in Arthur

The town of Arthur will be hosting it's first ever Steam Threshing Show on July 21st. All proceeds of the event will benefit the development of the Illinois Amish Heritage Center and it's plan to construct an Amish living history farm. 

Several threshing demonstrations are scheduled throughout the day that will include both threshing machines, plowing, and disking with horses. 

Admission is $10 for adults, $20 for families, and children under 12 are free.

For more information check out below and the event here:

FRIDAY, JULY 21 – Event Hours: 10:00 a.m. – 8:00 p.m.

11:00 A.M., 2:00 P.M., 5:00 P.M. – Wheat Threshing with steam and gas power

12:00 p.m. Noon Whistle1:00 p.m., 3:00 p.m. – Plowing & Disking with horses and early tractors

Other live demonstrations and attractions through-out BOTH days:

     Baker Fan operation with steam and gas power

     Grist Mill grinding wheat flour

     Straw baling and mini baler

     Corn Shelling

     Ice cream making with gas engines

     Wagon Rides, Barrel Rides, Carriage Rides

     Animal petting and Pony Rides

     Lunch tent open

     Displays of antique tractors and farm equipment

 

SATURDAY, JULY 22 – Event Hours: 9:00 a.m. – 4:00 p.m.

10:00 a.m., 11:30 a.m., 1:30 p.m., 2:30 p.m. – Wheat Threshing with steam and gas power

12:00 p.m. Noon Whistle

9:00 a.m., 11:00 a.m., 1:00 p.m., 3:00 p.m. – Plowing & Disking with horses and early tractor

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Illinois Shakespeare Fest opens this week

The annual Illinois Shakespeare Festival, held at Ewing Manor in Bloomington-Normal, opens its six-week run this Thursday. 

On the roster for the 40th anniversary year will be three versions of classic Shakespeare plays performed by local, regional, and nationally-known actors, including Champaign-Urbana resident couple: Nisi Sturgis and Jordan Caughtry. (Keep an eye out for an interview with them later this summer!) 

Productions include: a family-friendly production of A Midsummer Night's Dream, an adaptation called Shakespeare's Amazing Cymbeline, and the already sold-out I Heart Juliet presented by the Q Brothers Collective. 

The Improvised Shakespeare Company will be performing five shows, and young audiences can enjoy free performances of Sleeping Beauty

We'll have a more in-depth preview soon, but with the news of the Q Brothers selling out, we wanted to make sure everyone was aware of the opening night, this Thursday, June 29th. 

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MTD announces Independence Day closures for next Tuesday

Champaign-Urbana's Mass Transit District has announced that there will be no bus service next Tuesday, in observation of the 4th of July - one of the seven days that MTD shuts down during the year. For those looking to make it across town for a cookout, best start making other plans or budgeting for a Lyft.

For more information, check out the press release below:

No MTD Service on Independence Day

Champaign-Urbana, IL— MTD has no service on the Fourth of July and regular service will resume 7/5/17. This is one of only 7 days per year that MTD does not operate in Champaign-Urbana-Savoy. The others are Easter, Memorial Day, Labor Day, Thanksgiving, Christmas, & New Year's Day.

MTD will participate in Champaign County’s Freedom Celebration parade on the 4th of July, which begins near First Street and Kirby Avenue, Champaign, at 11:05 a.m. The theme of this year’s parade is “Salute to Education.” Find out more about the parade and view a map of the parade route at july4th.net/parade.

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Urbana’s Landmark Hotel renovation project deemed “not feasible”

After months of discussion surrounding Urbana's Landmark Hotel renovations potential — a proposal of turning it into a Hilton Tapestry Collection line — the City of Urbana has deemed the project "not feasible". Check out the press release:

Contacts:

Diane Marlin

Mayor, City of Urbana

217-384-2456

Brandon Boys

Economic Development Manager, City of Urbana

217-384-2439

For Immediate Release – June 26, 2017  

Hotel Project Not Feasible

The City of Urbana has concluded that a proposal by developer Crimson Rock Capital to renovate the Urbana Landmark Hotel is not feasible.

Mayor Diane Marlin said the major issues were the large amount of money the city would have to borrow to finance the project, the low level of equity participation by the developer and overall taxpayer risk.

“A vibrant hotel would make a great addition to our downtown, but unfortunately after many months of discussion, we were unable to reach an agreement with this developer on the current proposal,” Marlin said.

 The primary hurdle for the proposed $24.5 million project was the developer’s request for $9.5 million in city funds, which would have required the issuance of taxpayer-backed bonds. Total cost to the public would have approached $15 million over a 20-year period. Renovation costs were estimated to be $19.5 million, with the remainder going for the purchase of the now-closed hotel.

At the city’s request, SB Friedman Development Advisors of Chicago conducted a financial analysis of the project proposal and found the developer’s share in the risk to be too low.

 “The developer’s planned level of equity participation is substantially below industry standards and would not normally be considered sufficient in the eyes of other capital sources,” the report said.

The developer’s proposed equity share of the completed project was calculated to be less than 2 percent, or approximately $400,000.

“The numbers just don’t work,” said Marlin. “The current proposal would have put the city’s general fund at risk at a time when we’re trying to address a structural deficit and other financial challenges.”

Marlin said the city would welcome other proposals for the site and has already had recent inquiries. “Everyone supports revitalizing this area but this particular proposal is not the best way to get there,” she said.

Crimson Rock Capital, doing business as Upsilon Lambda Heta, LLC, is based in Glen Rock, NJ. The firm was notified of the city’s decision last week.

Top photo by Justine Bursoni.

UPDATE: 11:30 a.m.

Below is a report by consultant SB Friedman Development Advisors of Chicago, who reviewed the proposed development agreement for the Urbana Landmark Hotel on the city’s behalf.

TO: Brandon Boys, City of Urbana

MEMORANDUM

FROM: Geoff Dickinson, SB Friedman Development Advisors
Direct: (312) 384-2404; Email: gdickinson@sbfriedman.com

DATE: June 19, 2017

RE: Review of Developer’s Request for Financial Assistance - Landmark Hotel Redevelopment Project

SB Friedman Development Advisors (SB Friedman) has been engaged by the City of Urbana (the “City”) to conduct a review of a request for financial assistance to make the redevelopment of the Landmark Hotel (the “Project”) feasible. The Project encompasses a renovation of the existing Landmark Hotel into a boutique, upscale hotel under the flag of Hilton Hotels’ Tapestry Collection. The Project, located at 210 South Race Street, will create 128 hotel keys along with a hotel bar and restaurant, and 4,200 square feet of meeting space.

Crimson Rock Capital, LLC (the “Developer”) has requested City assistance to close the Project’s projected financial gap. The Developer has indicated that costs associated with renovating the historic hotel and the Project’s achievable revenues drive the need for City financial assistance.

This memorandum includes a review of the following:

  • Project characteristics

  • Development budget

  • Proposed sources of financing

  • Pro forma assumptions and 10-year cash flow

  • Need for requested financial assistance

    Developer Request for Assistance

    The Developer indicated that a City grant of $9.5 million is required for the Project to be financially feasible. He requested that the City provide that grant when the Project receives its Certificate of Occupancy. He indicated that he will be able to temporarily bridge the Project’s capital needs during the construction period but will need to substantially reduce his level of equity in the Project’s permanent financing structure.

Key Developer Pro Forma Assumptions

SB Friedman has reviewed the application materials submitted by the Developer, and has engaged the Developer in subsequent conversations to obtain additional and updated information to best understand the underlying financial assumptions regarding the Project. The Developer has provided the following documents for review:

  • Program description and development timeline

  • Narrative response to SB Friedman data request

  • Live pro forma including: budget (sources and uses), 10-year cash flow (income and expenses) and

    return calculations

  • Preliminary construction cost estimates

    Project Phasing

    The Developer has indicated that the Project will take 24 months to complete, with hotel occupancy starting in 2019 (hotel year 1) and the Project reaching stabilization in hotel year 3 (2021).

    Review of Developer Assumptions

    PROJECT BUDGET
    Table 1A below presents projected total development costs (TDC) included in the Developer’s preliminary

    pro forma.

    Table 1A: Preliminary Development Budget

Developer-Submitted Budget

Development Costs

Original
Budget [1] $ per Key % of TDC

Acquisition Costs

$5,171,200 $40,400 20.6%

Site Preparation Costs

$0 $0 0.0%

Hard Construction Costs

$10,801,361 $84,386 43.1%

FF&E Costs

$4,717,020 $36,852 18.8%

Soft Costs

$3,133,379 $24,480 12.5%

Financing Costs

$600,390 $4,691 2.4%

Developer Fees

$650,000 $5,078 2.6%

Reserves and Other Costs

$0 $0 0.0%

TOTAL DEVELOPMENT COSTS (TDC)

$25,073,349 $195,886 100.0%

[1] Costs reflect budget provided by Developer on March 27th, 2017 Source: Crimson Rock Capital, LLC

To evaluate the reasonableness of the preliminary Project budget, SB Friedman benchmarked certain development budget line items as a percentage of total costs and/or as cost per hotel key against SB Friedman’s project experience elsewhere and industry data including HVS. Key findings from our review of the Project budget are outlined below.

  • Site Acquisition. As of May 1st, 2017, the Developer had an option agreement to purchase the site from the current owner for $5.1 million. We have not been provided a recent appraisal for the site, nor comparable recent hotel property sales in the area. Thus, SB Friedman was unable to evaluate the reasonableness of the planned acquisition price.

  • Hard Construction Costs. Preliminary hard construction cost estimates for the Project were provided by a member of the development team and are based on the Developer’s experience with similar historic hotel redevelopment projects. The current budget includes a 15% contingency on construction costs. This is not uncommon for a project at this stage in the development process. As the Project advances, the Developer expects to gather additional information to reduce the level of uncertainty in the budget and thus the amount held as contingency in the hard cost budget.

  • Furniture, Fixtures and Equipment (FF&E). The budget includes FF&E costs of $36,900 per key. However, the Project’s total FF&E cost includes a 10% contingency, as well as back-of-the-house and kitchen buildout costs. When considering FF&E only for the guestroom and common area portions of the hotel, the Project’s costs are $27,100 per key (excluding the contingency) – very similar to industry data from the 2016 HVS cost estimating survey for new hotel construction, which suggests FF&E costs average $28,300 per key for full-service hotels.

    Given the preliminary nature of the renovation project, the inclusion of a 10% FF&E contingency may be reasonable. As the Project moves forward, this contingency should be reduced and the actual FF&E cost figure will presumably be refined.

  • Soft Costs. The Project’s projected soft costs, financing costs, and developer fee all appear to be within current industry benchmarks for hotel development. The Project’s soft costs of 12.5% of TDC are within the 2016 HVS cost estimating survey range of 12-14% for full-service hotels. The Project’s financing fees at 2.4% of TDC is slightly below the 3-5% of TDC range seen on other hotel renovation projects on which SB Friedman has worked. The Project’s developer fee at 2.6% of TDC is within the 2-4% of TDC range of comparable projects on which SB Friedman has worked.

    Based on our review, SB Friedman made one, minor, adjustment to the budget. It was a reduction in hard construction costs equal to the Developer’s anticipated amount of Enterprise Zone sales tax exemption. In parallel with this minor reduction in costs, sales tax exemption on materials was removed as a source of funds. As shown in Table 1B below, this did not result in substantial changes in the development budget.

Table 1B: Preliminary & Adjusted Development Budget

Developer-Submitted Budget

SBF-Adjusted Total Budget

Development Costs

Original
Budget [1] $ per Key % of TDC

SBF Adjusted SBF-Adjusted Budget - $ per

Budget Key

% of TDC - SBF-Adjusted Budget

Acquisition Costs

$5,171,200 $40,400 20.6%

$5,171,200 $40,400 20.9%

Site Preparation Costs

Hard Construction Costs [2]

$0 $0 0.0%

$0 $0 0.0%

$10,801,361 $84,386 43.1%

$10,418,161 $81,392 42.2%

FF&E Costs

$4,717,020 $36,852 18.8%

$4,717,020 $36,852 19.1%

Soft Costs

$3,133,379 $24,480 12.5%

$3,133,379 $24,480 12.7%

Financing Costs

$600,390 $4,691 2.4%

$600,390 $4,691 2.4%

Developer Fees

$650,000 $5,078 2.6%

$650,000 $5,078 2.6%

Reserves and Other Costs

$0 $0 0.0%

$0 $0 0.0%

TOTAL DEVELOPMENT COSTS (TDC)

$25,073,349 $195,886 100.0%

$24,690,149 $192,892 100.0%

[1] Costs reflect budget provided by Developer on March 27th, 2017
[2] SBF-adjusted budgets reflect hard costs reduction by amount of Enterprise Zone sales tax exemption Source: Crimson Rock Capital, LLC and SB Friedman

Overall, Project budget assumptions do not appear unreasonable based on the preliminary stage of development planning and available documentation of costs and industry benchmarks. However, as further due diligence is conducted and the redevelopment scope is further refined, we anticipate the level of constituency will be reduced.

PROPOSED FINANCING SOURCES

In addition to City financial assistance, the Project is anticipated to be financed with conventional debt, Federal historic tax credit equity, and cash equity from the Developer. Table 2 presents the preliminary financing sources included in the Project pro forma, with additional detail provided below.

Table 2: Preliminary Sources of Construction & Permanent Financing

Source: Crimson Rock Capital, LLC

• Conventional Debt. The Developer indicated that historic rehabilitation hotel projects in secondary or tertiary markets have challenges when trying to attract permanent and construction debt. The Developer has asserted that lenders have only been willing to provide debt financing at up to 50% loan-to-cost for both construction and permanent financing. SB Friedman has not independently verified the level of debt that the Project could attract. However, a figure on the order of a loan equal to 50% of total cost is consistent with debt levels we have observed for other complex redevelopment projects in smaller markets.

Source

Construction Capital Stack

Permanent Capital Stack

Permanent Capital Stack (w/ full City Assistance)

Conventional Debt

$12,500,000

$12,500,000 $12,500,000

Developer Equity

$12,190,149

$9,890,149 $390,149

Federal Historic Tax Credit Equity

$0

$2,300,000 $2,300,000

City Financial Assistance

$0

$0 $9,500,000

Total Sources

$24,690,149

$24,690,149 $24,690,149

  • Federal Historic Tax Credit Equity. The Developer has indicated that they will be seeking Federal historic tax credits for the entire Project. They have indicated that there is a question as to whether 100% of the project will be eligible. For the purposes of our review, we have assumed that the Developer will be able to secure and monetize these credits. The current Developer pro forma assumes that the entire Project is eligible. Assuming the Project can attract the level of credits as contemplated by the Developer, his calculations to estimate how much tax credit equity would be generated appear correct.

    The current capital stack does not appear to assume that the Project will attract state of Illinois historic tax credits. It is our understanding that the state of Illinois program is scheduled to expire on January 1, 2018. This may be an additional source of funds to explore as the Project moves forward.

  • Developer Equity. The Developer anticipates funding about half of the Project costs ($12.2 million), during the construction period, with equity. Upon Certificate of Occupancy, Federal historic tax credit equity and the City’s financial assistance would then “take out” the majority of the Developer’s equity. With the full assistance request, long-term Developer equity of $390,000 would represent 1.6% of TDC. Typically, financial partners/lenders prefer to see developer equity levels of 20% to 40% of TDC to help ensure that all parties have a substantial financial incentive in the long term success of the project. The Developer’s planned level of equity participation is substantially below industry standards and would not normally be considered sufficient in the eyes of other capital sources. The City may want to require a higher level of equity investment by the Developer. As shown in sections below, SB Friedman recommends a reduced level of City assistance.

    As a whole, the Project has levels of capital from two sources that appear reasonable when compared to industry standards. These are 1) conventional debt and 2) Federal historic tax credit equity. However, upon inclusion of the requested $9.5 million in City assistance, the share of Developer equity in the Project appears relatively small compared to standard industry benchmarks and presents a potential concern for the City.

    CASH FLOW ASSUMPTIONS

    The City engaged Patek & Associates (“Patek”) to conduct a third-party review of the Developer’s revenue, operating expenses, and net cash flow. Patek concluded that “the projections appear to be reasonable for the as described and renovated Urbana Landmark Hotel as a Tapestry Collection by Hilton.” In addition, Patek indicated that “the [Average Daily Rate] [in the Developer’s pro forma] is slightly higher than the competitive set ADR in the STR report by about $9-$10 yet it appears to be a reasonable ADR for an Upscale hotel concept by Hilton.” Based on the Patek review, SB Friedman has accepted the Developer’s operating revenue and expense projections for the purpose of evaluating the Project’s financial performance.

    However, SB Friedman has made one additional change to the Developer’s pro forma related to historic tax credit financing. It is our understanding that tax credit investors earn a 2% annual priority return for five years, along with a 5% priority put/return in the fifth year of the project. Collectively, these priority returns slightly decrease the Developer’s cash flow after debt service. This reduction in projected cash flow does not appear to substantially alter the Developer’s return calculations nor need for assistance.

Need for Financial Assistance

SB Friedman analyzed the Project’s financial performance under two scenarios:

  • Without Assistance. This scenario assumes the Project will not receive any City financial

    assistance (but will still secure Federal historic tax credits and enterprise zone sales tax relief).

  • With Requested $9.5 million in City Assistance. This scenario assumes the City provides $9.5 million in financial assistance upon Project occupancy (in addition to the Developer securing Federal historic tax credits and enterprise zone benefits).

    SB Friedman typically uses one or more of four return metrics to benchmark project returns, including:

  • Unleveraged Internal Rate of Return (IRR). This is the rate of return for a project, accounting for initial expenditures to construct the Project and ongoing cash inflows (annual net operating income [NOI] before debt service), as well as a hypothetical sale of the Project at the end of the analysis period.

  • Stabilized Yield on Cost. This metric is calculated by dividing NOI before debt service in the first year of stabilized operations by total project costs funded with private capital, and is an indicator of the annual overall return on private investment for the Project’s private capital.

  • Leveraged Internal Rate of Return. This is the annualized rate of return the Project’s equity investors would be projected to realize over their full investment period, including an assumed hypothetical sale of the Project at the end of the analysis period.

  • Stabilized Cash on Cash Return. This metric indicates the annual cash return to equity investors once the Project reaches stabilization, and is calculated by dividing net cash flow (after debt service) in a given year by the total initial equity investment.

    SB Friedman evaluated the Project’s projected returns based primarily on leveraged returns and cash-on- cash return, as these are most sensitive to the Developer’s equity investment in the Project. Unleveraged IRR presents an overall picture of the feasibility of the Project, without considering financing sources.

• Returns and Incentive Calculation. SB Friedman calculated the Project’s terminal value based on Year 11 net operating income (NOI), the Developer’s assumed 9.5% terminal cap rate, and a 3.0% cost of sale to be subtracted from sale proceeds. This differs from the Developer’s assumptions which calculated the reversion value based on Year 10 NOI. (The Developer’s terminal cap rate assumption is at the upper end of current industry data from PwC, but we believe that likely appropriately reflects the risk of the Project and size of this market.)

The Project returns with and without assistance are compared to industry benchmarks, as available, in Tables 3 and 4. SB Friedman estimates that the Project, without TIF assistance, generates an unleveraged IRR of 4.6%, which is below typical return thresholds for hotel development. Typically, a project of this type would achieve an unleveraged IRR on the upper end of an industry benchmark that ranges from 7% to 13%. Therefore, it appears unlikely the Project would move forward without City assistance. With the full requested $9.5 million in City assistance, the Project would achieve an unleveraged IRR of 12.9%, which is at the top end of benchmark returns.

However, with full City assistance, the Developer’s small equity contribution results in outsized returns to the Developer, well above what would be considered typical. With full City assistance, the Developer’s stabilized cash-on-cash return is 113%. This level of return would mean that the Developer is earning annual cash after debt payments equal to more than the equity the Developer has invested in the Project. In addition, a leveraged IRR of 86% is well above industry standards. A leveraged IRR below 30% should still provide sufficient returns to attract additional equity without making the Project financially infeasible.

Table 3: Projected Developer Returns

Returns Metric

No Assistance

Full Requested Assistance - $9.5M

Industry Benchmark [3]

Stabilized Debt Coverage Ratio

1.50

1.50

1.54 avg.

Stabilized Cash-on-Cash Return [1]

4.44%

112.67%

TBD

Leveraged IRR

2.20%

86.35%

20-30%

Stabilized Yield on Cost [2]

6.49%

11.26%

9.0-10.5%

Unleveraged IRR

4.58%

12.86%

9-13%

Source: Crimson Rock Capital and SB Friedman
[1] Annual cash return after debt service to Developer's cash equity
[2] NOI on total project costs (less public assistance: Historic Tax Credits/TIF grant)
[3] Benchmarks based on PWC, HVS, and Realty Rates national industry benchmarks and SB Friedman project history, and use the upper end of standard ranges to account for the higher risk of this project and this smaller market.

Based on our review of the Developer’s returns, it appears that, without assistance, the Project’s returns are below benchmark and thus, the Project is likely not feasible. However, if the City were to provide the full level of assistance requested by the Developer, the Project’s leveraged returns would be substantially in excess of benchmarks.

Potentially Appropriate Level of Assistance and Other Considerations

In an attempt to bring the Developer’s leveraged returns in line with benchmarks, SB Friedman analyzed a scenario under which the City provides $8 million in assistance rather than $9.5 million. See Table 4 below for a proposed alternative capital structure and resulting returns:

Table 4: Projected Developer Returns and Equity Contribution with Adjusted Level of Assistance

Returns Metric

No Assistance

Full Requested Assistance - $9.5M

Adjusted Level of Assistance - $8M

Industry Benchmark [3]

Stabilized Debt Coverage Ratio

1.50

1.50

1.50

1.54 avg

Stabilized Cash-on-Cash Return [1]

4.44%

112.67%

23.26%

TBD

Leveraged IRR

2.20%

86.35%

28.57%

20-30%

Stabilized Yield on Cost [2]

6.49%

11.26%

10.09%

9.0-10.5%

Unleveraged IRR

4.58%

12.86%

11.08%

9-13%

Developer's Permanent Cash Equity Contribution

$9,890,149

$390,149

$1,890,149

N/A

Developer's Equity as Percentage of TDC

40.1%

1.6%

7.7%

20-40%

Source: Crimson Rock Capital and SB Friedman
[1] Annual cash return after debt service to Developer's cash equity
[2] NOI on total project costs (less public assistance: Historic Tax Credits/TIF grant)
[3] Benchmarks based on PWC, HVS, and Realty Rates national industry benchmarks and SB Friedman project history, and use the upper end of standard ranges to account for the higher risk of this project and this smaller market.

If the City assistance is reduced by $1.5 million and the Developer’s cash equity contribution is subsequently increased by the same amount, the Project will achieve an equity return consistent with benchmarks. Note however, that the overall level of Developer equity invested in the Project under this scenario (now almost $2 million) is still substantially less than 20%, which is often considered a minimum in our experience. Without sufficient Developer equity, the following issues become material concerns for the City:

  1. 1)  A Relatively Low Level of Developer Equity Creates Downside Risk for the City. Even with reduced City assistance, the Developer’s equity would be less than 8% of TDC. If the Project underperforms, normally the Developer’s equity would be the first capital source to see its value diminished. With a comparatively small amount of Developer equity in the Project, any downside risk will fairly quickly move from being a Developer concern to being a concern for the City.

    Further, it is not typical for a City to have over four-times as much equity in a deal as a Developer. In our experience, the ratio of City equity to Developer equity would be, at most, 1:1.

  2. 2)  A Relatively Low Level of Developer Equity May Induce Risky Developer Behavior. A developer with a relatively low level of equity investment in a project is more likely to attempt a highly risky project since he/she has very little capital at risk. Thus, the City should not consider the 7.7% equity on the part of the Developer (under this proposed $8 million alternative level of assistance) sufficient to help guard against undue risk taking.

    This concern is heightened because the City, as the Project is currently contemplated, counts on the long term performance of the Project to pay off its equity investment. To the extent that the Project operates below pro forma, it will generate a lesser amount of taxes. This outcome could require that the City raise its tax levy to help pay off the loan required to make the $8 million contribution to the Project.

In conclusion, the proposed relatively low level of Developer equity exposes the City to material financial risks and may also induce the Developer to undertake a Project with more risk than he would if his equity levels were higher.

Conclusions and Recommendations

SB Friedman’s and Patek’s analyses of the information provided by the Developer indicate that the major inputs and conclusions regarding the feasibility of the Project without City assistance are reasonable.

The results of our review indicate that $8 million in City assistance appears to be necessary for the Project to close its financing gap while achieving viable investment returns for the Developer. This reduced level of City assistance would require an increase in the Developer’s equity. To the extent that negotiation between the City and Developer results in City assistance of more than $8 million, the Developer’s returns are expected to be above industry standards for a project of this sort.

Note that, even with the reduced level of City assistance to $8 million the Developer’s equity in the Project (8% of TDC) would still fall short of a typical transaction. Finally, the Developer’s equity would also be less than one-quarter of the City’s equity investment. This structure could lead to the City taking on too much financial risk in general as well as relative to the risk taken by the Developer. Ultimately, this Project appears to have a structural gap between the need for public support and the appropriate level of public support for a Project of this type.

Appendix A

LIMITATIONS OF OUR ENGAGEMENT

Our report is based on estimates, assumptions and other information developed from research of the market, knowledge of the industry, and meetings/teleconferences with the City of Urbana and the Developer during which we obtained certain information. The sources of information and bases of the estimates and assumptions are stated in the report. Some assumptions inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our analysis will necessarily vary from those described in our report, and the variations may be material.

The terms of this engagement are such that we have no obligation to revise analyses or the report to reflect events or conditions that occur subsequent to the date of the report. These events or conditions include, without limitation, economic growth trends, governmental actions, changes in TIF statute, additional competitive developments, interest rates, and other market factors. However, we will be available to discuss the necessity for revision in view of changes in the economic or market factors affecting the proposed project.

Our report is intended solely for your information, for purposes of reviewing a request for financial assistance, and is not a recommendation to issue bonds or other securities. The report should not be relied upon by any other person, firm or corporation, or for any other purposes. Neither the report nor its contents, nor any reference to our Firm, may be included or quoted in any offering circular or registration statement, appraisal, sales brochure, prospectus, loan, or other agreement or document intended for use in obtaining funds from individual investors without our prior written consent.

We acknowledge that upon submission to the City, the report may become a public document within the meaning of the Freedom of Information Act. Nothing in these limitations is intended to block the disclosure of the documents under such Act.

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Vagina Monologues — for Courage Connection — auditions tonight

Courage Connection is on the fundraising rampage, and one of the more interesting opportunities I've seen is a one-night production of The Vagina Monologues to be staged at the Virginia Theatre (tentatively) on August 25th. 

Auditions are today, Sunday, June 25th from 4-6 p.m., and tomorrow, Monday, June 26th from 5:30-9 p.m. at Champaign Public Library in a conference room on the 2nd floor. 

Everyone who auditions will be given a part, and the emphasis is on inclusivity. The auditions will be read from the script, and are mostly to determine strengths and see where each actor will fit best. Co-organizer Molly McLay told me: 

"We are aiming to have 50 people, with everyone using notecards for the actual show like Ensler intended.

We recognize that The Vagina Monologues is sometimes not done in an inclusive way, and we plan to make sure everyone feels welcome. Women, trans, non-binary, and genderqueer individuals are welcome to audition."

So you don't have to prepare anything, just come with a willingness to speak publicly, act a little, and support Courage Connection

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Krannert Center awarded $20,000 in NEA grants for youth series

Krannert Center for the Performing Arts' Youth Series will see a boost in the form of a grant from the National Endowment for the Arts. This grant, which totals $20,000, is allocated for sustaining diverse artistry, and for exploring and expanding the impact of arts programs for youth.

For more information, check out the press release below:

MORE THAN $82 MILLION AWARDED FOR ARTS PROJECTS NATIONWIDE

INCLUDES $20,000 AWARDED TO KRANNERT CENTER FOR THE PERFORMING ARTS

Urbana, IL—National Endowment for the Arts Chairman Jane Chu has approved more than $82 million to fund local arts projects across the country in the NEA’s second major funding announcement for fiscal year 2017. Included in this announcement is an Art Works award of $20,000 to Krannert Center for the Performing Arts at the University of Illinois at Urbana-Champaign, to sustain and expand its presentation of high-quality, diverse artistry; create residencies and engagement opportunities; and explore the impact of the arts for preK-12 students, families, artists, and partners. The NEA received 1,728 Art Works applications and will make 1,029 grants ranging from $10,000 to $100,000.

“The arts reflect the vision, energy, and talent of America’s artists and arts organizations,” said NEA Chairman Jane Chu. “The National Endowment for the Arts is proud to support organizations such as Krannert Center for the Performing Arts in serving their communities by providing excellent and accessible arts experiences.”

Krannert Center’s Youth Series: The IMPACT of the Arts for Youth grant work will be revealed through interviews, workshops, storytelling, stage tours, masterclasses, demonstrations, interactions, and other activities exploring early arts education experiences; connectivity around cultural, academic, and societal moments through the arts; methods of art-making; and the professional development of artists. Year one residencies will range from day-long interactions alongside performances to week-long residencies; this will build in year two to longer residencies such as a two-week continuous residency or multiple shorter visits from the same artist. During these visits, the artist/company/creative teams and students will engage in explorations about various art forms and their impact. Students and teachers will be collaborators in designing the interactions to promote conversations among our local community, university learning community, and national/international performing arts community.

Krannert Center director Mike Ross noted the critical nature of NEA funding throughout the arts community and its ability to propel long-standing, mission-centric projects like the Krannert Center Youth Series to new levels of excellence and impact. As Krannert Center prepares for the 35th anniversary of the Youth Series program in the 2017-18 season, Ross expressed the Center’s gratitude to the NEA and Chairman Chu for fueling the advancement of innovative education, creative research, and inclusive excellence in presenting and engagement through the performing arts.

To join the Twitter conversation about this announcement, please use #NEASpring17 and #KrannertCenter. For more information on projects included in the NEA grant announcement, go to arts.gov

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Illinois Football just offered a scholarship to a 10 year old

We can't make this one up, folks - word on the street (and on MaxPreps.com) is that Illinois Football has just offered a scholarship to 10 year old Bunchie Young.

Yes, you read that right: 10 years old.

I'm not so sure about this recruiting thing anymore, folks, but apparently he's the fastest 10 year old in the country, for what that's worth.

Watch his full highlight video here, and see the tweet confirming the signing below:

 

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Public Art League unveiling newest sculpture next Tuesday, June 27th

The Public Art League is unveiling their newest sculpture next week — Tuesday, June 27th at 5:30-7 p.m. at Art Mart in Champaign. Here's the info from their email blast:

Join us on Tuesday, June 27 from 5:30p-7:00p at Art Mart as we unveil the sculptures that could make their way to the Champaign-Urbana area this year! Artists from all over the country have submitted their entries and you will get a chance to see the wonderful pieces that have been selected for installation. Hors d’oeuvres Provided. Beer & Wine Available (Cash Bar).

Please RSVP by Friday, June 23 to events@publicartleague.org