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HomeMy WebLinkAboutMin - Economic Development Corporation - 2008 - 02/20 - RegularCall to Order and Announce a Ouomm Present. With a quorum of the Board present, the Regular Meeting of the Allen Economic Development Corporation (AEDC) was called to order by President Kurt Kizer at 6:04 p.m. on Wednesday, February 20, 2008 at the AEDC Office. 1. Approval of Minutes of the January 16, 2008 Regular Meeting On a motion by Maxine Sweet, seconded by Tim Wood, the Board unanimously approved the Minutes of the January 16, 2008 Regular Meeting of the AEDC Board of Directors. 2. Update on the Status of One Allen Center Blair Oder, Duke Realty Corporation, appeared before the Board to discuss the status of the new approximately 150,000-sf office building that was recently constructed by his company near the northwest comer of Bethany Drive and US 75 in Allen Central Park. Oden was informed that Gary Caplinger is a new member of the AEDC Board and Mark Pacheco has resigned from the Board. Oden noted that the first tenants, Stewart Title and The Halo Group, will be moving into the new building tomorrow. Collectively, these companies have leased half of the first Boor. Craig Friesland is the corporate attorney for The Halo Group and his company is Stuart Tide. Stewart Title's lease is completely separate from The Halo Group's lease. Trustmark Insurance has signed a lease on approximately 3,800 square feet on the second Boor of the building and will occupy the space shortly Oden is also working with Health Texas Providers, a company that is in the process of drafting a Letter of Intent on 9,000 square feet of space in the building. Oden is working with several deals ranging in size from 8,000 — 10,000 square feet. Overall, Oden has received a good deal of interest in the building. Oden mentioned that Duke is working with Women of Faith, which also operates under the name Thomas Nelson Publishing, to occupy 35,000 square feet of space in the building. Duke has a good relationship with the company and is pursuing the deal aggressively. He is confident that Women of Faith will locate in the building. ALLEN ECONOMIC DEVELOPMENT CORPORATION (AEDC) i BOARD OF DIRECTORS REGULAR MEETING WEDNESDAY, FEBRUARY 20, 2008 Board Staff Guests Kurt Kizer Robert Winningham Mark Pacheco Tim Wood Daniel Bowman Peter Vargas Carl Clemencich Tracey Cline David Hoover Gary Caplinger Pete Smith Maxine Sweet Blair Oden Call to Order and Announce a Ouomm Present. With a quorum of the Board present, the Regular Meeting of the Allen Economic Development Corporation (AEDC) was called to order by President Kurt Kizer at 6:04 p.m. on Wednesday, February 20, 2008 at the AEDC Office. 1. Approval of Minutes of the January 16, 2008 Regular Meeting On a motion by Maxine Sweet, seconded by Tim Wood, the Board unanimously approved the Minutes of the January 16, 2008 Regular Meeting of the AEDC Board of Directors. 2. Update on the Status of One Allen Center Blair Oder, Duke Realty Corporation, appeared before the Board to discuss the status of the new approximately 150,000-sf office building that was recently constructed by his company near the northwest comer of Bethany Drive and US 75 in Allen Central Park. Oden was informed that Gary Caplinger is a new member of the AEDC Board and Mark Pacheco has resigned from the Board. Oden noted that the first tenants, Stewart Title and The Halo Group, will be moving into the new building tomorrow. Collectively, these companies have leased half of the first Boor. Craig Friesland is the corporate attorney for The Halo Group and his company is Stuart Tide. Stewart Title's lease is completely separate from The Halo Group's lease. Trustmark Insurance has signed a lease on approximately 3,800 square feet on the second Boor of the building and will occupy the space shortly Oden is also working with Health Texas Providers, a company that is in the process of drafting a Letter of Intent on 9,000 square feet of space in the building. Oden is working with several deals ranging in size from 8,000 — 10,000 square feet. Overall, Oden has received a good deal of interest in the building. Oden mentioned that Duke is working with Women of Faith, which also operates under the name Thomas Nelson Publishing, to occupy 35,000 square feet of space in the building. Duke has a good relationship with the company and is pursuing the deal aggressively. He is confident that Women of Faith will locate in the building. AEDC Board of Directors Regular Afeetnng February 20, 2008 Page 2 Oden hopes that the building will be 70-80% leased by the end of 2008. Duke has had many small local deals looking at the building, which is the type of activity that Oden had been expecting. Oden would like to lease space to an operator of executive suites, but Trademark Property already signed a lease for executive suites in their Watters Creek development. He would prefer to wait to see if those executive suites are successful before pursuing that type of tenant any further. Oden has not seen any large office deals recently that are interested in Allen, which is not surprising since Allen is located so far north of Dallas. Aside from Commscope and Women of Faith, he has not seen any deals above 12,000 square feet. Allen really is not a Class "A" office market yet, but Duke is aggressively marketing the space to Class "A" tenants. Duke is seeing higher lease rates than had previously been expected for the Allen market. Duke Realty will raise lease rates if they are able to execute a lease with Women of Faith. Duke is not receiving any complaints regarding their lease rates for One Allen Center. Oden believes the lease to be a good value, since lease rates are typically $26-27 per square foot elsewhere in the Dallas area. Oden stated that Women of Faith is a good -credit, high quality, growing concern with well-paid employees. Peter Vargas inquired as to Women of Faith's timeframe for making a decision. Oden believes they will decide on where to lease space by March 2008 and will shoot for a July or August move -in date. Oden also noted that he is working with Robert Winningham on another high-quality deal. Kurt Kizer stated that the Board had expected that Oden would lease space to bigger tenants. Kizer has never heard of Women of Faith. When the Board provided incentives to Duke Realty .j they were agreeing to support the project, but the Board is not excited about supporting small tenants such as The Halo Group. Oden mentioned that the Board should expect to receive inquiries from any tenant that is looking to locate to Allen. Frisco has trained the brokerage community to seek incentives because they are available. For example, Project Odyssey, a 10,000 square foot tenant with employees paid an average salary of $100,000, can expect $8-10 per square foot in incentives from Frisco. Oden noted that Allen does not provide those types of incentives. Oden feels that Duke is delivering a great building at a great value. Many of the incentive issues are broker -driven, where the broker promises the potential tenants incentive money from the economic development offices. Overall, Oden has no problem with the way the AEDC and Duke Realty have handled their commitments to each other. Oden appreciates the efforts that the AEDC made to recruit Commscope to Allen. Tim Wood noted that the Board had been told previously that Duke would be recruiting big tenants from across the nation to Allen. Oden stated that such tenants are not currently in the market looking for space. Duke is still trying to pull on their national relationships with companies, such as their relationship with Thomas Nelson Publishing in Nashville. Duke initially held the building off the market for 2-3 months while waiting for a big tenant. Winningham noted that he recently had lunch with a broker from CB Richard Ellis who informed him that Allen is not a Class "A" office market right now, but it will eventually become a Class "A" officemarket. This particular broker also had good things to say about Duke Realty. Winningham also noted that Craig Hall built a building out on SH 121 back before that area was considered an office market. Hall filled that building with small tenants and then built a second building and filled it with larger tenants. Eventually, Hall built a building on SH 121 and was able to recruit Fujitsu to occupy space in the facility. Winningham encouraged the Board to think of One Allen Center as the "seed" for recruiting bigger and better tenants down the road. AEDC Board q(Directors Regular Meeting February 20, 1008 Page 3 Winningham also mentioned that the grand opening of the Trademark development will be helpful to Duke in marketing their building. Tom Carter, Trademark Properties, would like to work with Duke to market the entire comer of US 75 and Bethany Drive to potential tenants. Kizer mentioned that the way that the AFDC has historically incentivized projects has been more focused on capital investment and taxable values, and less focused on jobs. Kizer appreciated Oden explaining why many of the potential tenants seek incentives from the AFDC. Oden noted that Duke has been touring many larger (10,000 — 12,000 square foot) deals through the building lately. Potential tenants cannot believe that this high-quality space is available for such a low lease rate. Oden also noted that other landlords in Dallas often do not want to compete with Duke because the company is so aggressive. Kizer noted that the AFDC Board was under the impression that Oden wanted the AEDC to offer more incentives to small tenants. Oden stated that he had never advocated that the Board provide a big incentive package to a tenant such as The Halo Group, just that the AEDC Board show "a little love" to such tenants. Oden stated that when he feels he absolutely needs the Boards help, he will definitely let them know. Oden noted that these deals are broker -driven and the brokers like to work with Duke because Duke pays 100% of the broker commissions the day that they sign a lease with a tenant. He also stated that Board members can call him at any time if they have questions. Kizer inquired as to how the looming economic recession may affect Duke's leasing activity. Oden mentioned that leasing activity in the Dallas -Fort Worth market is as good as they have seen it in the last year. He feels that this market is somewhat insulated from the economic issues that are confronting the broader U.S. economy. The office market tends to take 12 — 18 months longer than the rest of the economy to slow down during a recession and often takes a longer period of time to speed backup again after the recession ends. When jobs shrink, the office market is hurt. However, Oden expects to see continued population and job growth in the Dallas - Fort Worth area, even if the U.S. goes into an economic recession. Winningham inquired as to how Oden thinks the recession may impact Countrywide's offices in Richardson. Oden stated that Countrywide has received funds from the state and was recently purchased by Bank of America. Given all that, the company is planning to maintain theirjob levels in the foreseeable future. They likely will be shrinking and may relocate jobs from California to Dallas. To that extent, the Dallas area may benefit from the downfall of Countrywide. 3. Convene into Closed Executive Session The Board convened into closed executive session at 6:38 p.m. to deliberate commercial and financial information and economic incentives for the following: • Recruitment of Project Z • Retention and Expansion of Local Businesses • Recruitment of Project Odyssey Reconvene in Open Session The Board reconvened into regular session at 8:38 p.m. AEDC Board of Directors Regular Afeeting February 20, 1008 Page 4 4. Recruitment of Project Z The Board discussed the project and considered providing assistance. On a motion by Tim Wood, seconded by Carl Clemencich, the Board unanimously approved $200,000 in incentives to be paid to Project Z on the following schedule: • $100,000 upon the receipt of a certificate of occupancy • $100,000 on the first anniversary of the receipt of a certificate of occupancy The incentives were contingent upon the company meeting the following requirements: • Company must submit infrastructure receipts totaling $200,000 • Company must maintain $6 million in building value and $7.5 million in personal property value • Company must maintain a minimum level of employment The Board authorized the AEDC Executive Director to negotiate the contract with Project Z. S. Consider and Take Action for the Retention and Expansion of Local Businesses The Board discussed issues associated with the retention and expansion of two (2) local businesses in Allen. Company representatives from one of the businesses appeared before the Board to discuss their company's Allen operations. On a motion by Carl Clemencich, seconded by Tim Wood, the Board unanimously approved a $50,000 incentive grant to be paid to a local Allen business in a lump sum upon the date that the company signs a 5 -year lease for approximately 50,000 square feet in Allen. The incentive grant is contingent upon the company meeting the following requirements: • Company must submit $50,000 in receipts/paid invoices for expenses incurred for space improvements • Company must maintain a minimum employment level • Company must lease and occupy the facility for a period of 5 years • Company must maintain taxable personal property values at the facility according to the following schedule: 0 1 -Jan -08 $809,200 0 1 -Jan -09 $1,387,030 0 1 -Jan -10 $1,997,143 0 1 -Jan -11 $2,618,077 0 1 -Jan -12 $3,214,981 0 1 -Jan -13 $3,803,461 No action was taken relating to the second local business. 6. Consider and Take Action for the Recruitment of Project Odyssey The Board discussed Project Odyssey. No action was taken on this item. I I AFDC Board of Directors Regular A4eenng February20, 2008 Page 5 7 Consider and Take Action on a Recommendation to the Allen City Council for Revision of the City of Allen Tax Abatement Guidelines Robert Winningham updated the Board on the current City of Allen Tax Abatement Guidelines, explaining that the guidelines should be approved every two years. The last time these guidelines were approved was 2005. Winningham had previously worked with Peter Vargas, City Manager, to determine potential changes to the guidelines. These changes were presented to the Board. These changes included adjusting the percentage of abatement that the City would apply for various levels of capital investment to the following: Value of Structure Years of Percent of Added Abatement Abatement $ 5,000,000- 15,000,000 5 40% $ 15,000,000- 100,000,000 10 40% $ 100,000,000+ 10 50% The Board also considered other minor changes to the guidelines. Carl Clemencich inquired as to whether the City of Allen must include an abatement schedule in the Tax Abatement Guidelines. Winningham stated that the City of Allen does not have to include a schedule. If they choose to include a schedule, they do not have to rigidly enforce the guidelines. Rather, the City has flexibility in determing the percentage and length of abatement to be supplied to companies on a case by case basis. On a motion be Gary Caplinger, seconded by Maxine Sweet, the AEDC Board approved a recommendation to the Allen City Council for revision of the City of Allen Tax Abatement Guidelines in accordance with changes presented. 8. Consider and Take Action for Amendment of Economic Development Agreement with R-75 L.P. Daniel Bowman updated the Board on the status of the Economic Development Agreement with R-75 LT The AEDC Board previously provided a $150,000 incentive grant for the purpose of recruiting BSM Financial, an anchor tenant for the office building located near US 75 and Ridgemont Drive. The Economic Development Agreement was not made with BSM Financial directly, but was instead executed with Cornerstone Development (under the time R-75 L.P.). The agreement required that BSM Financial meet the following requirements: • Employ fifty individuals at the premises • Execute a 10 -year lease on 28,000 square feet BSM Financial was hit hard by the mortgage crisis and forced to dissolve. Fortunately, another mortgage company, AmericaHomeKey, has been contracted by the former principals of BSM Financial to continue employing their approximately fifty (50) employees and managing their accounts. AmericaHomeKey's operation now occupies a little less than 8,000 square feet in the building. In addition, they have subleased 11,600 square feet of their space to other companies. Those other companies employ approximately 45 individuals at the facility. On a motion by Maxine Sweet, seconded by Gary Caplinger, the Board approved amending the Economic Development Agreement with R-75 LT to allow for the following: AEDC Board of Directors Regular Meeting February20, 2008 Page 6 • The space and employees employed by companies subleasing space in the building will count towards the space and employee requirements stipulated in the agreement. • Cornerstone Development has 12 months to ensure that a total of 28,000 square feet of space that was previously leased to BSM Financial is completely leased to other parties. 9. Consider and Take Action for Approval of Economic Development Agrewnent with Xtem Communications, Inc Daniel Bowman updated the Board on the status of the Economic Development Agreement with Xtera Communications. In 2007, the AEDC Board approved a $200,000 incentive grant to retain Xtem Communications in Allen. The incentives were contingent upon the company maintaining the following taxable values: Year 1 $3,700,000 Year2 $3,800,000 Yen $4,100,000 Year 4 $4,575,000 Year 5 $4,950,000 Year 6 $5,725,000 Year 7 $6,350,000 The AEDC Board required that the company repay the entire grant if they default on their agreement for any specific tax year. Based on the Board's incentive offer, Xtem proceeded to renew thein lease in Allen for a period of 7 years. However, the company never executed their Economic Development Agreement. Xtera representatives recently requested that the AEDC lower the benchmarks for the required annual taxable values in the agreement. Atter negotiations, AEDC staff determined a schedule that would allow Xtem to have lower taxable values in the early years of the contract term, but require higher values in later years: Year 1 $3,000,000 Year 2 $3,000,000 Year 3 $3,400,000 Year 4 $4,500,000 Year 5 $5,000,000 Year 6 $6,000,000 Year 7 $6,300,000 Whereas local taxing entities were projected to collect $725,765 in property taxes under the original schedule, taxing entities are projected to collect $686,669 in property taxes under the new schedule. Xtem representatives also requested that the AEDC allow the company to repay only a prorated portion of the grant if they were to default for any specific year. AEDC staff drafted a proposal that would allow the company to repay a prorated amount of the grant, based upon the amount of taxable value that the company should have had on the tax rolls for each specific year: AEDC Board of Directors Regular Afeeting February 20, 2008 Page 7 Amount Repaid Year 1 $0 Year 2 $0 Year 3 $5,085 Year $19,068 Year 5 $42,373 Yew $63,559 Year 7 $69,915 On a motion by Maxine Sweet, seconded by Tim Wood, the Board approved a final proposal to Xtera for the terms of an Economic Development Agreement that included reducing the required taxable values and allowing for prorated repayment of the grant if the company defaults in accordance with the schedules presented to the Board. The offer is good for 30 days after it is presented to the company 10. Consider and Take Action for the Recruitment of Proiect Eleven The AFDC Board previously discussed, in executive session, an incentive package that would be available to Project Eleven if they located into space in a specific building in Allen. Robert Winningham updated the Board on the project, explaining that the company would like to have the same incentive offer apply if the company is to occupy space in a different Allen building, Cornerstone Crossing. Kurt Kizer stated that the Board made the previous incentive offer to entice the company to locate into a specific building, not to locate into any building in Allen. The Board would like for the company to select a location and then approach the AEDC for incentives. Kizer noted that there is an economic reason why the Board wanted the company to occupy a specific building in Allen. Kizer mentioned that he does not believe that the existing offer is automatically available if the company occupies space in other Allen buildings. The AEDC Board does not want to be involved in a bidding war between building owners. Tim Wood stated that Project Eleven should not get the same incentives from the AEDC for occupying space in another building as they would if they occupied space in the building that was originally proposed to the Board. The Board invited Project Eleven to bring their request back to the AEDC once they have decided upon an office location. Winningham noted that Project Eleven needs to make a decision by March 2008. 11. Approval of AEDC Financial Reports Daniel Bowman presented the AEDC Financial Reports. On a motion by Tim Wood, seconded by Gary Caplinger, the Board unanimously approved the Financial Reports as submitted. 12. Administrative and Marketing Activities of the AEDC / Executive Director's Report Robert Winningham invited the Board to attend the Market Street V.LP. event on Wednesday, February 27, 2008 at the Watters Creek development. The AEDC is working with Duke Realty to provide extra parking for the event. AEDC Board ojDrrectors Regular Afeetrng February 20, 2008 Page 8 As of February 28, 2008, the AFDC will officially deed the approximately 23 acre property near the southwest comer of Bethany Drive and Greenville Avenue to the City of Allen. AEDC staff is still waiting to receive a legal description for the property. In early March 2008, AFDC staff will make a presentation to Henry S. Miller. Staff plans to make many presentations to brokerage firms within the next year. Winningham noted that he is planning to attend the Future of Optics Conference next week with Frank O'Reilly, Sanmina-SCI. 13. Scheduling of Next AFDC Board of Directors Meeting The next Board meeting was scheduled for Wednesday, March 19, 2008 at 6:00 p.m. 14. Adioum On a motion by Maxine Sweet, seconded by Gary Caplinger, the meeting was officially adjourned at 9:28 p.m. These minutes approved this 19'" day of March 2008. Kurt Kizer, Presi nt P Carl Clemencich, Secretary