City Council Regular Meeting

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CL-2873

New Business Item #: G.

Meeting Date:	11/01/2022
Subject: White Mill Moral Obligation for Up Fit Financing
From:	Corrie Bobe

COUNCIL ACTION

Business Meeting: 11/01/2022

SUMMARY

This action will provide a moral obligation from the City of Danville to American National Bank & Trust Company to finance a project at 424 Memorial Drive that is currently owned by the Industrial Development Authority under an entity named 424 Memorial Drive LLC. The project will cover the cost of constructing approximately 147,105 square feet of commercial space and 84,773 square feet of parking, also known as “Condo 1” within the building. American National Bank has committed a loan of $21,000,000 with White Mill Shell & Commercial LLC. This moral obligation agreement between the City and the Bank is to provide support for the sublease of Condo 1 between the master tenant of Condo 1 and the IDA.

BACKGROUND

The Industrial Development Authority of Danville, Virginia purchased the White Mill property located at 424 Memorial Drive in the River District in 2017. Later that year, the IDA transferred this property into a Limited Liability Company named 424 Memorial Drive LLC, which is fully owned by the IDA, to ensure that this property was grandfathered into a past Federal Historic Tax Credit program structure. In May 2021, the IDA and Wisconsin-based development firm, The Alexander Company, announced that it would enter into a joint venture to redevelop this historic structure over two phases. During the first phase of development, The Alexander Company will convert the western 2/3rds of the building on Floors 2 through 4 into 150 residential units and the IDA will redevelop the first floor and the eastern 1/3^rd of the second floor into commercial space available to lease and the lower level into parking (collectively referred to as “Condo 1”). The second phase of development will include approximately 56 additional residential units constructed by The Alexander Company in the eastern 1/3^rd of Floors 3 and 4.

American National Bank is requesting perfected security interest in Condo 1 of the White Mill Condominium. This property will total 147,105 square feet of office and commercial space and 84,773 square feet of parking space (Condo 1). In addition, American National is requesting a cash deposit in the amount of $2.65 million pledged to the loan until stabilization and when there is a debt coverage ratio of not less than 1.1:1. In addition, the IDA will need to contribute $5 million of cash equity into the project as described in the commitment letter. The final requirement is that there are provisions requiring the funding of any operating deficit for Condo 1 during a 10-year period.

RECOMMENDATION

Staff recommends that City Council approve the attached Moral Obligation Agreement for City of Danville and the Resolution authorizing the City Manager to enter into such an agreement with American National Bank and Trust Company in the amount of $21,000,000.

Attachments
Resolution
Moral Obligation