Public Hearing Stockton City Council Stockton Public Financing
Public Hearing Stockton City Council/ Stockton Public Financing Authority November 6, 2007 Agenda Item 9. 02 Building Acquisition Financing 400 East Main Street
Background • October 2, 2007: City entered into a purchase agreement to acquire 400 East Main Street from Washington Mutual for $35 million • October 2007: City begins due diligence inspections and document preparation
Building Details • • Constructed in 1988 246, 541 usable square feet, 8 floors 518 parking spaces beneath building Currently 86% leased – 186, 000 square feet by Washington Mutual – 25, 000 square feet by State, Verizon Wireless
Building Status Floor 1 2 3 4 5 6 7 8 Year Vacant Varies; 2012 2008 2012 2007 2009 2011 2009
Benefits • Locks in cost of office space needs at $140 per square feet versus $500 per square feet – Saves the City up to $90 million in future capital costs • Provides City with safe modern office space – Creates adjacencies between operations – Efficiency savings will likely exceed the City’s annual debt service for the building • Generates cash flow from existing tenants while City transitions operations into building • Opportunity to consider potential alternate uses for the Civic Center buildings • Assists in downtown revitalization by ensuring the property remains fully occupied
Financing Structure • Variable rate demand lease revenue bonds – Tax-exempt Series A – Taxable Series B • 40 -year Term • Aggregate issue not to exceed $48 million
Financing Structure Benefits • Taxable series allows City to lease back portions of the building for private tenants • Variable interest rate (3. 65% - 5. 27%) will save approximately $450, 000 annually • Reduced debt service obligation while the City transitions into the building • Ensures risks are appropriate for the City and are adequately mitigated
Bond Proceeds • Gross Bond Issue not to exceed $48 M – Current estimate is $44. 7 M Bond Issue • Net Bond Proceeds estimated at $40 M Bond Issuance $44, 745, 000 Underwriter’s Discount ($178, 980) Cost of Issuance ($258, 329) Insurance ($929, 808) Reserve Account ($3, 377, 883) Net Proceeds $40, 000
Public Financing Authority Recommendation Adopt a resolution: • Authorizing the issuance and sale of lease revenue bonds in the maximum principal amount of $48, 000 to finance the acquisition of an approximately 250, 000 square-foot, eight-story existing office building located at 400 East Main Street in Stockton, including a 518 -space underground parking garage; and • Approving related documents and official actions.
City Council Recommendation Adopt a resolution: • Approving proceedings to finance the acquisition of an approximately 250, 000 square-foot, eightstory existing office building located at 400 East Main Street in Stockton, including a 518 -space underground parking garage; • Approving the issuance and sale of lease revenue bonds for such purposes; and • Approving related documents and official actions.
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