Dubuque Initiatives_Status Report, Roshek Projecta
DUBUQUE
!INITIATIVES
MEMORANDUM
TO: The Honorable Mayor and Dubuque City Council Members
FROM: Bill Callahan, President of Dubuque Initiatives
SUBJECT: Roshek Building Status Update
DATE: March 4, 2011
This memorandum is to provide the City Council with an update for the Historic Roshek
Building redevelopment. Construction is nearing completion and the project is entering
into the operational stage.
The Historic Roshek Building redevelopment facilitated International Business
Machines, Inc. (IBM) to locate a 1,300 employee Information Technology Service
Delivery Center. These new jobs represent an additional $60 million in payroll to the
community. The project also saved the building from being a blighted influence on the
downtown as the main tenant and owner, McKesson Corporation, was moving most of
their operations into the former Advanced Data Com building in the Dubuque
Technology Park.
CONSTRUCTION
The total redevelopment expenditures to rehabilitate the building to date is
approximately $48,000,000. The project involved full replacement of electrical and
HVAC infrastructure, preservation of the exterior, restoration of the historic lobby, and
construction or improvements to space for all tenants in the building which include:
• IBM
• McKesson
• O'Connor & Thomas P.C.
• Community Foundation of Greater Dubuque
• Chalmers & Eaton
• Verizon Wireless
• Verizon Business
• Paetec /McLeod
• Cafe Manna Java
• Body & Soul SalonSpa
• Beijing Grill
• Rocky Mountain Candy
Approximately 60,000 square feet remain available for lease in the building for office
uses on floors 2, 3, and 4, two tenant spaces are available in the Lobby, and 3 booth
spaces are also available in the Lobby.
Construction projects that remain to be completed within the building are the
replacement of the main freight elevator (complete by July, 2011), and future tenant
buildout within available space.
The construction under the direction of Gronen Properties has been a very efficient,
effective, and timely undertaking. The building is on track to receive LEED Gold
certification from the U.S. Green Building Council, diverted over 70% of discarded
materials from the landfill, and preserved a major historic structure within the downtown.
The project has received numerous awards from local, state, and national
organizations. Most notably is the 2010 Timothy J. Anderson award for Best Historic
Rehabilitation Utilizing New Markets Tax Credits from the National Housing &
Rehabilitation Association and the 2010 Excellence in Economic Development Award in
Public- Private Partnerships from the International Economic Development Council. The
building was listed on the National Register of Historic Places on March 17, 2010.
FINANCING
To fund the $48 million development, the project utilized funding from Federal and State
Historic Tax Credits, New Markets Tax Credits, local Tax Increment Financing, the Iowa
Department of Economic Development, and Dubuque Initiatives' equity.
A total of $32,200,000 was borrowed from a consortium of all the local financial
institutions to provide the up -front funding to complete the construction. The following is
a status update of the individual loans making up the $32,200,000.
Federal Historic Tax Credit (FHTC) Loan — $9,800,000
This is a bridge loan for the value of FHTCs being provided to the project. The HTC
investor has provided payment and this loan is paid off. The amount of credits at the
start of the project was calculated using the standard 20% of qualified expenditures.
Federal legislation was passed to increase the percentage of qualified expenditures to
26% for projects that had damage relating to the 2008 flooding event which hit much of
Iowa. The building had significant water damage from excessive rains which qualified
the building for increased FHTCs. Once Part III approval is received from the National
Park Service, approximately an additional $2,000,000 will be provided by the HTC
investor to pay down part of the Buildout Loan, which is described below.
State Historic Tax Credit (SHTC) Loan - $10,600,000
The SHTC earned from this project can be refunded to Dubuque Initiatives. These
credits are expected to be received in April 2011 and at which point the loan will be
paid.
Leverage Loan from New Markets Tax Credits (NMTC) — $5,300,000
The value of the NMTCs is provided to the project through an interest -only loan to the
project for the first seven years. Interest will be paid on this loan for seven years. After
that time, this debt will be forgiven through a put payment to the NMTC Investor after
the 7 -year compliance period of the NMTCs.
Buildout Loan - $6,500,000
This funding was used to build out the tenant spaces within the building. This loan is
amortized over 10 years and is paid through additional lease payments made by the
tenants who utilized the funds. With the increased FHTCs coming into the project
(approximately $2,000,000), this note is expected to be paid in full in 2019. This note
will receive the additional funds from the increased FHTCs and interest costs saved
from this action will be used to pay down additional debt, as required in the
Development Agreement with the City. This loan is not covered in the $25,000,000 City
guarantee.
An additional Line of Credit was approved by the City Council on January 18, 2011 to
be included in the guarantee, which will be used for new tenant buildouts, should the
tenant need assistance for expenditures. An additional rent will be paid by the new
tenant to pay for funds drawn on the Line of Credit.
The following is a chart of the current Sources and Uses for the rehabilitation;
Roshek Building Source and Uses
Sources
Uses
DI Equity
Federal Historic Tax Credits
State Historic Tax Credits
Developer Fee
New Market Tax Credit Equity
Buildout Loan
Local Loan
Total
Construction Costs
New Market Tax Credit Fees
Historic Tax Credit Fees
Total
$ 2,000,000
$ 11,323,932
$ 10,666,022
$ 3,508,844
$ 8,965,125
$ 6,500,000
$ 5,294,384
$ 48,258,307
$ 45,180,429
$ 1,094,483
$ 1,983,395
$ 48,258,307
After receipt of the remaining Historic Tax Credits due to the project (expected April
2011), the following is the balances of debt remaining:
Debt Remaining on the Building after April 2011
Buildout Loan $ 3,950,000
NMTC Leverage Loan $ 5,300,000
Total $ 9,250,000
plus Line of Credit (if needed) $ 3,000,000
Total $ 12,250,000
2027
2020
2017
18
11
8
FINANCIAL PROJECTIONS
The project is well into the second year of operations and a much clearer picture is
available regarding the payment of the debt on the building. The City guarantee is a
$25,000,000 guarantee for 20 years.
The repayment status has improved since the original financial projections due to the
$2,000,000 of increased FHTCs into the project. Assuming conservatively that one
additional floor within the building is leased in 2012, all debt will be satisfied by 2020.
The original estimate was for the debt to be paid off by 2027. This accelerated debt
payoff further solidifies that the City will not need to provide assistance to the project
through the committed guarantee. The following is a chart summarizing the timing of
payoff of the original estimate, the new assumption of one additional floor being leased
in 2012, and should 100% of the building be leased in 2012.
Original Estimate Current Schedule At 100% Occupancy
Year Debt Payoff
# Years to Payoff
A side benefit of this project has been the creation of 106 new rental units in
rehabilitated downtown buildings further preserving and strengthening the community
core. This project is also a catalyst to the recent redevelopment efforts in the Historic
Millwork District. The need for market rate downtown housing was primarily created by
the influx of 1,300 new jobs located in the Roshek Building. The federal and state
funding for infrastructure improvements (TIGER I) and Caradco building rehabilitation
(IFA loan and CDBG grants) all stem from this project.
This project highlights the value of public - private partnerships in Dubuque. Dubuque
Initiatives is proud to be one of those partners and is thankful for all those that have
contributed to make this possible.