1. Call Meeting to Order
Ms. Barbara Barbour called the meeting to order at 4:35 pm.
2. Roll Call
Members Present
Scott Andrusis
Barbara Barbour, Chairperson
Cile Decker
William E. Keohane
Members Absent
None
Guests
Shari Fiveash, Executive Director of the Chamber of Commerce
Matthew Galligan, Town Manager
Dwight Johnson, Murtha Cullina
Michele Lipe, Town Planner
Craig Stevenson, Economic Developer
3. Approval of Minutes of Previous Meeting
The approval of minutes was tabled to the next meeting.
None
None
- Report of Executive Director
None
None
None
A. Resolution Concerning Reverter Provision in Deed to Connecticut Studios, LLC
WHEREAS, Connecticut Studios, LLC (“Connecticut Studios”) has in recent months made significant progress in the development of the Connecticut Studios project (the “Project”); and
WHEREAS, Connecticut Studios expects to close in early September 2013, on bridge financing for the Project in the amount of approximately $7 million (the “Bridge Closing”); and
WHEREAS, at the Bridge Closing, Connecticut Studios will purchase from Andre Charbonneau approximately 17 acres of property located at Chapel Road and Route 5 in South Windsor (the “Charbonneau Property”); and
WHEREAS, promptly following the Bridge Closing, Connecticut Studios intends to take out structural building permits for the first two studios that are part of the Project; and
WHEREAS, at or prior to the Bridge Closing, Connecticut Studios will enter into a Revised Agreement Concerning Sparrow Habitat with the Town providing for, among other things, a payment to the Town at the Bridge Closing of at least $150,000, which the Town will hold in escrow and disperse to Jay’s Landscaping, LLC or alternate contractor as it performs the Landscaping Proposal for Grassland Habitat, dated September 24, 2012; and
WHEREAS, at the Bridge Closing, dck North America, LLC (“dck”) will cause to be removed the mortgage (the “dck Mortgage”) that it placed on the real property deeded by the Town to Connecticut Studios by a certain Statutory Form Quit Claim Deed, dated October 26, 2009, and recorded on the land records of the Town at Book 2077, Page 183-187, as subsequently amended (the “Quit Claim Deed”); and
WHEREAS, a condition of the bridge financing is the removal of the automatic reverter provision (the “Reverter Provision”) set forth in the fourth paragraph of the Quit Claim Deed
(Resolution Continued on Next Page)
9. A) Continued
NOW, THEREFORE, BE IT RESOLVED: That the Redevelopment Agency has determined that:
(1) the completion of the Bridge Closing, (2) the purchase of the Charbonneau Property, (3) the termination and removal from the land records of the dck Mortgage, (4) the execution of the Revised Agreement concerning Sparrow Habitat, (5) the receipt by the Town of an escrow payment as required under that Agreement, and (6) the payment to the Town by Connecticut Studios of the estimated cost of the structural building permits for the first two studios of the Project
shall be sufficient grounds for the Town to waive or otherwise terminate the Reverter Provision contained in the Quit Claim Deed, and that the Town Manager be, and he hereby is, authorized to amend the Quit Claim Deed and/or execute any and all other documents necessary to waive or otherwise render null and void said Reverter Provision, provided that he has determined that the six conditions set forth in this resolution have been met to his satisfaction after consultation with the Town Attorney.
Was made by Mr. Scott Andrusis
Seconded by Mr. William Keohane
The Agency discussed the changes between the originally proposed Resolution and the Resolution as adopted by the Town Council. Town Manager Galligan explained that the $150,000 amount was taken out of the Resolution by the Town Council. Everything would eventually be put into an escrow for closing, and the amount was making the anonymous LLC backing Connecticut Studios nervous. Everything will be paid from the escrow before any reverter clause is removed or anything on the deed is changed.
Mr. Craig Stevenson said that he is glad to answer any questions regarding the bridge financing. If he does not have the answer immediately, he will provide it as the information is available. The bridge financing is a short-term, private transaction between private individuals.
Ms. Barbara Barbour pointed out a change in the fourth paragraph of the Resolution regarding the landscaping. Town Attorney Dwight Johnson said that it is very likely Jay’s Landscaping will be used, but since the contract was made over a year ago, the current negotiated price may be higher. The addition of “alternate contractor” would cover any possible contractor change.
9. A) Continued
Mr. Scott Andrusis asked if the Agency could view the term sheet. Mr. Stevenson said that the bridge loan financing is a private transaction, and the company would prefer not to release that information in a public forum. The information will be released to Dan Marsh, as he has signed a nondisclosure agreement. He will review it and can answer any questions regarding the financing. Mr. Stevenson will attempt to answer any questions at this meeting.
Mr. Galligan said that the Town Council discussed the bridge financing at the meeting on September 3rd. Some Councillors felt that who was financing the bridge loan did not matter because at closing, someone will be bringing $7 million forward and signing their name. The Town Council understood that some individuals would rather have privacy during their transactions.
Mr. Andrusis said he was not concerned with the entity but with the condition. He asked what the benefit is for the entity with the four-month short-term financing. He cannot in good conscience vote for the reverter clause without seeing the terms and conditions from the lender. The reverter clause is the Town’s one leverage point that affects the overall value.
Town Attorney Johnson said that at the closing, the Resolution authorizes the Town Manager to sign on behalf of the Town a document removing the reverter clause from the deed. The Town Manager will not sign the document until the closing and the $7 million has gone into the escrow account. At the September 3rd Town Council meeting, Mr. Anthony DelVicario has personally guaranteed that the Town would be paid the $7 million. He also said that the dck mortgage on the property would be removed, and a new one would be added. Town Attorney Johnson said that it is very likely that the project will happen, but if it fails, a new project would very likely take place on that property. Ms. Cile Decker asked who would have any say about what a possible new project would be.
Town Attorney Johnson said that the Town is also protected with this type of financing. The bridge financing is only the first financing, or an interim financing. There will be a second financing in either October or November, and the Town needs to approve the Development Agreement before that second financing. The Town is in a very strong leverage position and giving up the reverter is not a big deal, legally.
Town Manager Galligan also mentioned that Mr. DelVicario needs to own all of the land before he can finalize the documents that the Siting Council has submitted. PURA is moving forward, but the Siting Council says that Mr. DelVicario needs to show total control. Mr. Andre Charbonneau will not let him show any control until Mr. DelVicario purchases the land from him. The fuel cells
9. A) Continued
will be on Mr. Charbonneau’s piece of land, so Mr. DelVicario needs the last piece of land to close as soon as possible. All of the utilities come through Chapel Road and through Mr. Charbonneau’s property, and those utilities will need to get to the Town’s piece of land. Town Manager Galligan also mentioned that everything has to be built at once because the bank will not release money until the fuel cell is built, and the fuel cell people will not release money unless the studio is built, etc.
Mr. Craig Stevenson said the key to the bridge financing is in order for the bridge financer to provide funding, the construction financer needs to sign an agreement that says his check for repayment is the first check out of the construction loan. Everything is linked together.
Ms. Barbour asked how difficult it would be to take a look at the term sheet without revealing who is doing the financing. Town Manager Galligan responded that he did not know. Mr. Andrusis voiced his concerns with reverter clause leverage.
Town Attorney Johnson explained that Connecticut Studios has satisfied many of the criteria to remove the reverter clause. Mr. Dan Marsh and Town Manager Galligan recommended to the Town Council that the project is in very good shape, and the Council took their recommendations seriously. Town Attorney Johnson also mentioned that if the reverter clause is not removed at this point, the project would be jeopardized and so would the Town’s $0.5 million investment so far. Ms. Shari Fiveash said that she has heard that the project will not happen if the reverter clause is not removed.
Ms. Cile Decker said that the reverter clause was not put in the deed by the Town Council, but by the Redevelopment Agency. A recently published article in the Journal Inquirer mentioned that the Town Council put the reverter clause in the deed. Ms. Decker felt that the Agency should be privy to all the information that can possibly be given the Agency in order to make a good decision to remove the reverter clause.
Town Attorney Johnson said that the reverter clause was a good idea, but that it was not very well drafted. Ms. Decker said the previous attorney drafted the clause.
Mr. William Keohane asked what the $7 million is going to be used for. Mr. Stevenson said that $3.5 million is paid to Andre Charbonneau and Associates for the purchase of their 17 acres. $1.7 million is paid to dck Worldwide. There are additional fees associated with creating the Grasshopper Sparrow Habitat.
9. A) Continued
There will be a payment to the Town for building permits that will be initially escrowed. There are various other fees associated with the fuel cell. Legal predevelopment fees also need to be paid. Mr. Keohane asked if any of the $7 million would be used for construction financing. Mr. Stevenson said that the $7 million would allow Connecticut Studios to get to a point where a construction financing company will finance the project. Mr. Stevenson explained the regulatory process with PURA and the Siting Council.
Town Attorney Johnson clarified that Mr. Marsh has said that the project is 90% down the road. If anything went wrong, someone else would pick up the project. Ms. Decker said that if someone else picked up the project, the Agency would have no control. Town Manager Galligan said that the Development Agreement would keep the Agency in control.
Mr. Andrusis asked what amount Seminole Bank is responsible for. Mr. Stevenson said that the commitment letter stated $10 million. He also clarified that it is not the only source of construction dollars, as there is a $5 million DECD loan and proceeds from infrastructure tax credits. The project has minimal debt because the tax credits were sold before loans were taken out.
Town Manager Galligan said that the Town will not move forward with the project without the recommendation of Mr. Marsh and the Town Attorney and without knowing that there is a bona fide commitment behind the bridge financing.
Town Attorney Johnson asked if the Agency was going to have a second meeting to approve the Resolution, or if they were going to approve it at this meeting subject to the Town Manager’s conditions. Ms. Barbour said she was hoping to see the term sheet tonight so the Agency could move forward. None of the attendees has seen the term sheet. Town Attorney Johnson said that the term sheet does not matter because they are bringing $7 million in cash to the closing. The terms are Connecticut Studios’ problem, and they have more of an interest in making sure that they can live with those terms.
Mr. Andrusis emphasized that he wants to make sure the Resolution for approval matches the conditions on the term sheet. Mr. Stevenson explained how the deal is not a great risk despite the fact that it is complex. Once the mechanism is set in motion, there is no chance of not getting to the other side. The challenge is getting every participant to put their cards on the table at the same time.
9. A) Continued
Town Attorney Johnson clarified that the Agency is not releasing the reverter clause if they decide to approve the Resolution. The reverter clause will only be removed if Connecticut Studios meets all of the conditions in the provided Resolution. It is not a question of relying on the term sheet. Ms. Barbour asked why the Agency has to vote on the Resolution at this meeting. Town Attorney Johnson said the closing will probably happen within the next two weeks.
Mr. Andrusis and Ms. Decker were concerned about the reputation of the Agency if the reverter clause was release and the project fell through. Mr. Stevenson assured the Agency that the requirement is for Connecticut Studios to be in first position. Discussion ensued regarding financing.
Mr. Keohane reviewed the situation with the mortgage and the land. The Agency does not want the land back. Ms. Decker recalled the original meeting where the reverter clause was put into the agreement.
The Agency discussed how Mr. DelVicario’s financing has changed in the past few months.
Mr. Andrusis asked how a possible project failure would impact the State’s land transfer to the Town of $1. Town Manager Galligan said it would not affect the $1 transfer of land because it is protected by a State Statute. This Statute determines that the Town cannot make money on the land because it was transferred for economic development purposes.
Ms. Barbour asked how difficult it would be for the Agency to look at the term sheet. Mr. Stevenson said he would make a phone call to check. While Mr. Stevenson was making the call, the Agency discussed the Town Council’s history with the Connecticut Studios project.
A resident came forward and spoke in favor of the Connecticut Studios project. He does not see the risk. He compared the project to closing on a home he recently bought, and that papers can be changed as closing progresses. He said he appreciated the tenacity that Mr. Andrusis showed.
Mr. Stevenson said that Mr. DelVicario will provide him with a copy of the term sheet, but it cannot be a part of the public record. The Agency decided to go into executive session to view the term sheet in order to make an informed decision on the related Resolution.
9. A) Continued
Ms. Cile Decker made a motion to go into Executive Session to discuss the term sheet as it relates to Item 9.A. It was seconded; and approved unanimously. The Agency came out of executive session at approximately 5:45 p.m.
After reviewing the term sheet in an Executive Session, Ms. Barbour asked for a motion to approve the resolution.
The motion was approved unanimously.
10. Adjournment
Ms. Cile Decker made a motion to adjourn at 5:50 pm; Ms. Barbara Barbour seconded the motion; and approved unanimously.
Respectfully submitted,
_____________________
Ashley Summers
Recording Secretary
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