ASC to get title before receiving construction loan
American Skiing Company, the main developer in the Park Avenue Redevelopment Project, will be allowed title to the land at least a month before it is required to show proof of financing for its proposed 351-unit Grand Summit Hotel.
The South Tahoe Redevelopment Agency approved an amendment to the disposition and development agreement Tuesday, rearranging the timeline of project details, not its construction dates.
“The developers had to show proof of financing before the title was transferred, now they will show the documents after the title is transferred,” said Judith Von Klug, the city’s redevelopment manager.
The change comes as a solution to a round-robin situation laid out in the original DDA, signed Oct. 28 by the Agency and the developers.
The agreement required ASC to show proof of financing by April 28, before the city turned the land over for development. In order to obtain those documents, however, ASC had to show its lenders the title to the property before.
“It was physically impossible,” said Stan Hansen, ASC’s senior vice president. “You couldn’t do that without the title.”
Without the documents in place by the April deadline, the city would have cashed out on the $5 million letter of credit banked by ASC last October as a deposit on their commitment to the project.
The amendment, which passed 4-1, extended ASC’s deadline to show financial proof by June 30. It does not change the July 1 deadline for closing escrow on the property which, if missed, will raise hefty fines on the party responsible for the default.
Councilmember Bill Crawford reminded the Agency of ASC’s recent financial shortcomings – a dive in ASC’s stock price on Monday to a 52-week low of near $2 per share and declining financial ratings – before providing the only dissenting vote on the DDA changes.
“The prudent thing to do is to collect the ($5 million letter of credit),” he said. “The DDA was signed in October, the developers knew the conditions of getting the title.
“I voted no on the first contract – why should I vote for the second one?” Crawford said after the meeting. “I’m not so sure they can deliver.”
Hansen said considering the company’s trading position on the stock market was an insult after the company had already spent more than $10 million on the project, showing a strong financial commitment to the area.
Agency Vice Chair Brooke Laine said the amendment to extend the letter of credit could give the city more financial leverage in the real estate deal. She said the city could still cash out the $5 million letter of credit after the June 30 deadline, and have hold of the $2 million developer’s fee that the company will turn over for the title of the property.
“In actuality I think the city is more protected in this current proposal,” she said.
ASC has until Sept. 15 to start construction on its portion of the project which includes a four-star hotel and a gondola that leads to Heavenly’s slopes. If the ground breaking is put off until next season, the city can use the letter of credit money to pay for interest expenses incurred from the sale of $33 million of municipal bonds, sold in October.
In addition to ASC’s real estate plans, the Park Avenue Project calls for the development of retail shops, a six-screen cinema complex, restaurants, a parking garage and an ice rink. The city has used the power of eminent domain to secure the properties on the 34-acre plot on the corner of U.S. Highway 50 and Park Avenue. It plans to turn a large portion of that property over to ASC by May 15 in order to close escrow by July 1 to get the project under way.
Other changes to the DDA approved Tuesday by the Agency:
– Defer the demolition of Bandana’s Gourmet Pizza, allowing the business to operate through the summer. Heavenly will renovate the building in the fall to use as a ski rental shop and ticket sales location for its gondola until the Grand Summit Hotel opens in 2002. At that point the Agency will have 60 days to level the Bandana’s building.
– Allow the project to move forward without the formation of the Mello-Roos district that would pay for the $5 million streetscape plan near the Grand Summit Hotel.
– Allow ASC to determine how the Mello-Roos tax assessment will be divided among the property owners in the hotel project.
– Allow commercial use of the Paul Kennedy Steak House property during Phase 1 construction.
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