KUTAK ROCK LLP Preliminary Official Statement Dated November __, 2012 DRAFT 11/15/12 t NEW ISSUE NOT RATED BOOK-ENTRY ONLY
In the opinion of Kutak Rock LLP, Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended, the interest on the Series 2012 STAR Bonds (including any original issue discount properly y jurisdiction in allocable to an owner thereof) is excluded from gross income for federal income tax purposes, except as described herein and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The interest on the Series 2012 STAR Bonds is excluded from the computation of Kansas adjusted gross income. See “TAX MATTERS” herein. $[Principal Amount]*
e securities in an e securities CITY OF OVERLAND PARK, KANSAS SALES TAX SPECIAL OBLIGATION REVENUE BONDS SERIES 2012 (PRAIRIEFIRE AT LIONSGATE PROJECT) accepted prior to the time the Official Statemen the to the time accepted prior Dated: Date of Delivery Due: As shown on inside cover page The Series 2012 STAR Bonds (defined herein) are issuable only as fully registered Bonds, without coupons, and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Series 2012 STAR Bonds. Purchases of the Series 2012 STAR Bonds will be made in book-entry form in the original denomination of $100,000 or any integral multiple of $5,000 in excess thereof, subject to certain transfer rights as described herein. See “THE SERIES 2012 BONDS – Registration, shall there be any sale of thes there be any sale shall Transfer and Exchange.” Purchasers will not receive physical certificates representing their interests in Series 2012 STAR Bonds purchased. So long as Cede & Co. is the registered owner of the Series 2012 STAR Bonds, as nominee of DTC, references herein to the Bondowners or Registered Owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (herein defined) of the Series 2012 STAR Bonds. Principal of and semiannual interest on the Series 2012 STAR Bonds will be paid from moneys available therefor under the terms of the Indenture (herein defined). So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. DTC is expected, in turn, to remit such principal and interest to the DTC Participants (herein defined) for subsequent disbursement to the Beneficial Owners. Interest on the Series 2012 STAR Bonds will be payable semiannually on each June 1 and December 1, beginning June 1, 2013.
The Series 2012 STAR Bonds are being issued by the City of Overland Park, Kansas (the “Issuer”) pursuant to a Trust Indenture dated as of December 1, 2012 (the “Indenture”), by and between the Issuer and UMB Bank, n.a., Kansas City, Missouri, as trustee (the “Trustee”) to (i) fund a portion of the costs of the STAR ies may not be sold nor may offers to buy be buy offers to nor may be sold not ies may Bond Improvements described herein as a part of the herein-described Project, (ii) fund capitalized interest, (iii) fund a debt service reserve fund and (iv) pay
solicitation of an offer to buy nor of an offer to buy solicitation certain costs of issuance. The Series 2012 STAR Bonds are special, limited obligations of the Issuer payable solely from and secured by a pledge of, and lien
y such jurisdiction. y such jurisdiction. upon, certain State and local sales and compensating use taxes generated from retail sales in the herein defined Redevelopment Project Area (the “Revenues”) and other moneys held by the Trustee pursuant to the Indenture. See “SECURITY FOR THE STAR BONDS” herein.
The Series 2012 STAR Bonds are subject to optional and mandatory redemption prior to maturity as described herein. See “THE SERIES 2012 STAR BONDS—Redemption Provisions” herein.
MATURITY SCHEDULE—SEE INSIDE COVER PAGE THE SERIES 2012 STAR BONDS ARE NOT GENERAL OBLIGATIONS OF THE ISSUER AND NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAXING POWER OF THE ISSUER, THE STATE OF KANSAS (THE “STATE”), OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2012 STAR BONDS. THE SERIES 2012 STAR BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE
completion or amendment. These securit completion MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Statement constitute an offer to sell or a Statement an constitute EACH PURCHASER OF THE SERIES 2012 STAR BONDS IS REQUIRED TO BE AN “APPROVED INVESTOR,” AS DEFINED HEREIN, WITH qualification under the securities laws of an SUFFICIENT KNOWLEDGE AND EXPERIENCE TO BE ABLE TO FULLY EVALUATE THE MERITS AND RISKS OF SUCH AN INVESTMENT, AND AGREES BY ITS PURCHASE OF SERIES 2012 STAR BONDS TO CERTAIN MATTERS, INCLUDING THAT ITS PURCHASE IS FOR ITS OWN ACCOUNT, OR AS A FIDUCIARY FOR OTHERS, AND FOR THE PURPOSE OF INVESTMENT AND NOT WITH A PRESENT VIEW TO RESALE. EACH PURCHASER OF THE SERIES 2012 THAT IS AN INDIVIDUAL ACCREDITED INVESTOR IS REQUIRED TO PROVIDE AN INVESTMENT LETTER UPON PURCHASE OF SUCH BONDS UNTIL SUCH TIME AS CERTAIN PROJECT MILESTONES HAVE BEEN SATISFIED. SEE “NOTICE TO INVESTORS” AND “THE SERIES 2012 STAR BONDS - Bondowner Restrictions.”
The Series 2012 STAR Bonds involve a high degree of risk, and prospective purchasers should read the Section herein captioned “BONDOWNERS’ RISKS.” The Series 2012 STAR Bonds may not be suitable investments for all persons, and prospective purchasers should carefully evaluate the risks and merits of an investment in the Series 2012 STAR Bonds, should confer with their own legal and financial advisors and should be able to bear the risk of loss of their investment in the Series 2012 STAR Bonds before considering a purchase of the Series 2012 STAR Bonds. information contained herein are subject to are herein contained information
umstances shall this Preliminary Official The Series 2012 STAR Bonds are offered when, as and if issued by the Issuer and received by Stifel Nicolaus & Company, Incorporated (the
ould be unlawful prior to registration or “Underwriter”), subject to approval of their validity by Kutak Rock LLP, Kansas City, Missouri, Bond Counsel, and subject to certain other conditions. Certain other legal matters will be passed upon for the Issuer by the City Attorney, for the Developer, MC Prairiefire I, LLC and MC Prairiefire II, LLC, by Polsinelli Shughart, P.C., Overland Park, Kansas and for the Underwriter by its counsel, Gilmore & Bell, PC, Kansas City, Missouri. It is expected the Series 2012 STAR Bonds will be available for delivery to the Underwriter on or about December __, 2012. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
* Preliminary, subject to change. This Preliminary Official Statement and the is delivered in final form. Under no circ which such offer, solicitation or sale w 4848-0467-6625.6
Official Statement dated December __, 2012
4848-0467-6625.6
MATURITY SCHEDULE
$[PRINCIPAL AMOUNT]* SERIES 2012 BONDS
TERM BONDS
$______% Term Bonds Due December 15, 20__ Priced at ______% to Yield: ___% CUSIP(1): ______
$______% Term Bonds Due December 15, 20__ Priced at ______% to Yield: ___% CUSIP(1): ______
$______% Term Bonds Due December 15, 2032 Priced at ______% to Yield: ___% CUSIP(1): ______
(1)The Issuer shall not be responsible for the use of the CUSIP numbers, nor is any representation made as to their correctness. They are included solely for the convenience of readers of this Official Statement.
*Preliminary; subject to change.
4848-0467-6625.6
CITY OF OVERLAND PARK, KANSAS
8500 Santa Fe Drive Overland Park, Kansas 66212
MAYOR Carl R. Gerlach
CITY COUNCIL Dave Janson Ward I Fred Spears Ward IV Terry Happer Scheier Ward I Terry Goodman Ward IV Paul Lyons Ward II Jim Hix Ward V Curt Skoog Ward II John Skubal Ward V Donna Owens Ward III Richard Collins Ward VI David W. White Ward III Dan Stock, Council President Ward VI
CITY MANAGER William Ebel DEPUTY CITY MANAGER Kristy Stallings DEVELOPER MC Prairiefire I, LLC MC Prairiefire II, LLC Overland Park, Kansas BOND COUNSEL Kutak Rock LLP Kansas City, Missouri DISCLOSURE COUNSEL Kutak Rock LLP Kansas City, Missouri FINANCIAL ADVISOR Public Financial Management Minneapolis, Minnesota UNDERWRITER Stifel Nicolaus & Company, Incorporated St. Louis, Missouri UNDERWRITER’S COUNSEL Gilmore & Bell, P.C. Kansas City, Missouri SALES TAX FEASIBILITY CONSULTANT Development Strategies St. Louis, Missouri TRUSTEE AND DISSEMINATION AGENT UMB Bank, n.a. Kansas City, Missouri
4848-0467-6625.6
REGARDING USE OF THIS OFFICIAL STATEMENT
The use of this Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2012 STAR Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Interested investors are being provided the opportunity to ask such questions and examine such documents and records as they may desire, and are advised to contact the Underwriter to secure further information concerning the Series 2012 STAR Bonds.
No dealer, broker, salesman or other person has been authorized to give any information or to make any representations in connection with the offering of the Series 2012 STAR Bonds other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon. The information set forth or incorporated by reference herein has been obtained from sources believed to be reliable, but the accuracy or completeness of that information is not guaranteed by, and should not be construed as a representation by Stifel Nicolaus & Company, Incorporated, the Underwriter for the Series 2012 STAR Bonds. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Issuer since the date hereof (or since the date of any other information dated other than the date hereof).
This Official Statement should be considered in its entirety and no one factor considered less important than any other by reason of its position in this Official Statement. Where statutes, resolutions, ordinances, reports or other documents are referred to herein, reference should be made to such statutes, resolutions, ordinances, reports or other documents for more complete information regarding the rights and obligations of parties thereto, facts and opinions contained therein and the subject matter thereof.
Upon issuance, the Series 2012 STAR Bonds will not be registered under the Securities Act of 1933, as amended, nor will the Indenture be qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such Acts, and the Series 2012 STAR Bonds will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity shall have passed upon the accuracy or adequacy of any portion of this Official Statement. Any representation to the contrary is a criminal offense.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SERIES 2012 STAR BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED OR RECOMMENCED AT ANY TIME. THE PRICES AND OTHER TERMS RESPECTING THE OFFERING AND SALE OF THE SERIES 2012 STAR BONDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER AFTER SUCH TIME AS THE SERIES 2012 STAR BONDS ARE RELEASED FOR SALE, AND THE SERIES 2012 STAR BONDS MAY BE OFFERED AND SOLD AT PRICES OTHER THAN THE INITIAL OFFERING PRICE.
The Series 2012 Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or under any state securities or “blue sky” laws. The Series 2012 Bonds are offered pursuant to an exemption from registration with the Securities and Exchange Commission. In making an investment decision, investors must rely on their own examination of the terms of this offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary may be a criminal offense.
4848-0467-6625.6
______CAUTIONARY STATEMENTS REGARDING FORWARD–LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT ______
Certain statements included or incorporated by reference in this Official Statement constitute
“forward–looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “anticipate,” “projected,” “budget” or other similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED
INSUCH FORWARD–LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM
ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD–LOOKING STATEMENTS. THESE FUTURE RISKS AND UNCERTAINTIES
INCLUDE THOSE DISCUSSED IN THE “BONDOWNERS’ RISKS” SECTION OF THIS OFFICIAL STATEMENT. NEITHER THE ISSUER NOR ANY OTHER PARTY PLANS TO ISSUE ANY
UPDATES OR REVISIONS TO THOSE FORWARD–LOOKING STATEMENTS IF OR WHEN
THEIR EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES UPON WHICH SUCH
STATEMENTS ARE BASED OCCUR. NOTICE TO BONDOWNERS EACH PROSPECTIVE PURCHASER IS RESPONSIBLE FOR ASSESSING THE MERITS AND RISKS OF AN INVESTMENT IN THE SERIES 2012 STAR BONDS AND MUST BE ABLE TO BEAR THE ECONOMIC RISK OF SUCH INVESTMENT IN THE SERIES 2012 STAR BONDS. MOREOVER, EACH PURCHASER, BY PURCHASING THE SERIES 2012 STAR BONDS, AGREES AND ACKNOWLEDGES THAT (A) ITS PURCHASE OF THE SERIES 2012 STAR BONDS IS FOR ITS OWN ACCOUNT, OR AS FIDUCIARY FOR OTHERS, FOR THE PURPOSE OF INVESTMENT AND NOT WITH A PRESENT VIEW TO RESALE OR OTHER DISTRIBUTION, (B) THE PURCHASER HAS RECEIVED THIS OFFICIAL STATEMENT, (C) THE PURCHASER IS AN “APPROVED INVESTOR” AS DEFINED IN THE FOLLOWING PARAGRAPH WITH SUFFICIENT KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT IT IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN THE SERIES 2012 STAR BONDS, AND (D) THE PURCHASER HAS OBTAINED SUCH INFORMATION REGARDING THE DEVELOPER AND THE PROJECT AS IT DEEMS NECESSARY TO EVALUATE THE MERITS AND RISKS OF AN INVESTMENT IN THE SERIES 2012 STAR BONDS. THE INDENTURE SPECIFIES THAT EACH BOND PURCHASER OR FUTURE BONDOWNER MUST BE AN “APPROVED INVESTOR” THAT QUALIFIES EITHER AS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN SECURITIES AND EXCHANGE COMMISSION RULE 144A OR AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) OF REGULATION D PROMULGATED BY THE SECURITIES EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933. THE INDENTURE FURTHER SPECIFIES THAT EACH BOND PURCHASER OR FUTURE BONDOWNER THAT IS AN “INDIVIDUAL ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(A)(5) OR (6) OF SAID REGULATION D MUST PROVIDE AN INVESTMENT LETTER UNTIL SUCH TIME AS THE CONDITIONS FOR RELEASE OF MONEYS FROM THE ESCROWED PROJECT COSTS FUND SET FORTH UNDER THE DEFINITION OF “ESCROW RELEASE CONDITIONS – 100% RELEASE” HAVE BEEN SATISFIED IN FULL. SEE “THE SERIES 2012 STAR BONDS – Bondowner Restrictions.”
4848-0467-6625.6 TABLE OF CONTENTS Page
INTRODUCTION ...... 1 General ...... 1 The Issuer ...... 1 Authority for Issuance ...... 2 Security for the Series 2012 STAR Bonds...... 2 Limited Obligations ...... 3 SUMMARY OF THE PROJECT ...... 3 General ...... 3 Project Improvements and Attractions ...... 4 Project Phases ...... 5 PLAN OF FINANCE FOR THE PROJECT ...... 8 General ...... 8 Percentage Limitations Relating to Public Financing and Private Funds ...... 12 Economic Development Revenue Bonds ...... 13 MASTER FUNDING AGREEMENT ...... 13 General ...... 13 Disbursements ...... 13 ESTIMATED SOURCES & USES OF FUNDS SERIES 2012 STAR BONDS ...... 14 THE SERIES 2012 STAR BONDS ...... 14 Authorization ...... 14 Description of the Series 2012 STAR Bonds ...... 14 Registration, Transfer and Exchange ...... 15 Bondowner Restrictions ...... 16 Redemption Provisions ...... 17 SECURITY FOR THE STAR BONDS ...... 20 The Trust Estate ...... 20 Special Limited Obligations ...... 20 Debt Service Reserve Fund ...... 21 Capitalized Interest Fund ...... 21 Escrowed Project Costs Fund ...... 21 Additional STAR Bonds ...... 23 BONDOWNERS’ RISK ...... 24 Special, Limited Obligations ...... 25 Limited Sources of Debt Service and Factors Affecting Revenues ...... 25
4848-0467-6625.6
Retail Sales Tax Report and Development Strategies Projections ...... 30 Concentration of Revenues - Largest Taxpayers ...... 31 Limited Collateral: No Pledge of any Portion of the Project ...... 31 Additional STAR Bonds ...... 31 Priority Fees ...... 32 Legal Matters; Future Changes in the Law ...... 32 Forward-Looking Statements ...... 32 Availability of Debt Service Reserve Fund ...... 33 In Summary ...... 35 THE PROJECT ...... 35 Overview ...... 35 Merrill Companies, LLC and Its Principals ...... 35 The Developer ...... 37 Ground Lease ...... 37 Design and Construction of Phase 1 Improvements ...... 37 Guaranty of Completion ...... 39 Museum ...... 39 Leasing and Management of the Project ...... 40 Tenants ...... 40 Residential ...... 46 Wetlands and Trail ...... 46 RETAIL SALES TAX REPORT ...... 46 Development Strategies ...... 46 Retail Sales Tax Report ...... 46 REVENUES AVAILABLE FOR DEBT SERVICE ...... 47 General ...... 47 Imposition of Sales and Compensating Use Taxes ...... 47 Tax Rates ...... 49 Deposit and Transfer of Revenues ...... 51 TAX DISTRIBUTION AGREEMENT ...... 53 Overview ...... 53 Escrow Fund ...... 53 Transfer of Issuer Sales Tax Revenues to the Trustee ...... 53 Transfer of State Sales Tax Revenues to the Trustee ...... 53 Allocation of State Sales Tax Revenues and Issuer Sales Tax Revenues ...... 53
ii 4848-0467-6625.6
Application of Revenues in Escrow Fund ...... 54 Application of Issuer Sales Tax Revenues to Pay Certain Fees ...... 55 Reporting of Revenues ...... 55 Confidentiality of Tax Information ...... 55 Reports to Bondowners and the Issuer ...... 55 Amendments ...... 56 PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS ...... 56 Introduction ...... 56 Structuring Assumptions ...... 56 Projected Semi-Annual Mandatory Redemptions ...... 57 CONTINUING DISCLOSURE ...... 62 NO LITIGATION ...... 62 The Issuer ...... 62 The Developer ...... 62 CERTAIN LEGAL MATTERS...... 62 TAX MATTERS ...... 63 General ...... 63 [Original Issue Discount ...... 64 [Original Issue Premium ...... 64 Backup Withholding ...... 65 Changes in Federal Tax Law ...... 65 NO BOND RATING ...... 65 UNDERWRITING ...... 65 FINANCIAL ADVISOR ...... 66 AUTHORIZATION ...... 67
APPENDIX A – RETAIL SALES TAX REPORT – PRAIRIEFIRE AT LIONSGATE PROJECT APPENDIX B – THE MUSEUM A. Overview B. Information on the Museum of Prairiefire and the Museum Owner C. Information on American Museum of Natural History APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS APPENDIX D - FORMS OF CONTINUING DISCLOSURE AGREEMENTS A. Issuer Continuing Disclosure Agreement
iii 4848-0467-6625.6
B. Developer Continuing Disclosure Agreement C. Museum Owner Continuing Disclosure Agreement APPENDIX E - PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX F – ECONOMIC AND DEMOGRAPHIC INFORMATION OF THE ISSUER APPENDIX G – BOOK-ENTRY ONLY SYSTEM APPENDIX H – FORM OF INDIVIDUAL ACCREDITED INVESTOR INVESTMENT LETTER
iv 4848-0467-6625.6
SUMMARY STATEMENT
The following Summary Statement is subject in all respects to more complete information contained elsewhere in this Official Statement, which should be read in its entirety. The offering of the Series 2012 STAR Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this Summary Statement from the Official Statement or otherwise use it without the entire Official Statement. The order and placement of materials in the Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or relative importance. All capitalized terms used in this Official Statement that are not otherwise defined herein shall have the meanings ascribed to them in the Indenture. See APPENDIX C - DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS attached hereto.
Overview The Sales Tax Special Obligation Revenue Bonds, Series 2012 (Prairiefire at LionsGate Project) (the ”Series 2012 STAR Bonds”), in the principal amount of $______* are being issued by the City of Overland Park, Kansas (the ”Issuer”), pursuant to K.S.A. 12–17,160 et seq., as amended (the ”STAR Bond Act”) and the Trust Indenture dated as of December 1, 2012 (the ”Indenture”), by and between the Issuer and UMB Bank, n.a., as trustee (the ”Trustee”). The Series 2012 STAR Bonds are being issued for the purpose of providing funds to: (i) fund a portion of the costs of the STAR Bond Improvements described herein, (ii) fund capitalized interest, (iii) fund a debt service reserve fund for the Series 2012 STAR Bonds and (iv) pay certain costs of issuance. See “THE SERIES 2012 STAR BONDS” herein.
In addition, a portion of the proceeds of the Series 2012 STAR Bonds will be held in the Escrowed Project Costs Fund until either transferred to the Project Fund upon satisfaction of the applicable Escrow Release Conditions described herein or transferred to the 2012 Redemption Account of the Debt Service Fund to be applied to the mandatory redemption of Series 2012 STAR Bonds. Prior to such transfer, moneys held in the Escrowed Project Costs Fund will be available to pay debt service on the Series 2012 STAR Bonds if moneys in the Debt Service Fund and the Capitalized Interest Fund are insufficient therefore. See “SECURITY FOR THE STAR BONDS – Escrowed Project Costs Fund” herein.
A description of the Series 2012 STAR Bonds is contained in this Official Statement under the caption “THE SERIES 2012 STAR BONDS.” All references to the Series 2012 STAR Bonds are qualified in their entirety by the definitive forms thereof and the provisions with respect thereto included in the Indenture. See APPENDIX C – DEFINITIONS AND SUMMARY OF THE PRINCIPAL FINANCING DOCUMENTS. A description of the estimated sources and uses of funds is contained herein under the caption “PLAN OF FINANCE FOR THE PROJECT” and “ESTIMATED SOURCES & USES OF FUNDS, SERIES 2012 STAR BONDS.”
The Issuer The Issuer is a municipal corporation organized and existing pursuant to the laws of the State of Kansas (the “State”) as a city of the first class. See “THE ISSUER” and APPENDIX F – ECONOMIC AND DEMOGRAPHIC
* Preliminary, subject to change.
INFORMATION OF THE ISSUER to this Official Statement for further information related to the Issuer.
STAR Bonds The provisions of the STAR Bond Act authorize cities to acquire property and and STAR to issue special obligation “sales tax and revenue” bonds (“STAR Bonds”) Bond Act secured by certain tax revenues. The STAR Bond Act authorizes the establishment of a redevelopment district and a redevelopment project area therein and the issuance of bonds payable from incremental State and local sales and compensating use taxes generated from retail projects constructed within the redevelopment district. STAR Bonds may be used to pay for certain costs of a redevelopment project, including the STAR Bond Improvements described herein, which include certain costs of property acquisition, site preparation and infrastructure improvements, construction of the herein-defined Museum and parking improvements, bond issuance and financing costs, and related soft costs.
The Project The Prairiefire at LionsGate Project (the “Project”) consists of the development of approximately 61.5 acres located in the general vicinity of 135th Street between Lamar Avenue and Nall Avenue in the City of Overland Park, Kansas. The development is designed to be an integrated urban village with a mix of retail, museum, office, hotel and residential uses, to be constructed in two phases as described below. Certain costs of the Project are eligible to be paid under the STAR Bond Act (the “STAR Bond Improvements”). See “SUMMARY OF PROJECT,” “THE PROJECT” and APPENDIX B – THE MUSEUM.
The 61.5 acre Prairiefire at LionsGate site constitutes the herein-described Redevelopment District. The Prairiefire at LionsGate STAR Bond Redevelopment Project Plan described below encompasses the development of approximately 56 of such 61.5 acres, which 56 acres constitutes the Redevelopment Project Area for the Redevelopment Project Plan as defined below. The Project is designed to be constructed and completed in two (2) distinct phases, with Phase 1 to be developed by MC Prairiefire I, LLC (“MCP I”) and Phase 2 to be developed by MC Prairiefire II, LLC (“MCP II” and with MCP I, the “Developer”). Phase 1 is designed to cover approximately [35] acres and includes approximately [254,000] square feet of retail and museum space. There will also be construction of an apartment complex in Phase 1, to be developed by another entity unrelated to the Developer. Substantially all of the approximately 56 acres in the Redevelopment Project Area is currently owned by an affiliate of the Developer, MC Prairiefire, LLC (“MCP”). MCP will enter into Ground Leases with the Developer for the property being developed by the Developer. The Issuer and the Developer have entered into the Prairiefire at LionsGate Development Agreement (the “Development Agreement”) effective November 12, 2012. MCP has consented to the terms and conditions of the Development Agreement and has agreed to comply with and perform certain responsibilities assigned to MCP thereunder. See APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – The Development Agreement.
Information on the Project, the Phases of the Project and the contracts which the Developer has entered for the design and construction of Phase 1 of the Project,
S-2 4848-0467-6625.6
the Phase 1 timeline and expected Phase 1 tenants for the Retail Space, is set forth in “SUMMARY OF THE PROJECT” and “THE PROJECT.”
Financing of Each phase of the Project being developed by the Developer will be financed the Project with Developer equity and construction loans, STAR Bonds and CID Bonds (as defined herein), as described under the caption “PLAN OF FINANCE.” Phase 1 of the Project is the subject of the current financing. As described therein, proceeds of the Series 2012 STAR Bonds will be applied to finance certain Phase 1 improvements and costs eligible to be paid under the STAR Bond Act, including among other things the construction of the Museum (the “2012 STAR Bond Improvements”). The developer of the apartment complex will obtain its own financing for such residentail component of the Phase 1 of the Project.
Simultaneously with the issuance of the Series 2012 STAR Bonds, the Issuer will also issue its $______* Taxable Sales Tax Revenue Bonds, Series 2012A (Prairiefire Community Improvement District No. 1 Project) (the ”Series 2012A CID Bonds”) and $______* Sales Tax Revenue Bonds, Series 2012B (Prairiefire Community Improvement District No. 1 Project) (the ”Series 2012B CID Bonds”) (collectively, the ”Series 2012 CID Bonds”) pursuant to K.S.A. 12–6a26 et seq., as amended (the “CID Act”) to finance certain Phase 1 costs eligible to be paid under the CID Act.
The Pursuant to the STAR Bond Act, municipalities are authorized to utilize STAR Redevelopment Bond financing for specific development projects through (i) the creation of a District, the STAR Bond Project District, subject to a finding by the Secretary that the Redevelopment STAR Bond Project District Plan is eligible for STAR Bond financing, and Project Area (ii) the adoption of a STAR Bond Redevelopment Project Plan that is and the 2012 subsequently approved by the Secretary. STAR Bond Improvements On December 1, 2008, after a public hearing, the governing body of the Issuer adopted an ordinance making findings and establishing the Prairiefire at LionsGate STAR Bond Project District (the “Redevelopment District”), an approximately 61.5 acre area that includes the approximately 56 acre Redevelopment Project Area described below and also an additional area to the south on which townhouses will be constructed. The Kansas Secretary of Commerce has determined that the Redevelopment District is an “eligible area” in that it is a major commercial entertainment and tourism area, as such terms are defined in the STAR Bond Act, in accordance with the requirements of the STAR Bond Act.
On October 22, 2012, after a public hearing, the governing body of the Issuer adopted an ordinance making findings and approving and adopting the Prairiefire at LionsGate STAR Bond Redevelopment Project Plan (the “Redevelopment Project Plan”) for the approximately 56 acre site described therein (the “Redevelopment Project Area”). The Kansas Secretary of Commerce has approved the Redevelopment Project Plan, and has approved up to $81,000,000 in STAR Bond financing for the STAR Bond Improvements (exclusive of financing costs). The Series 2012 STAR Bonds will finance approximately $_____* of the STAR Bond Improvements so authorized, with
* Preliminary, subject to change.
S-3 4848-0467-6625.6
the remaining authorized amount to be financed through the issuance of Additional STAR Bonds as described herein.
The Series 2012 The Series 2012 STAR Bonds will be issued pursuant to the Indenture and will STAR Bonds mature and bear interest as described on the cover page. The Series 2012 STAR Bonds will be issued in the original denomination of $100,000 or any integral multiples of $5,000 in excess thereof, subject to transfer rights by a beneficial owner of Series 2012 STAR Bonds which have been reduced to a lower principal amount as a result of mandatory redemptions thereof (an “Authorized Denomination”). See “THE SERIES 2012 STAR BONDS – Registration, Transfer and Exchange” and “- Special Mandatory Redemption.” The Series 2012 STAR Bonds will be registered bonds without coupons registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company. See “THE SERIES 2012 STAR BONDS”.
Bondowner Each Series 2012 STAR Bond purchaser must be an “Approved Investor” that Restrictions qualifies either as a “Qualified Institutional Buyer” as defined in Securities and Exchange Commission Rule 144A or an “Accredited Investor” as defined in Rule 501(A) of Regulation D promulgated by the Securities Exchange Commission under the Securities Act of 1933.
Each Series 2012 STAR Bond purchaser that is an “Individual Accredited Investor” within the meaning of Rule 501(a)(5) or (6) of said Regulation D must provide an investment letter until such time as the conditions for release of moneys from the Escrowed Project Costs Fund set forth under the definition of “Escrow Release Conditions – 100% Release” have been satisfied in full. See “THE SERIES 2012 STAR BONDS – Bondowner Restrictions” and APPENDIX H hereto.
Security and Pursuant to the STAR Bond Act, bonds may be secured by a pledge of State Sources of and local sales and compensating use taxes generated within the Payment Redevelopment Project Area which are collected by the State and available to pay STAR Bonds (individually, the “State Sales Tax Revenues” or the “Issuer Sales Tax Revenues,” as applicable, and collectively, the “Revenues”). See the caption herein entitled “REVENUES AVAILABLE FOR DEBT SERVICE.” The Series 2012 Bonds and the interest thereon are special, limited obligations of the Issuer payable from the Revenues in accordance with the flow of funds as provided in the Tax Distribution Agreement (as defined herein), on a parity lien basis with any Additional STAR Bonds issued from time to time pursuant to the Indenture, and secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee, as provided in the Indenture. The Series 2012 STAR Bonds and any Additional STAR Bonds are referred to herein as the “STAR Bonds.” See the captions herein entitled “SECURITY FOR THE STAR BONDS” and “TAX DISTRIBUTION AGREEMENT.”
THE SERIES 2012 STAR BONDS SHALL NOT BE OR CONSTITUTE A GENERAL OBLIGATION OF THE ISSUER, NOR SHALL THEY CONSTITUTE AN INDEBTEDNESS OF THE ISSUER WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY
S-4 4848-0467-6625.6
PROVISION, LIMITATION OR RESTRICTION.
Retail Sales Development Strategies, St. Louis, Missouri (“Development Strategies”), Tax Report has prepared the Sales Tax STAR Bond Revenue Study for the Proposed Prairiefire at LionsGate Development (the “Retail Sales Tax Report”). A copy of the Retail Sales Tax Report is attached hereto as APPENDIX A and is a “forward looking statement” as described herein under the caption “BONDOWNERS’ RISKS - Forward Looking Statements.” The Issuer makes no representation or warranty (express or implied) as to the accuracy or completeness of any financial, technical or statistical data or any estimates, projections, assumptions or expressions of opinion set forth in the Retail Sales Tax Report. The Issuer assumes no responsibility to update such information after the delivery of the Series 2012 STAR Bonds.
Redemption The Series 2012 STAR Bonds are subject, in whole or in part, to optional and mandatory redemption as described in “THE SERIES 2012 STAR BONDS—Redemption Provisions.”
The Series 2012 STAR Bonds do not have scheduled principal payments or scheduled mandatory sinking fund requirements. After payment of interest on the Series 2012 STAR Bonds, replenishment of the Debt Service Reserve Fund and payment (but solely from Issuer Sales Tax Revenues) of Trustee, Dissemination Agent and Rebate Analyst fees, Revenues will be applied on each Interest Payment Date commencing December 15, 2014 to the special mandatory redemption of the Series 2012 STAR Bonds, at par plus accrued interest, in order of maturity. A description of the Projected Case 1 Redemption Schedule and other redemption scenarios are set forth in “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS – Structuring Assumptions” herein. No assurance can be made that redemptions will occur as shown on the Projected Case 1 Redemption Schedule. See the captions herein titled “THE SERIES 2012 STAR BONDS – Redemption Provisions” and “BONDOWNERS’ RISKS – Early Redemption of the Series 2012 STAR Bonds.”
Release of Moneys held in the Escrowed Project Costs Fund are eligible for transfer to the Escrowed Project Fund upon satisfaction of the applicable Escrow Release Conditions, as Project Costs described herein. Such conditions include criteria for 50% Release, 75% Fund Moneys Release and 100% Release, based on square footage of retailers that are open for business, in addition to requirements that the Museum and the herein- defined Junior Anchors are open, as described herein. The Final Escrow Release Date is May 15, 2014. Any moneys remaining in the Escrow Project Costs Fund on such date will be transferred to the 2012 Redemption Account of the Debt Service Fund and applied to the redemption of the Series 2012 Bonds. See “SECURITY FOR THE STAR BONDS – Escrowed Project Costs Fund” herein.
Additional The Issuer may issue one or more series of Additional STAR Bonds which may STAR Bonds be secured in the same manner as, and rank on a parity with the Series 2012 Bonds for the purpose of paying for certain costs of the STAR Bond Improvements subject to certain conditions set forth in the Indenture and the STAR Bond Act. See the caption herein entitled “SECURITY FOR THE
S-5 4848-0467-6625.6
STAR BONDS – Additional STAR Bonds.”
Bondowners’ The Series 2012 STAR Bonds involve a substantial degree of risk, and Risks prospective purchasers should read the Section herein captioned “BONDOWNERS’ RISKS.”
THIS OFFICIAL STATEMENT IS FURNISHED SOLELY FOR THE PURPOSE OF CONSIDERATION OF AN INVESTMENT IN THE SERIES 2012 STAR BONDS BY SOPHISTICATED INVESTORS WITH THE EXPERIENCE AND FINANCIAL EXPERTISE TO UNDERSTAND AND EVALUATE THE RISKS INHERENT IN THE INVESTMENT. THE SERIES 2012 STAR BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SERIES 2012 STAR BONDS ARE NOT RATED. PURCHASE OF THE SERIES 2012 STAR BONDS WILL CONSTITUTE AN INVESTMENT SUBJECT TO SIGNIFICANT RISKS, INCLUDING THE RISK OF NONPAYMENT OF PRINCIPAL AND INTEREST AND THE LOSS OF ALL OR PART OF THE INVESTMENT. THERE CAN BE NO ASSURANCE THAT THE PROJECT WILL BE COMPLETED AND OPERATED IN A SUCCESSFUL MANNER NOR THAT THE REVENUES GENERATED WITHIN THE REDEVELOPMENT PROJECT AREA WILL BE SUFFICIENT TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2012 STAR BONDS, AND TO AVOID A DEFAULT ON THE SERIES 2012 STAR BONDS IN THE FUTURE. PROSPECTIVE PURCHASERS SHOULD CAREFULLY EVALUATE THE RISKS AND MERITS OF AN INVESTMENT IN THE SERIES 2012 STAR BONDS, CONFER WITH THEIR OWN LEGAL AND FINANCIAL ADVISORS AND BE ABLE TO BEAR THE RISK OF LOSS OF THEIR INVESTMENT IN THE SERIES 2012 STAR BONDS BEFORE CONSIDERING A PURCHASE OF THE SERIES 2012 STAR BONDS. SEE THE DISCUSSIONS HEREIN UNDER THE CAPTIONS “SECURITY FOR THE STAR BONDS” AND “BONDOWNERS’ RISKS.”
No Rating The STAR Bonds are NOT rated.
Definitions and This Official Statement contains certain definitions and summaries of certain Summaries of provisions of the Indenture, the Tax Distribution Agreement, the Development Documents Agreement, the Master Funding Agreement and the Continuing Disclosure Agreements (collectively, the ”Financing Documents”), but such do not purport to be comprehensive or definitive. See “TAX DISTRIBUTION AGREEMENT,” APPENDIX C – DEFINITION OF TERMS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS and APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENTS. All references herein to the specified documents are qualified in their entirety by reference to the definitive forms of such documents, copies of which may be viewed as described in this Summary Statement under the caption “Additional Information” and in the Official Statement under the caption “INTRODUCTION – General.”
S-6 4848-0467-6625.6
Tax Matters In the opinion of Bond Counsel, under existing law, the interest accruing on the Series 2012 STAR Bonds is exempt from federal income taxation, subject to certain limitations and exceptions as set forth herein under the heading “TAX MATTERS,” and is not an item of tax preference for purposes of the federal alternative minimum tax. Additionally, under existing laws, the interest on the Series 2012 STAR Bonds is excluded from computation of Kansas adjusted gross income. See APPENDIX E – FORM OF BOND COUNSEL OPINION.
Continuing Pursuant to continuing disclosure agreements between the Issuer and the Disclosure Dissemination Agent, the Developer and the Dissemination Agent and the Museum Owner and the Dissemination Agent, the Issuer, the Developer and the Museum Owner will undertake to provide certain annual financial information and operating data concerning the Revenues, the Redevelopment Project Area and the Museum and notices of the occurrence of certain material events for the benefit of the Bondholders. The specific nature of the financial information to be provided and the information contained in such notices of material events is set forth in APPENDIX D—FORM OF CONTINUING DISCLOSURE AGREEMENTS. The Issuer has never failed to comply in all material aspects with any previous disclosure covenants under S.E.C. Rule 15c2-12(b)(5).
The Trustee UMB Bank, n.a., Kansas City, Missouri, is designated pursuant to the Indenture to serve as the Trustee, and act as paying agent, bond registrar and transfer agent in connection with the issuance of the Series 2012 STAR Bonds.
Additional Additional information regarding the Issuer or the Series 2012 STAR Bonds Information may be obtained from the Underwriter, Stifel Nicolaus & Company, Incorporated, Attention: Jim Lahay, (314) 342-4002, 501 North Broadway, 8th Floor, St. Louis, Missouri 63102 (the “Underwriter”) or from Public Financial Management, 45 South Seventh Street, Suite 2800, Minneapolis, Minnesota 55402, Attention: Heather Casperson (612) 371-3753, e-mail: [email protected].
[Remainder of Page Intentionally Left Blank]
S-7 4848-0467-6625.6
OFFICIAL STATEMENT $[Principal Amount] CITY OF OVERLAND PARK, KANSAS TRANSPORTATION DEVELOPMENT DISTRICT SALES TAX SPECIAL OBLIGATION REVENUE BONDS SERIES 2012 (PRAIRIEFIRE AT LIONSGATE PROJECT)
INTRODUCTION
General
The purpose of this Official Statement is to furnish information relating to (1) the City of Overland Park, Kansas (the “City” or the “Issuer”), (2) the Sales Tax Special Obligation Revenue Bonds, Series 2012 (Prairiefire at LionsGate Project) (the “Series 2012 STAR Bonds” and together with any Additional STAR Bonds, the “STAR Bonds”), being issued by the Issuer in the principal amount of $[Principal Amount]*, pursuant to the terms of an ordinance passed by the Issuer and a Trust Indenture dated as of December 1, 2012 (the “Indenture”) by and between the Issuer and UMB Bank, n.a., Kansas City, Missouri, as trustee (the “Trustee”), and (3) the construction of certain improvements (the “STAR Bond Improvements”) within the herein-defined Redevelopment Project Area as part of a mixed use development known as Prairiefire at LionsGate (the “Project”). The Project is designed to be constructed and completed in two (2) distinct phases, with Phase 1 of the Project to be developed by MC Prairiefire I, LLC, a Kansas limited liability company (“MCP I”) and Phase 2 of the Project to be developed by MC Prairiefire II, LLC, a Kansas limited liability company (“MCP II” and with MCP I, the “Developer”). MCP I is the Developer with respect to the herein-defined 2012 STAR Bond Improvements. For the definition of certain capitalized terms used herein and not otherwise defined, see APPENDIX C –DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS attached hereto.
There follows in this Official Statement and the Appendices hereto a description of the Bondowners’ risks, and descriptions of the Issuer, the Project, the Plan of Finance, the STAR Bond Improvements and the Series 2012 STAR Bonds. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Series 2012 STAR Bonds are qualified in their entirety by reference to such documents, copies of which may be examined at the offices of Stifel Nicolaus & Company, Incorporated, Attention: James Lahay, (314–342–2000) 501 N. Broadway, St. Louis, MO 63102 (the ”Underwriter”) or from Public Financial Management, 45 South Seventh Street, Suite 2800, Minneapolis, Minnesota 55402, Attention: Heather Casperson (612) 371-3753, or will be provided to any prospective purchaser requesting the same in writing.
The Issuer
The Issuer is a municipal corporation duly organized and existing under the laws of the State as a city of the first class. See APPENDIX F – ECONOMIC AND DEMOGRAPHIC INFORMATION OF THE ISSUER. Pursuant to K.S.A. 12-17,160 et seq., as amended (the “STAR Bond Act”), the Issuer is authorized to issue Sales Tax Special Obligation Revenue Bonds, the proceeds of which shall be used for the purpose of paying all or part of the Costs of the STAR Bond Improvements that may be paid through financing as provided in the STAR Bond Act.
* Preliminary, subject to change.
4848-0467-6625.6
Authority for Issuance
General. The Series 2012 STAR Bonds will be issued pursuant to the Constitution and statutes of the State, including K.S.A. 10-101 to 10-125, inclusive (specifically including K.S.A. 10-116a), K.S.A. 10-620 et seq. and K.S.A. 12-17,160 et seq. (the “STAR Bond Act”), all as amended and supplemented from time to time (the “Act”), and pursuant to an ordinance adopted by the governing body of the City authorizing the issuance of the Series 2012 STAR Bonds.
STAR Bond Financing. As indicated in “SUMMARY STATEMENT – STAR Bonds and STAR Bond Act,” the provisions of the STAR Bond Act authorize cities to acquire property and to issue special obligation “sales tax and revenue” bonds (“STAR Bonds”) secured by certain tax revenues. Pursuant to the STAR Bond Act, municipalities are authorized to utilize STAR Bond financing for specific development projects through (i) the creation of a STAR Bond Project District, subject to a finding by the Secretary of the State Department of Commerce (the “Secretary”) that the STAR Bond Project District Plan is eligible for STAR Bond financing, and (ii) the adoption of a STAR Bond Redevelopment Project Plan that is subsequently approved by the Secretary.
STAR Bonds issued under the STAR Bond Act are payable from incremental State and local sales and compensating use taxes generated from retail projects constructed within the redevelopment district. STAR Bonds may be used to pay for certain costs of a redevelopment project, including the STAR Bond Improvements described herein, which include certain costs of property acquisition, site preparation and infrastructure improvements, construction of the Museum and parking improvements, bond issuance and financing costs, and related soft costs.
Prairiefire at LionsGate STAR Bond Project Approvals. As indicated in “SUMMARY STATEMENT – The Redevelopment Project District, the Redevelopment Project Area and the 2012 STAR Bond Improvements,” on December 1, 2008, after a public hearing, the governing body of the Issuer adopted an ordinance making findings and establishing the Prairiefire at LionsGate STAR Bond Project District (the “Redevelopment District”), an approximately 61.5 acre area that includes the approximately 56 acre Redevelopment Project Area described in this Official Statement. The Kansas Secretary of Commerce has determined that the Redevelopment District is an “eligible area” in that it is a major commercial entertainment and tourism area, as such terms are defined in the STAR Bond Act, in accordance with the requirements of the STAR Bond Act.
On October 22, 2012, after a public hearing, the governing body of the Issuer adopted an ordinance making findings and approving and adopting the Prairiefire at LionsGate STAR Bond Redevelopment Project Plan (the “Redevelopment Project Plan”) for the approximately 56 acre site described therein (the “Redevelopment Project Area”). The Kansas Secretary of Commerce has approved the Redevelopment Project Plan, and has approved up to $81,000,000 in STAR Bond financing for the STAR Bond Improvements (exclusive of financing costs), a portion of which will be financed with proceeds of the Series 2012 STAR Bonds, with the remaining authorized amount to be financed through the issuance of Additional STAR Bonds as described herein.
Security for the Series 2012 STAR Bonds
Pursuant to the STAR Bond Act, the Series 2012 STAR Bonds are secured by a pledge of State and local sales and compensating use taxes generated within the Redevelopment Project Area which are collected by the State and available to pay STAR Bonds (individually, the “State Sales Tax Revenues” or the “Issuer Sales Tax Revenues,” as applicable, and collectively, the “Revenues”).
2 4848-0467-6625.6
Limited Obligations
The STAR Bonds and the interest thereon are special, limited obligations of the Issuer payable (except to the extent paid out of STAR Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate including, with respect to the STAR Bonds, the Revenues, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the STAR Bonds, as provided in the Indenture. Receipt of the State Sales Tax Revenues and the pledge of those revenues pursuant to the Tax Distribution Agreement terminates after October 2032, as does the pledge of the Issuer Sales Tax Revenues, whether or not the principal of or interest on the Series 2012 STAR Bonds has been paid in full.
THE SERIES 2012 STAR BONDS SHALL NOT BE OR CONSTITUTE A GENERAL OBLIGATION OF THE ISSUER, NOR SHALL THEY CONSTITUTE AN INDEBTEDNESS OF THE ISSUER WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION, LIMITATION OR RESTRICTION.
SUMMARY OF THE PROJECT
General
The Project consists of the development of approximately 61.5 acres located in the general vicinity of 135th Street between Lamar Avenue and Nall Avenue in the City of Overland Park, Kansas. The development, known as Prairiefire at LionsGate, is designed as an integrated urban village with a mix of retail, museum, office, hotel and residential uses.
The 61.5 acre Prairiefire at LionsGate site constitutes the herein-described District. This Prairiefire at LionsGate STAR Bond Redevelopment Project Plan (the “Redevelopment Project Plan”) encompasses the development of approximately 56 of such 61.5 acres; such 56 acres constitutes the Redevelopment Project Area for the Redevelopment Project Plan. Residential townhouses will be located on approximately 5.5 acres south of 137th Street; such townhouses are not included within the Redevelopment Project Area. It is noted that descriptions herein of the anticipated square feet of residential space to be developed as a part of the Prairiefire at LionsGate Project include such townhouses, as well as residential space to be developed within the Redevelopment Project Area.
The Project calls for the construction of the Museum building, 18 commercial buildings, 14 residential apartment buildings and 4 garage buildings north of 137th Street plus 23 residential townhouses south of 137th Street, all to be constructed at Prairiefire at LionsGate in two phases. Each phase will be developed on discrete portions of the Redevelopment Project Area. See the site map on p. [7] for an indication of the project components and the phases of the Project. Phase 1 will be constructed on approximately [9] acres and Phase 2 will be constructed on approximately [26] acres within the Redevelopment Project Area.
Phase 1 of the Project will be developed by MCP I and Phase 2 of the Project will be developed by MCP II. Substantially all of the approximately 56 acres in the Redevelopment Project Area is currently owned by an affiliate of the Developer, MC Prairiefire, LLC (“MCP”). On or about the Issue Date, MCP will enter into a Ground Lease with MCP I for the real property being developed by the Developer in Phase 1 of the Project, which is the subject of this financing. The Phase 1 property being developed by the residential developer will be sold by MCP to such residential developer. It is expected that MCP will enter into a Ground Lease with MCP II for the real property being developed in Phase 2 of the Project, at such time as Phase 2 is developed. See “THE PROJECT – Ground Lease.” The Issuer and the Developer have entered into the Prairiefire at LionsGate Development Agreement (the
3 4848-0467-6625.6
“Development Agreement”) effective November 12, 2012, and MCP has agreed to carry out the responsibilities assigned to MCP thereunder. See APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – The Development Agreement.
Project Improvements and Attractions
The Project, as outlined in the Development Agreement, is to be developed, designed and constructed as an entertainment facility and unique destination experience. As provided in the Development Agreement, the Project is designed to include, at a minimum, the following improvements and attractions:
(a) An approximately 41,000 square foot natural history museum (the “Museum”), which will be owned and operated by the Museum of Prairiefire Foundation, a Kansas not-for- profit corporation which has been designated as an Internal Revenue Code Section 501(c)(3) organization (the “Museum Owner”). The Museum Owner has a contract with the American Museum of Natural History (“AMNH”) of New York, pursuant to which the Museum will offer permanent exhibits and approximately 7,000 square feet of traveling exhibits from the AMNH which will be updated twice a year and provide a unique destination science and cultural experience for its patrons. The Museum will also feature an interpretive walk, prairie gardens, a discovery room providing an interactive learning experience for children, event space and art installations. See APPENDIX B – THE MUSEUM.
(b) Approximately 357,000 square feet of destination lifestyle and entertainment and retail shopping, including, among other concepts, stores and offerings, high-end specialty and boutique shops and fine dining restaurants (“Retail Space”). See “THE PROJECT – Tenants” and APPENDIX A – RETAIL SALES TAX REPORT.
(c) approximately 290,000 square feet of Class A office space (“Office Space”).
(d) approximately four hundred seventy-five (475) residential units, including condominium units and/or apartment units (collectively, the “Residential Units”). See “THE PROJECT – Residential.”
(e) a full-service, high-end boutique hotel comprised of between eighty (80) and one hundred twenty (120) rooms (the “Hotel”).
(f) a central park area called the “Arbor Plaza,” which will be an outdoor, interactive area for visitors of the Project to congregate and enjoy outdoor events, such as festivals, art exhibits, concerts and certain Museum-related events. The Arbor Plaza will also feature landscaping which includes trees, flowers and other horticulture which is native to Kansas and is both attractive and educational for the visitors of the Project.
(g) a native wetlands area (the “Wetlands”) which is a biologically-functional natural system within the Project and includes streams, rocks and vegetation which is developed in accordance with a wetlands mitigation plan (the “Wetlands Plan”) and is a living educational experience for visitors of the Project. Additionally, the Wetlands will be traversed by a “Timber Bridge” which features will be constructed with natural and other materials which are in concert with the Wetlands it travels over and across.
(h) a trail around the perimeter of Phase 1 and a nature trail around the Wetlands which is designed to be a unique walking trail experience with various features, including an
4 4848-0467-6625.6
entertaining narrative of Kansas prairie heritage and other educational components (collectively, the “Trail”). The Wetlands and the Trail will be subject to a conservation easement (the “Conservation Easement”), which Conservation Easement will be recorded against that portion of the Redevelopment Project Area upon which the Wetlands and Trail will be located. See “THE PROJECT – Wetlands.”
(i) a “Sunflower Garden” which will feature varieties of the Kansas state flower, or a similar amenity or attraction.
(j) a “Butterfly Garden” which contains specifically-selected plants and materials designed to attract various species of butterflies, or a similar amenity or attraction.
(k) art, sculptures and other amenities.
The Project will also include surface parking lots and parking garages (the “Parking Improvements”). One parking garage and certain surface lots will be constructed as part of Phase 1 of the Project. Parking in the Parking Improvements will generally be provided free of charge to the public, provided however that certain portions of the Parking Improvements may include a fee, including without limitation, for Hotel parking and valet parking, and will contain a total of approximately 1375 parking spaces for museum and retail purposes.
See “THE PROJECT” herein.
Project Phases
Phase 1 Project components include the Museum, approximately 213,000 square feet of Retail Space, approximately 300 Residential Units, the Wetlands (except for the Timber Bridge), the Trail, the Sunflower Garden, the Butterfly Garden and a portion of the Parking Improvements. Pursuant to the Development Agreement, the Phase 1 Retail Space is to include an approximately 24,000 square foot sporting goods store (REI, as described under the caption “THE PROJECT – Tenants” and in APPENDIX A – RETAIL SALES TAX REPORT), an approximately 25,000 square foot, fresh/healthy-food grocery concept (Fresh Markets, as so described), an approximately 75,000 square foot movie and dining experience facility (Cinetopia, as so described), an approximately 32,500 square foot themed bowling/bocce and entertainment facility (Pinstripes, as so described), an approximately 5,000 square foot rock and roll themed restaurant (Rock and Brews, as so described), other restaurants as so described and other retailers.
Phase 2 Project components include the Hotel, approximately 157,000 square feet of Retail Space, approximately 280,000 square feet of Office Space, approximately 175 Residential units, the Timber Bridge, the Arbor Plaza and a portion of the Parking Improvements. Phase 2 improvements are not being funded at this time and are contingent on future events.
Construction of the improvements to be included in Phase 1 of the Project is scheduled to begin shortly after the Issue Date. Certain improvements are scheduled to be completed in the fall of 2013, other improvements are scheduled to be completed in the spring of 2014 and substantial completion of Phase 1 is expected by December 31, 2014. Pursuant to the Development Agreement, the Phase 2 commencement date is to be the earlier of (a) three years after substantial completion of Phase 1, or (b) December 31, 2017, and the Phase 2 substantial completion date is to be the earlier of (a) three years after commencement of Phase 2, or (b) December 31, 2020. The receipt of Revenues from Phase 1 of the Project to pay debt service on the Series 2012 STAR Bonds is not conditioned on the development of Phase 2 of the Project. Additional information on the Project and the contracts which the Developer has
5 4848-0467-6625.6
entered for the design and construction of Phase 1 of the Project, the Phase 1 timeline and expected Phase 1 tenants for the Retail Space, is set forth in “THE PROJECT.”
[Remainder of page intentionally left blank]
6 4848-0467-6625.6
[INSERT SITE MAP]
7 4848-0467-6625.6 Phase I Phase II Phase I
Phase I Apartments Phase II Apartments
OCTOBER 21, 2012
PLAN OF FINANCE FOR THE PROJECT
General
The Project, including each Phase thereof, will be funded in part by public incentives, including STAR Bonds and CID Bonds (collectively, the “Public Financing”), and in part by private debt, equity or other private sources (collectively, the “Private Funds”). (The term “Private Funds” does not include private funding sources for the Phase 1 residential development and any Phase 2 Project components within the Redevelopment Project Area being developed by an entity other than the Developer.)
As indicated in the Summary Statement, the Kansas Secretary of Commerce has authorized up to $81,000,000 financing of STAR Bond Improvements for the Project with the proceeds of STAR Bonds, net of financing costs. The STAR Bond Improvements include Museum construction and improvements, street construction and improvements, site acquisition and preparation, utility relocation, landscaping, parking, plazas and arcades, signage, engineering, architectural and all other costs permitted by law relating to the Redevelopment Project Area. Approximately $____* of such authorization is being financed with proceeds of the Series 2012 STAR Bonds. The expected 2012 STAR Bond Improvements to be financed as a part of Phase 1 of the Project include certain costs of the Museum, parking improvements, land acquisition and site development costs and infrastructure costs.
Pursuant to the CID Act, municipalities are authorized to utilize CID Bond financing of certain development projects through the creation of community improvement districts. On October 22, 2012, after a public hearing, the governing body of the Issuer created the Prairiefire Community Improvement District No. 1 and imposed a 1.5% sales tax that commences October 1, 2013 to finance up to $16,000,000 of CID improvements within such district in connection with Phase 1 of the Project. As indicated in the Summary Statement, simultaneously with the issuance of the Series 2012 STAR Bonds, the Issuer will also issue its $______* Series 2012A CID Bonds and $______* Series 2012B CID Bonds pursuant to the CID Act to finance a portion of such costs. The expected CID costs to be financed as a part of Phase 1 of the Project include, but are not limited to, certain costs of the Wetlands and Trails, road improvements, land acquisition and site development costs, costs of buildings, structures, facilities, signage, landscaping, site amenities/sculpture/art, infrastructure costs (including utilities) and certain professional fees. After the Series 2012 CID Bonds have been paid and redeemed in full, the Developer may utilize CID revenues for each phase on a pay-as-you-go basis to the extent not financed with CID Bonds, up to the $16,000,000 cap. (The governing body of the Issuer also created the Prairiefire Community Improvement District No. 2 and imposed a 1.5% sales tax to finance up to $14,000,000 of CID improvements within such district in connection with Phase 2 of the Project.)
[Remainder of page intentionally left blank]
* Preliminary, subject to change.
8 4848-0467-6625.6
The following table sets forth the estimated costs of each phase of the Project, by category.
Table 1 Estimated Costs of Project*
CATEGORY PHASE 1 PHASE 2 TOTAL % OF TOTAL AMNH Development $ 25,257,601 $ - $ 25,257,601 5.92% Wetlands & Interpretive Trails Educational Areas & Related Landscape 2,853,968 3,625,690 6,479,658 1.52% Arbor Plaza - 8,617,357 8,617,357 2.02% Signature Hotel Land & Infrastructure Allocation - 150,600 150,600 0.04% Structured Parking for Museum & Hotel Uses 11,795,572 1,600,000 13,395,572 3.14% Access Roads & Internal Drives & Related - 41,665,088 41,665,088 9.77% Core Village Development - 126,664,000 126,664,000 29.69% Public Infrastructure - Remainder of Prairiefire Site 12,569,459 - 12,569,459 2.95% Destination Retail - Land and Sitework/Landscape/Hardscape 13,770,199 - 13,770,199 3.23% Residential Construction 30,000,000 41,950,000 71,950,000 16.86% Vertical/Building Construction - Remainder of Prairiefire Site 54,037,956 22,000,000 76,037,956 17.82% Pre-development costs 6,625,588 4,951,270 11,576,858 2.71% Financing & Contingency Costs 3,869,668 14,629,682 18,499,350 4.34% TOTAL ESTIMATED PROJECT COST $160,780,011 $ 265,853,687 $ 426,633,698 100.00%
The following table sets forth the estimated funding sources for each phase of the Project.
Table 2 Estimated Funding Sources for Project*
CATEGORY PHASE 1 PHASE 2 TOTAL % OF TOTAL STAR Bonds Net Proceeds $ 48,582,500 $ 32,417,501 $ 81,000,000 18.99% CID Bonds Net Proceeds 12,462,400 10,904,600 23,367,000 5.48% Developer Private Debt, Equity, & Museum Donations 69,735,112 180,581,586 250,316,698 58.67% Residential Developer Debt & Equity 30,000,000 41,950,000 71,950,000 16.86% $ 160,780,011 $ 265,853,687 $ 426,633,698 100.00%
* Preliminary, subject to change.
9 4848-0467-6625.6
The following table sets forth the estimated sources and uses for Phase 1 of the Project, showing costs by category, and showing the proportionate amount of such costs anticipated to be funded with proceeds of the Series 2012 STAR Bonds, the Series 2012 CID Bonds and private funding sources. As indicated in footnote 3 to the table and as discussed herein, a third party developer will develop the Phase 1 Residential Units, and the Developer will not have any responsibility to finance the estimated $30,000,000 cost of such Residential Units. As indicated in footnote 2 to the table, private funding sources of the Developer are expected to be approximately $67,035,112* consisting of an estimated $28,733,985* of private equity and $38,301,127* in construction loan proceeds.
Table 3 Estimated Sources and Uses for Phase 1 of Project*
Estimated Project Cost STAR Bonds CID Bonds Private
Retail Component: Wetlands & Hike/Bike Trail Educational Areas Attraction $ 2,853,968 $ - $ 2,853,968 $ - Museum District Development Attraction 16,097,332 2,571,484 - 13,525,848 Museum District - Tenant Improvements 20,092,535 - - 20,092,535 Museum District - Sitework/Landscaping 5,633,590 4,670,634 865,353 97,603 Museum District - Fees & Expenses 11,498,889 2,228,964 1,027,461 8,242,464 Museum District Attraction - Parking Structure 11,795,572 11,795,572 - - West End Attraction Development 6,917,848 2,142,404 - 4,775,444 West End - Tenant Improvements 2,047,318 - - 2,047,318 West End - Sitework/Landscaping 3,422,721 606,635 2,816,086 - West End - Fees & Expenses 2,097,922 300,000 - 1,797,922 Other Infrastructure necessary and linking all Attractions 12,569,459 1,079,087 4,899,532 6,590,840 Pre-Development Costs 6,625,588 - - 6,625,588 Contingency 2,500,000 500,000 - 2,000,000 Private Construction Loan Interest 1,369,668 130,118 - 1,239,550
Subtotal $ 105,522,410 $ 26,024,899 $ 12,462,400 $ 67,035,1121
Museum of Prairiefire Attraction 25,257,601 22,557,601 - 2,700,0002
Nall Multifamily 30,000,000 - - 30,000,0003
TOTAL $ 160,780,011 $ 48,582,500 $ 12,462,400 $ 99,735,112 1 All retail hard and soft construction costs to be incurred by Developer. $67,035,112 in private funds consists of an estimated $28,733,985 of private equity and $38,301,127 in construction loan proceeds. 2 All museum had and soft construction costs to be incurred by Developer. $2,700,000 in private funds consists of third party private donations pledged to pay for specific museum interior costs. 3 Third party multi-family developer will incur all multi-family hard and soft construction costs. $30,000,000 in private funds consists of debt and equity secured by third party developer.
* Preliminary, subject to change.
10 4848-0467-6625.6
Table 3 above divides the $160,780,011 estimated cost of Phase I of the Project into three categories, (1) the Retail Component; (2) the Museum of Prairiefire Attraction; and (3) the Nall Multifamily.
As indicated, Phase 1 of the Project will include the Museum, the approximately 213,000 square feet of Phase 1 Retail Space, approximately 300 Residential Units (the “Phase 1 Residential Units”), the Wetlands (except for the Timber Bridge), a portion of the Trail, the Sunflower Garden, the Butterfly Garden and a portion of the Parking Improvements, including a parking garage. The retail space being constructed in Phase 1 of the Project includes the West End and the Museum District described below, as indicated on the map on p. [7] and in the Retail Sales Tax Report. The West End contains approximately 9 acres located on the southeast corner of West 135th Street and Lamar Avenue intersection. This area is projected to include approximately 58,000 square feet of retail space. The Museum District contains approximately 26 acres located on the southwest corner of the intersection of West 135th Street and Nall Avenue. This area is projected to include approximately 155,000 square feet of retail space, the Museum and approximately 300 multi-family Residential Units.
Retail Component
The Retail Component consists of approximately [213,000] square feet of restaurant and retail development located in the northwest and northeast corners of the Prairiefire at LionsGate property, as depicted in the site plan set forth on page [7]. The estimated cost of the Retail Component is $105,522,410, which will be financed with STAR Bond net proceeds, CID Bond net proceeds, and private debt and equity, as set forth in Table 3 above.
The portion of the Retail Component in the northwest corner of the Prairiefire at LionsGate property consists of three buildings totaling approximately ______square feet and is referred to in Table 3 above as the “West End.” The West End land and estimated construction costs (referred to above as the “Attraction Development”), estimated tenant improvement costs, estimated sitework/landscaping costs, and estimated fees and expenses associated with developing and constructing the West End portion of the Retail Component are set forth in Table 3 above.
The portion of the Retail Component in the northeast corner consists of ___ buildings totaling approximately ____ square feet and is referred to in Table 3 above as the “Museum District.” The Museum District land and estimated construction costs (referred to above as the “Attraction Development”), estimated tenant improvement costs, estimated sitework/landscaping costs, and estimated fees and expenses associated with developing and constructing the Museum District portion of the Retail Component are set forth in Table 3 above. The Museum District also includes a multi-level parking structure that will serve both the Museum of Prairiefire and the Museum District portion of the Retail Component, the estimated costs of which are set forth in Table 3 above.
Certain infrastructure costs associated with construction of the Retail Component are listed in Table 3 above as “Other Infrastructure necessary and linking all Attractions.” Such costs include items such as construction of the public street that runs along the southern boundary of Prairiefire at LionsGate (137th Street), water main costs, and turn lanes on the public street adjacent to the northern boundary of the Prairiefire at LionsGate (135th Street).
The costs listed in Table 3 above as “Pre-Development Costs” are those costs already incurred to put Phase I of the Project in position for further development. Such costs include, for example, architecture, engineering, and legal fees, brokerage commissions, City taxes and fees, and loan fees and interest.
11 4848-0467-6625.6
Museum at Prairiefire Attraction
The approximately 41,000 square foot Museum of Prairiefire will be the anchor attraction for the Project, located between the Wetlands and the Museum District portion of the Retail Component, as depicted on the site plan set forth on page [7]. The estimated $25,257,601 cost of the Museum of Prairiefire includes all design, development, and construction costs. Approximately ninety percent (90%) of the funding needed to design, develop, and construct the Museum will come from Series 2012 STAR Bond net proceeds, with the remaining amount to come from private donations to the Museum Owner, as set forth in Table 3 above.
Nall Multifamily
The approximately 300-unit luxury apartment project will be located in the southeast corner of the Prairiefire at LionsGate property, as depicted in the site plan set forth on page [7] in the area termed “Hearthview Residential.” The estimated cost of the apartment project is $30,000,000. Funding for the apartment project will be provided by the third-party owner/developer constructing the apartments, as set forth in Table 3 above.
Percentage Limitations Relating to Public Financing and Private Funds
The Development Agreement contains provisions relating to the expenditures of proceeds of the Public Financing and the Private Funds. In the Development Agreement, the Issuer and the Developer agree that it is intended that the Project Costs will be paid, in the aggregate, proportionately from the various funding sources set forth in the Project Budget, as defined therein, throughout the construction cycle for each respective Phase; provided however, that nothing in the Development Agreement requires that any specific line item be paid proportionately from such funding sources. The following is an illustrative example of the percentages of Public Financing Proceeds and Private Funds for the portion of Phase 1 of the project being developed by the Developer using the estimated costs set forth in Table 3, exclusive of the Phase 1 residential development, as the Project Budget: If the Project Budget for Phase 1 shows an estimated $130,750,000 of Project Costs, $48,500,000 of which are to paid with STAR Bonds, $12,500,000 of which are to be paid with CID Proceeds and $69,750,000 of which are to be paid with Private Funds (as defined below), then the percentage allocations (the “Percentage Allocations”) for purposes of the foregoing provision of the Development Agreement will be (i) 47% from Public Financing Proceeds, and (ii) 53% from Private Funds.
In the Development Agreement, the parties also agree that on or about July 15, 2013 and again on or about January 15, 2014 (each date, a “Percentage Limitation Date” and collectively the “Percentage Limitation Dates”), the Developer will provide a detailed breakdown of all Project Costs paid to date and an indication of the source of funds (i.e., Private Funds, STAR Bond Proceeds, or CID Proceeds) used to pay for all such costs. (Two (2) different Percentage Limitation Dates will be mutually agreed upon by the parties for Phase 2 on or before the Phase 2 Commencement Date, as such term is defined therein.) If, as of either Percentage Limitation Date, the actual Percentage Allocation for the Private Funds at that time, when compared to the Percentage Allocations for the Public Financing sources is materially less than the Private Funds Percentage Allocation shown in the Project Budget, then the City may in its sole discretion elect not to distribute any further Public Financing proceeds (including STAR Bond proceeds) to the Developer unless and until the Developer demonstrates to the City that it has spent enough Private Funds to fully compensate for the difference in the Percentage Allocation for Private Funds (the “Percentage Limitation”). For purposes of this provision, the term “materially less” is deemed to mean a variance of 5% or more, and the term “compensate for the difference” means to bring the Percentage Allocation for Private Funds back within such 5% range.
12 4848-0467-6625.6
The following is an illustrative example of a failure on the part of the Developer to meet the Percentage Limitation for Phase 1, using the estimated costs set forth in Table 3, exclusive of the Phase 1 residential development, as the Project Budget: If the total cost of Phase 1 Percentage Allocations for Phase 1 in the Project Budget are (i) 47% from Public Financing Proceeds, and (ii) 53% from Private Funds, and as of July 15, 2013, Developer has spent $70,000,000 for Project Costs, of which $38,000,000 were paid with Private Funds and $32,000,000 were paid with Public Financing Proceeds, then Developer's Percentage Allocation for Private Funds as of that Percentage Limitation Date would be deemed to be materially (more than 5%) less than the 53% Percentage Allocation shown in the Project Budget. Accordingly, in this example, the City will not be obligated to disburse any further Public Financing Proceeds to Developer unless and until Developer has demonstrated to the City that it has compensated for the difference by spending enough Private Funds to constitute at least 48% of the Project Costs at the time of such demonstration.
Economic Development Revenue Bonds
The Issuer has adopted a Resolution of Intent to issue not to exceed $16,000,000 economic development revenue bonds to finance the construction, furnishing and equipping of the retail buildings located within the area of Phase 1 of the Project. The Developer will seek a Kansas sales tax exemption certificate for the items financed with the proceeds of the economic development revenue bonds
MASTER FUNDING AGREEMENT
General
The Trustee, the Developer, the construction lender to the Developer for Phase 1 (the “Construction Lender”) and the title company for Phase 1 as Escrow Agent will enter into the Master Funding Agreement dated as of December 1, 2012 (the “Master Funding Agreement”), which will, among other things, provide procedures for the disbursement of the various funding sources for Phase 1 of the Project.
Disbursements
The Master Funding Agreement provides for the joint disbursement of Private Funds and Public Financing funds to be used for the development and construction of Phase 1 of the Project. Not more often than monthly, Developer will submit a request for disbursement (“Request for Disbursement”) to the Escrow Agent to receive the funds necessary to: (i) pay the Contractor (as defined and described herein under the caption “THE PROJECT – Design and Construction of Phase 1 Improvements – Construction);” (ii) pay appropriate vendors or suppliers; or (iii) reimburse the Developer for costs incurred in the development and construction of Phase 1 of the Project. The Trustee and Construction Lender will review the Request for Disbursement and, if appropriate, countersign the Request for Disbursement and transfer appropriate funds to the Escrow Agent. Upon receipt of funds from the Trustee, the Construction Lender and Developer as required by the Request for Disbursement, the Escrow Agent will disburse funds to the Contractor, other appropriate vendors or suppliers, or the Developer as set forth in the Request for Disbursement. The Trustee will not transfer funds to the Escrow Agent in contravention of the Indenture. Further, the Escrow Agent will not be obligated to disburse funds as requested by a Request for Disbursement until it has received necessary funds to fulfill a Request for Disbursement from each of the Construction Lender, the Developer, and the Trustee. Accordingly, no Series 2012 STAR Bond Proceeds will be used to pay project costs unless the Developer and Construction Lender have provided funds as contemplated by the Indenture, the Development Agreement, and the construction loan documents.
13 4848-0467-6625.6
ESTIMATED SOURCES & USES OF FUNDS SERIES 2012 STAR BONDS
The proceeds derived from the sale of the Series 2012 STAR Bonds and investment earnings thereon are expected to be used to pay a portion of the costs of financing the STAR Bond Improvements, funding a debt service reserve fund and paying certain Costs of Issuance with respect to the Series 2012 STAR Bonds. In addition, a portion of the proceeds of the Series 2012 STAR Bonds will be held in the Escrowed Project Costs Fund until either transfered to the Project Fund upon satisfaction of the applicable Escrow Release Conditions described herein or transferred to the 2012 Redemption Account of the Debt Service Fund to be applied to the mandatory redemption of Series 2012 STAR Bonds. See “SECURITY FOR THE STAR BONDS – Escrowed Project Costs Fund” herein.
The following sets forth the estimated sources and uses of funds relating to the proceeds of the Series 2012 STAR Bonds:
Sources of Funds: Principal Amount of the Series 2012 STAR Bonds$[Principal Amount] [Plus/Less] Net Original Issue [Premium/Discount]
Total Sources of Funds $ Uses of Funds: Deposit to Project Fund $ Deposit to Debt Service Reserve Fund Deposit to Escrowed Project Costs Fund Deposit to Capitalized Interest Fund Underwriting Discount Costs of Issuance Total Uses of Funds $
THE SERIES 2012 STAR BONDS
Authorization
The Series 2012 STAR Bonds are being issued pursuant to the Indenture and pursuant to and in full compliance with the Constitution and laws of the State, including particularly the STAR Bond Act. The Issuer authorized the execution of the documents to which it is a party and the issuance and sale of the Series 2012 STAR Bonds pursuant to an Ordinance passed on November 19, 2012 and the Trust Indenture dated as of December 1, 2012, by and between the Issuer and UMB Bank, n.a., Kansas City, Missouri, as trustee (“Trustee”).
Description of the Series 2012 STAR Bonds
The Series 2012 STAR Bonds will be issuable in the form of fully registered bonds, without coupons, in minimum original Authorized Denominations of $100,000 and any integral of $5,000 in excess thereof, subject to transfer rights by a beneficial owner of Series 2012 STAR Bonds which have been reduced to a lower principal amount as a result of mandatory redemptions thereof. See “Registration, Transfer and Exchange” and “Special Mandatory Redemption” below. Ownership interests in the Series 2012 STAR Bonds will be available to purchasers through book-entry only. Only Approved Investors may own Series 2012 STAR Bonds, and Individual Accredited Investors who purchase Series 2012 STAR Bonds prior to satisfiaction of the Escrow Release Conditions – 100%
14 4848-0467-6625.6
Release must provide an investor letter to the Trustee. See “Bondowner Restrictions” below and “BONDOWNERS’ RISKS – Lack of Rating and Market for the Series 2012 STAR Bonds, Restrictions on Transferability.” The Series 2012 STAR Bonds will be dated as of the date of the Date of Delivery and will mature on the dates set forth on the cover page of the Official Statement. Principal of the Series 2012 STAR Bonds is payable on the maturity thereof or upon prior redemption. See “Redemption Provisions” below. The Series 2012 STAR Bonds will bear interest at the rates per annum set forth on the cover page hereof, which interest will be payable semiannually on June 15 and December 15 in each year (each an “Interest Payment Date”), commencing June 15, 2013. Interest and mandatory redemption payments will be payable by check or draft of the Trustee mailed to the persons who are the registered owners of the Series 2012 STAR Bonds as of the close of business on the 1st day of the calendar month next preceding such Interest Payment Date.
Registration, Transfer and Exchange
The STAR Bonds will be issued only in fully registered form. The Trustee is appointed the Bond Registrar, and will cause to be kept at its principal corporate trust office the Bond Register in which, subject to such reasonable regulations as it may prescribe, the Trustee will provide for the registration, transfer and exchange of STAR Bonds as provided in the Indenture.
When issued, the Series 2012 Bonds will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust (“DTC”), New York, New York. DTC will act as securities depository for the Series 2012 Bonds. See APPENDIX G – “BOOK-ENTRY ONLY” attached hereto.
STAR Bonds may be transferred or exchanged only upon the Bond Register maintained by the Trustee as provided in the Indenture, subject to the conditions described below under “Bondowner Restrictions.” Upon surrender for transfer or exchange of any STAR Bond at the principal corporate trust office of the Trustee, the Issuer will execute, and the Trustee will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of the same maturity, of any authorized denominations and of a like aggregate principal amount. A STAR Bond may be transferred or exchanged in a principal amount lower than an Authorized Denomination provided that such STAR Bond was originally in an Authorized Denomination, the principal amount of such STAR Bond was reduced to a principal amount lower than an Authorized Denomination because of special mandatory redemptions as described below under the caption “Redemption of Bonds – Special Mandatory Redemption,” and the transferee acquires the full principal amount of the Outstanding STAR Bond.
STAR Bonds presented for transfer or exchange must be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Trustee, duly executed by the Bondowner thereof or by the Bondowner’s duly authorized agent, and if applicable as described below under “Bondowner Restrictions,” the receipt of an investor letter from an Individual Accredited Investor in the form set forth in APPENDIX H.
In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Trustee will authenticate and deliver Bonds in accordance with the provisions of the Indenture. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Trustee, are the responsibility of the Bondowners of the Series 2012 STAR Bonds. In the event any Bondowner fails to provide a correct taxpayer identification number to the Trustee, the Trustee may make a charge against such Bondowner sufficient to pay any governmental charge required to be paid as a result of such failure. In compliance with Section 3406 of the Code, such amount may be deducted by the Trustee from amounts otherwise payable to such Bondowner under the Indenture or under the STAR Bonds.
15 4848-0467-6625.6
The Trustee is not required (a) to transfer or exchange any STAR Bond during a period beginning at the opening of business 15 days before the day of the first publication or the mailing (if there is no publication) of a notice of redemption of such STAR Bond and ending at the close of business on the day of such publication or mailing; or (b) to transfer or exchange any STAR Bond so selected for redemption in whole or in part, during a period beginning at the opening of business on any Record Date for such series of STAR Bonds and ending at the close of business on the relevant Interest Payment Date therefor.
The Person in whose name any STAR Bond will be registered on the Bond Register will be deemed and regarded as the absolute owner thereof for all purposes, except as otherwise provided in the Indenture, and payment of or on account of the principal of and premium, if any, and interest on any such STAR Bond will be made only to or upon the order of the registered owner thereof or such owner’s legal representative, but such registration may be changed as provided in the Indenture. All such payments will be valid and effectual to satisfy and discharge the liability upon such STAR Bond to the extent of the sum or sums so paid.
The Trustee will keep on file at its principal corporate trust office a list of the names and addresses of the last known owners of all STAR Bonds and the serial numbers of such STAR Bonds held by each of such owners. At reasonable times and under reasonable regulations established by the Trustee, the list may be inspected and copied by the Issuer, the owners of 10% in principal amount of the Bond Obligation or the authorized representative thereof; provided that the ownership of such owner and the authority of any such designated representative must be evidenced to the satisfaction of the Trustee.
Bondowner Restrictions
Approved Investors. The STAR Bonds will be sold and subsequently transferred only to purchasers who constitute Approved Investors. “Approved Investor” means any investor that is a Qualified Institutional Buyer as defined in Rule 144A promulgated by the Securities Exchange Commission under the Securities Act of 1933 or an Accredited Investor as defined in Rule 501(a) of Regulation D promulgated by the Securities Exchange Commission under the Securities Act of 1933.
Individual Accredited Investors. In addition, until such time as the conditions for release of moneys from the Escrowed Project Costs Fund to the Project Fund set forth under the definition of Escrow Release Conditions – 100% Release have been satisfied in full, any Individual Accredited Investor purchasing any Series 2012 STAR Bond must deliver, or cause to be delivered to the Trustee an investor's letter substantially in the form set forth in APPENDIX H to this Official Statement. An “Individual Accredited Investor” means an Accredited Investor that is defined in Rule 501(a)(5) or (6) under the Securities Act of 1933. The Trustee will be entitled to rely, without any further inquiry, on any investor's letter delivered to it and will be fully protected in registering any sale of the Series 2012 STAR Bonds or transfer or exchanges of any Series 2012 STAR Bonds in reliance on any such investor's letter which appears on its face to be correct and of which a Responsible Officer of the Trustee has no actual knowledge otherwise.
After the Escrow Release Conditions - 100% Release have been satisfied in full, no investor letter will be required from any Individual Accredited Investor purchasing a Series 2012 STAR Bond. The Issuer will advise the Trustee when the Escrow Release Conditions – 100% Release have been satisfied. In addition, the Issuer has agreed, pursuant to the Issuer Continuing Disclosure Agreement, to cause notice to be given as provided therein at such time as the Escrow Release Conditions – 100% Release have been satisfied and that investor letters are no longer required from any Individual Accredited Investor purchasing a Series 2012 STAR Bond. See “SECURITY FOR THE SERIES 2012 STAR BONDS – Escrowed Project Costs Fund,” APPENDIX D - FORM OF CONTINUING
16 4848-0467-6625.6
DISCLOSURE AGREEMENT – Issuer Continuing Disclosure Agreement and APPENDIX H- Form of Individual Accreted Investor Letter.
By acceptance of the Series 2012 STAR Bonds, each Bondowner acknowledges that the Series 2012 STAR Bonds are issuable only in Authorized Denominations, that the Series 2012 STAR Bonds are not being registered under the Securities Act of 1933, as amended, and are not being registered or otherwise qualified for sale under the “Blue Sky” laws and regulations of any state, and that as of the date of original issuance thereof, they are not rated by any rating service. All Bondowners also acknowledge that their Series 2012 STAR Bonds may be sold, transferred or otherwise disposed of only in Authorized Denominations and only to Approved Investors, and that individual accredited investors who purchase the Series 2012 STAR Bonds must deliver an investor’s letter until the conditions described above have been satisfied. The Bondowner also acknowledges several items related to the purchase of the Series 2012 STAR Bonds, as described under “NOTICE TO INVESTORS.”
Redemption Provisions
Optional Redemption.
The Series 2012 STAR Bonds are subject to redemption and payment prior to maturity, at the option of the Issuer, on and after ______1, 20_____, in whole or in part (selection of maturities and the amount of Series 2012 STAR Bonds to be redeemed to be determined by the Issuer in such equitable manner as it may determine) on any date in Authorized Denominations, at a redemption price of 100% of the principal amount thereof, plus accrued interest to the redemption date, without premium.
Unless moneys sufficient to pay the principal of and premium, if any, and interest on the Series 2012 STAR Bonds to be redeemed have been received by the Trustee prior to the giving of such notice, the notice of redemption described above will state that it is conditioned upon receipt by the Trustee of sufficient moneys to redeem the Series 2012 STAR Bonds, and such notice and optional redemption will be of no effect if by no later than the scheduled redemption date, sufficient moneys to redeem the Series 2012 STAR Bonds are not on deposit with and available to the Trustee.
Special Mandatory Redemption
Special Mandatory Redemption on Each Interest Payment Date. The Series 2012 STAR Bonds are subject to special mandatory redemption by the Issuer on any Interest Payment Date, commencing December 15, 2014, in order of maturity, at the redemption price of 100% of the principal amount being redeemed, together with accrued interest thereon to the date fixed for redemption, in an amount equal to the amount of Revenues which the Trustee has in its custody or of which the Trustee has knowledge as of the day that is 40 days prior to the Interest Payment Date (or if such date is not a Business Day, the immediately preceding Business Day) that will be available to the Trustee to pay the principal amount of Series 2012 STAR Bonds to be redeemed on the Interest Payment Date. Such amount of Revenues that will be available to pay the principal amount of Series 2012 STAR Bonds to be redeemed on the Interest Payment Date includes: (A) Revenues which are on deposit in the 2012 Debt Service Account of the Debt Service Fund on such 40th day prior to such Interest Payment Date, (B) Revenues which are on deposit in the Escrow Fund on such 40th day prior to such Interest Payment Date, which the Trustee has determined will be transferred to the Debt Service Fund pursuant to the Tax Distribution Agreement to pay the principal amount of Series 2012 STAR Bonds being redeemed on the Interest Payment Date as described under the caption “THE TAX DISTRIBUTION AGREEMENT - Application of Revenues in Escrow Fund Prior to Each Interest Payment Date – subsection (d), and (C) State Sales Tax Revenues which are on deposit in the City Bond Finance Fund on such 40th date prior to such Interest Payment Date, of
17 4848-0467-6625.6
which the Trustee has had notice from the State pursuant to the Tax Distribution Agreement (as described under the caption “THE TAX DISTRIBUTION AGREEMENT – Reporting of Revenues”), in each case net of any amounts which will be applied to the payment of interest on the Series 2012 STAR Bonds on such Interest Payment Date and net of any amounts which will be applied to the payment of Trustee, Dissemination Agent, Rebate Analyst and third party monitor fees prior to such Interest Payment Date as provided in the Tax Distribution Agreement.
Special Mandatory Redemption from Unexpended Proceeds in Project Fund or Escrowed Project Costs Fund. The Series 2012 STAR Bonds are subject to special mandatory redemption and payment prior to Stated Maturity on the earliest practicable date(s), at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the Redemption Date thereof from funds transferred to the 2012 Redemption Account of the Debt Service Fund from the Project Fund as described in APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – THE INDENTURE – Project Fund” or from funds transferred to the 2012 Redemption Account of the Debt Service Fund from the Escrowed Project Costs Fund as described in “SECURITY FOR THE SERIES 2012 BONDS – Escrowed Project Costs Fund.”
Special Mandatory Redemption When Moneys Are Sufficient To Redeem. The Series 2012 STAR Bonds are subject to special mandatory redemption by the Issuer, in whole but not in part, on any date in the event that moneys in the 2012 Debt Service Account and the 2012 Redemption Account of the Debt Service Fund and the Series 2012 Debt Service Reserve Account of the Debt Service Reserve Fund are sufficient to redeem all of the Series 2012 STAR Bonds, at a redemption price of 100% of the Series 2012 STAR Bonds Outstanding, together with accrued interest thereon to the date fixed for redemption.
Selection by Trustee of STAR Bonds To Be Redeemed. Bonds may be redeemed only in Authorized Denominations or, with respect to any Additional STAR Bonds, in such other principal amount as are specified in the Supplemental Indenture authorizing such Additional STAR Bonds; provided that Bonds to be redeemed as described above under the caption “Special Mandatory Redemption - Special Mandatory Redemption from Unexpended Proceeds in Project Fund or Escrowed Project Costs Fund” will be redeemed in increments of $5,000.
At all times that Series 2012 Bonds and Additional STAR Bonds are Outstanding, for any optional redemption as described above under the caption “Optional Redemption” and comparable optional redemption provisions of the applicable Supplemental Indenture, and for any special mandatory redemption on any Interest Payment Date as described above under the caption “Special Mandatory Redemption - Special Mandatory Redemption on Each Interest Payment Date” and comparable special mandatory redemption provisions of the applicable Supplemental Indenture, the Series 2012 Bonds shall be redeemed in full prior to any redemption of any Additional STAR Bonds.
If less than all the STAR Bonds of any maturity are to be redeemed, the particular Bonds to be redeemed will be selected by the Trustee from the STAR Bonds of such maturity which have not previously been called for redemption, by such method as the Trustee deems fair and appropriate and which may provide for the selection for redemption of portions equal to minimum Authorized Denominations (or other authorized redemption amount for the STAR Bonds of such series); provided that Bonds to be redeemed as described above under the caption “Special Mandatory Redemption - Special Mandatory Redemption from Unexpended Proceeds in Project Fund or Escrowed Project Costs Fund” will be redeemed in increments of $5,000.
Nothing contained in the Indenture prohibits the reduction of the principal amount of a STAR Bond to a principal amount less than an Authorized Denomination as a result of mandatory redemptions as described above under the caption “Special Mandatory Redemption - Special Mandatory
18 4848-0467-6625.6
Redemption from Unexpended Proceeds in Project Fund or Escrowed Project Costs Fund” provided that the original principal amount of such STAR Bond was in an Authorized Denomination.
Notice of Redemption. Unless waived by any owner of STAR Bonds to be redeemed, official notice of any such redemption will be given by the Trustee on behalf of the Issuer by mailing a copy of an official redemption notice by first class mail, at least 30 days and not more than 60 days prior to the redemption date to each registered owner of the STAR Bonds to be redeemed at the address shown on the Bond Register.
All official notices of redemption will be dated and will state: (a) the Redemption Date; (b) the Redemption Price; (c) the principal amount of STAR Bonds of the series to be redeemed and, if less than all STAR Bonds of a particular maturity of a series are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts, numbers and maturity dates) of the STAR Bonds to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such STAR Bond or portion thereof called for redemption, and that interest thereon will cease to accrue from and after said date; (e) the place where the STAR Bonds to be redeemed are to be surrendered for payment of the redemption price, which place of payment will be the principal corporate trust office of the Trustee or other Paying Agent; and (f) in the event there will be an application of credits against mandatory sinking fund installments as a result of the redemption, the effective schedule of sinking fund installments after the application of such credits.
With respect to optional redemptions, such notice may be conditioned upon moneys being on deposit with the Trustee on or prior to the Redemption Date in an amount sufficient to pay the Redemption Price on the Redemption Date. If such notice is conditional and either the Trustee receives written notice from the Issuer that moneys sufficient to pay the Redemption Price will not be on deposit on the Redemption Date, or such moneys are not received on the Redemption Date, then such notice will be of no force and effect, the Trustee will not redeem such STAR Bonds and the Trustee will give notice, in the same manner in which the notice of redemption was given, that such moneys were not or will not be so received and that such STAR Bonds will not be redeemed.
The failure of any owner of STAR Bonds to receive notice, or any defect therein, will not affect the validity of any proceedings for the redemption of any STAR Bonds. Any notice mailed as provided in the Indenture will be conclusively presumed to have been duly given and will become effective upon mailing, whether or not any owner receives such notice.
In addition to the foregoing notice, further notice will be given by the Trustee on behalf of the Issuer at least two days before the date of mailing of such notice to the registered owners by first-class, registered or certified mail or overnight delivery service or facsimile transmission to the Municipal Securities Rulemaking Board, through the Electronic Municipal Market Access system for municipal securities disclosures. Each further notice of redemption given will contain the information required above for an official notice of redemption plus (a) the CUSIP numbers of all STAR Bonds being redeemed; (b) the date of issue of the STAR Bonds as originally issued; (c) the rate of interest borne by each STAR Bond being redeemed; (d) the maturity date of each STAR Bond being redeemed; and (e) any other descriptive information needed to identify accurately the STAR Bonds being redeemed. No defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
For so long as the Securities Depository is effecting book-entry transfers of the STAR Bonds, the Trustee will provide the notices described in this Section to the Securities Depository. It is expected that the Securities Depository will, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the beneficial owners. Any failure on the part of the Securities Depository or a
19 4848-0467-6625.6
Participant, or failure on the part of a nominee of a beneficial owner of a STAR Bond (having been mailed notice from the Trustee, the Securities Depository, a Participant or otherwise) to notify the beneficial owner of the STAR Bond so affected, will not affect the validity of the redemption of such STAR Bond.
SECURITY FOR THE STAR BONDS
The Trust Estate
The Series 2012 STAR Bonds will be issued under the Indenture. Pursuant to the Indenture, the Issuer will assign and pledge to the Trustee and grant a security interest in the property described below (the “Trust Estate”):
(a) all right, title and interest of the Issuer (including, but not limited to, the right to enforce any of the terms thereof) in, to and under (i) the Revenues; and (ii) the Financing Documents; and
(b) all moneys and securities (except moneys and securities held in the Rebate Fund) from time to time held by the Trustee under the terms of the Indenture; and
(c) any and all other property (real, personal or mixed) of every kind and nature from time to time, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security under the Indenture by the Issuer or by anyone on its behalf or with its written consent, to the Trustee, which is authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms thereof.
The Trustee will hold in trust and administer the Trust Estate, upon the terms and conditions set forth in the Indenture for the equal and pro rata benefit and security of each and every owner of STAR Bonds, without preference, priority or distinction as to participation in the lien, benefit and protection of the Indenture of one Bond over or from the others, except as otherwise expressly provided therein, and for the uses and purposes and upon the terms, agreements and conditions set forth therein; provided, however; that the Trustee will apply the Revenues to the payment of principal of and interest on the STAR Bonds as set forth in the Tax Distribution Agreement. See “TAX DISTRIBUTION AGREEMENT” below.
Special Limited Obligations
General. The STAR Bonds and the interest thereon are special, limited obligations of the Issuer payable (except to the extent paid out of STAR Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate including, with respect to the STAR Bonds, the Revenues, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the STAR Bonds, as provided in the Indenture. Receipt of the State Sales Tax Revenues and the pledge of those revenues pursuant to the Tax Distribution Agreement terminates after October 2032, as does the pledge of the Issuer Sales Tax Revenues, whether or not the principal of or interest on the Series 2012 STAR Bonds has been paid in full.
The STAR Bonds and interest thereon shall not be deemed to constitute a debt or liability of the Issuer, the State or of any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the Issuer, the State or of any political subdivision thereof, but shall be payable solely from the Trust Estate. The
20 4848-0467-6625.6
issuance of the STAR Bonds shall not, directly, indirectly or contingently, obligate the Issuer, the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The State shall not in any event be liable for the payment of the principal of or interest on the STAR Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach by the Issuer of any such pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State or any charge upon its general credit or against its taxing power.
Revenues Under the Tax Distribution Agreement. State and local sales and compensating use tax revenues collected by businesses within the Redevelopment Project Area, referred to herein as the “Revenues,” are collected by the State Department of Revenue (the “Department”) and deposited with the Trustee pursuant to the Tax Distribution Agreement. See the discussion herein under the caption “REVENUES AVAILABLE FOR DEBT SERVICE.” The Revenues will be distributed to pay the scheduled debt service and special mandatory redemption of the Series 2012 STAR Bonds and any Additional STAR Bonds issued from time to time pursuant to the Indenture in the order of priority as described under the caption herein entitled “TAX DISTRIBUTION AGREEMENT.”
Debt Service Reserve Fund
The Indenture provides for the establishment of a Debt Service Reserve Fund for the STAR Bonds. Upon the issuance of the Series 2012 STAR Bonds, proceeds of the Series 2012 STAR Bonds are to be deposited into the 2012 Debt Service Reserve Account of the Debt Service Reserve Fund in a sum equal to $[______]*, the Debt Service Reserve Requirement for the Series 2012 STAR Bonds. See the section captioned “ESTIMATED SOURCES AND USES OF FUNDS.” Except as otherwise provided in the Indenture, moneys in the Debt Service Reserve Fund will be disbursed and expended by the Trustee solely for the payment of the principal of, and redemption premium, if any, and interest on the Series 2012 STAR Bonds if sufficient moneys therefor are not available in the Debt Service Fund. In the event that money on deposit in the Debt Service Reserve Fund is withdrawn to pay principal of or interest on the Series 2012 STAR Bonds, the Trustee will be required to replenish the Debt Service Reserve Fund to the Debt Service Reserve Requirement as and to the extent it receives sufficient Revenues. See “TAX DISTRIBUTION AGREEMENT,” APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – The Indenture.
Capitalized Interest Fund
The Indenture provides for the establishment of a Capitalized Interest Fund. Upon the issuance of the Series 2012 STAR Bonds, proceeds of the Series 2012 STAR Bonds in the amount of $____* are to be deposited into the 2012 Capitalized Interest Account of the Capitalized Interest Fund, to be applied to pay interest on the Series 2012 STAR Bonds.
Escrowed Project Costs Fund
The Indenture provides for the establishment of an Escrowed Project Costs Fund. Upon the issuance of the Series 2012 STAR Bonds, proceeds of the Series 2012 STAR Bonds in the amount of $____*, representing the Escrowed Project Costs Fund Requirement, are to be deposited into the Escrowed Project Costs Fund.
Moneys in the Escrowed Project Costs Fund will be available to pay debt service on the Series 2012 STAR Bonds, prior to any transfer of such moneys to the Project Fund or any application of such
* Preliminary, subject to change.
21 4848-0467-6625.6
moneys to the mandatory redemption of Series 2012 STAR Bonds as described below, as follows: If on the Business Day immediately preceding an Interest Payment Date for Outstanding Series 2012 STAR Bonds, or any other date on which the principal or interest on Series 2012 STAR Bonds is due, the amount in the 2012 Debt Service Account of the Debt Service Fund available for such payment is less than the principal amount or interest on the Series 2012 STAR Bonds due on such date, after taking into account any moneys in the 2012 Capitalized Interest Account of the Capitalized Interest Fund available for such payment, the Trustee will apply amounts from the Escrowed Project Costs Fund to the extent necessary to make good the deficiency. The Escrowed Project Costs Fund will not be replenished after any such drawing.
Moneys are eligible for release from the Escrowed Project Costs Fund prior to the Final Escrow Release Date as follows:
(a) On or about the first Business Day of the month following the month in which the Trustee receives a certificate executed by the Developer Representative and approved by the Issuer Representative to the effect that the Escrow Release Conditions - 50% Release have been satisfied, an amount equal to 50% of the amount on deposit in the Escrowed Project Costs Fund will be transferred from the Escrowed Project Costs Fund to the 2012 Project Account of the Project Fund;
(b) On or about the first Business Day of the month following the month in which the Trustee receives a certificate executed by the Developer Representative and approved by the Issuer Representative to the effect that the Escrow Release Conditions - 75% Release have been satisfied, an amount equal to (i) in the event that there has been a prior transfer of funds to the 2012 Project Account of the Project Fund pursuant to subsection (a) above, 50% of the remaining amount on deposit in the Escrowed Project Costs Fund or (ii) in the event that there has not been a prior transfer of funds to the 2012 Project Account of the Project Fund pursuant to subsection (a) above, 75% of the amount on deposit in the Escrowed Project Costs Fund, will be transferred from the Escrowed Project Costs Fund to the 2012 Project Account of the Project Fund; and
(c) On or about the first Business Day of the month following the month in which the Trustee receives a certificate executed by the Developer Representative and approved by the Issuer Representative to the effect that the Escrow Release Conditions - 100% Release have been satisfied, all amounts remaining in the Escrowed Project Costs Fund will be transferred to the 2012 Project Account of the Project Fund. In addition, on the Final Escrow Release Date, provided that the Trustee has received such certificate as to satisfaction of the Escrow Release Conditions – 100% Release, all amounts remaining in the Escrowed Project Costs Fund shall be transferred to the 2012 Project Account of the Project Fund.
The Final Escrow Release Date is May 15, 2014. If the Trustee has not received a certification on or before the Final Escrow Release Date, as described above stating that the Escrow Release Conditions – 100% Release have been satisifed. Any amounts remaining in the Escrowed Project Costs Fund on the Final Escrow Release Date, will be transferred to the 2012 Redemption Account of the Debt Service Fund and applied to the redemption of the Series 2012 STAR Bonds as described above under the caption “Special Mandatory Redemption - Special Mandatory Redemption from Unexpended Proceeds in Project Fund or Escrowed Project Costs Fund.”
22 4848-0467-6625.6
The Escrow Release Conditions are as follows:
(a) 100% Release requires (1) the Anchor is open and fully operational, (2) the Junior Anchors are open for business with aggregate retail space (fully stocked) of at least 150,000 sq. ft. and (3) at least 50,000 square footage of the Other Retailers are open for business.
(b) 75% Release requires (1) the Anchor is open and fully operational, (2) the Junior Anchors are open for business with aggregate retail space (fully stocked) of at least 150,000 sq. ft. and (3) at least 35,000 square footage of the Other Retailers are open for business.
(c) 50% Release requires (1) the Anchor is open and fully operational, (2) the Junior Anchors are open for business with aggregate retail space (fully stocked) of at least 150,000 sq. ft. and (3) at least 30,000 square footage of the Other Retailers are open for business.
The Museum is the Anchor tenant. The Junior Anchors are the retailers REI, Fresh Market, Pinstripes and Cinetopia (as described under the caption “THE PROJECT – Tenants” and in APPENDIX A – RETAIL SALES TAX REPORT). The Other Retailers are tenants, other than the Anchor and the Junior Anchors, that have signed leases with the Developer as of the date of this Official Statement, including Rock & Brews, Bar Louie*, The Club*, the Paradise Diner*, Newport Grill*, The Pub*, Wasabi Sushi Bar*, Coco Bolos KC, LLC* and Trendz, LLC*, and/or comparable retailers that have signed leases with the Developer and for which the Issuer and the Trustee have received a certificate from Development Strategies as the Consultant or from another Consultant acceptable to the Issuer, to the effect that the projected Revenues to be received from the proposed comparable retailer is not less than the projected Revenues identified in the Retail Sales Tax Report to be received from the previously identified tenant or from the spec space as shown in the Retail Sales Tax Report.
Additional STAR Bonds
The Indenture authorizes the issuance of Additional STAR Bonds on a parity (except as otherwise provided in the Indenture) with the Series 2012 STAR Bonds and any other Additional STAR Bonds at any time and from time to time, upon compliance with the conditions set forth in the Indenture (as summarized below) and in the Development Agreement, for any of the following purposes to the extent authorized under the STAR Bond Act: (1) financing any additional Costs of the STAR Bond Improvements approved by the Secretary of Commerce of the State; (2) obtaining funds for the refunding of all or a portion of any Series of STAR Bonds at the time Outstanding, regardless of whether such STAR Bonds may be prepaid, including the payment of redemption premium, if any, thereof and interest due at the designated Redemption Date; or (3) any other purpose permitted under the STAR Bond Act.
Not prior to twelve (12) months following substantial completion of Phase 1 of the Project in accordance with the Development Agreement, and following either (x) substantial completion of the Series 2012 STAR Bond Improvements as evidenced by an Officer’s Certificate of the Developer and application of any remaining funds in the 2012 Project Account of the Project Fund as described in APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – THE INDENTURE – The Project Fund – Completion of the STAR Bond Improvements or Portion Thereof,” or (y) if an event described in APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – THE INDENTURE – The Project Fund – Loss of Entitlement to Distribution of STAR Bond Proceeds,” has occurred, provided that the costs of the Series 2012 STAR Bond Improvements not paid from proceeds of the Series 2012 Bonds have been paid from
* Preliminary, subject to change.
23 4848-0467-6625.6
other sources, and application of any remaining funds in the 2012 Account of the Project Fund as described in such captioned section, Additional STAR Bonds may be issued on a parity with the Series 2012 STAR Bonds and any Additional STAR Bonds then Outstanding but only upon delivery to the Trustee of the following:
(a) a certificate of the Issuer, as of the date of issuance of such Additional STAR Bonds, demonstrating that (A) the cumulative redemptions (excluding redemptions from moneys transferred from the Project Fund or the Escrowed Project Costs Fund) of the Series 2012 STAR Bonds are not less than the projected cumulative redemptions as of such date as shown on the Projected Case 1 Redemption Schedule described herein under the caption “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS” and (B) the cumulative redemptions of any Additional STAR Bonds then Outstanding are not less than the applicable projected cumulative redemptions for such then Outstanding Additional STAR Bonds, as set forth in the Supplemental Indenture authorizing the issuance of such then Outstanding Additional STAR Bonds;
(b) a certificate of the Original Purchaser or the original purchaser of such Additional STAR Bonds, based on revenue projections (the “Revised Projected Revenues”) approved by the Issuer and prepared by a Consultant acceptable to the Issuer, the Developer and the Original Purchaser or the original purchaser of such Additional STAR Bonds, that includes a calculation showing that if not more than 100.0% of the projected revenues and assuming application of moneys (excluding any interest income thereon) in the Debt Service Reserve Fund (with moneys in each subaccount to be applied to the applicable series of the STAR Bonds) to the final payment of the Series 2012 STAR Bonds, Additional STAR Bonds Outstanding and such Additional STAR Bonds, the Series 2012 STAR Bonds, Additional STAR Bonds Outstanding and such Additional STAR Bonds will be repaid in accordance with their terms, and the Series 2012 STAR Bonds will be repaid on or before the dates shown on the Projected Case 1 Redemption Schedule described herein under the caption “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS,” and
(c) evidence satisfactory to the Trustee that the principal and interest payment dates on such Additional STAR Bonds are the same as for the Series 2012 STAR Bonds and that no Additional STAR Bonds will mature prior to the final maturity date of any Outstanding Series 2012 STAR Bonds or be subject to mandatory sinking fund redemption while any Series 2012 STAR Bonds are Outstanding.
Except as described above, the Issuer will not otherwise issue any Bonds or any other obligations on a parity with the Series 2012 STAR Bonds, but the Issuer may issue other obligations specifically subordinate and junior to the Series 2012 STAR Bonds. However, the Issuer will make no payments of either principal of or interest on said subordinate and junior obligations until the Series 2012 STAR Bonds are redeemed and paid in full.
BONDOWNERS’ RISK
The following is a discussion of certain risks that could affect payments to be made with respect to the Series 2012 STAR Bonds. Such discussion is not, and is not intended to be, exhaustive and should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Series 2012 STAR Bonds should analyze carefully the information contained in this Official Statement, including the Appendices hereto.
24 4848-0467-6625.6
THIS OFFICIAL STATEMENT IS FURNISHED SOLELY FOR THE PURPOSE OF CONSIDERATION OF AN INVESTMENT IN THE SERIES 2012 STAR BONDS BY SOPHISTICATED INVESTORS WITH THE EXPERIENCE AND FINANCIAL EXPERTISE TO UNDERSTAND AND EVALUATE THE RISKS INHERENT IN THE INVESTMENT. THE SERIES 2012 STAR BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SERIES 2012 STAR BONDS ARE NOT RATED. PURCHASE OF THE SERIES 2012 STAR BONDS WILL CONSTITUTE AN INVESTMENT SUBJECT TO SIGNIFICANT RISKS, INCLUDING THE RISK OF NONPAYMENT OF AND THE LOSS OF ALL OR PART OF THE INVESTMENT. THERE CAN BE NO ASSURANCE THAT THE REVENUES GENERATED WITHIN THE REDEVELOPMENT PROJECT AREA WILL BE SUFFICIENT TO PAY THE SERIES 2012 STAR BONDS, AND ANY ADDITIONAL STAR BONDS ISSUED FROM TIME TO TIME PURSUANT TO THE INDENTURE AND AVOID A DEFAULT ON THE SERIES 2012 STAR BONDS IN THE FUTURE.
Special, Limited Obligations
The STAR Bonds and the interest thereon are special, limited obligations of the Issuer payable (except to the extent paid out of STAR Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate including, with respect to the STAR Bonds, the Revenues, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the STAR Bonds, as provided in the Indenture.
The Series 2012 STAR Bonds and interest thereon shall not be deemed to constitute a debt or liability of the Issuer, the State or any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the Issuer, the State or any political subdivision thereof, but shall be payable solely from the Trust Estate. The issuance of the Series 2012 STAR Bonds shall not, directly, indirectly or contingently, obligate the Issuer, the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The State shall not in any event be liable for the payment of the principal of, redemption premium, if any, or interest on the Series 2012 STAR Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach by the Issuer of any such pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State or any charge upon the State or any charge upon its general credit or against its taxing power. See the discussion herein under the caption “SECURITY FOR THE STAR BONDS.”
Limited Sources of Debt Service and Factors Affecting Revenues
Overview. The payment of the Series 2012 STAR Bonds is solely dependent on the generation of sufficient Revenues to make the payments necessary to pay principal of and interest on the Series 2012 STAR Bonds together with any Additional STAR Bonds issued from time to time pursuant to the Indenture. In addition, the amount of Revenues generated will impact the amount of Series 2012 STAR Bonds redeemed on each Interest Payment Date, both as to the Projected Case 1 Redeemption Schedule, the base redemption case as described in “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS – Structuring Assumptions,” and any principal amount of Series 2012 STAR Bonds redeemed in excess of the Projected Case 1 Redemption Schedule on any Interest Payment Date. See the discussion under this caption under the subheading “Early Redemption of the Series 2012 STAR Bonds” and under the caption “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS.”
25 4848-0467-6625.6
Revenues are contingent upon and the amount generated will be affected by a variety of factors, including the following: economic conditions within the Redevelopment Project Area and the surrounding area; timely completion of construction of the Project, including in particular for the Series 2012 STAR Bonds, completion of the Retail Space to be constructed in Phase 1 of the Project and completion of the Museum; competition from other retail businesses; rental rates and occupancy rates in the Redevelopment Project Area; suitability of the Redevelopment Project Area for the local market; local unemployment, availability of transportation, neighborhood changes, crime levels in the area, vandalism, and operating costs; and interruption or termination of operation of the Museum and of retail operations in the Redevelopment Project Area as a result of fire, natural disaster, strikes or similar events, among many other factors. Revenues are also contingent upon the then applicable tax rates, and timely collection and transfer of tax revenues. As a result, it is not possible to predict with certainty the amount of Revenues which will be available in any year to pay debt service on the Series 2012 Bonds. The retail sales industry is highly competitive. Retail businesses outside of the Redevelopment Project Area, which are currently existing or which are developed after the date of this Official Statement, will be competitive with retail businesses in the Redevelopment Project Area and could have an adverse impact on the available amount of Revenues generated within the Redevelopment Project Area.
Certain Risks Related to Construction. Construction of the Project has not yet commenced. There are no retail operations of any kind in existence in the Redevelopment Project Area as of the date of issuance of the Series 2012 Bonds. The amount of Revenues generated in any year is dependent on the completion of construction of the Museum and of the Retail Space in Phase 1 of the Project and later, in Phase 2 of the Project. Any significant delay in completion of or failure to complete such phase of the Project, or any failure to obtain any required building permit, license or approval, or increased or unusual user requirements or circumstances, will impact the amount of Revenues. Construction projects are subject to cost increases and delays due to a variety of causes, including, without limitation, delay in procurement of excavation, demolition or building permits or other governmental approvals, weather, labor disputes, availability of materials or supplies, wind, fire or other casualty damages, unanticipated subsoil conditions or environmental problems, unanticipated construction difficulties and other “force majeure” occurrences or events or financial failure of or failure to perform by one or more contractor, a significant subcontractor or supplier.
The Developer is obtaining a construction loan from the Construction Lender to finance a portion of the construction of Phase 1 of the Project, with the closing of the construction loan expected to occur on or about the date that the Series 2012 STAR Bonds and the 2012 CID Bonds are issued. The estimated amount of the cost of the Project to be financed with is as described under the caption “PLAN OF FINANCE FOR THE PROJECT.” As indicated under the caption “THE MASTER FUNDING AGREEMENT,” the Trustee, the Issuer, the Construction Lender, the Developer and the Escrow Agent named therein will enter into the Master Funding Agreement, which will, among other things, provide procedures for the disbursement of the various funding sources for Phase 1 of the Project. Although it is a condition for the issuance of the Series 2012 STAR Bonds and the 2012 CID Bonds that such construction loan be in place, there is no assurance that the construction lender will fully fund the construction loan. Under Developer’s loan agreement for the construction of Phase 1 of the Project, the Developer and the guarantors of such loan are required to guarantee completion of the construction of Phase 1. As indicated below in this section and under the caption “THE PROJECT – Guaranty of Completion,” the Merrill Companies, LLC has also guaranteed completion of construction of Phase 1 in its Guaranty Agreement with the Issuer.
The Developer has entered guaranteed maximum price contracts (the “Guaranteed Maximum Price Contracts”) with McCownGordon Construction as the contractor (the “Contractor”), for the construction of the Museum and for the construction of the West End, the Museum District and a parking garage and other parking spaces (the “Phase 1 Retail Space”), as described under the caption “THE
26 4848-0467-6625.6
PROJECT – Design and Construction of Phase 1 Improvements - Construction.” Under the Guaranteed Maximum Price Contracts, the Contractor has covenanted to construct the Museum and the Phase 1 Retail Space for the respective guaranteed maximum prices by the respective guaranteed completion deadlines set forth therein.
Under the Guaranteed Maximum Price Contracts, each such guaranteed completion deadline is subject to extension if the applicable component of the Project is delayed by changes in the work agreed to or ordered by the Developer, with approvals of, as applicable, the construction lender or the Issuer. In determining the respective completion deadlines, each Guaranteed Maximum Price Contract provides for an agreed upon number of built in “bad weather” days. Any change in the applicable completion deadline must be pursuant to a change order approved by the Developer, and the Contractor must demonstrate to the reasonable satisfaction of the Developer that the delay was not due to the fault of the Contractor. Further, no change order can extend the deadline for delivery of a particular building unless the affected tenant of such building has also agreed to such change order without penalty or reduction in rent charged against the Developer unless the lease otherwise allows the extension of the delivery date due to force majeure events or unless the acts or omissions of such tenant or the Developer caused the circumstances necessitating an extension of the deadline.
Any extension of the applicable guaranteed completion deadline as to the Phase 1 Retail Space may cause the Developer to fail to have the applicable retail space for a retailer available by the time set forth in the applicable lease, which may in turn permit the applicable retailer to terminate its lease agreement with the Developer.
Like the guaranteed completion deadlines set forth in the Guaranteed Maximum Price Contracts, each guaranteed maximum price is subject to certain limitations. Delays which entitle the Contractor to an extension of the applicable guaranteed completion deadline may also entitle the Contractor to additional compensation for the delay. In addition, additional costs incurred for changes in the work requested or agreed to by the Developer will entitle the Contractor to additional compensation. Finally, latent, concealed or physical subsurface conditions which differ from the conditions the Contractor reasonably anticipated may also give rise to additional compensation to the Contractor. If the amount to be paid to the Contractor under the applicable contract exceeds the applicable guaranteed maximum price, the Developer must absorb such cost overrun, which increases the likelihood that Phase 1 of the Project will not be constructed within the amount of proceeds of the Public Financing and Private Funds available therefor to the Developer. In addition, if the Contractor incurs cost overruns for which it is not entitled to additional compensation, and the Contractor lacks the financial resources or the will to absorb such cost overruns, a delay in completing or a failure to complete the Museum or the Phase 1 Retail Space would likely occur. See “THE PROJECT – Design and Construction of the Project - Construction” for a description of the contractual provisions relating to an increase in the applicable guaranteed maximum price.
Under the Guaranteed Maximum Price Contracts, the Contractor is required to obtain surety bonds securing the completion of construction and the payment of the various subcontractors and suppliers providing goods and services with respect to the Museum and the Phase 1 Retail Space, should the Contractor fail to do so. See “THE PROJECT – Design and Construction of the Project - Construction” for a description of the Performance and Payment Bonds. Such surety bonds are subject to a number of legal limitations and customary contractual limitations, including, for example, the right of the surety to refuse to honor the performance bond to the extent the Developer has paid the Contractor more than the Contractor was contractually entitled. In addition, if the Contractor fails to complete the Museum and/or the Phase 1 Retail Space and a claim on the performance bond is made, the hiring of a new general contractor to complete the Museum and/or the Phase 1 Retail Space will likely entail delays and additional unbudgeted costs, which may or may not be covered by such bond. Finally, as with any
27 4848-0467-6625.6
surety instrument, the security offered by the performance and payment bonds is dependent on the claims paying ability of the surety.
Merrill Companies, LLC (or other entity approved by the Issuer with respect to Phase 2) (the “Guarantor”) has agreed pursuant to a Guaranty Agreement, for the benefit of the Issuer, both (a) the full and prompt completion of construction of each Phase of the Project in accordance with the Development Plan described in the Development Agreement, and (b) the performance of certain Development Agreement obligations. In the event that Developer fails to perform any of these guaranteed obligations, the Guarantor has agreed to perform or pay, as appropriate. The funds needed to complete construction are not escrowed and there is no assurance that the Developer or the Guarantor will have sufficient funds for completion. The guarantees do not run for the entire term of the Development Agreement; the guarantees terminate 3 years after the Developer completes all of the improvements for the particular Phase and 80% of the improvements for that Phase are leased and occupied by tenants who are open for business. There is no assurance that the construction of Phase 1 of the Project will be completed and any guarantees of such completion may not be enforceable.
The Issuer is not obligated to issue Additional STAR Bonds to pay any additional cost of completing such projects and has limited ability to issue Additional STAR Bonds under the STAR Bond Act and the Indenture. As indicated under the caption “SECURITY FOR THE STAR BONDS – Additional STAR Bonds,” among other things, Additional STAR Bonds cannot be issued until, among other things, cumulative redemptions of Series 2012 STAR Bonds at least equal the Projected Case 1 Redemption Schedule. See “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS” for a description of the Projected Case 1 Redemption Schedule.
As described under “PLAN OF FINANCE FOR THE PROJECT,” pursuant to the Development Agreement, if private funding sources are not sufficient to meet the applicable Percentage Limitation on either July 15, 2013 or January 15, 2014, the Percentage Limitation Dates, the Issuer may withhold further disbursement of proceeds of the Series 2012 STAR Bonds or the Series 2012 CID Bonds to pay the applicable Project costs unless and until the Developer demonstrates to the Issuer that it has spent enough Private Funds to satisfy the Percentage Limitation. As described under “MASTER FUNDING AGREEMENT – Disbursements,” a disbursement procedure has been established for the disbursement of the various public and private funding sources, and no Series 2012 STAR Bond proceeds will be used to pay project costs unless the Developer and the Construction Lender have provided funds as contemplated by the Indenture, the Development Agreement and the construction loan documents.
Even if Phase 1 of the Project is completed, there is no assurance that the construction of a particular Retail Space will be completed in time to satisfy the completion and opening date requirements set forth in the tenant lease agreement for such Retail Space. If a retail lease is terminated because of a failure by the Developer to have the space ready in time, additional time may be required for the Developer to locate a replacement tenant and to enter into a lease agreement with such tenant. In the event that a retailer does not open for business as scheduled, there may be delays in the receipt of Revenues.
Under the Indenture, a portion of the proceeds of the Series 2012 STAR Bonds have been deposited into the Escrowed Project Costs Fund. As described under the caption “SECURITY FOR THE STAR BONDS – Escrowed Project Costs Fund,” the Developer must satisfy the conditions for release by no later than the Final Escrow Release Date. Amounts in the Escrowed Project Costs Fund which are not eligible for transfer to the Project Fund by such date will be transferred to the 2012 Redemption Account of the Debt Service Fund and applied to the mandatory redemption of Series 2012 Bonds as described under the caption “THE SERIES 2012 STAR BONDS – Redemption Provisions – Special Mandatory Redemption - Special Mandatory Redemption from Unexpended Proceeds in
28 4848-0467-6625.6
Project Fund or Escrowed Project Costs Fund.” In the event that any Series 2012 STAR Bonds are redeemed from funds transferred from the Escrowed Project Costs Fund to the 2012 Redemption Account of the Debt Service Fund, the Developer will be obligated to either find a replacement private source for such funding amount or lower the Project cost accordingly.
Although the Retail Sales Tax Report indicates that the expected Revenues from the tenants who have signed or are expected to sign leases for Phase 1 Retail Space will support payment of debt service on the Series 2012 STAR Bonds whether or not Phase 2 of the Project is ever completed, any delay in the construction of Phase 2 may have a significant adverse impact upon the Project generally.
For more information on matters related to construction within the Redevelopment Project Area, see the discussion herein under the caption “THE PROJECT.”
Financial Feasibility. The amount of Revenues generated in each year and the financial feasibility of the Project depends in part upon completion of construction, leasing, operation and retention of retailers to achieve and then to maintain substantial retail sales throughout the term of the Series 2012 STAR Bonds. There is no guarantee that the Redevelopment Project Area will be occupied by retailers or that specific retailers will open, continue to occupy and remain open within the Redevelopment Project Area for the term of the Series 2012 STAR Bonds. Any covenants by retailers or others to open or operate within the Redevelopment Project Area may not be enforceable or may be dependent on other tenants who fail to open. Failure to maintain adequate occupancy and rental levels or retail space could impair the ability of the Developer and certain of the retail businesses to pay operating expenses and debt service on financing for such projects, resulting in foreclosure or change in ownership or use. See the discussion herein in APPENDIX A – RETAIL SALES TAX REPORT.
Competition. The Project faces competition for sales (which, in turn, generate sales tax revenues) from other shopping centers, strip centers, and freestanding retailers located in the greater Kansas City metropolitan area. The Retail Sales Tax Report has identified certain destination lifestyle and entertainment districts, including Country Club Plaza, Town Center Plaza, Park Place, One Nineteen, Zona Rosa, Kansas City Power and Light District, Corbin Park Shopping Center and The Legends at Village West, as competitors for the Project. Other centers in the market area may be possible competitors of the Redevelopment Project Area and new competitors may be developed. In addition, competition between retailers within the Redevelopment Project Area could cause the failure of other retailers within the Redevelopment Project Area. Such competition within and without the Redevelopment Project Area could adversely affect the ability of the Redevelopment Project Area to generate Revenues in each year in amounts sufficient to pay principal of and interest on the Outstanding STAR Bonds on a timely basis or at all. See a discussion of competition for the Redevelopment Project Area see the captions “RETAIL SALES TAX REPORT” and APPENDIX A – RETAIL SALES TAX REPORT.
Changes to State and Local Tax Rates. The Kansas legislature has the authority to amend the provisions of State law governing the sales and use taxes imposed within the Redevelopment Project Area. As indicated under “REVENUES AVAILABLE FOR DEBT SERVICE – Tax Rates,” the State sales and use tax rate has been amended several times since the inception thereof. The local sales and use taxes may be amended or repealed by the Issuer, the county or voter referendum. Changes to the tax base and exemptions could affect the amount of Revenues available for payment of the Outstanding STAR Bonds. Any change in the current system of collection and distribution of sales taxes in the State, including without limitation the reduction or elimination of any such tax, judicial action concerning any such tax or voter initiative, referendum or action with respect to any such tax, would likely affect the amount of Revenues generated in any year and could adversely affect the availability of Revenues in any year in amounts sufficient to pay the principal of and interest on the Outstanding STAR Bonds. There
29 4848-0467-6625.6
can be no assurance that the current system of collection and distribution of sales taxes will not be changed by any competent authority having jurisdiction to do so, including without limitation the State, the Issuer, the courts or the voters. See the discussion herein under the caption “REVENUES AVAILABLE FOR DEBT SERVICE.”
Damage or Destruction of the Retail Businesses. The partial or complete destruction of any retail business within the Redevelopment Project Area as a result of fire, natural disaster or similar casualty event, or the temporary or permanent closing of one or more retail businesses due to strikes or business failure, would adversely affect the amount of Revenues generated within the Redevelopment Project Area in the years affected. Due to the concentration of Revenues projected to be generated by large taxpayers within the Redevelopment Project Area the damage or destruction of such retail businesses, even for a short amount of time, could have a substantial impact on the amount of Revenues generated during the affected time period.
Changes in Economic and Demographic Conditions. Sales tax revenues historically have been sensitive to changes in local, regional and national economic conditions. For example, sales tax revenues have historically declined during economic recessions, when high unemployment adversely affects consumption. Demographic changes in the population of the market area for the Redevelopment Project Area may adversely affect the level of sales tax revenues. A decline in population, or reductions in the level of tourism in the market area, could reduce the number and value of taxable transactions and thus reduce the amount of sales tax revenues. It is not possible to predict whether or to what extent any such changes in economic conditions, demographic characteristics, population or commercial and industrial activity will occur, and what impact any such changes would have on Revenues.
Pursuant to its Continuing Disclosure Agreement, the Issuer has covenanted to make available annual information regarding Revenues deposited in the Escrow Fund under the Tax Distribution Agreement. Due to the confidentiality of sales tax information under State law the Issuer will not be permitted to disclose the aggregate Revenues generated from the retailers within the Redevelopment Project Area unless they are generated by five or more taxpayers. See the discussion herein under the caption “REVENUES AVAILABLE FOR DEBT SERVICE - Confidentiality of Tax Information.” The Issuer has agreed in its Continuing Disclosure Agreement to provide certain information with respect to taxpayers doing business on the Issuer Retained Parcels and the Revenues generated by such taxpayers as provided in the Continuing Disclosure Agreement. See APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENTS.
Change to Plans. The Redevelopment Project Plan, the Development Agreement, the plans and specifications for Phase 1 of the Project, the Guaranteed Maximum Price Contracts and other documents contemplate the construction of Phase 1 of the Project as described herein. However, in the event of cicumstances not presently anticipated, including but not limited to such things as an economic downturn, a bankruptcy of the Developer, a loss of construction financing and other events which result in the current plans not being commercial feasible, there may be significant modifications to the plans for Phase 1 of the Project and resultant changes to the anticipated Revenues projected to be available to pay debt service on the Series 2012 Bonds.
Retail Sales Tax Report and Development Strategies Projections
The projected annual Revenues contained in the Retail Sales Tax Report and included or reflected in this Official Statement are based on various assumptions concerning facts and events over which the Issuer has no control. No representation or warranty is or can be made about the amount or timing of any future income, loss, occupancy, valuation, increased assessment or revenues, or that actual results will be consistent with the Retail Sales Tax Report or with the Revenue projections contained therein.
30 4848-0467-6625.6
The information in the Retail Sales Tax Report is based on various assumptions, estimates and opinions. There is no assurance that actual events will correspond with the projections or the assumptions, estimates and opinions on which they are based.
The Retail Sales Tax Report is forward-looking and involves certain assumptions and judgments regarding future events. Although the Retail Sales Tax Report is based on currently available information, it is also based on assumptions about the future state of the national and regional economy and the local real estate markets as well as assumptions about future actions by various parties, which cannot be assured or guaranteed. The Retail Sales Tax Report is not a prediction or assurance that a certain level of performance will be achieved or that certain events will occur. The actual results will vary from the Retail Sales Tax Report, and the variations may be material. Prospective bondowners should read the Retail Sales Tax Report carefully and form their own opinions about the validity and reasonableness of such assumptions. See the discussion herein under the caption “RETAIL SALES TAX REPORT” and APPENDIX A – RETAIL SALES TAX REPORT.
Concentration of Revenues - Largest Taxpayers
The Retail Sales Tax Report projects that certain retailers will be among the largest taxpayers of Revenues within the Phase 1 portion of the Redevelopment Project Area throughout the term of the Series 2012 STAR Bonds. The Phase 1 Retail Space in which these projected retailers will be located has not yet been constructed and none of these retailers is currently open for business. The concentration of a substantial portion of the actual and projected sales activity in the Redevelopment Project Area in a small number of retailers increases the risk from factors which may impact the construction, operations or sales activity of the largest taxpayers. The damage or destruction, closing of business, changes in business operations, and many other factors which adversely affect sales of a retail business, could impact one or more large taxpayers and would have a substantial adverse impact on the availability of Revenues in the years impacted. See the discussion herein under the captions “RETAIL SALES TAX REPORT” and APPENDIX A – RETAIL SALES TAX REPORT.
Limited Collateral: No Pledge of any Portion of the Project
The payment of the Series 2012 STAR Bonds is not secured by an encumbrance, mortgage, security interest or other pledge of any of the property in the Redevelopment Project Area or any other property of the Developer. Therefore, in the event of a default, the Trustee will not have the ability to sell the Project or any portion thereof to retire the Series 2012 STAR Bonds nor look to the Developer or to any other asset or collateral to secure repayment of the Series 2012 STAR Bonds. Further, no property of the Issuer (other than the Revenues) shall be liable to be forfeited or taken in payment of the Series 2012 STAR Bonds. See “SECURITY FOR THE STAR BONDS – Special, Limited Obligations.”
Additional STAR Bonds
The Indenture authorizes the issuance of Additional STAR Bonds which can be issued as upon satisfaction of the requirements of the STAR Bond Act and the Indenture. See the caption herein “SECURITY FOR THE STAR BONDS - Additional STAR Bonds.” Revenues will be used to pay scheduled principal and interest, redemptions and deposits to Debt Service Reserve Accounts with respect to any Additional STAR Bonds on a parity basis with the Series 2012 STAR Bonds. The issuance of Additional STAR Bonds will reduce the Revenues available to pay the Series 2012 STAR Bonds.
31 4848-0467-6625.6
Priority Fees
Pursuant to the Tax Distribution Agreement, the fees of the Trustee, Dissemination Agents, any third party monitor that provides support services to the Dissemination Agent, and Rebate Analyst are payable from the Revenues prior to payment of the Outstanding Bonds. The Projected Case 1 Redemption Schedule and the other redemption scenarios set forth under the caption “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS” assume that such fees will not exceed $10,500 in any calendar year. Increases in the amounts of such fees will decrease Revenues available to pay scheduled principal and interest, redemptions and deposits to Debt Service Reserve Accounts in the order of priority as provided in the Tax Distribution Agreement and will reduce the Revenues available to pay the Series 2012 STAR Bonds. In the Issuer Continuing Disclosure Agreement, the Issuer has agreed to disclose any increase in the aggregate amount of such fees over the $10,500 assumed amount.
Legal Matters; Future Changes in the Law
Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Series 2012 STAR Bonds. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the Issuer or the Series 2012 STAR Bonds.
There can be no assurance that the Kansas state legislature will not enact legislation that will amend the laws governing the imposition of sales and compensating use taxes and the applicable tax rates or other laws or the Constitution of the State of Kansas resulting in a reduction of sales tax revenues, and consequently, an adverse effect on the Revenues otherwise available to pay the debt service on the Series 2012 STAR Bonds. See “Limited Sources of Debt Service and Factors Affecting Revenues – Changes to State and Local Tax Rates” above.
Forward-Looking Statements
Certain statements included in or incorporated by reference in this Official Statement that are not purely historical are “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended, and reflect current expectations, hopes, intentions or strategies regarding the future. Such statements may be identifiable by the terminology used such as “project,” “plan,” “expect,” “estimate,” “budget,” “intend,” “anticipate” or other similar words.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS, INCLUDED IN SUCH RISKS AND UNCERTAINTIES ARE (I) THOSE RELATING TO THE POSSIBLE INVALIDITY OF THE UNDERLYING ASSUMPTIONS AND ESTIMATES, (II) POSSIBLE CHANGES OR DEVELOPMENTS IN SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY CIRCUMSTANCES, AND (III) CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD PARTIES, INCLUDING CUSTOMERS, SUPPLIERS, USERS, BUSINESS PARTNERS AND COMPETITORS, AND LEGISLATIVE, JUDICIAL AND OTHER GOVERNMENTAL
32 4848-0467-6625.6
AUTHORITIES AND OFFICIALS. ASSUMPTIONS RELATED TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE, AND MARKET CONDITIONS AND FUTURE BUSINESS DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY. FOR THESE REASONS, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENT WILL PROVE TO BE ACCURATE.
UNDUE RELIANCE SHOULD NOT BE PLACED ON FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENT ARE BASED ON INFORMATION AVAILABLE ON THE DATE HEREOF, AND THE ISSUER ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS IF OR WHEN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR OR FAIL TO OCCUR, OTHER THAN AS INDICATED UNDER THE CAPTION “CONTINUING DISCLOSURE.”
Availability of Debt Service Reserve Fund
At the time of issuance of the Series 2012 STAR Bonds, the Debt Service Reserve Fund will be funded from proceeds of the Series 2012 STAR Bonds in the amount of the Debt Service Reserve Requirement for the Series 2012 STAR Bonds. There can be no assurance that the amounts on deposit in the Debt Service Reserve Fund, if needed for payment of the Series 2012 STAR Bonds, will be available in the full amount of the Debt Service Reserve Requirement for the Series 2012 STAR Bonds, because (1) the market value of the securities in which such funds are invested may have declined or (2) funds may previously have been transferred from the Debt Service Reserve Fund to the account in the Debt Service Fund for the Series 2012 STAR Bonds; and in any such case sufficient amounts may not be available in the Revenue Fund to replenish the Debt Service Reserve Fund to the Debt Service Reserve Requirement for the Series 2012 STAR Bonds.
Tax-Exempt Status of the Series 2012 STAR Bonds
The exclusion from federal gross income of interest on the Series 2012 STAR Bonds is based on the continued compliance by the Issuer with certain covenants relating generally to restriction on use of the STAR Bond Projects financed with proceeds of the Series 2012 STAR Bonds, arbitrage limitations, and rebate of certain excess investment earnings to the federal government. Failure to comply with such covenants could cause interest on the Series 2012 STAR Bonds to become subject to federal income taxation retroactive to the date of issuance. The Series 2012 STAR Bonds are not subject to redemption solely as a consequence thereof. No additional interest or penalty is payable under the terms of the Indenture in the event of the taxability of interest on the Series 2012 STAR Bonds. See the discussion herein under the caption “TAX MATTERS.”
Enforceability of Remedies
The remedies available to the Trustee, the Issuer and the holders of the Series 2012 STAR Bonds upon an event of default under the Indenture are in many respects dependent upon judicial actions that are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically the United States Bankruptcy Code, the remedies specified by the Indenture may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2012 STAR Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by principles of equity and by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the rights of creditors generally.
33 4848-0467-6625.6
See APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – The Indenture.
Lack of Rating and Market for the Series 2012 STAR Bonds, Restrictions on Transferability
The Series 2012 STAR Bonds have not received a credit rating by any rating agency. The absence of a rating could affect the ability of owners of the Series 2012 STAR Bonds to sell their Bonds or the price at which their Bonds can be sold. No assurance can be given that a secondary market for the Series 2012 STAR Bonds will develop following the completion of the offering of the Series 2012 STAR Bonds. Series 2012 STAR Bond purchasers must be Approved Investors, and each Series 2012 STAR Bond purchaser that is an Individual Accredited Investor must provide an investment letter until such time as the conditions for release of moneys from the Escrowed Project Costs Fund set forth under the definition of “Escrow Release Conditions – 100% Release” have been satisfied in full, as described under the caption “THE SERIES 2012 STAR BONDS – Bondowner Restrictions.” The Series 2012 STAR Bonds are not readily liquid, and no person should invest in the Series 2012 STAR Bonds with funds such person may need to convert readily into cash. Bondowners should be prepared to hold their Series 2012 STAR Bonds to the stated maturity date. The Underwriter will not be obligated to repurchase any of the Series 2012 STAR Bonds, and no representation is made concerning the existence of any secondary market for the Series 2012 STAR Bonds. No assurance can be given that any secondary market will develop following the completion of the offering of the Series 2012 STAR Bonds and no assurance can be given that the initial offering price for the Series 2012 STAR Bonds will continue for any period of time.
Early Redemption of the Series 2012 STAR Bonds
Revenues derived from the Redevelopment Project Areas in excess of the amount required to pay rebate, if any, to the United States of America, to pay interest on the Series 2012 STAR Bonds as and when due, to restore any deficiency in the Debt Service Reserve Fund and to pay certain fees and expenses, are available for the purpose of redeeming Series 2012 STAR Bonds prior to maturity on each Interest Payment Date pursuant to the special mandatory redemption provisions described in this Official Statement. See “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS – Structuring Assumptions.” In addition, Revenues from Phase 2 of the Project, when and if such Phase 2 is constructed, will be applied first to the special mandatory redemption of the Series 2012 Bonds in full as described herein under the caption THE SERIES 2012 STAR BONDS – Redemption Provisions – Special Mandatory Redemption - Special Mandatory Redemption on Each Interest Payment Date” before being applied to the special mandatory redemption of any Additional STAR Bonds. Because Phase 2 of the Project has not yet commenced, no assumptions can be made as to the additional amount of Revenues that may be generated within the Redevelopment Project Area from Phase 2. It is not possible to determine the actual amount of Revenues that will be generated within the Redevelopment Project Area and the assumptions regarding the amount of such revenues available for redemptions of the Series 2012 STAR Bonds prior to maturity are based on the Retail Sales Tax Report and the Structuring Assumptions. Purchasers of the Series 2012 STAR Bonds should bear in mind that such redemption features could affect the price of the Series 2012 STAR Bonds in the secondary market. See “THE SERIES 2012 STAR BONDS – Redemption Provisions – Special Mandatory Redemption - Special Mandatory Redemption on Each Interest Payment Date,” “REVENUES AVAILABLE FOR DEBT SERVICE – Tax Rates,” “RETAIL SALES TAX REPORT,” “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS” and APPENDIX A – RETAIL SALES TAX REPORT.
34 4848-0467-6625.6
In Summary
THE FOREGOING STATEMENTS REGARDING BONDOWNERS’ RISKS SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN A DECISION TO PURCHASE THE SERIES 2012 STAR BONDS. Prospective purchasers of the Series 2012 STAR Bonds should analyze carefully the information contained in this Official Statement (including the Appendices hereto) and additional information in the form of the complete documents summarized herein, copies of which are available and may be obtained from the Underwriter.
THE PROJECT
Overview
As indicated above under the caption “SUMMARY OF THE PROJECT,” the Project being developed by the Developer is designed to be an integrated urban village with a mix of retail, museum, office, hotel and residential uses. The Project is being constructed and completed in two phases; Phase 1 of the Project is the subject of the current financing.
As indicated, Phase 1 of the Project will include the Museum, the approximately 213,000 square feet of Phase 1 Retail Space, approximately 300 Residential Units (the “Phase 1 Residential Units”), the Wetlands (except for the Timber Bridge), a portion of the Trail, the Sunflower Garden, the Butterfly Garden and a portion of the Parking Improvements, including a parking garage. The retail space being constructed in Phase 1 of the Project includes the West End and the Museum District described below, as indicated on the map on p. [7] and in the Retail Sales Tax Report. The West End contains approximately 9 acres located on the southeast corner of West 135th Street and Lamar Avenue intersection. This area is projected to include approximately 58,000 square feet of retail space. The Museum District contains approximately 26 acres located on the southwest corner of the intersection of West 135th Street and Nall Avenue. This area is projected to include approximately 155,000 square feet of retail space, the Museum and approximately 300 multi-family Residential Units.
The anticipated tenants in each area and status of leases are described in the table below.
Merrill Companies, LLC and Its Principals
MCP I, the Developer of Phase 1 of the Project, is an affiliate of Merrill Companies, LLC. Merrill Companies, LLC was founded in 2000 by Fred L. Merrill, Jr. Merrill Companies, LLC provides a broad range of commercial real estate services to clients through development, management, brokerage and consulting. The firm’s experience in multiple markets across the country with varying degrees of volatility provides a base of knowledge for real estate development, brokerage and management practices. Merrill Companies is structured to provide the flexibility to evaluate and take advantage of market opportunities as they arise, while remaining focused on the firm’s core competencies and client services at a variety of levels. Through Merrill Commercial Realty the firm’s experienced professionals successfully represent clients for new or expanded retail locations and office facilities. Merrill Companies is one of the few local accredited Accredited Management Organizations (AMO®).
Fred L. Merrill, Jr., President of Merrill Companies, LLC, has been actively involved in the commercial real estate business for over 35 years. After receiving a Bachelor of Science degree majoring in Political Science from Kansas State University, he graduated with a real estate and finance M.B.A. from Southern Methodist University in Dallas, Texas. His initial entrance into the commercial real estate business was in the mortgage banking area where he arranged permanent financing, construction loans,
35 4848-0467-6625.6
equity placement and joint venture agreements in Dallas. Over his entire career, Mr. Merrill has arranged financing for or developed over 4,000,000 square feet of office buildings, mixed-use, retail, industrial and multi-family projects. Development supervision responsibilities also included site and architectural design, the entitlements process, and construction contract negotiation and administration. Mr. Merrill directed the marketing, leasing and management efforts for all projects and has extensive experience on either side of a real estate transaction. He is a member of the Urban Land Institute, and currently serves on the Urban Land Institute’s Entertainment Development Council. Mr. Merrill served as Chairman of the 2011 Overland Park Economic Development Council. In 2009 he was named the Kansas State University College of Business Advisory Council ‘Business Leader of the Year. He has been an active member of the National Association of Office and Industrial Properties, Building Owners and Managers Association, International Council of Shopping Centers, and various civic organizations including the Juvenile Diabetes Research Foundation and Children’s Mercy Hospital. He maintains real estate broker licenses for the states of Arizona and Kansas, as well as brokerage associations with companies in several other states.
Richard A. Napper, Executive Vice President of Merrill Companies, LLC, joined the firm in 2002. Mr. Napper is integrally involved in the financing and equity structure of Merrill Companies projects. He has supervised and documented construction and permanent loan transactions as well as acquisition contracts for retail, office and land investments since joining Merrill Companies. Prior to joining Merrill Companies, Mr. Napper worked for Artemis Realty Group in Phoenix, Arizona. While with Artemis, Mr. Napper supervised the financing and structuring of project level and corporate level debt and equity. Projects of note while with Artemis include Camelback Centre, a 246,000 square foot Class A office project at 24th & Camelback, in the center of the Camelback Corridor in Phoenix, Arizona; the renovation of Camelsquare Office Park, a 300,000 square foot office project at 44th Street & Camelback Road in the Camelback Corridor; and 1899 Pennsylvania Avenue, a 186,000 square foot office project located at the northeast corner of 19th Street and Pennsylvania Avenue in downtown Washington, D.C. Prior to joining Artemis, Mr. Napper’s background was centered on mortgage finance. While affiliated with WMF Robert C. Wilson and State Savings Bank in the Phoenix area, he originated in excess of $300,000,000 of commercial real estate loans. His duties also included supervising the disposition of the State Savings Bank REO portfolio. Mr. Napper graduated from Southern Methodist University in 1992 with a B.B.A. degree majoring in Finance, Real Estate and Urban Land Economics. He is a licensed Arizona and Kansas Real Estate Agent and a member of NAIOP and ICSC, and in 2007, Mr. Napper was recognized by Ingram’s, Kansas City’s Business Magazine, as one of forty local individuals under the age of 40, for his leadership and accomplishments.
Chris McIntyre, CPM®, RPA, joined Merrill Companies in 2007 as Executive Vice President. Mr. McIntyre oversees the operation of Merrill Companies’ commercial portfolio, coordinates the activities of the commercial property management staff and oversees the financial services for management activities. He also plays a key role in both the analysis of investment assets and in Merrill Companies’ investment funds. Mr. McIntyre has managed extensive portfolios owned by numerous local owners and national institutions over the past two decades. He has acquired significant management experience in all phases of commercial real estate including office, retail, industrial and facilities management. Before joining Merrill Companies, Mr. McIntyre was the Senior Vice President of NAI Cohen-Esrey and Director of Property Management for a midwest development company, where he also gained experience in building construction management. During his time at NAI Cohen-Esrey, his commercial management portfolio peaked at 10,000,000 square feet of space. Mr. McIntyre holds both the Certified Property Manager designation from the Institute of Real Estate Management and Real Property Administrator designation from the Building Owners and Managers Association. He is past president of the Kansas City IREM chapter and was chosen to serve on several national IREM steering committees. He is also past Chairman of the NAI Global Property Management Council representing over 300 million feet of managed assets. Mr. McIntyre holds a Bachelor of Arts degree in sociology from the
36 4848-0467-6625.6
University of Western Ontario and a Master of Arts degree in sociology from the University of Missouri at Kansas City. He is a member of the Metropolitan Kansas City Board of Realtors, holds broker’s licenses in Kansas and Missouri and is a member of ICSC.
Merrill Companies, LLC, together with UCR Urban, a division of United Commercial Realty, has responsibilities for the leasing and management of the Project as indicated below under the caption “Leasing and Management of the Project.”
As required by the Development Agreement, Merrill Companies, LLC has entered into a Guaranty Agreement for the benefit of the Issuer, providing for both (a) the full and prompt completion of construction of Phase 1 of the Project in accordance with the Development Plan described in the Development Agreement, and (b) the performance of certain Development Agreement obligations. See “Guaranty of Completion” below.
The Developer
MCP I is the single purpose entity formed to act as developer of Phase I of the Project, which will include, among other roles, acting as borrower under the construction loan and lessor of the improvements to commercial tenants. MCP I has entered into a Management Agreement with Merrill Companies, LLC for the management of the Phase 1 Retail Space and thus will benefit from the significant commercial real estate experience of the Merrill Companies, LLC, as discussed under the caption “Leasing and Management of the Project.”
Ground Lease
Substantially all of the real property in the Redevelopment Project Area is currently owned by MCP, an affiliate of the Developer and of Merrill Companies, LLC. MCP will enter into a Ground Lease with the Developer for the property being developed by the Developer in Phase 1 of the Project for the purposes set forth above. Upon substantial completion of the Museum, MCP will convey title to the Museum to the Museum Owner and such property will be removed from the Ground Lease.
Design and Construction of Phase 1 Improvements
Design. The Developer has entered into an agreement with Rees Masilionis Turley Architecture, LLC and with Field Paoli for the design of the Phase 1 Retail Space. Rees Masilionis Turley Architecture, LLC was founded in 1990 and is a full service design firm based in Kansas City, Missouri. Field Paoli was founded in ___ and is a ___ firm based on San Francisco, California. The Phase 1 Retail Space design agreement provides for the design of the commercial buildings, certain building pad sites and site design of streets and perimeter.
The Developer has entered into an agreement with Verner Johnson for the design of the Museum. Verner Johnson was founded in ____ and is a ______firm based on Boston, Massachusetts. The Museum design agreement provides for the design of the Museum, including all of the spaces therein for exhibitions, Discovery Room, gift shop, café, offices and adminstrative services and other Museum components. The Museum design agreement also provides for the general site development adjacent to the building, including outdoor park, terraces, wetlands and exhibit areas.
Construction. The Developer has entered into two guaranteed maximum price contracts (the “Guaranteed Maximum Price Contracts”) with McCownGordon Construction, LLC as the contractor (the “Contractor”), one for the construction of the Museum and the other for the construction of the Phase 1
37 4848-0467-6625.6
Retail Space and a parking garage. Founded in 2001 by Pat McCown and Brett Gordon, McCownGordon has become the regions’s third largest contractor.
The Guaranteed Maximum Price ContRact for the Phase 1 Retail Space provides for the applicable sitework and the construction of the West End buildings and shell work and for the Museum District buildings and parking structures. The Guaranteed Maximum Price Contract for the Museum provides for the applicable sitework and the construction of the Museum. EachContract sets out a guaranteed maximum price for the applicable work, subject to additions and deductions by change order as provided therein. Each Guaranteed Maximum Price Contract provides for an allocation of savings between the Developer and the Contractor in the event that the final cost is less than the guaranteed maximum price by a specified amount. Each Guaranteed Maximum Price Contract provides that Adjustments to the guaranteed maximum price on account of changes in the work described tehrein may be determined by the applicable AIA Document methods, provided that there may be no increase in the Developer’s financing of the cost of the applicable work and project without the approval of any construction lender or the Issuer with respect to the Developer’s financing of the cost of such work and project if such approval is required by the applicable agreement between the Developer and the construction lender or Issuer. There is not an agreement between the Developer and the Issuer that requires such approval. There [is] [is not] an agreement between the Developer and the construction lender that requires such approval.
See “BONDOWNERS’ RISKS - Limited Sources of Debt Service and Factors Affecting Revenues – Certain Risks Relating to Construction” for a description of the provisions of the Guaranteed maximum Price Contracts relating to the completion deadline and construction delays.
Surety Bonds. The Contractor is required to procure and furnish a performance bond and a payment bond in an amount equal to 100% of the contract sum as described in each Guaranteed Maximum Price Contract, as well as adjustments to the contract sum. The performance bond will secure and guarantee the Contractor’s faithful performance of the applicable work, including the Contractor’s obligation to correct defects after final payment has been made. The payment bond will secure and guarantee payment of all persons performing labor on the applicable project and furnishing materials in connection with the applicable Guaranteed Maximum Price Contract.
38 4848-0467-6625.6
Phase 1 Construction Schedule. The following table sets out the anticipated construction schedule for Phase 1 of the Project.
Schedule
Final Final Permit Permit Construction Shell Occupancy Project Plan Plan Submittal Receipt Commencement Delivery Submittal Approval Date Grading N/A N/A 10/15/12 11/15/12 N/A N/A N/A West Site 8/29/12 10/22/12 11/5/12 12/17/12 N/A N/A N/A Development REI 8/29/12 10/22/12 11/5/12 12/17/12 December 2012 May 2013 October 2013 Fresh Market 8/29/12 10/22/12 11/5/12 12/17/12 December 2012 May 2013 October 2013 Bldg 3 10/31/12 12/17/12 1/7/13 2/15/13 February 2013 July 2013 October 2013 East Site 10/31/12 12/17/12 1/7/13 2/15/13 N/A N/A N/A Development Cinetopia 12/5/12 1/28/13 2/4/13 3/12/13 March 2013 N/A March 2014 Garage/Bar 10/31/12 12/17/12 1/7/13 2/15/13 February 2013 September March Louie 2013 2014 Pinstripes 12/5/12 1/28/13 2/4/13 3/12/13 March 2013 September March 2013 2014 Bldg 21, 22, 10/31/12 12/17/12 1/7/13 2/15/13 March 2013 September March 23 2013 2014 Museum 10/3/12 12/3/12 1/7/13 2/15/13 February 2013 February March Core & Shell 2014 2014 Wetlands 10/31/12 12/17/12 1/7/13 1/15/13 N/A N/A N/A
Guaranty of Completion
As indicated under the caption “Merrill Companies, LLC” above, Merrill Companies, LLC has guaranteed, among other things, the completion of Phase 1 of the Project pursuant to its Guaranty Agreement with the Issuer. Further, as indicated under the caption “BONDOWNERS’ RISKS – Limited Sources of Debt Service and Factors Affecting Revenues – Certain Risks Relating to Construction,” under Developer’s loan agreement for the construction of Phase 1 of the Project, the Developer and the guarantors of such loan are required to guarantee completion of the construction of Phase 1. See APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING AGREEMENT – Guaranty Agreement.
Museum
The Museum will be constructed by the Contractor on land owned by MCP pursuant to the Museum Guaranteed Maximum Price Contract between the Contractor and the Developer. Within 60 days after substantial completion of the Museum, title to the Museum will be transferred to the Museum Owner. The Issuer and the Museum Owner will enter into the Museum Operation Agreement, which provides the Issuer with a direct contractual relationship with the Museum Owner, which will be the owner and operator of the Museum after it is completed by the Developer.
39 4848-0467-6625.6
The language for most of the covenants in Museum Operation Agreement track very closely with the corresponding operational provisions in the Development Agreement, as described in APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS – The Development Agreement. However, there are key differences, including the following: The Museum Owner agrees that if the American Museum of Natural History (referred to herein as “AMNH”) terminates or does not at any point renew its agreement with the Museum Owner, the Museum Owner is obligated to use best efforts to secure a substantially similar contractual agreement to provide exhibits for the Museum with a similar institution or educational facility, and the Issuer has a right to reasonably approve any such substitute agreement. The Museum Owner also agrees to report to the Issuer on an annual basis about the operation of the Museum, its visitation numbers and the ongoing relationship with AMNH. (Similar reporting requirements are contained in the Museum Owner Continuing Disclosure Agreement.) Also, upon a request from the Issuer, the Museum Owner will arrange a meeting with the administrative officers for AMNH in New York City to talk about the ongoing relationship between the parties.
Leasing and Management of the Project
Merrill Companies, LLC and UCR Urban, a division of United Commercial Realty, are handling all leasing for the Project, and Merrill Companies, LLC will serve as the Manager for the Phase 1 Retail Space pursuant to a Management Agreement with the Developer.
Tenants
West End. The Developer has signed leases with two retailers in the West End, including a lease for the approximately 23,978 square foot national outdoor retailer REI and a lease for approximately 24,803 square foot The Fresh Market grocery store. REI and Fresh Market are identified as Junior Anchors under the Indenture. Tenants have not been identified for approximately 9,084 square feet of retail space in the West End. This portion of Phase I is projected to be open in the fall of 2013.
Museum District. The Museum District will be anchored by the Museum, and will have two Junior Anchors. Cinetopia, an approximately 75,398 square foot movie theater with restaurant and wine bar, and Pinstripes (an approximately 32,335 square foot bowling, bocce ball, restaurant and event venue). In addition, other restaurants/bars are to be built, including the following as of the date of this Official Statement: Rock and Brews (5,453 square feet), The Pub* (6,691 square feet), Paradise Diner* (2,627 square feet), Newport Grill* (4,500 square feet), The Club* (7,869 square feet) and Bar Louie* (6,025 square feet), Wasabi Sushi Bar Eleven*, Coco Bolos KC, LLC and Trendz, LLC. Tenants have not been identified for approximately [______] square feet of retail space in the Museum District. This portion of Phase 1 is projected to be open in the spring of 2014.
See APPENDIX A – Retail Sales Tax Report for more information on the tenants with which leases have been entered or are being negotiated.
The Phase 1 Retail Space is approximately [___]% * pre-leased with leases in negotiation for another approximately [____] * square feet, with the remaining [____]* square feet of space under discussion with multiple potential tenants. The following table sets out information on the Junior Anchors, Other Retailers and other potential retail tenants known to date with respect to Phase 1 of the Project:
* Preliminary, subject to change.
40 4848-0467-6625.6
RETAIL TENANTS WITH SIGNED LEASES OR LEASES IN NEGOTIATION AS OF DECEMBER ___, 2012
Anticipated Approximate Opening Date Approximate Square Tenant Term Footage Permitted Use Co-Tenancy Requirement
Recreational October 2013 10 years 23,978 Specialty retail store, including, but not REI is not required to open and may delay Equipment, Inc. d/b/a limited to, the retail sale of sporting commencement of its rent obligations until REI goods, recreational equipment, clothing, Fresh Market is open or, at its option, pay and other related goods and services of a reduced rent if it does open prior to Fresh similar manner and quality as Tenant’s Market. If Fresh Market is not open for a other comparable stores, or any other period of 12 consecutive months after REI lawful retail use except the prohibited has opened, REI may terminate its lease. uses itemized on Exhibit F of the Lease.
The Fresh Market, October 2013 10 years with 24,677 Grocery store and/or supermarket and/or Fresh Market may pay reduced rent if REI Inc. six five-year for the sale of Grocery Items and/or any is not open and fully operational by renewal terms other lawful retail purpose subject to October 1, 2013. exclusivity rights of other tenants.
Pinstripes, Inc. March 2014 12 years with 32,335 Destination retail and event venue Pinstripes may pay reduced rent (1) of one 10-year specializing in upper-scale bowling, Cinetopia or another movie theater of renewal term bocce ball and bistro (restaurant and bar), equal or greater quality approved by and one five- including, without limitation, the sale of Pinstripes is not open for business at the year renewal products, items and services commonly Project for a period of more than 60 term sold, offered or performed in a consecutive days; or (2) if, as a result of a prototypical “Pinstripes,” and for no other default by Developer under its agreement use or purpose whatsoever without with the American Museum of Natural Developer’s consent. History, exhibits from the American Museum of Natural History cease being displayed for a period of more than sixty (60) consecutive days.
41 4848-0467-6625.6
Cinetopia, LLC March 2014 20 years with 75,398 Primarily for the operation of (1) a first Cinetopia’s may pay reduced rent (1) if three five- class movie theater, employing the state 50% of the non-residential floor area of the year renewal of the art equipment, showing “first-run [*Museum Phase*] of the Project is not terms motion pictures”* to the extent available, open to the public simultaneously with the (2) a table service restaurant, including Cinetopia’s opening; or (2) the [*Museum the sale of beer, wine, and other alcoholic Phase*] of the Project is not 50% occupied beverages, and 3) the operation of a wine for 120 consecutive days after Cinetopia’s tasting bar and wine tasting cellar; and the opening. following incidental uses (1) operation of special screening rooms which may simulcast live events; (2) presentation within the restaurant portion of live entertainment appealing to mature audiences; (3) sale of works of art; (4) incidental sale of “Cinetopia” branded merchandise and other merchandise typically sold in other Cinetopia theaters; (5) conduct of seminars, business meetings and conferences.
R&B Concert Bar, October 2013 10 years with 5,453† Only for a typical Rock and Brews N/A LLC d/b/a Rock & two five-year Restaurant and Bar and for no other use Brews renewal terms or purpose.
[*Legal Name*] d/b/a [*unknown*] 10 years with 6,691 Only for a prototypical (as of the Lease N/A The Pub (1) two five-year Date) “The Pub” restaurant and for no renewal terms other use or purpose.
* Permits the incidental special presentation of reissued movie classics, art or so-called “art-house” films, documentaries and movie festival presentations. Cinetopia is generally precluded from showing motion pictures or telecasts which have been given an MPAA rating of “X” or “NC- 17” or pornographic movies. † [*Excludes 1,500 square feet of patio space.*]
(1) Lease not signed.
42 4848-0467-6625.6
BL Restaurant March 2014 10 years with 6,025 Subject to existing lease exclusive and N/A Operations, LLC three five- restrictive covenants, any restaurant use d/b/a Bar Louie (1) year renewal commensurate with the Project, including terms use as a Bar Louie restaurant and bar, martini bar, sale of incidental merchandise, sale of prepared food for both on-premises and carry out off- premises consumption and live music, catering, banquets and music supplied by a disc jockey.
Wasabi Sushi Bar April 2014 10 years with 3,000* Only for a typical Wasabi Restaurant N/A Eleven two five-year specializing in Japanese Cuisine renewal terms including sushi, sukiyaki, shishamo, ton katsu, prepared teriyaki, prepared tempura, prepared shashimi, stir fried food maki, Wystone Teas, mocha ice cream, green tea ice cream and for no other use or purpose whatsoever.
Coco Bolos KC, LLC April 2014 10 years 4,000 Only for a prototypical Coco Bolos N/A Restaurant and Bar and for no other purpose whatsoever.
Trendz, LLC October 2013 5 years 2,000 Only for a prototypical Trendz clothing N/A boutique and for no other use or purpose whatsoever.
* [*Excludes ____ square feet of patio space.*]
43 4848-0467-6625.6
PB&J Restaurants March 2014 10 years with 4,500 A restaurant specializing in steak and If the Museum Phase of the Project is less d/b/a Newport Grill two five-year seafood and for no other use or purpose than 75% occupied and open for business (1) renewal terms whatsoever. at the time Tenant has occupied the Leased Premises and is open for business for each Permitted Use. Tenant shall pay Minimum Annual Rent at 50% of the amount set forth in this Lease until the Museum Phase is 75% occupied and open for business. Tenant shall continue to pay Percentage Rent and additional rent without reduction. If Tenant does not timely open for business for each of the Permitted Uses by the Opening Date for each use, the provisions of this subparagraph © shall terminate. PB&J Restaurants March 2014 10 years with 6,000 Private restaurant and lounge d/b/a the If the Museum Phase of the Project is less d/b/a The Club (1) two five-year “Club” and for no other use or purpose than 75% occupied and open for business renewal terms whatsoever. at the time Tenant has occupied the Leased Premises and is open for business for each Permitted Use. Tenant shall pay Minimum Annual Rent at 50% of the amount set forth in this Lease until the Museum Phase is 75% occupied and open for business. Tenant shall continue to pay Percentage Rent and additional rent without reduction. If Tenant does not timely open for business for each of the Permitted Uses by the Opening Date for each use, the provisions of this subparagraph © shall terminate.
44 4848-0467-6625.6
PB&J Restaurants March 2014 10 years with 3,000 A restaurant d/b/a Paradise Diner and for If the Museum Phase of the Project is less d/b/a Paradise Diner two five-year no other use or purpose whatsoever. than 75% occupied and open for business (1) renewal terms at the time Tenant has occupied the Leased Premises and is open for business for each Permitted Use. Tenant shall pay Minimum Annual Rent at 50% of the amount set forth in this Lease until the Museum Phase is 75% occupied and open for business. Tenant shall continue to pay Percentage Rent and additional rent without reduction. If Tenant does not timely open for business for each of the Permitted Uses by the Opening Date for each use, the provisions of this subparagraph © shall terminate. Note: Need further input from Merrill Companies regarding allocation of deck space among PB&J Restaurants, if any, beyond the 1,000 s/f to be used by Newport Grill.
45 4848-0467-6625.6
Residential
Approximately 300 Residential Units are included in the Phase 1 Residential Units being constructed in the area to the south of the Museum District, identified as Hearthview Residential on the map on p. [7]. The Issuer and PrairieFire Apartments, LLC (the "Residential Developer"), the entity that will design, construct and operate the Phase 1 Residential Units after it purchases that property from MCP, will enter into the Residential Project Acknowledgment and Assumption Agreement, wherein the Residential Developer acknowledges, assumes and agrees to perform the obligations and agreements of the Developer under the Development Agreement, at least to the extent that those obligations and agreements pertain to the design, construction, completion and operation of the Phase 1 Residential Units. The development of the Phase 1 Residential Unites is not conditional on pre-sales or pre-leases of such Residential Uses.
Wetlands and Trail
On or about the Issue Date, MCP will grant the Issuer a Conservation Easement on approximately ___ acres adjacent to the Museum that restricts the use and operation of the Wetlands in the Redevelopment Project Area as well as the Trails contemplated by the Development Plan. The Conservation Easement is designed to protect certain natural elements of the Project, including natural waters, natural resources, wildlife habitat and other conservation values into perpetuity, and requires the Developer to use and maintain these areas in accordance with certain standards, and prohibits various activities including building certain structures, on the protected area. The Conservation Easement requires MCP to maintain this area at its cost and provides an indemnity to the Issuer and rights in the Issuer to enforce the terms of the document in order to protect the core conservation values.
RETAIL SALES TAX REPORT
Development Strategies
Development Strategies is a St. Louis-based consulting firm with a national practice providing economic and market research, strategic and land use planning, consulting, and appraisal services. Development Strategies’ fields of endeavor include real estate development, economic development and community development. The firm was founded in 1988 by the core consulting staff of a predecessor firm.
Retail Sales Tax Report
Development Strategies has prepared a report for the Issuer entitled “Sales Tax STAR Bond Revenue Bond Study for the Proposed Prairiefire at LionsGate Development” dated November __ 2012 (the “Retail Sales Tax Report”), which is set forth in APPENDIX A. The Retail Sales Tax Report includes a description of the Museum and the retailers proposed in that portion of the Redevelopment Project Area constituting Phase 1 of the Project, a discussion of general economic conditions, retail trends, metropolitan Kansas City retail conditions, and sales and development history in the Redevelopment Project Area and a projection of Revenues based on certain assumptions as set forth therein.
The Retail Sales Tax Report is intended for the information of the Issuer for general planning purposes and for disclosure within this Official Statement. Development Strategies has consented to inclusion of the Retail Sales Tax Report in this Official Statement and has reviewed and consented to the provisions of this caption. This caption contains summaries of certain provisions of the Retail Sales Tax Report but such do not purport to be comprehensive or definitive. All references herein to the Retail
46 4848-0467-6625.6
Sales Tax Report are qualified in their entirety by reference to the definitive form of such report in APPENDIX A. Prospective bondowners should read the Retail Sales Tax Report carefully and its entirety and form their own opinions about the validity and reasonableness of the assumptions and projections included therein. The projected annual Revenues contained in the Retail Sales Tax Report and included or reflected in this Official Statement are based on various assumptions concerning facts and events over which the Issuer has no control. No representation or warranty is or can be made about the amount or timing of any future income, loss, occupancy, valuation, increased assessment or revenues, or that actual results will be consistent with the Retail Sales Tax Report or with the forecasts contained therein. The information in the Retail Sales Tax Report is based on various assumptions, estimates and opinions. There is no assurance that actual events will correspond with the projections or the assumptions, estimates and opinions on which they are based.
The Retail Sales Tax Report is forward-looking and involves certain assumptions and judgments regarding future events. Although the Retail Sales Tax Report is based on currently available information, it is also based on assumptions about the future state of the national and regional economy and the local real estate markets as well as assumptions about future actions by various parties, which cannot be assured or guaranteed. The Retail Sales Tax Report is not a prediction or assurance that a certain level of performance will be achieved or that certain events will occur. The actual results will vary from the Retail Sales Tax Report, and the variations may be material. See the discussion herein under the caption “BONDOWNERS’ RISKS – Forward-Looking Statements” and APPENDIX A – RETAIL SALES TAX REPORT.
REVENUES AVAILABLE FOR DEBT SERVICE
General
Debt service on the Series 2012 STAR Bonds will be payable solely from the Trust Estate, which consists primarily of Revenues. Revenues include State Sales Tax Revenues and Issuer Sales Tax Revenues derived from retail sales in the Redevelopment Project Area.
“State Sales Tax Revenues” means receipts of the State received through the last day of October 2032 and credited to the City Bond Finance Fund by the State Treasurer in accordance with K.S.A. 79- 3620(d), as amended, from the taxes imposed by K.S.A. 79-3603, as amended and K.S.A. 79-3703, as amended, with respect to sales and compensating use within the Redevelopment Project Area portion of the Redevelopment District. “Issuer Sales Tax Revenues” means gross receipts of the Issuer received through the last day of October 2032 under K.S.A. 12-187 et seq., as amended, from (i) the city retail sales tax (currently 1.0%) and (ii) the Issuer’s share of the countywide retail sales tax, in each case with respect to retail sales within the Redevelopment Project Area and in each case excluding sales taxes committed to special purposes and therefore not available under the STAR Bond Act. See the discussion below under the caption “Tax Rates” for a description of current tax rates and of assumed tax rates used in the Retail Sales Tax Report. See “TAX DISTRIBUTION AGREEMENT” herein.
The following discussion includes a description of the statutes (the “Tax Acts”) relating to the State’s collection, administration and enforcement of sales tax and compensating use tax.
Imposition of Sales and Compensating Use Taxes
The Kansas retail sales tax was first enacted in 1937. The Kansas compensating use tax was enacted in 1937 for consumers and in 1945 for retailers.
47 4848-0467-6625.6
Sales Tax. The sales tax is imposed upon the gross receipts from retail sale of tangible personal property and specified services. Gross receipts subject to tax do not include allowable discounts, rescinded sales where a complete refund is made, and trade-in allowances. Historically, this tax base has changed throughout the years, providing either the exemption or inclusion of certain property items and services.
Use Tax. The compensating use tax is imposed on the purchase price paid for tangible personal property used, stored or consumed within the State. The use tax does not apply to purchases of articles that are not subject to sales tax, to purchases made other than at retail, or to articles already subject to an equal or greater tax. The use tax also does not apply to articles brought into the state by nonresidents for a period not in excess of 60 days, or by a railroad or public utility for consumption or movement in interstate commerce.
Retail Sales. The Kansas sales tax generally applies to three types of transactions: (1) the retail sale, rental or lease of tangible personal property, including the sale or furnishing of utilities; (2) charges for labor services to install, apply, repair, service, alter or maintain tangible personal property; and (3) the sale of admissions to places providing amusement, entertainment or recreation services (collectively, “Retail Sales”).
Exemptions. Each Retail Sale is presumed to be taxable, but there are numerous exemptions. Some exemptions are explicitly provided for, while others are the result of exceptions to a definition of a taxable sale or of tangible personal property. Exemptions are granted on the basis of the nature of the product, the type of transaction, or the nature of the entity buying or selling the product.
Currently, Kansas exempts prescription drugs from sales tax but imposes the tax on food. There are approximately 65 categories of exempt sales. The entities operating the retail, hotel and entertainment businesses within the Redevelopment Project Area will, from time to time, engage in transactions that will qualify for exemption. Given the nature of the transactions typically engaged in by establishments such as those businesses, among the exemptions likely to be claimed may be the following:
• Sales for purposes of resale; • Sales to qualifying exempt organizations and to federal and Kansas state or local government agencies and instrumentalities; • The lease or rental of films, records, tapes or any type of sound or picture transcriptions used by motion picture exhibitors; • Sales of lottery tickets and shares made as part of a lottery operated by the State of Kansas; • Sales of drinks containing alcoholic liquor, and that are subject to the Liquor Drink Tax (meals and drinks sold to the public at restaurants are subject to sales tax, as are sales of beer); and • Sales of meals served without charge or food used in the preparation of meals to employees of any restaurant where meals or drinks are regularly sold to the public if such employees’ duties are related to the furnishing of such meals or drinks.
Under the Museum Operation Agreement between the Issuer and the Museum Owner, described herein under the caption “THE PROJECT – The Museum” and in APPENDIX C – DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING AGREEMENT – The Museum Operation Agreement, the Museum Owner has agreed not to take any actions or adopt any practices or procedures which are designed to, or which may or will have the effect of, eliminating, reducing or diverting in any way any sales taxes or use taxes payable to the Issuer or the State in connection with sales made or services from, in or on and about the Museum, including without limitation, using its Internal Revenue
48 4848-0467-6625.6
Code Section 501(c)(3) status to try to avoid any payment of sales taxes or use taxes by it or any other business operating within the Museum (as set forth therein).
Tax Rates
State. The Sales and Compensating Use Tax rates currently in effect are 6.3% of the gross receipts from taxable sales. Because the use tax is a compensating tax, its rate has historically matched the sales tax rate. These two State taxes have been in effect since 1937, when each was imposed at a rate of 2.0%. The rate has been increased gradually over time for each tax. The rate was increased from 2.0% to 2.5% by the 1958 Special Session of the Kansas Legislature. The rate was further increased to 3.0% in 1965 and remained at this rate until the 1986 Kansas Legislature increased the rate to 4.0%. In 1989, the Kansas Legislature raised the rate to 4.25%. In 1992, the Kansas Legislature raised the rate to 4.9% The 2002 Kansas Legislature increased the rate to 5.3%, effective July 1, 2002. The 5.3% rate was originally scheduled to reduce to 5.0% on July 1, 2006. However, in 2004 the 5.3% tax rate was extended indefinitely. In 2010, the tax rate was increased to 6.3%, effective July 1, 2010; at the time of such increase, the Kansas Legislature approved a scheduled reduction of the tax rate to 5.7% on July 1, 2013. The Governor of the State of Kansas has recently indicated that he has not ruled out requesting the Kansas Legislature to extend the 6.3% sales tax. It is unknown whether or not the Kansas Legislature in its next legislative session will approve a different tax rate than 5.7% to be effective on July 1, 2013.
Development Strategies assumed a 5.7% State Sales Tax Rate in calculating the projected Revenues described therein, based on the current Kansas legislation providing for State Sales Tax Rate to be reduced from 6.3% to 5.7% on July 1, 2013. See APPENDIX A – RETAIL SALES TAX REPORT. Receipt of Revenues based on a State Sales Tax Rate of 5.7%, as indicted in the receipts shown in the Retail Sales Tax Report, was used by the Underwriter in its preparation of the Projected Case 1 Redemption Schedule and the other redemption scenarios described in “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS.”
County. Any county may levy a retailers’ sales tax of 0.25%, 0.50%, 0.75, or 1.00% for general purposes. The Johnson County sales and compensating use tax rate for general purposes is 0.50%; the county levies an additional 0.725% in retailers’ sales taxes for special purposes. Under state law a portion of the county sales tax imposed is distributed to the Issuer and is available to pay debt service on the Series 2012 STAR Bonds. The remaining portion of the county sales tax is distributed to other municipalities in the county. The state formula that guides the distribution bases the distribution on two factors, property tax levies and population. The Issuer’s share of the countywide taxes is tied to the population estimates issued by the Census Bureau in the 1st and 3rd quarters of each year, and thus fluctuates over time.
One-half of all county sales tax revenues are apportioned among the county and each city located in the county in the proportion that the total preceding year property tax levies made in the county represent to the total of all such levies. The remaining one half of all revenues received are apportioned to the cities and county, based on their share of total population within the county. The county population for this share of the allocation includes all population residing in the unincorporated area of the county. The percentages are adjusted on a semi-annual basis to reflect the annual certified preceding year property tax levies and current population estimates, released by the U.S. Census Bureau.
As indicated in the Retail Sales Tax Report attached hereto as APPENDIX A under the caption “ESTIMATED RETAIL STAR BOND REVENUE – STAR Bond Taxes,” the Issuer’s share of the county’s 0.50% general purpose sales tax has declined from 13.8% in 2007 to 12.2% in 2010 and 2011, with an average distribution to the Issuer over the five-year period of 12.9% of such 0.50% county sales tax. Given the downward trend and stability of the past two years’ distribution, Development Strategies
49 4848-0467-6625.6
has estimated a distribution to the Issuer of 12.5% of such 0.50% county sales tax, or 0.063%, which is below the five-year average.
City. Kansas cities are authorized to levy retailers’ sales taxes ranging from 0.25% to 2.0%, in 0.25% increments for general purposes, on sales or transfers subject to state sales tax. In addition, cities may impose an additional retailers’ sales tax of up to 1.0% for special purposes.
The Overland Park, Kansas sales and compensating use tax rate is currently 1.125%. Of such amount, 1.0% is for general purposes and is available to pay debt service on the Series 2012 STAR Bonds. In addition, the Issuer collects a 0.125% special sales tax for street improvements; receipts from special sales taxes do not constitute Issuer Sales Tax Revenues and will not be available to pay debt service on the Series 2012 STAR Bonds.
Changes in Sales and Use Tax Rates. Reference is made to “BONDOWNERS’ RISKS – Limited Sources of Debt Service and Factors Affecting Revenues - Changes to State and Local Tax Rates” for a description of risks relating to changes in State and local sales and use taxes and tax rates.
Combined Rate Used in Retail Sales Tax Report. Development Strategies has used a combined assumed State Sales Tax Rate and Issuer Sales Tax Rate of 6.763% as its assumed combined tax rate in projecting Revenues in the Retail Sales Tax Report, including an assumed State Sales Tax Rate of 5.7% and an assumed Issuer Sales Tax Rate of 1.063%, representing an assumed City tax rate of 1.0% and an assumed City share of County tax rate of 0.063% as described above under the subheading “County”. A combined tax rate of 6.7625% was used by the Underwriter in its preparation of the Projected Case 1 Redemption Schedule and the other redemption scenarios described in “PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS.”
Destination Sourcing Rules Relating to Kansas Sales
Retailers operating in the State are required to collect sales and use tax in accordance with “destination-based” sourcing provisions. Under the destination based sourcing rules, the rate of sales tax due on in-State sales is the combined state and local sales tax rate in effect where the customer takes delivery/possession of the purchased item. Under this rule, the seller collects the sales tax rate in effect at the seller’s place of business for over-the-counter transactions. However, if the item is shipped or delivered to the purchaser, the seller will collect the combined sales tax rate in effect at the location where the purchaser received the item. Effectively, if sellers deliver or ship items outside the Redevelopment District (or the City), retailers must collect the tax rate in effect at the destination and the sales taxes collected also are remitted to that jurisdiction by the State. The projected sales tax revenues reflected in the Retail Sales Tax Report reflect the application based source rules; the revenues are based upon taxable sales in the Redevelopment District and items delivered to another destination are not included in those figures. See APPENDIX A - RETAIL SALES TAX REPORT.
Sales Tax Reporting and Collection
All retailers with annual sales tax liability over $3,200 are required to file tax returns reporting their sales activity for the month on or before the 25th of the following month. Tax payments must accompany the tax report, except that, if annual tax liability exceeds $32,000, the tax for the first 15 days of the month must be paid on or before the 25th day of that month.
50 4848-0467-6625.6
Deposit and Transfer of Revenues
State Sales Tax. All State sales tax revenue collected or received by the State Department of Revenue is remitted to the State Treasurer, which amounts are deposited in the State Treasury, less an amount not exceeding $100,000 set apart and maintained by the Director of the Department of Revenue in a “sales tax refund fund.” K.S.A. 79-3620. All such revenue received from taxpayers doing business in a redevelopment district occupied by a redevelopment project determined by the State to be of statewide as well as local importance, or that will create a major tourism area for the State, including the Redevelopment Project Area, is deposited to the “City Bond Finance Fund.” See “TAX DISTRIBUTION AGREEMENT” below.
All State compensating use tax revenue received by the State Department of Revenue is also remitted to the State Treasurer, less $10,000 set apart in the “compensating tax refund fund.” All such revenue received from taxpayers doing business in a redevelopment district occupied by a redevelopment project determined by the State to be of statewide as well as local importance, or that will create a major tourism area for the State, including the Redevelopment Project Area, is deposited to the City Bond Finance Fund established by the State Treasurer. See “TAX DISTRIBUTION AGREEMENT” below.
Sales and compensating use tax receipts credited to the City Bond Finance Fund are to be distributed biannually to cities that have issued special obligation bonds to finance, in whole or in part, a redevelopment project. The biannual distributions are on such dates as are mutually agreed by the State Treasurer and the city. The Tax Distribution Agreement sets forth the agreements of the State Treasurer with respect to the distribution of moneys in the City Bond Finance Fund to pay the STAR Bonds issued by the Issuer for the Redevelopment Project Area. See the discussion herein under the caption “TAX DISTRIBUTION AGREEMENT.”
Issuer Sales Tax. Any county or city imposing a retailers’ sales tax is prohibited from administering or collecting the tax locally, and is required to utilize the services of the State Department of Revenue to administer, enforce and collect the tax. The Department of Revenue collects the local tax in the same manner provided for the collection of the State retailers’ sales tax. All moneys collected by the Department of Revenue are credited to the “county and city retailers’ sales tax fund” established in the State Treasury. Except for local retailers’ sales tax revenue required to be deposited in the redevelopment bond fund, all local retailers’ sales tax revenues collected within any county or city are apportioned and remitted at least quarterly by the State Treasurer to the Treasurer of a county or city. Funds certified by the Director of the Department of Revenue to have been derived from taxpayers located in the redevelopment district, and then credited by the State Treasurer to the redevelopment fund in the State Treasury pursuant to K.S.A. 74-8927(a), do not require an appropriation from the legislature for their distribution. Instead, pursuant to K.S.A. 74-8927(b) the State Treasurer shall make distributions on dates mutually agreed between the treasurer and the authority for the redevelopment. See the discussion under the caption “TAX DISTRIBUTION AGREEMENT.” Any revenues not needed or committed to the payment of bonds or other project costs authorized by the redevelopment plan implementation agreement shall upon approval of the authority be remitted to the State Treasurer proportionately to the appropriate taxing authorities. All revenue received from a countywide retailers’ sales tax is apportioned between the applicable cities and county as follows: (1) one-half of all revenue is apportioned in the proportion that the tangible property tax levies in a county for the preceding year for all funds of each governmental unit bear to the total of all such levies made in the preceding year, and (2) one-half is apportioned first to the county in that portion of revenue equal to the proportion of that county’s population residing in the unincorporated area bears to the total population of the county, and second to the cities in proportion to the population that each city bears to the total population of the county. The Issuer’s share of the countywide taxes is tied to the population estimates issued by the Census Bureau in the 1st and 3rd
51 4848-0467-6625.6
quarters of each year, and thus fluctuates over time, when computing the apportionment among the county and each city by population, as required by K.S.A. 12-192.
Enforcement, Penalties and Interest
Penalty and interest amounts paid pursuant to the Tax Acts are not included in Revenues. Taxes remaining unreported or unpaid after the due date accrue a penalty equal to 1% of the unpaid balance for each month or fraction of a month that the failure to file a return or pay the tax continues, not to exceed 24% in the aggregate. If a filed return is subject to a field audit, any unpaid tax amount assessed will accrue a penalty of 1% per month, but not to exceed 10% of the unpaid tax. However, if it is determined that the taxpayer made no reasonable attempt to comply with the tax law, the penalty will be 25% for taxes due. If there is a fraudulent intent to evade any tax, the penalty added will be 50% of the taxes due, imposed in addition to any other applicable penalty. A fine of $500 to $10,000 may also be imposed in addition to all other penalties where a person is convicted of other tax law violations.
Interest accrues on unpaid sales and use taxes, at a rate of 1% plus the federal tax underpayment rate in effect on July 1 of the preceding year (as determined under Internal Revenue Code section 6621). When computed monthly, the interest rate is 1/12 of the annual rate.
Confidentiality of Tax Information
Under Kansas law, all information received by the State from returns filed under the Tax Acts is confidential. It is unlawful to make a disclosure of taxpayer information except pursuant to a proper court order or a governmental exchange of information, and any person receiving tax information from the State is subject to the same confidentiality restrictions as apply to the State.
Notwithstanding these restrictions, the State is authorized to provide monthly reports upon the request of a city or county clerk or treasurer of any city or county levying a local retailer’s sales tax. The report may identify each retailer having a place of business in the taxing city or county, and the amount of tax remitted by each retailer during the prior month, as well as identifying each business location maintained by a retailer within such city or county. The information so received by a city or county remains confidential, and an unauthorized disclosure may be prosecuted as a class B misdemeanor and may lead to dismissal from office of the disclosing officer or employee. In response to an enquiry from a Kansas city on how the city might use the information and what kinds of reports the city might prepare using such information, the Kansas Attorney General opined that the law does not prohibit review of sales tax reports by city officials or employees for official city purposes, but that the law prohibits further disclosure of information contained in those reports and therefore the city may not place information obtained from the sales tax reports in a record intended to be open for public inspection. The Attorney General opinion went on to say that if information from such reports is further manipulated by the city, it may no longer be considered the information that was contained in the confidential reports and thus may not be subject to limitations on disclosure.
Moreover, in connection with a redevelopment project area or special bond project relying on pledged sales, use and transient guest tax revenues, upon request of the issuer of the related bonds, the State is required to provide copies of all retailers’ sales, use and transient guest tax returns to the bond trustee, escrow agent or paying agent of the issuer within 15 days of receipt by the Director of the Department of Revenue. The bond trustee, escrow agent or paying agent is required to maintain the returns and return information confidential.
52 4848-0467-6625.6
TAX DISTRIBUTION AGREEMENT
The discussion under this caption contains a summary of certain provisions of the Tax Distribution Agreement, but such summary does not purport to be comprehensive or definitive. All references herein to the Tax Distribution Agreement are qualified in their entirety by reference to the definitive form of such document. Copies of the Tax Distribution Agreement may be obtained from the sources listed in “SUMMARY STATEMENT – Additional Information.”
Overview
The Issuer has entered into the Tax Distribution Agreement pursuant to the provisions of the STAR Bond Act. The Tax Distribution Agreement provides for the deposit of all Revenues generated within the Redevelopment Project Area in the Escrow Fund and the transfer of such Revenues to the Trustee for further deposit in the funds and accounts established under the Indenture. The Revenues will be transferred to the Trustee for distribution as provided in the Tax Distribution Agreement.
Escrow Fund
Pursuant to the Tax Distribution Agreement, the Trustee will establish a special and irrevocable separate trust fund to be held in the custody of the Trustee and designated as the “Tax Revenues Escrow Fund – Prairiefire at LionsGate Redevelopment District” (the “Escrow Fund”). All Revenues received by the Trustee are deposited into the Escrow Fund. Moneys in the Escrow Fund shall be held in trust by the Trustee and applied solely in accordance with the provisions of the Tax Distribution Agreement.
Transfer of Issuer Sales Tax Revenues to the Trustee
Pursuant to the Tax Distribution Agreement, the Issuer has directed that all Issuer Sales Tax Revenues be remitted monthly by not later than the last Business Day of each calendar month directly to the Trustee for deposit in the Escrow Fund.
Transfer of State Sales Tax Revenues to the Trustee
Upon collection, State Sales Tax Revenues are credited to the City Bond Finance Fund. The State Treasurer is required to make semiannual distributions of State Sales Tax Revenues from the City Bond Finance Fund established in the State Treasury pursuant to the STAR Bond Act in order to pay debt service on the STAR Bonds in accordance with the Tax Distribution Agreement. Pursuant to the Tax Distribution Agreement, the State Sales Tax Revenues credited to the City Bond Finance Fund shall be transferred by the State Treasurer to the Trustee semiannually not less than two (2) Business Days prior to each Interest Payment Date for deposit in the Escrow Fund. Specifically, moneys in the City Bond Finance Fund may be used only to pay principal of and interest on any series of STAR Bonds or replenish the Debt Service Reserve Fund to the Debt Service Reserve Requirement. Moneys in the City Bond Finance Fund will not be used to pay the fees and expenses of the Trustee, Dissemination Agent or Rebate Analyst. Interest earnings on amounts on deposit in the City Bond Finance Fund shall be transferred to the State general fund.
Allocation of State Sales Tax Revenues and Issuer Sales Tax Revenues
The following order of priority will be used in making distributions of State Sales Tax Revenues and Issuer Sales Tax Revenues pursuant to the Tax Distribution Agreement:
53 4848-0467-6625.6
(a) first, all State Sales Tax Revenues shall be allocated (i) first, to pay scheduled principal and interest on the STAR Bonds, (ii) second, to replenish the Debt Service Reserve Fund to the Debt Service Reserve Requirement and (iii) third, to pay principal and interest on the STAR Bonds on the redemption thereof.
(b) second, the Issuer Sales Tax Revenues and any investment earnings thereon shall be allocated (i) first, to pay the fees and expenses of the Trustee, the Dissemination Agent and any third- party monitor retained by the Dissemination Agent, and the Rebate Analyst, and to reimburse the Issuer for the payment of any of such costs, and (ii) second, to pay principal and interest on the STAR Bonds.
Application of Revenues in Escrow Fund
Pursuant to the Tax Distribution Agreement, the Trustee is directed to allocated and distribute Revenues in the Escrow Fund not less than one (1) Business Day prior to each Interest Payment Date, in the following order of priority:
(a) Past Due Debt Service on STAR Bonds. The Trustee shall transfer to the Debt Service Fund established under the Indenture an amount equal to the amount of any due and unpaid principal of and interest on the STAR Bonds.
(b) Current Debt Service on STAR Bonds. If and to the extent there are moneys remaining in the Escrow Fund after the transfer required under subsection (a) above has been made, the Trustee shall transfer to the Debt Service Fund established under the Indenture the amount of principal and interest becoming due on the upcoming Interest Payment Date on the STAR Bonds, less any amounts then on deposit in the Debt Service Fund and available for payment of such amount in accordance with the provisions of the Indenture.
(c) Replenish Debt Service Reserve Fund. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required under subsections (a) and (b) above have been made, the Trustee shall transfer to the Debt Service Reserve Fund an amount necessary to cause the aggregate amount on deposit in the Debt Service Reserve Fund to equal the Debt Service Reserve Requirement.
(d) Redemption of STAR Bonds. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required under subsections (a) through (c) above have been made, in which case provision for payment of all of the STAR Bonds shall have been made, the Trustee shall transfer to the Debt Service Fund established under the Indenture an amount sufficient to redeem the outstanding STAR Bonds on the upcoming Interest Payment Date pursuant to the terms of the Indenture.
(e) Payments to State Treasurer and Issuer. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required under subsections (a) through (d) above have been made, in which case no STAR Bonds will be outstanding at the close of business on the upcoming Interest Payment Date, the Trustee shall (i) transfer to the State Treasurer, for deposit in the State general fund, an amount equal to the State Percentage (as defined in the Tax Distribution Agreement) of such remaining moneys and (ii) transfer to the Issuer the balance of such remaining moneys.
54 4848-0467-6625.6
Application of Issuer Sales Tax Revenues to Pay Certain Fees
On each June 1 and December 1, the Trustee shall pay, from Issuer Sales Tax Revenues and any investment earnings thereon on deposit in the Escrow Fund: certain fees, expenses and other amounts payable to the Trustee, Dissemination Agents, third party monitors engaged by the Dissemination Agent and Rebate Analysts, and to reimburse the Issuer for the payment of any of such costs, as provided in the Tax Distribution Agreement.
The Issuer has agreed that if such fees exceed $10,500, the Issuer will disclose such higher fees pursuant to the Issuer Continuing Disclosure Agreement.
Reporting of Revenues
General. Each retailer that does business within the Redevelopment Project Area is required to submit to the Kansas Department of Revenue (the “Department”), the Department, at the times specified in such statutes, (i) Revenues collected by such taxpayer and (ii) returns detailing the collection of such Revenues. See the discussion herein under the caption “REVENUES AVAILABLE FOR DEBT SERVICE.” Under the Tax Distribution Agreement, the State Treasurer shall request that the Kansas Department of Revenue shall advise the State Treasurer and the Escrow Agent not later than the last Business Day of each calendar month of the total amount of Issuer Sales Tax Revenues and State Sales Tax Revenues collected by the Kansas Department of Revenue during the preceding calendar month.
Notices Regarding Tax Rates. Pursuant to the Tax Distribution Agreement, the State Treasurer shall request that the Department promptly advise the State Treasurer, the Trustee and the Issuer of any adjustments in State or local retail sales or use tax rates applicable with respect to retail sales within the Redevelopment Project Area and any adjustments to the Issuer's share of the retail sales and use tax of Johnson County, Kansas.
Confidentiality of Tax Information
State statutes make it unlawful to disclose tax reports filed with the State. See the discussion herein under the caption “REVENUES AVAILABLE FOR DEBT SERVICE - Confidentiality of Tax Information.” Pursuant to the Tax Distribution Agreement, the Trustee agrees that it shall not use or communicate, publish or disclose to any third party any sales or use tax information of any individual taxpayer or group of less than five taxpayers obtained by the Trustee pursuant to the Tax Distribution Agreement, for any purpose other than carrying out the Trustee's obligations under the Tax Distribution Agreement, without the prior written consent of the individual taxpayer that submitted such tax information to the Department; provided, however, that such restriction on use and disclosure shall not apply to information that, in the opinion of counsel to the Trustee, is required to be disclosed by applicable law, court order or other governmental authority.
Reports to Bondowners and the Issuer
Semi-Annual Reports to Bondowners. Within 30 days after each June 15 and December 15, the Trustee shall prepare and send to the Original Purchaser of the STAR Bonds or any subsequent owner of STAR Bonds requesting the same, by first class mail or electronic mail, a report containing the following information: (a) the amount of State Sales Tax Revenues and Issuer Sales Tax Revenues remitted to the Trustee during the semi-annual period ending on such June 15 and December 15 pursuant to the Tax Distribution Agreement; (b) the principal and interest on the STAR Bonds paid during the semi-annual period ending on such June 15 and December 15; and (c) the outstanding principal amount of STAR Bonds as of the close of business on such June 15 and December 15.
55 4848-0467-6625.6
Reports to Issuer. Not later than 30 days after each June 15 and December 15, the Trustee shall provide to the Issuer a report stating the application of Revenues to the payment of principal and interest on the STAR Bonds, replenishment of any debt service reserve funds and payment of any fees of the Trustee, the Dissemination Agent, any third-party monitor engaged by the Dissemination Agent and the Rebate Analyst. (Similar reporting requirements are contained in the Issuer Continuing Disclosure Agreement.)
Not later than the 30th day of each month other than June and December, the Trustee shall provide a monthly report to the Issuer stating the amount of Issuer Sales Tax Revenues remitted by the State Treasurer during the preceding month and the amount of State Sales Tax Revenues that the State has indicated is on deposit in the City Bond Finance Fund during the preceding month.
Not less often than quarterly, (i) the Issuer shall compare the amount of State Sales Tax Revenues and Issuer Sales Tax Revenues received by and/or reported to the Trustee as set forth in such reports with the copies of tax returns detailing the collection of State Sales Tax Revenues and Issuer Sales Tax Revenues received by the Issuer from businesses operating within the Redevelopment Project Area during the same period, and (ii) if any discrepancies exist, the Issuer shall contact the Trustee or the Department, as appropriate, to reconcile such discrepancies and ensure that all State Sales Tax Revenues and Issuer Sales Tax Revenues received by the Department were properly applied and credited.
Amendments
The Tax Distribution Agreement may be amended or otherwise modified by a written instrument executed by all parties hereto; provided, however, that in the event that any modification or amendment to the Tax Distribution Agreement would have a material adverse effect on the interests of the owners of the STAR Bonds, then the Tax Distribution Agreement may not be amended without the prior written consent of the owners of 100% of the outstanding STAR Bonds.
PROJECTED SEMI-ANNUAL REDEMPTIONS OF SERIES 2012 STAR BONDS
Introduction
The following discussion describes the assumptions (the “Structuring Assumptions”) used to calculate the projected semi-annual redemptions of Series 2012 STAR Bonds pursuant to the mandatory redemption provisions described under the caption “THE SERIES 2012 BONDS – Redemption Provisions – Special Mandatory Redemption - Special Mandatory Redemption on Each Interest Payment Date,” under the various scenarios described below. Potential investors are cautioned that the information in this section of the Official Statement represents “forward-looking statements” as described in “BONDOWNERS’ RISKS -- Forward-Looking Statements.”
Structuring Assumptions
General. The Structuring Assumptions described under this heading were prepared by the Underwriter and are believed to be reasonable. However, some assumptions inevitably will not materialize and unanticipated events and circumstances may occur. In addition the Structuring Assumptions are stated assumptions regarding certain revenues and expenditures related to payment of the Series 2012 STAR Bonds but do not include all revenues available and expenses payable under the Financing Documents. Therefore, actual results achieved will vary from the results based on the Structuring Assumptions, and the variations may be material. If actual results are materially different from those assumed, it could have a material effect on the projections set forth under this caption.
56 4848-0467-6625.6
Retail Sales Tax Report Revenues. The Revenues described in the Retail Sales Tax Report were based on the projections for Revenues from the retailers expected to be operating in Phase 1 of the Project and from the Museum as set forth in the Retail Sales Tax Report, assuming a State Sales Tax Rate of 5.7% and an Issuer Sales Tax Rate of 1.0625%, for a combined tax rate of 6.7625%. See the discussion herein under the captions “REVENUES AVAILABLE FOR DEBT SERVICE – Tax Rates,” “RETAIL SALES TAX REPORT” and APPENDIX A – RETAIL SALES TAX REPORT.
Projected Case 1 Revenues. Assumes that revenues will be received in accordance with the projections set forth in APPENDIX A – RETAIL SALES TAX REPORT.
Projected Case 2 Revenues. Assumes that 71.4%* of projected revenues set forth in APPENDIX A – RETAIL SALES TAX REPORT will actually be received.
Projected Case 3 Revenues. Assumes that revenues are received based on 80%* of projected revenues for the Anchor and Junior Anchors, as set forth in APPENDIX A – RETAIL SALES TAX REPORT, and 80%* of the average sales per square foot assumption for Other Retailers for only 35,000 square feet of Other Retailers. Based on all components opening on May 15, 2014.
Projected Case 4 Revenues. Assumes that revenues are received based on 80%* of projected revenues for the Anchor and Junior Anchors, as set forth in APPENDIX A – RETAIL SALES TAX REPORT, and 80%* of the average sales per square foot assumption for Other Retailers for only 30,000 square feet of Other Retailers. Based on all components opening on May 15, 2014.
Assumed Investment Earnings. The amounts on deposit in the Project Fund, the Debt Service Reserve Fund and the Escrowed Project Cost Fund are assumed to earn interest at the rate of 0%.
Assumed Agent Fees. Fees and expenses of the Trustee, Dissemination Agent, third party monitor and Rebate Analyst have been assumed at $10,500 annually upon delivery of the Series 2012 STAR Bonds (the “Assumed Agent Fees”). In the Issuer Continuing Disclosure Agreement, the Issuer has agreed to disclose any increase in the aggregate amount of such Assumed Agent Fees.
Issue Date. The Series 2012 STAR Bonds were assumed to be issued on the Date of Delivery.
Assumed Interest. The Series 2012 STAR Bonds are assumed to bear interest at the rate shown on the inside cover.
Projected Semi-Annual Mandatory Redemptions
The following tables were prepared by the Underwriter based on the Structuring Assumptions as described above. The tables show Revenues (based upon the assumptions above) applied pursuant to the Flow of Funds under the Tax Distribution Agreement.
* Preliminary, subject to change.
57 4848-0467-6625.6
Projected Case 1 Redemption Schedule* Series 2012 Bonds Maturing: December 15, 2023 Series 2012 Bonds Maturing: December 15, 2029 Series 2012 Bonds Maturing: December 15, 2032 Redemptions Redemptions Redemptions Special Project Fund or Cumulative Special Project Fund or Cumulative Special Project Fund or Cumulative As of Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions 15‐Jun‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐14 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐14 1,760,000 ‐ 1,760,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐15 1,000,000 ‐ 2,760,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐15 1,615,000 ‐ 4,375,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐16 1,650,000 ‐ 6,025,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐16 1,855,000 ‐ 7,880,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐17 1,970,000 ‐ 9,850,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐17 2,050,000 ‐ 11,900,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐18 2,145,000 ‐ 14,045,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐18 955,000 ‐ 15,000,000 1,260,000 ‐ 1,260,000 ‐ ‐ ‐ 15‐Jun‐19 ‐ ‐ 2,295,000 ‐ 3,555,000 ‐ ‐ ‐ 15‐Dec‐19 ‐ ‐ 2,370,000 ‐ 5,925,000 ‐ ‐ ‐ 15‐Jun‐20 ‐ ‐ 2,485,000 ‐ 8,410,000 ‐ ‐ ‐ 15‐Dec‐20 ‐ ‐ 2,575,000 ‐ 10,985,000 ‐ ‐ ‐ 15‐Jun‐21 ‐ ‐ 2,700,000 ‐ 13,685,000 ‐ ‐ ‐ 15‐Dec‐21 ‐ ‐ 2,795,000 ‐ 16,480,000 ‐ ‐ ‐ 15‐Jun‐22 ‐ ‐ 2,925,000 ‐ 19,405,000 ‐ ‐ ‐ 15‐Dec‐22 ‐ ‐ 595,000 ‐ 20,000,000 2,440,000 ‐ 2,440,000 15‐Jun‐23 ‐ ‐ ‐ ‐ 3,175,000 ‐ 5,615,000 15‐Dec‐23 ‐ ‐ ‐ ‐ 3,300,000 ‐ 8,915,000 15‐Jun‐24 ‐ ‐ ‐ ‐ 3,435,000 ‐ 12,350,000 15‐Dec‐24 ‐ ‐ ‐ ‐ 3,550,000 ‐ 15,900,000 15‐Jun‐25 ‐ ‐ ‐ ‐ 3,715,000 ‐ 19,615,000 15‐Dec‐25 ‐ ‐ ‐ ‐ 9,385,000 ‐ 29,000,000 15‐Jun‐26 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐26 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐27 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐27 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐28 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐28 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐29 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐29 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐30 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐30 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐31 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐31 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐32 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐32 ‐ ‐ ‐ ‐ ‐ ‐
Average Life 4.030 yrs 7.991 yrs 11.865 yrs
* Preliminary; Subject to Change
58 4848-0467-6625.6
Projected Case 2 Redemption Schedule* Series 2012 Bonds Maturing: December 15, 2023 Series 2012 Bonds Maturing: December 15, 2029 Series 2012 Bonds Maturing: December 15, 2032 Redemptions Redemptions Redemptions Special Project Fund or Cumulative Special Project Fund or Cumulative Special Project Fund or Cumulative As of Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions 15‐Jun‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐14 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐14 750,000 ‐ 750,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐15 185,000 ‐ 935,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐15 610,000 ‐ 1,545,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐16 620,000 ‐ 2,165,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐16 755,000 ‐ 2,920,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐17 820,000 ‐ 3,740,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐17 870,000 ‐ 4,610,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐18 920,000 ‐ 5,530,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐18 955,000 ‐ 6,485,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐19 995,000 ‐ 7,480,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐19 1,025,000 ‐ 8,505,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐20 1,090,000 ‐ 9,595,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐20 1,130,000 ‐ 10,725,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐21 1,190,000 ‐ 11,915,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐21 1,240,000 ‐ 13,155,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐22 1,305,000 ‐ 14,460,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐22 540,000 ‐ 15,000,000 810,000 ‐ 810,000 ‐ ‐ ‐ 15‐Jun‐23 ‐ ‐ 1,430,000 ‐ 2,240,000 ‐ ‐ ‐ 15‐Dec‐23 ‐ ‐ 1,480,000 ‐ 3,720,000 ‐ ‐ ‐ 15‐Jun‐24 ‐ ‐ 1,545,000 ‐ 5,265,000 ‐ ‐ ‐ 15‐Dec‐24 ‐ ‐ 1,595,000 ‐ 6,860,000 ‐ ‐ ‐ 15‐Jun‐25 ‐ ‐ 1,680,000 ‐ 8,540,000 ‐ ‐ ‐ 15‐Dec‐25 ‐ ‐ 1,740,000 ‐ 10,280,000 ‐ ‐ ‐ 15‐Jun‐26 ‐ ‐ 1,830,000 ‐ 12,110,000 ‐ ‐ ‐ 15‐Dec‐26 ‐ ‐ 1,900,000 ‐ 14,010,000 ‐ ‐ ‐ 15‐Jun‐27 ‐ ‐ 1,995,000 ‐ 16,005,000 ‐ ‐ ‐ 15‐Dec‐27 ‐ ‐ 2,065,000 ‐ 18,070,000 ‐ ‐ ‐ 15‐Jun‐28 ‐ ‐ 1,930,000 ‐ 20,000,000 235,000 ‐ 235,000 15‐Dec‐28 ‐ ‐ ‐ ‐ 2,245,000 ‐ 2,480,000 15‐Jun‐29 ‐ ‐ ‐ ‐ 2,315,000 ‐ 4,795,000 15‐Dec‐29 ‐ ‐ ‐ ‐ 2,385,000 ‐ 7,180,000 15‐Jun‐30 ‐ ‐ ‐ ‐ 2,505,000 ‐ 9,685,000 15‐Dec‐30 ‐ ‐ ‐ ‐ 2,600,000 ‐ 12,285,000 15‐Jun‐31 ‐ ‐ ‐ ‐ 2,725,000 ‐ 15,010,000 15‐Dec‐31 ‐ ‐ ‐ ‐ 2,830,000 ‐ 17,840,000 15‐Jun‐32 ‐ ‐ ‐ ‐ 2,965,000 ‐ 20,805,000 15‐Dec‐32 ‐ ‐ ‐ ‐ 8,195,000 ‐ 29,000,000
Average Life 6.500 yrs 13.036 yrs 18.426 yrs
* Preliminary; Subject to Change
59 4848-0467-6625.6
Projected Case 3 Redemption Schedule* Series 2012 Bonds Maturing: December 15, 2023 Series 2012 Bonds Maturing: December 15, 2029 Series 2012 Bonds Maturing: December 15, 2032 Redemptions Redemptions Redemptions Special Project Fund or Cumulative Special Project Fund or Cumulative Special Project Fund or Cumulative As of Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions 15‐Jun‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐14 ‐ 1,925,000 1,925,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐14 ‐ ‐ 1,925,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐15 ‐ ‐ 1,925,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐15 235,000 ‐ 2,160,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐16 620,000 ‐ 2,780,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐16 750,000 ‐ 3,530,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐17 810,000 ‐ 4,340,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐17 855,000 ‐ 5,195,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐18 905,000 ‐ 6,100,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐18 940,000 ‐ 7,040,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐19 980,000 ‐ 8,020,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐19 1,010,000 ‐ 9,030,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐20 1,070,000 ‐ 10,100,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐20 1,110,000 ‐ 11,210,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐21 1,175,000 ‐ 12,385,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐21 1,215,000 ‐ 13,600,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐22 1,285,000 ‐ 14,885,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐22 115,000 ‐ 15,000,000 1,220,000 ‐ 1,220,000 ‐ ‐ ‐ 15‐Jun‐23 ‐ ‐ 1,405,000 ‐ 2,625,000 ‐ ‐ ‐ 15‐Dec‐23 ‐ ‐ 1,460,000 ‐ 4,085,000 ‐ ‐ ‐ 15‐Jun‐24 ‐ ‐ 1,520,000 ‐ 5,605,000 ‐ ‐ ‐ 15‐Dec‐24 ‐ ‐ 1,575,000 ‐ 7,180,000 ‐ ‐ ‐ 15‐Jun‐25 ‐ ‐ 1,655,000 ‐ 8,835,000 ‐ ‐ ‐ 15‐Dec‐25 ‐ ‐ 1,715,000 ‐ 10,550,000 ‐ ‐ ‐ 15‐Jun‐26 ‐ ‐ 1,805,000 ‐ 12,355,000 ‐ ‐ ‐ 15‐Dec‐26 ‐ ‐ 1,875,000 ‐ 14,230,000 ‐ ‐ ‐ 15‐Jun‐27 ‐ ‐ 1,960,000 ‐ 16,190,000 ‐ ‐ ‐ 15‐Dec‐27 ‐ ‐ 2,040,000 ‐ 18,230,000 ‐ ‐ ‐ 15‐Jun‐28 ‐ ‐ 1,770,000 ‐ 20,000,000 365,000 ‐ 365,000 15‐Dec‐28 ‐ ‐ ‐ ‐ 2,210,000 ‐ 2,575,000 15‐Jun‐29 ‐ ‐ ‐ ‐ 2,285,000 ‐ 4,860,000 15‐Dec‐29 ‐ ‐ ‐ ‐ 2,350,000 ‐ 7,210,000 15‐Jun‐30 ‐ ‐ ‐ ‐ 2,470,000 ‐ 9,680,000 15‐Dec‐30 ‐ ‐ ‐ ‐ 2,565,000 ‐ 12,245,000 15‐Jun‐31 ‐ ‐ ‐ ‐ 2,685,000 ‐ 14,930,000 15‐Dec‐31 ‐ ‐ ‐ ‐ 2,795,000 ‐ 17,725,000 15‐Jun‐32 ‐ ‐ ‐ ‐ 2,920,000 ‐ 20,645,000 15‐Dec‐32 ‐ ‐ ‐ ‐ 8,355,000 ‐ 29,000,000
Average Life 6.112 yrs 12.956 yrs 18.428 yrs
* Preliminary; Subject to Change
60 4848-0467-6625.6
Projected Case 4 Redemption Schedule* Series 2012 Bonds Maturing: December 15, 2023 Series 2012 Bonds Maturing: December 15, 2029 Series 2012 Bonds Maturing: December 15, 2032 Redemptions Redemptions Redemptions Special Project Fund or Cumulative Special Project Fund or Cumulative Special Project Fund or Cumulative As of Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions Mandatory Escrow Fund Redemptions 15‐Jun‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐13 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐14 ‐ 3,850,000 3,850,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐14 ‐ ‐ 3,850,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐15 ‐ ‐ 3,850,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐15 205,000 ‐ 4,055,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐16 595,000 ‐ 4,650,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐16 720,000 ‐ 5,370,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐17 775,000 ‐ 6,145,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐17 815,000 ‐ 6,960,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐18 865,000 ‐ 7,825,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐18 900,000 ‐ 8,725,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐19 935,000 ‐ 9,660,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐19 970,000 ‐ 10,630,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐20 1,020,000 ‐ 11,650,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐20 1,065,000 ‐ 12,715,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Jun‐21 1,125,000 ‐ 13,840,000 ‐ ‐ ‐ ‐ ‐ ‐ 15‐Dec‐21 1,160,000 ‐ 15,000,000 10,000 ‐ 10,000 ‐ ‐ ‐ 15‐Jun‐22 ‐ ‐ 1,230,000 ‐ 1,240,000 ‐ ‐ ‐ 15‐Dec‐22 ‐ ‐ 1,280,000 ‐ 2,520,000 ‐ ‐ ‐ 15‐Jun‐23 ‐ ‐ 1,350,000 ‐ 3,870,000 ‐ ‐ ‐ 15‐Dec‐23 ‐ ‐ 1,410,000 ‐ 5,280,000 ‐ ‐ ‐ 15‐Jun‐24 ‐ ‐ 1,465,000 ‐ 6,745,000 ‐ ‐ ‐ 15‐Dec‐24 ‐ ‐ 1,510,000 ‐ 8,255,000 ‐ ‐ ‐ 15‐Jun‐25 ‐ ‐ 1,595,000 ‐ 9,850,000 ‐ ‐ ‐ 15‐Dec‐25 ‐ ‐ 1,655,000 ‐ 11,505,000 ‐ ‐ ‐ 15‐Jun‐26 ‐ ‐ 1,735,000 ‐ 13,240,000 ‐ ‐ ‐ 15‐Dec‐26 ‐ ‐ 1,805,000 ‐ 15,045,000 ‐ ‐ ‐ 15‐Jun‐27 ‐ ‐ 1,890,000 ‐ 16,935,000 ‐ ‐ ‐ 15‐Dec‐27 ‐ ‐ 1,960,000 ‐ 18,895,000 ‐ ‐ ‐ 15‐Jun‐28 ‐ ‐ 1,105,000 ‐ 20,000,000 950,000 ‐ 950,000 15‐Dec‐28 ‐ ‐ ‐ ‐ 2,135,000 ‐ 3,085,000 15‐Jun‐29 ‐ ‐ ‐ ‐ 2,200,000 ‐ 5,285,000 15‐Dec‐29 ‐ ‐ ‐ ‐ 2,270,000 ‐ 7,555,000 15‐Jun‐30 ‐ ‐ ‐ ‐ 2,380,000 ‐ 9,935,000 15‐Dec‐30 ‐ ‐ ‐ ‐ 2,475,000 ‐ 12,410,000 15‐Jun‐31 ‐ ‐ ‐ ‐ 2,590,000 ‐ 15,000,000 15‐Dec‐31 ‐ ‐ ‐ ‐ 2,695,000 ‐ 17,695,000 15‐Jun‐32 ‐ ‐ ‐ ‐ 2,815,000 ‐ 20,510,000 15‐Dec‐32 ‐ ‐ ‐ ‐ 8,490,000 ‐ 29,000,000
Average Life 5.191 yrs 12.649 yrs 18.390 yrs
* Preliminary; Subject to Change
61 4848-0467-6625.6
CONTINUING DISCLOSURE
The Issuer, the Developer and the Museum Owner have covenanted, for the benefit of the Bondowners, to provide certain financial information and operating data relating to the Issuer, the Developer, the Revenues and the Museum, and to provide notices of the occurrence of certain enumerated events relating to the Issuer, the Developer and the Museum Owner, if material. The specific nature of the financial information to be provided and the information contained in such notices of material events is set forth in APPENDIX D—FORM OF CONTINUING DISCLOSURE AGREEMENTS. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”). The Issuer has never failed to comply in all material aspects with any previous disclosure covenants under the Rule.
NO LITIGATION
The Issuer
At the time of delivery of and payment for the Series 2012 STAR Bonds, the Issuer will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending with respect to which the Issuer has been served with process or is otherwise aware, or, to the knowledge of the officer of the Issuer executing such certificate, threatened against the Issuer affecting the existence of the Issuer or the titles of its officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Series 2012 STAR Bonds, the application of the proceeds thereof in accordance with the Ordinance and/or the Indenture, or the collection or application of the taxes provided for the payment of the Series 2012 STAR Bonds, or in any way contesting or affecting the validity or enforceability of the Series 2012 STAR Bonds, the Ordinance, the Indenture, the agreements entered into by the Issuer, or any action of the Issuer contemplated by any of the said documents, or the collection or application of any tax receipts provided for the payment of the Series 2012 STAR Bonds, or in any way contesting the completeness or accuracy of the Ordinance, the Indenture or any amendments or supplements hereto, or contesting the powers of the Issuer contemplated by any of said documents, nor, to the knowledge of the officer of the Issuer executing such certificate, is there any basis therefore.
The Developer
At the time of delivery of and payment for the Series 2012 STAR Bonds, the Developer will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or threatened by or against the Developer: (i) in any way questioning the due formation and valid existence of the Developer or (ii) in any way questioning or affecting the validity of any agreements entered into by the Developer or the consummation of the transactions contemplated thereby.
CERTAIN LEGAL MATTERS
All legal matters related to the authorization, issuance, sale and delivery of the Series 2012 STAR Bonds are subject to the approval of Kutak Rock LLP, Kansas City, Missouri, Bond Counsel. See APPENDIX E hereto for the proposed form of opinion of Bond Counsel. Certain legal matters will be passed upon for the Issuer by the City Attorney, for the Developer of Phase 1 of the Project, MC Prairiefire I, LLC, by Polsinelli Shughart, P.C., Overland Park, Kansas and for the Underwriter by its counsel, Gilmore & Bell, PC. The legal fees of Bond Counsel and Underwriter’s Counsel are contingent upon the issuance of the Series 2012 STAR Bonds.
62 4848-0467-6625.6
The various legal opinions to be delivered concurrently with the delivery of the Series 2012 STAR Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by the valid exercise of the constitutional powers of the State of Kansas and the United States of America and bankruptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
The remedies available to the bondholders upon a default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code), the remedies provided in the Indenture may not be readily available or may be limited.
The various legal opinions to be delivered concurrently with the delivery of the Series 2012 STAR Bonds express the professional judgment of the attorneys rendering the opinions on the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to such transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
TAX MATTERS
General
In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Series 2012 STAR Bonds (including any original issue discount properly allocable to an owner thereof) is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinions set forth in this paragraph are subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Series 2012 STAR Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Issuer has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2012 STAR Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2012 STAR Bonds.
Notwithstanding Bond Counsel’s opinion that interest on the Series 2012 STAR Bonds is not a specific preference item for purposes of the federal alternative minimum tax, such interest will be included in adjusted current earnings of certain corporations, and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of such corporation’s adjusted current earnings over its alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses).
The interest on the Series 2012 STAR Bonds is excluded from gross income for Kansas income tax purposes whether or not included in gross income for federal income tax purposes.
Bond Counsel expresses no opinion regarding other federal or State tax consequences arising with respect to the Series 2012 STAR Bonds.
The accrual or receipt of interest on the Series 2012 STAR Bonds may otherwise affect the federal (and, in some cases, state and local) income tax liability of the owners of the Series 2012 STAR
63 4848-0467-6625.6
Bonds. The extent of these other tax consequences will depend upon such owner’s particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Series 2012 STAR Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers otherwise entitled to claim the earned income credit, or taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Series 2012 STAR Bonds.
[Original Issue Discount
Series 2012 STAR Bonds sold at an initial public offering price that is less than the stated amount to be paid at maturity constitute “Discount Bonds.” The difference between the initial public offering prices, as set forth on the inside front cover page of this Official Statement, of such Discount Bonds and their stated amounts to be paid at maturity, constitutes original issue discount treated as interest which is excluded from gross income for federal income tax purposes, as described above.
The amount of original issue discount which is treated as having accrued with respect to such Discount Bond is added to the cost basis of the owner in determining, for federal income tax purposes, gain or loss upon disposition of such Discount Bond (including its sale, redemption or payment at maturity). Amounts received upon disposition of such Discount Bond which are attributable to accrued original issue discount will be treated as tax-exempt interest, rather than as taxable gain, for federal income tax purposes.
Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discount Bond, on days which are determined by reference to the maturity date of such Discount Bond. The amount treated as original issue discount on such Discount Bond for a particular semiannual accrual period is equal to the product of (i) the yield to maturity for such Discount Bond (determined by compounding at the close of each accrual period) and (ii) the amount which would have been the tax basis of such Discount Bond at the beginning of the particular accrual period if held by the original purchaser, less the amount of any interest payable for such Discount Bond during the accrual period. The tax basis is determined by adding to the initial public offering price on such Discount Bond the sum of the amounts which have been treated as original issue discount for such purposes during all prior periods. If such Discount Bond is sold between semiannual compounding dates, original issue discount which would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.
Owners of Discount Bonds should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date and with respect to the state and local tax consequences of owning a Discount Bond.]
[Original Issue Premium
Series 2012 STAR Bonds sold at an initial public offering price that is greater than the stated amount to be paid at maturity constitute “Premium Bonds.” An amount equal to the excess of the issue price of a Premium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond. An initial purchaser of a Premium Bond must amortize any premium over such Premium Bond’s term using constant yield principles, based on the purchaser’s yield to maturity (or, in the case of Premium Bonds callable prior to their maturity, by amortizing the premium to the call date, based on the
64 4848-0467-6625.6
purchaser’s yield to the call date and giving effect to the call premium). As premium is amortized, the purchaser’s basis in such Premium Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser’s basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Premium Bonds should consult with their tax advisors with respect to the determination and treatment of amortizable premium for federal income tax purposes and with respect to the state and local tax consequences of owning a Premium Bond.]
Backup Withholding
As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Series 2012 STAR Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made after March 31, 2007 to any bondholder who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The new reporting requirement does not in and of itself affect or alter the excludability of interest on the Series 2012 STAR Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations.
Changes in Federal Tax Law
From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to above or adversely affect the market value of the Series 2012 STAR Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Series 2012 STAR Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Series 2012 STAR Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2012 STAR Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Series 2012 STAR Bonds and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.
NO BOND RATING
No rating has been applied for or received in connection with the issuance of the Series 2012 STAR Bonds.
UNDERWRITING
Stifel Nicolaus & Company, Incorporated (the “Underwriter”), pursuant to a purchase agreement among the Underwriter, the Issuer and the Developer, has agreed, subject to certain conditions, to purchase the Series 2012 STAR Bonds at the aggregate purchase price of $______(which takes into account an underwriter’s discount of $______. The obligation of the Underwriter to purchase the Series 2012 STAR Bonds is subject to certain terms and conditions set forth in the purchase agreement among the Underwriter, the Issuer and the Developer. The Series 2012 STAR Bonds
65 4848-0467-6625.6
may be sold to certain dealers, banks and others at prices lower than the initial offering prices, and such initial offering prices may be changed, from time to time by the Underwriter. Under the purchase agreement, the Developer has agreed to indemnify the Underwriter under certain circumstances against certain liabilities, including certain liabilities under federal securities laws.
FINANCIAL ADVISOR
The Issuer has retained Public Financial Management of Minneapolis, Minnesota, as financial advisor (the “Financial Advisor”) in connection with the issuance of the Series 2012 STAR Bonds. In assisting with the preparation of the Official Statement, the Financial Advisor has relied upon Issuer officials, and the Financial Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. The Financial Advisor is not a public accounting firm and has not been engaged by the Issuer to compile, review, examine, or audit any information in the Official Statement in accordance with accounting or audit standards. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal securities or other public securities. The Financial Advisor will not participate in the underwriting of the Series 2012 STAR Bonds.
[Remainder of page intentionally left blank]
66 4848-0467-6625.6
AUTHORIZATION
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. The Issuer and the Developer have authorized the distribution and execution of this Official Statement.
CITY OF OVERLAND PARK, KANSAS
By: Carl R. Gerlach, Mayor
MC PRAIRIEFIRE I, LLC
By: Name: Title:
4848-0467-6625.6
APPENDIX A RETAIL SALES TAX REPORT
4848-0467-6625.6
DRAFT
Sales Tax STAR Bond Revenue Study for the Proposed Prairiefire at LionsGate Development
Overland Park, Kansas
November 5, 2012
TABLE OF CONTENTS
EXECUTIVE SUMMARY ...... 2
Project Overview ...... 2 Study Purpose ...... 3 Overview of Proposal Phase I Development ...... 4 Overview of Proposal Phase II Development ...... 6 Key Findings and Conclusions Area ...... 7
MARKET OVERVIEW ...... 10
Primary Market Area ...... 10 Population and Households ...... 12 Supply and Demand Comparisons ...... 21 Overview of Competitive Market Lifestyle and Retail Centers ...... 24
ESTIMATE RETAIL STAR BOND REVENUE ...... 30
STAR Bond Taxes ...... 30 Phase I Tenants and Sales Estimates ...... 31 Adjustments ...... 40 STAR Bond Revenue Collection Projections ...... 42
MUSEUM OF PRAIRIEFIRE STAR BOND REVENUE ...... 44
Overview ...... 44 American Museum of Natural History ...... 46 Market Overview ...... 48 Museum Demographics ...... 52 Attendance Assumptions and Forecasts ...... 54 Estimated Museum Sales and STAR Bond Capture ...... 57
COMBINED STAR BOND REVENUE COLLECTION ...... 60
APPENDICES
A Detailed Retail Sales Projection
Prairiefire at LionsGate STAR Bond Revenue Study
EXECUTIVE SUMMARY
Project Overview
Prairiefire at LionsGate (the “Project”) is a proposed mixed-use development that is to be constructed on a 61.5 acre site fronting on West 135th Street in Overland Park, Kansas. The site includes the 56 acre Redevelopment Area and a 5.5 acre townhome development. Overland Park is located to the southwest of downtown Kansas City in Johnson County. The map shows the location of Prairiefire at Lionsgate in relation to Overland Park, Johnson County, and downtown Kansas City.
DEVELOPMENT STRATEGIES 2 Prairiefire at LionsGate STAR Bond Revenue Study
The site is surrounded by existing development. To the west is the partially occupied 1.1 million square foot Corbin Park Shopping Center. To the north is the Overland Trail Middle School and high-end multi- family residential. To the east side of Nall Avenue is a partially completed commercial development. To the south is the Nicklaus Golf Club at LionsGate, with its high-end single family residences.
DEVELOPMENT STRATEGIES 3 Prairiefire at LionsGate STAR Bond Revenue Study
Neighboring Development
When completed, the proposed Project is scheduled to include retail space, office space, a hotel, residences, a museum, an outdoor interpretive nature area and a perimeter trail system. It is proposed that construction of the Project be accomplished in two phases. Phase I is to include retail space, the museum, a portion of the interpretive nature area and trail system, and residences. Phase II is to include more retail space, the hotel, office space, additional residences and the remainder of the interpretive nature area and trail system. Phase I and Phase II are shown on the map below.
Development Phasing
Study Purpose
To fund a portion of the Project, STAR bonds are being sought, pursuant to the STAR Bonds Financing Act, K.S.A. 12-17,160 et seq. (the “STAR Bonds Financing Act”). On October 22, 2012 the City Council of Overland Park approved the STAR Bond Project Plan, and the STAR Bond Project Plan Ordinancewas published and became effective on November 6, 2012..
While STAR Bonds will be sought for portions of the entire Project, the request will be divided into two parts that will coincide with the proposed phasing of development. Therefore, it is the intent of this
DEVELOPMENT STRATEGIES 4 Prairiefire at LionsGate STAR Bond Revenue Study revenue study to only focus on the STAR Bond revenues that could be derived from the uses to be constructed in Phase I of the Project.
Overview of Proposed Phase I Development
It is important to note that the development proposed for Phase I is not contiguous. A portion of the proposed Phase I development is to be constructed on the west side of the site, containing approximately 9 acres located on the southeast corner of West 135th Street and Lamar Avenue intersection. This area is projected to include approximately 57,865 square feet of retail space. The retail development is to be anchored by a 23,978 square foot REI and a 24,803 square foot The Fresh Market grocery store. Tenants have not been identified for the remaining 9,084 square feet of spec space. This portion of Phase I is projected to be open in the fall of 2013.
The portion of Phase I development on the east side of the site is to be constructed on approximately 26 acres located on the southwest corner of the intersection of West 135th Street and Nall Avenue. This area is projected to include approximately 154,819 square feet of retail space to be anchored by Cinetopia, a 75,398 square foot movie theater with restaurant and wine bar, and Pinstripes (a 32,335 square foot bowling, bocce ball, restaurant and event venue). In addition, six restaurants/bars are to be built – Rock Brews (5,453 square
DEVELOPMENT STRATEGIES 5 Prairiefire at LionsGate STAR Bond Revenue Study feet), The Pub (6,691 square feet), Paradise Diner (2,627 square feet), Newport Grill (4,500 square feet), The Club (7,869 Square feet) and Bar Louie (6,025 square feet). There will also be 13,921 square feet of spec retail space. The Developer has elected to initiate leasing of the spec retail space once construction has begun. This portion of Phase I is projected to be open in the spring of 2014.
Central to the Phase I development program will be the construction of the 40,000 square foot Museum of Prairiefire, which is to be especially designed to accommodate permanent exhibits and a revolving series of exhibits from The American Museum of Natural History, in New York, New York. The Museum is to be set in a 6 acre natural wetlands interpretive area, which will include interpretive trails that will connect to trail system that will extend along the entire perimeter of the 56-acre site. The museum is projected to open in the spring of 2014.
DEVELOPMENT STRATEGIES 6 Prairiefire at LionsGate STAR Bond Revenue Study
The final component of the eastern Phase I area will be the construction of an apartment complex, to be located on the northwest corner of Nall Avenue and West 137th Street intersection. The development, to be called “Hearthview”, is projected to contain approximately 300 units in eight three to four story buildings plus a clubhouse.
Overview of Proposed Phase II Development
As previously mentioned, Phase II development will not be part of the current STAR Bond offering. However, a brief overview of Phase II is provided in order to complete the picture of the entire development that is to be constructed as part of Prairiefire at LionsGate project. Phase II is to be developed on 21 acres located between the two Phase I development areas.
Commercial development is currently planned to be arranged as a lifestyle center focused on a street running east-west between the two Phase I areas and a central plaza, which opens out on West 137th Street. The buildings are primarily three to four stories tall and are projected to contain approximately 157,000 square feet of ground level retail space and 280,000 square feet of office space to be located on the upper floors.
A five story hotel, containing approximately 80 to 120 rooms is planned to be constructed along the western edge of Phase II overlooking the museum and interpretive area.
DEVELOPMENT STRATEGIES 7 Prairiefire at LionsGate STAR Bond Revenue Study
The final component of Phase II is an apartment complex to be constructed on the northeast corner of Lamar Avenue and West 137th Street. A clubhouse and approximately 175 units are to be constructed in four three to four story buildings.
Phase II components are not to be funded at this time and are conceptual in nature. Such plans are subject to change and contingent on future events. The projected content herein is not contingent on successful financing and construction of Phase II.
Key Findings and Conclusions
Retail Market Overview - Overall, due to location or tenancy none of the competitive developments compete directly with Prairiefire with Phase I tenants the skew towards high-end first to market retail anchors and a concentration of unique dining and entertainment concepts. But several insights can be gained through this analysis.
Lifestyle retail and entertainment developments are generally performing well. According to CoStar the average occupancy of large regional malls and lifestyle centers in the Kansas City region is 98 percent. The adjacent Corbin Park shopping center stalled in 2008 due to financial and ownership issues, but several anchor tenants have opened, new ownership has completed build-out of the property and is now leasing available space.
Developments such as Country Club Plaza and the Power and Light District define the primary market area for Prairiefire to the north, as most visitors and residents in central and northern Kansas City will more often choose these more proximate options.
The Town Center Plaza, Park Place and One Nineteen cluster along with other retail along the 119th Street corridor has already established the South Johnson County submarket as a premier retail destination with numerous high-end retail and restaurant tenants.
Lifestyle center development is well established in the central and northern portions of the Kansas City region. However, South Johnson County lacks a destination lifestyle center offering a unique mix of dining, entertainment and retail.
Most of the confirmed tenants for Phase 1 of Prairiefire will be the first in the Kansas City region with a focus on large upscale shopping anchors with a concentration of dining and entertainment tenants within a “main street” entertainment district. As a result the more retail focused developments along 119th Street and anticipated for the adjacent Corbin Park are more complementary and not directly competitive.
Our demographic analysis identifies the area immediately surrounding Prairiefire as one of the highest income and fastest growing areas in the Kansas City region. It is contains one of the highest densities of disposable income in the region. Furthermore the strongest growth is occurring south of 135th Street, and there is very limited retail development serving the area to the south.
DEVELOPMENT STRATEGIES 8 Prairiefire at LionsGate STAR Bond Revenue Study
Prairiefire and complementary retail along the 135th Street corridor will be the primary shopping and dining option for new high income residents moving to South Johnson County.
We are confident that Prairiefire is well positioned to compete within both the regional and local retail environment given the demographics, location, project design and tenanting.
Museum of Prairiefire -- The Museum of Prairiefire is well positioned to attract visitors from both the Kansas City metropolitan area and the greater region. We conclude that the Museum of Prairiefire will be successful for the reasons identified below:
Over the next five years, the Museum of Prairiefire will have exclusive rights, within a 300 mile radius of Overland Park, to special exhibits developed by the American Museum of Natural History in New York City, one of the premiere cultural institutions in the world. The agreement between the Museum of Prairiefire and the American Museum of Natural History will include an option to extend the contract for an additional five years. No museum of natural history currently is located in the Kansas City metro. Documented attendance to special exhibits held at other museums in the Kansas City metro is high The presence of other entertainment, shopping, and dining amenities at the Prairiefire at LionsGate development will attract additional museum visitors. The Overland Park Convention & Tourism Bureau plans to direct visitors and conventioneers to the Museum of Prairiefire.
Combined STAR Bond Revenue Collection from the Retail and Museum Components
The following table combines the revenue collected from the STAR Bond from both the retail and museum components.
DEVELOPMENT STRATEGIES 9 Prairiefire at LionsGate STAR Bond Revenue Study
Projected Annual Sales Tax Revenues Available for STAR Bond Financing Obligations Prairiefire at LionsGate, Phase I (Retail and Museum Revenue) STAR Year STAR Bond Sales Tax STAR Bond Sales Tax STAR Bond STAR Bond Starts: Nov. 2012 Year Collections From Collections From Collections From Sales Tax Ends: Oct. 2032 Ending Retail Anchors In-line Retail Museum Component Collections 0Oct-12$ -$ - $ - $ - 1Oct-13 - - - - 2 Oct-14 2,661,956 933,796 176,863 3,772,614 3 Oct-15 3,890,481 1,763,037 327,296 5,980,814 4 Oct-16 4,523,091 2,108,549 300,628 6,932,268 5 Oct-17 4,716,652 2,234,519 282,925 7,234,096 6 Oct-18 4,816,007 2,288,524 273,455 7,377,986 7 Oct-19 4,870,809 2,314,566 271,252 7,456,626 8 Oct-20 4,959,962 2,356,930 273,470 7,590,362 9 Oct-21 5,059,161 2,404,069 277,027 7,740,257 10 Oct-22 5,160,344 2,452,150 280,780 7,893,274 11 Oct-23 5,263,551 2,501,193 284,603 8,049,347 12 Oct-24 5,322,983 2,529,435 288,499 8,140,916 13 Oct-25 5,420,319 2,575,688 292,468 8,288,475 14 Oct-26 5,528,725 2,627,201 296,513 8,452,440 15 Oct-27 5,639,300 2,679,745 300,636 8,619,681 16 Oct-28 5,752,086 2,733,340 304,839 8,790,265 17 Oct-29 5,765,908 2,739,908 309,123 8,814,939 18 Oct-30 5,861,079 2,785,133 313,490 8,959,702 19 Oct-31 5,978,300 2,840,836 317,943 9,137,079 20 Oct-32 6,097,866 2,897,652 322,484 9,318,002
TOTAL $ 97,288,579 $ 45,766,270 $ 5,494,293 $ 148,549,143
DEVELOPMENT STRATEGIES 10 Prairiefire at LionsGate STAR Bond Revenue Study
MARKET OVERVIEW
Primary Market Area
We have focused our analysis of demographics and potential sales generated by Prairiefire on the primary market area. The primary market area (PMA) is briefly defined as the smallest geographic area that is expected to generate between 70 to 80 percent of the support for the proposed project. The primary market area is separated from adjacent market areas by natural and manmade barriers such as rivers, highways, railroads, major arteries, or a marked difference in the socioeconomic makeup of the neighborhood or area. It is also confined by competitive retail developments located in the Kansas City Metropolitan area.
The primary market area has been determined by: 1) Interviews conducted with city officials, real estate agents, and area developers; 2) Demographic analysis; and 3) Field analyst observations.
In the case of the subject property, the PMA consists mainly of the urbanized areas of Johnson County, Kansas, including (but not limited to) the cities of Overland Park, Lenexa, Leawood, and Olathe. This area is generally bounded by Kansas State Highway 7 on the west, 175th Street on the south, Stateline Road (the Kansas/Missouri state line) on the east, and the Johnson/Wyandotte county line to the north. It includes a portion of Kansas City, Missouri located directly across the state line. These high-income neighborhoods are located south of 47th Street, north of 75th Street and west of Troost Avenue. Overall, the area is largely suburban in nature and is the highest income area in the Kansas City region.
The areas of Johnson County to the south and west of the PMA have not been developed and remain largely rural in nature. The areas to the immediate north and east of the PMA include neighborhoods with lower income households that would not constitute a significant portion of customers for the retail and dining tenants at Prairiefire. These areas also create some separation from other high-income areas in the northern and eastern portions of the Kansas City region. While these households could shop and dine at Prairiefire, these areas of the region include other attractive lifestyle centers and entertainment districts such as Zona Rosa, Country Club Plaza, and the Power and Light District.
Although households outside of the PMA may not generate the majority of sales at Prairiefire, the vast majority of the committed tenants are new to Kansas City and will attract sales from households throughout the region. The museum as well as the numerous hotels in Overland Park and Johnson County will also draw customers from outside the Kansas City region.
The map on the following page highlights the PMA. Demographics of the area and retail sales opportunities are discussed in the following sections.
DEVELOPMENT STRATEGIES 11 Prairiefire at LionsGate STAR Bond Revenue Study
DEVELOPMENT STRATEGIES 12 Prairiefire at LionsGate STAR Bond Revenue Study
Population and Households
Population, Income, and Age Trends for Prairiefire PMA and Surrounding Geographies - Prairiefire is located on the south side of Overland Park in northeastern Johnson County, Kansas. The Prairiefire primary market area (PMA) geography is designed to include the area from which visitors will travel in order to visit the Prairiefire site.
The designated Prairiefire PMA, Overland Park, and Johnson County are located in the Kansas City MSA and are characterized by high income levels, high levels of educational attainment, and a growing young population. According to ESRI, the current population in the Prairiefire PMA is estimated to be 521,119 people, which reflects a 17 percent increase since 2000. ESRI projects that the PMA’s population will increase by six percent over the next four years. The city of Overland Park and the Kansas City MSA experienced similar population growth in the past decade, a trend that is expected to continue through 2016. Johnson County as a whole experienced greater growth over the same time period and additional growth is projected through 2016.
The average household size in all four geographies is similar, with sizes ranging from 2.41 to 2.53 persons. Marital status is also similar in all four geographic regions, varying only by a few percentage points per category. The Prairiefire PMA and Overland Park have slightly higher educational attainment than the Kansas City MSA and the county as a whole; specifically, residents of Overland Park and the PMA have higher rates of Bachelors and Graduate Degrees.
The following table compares demographic characteristics of the PMA, Overland Park, Johnson County, and the Kansas City MSA.
DEVELOPMENT STRATEGIES 13 Prairiefire at LionsGate STAR Bond Revenue Study
Demographic Trends Prairiefire Overland Johnson Kansas City Description PMA Park County MSA Population 2016 Projection 554,915 187,483 588,218 2,141,252 2011 Estimate 521,119 175,265 549,809 2,051,278 2010 Census 516,451 173,372 544,179 2,035,334 2000 Census 446,119 149,080 451,086 1,836,038 Growth 2011-2016 6% 7% 7% 4% Growth 2010-2011 1% 1% 1% 1% Growth 2000-2010 16% 16% 21% 11% Household Size 2016 Projection 2.47 2.40 2.53 2.50 2011 Estimate 2.47 2.41 2.53 2.51 2010 Census 2.47 2.41 2.53 2.51 2000 Census 2.48 2.47 2.56 2.51 Growth 2011-2016 0.0% -0.4% 0.0% -0.4% Growth 2010-2011 0.0% 0.0% 0.0% 0.0% Growth 2000-2010 -0.4% -2.4% -1.2% 0.0% Marital Status Never Married 26% 25% 25% 28% Married 59% 59% 60% 55% Widowed 4% 5% 4% 6% Divorced 11% 10% 11% 12% Educational Attainment Less Than 9th Grade 1% 1% 1% 3% 9th - 12th Grade 2% 2% 3% 7% High School Graduate 15% 13% 17% 28% Some College 21% 20% 21% 23% Associates Degree 7% 6% 7% 7% Bachelors Degree 35% 37% 34% 21% Graduate/Professional Degree 19% 19% 17% 11% © ESRI, 2012 The median age of the population in all four geographic areas is relatively similar. The PMA’s population is the youngest, with an average age of 37.1 years. The largest segment of the population in the PMA is in the Family Years (aged 35-49) cohort, followed by the Empty Nesters (aged 50-64) and K-12 (aged 5-17) cohorts. This shows a prevalence of both an aging population as well as families with children. The following table shows age distributions for the four geographic areas.
DEVELOPMENT STRATEGIES 14 Prairiefire at LionsGate STAR Bond Revenue Study
Age Distribution Comparison Prairiefire Overland Johnson Kansas City Age Cohort PMA Park County MSA Total population (estimates): 523,367 179,709 549,792 2,051,186 0 - 4 (Pre-school) 7% 7% 7% 7% 5 - 17 (K-12) 19% 19% 19% 18% 18 - 24 (College Age) 8% 8% 8% 9% 25 - 34 (Early Workforce) 13% 12% 13% 13% 35 - 49 (Family Years) 23% 23% 23% 22% 50 - 64 (Empty Nesters) 19% 19% 19% 19% 65 - 74 (Seniors) 6% 6% 5% 6% 75+ (Elderly) 5% 6% 5% 6% Median Age 37.1 37.8 36.8 36.8 © ESRI (2010), 2012 * As 2010 Census data is not yet available for age breakdowns, the above population numbers and percentages are projections based off of the 2000 Census; this is the most Analysis of Trends - The population in all four geographies has increased since 2000 and the populations of each are expected to grow through 2016. The number of households in all four geographies is also projected to grow through 2016, with Overland Park projected to see the greatest amount of growth in households (eight percent). The table below illustrates projected population increases by age group through 2015 in the PMA. The PMA is projected to see an increase of nearly 40 percent in its Senior population through 2015. Similarly, there is a projected 15 percent increase in the Early Workforce population during the same time period, while the Family Years population is projected to decrease by five percent.
PMA Age Distribution Comparison, 2000 - 2015
Age Cohort 2000 2010 % Change 2015 % Change Total population (estimates): 446,119 523,367 17% 555,475 6% 0 - 4 (Pre-school) 32,474 37,967 17% 40,050 5% 5 - 17 (K-12) 84,007 96,837 15% 102,826 6% 18 - 24 (College Age) 34,170 42,692 25% 44,244 4% 25 - 34 (Early Workforce) 68,936 67,608 -2% 77,809 15% 35 - 49 (Family Years) 115,006 122,622 7% 116,527 -5% 50 - 64 (Empty Nesters) 65,236 99,377 52% 106,455 7% 65 - 74 (Seniors) 23,290 28,993 24% 39,804 37% 75+ (Elderly) 22,997 27,279 19% 27,762 2% Median Age 35.4 37.1 36.8 © ESRI (2010), 2012 * As 2010 Census data is not yet available for age breakdowns, the above population numbers are projections based off of the 2000 Census; this is the most recent data available. Households by Income - According to ESRI, the median household income in the PMA increased 31 percent between 2000 and 2010. The household income distribution is detailed in the following table.
DEVELOPMENT STRATEGIES 15 Prairiefire at LionsGate STAR Bond Revenue Study
Income Trend and Distribution Comparison Prairiefire Overland Johnson Kansas City Household Income PMA Park County MSA Median Income 2015 Projection $92,602 $99,034 $93,002 $67,190 2010 Estimate $80,238 $83,061 $80,454 $60,442 2000 Census $61,351 $62,388 $61,484 $45,783 2010 Income Distribution* Total households (estimates): 209,473 71,637 214,048 806,044 <$10,000 2% 2% 2% 5% $10,000 - $14,999 2% 2% 2% 3% $15,000 - $19,999 2% 2% 2% 3% $20,000 - $24,999 3% 2% 2% 4% $25,000 - $29,999 3% 2% 3% 4% $30,000 - $34,999 2% 2% 2% 4% $35,000 - $39,999 4% 3% 3% 6% $40,000 - $44,999 4% 4% 4% 6% $45,000 - $49,999 5% 5% 5% 6% $50,000 - $59,999 8% 8% 8% 9% $60,000 - $74,999 11% 11% 12% 12% $75,000 - $99,999 17% 16% 18% 17% $100,000 - $124,999 14% 14% 14% 9% $125,000 - $149,999 10% 10% 10% 5% $150,000 - $199,999 7% 8% 7% 4% $200,000 - $249,999 3% 5% 3% 2% $250,000 - $499,999 3% 3% 3% 1% $500,000 + 1% 1% 1% 0% © ESRI (2010), 2012 * As 2010 Census data is not yet available for income breakdowns, the above household numbers and percentages are projections based off of the 2000 Census; this is the most recent data available. During the same time period, incomes in the city, county, and region also increased more than 30 percent. Overall, the median incomes in the PMA and Overland Park are higher than in the MSA and Johnson County. ESRI projects that the median income in the PMA and Overland Park will increase by 15 percent and 19 percent, respectively, between 2010 and 2015, far outpacing income growth in the MSA, but mirroring income growth in the county. The high concentration of households in the PMA, Overland Park, and Johnson County that make $100,000 to $200,000 a year suggests that the area will support new high-end tenants located in Prairiefire.
Submarket Comparisons of Population Growth and Income - It is important to take into account the difference in population growth between northern and southern Johnson County. Growth has occurred at a much higher rate in the southern half of Johnson County (south of 135th Street) in the past decade than the northern portion. From 2000 through 2011, the population of southern Johnson County more than doubled (57 percent increase), whereas the population of northern Johnson County has increased by eleven percent during the same time period. The land area north of 135th Street in the county is mostly built out; therefore growth is occurring in the Southern portion. The chart below illustrate population trends for northern and southern Johnson County.
DEVELOPMENT STRATEGIES 16 Prairiefire at LionsGate STAR Bond Revenue Study
Johnson County, KS Population North and South of 135th Street North Johnson South Johnson County County Population 2000 347,470 103,616 2011 387,169 162,640 2016 411,941 176,277 Percent Change 2000 - 2011 11.4% 57.0% 2011 - 2016 6.4% 8.4% © ESRI, 2012 Based on income data from ESRI, the southern portion of the county is being populated by higher income households; in 2011, the median household income in southern Johnson County ($85,567) was 22 percent higher than in the northern portion. Similarly, the mean household income in southern Johnson County in 2011 ($103,158) was 15 percent higher than in the northern portion. The following table illustrates the difference in income between households located south of the 135th Street Corridor and those north of the corridor. The supply of retail space south of 135th Street is very limited. Although the county has a very large supply of retail space, developments along the corridor (including Prairiefire) are well positioned to capture spending from the growing number of high-income households south of 135th Street.
Johnson County, KS Incomes North and South of 135th Street North Johnson South Johnson County County Median Household 2011 $70,117 $85,567 2016 $81,903 $94,864 Average Household 2011 $89,239 $103,158 2016 $103,855 $119,254 © ESRI, 2012
DEVELOPMENT STRATEGIES 17 Prairiefire at LionsGate STAR Bond Revenue Study
Households by Disposable Income - Household disposable income data indicate that the PMA, Johnson County, and Overland Park have relatively high disposable incomes in comparison to the nation as a whole. As of 2011, median disposable income in Overland Park is the highest among the study geographies, at $62,947 a year, which is only 3.7 percent higher than the county ($60,659), but 30 percent higher than the nation as a whole.
The amount of income dedicated to Apparel & Services; Sports, Recreation, Exercise Equipment; Food at Home; Food Away from Home; Alcoholic Beverages; and Entertainment Fees and Admissions represent the amount of money residents may spend at the retail establishments in the Prairiefire development. On average, households in Overland Park spend more on the aforementioned retail categories than residents of the county, PMA, and nation as a whole. Of all selected retail categories, Overland Park households spend the most on food. Of the total retail spending by each household in Overland Park, eight percent ($6,061 per year) is spent on Food at Home. Six percent ($4,540 per year) of all retail spending per household is spent on Food Away from Home, consisting mostly of eating at restaurants.
The table below displays Overland Park’s high level of spending on food, as well as other retail categories in comparison to the other study areas. In the Prairiefire development, sports and recreation apparel stores such as REI, and bars and entertainments venues such as Pinstripes and Rock and Brews, have a surrounding population with high incomes to support their business.
Household Disposable Income PMA Overland Park Johnson County United States Average % of Total Average % of Total Average % of Total Average % of Total Description Spending Retail Spending Spending Retail Spending Spending Retail Spending Spending Retail Spending Income Dedicated to Retail Expenditures Apparel & Services $2,277 3.57% $2,392 3.10% $2,257 3.09% $2,321 4.31% Sports, Recreation, Exercise Equipment $197 0.31% $207 0.27% $197 0.27% $176 0.33% Food at Home $5,772 9.05% $6,061 7.87% $5,723 7.83% $4,337 8.06% Food Away from Home $4,326 6.78% $4,540 5.89% $4,292 5.87% $3,120 5.80% Alcoholic Beverages $786 1.23% $824 1.07% $775 1.06% $553 1.03% Entertainment Fees and Admissions $889 1.39% $935 1.21% $885 1.21% $600 1.11% Total Households 209,472 71,638 214,047 116,759,989 Average Household Size 2.47 2.41 2.53 2.59 Median Income $80,238 $83,061 $80,454 $54,442 Median Disposable Income $60,538 $62,947 $60,659 $43,033 © ESRI (2010), 2012 On the following pages we have included maps illustrating population growth, median household income growth, and income density for Overland Park and the surrounding areas.
DEVELOPMENT STRATEGIES 18 Prairiefire at LionsGate STAR Bond Revenue Study
DEVELOPMENT STRATEGIES 19 Prairiefire at LionsGate STAR Bond Revenue Study
Insert Income Growth Map DEVELOPMENT STRATEGIES 20 Prairiefire at LionsGate STAR Bond Revenue Study
DEVELOPMENT STRATEGIES 21 Prairiefire at LionsGate STAR Bond Revenue Study
Supply and Demand Comparisons
A comparison of supply and demand in different retail categories can identify potential opportunities and risks in the local market. If there is a gap between the demand for products in a category and the amount of supply determined by existing sales, it is an indication that the local shoppers’ needs are being satisfied somewhere outside of the city. This would indicate an opportunity for a new store in the city to capture that demand locally. Conversely, if supply is greater than local demand, local merchants are capturing sales from residents in surrounding areas or visitors shopping within the city. Local demand/spending has been estimated by ESRI, using information from the US Bureau of Labor Statistics Consumer Expenditure Survey. Supply has also been estimated by ESRI using information from the US Census’ Census of Retail Trade. The amount of space was multiplied by an estimated sales per square foot for each retail category. The sales per square foot estimate was determined using our estimates of sales for Prairiefire. These sales are significantly higher than average for the KC market. Thus, the resulting surplus/supported square footage are understated in terms of the general retail market, but consistent with high-end lifestyle center. We have included analysis of specific categories most relevant to the tenant mix proposed and currently committed to Prairiefire. The following table summarizes this comparison for retail supply and demand in the PMA, Johnson County, and the Kansas City MSA.
DEVELOPMENT STRATEGIES 22 Prairiefire at LionsGate STAR Bond Revenue Study
Supply and Demand Analysis Primary Market Area Demand (Consumer Estimated Surplus SF/ Industry Group Spending) Supply (Retail Sales) Retail Gap Sales/SF** Supported Add'l SF General Shopping and Dining* $4,859,614,758 $4,781,354,382 $78,260,376 $600 130,000 Shopping $3,711,587,169 $3,868,692,703 ($157,105,534) $725 (217,000) Furniture & Home Furnishings Stores $191,052,892 $226,936,360 ($35,883,468) $725 (49,000) Groceries and Specialty Foods $1,196,212,489 $1,362,270,917 ($166,058,428) $725 (229,000) Clothing & Clothing Accessories Stores $282,955,396 $303,400,022 ($20,444,626) $725 (28,000) Sporting Goods, Hobby, Book & Music Stores $70,674,642 $119,994,720 ($49,320,078) $725 (68,000) Dining $1,148,027,589 $912,661,679 $235,365,910 $590 399,000 Full-Service Restaurants $444,975,686 $398,164,347 $46,811,339 $590 79,000 Johnson County Demand (Consumer Estimated Surplus SF/ Industry Group Spending) Supply (Retail Sales) Retail Gap Sales/SF** Supported Add'l SF General Shopping and Dining* $4,947,805,465 $4,603,098,917 $344,706,548 $600 575,000 Shopping $3,778,052,545 $3,805,907,556 ($27,855,011) $725 (38,000) Furniture & Home Furnishings Stores $194,699,713 $209,533,551 ($14,833,838) $725 (20,000) Groceries and Specialty Foods $1,227,154,346 $1,339,286,957 ($112,132,611) $725 (155,000) Clothing & Clothing Accessories Stores $287,323,313 $252,054,986 $35,268,327 $725 49,000 Sporting Goods, Hobby, Book & Music Stores $71,667,669 $114,822,804 ($43,155,135) $725 (60,000) Dining $1,169,752,920 $797,191,361 $372,561,559 $590 631,000 Full-Service Restaurants $453,976,754 $307,360,007 $146,616,747 $590 249,000
Kansas City MSA Demand (Consumer Estimated Surplus SF/ Industry Group Spending) Supply (Retail Sales) Retail Gap Sales/SF** Supported Add'l SF General Shopping and Dining* $14,000,533,383 $13,897,616,274 $102,917,109 $600 172,000 Shopping $10,698,818,756 $10,936,289,397 ($237,470,641) $725 (328,000) Furniture & Home Furnishings Stores $497,075,691 $733,185,850 ($236,110,159) $725 (326,000) Groceries and Specialty Foods $3,268,828,207 $3,322,833,672 ($54,005,465) $725 (74,000) Clothing & Clothing Accessories Stores $734,522,772 $674,739,709 $59,783,063 $725 82,000 Sporting Goods, Hobby, Book & Music Stores $186,436,515 $213,149,506 ($26,712,991) $725 (37,000) Dining $3,301,714,627 $2,961,326,877 $340,387,750 $590 577,000 Full-Service Restaurants $1,277,395,612 $1,097,764,201 $179,631,411 $590 304,000 * Excludes auto sales, gasoline sales, and non-store retail sales ** Uses averages from Prairiefire sales projections which are higher than average for the overall KC retail market This analysis indicates all three areas are generally well balanced in terms of the overall supply of shopping and dining. Overall, the PMA would support about 130,000 square feet of additional shopping and dining space. Johnson County as a whole has a significant demand gap that would support over half a million square feet of retail space. This indicates there is substantial unmet retail demand in the less developed areas of the county. However, over a 20-year period these will be the areas that see significant growth in households and income as the Kansas City region continues to expand into southern Johnson County. Our demographic analysis of the market also confirms that the area of Johnson County located south of Prairiefire is one of the fastest growing areas of the region in terms of both population and income.
Looking specifically at retail sectors that are currently committed or have been targeted as potential tenants, the analysis of Prairiefire shows that the gap is largely contained within the dining sector. Restaurant tenants committed to Prairiefire are all in the full-service dining sector. The total square footage of these tenants is approximately 145,000 square feet; however, two of the tenants (Cinetopia and Pinstripes) include large amounts of non-restaurant entertainment space. So the project would satisfy the existing gap for full service dining within the PMA and Johnson County. A large portion of the dining sector gap is contained within limited
DEVELOPMENT STRATEGIES 23 Prairiefire at LionsGate STAR Bond Revenue Study service dining, and these types of tenants should be considered when leasing the spec retail space within Prairiefire.
There are no existing demand gaps for the shopping sectors that are committed or targeted for the shopping component of Prairiefire. It is not unusual for areas with large concentrations of retail to have more retail supply than demand. This indicates that retail space within the PMA is supported by shoppers from outside the PMA and visitors from outside the region. In this case visitors are currently attracted to the area by the Overland Park Convention Center and additional visitors will be attracted in the future with the planned museum component. In this case the South Johnson County retail submarket has the lowest vacancy rate and highest lease rates of suburban Kansas City submarkets, indicating that the market does not have an oversupply of retail space.
Furthermore, population and income growth in the PMA (specifically south and west of Prairiefire) is among the strongest in the region, and will continue to support further development of retail space. Most of this growth is occurring south of 135th Street, so Prairiefire is ideally located to capture demand from these new high-income households. Large-scale retail development serving the area south of 135th Street is almost non-existant.
Nonetheless, a shopping center in a market where there is no excess local demand to be captured must be competitive and positioned well to attract spending from both PMA residents and those shoppers and visitors from outside the PMA. Prairiefire is currently 80 percent pre-leased and all of the tenants are the first and only locations in the entire Kansas City market. For example, the nearest REI stores to Kansas City are currently located in Tulsa and St. Louis, both over four hours away. The nearest Fresh Market store is located 170 miles from Overland Park in Wichita. The concentration of destination dining and entertainment restaurants in a “main street” setting is unique in the PMA. The Power and Light District also includes a concentration of dining and entertainment tenants, but it is located 15 miles north in Downtown Kansas City. The concentration of unique shopping, dining and entertainment options will itself be a destination and draw visitors from outside the PMA.
Overall, Prairiefire is well positioned to attract retail spending from both inside and outside the PMA. The planned retail development is currently supported by the market and demand will strengthen as growth in the Kansas City region continues to expand into southern Johnson County. We conclude that Prairiefire will be successful for the reasons identified below:
There is excess demand within the PMA for full-service dining restaurants About two-thirds of the space and half of the retail spending at Prairiefire will be generated by dining and entertainment tenants Retail space in South Johnson County is the highest performing of all suburban retail markets and has demonstrated the ability to attract retail sales from shoppers and visitors living outside the PMA. All of the committed tenants are unique to the Kansas City region which will limit competition within the PMA and attract shoppers from elsewhere in the region and beyond The museum component of the project will attract additional spending from visitors
DEVELOPMENT STRATEGIES 24 Prairiefire at LionsGate STAR Bond Revenue Study
Prairiefire is located in the fastest growing, highest income area of the Kansas City region The fastest population and income growth is occurring south of Prairiefire Retail development located south of 135th Street is very limited Prairiefire’s location is ideal to capture spending from new high-income households
Overview of Competitive Lifestyle and Retail Centers
Prairiefire will include approximately 365,000 square feet of retail space designed to support specialty retailers, restaurants and entertainment venues. Six existing destination lifestyle and entertainment districts operate within the Kansas City MSA, including Country Club Plaza, Town Center Plaza, Zona Rosa, the Kansas City Power & Light District, The Legends at Village West, and neighboring Corbin Park. A brief description of each comparable/competitive destination lifestyle and entertainment center/district is provided in the text below.
Country Club Plaza is a mixed-use development that spans 15 blocks between 47th street and J.C Nichols Parkway in Kansas City, Missouri. It was built in 1922 and includes 1.4 million square feet of office space, 900,000 square feet of retail space, nine hotels totaling 1,900 guest rooms, a mix of residential uses, and 14 parking garages occupying 6,400 spaces. The Country Club Plaza is Kansas City’s and the regions well-known destination for upscale shoppers. It also attracts 20 million annual visitors and accounts for 40 percent of retail sales in Kansas City. The streets in the development follow the current street grid of the surrounding urban area, and wide sidewalks cater to pedestrian activity. An upscale feel is created in Country Club Plaza through the design of landscaped boulevards, public art, outdoor seating, pedestrian-oriented lighting, and seasonal decorative lights.
The major draw to the Plaza is the cluster of upscale restaurants, specialty foods, upscale clothing stores, and home decoration stores. Many retailers are unique and draw shoppers from the entire region. Unique stores and restaurants include Tommy Bahamas, H&M, J Crew, Brio Tuscan Grille, California Pizza Kitchen, Capital Grille, Houston’s, Kona Grill, McCormick & Schmick’s, and P.F. Chang’s. Entertainment venues, special events, and live music also attract visitors to the 15-block shopping district. In addition, Country Club Plaza is home to the Plaza Art Fair, monthly Plaza Live! Concerts, and the Annual KCP&L Plaza Lighting Ceremony where the buildings in the plaza ignite with decorative lighting.
Based on Country Club Plaza’s location 13.5 miles to the northeast of the subject, and its similar retail mix, it is a competitor to Prairiefire at LionsGate.
Town Center Plaza, Park Place, and One Nineteen are located in Leawood, Kansas and together form Johnson County’s largest upscale retail destination.
Town Center Plaza is a 610,287 square foot shopping center located at 119th Street and Nall Avenue in Leawood, Kansas. It is owned by Glimcher property, based in Columbus, Ohio. The site consists of an outdoor regional center surrounded by free-standing buildings that house restaurants and various retailers; however, it lacks the “main street” feel of many outdoor regional centers with many shops facing inward on a pedestrian corridor. Town Center Plaza boasts over 90 specialty shops and national retailers as well as 13 restaurants,
DEVELOPMENT STRATEGIES 25 Prairiefire at LionsGate STAR Bond Revenue Study and an AMC 20 Movie Theatre. Anchor tenants include Dick’s Sporting Goods, Macy’s, Barnes & Nobel Bookstores, and Pottery Barn. The center has sales of approximately $500 per square foot.
Town Center Plaza is located two miles north of Prairiefire at LionsGate. While the plaza is anchored by a multi-screen movie theater, it lacks a featured attraction, event space, or outdoor common areas.
Park Place is a high-end, mixed-use development directly northwest of Town Center Plaza. It consists of seven buildings oriented to an interior traffic circle and green space. This interior space, with pedestrian lighting, outdoor seating, attractive landscaping, and ample sidewalks create an inviting urban environment for shoppers and diners. In addition to retail and restaurants, the development houses an Aloft hotel, 235,000 square feet of class A office space, as well as residences. Restaurants include California Pizza Kitchen, Gordon Biersch, 801 Chophouse, RA Sushi, and Mestizo by Aaron Sanchez. Retail shops include mainly local upscale boutiques and niche stores. Attractions at Park Place include a seasonal outdoor ice-skating rink and a summer concert series.
One Nineteen is a Glimcher property directly southeast of Town Center Plaza. It is a 165,000 square foot upscale strip mall shopping center with two free-standing buildings located on the site. It is occupied by specialty retailers such as Crate & Barrel, Trader Joe’s, Sullivan’s Steakhouse and the Apple Store. Town Center Plaza, Park Place, and One Nineteen form a large upscale retail destination in Johnson County two miles north of Prairiefire.
Zona Rosa is located in Kansas City, Missouri, 30 miles north of Prairiefire. Zona Rosa is a nearly 900,000 square foot lifestyle center housing specialty shops, restaurants, and entertainment venues. Office space, residences, and hotels are also included in this lifestyle center. The development consists of a parking garage, an outdoor plaza, green space, and several two- to four-story buildings with retail storefronts facing tree-lined streets. The inviting tree-lined sidewalk environment and the combination of commercial and residential uses create an interesting pedestrian environment. This increased foot traffic results in high retail sale volumes.
Anchor tenants in Zona Rosa include Dick’s Sporting Goods, Marshalls Megastore, Barnes & Noble, Staples, and DSW Shoes. Visitors come and spend a day at Zona Rosa because of its unique entertainment venues; the Kansas City Improv Comedy Club attracts older visitors while the Bounce House Moonwalks and Maze Craze attract young families and teenagers. Average sales in Zona Rosa range from approximately $323 to $328 per square foot.
In 2008 several retail stores such as Old Navy, Staples, and Dillard’s were added to the tenant mix at Zona Rosa, adding over 400,000 square feet of retail space to the development.
Zona Rosa’s distance from Prairiefire and lack of upscale shops reduces the direct competitiveness to the proposed development. But its unique design and concentration of stores and restaurants is similar to Prairiefire and serves as a major retail and dining destination for residents in northern Kansas City.
DEVELOPMENT STRATEGIES 26 Prairiefire at LionsGate STAR Bond Revenue Study
Kansas City Power and Light District is located 15 miles north of Prairiefire. The development covers nine city blocks in downtown Kansas City, Missouri and is a premier dining, entertainment, and shopping district. The newly-completed Sprint Center Arena and Bartle Hall Convention Center bound this pedestrian-oriented district. Major attractions in this shopping district include Midland Theater by AMC, the Empire Theatre, the Alamo Drafthouse Cinema, the KC Live! Entertainment District, and Lucky Strikes Lanes & Lounge.
Phase one of the Kansas City Power & Light District consists of 450,000 square feet of restaurants, night clubs, and entertainment venues. Buildings fit into the current street grid of downtown Kansas City, Missouri. Overall, it acts as major tourist attraction and brings people and business back to downtown Kansas City, Missouri. In particular, businesses will benefit from heavy pedestrian traffic in the area due to the nearby Sprint Center Arena, Bartle Hall Convention Center, and Kauffman Center for the Performing Arts.
Additional customer draw stems from the various theatres, the bowling alley, and the KC Live! Entertainment District. The KC Live! Entertainment District is a concert venue that covers a city block and includes two stories of upscale restaurants and night spots. Restaurants and night clubs within the Entertainment District include Bristol Seafood Grill, 801 Chophouse, Gordon Biersch Brewery & Restaurant, Howl at the Moon, Famous Dave’s Barbecue, Maker’s Mark Bourbon House, and PBR Big Sky.
The historic Midland and Empire Theaters are additional major attractions for the Kansas City Power & Light District, both of which were rehabbed by AMC Entertainment, Inc. The Midland Theater is a 3,000-seat venue, restaurant, and bar located at the northwest corner of the district, while the Empire Theater is a six-screen movie theatre located at the southeast corner. The soon-to-open Alamo Drafthouse Cinema will be a unique additional theatre, with a bar that provides personal food and drink service to your seat.
General retail uses take up a majority of the retail space in the Kansas City Power & Light District. Retailers include Consentino’s Market Downtown, Polished Nail Salon, GNC, Jos. A. Bank, Organic Power Dry Cleaners, Sprint Studio, and T-Mobile.
While The Kansas City Power & Light District is a major shopping and entertainment district, it specifically targets visitors and workers in Downtown Kansas City, as well as residents in Downtown and surrounding neighborhoods.
Corbin Park is located directly west of Prairiefire. It is an outdoor mall located on the corner of Metcalf and W 135th Street. This Cormac Co. development was planned in 2008 and aimed to include JC Penney, Von Maur, Old Navy, Best Buy, Barnes & Noble Bookstores, Sports Authority, and Lifetime Fitness. However, only the JC Penney, Von Maur, and Lifetime Fitness have been developed and Backwoods (outdoor recreation retailer) has opened. According to Gilmore & Bell, the property has also received a preliminary commitment for Scheels Sports, a sporting goods retailer with stores generally over 200,000 square feet in size. In 2010 the mall’s developer filed for bankruptcy and construction was halted. In October 2011 the property was auctioned off and bought by Michael Schlup for $8.1 million, who briefly re-branded Corbin Park as “Aspen Square” before returning it to its original name. According to the Kansas City Business Journal the new developer has no distinct plan for the new development other than adding facades to the buildings as well as amenities such as
DEVELOPMENT STRATEGIES 27 Prairiefire at LionsGate STAR Bond Revenue Study fountains. However, in late September of 2012 construction of the the property was largely completed and the development announced a lease with Sprouts Farmers Market, and Schlup has reported that Corbin Park continues to see leasing activity pick up and expects most of the originally planned tenants to eventually locate within Corbin Park. Our discussion with local market participants also suggest that leasing is moving forward quickly at this time with several tenants committed. Overall, the existing and proposed tenant mix at Corbin Park skews more toward big box discount retailers and lacks large scale restaurant tenants. As a result it will largely complement rather than compete with Prairiefire. Backwoods will compete directly with REI, but we are confident that REI will not be impacted due to its superior national brand. Scheels Sports will also be competitive, although we view the store as more directly competitive with general sports retailers such as Dick’s Sporting Goods, and outdoor retailers that focus on fishing and hunting, such as Bass Pro Shops and Cabella’s. Scheels Sports are mainly located in the upper Midwest with a few stores in the Mountain West. The stores co-exist with REI in Reno, Minneapolis, and Sandy, Utah.
Mission Farm is a smaller mixed-use development located in Leawood at the intersection of Mission Road and 107th Street, about 3.5 miles north of Prairiefire. The development includes upscale suburban apartments with street level retail and surrounding office uses. It enjoys excellent visibility from Interstate 435, but is set back about a half-mile behind the concentration of retail uses along Roe Avenue at the interchange with the interstate. It is surrounded by undeveloped land and residential uses. Mission Farm is not regional in scale, since it lacks a large anchor tenants. Current tenants are upscale niche stores and local restaurants. The site includes additional land for expansion, but due to its scale, tenancy and location, it is not competitive with Prairiefire.
The Legends at Village West is a super-regional outlet mall and lifestyle center located in Village West in Kansas City, Kansas, twenty miles northwest of Prairiefire. While The Legends at Village West is not an upscale center, it is similar to Prairiefire in its attractions and lifestyle center design. Tenants inside the 1,200,000 square foot mall include a Dave and Busters and a movie theater. The mall’s overall theme exemplifies famous Kansans in the arts, exploration, science, technology, and politics fields. Visitors can take an audio walking tour around the mall and learn about 80 famous legends that are portrayed on banners, statues and murals. However, the mall is only one of many destinations in Village West. The Livestrong Sporting Park, Kansas Speedway, Hollywood Casino, Nebraska Furniture Mart, Great Wolf Lodge, Phoenix Theatres at Legends 14, Cabela's Sporting goods store, Target, and CommunityAmerica Ballpark are all located within a mile of the mall, making it a regional hub for shoppers, diners, and tourists.
Summary
Overall, none of the competitive developments compete directly with Prairiefire due to location and its Phase I tenants include high-end first-to-market retail anchors and a concentration of unique dining and entertainment concepts. Several insights can be gained through this analysis.
DEVELOPMENT STRATEGIES 28 Prairiefire at LionsGate STAR Bond Revenue Study
Lifestyle retail and entertainment developments are generally performing well. According to CoStar the average occupancy of large regional malls and lifestyle centers in the Kansas City region is 98 percent. Developments such as Country Club Plaza and the Power and Light District define the primary market area for Prairiefire to the north, as most visitors and residents in central and northern Kansas City will more often chose these more proximate options. The Town Center Plaza, Park Place and One Nineteen cluster along with other retail along the 119th Street corridor has already established the South Johnson County submarket as a premier retail destination with numerous high-end retail and restaurant tenants. Lifestyle center development is well established in the central and northern portions of the Kansas City region. However, South Johnson County lacks a destination lifestyle center offering a unique mix of dining, entertainment and retail. Most of the confirmed tenants for Phase 1 of Prairiefire will be the first in the Kansas City region with a focus on large upscale shopping anchors with a concentration of dining and entertainment tenants within a “main street” entertainment district. As a result the more retail focused developments along 119th Street and anticipated for the adjacent Corbin Park are more complementary and not directly competitive. Our demographic analysis identifies the area immediately surrounding Prairiefire as one of the highest income and fastest growing areas in the Kansas City region. It contains one of the highest densities of disposable income in the region. Furthermore, the strongest growth is occurring south of 135th Street, and there is very limited retail development serving the area to the south. Prairiefire and complementary retail along the 135th Street corridor will be the primary shopping and dining option for new high income residents moving to South Johnson County.
We are confident that Prairiefire is well positioned to compete within both the regional and local retail environment given the demographics, location, project design and tenanting.
A map of these developments is included on the following page.
DEVELOPMENT STRATEGIES 29 Prairiefire at LionsGate STAR Bond Revenue Study
Insert Competitive Shopping Center Map DEVELOPMENT STRATEGIES 30 Prairiefire at LionsGate STAR Bond Revenue Study
ESTIMATED RETAIL STAR BOND REVENUE
STAR Bond Taxes
STAR Bond taxes allows the Project to capture 100 percent of eligible state, county, and city taxes on incremental sales for a 20-year term starting November 6, 2012; however, no sales are anticipated to occur until October 2013. Regarding county sales taxes, only the city’s share is eligible for capture. Prior to the development the property generated no sales taxes, so all sales taxes are subject to capture by the STAR Bond.
In addition to the STAR Bond, Prairiefire is located within a Community Improvement District (CID) which imposes an additional 1.5 percent tax on sales occurring within the district. By statute, the CID tax can remain in place for 22 years starting in October 2013, ending in September 2035; however, it is anticipated that the bonds supported by the CID tax will be retired prior to the end of the term. Revenues generated by the CID are pledged to the project in a separate bond issue, but analysis of revenue generated by the CID is analyzed in a separate report.
The state sales tax increased on July 1, 2010 from 5.3 percent to 6.3 percent. However, the tax rate is scheduled to drop to 5.7 percent on July 1, 2013 prior to the opening of any of the proposed retail tenants.
Only three of the taxes are eligible for capture by the STAR Bond. State sales taxes and the general sales tax collected by the city of Overland Park are captured. The city’s share of Johnson County’s 0.5 percent general sales tax is also eligible. This tax is collected by Johnson County and distributed to cities within the county based on a state-mandated formula based on population and ad valorem taxing effort. The following table summarizes Overland Park’s distribution of the county sales tax from 2005 to 2011.
Countywide Sales Tax Distributions to City of Overland Park and Johnson County
2007 2008 2009 2010 2011 Average OP Dist - Countywide $ 9,606,927 $ 10,232,387 $ 9,434,067 $ 8,572,896 $ 9,548,262 $ 9,478,908 OP Dist - Public Safety 2,401,737 2,558,102 2,358,522 2,120,670 2,387,121 2,365,231 OP Dist - Econ Development 2,401,737 2,558,102 2,358,522 2,120,670 2,387,121 2,365,231 Total OP Dist. 14,410,402 15,348,591 14,151,112 12,814,236 14,322,504 14,209,369 Total Countywide Tax 104,478,043 112,094,590 110,366,291 105,016,392 117,446,575 109,880,378 OP Countywide Allocation 13.8% 13.7% 12.8% 12.2% 12.2% 12.9% Source: Kansas Department of Revenue and the City of Overland Park The city’s portion of collections has declined from 13.8 percent in 2007 to 12.2 percent in 2010 and 2011, with an average distribution of 12.9 percent. Given the downward trend and stability of the past two years’ distributions, we have estimated a distribution of 12.5 percent which is below the five-year average.
Store sales estimates are for in-store sales only. The STAR Bond statutes do not permit the capture of sales taxes generated by deliveries to other locations in Kansas for the Project.
A breakdown of the sales taxes as of July 1, 2013 is summarized in the following table.
DEVELOPMENT STRATEGIES 31 Prairiefire at LionsGate STAR Bond Revenue Study
Overland Park Sales Tax Breakdown, 2013
Sales Tax Tax Rate Portion Captured STAR Bond Eligible City of Overland Park - General1 1.000% 100.0% 1.000% City of Overland Park - Street Improvements 0.125% 0.0% 0.000% Johnson County - General2 0.500% 12.5% 0.063% Johnson County - Law Enforcement 0.250% 0.0% 0.000% Johnson County - Public Safety 0.250% 0.0% 0.000% Johnson County - Stormwater 0.100% 0.0% 0.000% Johnson County - Research Triangle 0.125% 0.0% 0.000% State of Kansas3 5.700% 100.0% 5.700% Total Current Sales Tax 8.050% 6.763% Prairiefire CID 1.500% Total Sales Tax at Prairiefire 9.550% 1 100% of the city's general sales taxes are eligible for collection by the STAR Bond District 2 The city's portion of Johnson County's general sales taxes are eligible for collection by the STAR Bond District
3 100% of the state's general sales taxes are eligible for collection by the STAR Bond District
Thus, sales will be taxed at a rate of 9.55 percent as the tenants begin opening in October 2013. For our analysis we have assumed these rates will remain in place throughout the 20-year term of the STAR Bond. Although no taxes are scheduled to expire, tax rates are subject to change through the regular legislative process. Of the 9.550 percent overall sales tax, 6.763 percent will be eligible for capture by the STAR Bond.
Phase I Retail Tenants and Sales Estimates
In the following section we have included a summary of each of the tenants committed to Phase I of Prairiefire. The summaries include a brief analysis of the competitive environment specific to each tenant and an estimate of sales. To project the potential retail sales figures, DS relied on shopping center and tenant information from several retail industry sources, including RetailSails 2011 Chain Store Productivity Report, Nielson’s Retail Tenant Directory: 2011, and Plunkett’s Retail Almanac, 2011, and publically available corporate information. DS also spoke with retail brokers familiar with lifestyle center development and representatives of each tenant to discuss their expectations of sales and get their perspective on the retail market in Kansas City and south Johnson County.
REI - Recreation Equipment Incorporated (REI) at Prairiefire will occupy 23,978 square feet of retail space in Building One. REI is a national outdoor retail co-op dedicated to inspiring, educating, and outfitting its members and the community. It offers top brands for camping, climbing, cycling, fitness, hiking, paddling, snow sports, and travel, with knowledgeable employees to provide advice about
DEVELOPMENT STRATEGIES 32 Prairiefire at LionsGate STAR Bond Revenue Study merchandise—an amenity not available to online shoppers.
In addition to merchandise opportunities, REI Adventures offers planned trips to co-op members. Trips are offered to destinations around the world and feature outdoor activities. REI also involves its members through Outdoor Schools where professional instructors share their knowledge of outdoor skills during planned outings. In Store Classes are also offered to educate members and nonmembers about outdoor activities and skills. Most of REI’s buildings are LEED-Commercial Interior certified buildings that consume 50 percent less energy than traditional buildings.
The location at Prairiefire will be the first REI in the state of Kansas and plans to employ 50 to 60 people. REI has 123 stores in 30 states, and the closest location is in St. Louis, with the next closest located in Tulsa, Oklahoma. There is a Backwoods located just west of the proposed site and a Dick’s Sporting Goods located about two miles north at Town Center Plaza, but REI is at a competitive advantage to these two stores as a nationally recognized brand specializing in outdoor and adventure sports. Scheels Sports is expected to locate in Corbin Plaza just west of Prairiefire along with the existing Backwoods. This sports “mega-store” has many outdoor apparel and gear product lines that overlap with REI. However, Scheels focus on a broader sporting market which includes hunting and fishing is more directly competitive with Dick’s Sporting Goods, Bass Pro, and Cabella’s. The difference can also be seen in Scheels’ Upper Midwest roots versus REI’s Pacific Northwest origins. Both stores are the first and only in the Kansas City market, and both will be able to coexist successfully in the market. Three markets currently have both stores within reasonably close proximity, but the stores are not virtually next door as is the case here in Overaland Park. We anticipate that Backwoods may eventually be the retailer “squeezed out” in this busy marketplace.
As a nationally recognized brand and the first and only location in the Kansas City region, REI is an ideal anchor tenant for Prairiefire. It will draw shoppers from well beyond our defined PMA and generate strong sales. According to information available on REI’s website, its average store has annual sales of about $14 million. However, many of the older stores are location in smaller locations with multiple stores in a single market mainly in the Northwest. REIs expansion strategy in markets such as Kansas City and St. Louis has been to enter with a single large store in a high-income, high-traffic location. Therefore, we expect sales to be higher than average. According to commercial brokers who have worked with REI, newer suburban stores located in St. Louis, Bloomington, Minnesota, and San Diego, and Houston have sales ranging from $17 to $27 million. San Diego and Bloomington have a very strong outdoor lifestyle customer bases and are at the high-end of this range. We believe sales will be more similar to the stores in St. Louis and Houston and have estimated sales of about $19.8 million annually.
DEVELOPMENT STRATEGIES 33 Prairiefire at LionsGate STAR Bond Revenue Study
The Fresh Market - The Fresh Market is a specialty grocery store that specializes in unique selections of high quality and fresh groceries. This new shopping concept will be located in Building Two and will occupy 24,803 square feet of retail space. The Fresh Market takes pride in their knowledgeable and friendly staff. Each store offers a butcher, a European style delicatessen, and fresh baked goods as well as a high quality selection of beer and wine. Fresh Market stores offer an inviting atmosphere similar to that of an old-world European market by incorporating low-level lighting and classical music. The chain currently has 124 stores, plus six additional planned stores with signed leases. The Fresh Market stores are predominantly located in the Mid-Atlantic and Southeast region, but its reach is expanding with many stores in New England, the Midwest and one store (with an additional planned) in California.
The Fresh Market in Prairiefire will be the first Fresh Market in eastern Kansas. The nearest Fresh Market is in Wichita (roughly 170 miles southwest). Competition from other groceries in the area is strong. There are two supermarkets located along the 135 Street corridor. Hen House and PriceChopper are local supermarket chains with locations less than a mile from The Fresh Market; however, neither targets the similar high-end grocery niche. A Whole Foods, Trader Joes and Dean and Deluca are all located about two miles north along the 119th Street corridor. These specialty grocers are more directly competitive with The Fresh Market. The Whole Foods is located in an older and less attractive shopping center. Dean and Deluca is a small store that is not condusive for regular grocery shopping, but more targeted to prepared foods and specialty items. Trader Joes is in an attractive outlot building of the new One Nineteen shopping center, but it targets value shopping with limited produce and no fresh fish, meat or deli counter. The Fresh Market benefits by being separated from this cluster of specialty grocers on the more recently developed 135th Street corridor. As a result it will be more easily accessible to high-income households immediately surrounding Prairiefire and other neighborhoods to the south. There are no supermarkets located south of 135th Street and this area is one of the fastest growing in terms of population and income in the region.
Based on information from their annual report, The Fresh Market stores have average sales of about $10.6 million or about $500 per square foot in the year ending January 29, 2012. In the first portion of 2012, the company has reported a same store sales increase of eight percent, suggesting average sales increasing to $11.5 million or $540 per square foot. A representative of The Fresh Market said that he viewed incomes and population density of the area as above average for their locations, but competition as also above average. He indicated that recently opened stores in Tulsa and Wichita have performed above average, but could not provide specific sales data. Based on this information we have estimated sales of about $13.6 million, or
DEVELOPMENT STRATEGIES 34 Prairiefire at LionsGate STAR Bond Revenue Study
$550 per square foot. We have included a map of competitive grocery stores and supermarkets on the following page.
DEVELOPMENT STRATEGIES 35 Prairiefire at LionsGate STAR Bond Revenue Study
Grocery Store Map DEVELOPMENT STRATEGIES 36 Prairiefire at LionsGate STAR Bond Revenue Study
CINETOPIA - CINETOPIA is a Digital Super HD Theatre and entertainment venue chain. CINETOPIA offers plush, extra-wide theatre seats, private “Living Room” theatre areas, an art gallery, live music, and a restaurant and wine bar. This upscale theatre also offers personal food service to movie watchers. CINETOPIA uses modern technology such as Dolby / Klipsch Sound System, 50-foot wide screens, and Digital Super High Definition Projection to lure visitors to this unique theatre. CINETOPIA at Prairiefire will occupy 75,398 square feet of retail space in Building 25.
The Prairiefire CINETOPIA will be the first of its kind in the Midwest region. CINETOPIA currently has one cinema in Beaverton, Oregon and two cinemas in Vancouver, Washington. The local market includes several large cinemas and is the corporate home to AMC Theaters. Most notably Palazzo 16 and AMC Town Center 20 combine for 36 screens within 2.5 miles of the subject. However, both theaters are traditional multi-plexes and do not offer the variety of screening room options or dining and drinking options. Furthermore, CINETOPIA will benefit with a location directly adjacent to both a museum and the concentration of other dining and entertainment tenants located within Prairiefire. A representative of CINETOPIA estimated combined ticket and food sales of about $275 to $300 per square foot. Current locations have sales of about $275 per square foot, and $17 million in sales. We have estimated sales of $280 per square foot with total sales of about $21.1 million. The higher total sales are due to the larger size of this location and the additional business generated by the attractive co-tenancy offered at Prairiefire.
Pinstripes - Pinstripes at Prairiefire will be a unique dining, entertainment, and recreational venue featuring high-quality Italian-American dining, indoor and outdoor bocce ball courts, and bowling lanes. Pinstripes will be located in Building 25 and will occupy 32,335 square feet of retail space. This unique venue will have a spacious outdoor patio with space for 600 people. The patio features fire pits and seating that can be used for weddings, banquets, or other events. The atmosphere at Pinstripes is casual, with living room-style furniture and lighting. Pinstripes will cater to all age groups by offering jazz and blues concerts, wine dinners,
DEVELOPMENT STRATEGIES 37 Prairiefire at LionsGate STAR Bond Revenue Study bowling clubs and leagues, and mom and tot play dates. Other locations host up to 2,000 events annually ranging from small groups over 1,000 people. Pinstripes is beginning a more aggressive expansion into upscale markets in developments with high quality co-tenants. Over the next several years they expect to add three new locations annually.
Pinstripes at Prairiefire will be one of only five similar locations in the country. Three venues are located in suburban Chicago (Oakbrook, Northbrook, South Barrington) and one is located in suburban Minneapolis (Edina). Over the next several years, Pinstripes plans to open about three new locations each year. Current locations have average sales of about $9 million. A representative of Pinstripes expects the Prairiefire location to exceed the sales of the existing locations due to superior demographics and foot traffic generated by other tenants within the development including the museum. He suggested the location could achieve sales of $400 per square foot or $14.4 million. We have estimated sales of $335 per square foot or $10.8 million, which still outperforms the three current locations.
Bar Louie - Bar Louie is a sophisticated, urban sports bar characterized by its casual environment and neighborhood bar feel. It will be located in Building 26B and will occupy 6,025 square feet of retail space. The atmosphere is warm but contemporary with mosaic tiling, modern lighting, and plasma televisions. The menu features flatbreads, burgers, salads, sandwiches and gourmet small plates. The drinks menu includes hand-crafted martinis, an extensive selection of imports and microbrews, and over twenty wines by the glass.
The Bar Louie in Prairiefire will be the first such location in the state of Kansas. The nearest Bar Louie is located in the Power and Light District in downtown Kansas City, Missouri and in Zona Rosa in northern Kansas City. Bar Louie tends to locate within lifestyle centers or entertainment districts in high-income high-traffic areas. There are several large sports bar/restaurants located throughout Johnson County; however, the location within Prairiefire among other dining and entertainment concepts sets Bar Louie apart from other similar concepts in the area. A representative of Bar Louie Restaurants has estimated typical Bar Louie sales range from $3.5 to $4.0 million, based on the location and co-tenancy of Prairiefire, he believes that this location should perform at the high-end of this range. The existing locations in Kansas City have sales in excess of $600 per square foot. We have estimated sales of $650 per square foot, or about $3.9 million.
DEVELOPMENT STRATEGIES 38 Prairiefire at LionsGate STAR Bond Revenue Study
Rock & Brews - Rock Star Gene Simmons, concert promoter Dave Furano, and restaurateur Michael Zislis created Rock and Brews, a restaurant and beer garden that recreates the backstage experience provided to rock stars. Rock & Brews Beer Garden is decorated to remind customers of a rock tour’s backstage, surrounded by rare concert posters and photos. Menu selections are based on the favorite foods of various rock and roll bands, making the Rock & Brews Beer Garden an interesting and unique dining experience. The concept differs from the well-known Hard Rock Café with a stronger emphasis on themed décor and outdoor dining. It will be located in Building 21 and will occupy 5,453 square feet of retail space.
The first Rock and Brew location officially opened in April of this year in El Segundo, California. The franchise has plans to open three more establishments in Hawaii, the Los Angeles International airport, and Prairiefire, with further expansion to follow. A representative of Rock & Brews estimated sales of $4 million, or $800 per square foot for the Prairiefire location which is superior to its location in El Segundo. We have estimated more conservative sales of $625 per square foot, or about $3.4 million. This is more consistent with the market for themed restaurants and our discussion with other large restaurant tenants committed to Prairiefire.
The Pub - The Pub is United Kingdom-style restaurant and bar with American hospitality and flair. The atmosphere is casual with low-level lighting, eclectic furniture, and London-themed decorations. The menu has British, Scottish, and Irish-inspired options such as scotch eggs, fish and chips, shepherd’s pie, and English pot roast, among other American options such as burgers, cheese dips, and wraps. The beer selection is extensive and includes over 30 United Kingdom and American favorites on tap. Television screens play live sports and outdoor seating is available. It will be located in Building 22 and will occupy 6,691 square feet of retail space.
The Pub has additional locations in Florida, Kentucky, and Ohio. Mathew Focht, president of Emerging Concepts (real estate consultant for destination restaurant tenants including The Pub) has estimated sales of
DEVELOPMENT STRATEGIES 39 Prairiefire at LionsGate STAR Bond Revenue Study
$4 million, based on the performance of other The Pub locations. We have estimated sales of $600 per square foot, or about $4.0 million.
PB&J Restaurants Inc. - PB&J has established a variety of restaurants all over the United States. PB&J restaurants feature casual dining experiences, with high quality food and service. There are two other PB&J restaurants in the Kansas City Area (YaYa’s European Bistro and Burnt End BBQ). Prairiefire currently has LOI’s with three PB&J Concepts: Newport Grill, The Club, and Paradise Diner. All three restaurants will be located in separately themed spaces within 14,996 feet of space in Building 23 and will share kitchen facilities. This allows PB&J to keep costs down while maintaining flexibility to adjust the spaces or change individual concepts as determined by the market.
Newport Grill specializes in fresh seafood, shipped six days a week. This casual restaurant has an inviting dining room and a patio for outdoor seating. The Newport Grill boasts a highly skilled culinary team that prepares meals with local, fresh ingredients. Newport Grill will occupy 4,500 square feet of building 23. The only other Newport Grill location is in Wichita, Kansas in the upscale Bradley Fair shopping center. The Club is a new restaurant concept for PB&J. It will be an upscale Las Vegas style night club offering a wide variety of drink offerings and food from the shared kitchen. It will occupy 7,869 square feet of building 23. Paradise Diner’s atmosphere resembles a 1950s diner with a contemporary and whimsical twist. The menu will take classic diner-fare up a notch and include west-coast American favorites. It will occupy 2,627 square feet of building 23. Paradise Diner currently has a location in Overland Park on 95th Street, but the Prairiefire location will replace this location with a larger floorplan.
A representative of PB&J indicated the existing Newport Grill in Wichita has sales of about $3 million to $4 million annually. The existing Paradise Diner has sales of about $2 million. We estimated similar sales for the Prairiefire locations of $3 million for Newport Grill ($675 per square foot) and $1.6 million for Paradise Diner ($625 per square foot). We have estimated sales of $450 per square foot or $3 million for The Club, based on the information gathered in estimating other dining and entertainment concepts committed to Prairiefire.
DEVELOPMENT STRATEGIES 40 Prairiefire at LionsGate STAR Bond Revenue Study
Spec Retail Space (West)
The western portion of Phase 1 will include 9,084 square feet of spec retail space which will share parking with REI and The Fresh Market. Based on our discussion with the developer, interest in these spaces is high given the two high-quality, high-traffic anchors already committed to the project. Therefore, we expect similar high quality tenants to fill the space. Possibilities mentioned include a high-end furniture store and upscale liquor store which has been suggested by The Fresh Market as a good complement to their offerings. A similar shopping center in St. Louis anchored by REI and Whole Foods includes co-tenants such as The Container Store, Arhaus (furniture), Nordstrom Rack, and TrueRunner (running/fitness). Based on our research these stores typically see sales of about $400 to $600 per square foot. Tenants such as these would fit the profile of those we would expect for the available retail space and we have estimated sales of $500 per square foot.
Spec Retail Space (East)
The eastern portion of Phase 1 will include 13,921 square feet of spec retail space which will be located alongside the larger dining and entertainment anchors. The developer anticipates filling these spaces with complementary, but smaller scale dining uses with some retail stores mixed in. Most notably the existing tenant mix does not include limited service restaurants or dessert options that would appeal to movie-goers or visitors to the museum. There are an increasing number of high-quality hamburger restaurants such as Five Guys, Smashburger, In n’ Out (West Coast, but recent expansion to Dallas), Meatheads (Illinois, but expanding), and Shake Shack (East Coast, but location near American Museum of Natural History in New York City) , that could serve as possible tenants. Dessert tenants such as frozen yogurt, ice cream, coffee and pastries, cupcake stores would also complement the existing uses. Other fast causal restaurants such a Chipotle, Pei Wei, or Panera would also fit well. Limited service restaurants can expect sales of $450 to $550 per square foot, and we have estimated sales of $500 per square foot for this space.
Summary of Estimated Retail Sales
The following table summarizes our estimate of stabilized sales for Prairiefire. This estimate is hypothetical and used only as a baseline for analysis of sales over the 20-year term of the STAR Bond. Other factors such as initial years’ sales (ramp-up), an overall vacancy rate, and annual increase in sales result affect the estimated sales revenue over the life of the bond.
DEVELOPMENT STRATEGIES 41 Prairiefire at LionsGate STAR Bond Revenue Study
Retail Sales Revenue Estimate - Prairiefire (Phase I) DS Estimate DS Estimate DS Estimate Template Store Location Tenant Type Open Total SF Taxable Sales/SF Taxable Sales REI* 1 Sporting Goods/Apparel 10/1/2013 23,978 $ 825 $ 19,781,850 The Fresh Market* 2 Supermarket 10/1/2013 24,803 $ 550 $ 13,641,650 Spec Retail (West) 3 Food, Restaurant, Furniture 12/1/2013 9,084 $ 500 $ 4,542,000 Rock & Brews 21 Dining w/ alcohol, Ent. 3/1/2014 5,453 $ 625 $ 3,408,125 Spec Retail (East) 22 Dining/Enterainment 5/1/2014 4,966 $ 500 $ 2,483,000 The Pub 22 Dining w/ alcohol 3/1/2014 6,691 $ 600 $ 4,014,600 Paradise Diner 23 Dining 3/1/2014 2,627 $ 625 $ 1,641,875 The Club 23 Dining w/ alcohol 3/1/2014 7,869 $ 450 $ 3,541,050 Newport Grill 23 Dining w/ alcohol 3/1/2014 4,500 $ 675 $ 3,037,500 Pinstripes* 24 Dining w/ alcohol, Ent. 3/1/2014 32,335 $ 335 $ 10,832,225 Bar Louie 26B Dining w/ alcohol 3/1/2014 6,025 $ 650 $ 3,916,250 Spec Retail (East) 26A Dining/Enterainment 5/1/2014 8,955 $ 500 $ 4,477,500 Cinetopia* 25 Dining w/ alcohol, Ent. 3/1/2014 75,398 $ 280 $ 21,111,440 TOTAL 212,684 $ 453 $ 96,429,065 * Anchor tenant with signed lease. Other named tenants have committed to the project, but may not yet have a signed lease. We have estimated overall stabilized sales of about $96.4 million for Prairiefire, which is equal to sales of $453 per square foot. This is actually lower than average for nearby shopping centers such as Town Center Plaza with sales of $500 per square foot and One Nineteen with sales of $700 per square foot, excluding its Apple Store. One Nineteen includes some of the top performing retail stores in many retail segments including Lululemon, Trader Joes and Crate and Barrel. A well-performing regional shopping mall can expect sales of $400 to $500 per square foot.
Overall the high sales performance of the anchors and large restaurant tenants is somewhat offset by the large restaurant/entertainment anchors (Pinstripes and CINETOPIA) which have large spaces that do not generate significant revenue resulting in lower sales per square foot. However, these tenants serve as important and unique attractions to Prairiefire along with the museum.
Adjustments
For underwriting purposes, separate projections have been done with one combining the large anchor tenants (REI, The Fresh Market, Cinetopia, and Pinstripes, all with signed leases), and another with the remaining restaurants and spec retail space. The same assumptions and adjustments described below have been used for both projections. The STAR Bond revenue generated by each tenant grouping is combined and summarized later in the report.
Sales Ramp-Up: All the brokers and tenant representative we spoke with anticipated that sales in the initial years after opening are lower than those anticipated in a later “stabilized” year. Shoppers have established shopping habits and patterns that take time to change and new shopping centers and tenants enter the market. Those we spoke with suggested that this ramp-up period can take about three years (stabilized sales
DEVELOPMENT STRATEGIES 42 Prairiefire at LionsGate STAR Bond Revenue Study occurring in the third full year of operation) with initial year’s sale at about 75 to 85 percent of stabilized sales. For our analysis we have utilized a ramp-up schedule for all tenants with initial year sales at 80 percent of stabilization, second year sales at 90 percent of stabilization, and stabilized sales occurring in year three. The initial years’ sales have also been adjusted to the STAR Bond schedule (Year 1 starting November 6, 2012) and anticipated opening dates of each tenant. Based on our discussion with the developers and tenants we anticipate that the anchor tenants in the western portion of Phase 1 will open in October 2013 with spec tenants opening two months later. Signed tenants for the eastern portion of Phase 1 are anticipated to open March 2014 with spec tenants opening two month later. So, tenants opening in October will have effective occupancy of 100 percent in Year 2 (will not be open in Year 1), while tenants opening in March will have an effective occupancy of 67 percent in Year 2 (7 months open [March through October] ÷ 12 months).
Overall Occupancy: Phase 1 of Prairie Fire is 89 percent pre-leased with about 23,005 square feet of spec retail space available for lease. Based on our discussion with the developer interest for this space is high and the only reason it is not already pre-leased is that they are waiting until construction starts to market the space. Given the demographics of the market, successful pre-lease of the anchor and restaurant space, the museum component, and overall design of the development, we anticipate that the property will be fully occupied within the first year of opening. We have maintained full occupancy through the Year 4 of the STAR Bond period (three years of operation) with a one percent vacancy rate in years 5 and 6 allowing for some turnover of the spec retail space. In years 7 through 11 we have included a vacancy rate of two percent, allowing for increased turnover. According to CoStar average occupancy of competitive lifestyle centers and regional malls in the Kansas City region is 98 percent. In years 12 through 16 vacancy is increased to three percent, and five percent in years 17 through 22. Overall, this vacancy schedule is better than average for the life cycle of a typical anchored shopping center, but the signed tenants are national credit tenants and are in early periods of expansion, suggesting that this is a priority development for the business, not the tail-end of an over-expansion. Given the high quality tenants already committed to Prairiefire, we anticipate that spec tenants will be of comparable quality. The presence of the museum and future office, residential and additional retail development should provide further stability. Nevertheless, we have included some vacancy to account for turnover of the spec space and the likely turnover of some of the larger restaurant or anchor spaces over the STAR Bond period (20 years). Although we anticipate any eventual vacancy will be quickly leased, the high finish of the departing and likely new tenants will result in a period of vacancy. Although the restaurant tenants are unique to the market, the building designs do allow for conversion to other more typical restaurant or retail uses. Even the more unique Cinetopia and Pinstripes could be converted to more conventional uses including first floor retail and second floor office space if necessary. Both of these tenants have the lowest estimated sales on a per square foot basis, so conversion to a more traditional retail tenanting could equal or exceed projected sales. However, we have no reason to anticipate any of the existing tenants will vacate their space. The overall average vacancy of the retail space over the life of the STAR Bond is three percent, just slightly higher than the current vacancy of large regional and lifestyle centers in the Kansas City region.
DEVELOPMENT STRATEGIES 43 Prairiefire at LionsGate STAR Bond Revenue Study
Annual Increase in Sales: We have included an annual increase in retail sales due to changes in the market such as the growing population of the PMA and higher household incomes. Over the next five years aggregate retail spending of shoppers living within the PMA is anticipated to increase by 3.28 percent annually due to these factors. However, a portion of this increase in spending will be captured by other retail developments entering the market. Spending increases at a 2.1 percent annual rate on a per capita basis, while population increases at a 1.20 percent annual rate. Given the increases in population and income in the market area we have estimated an annual increase in sales of 2.0 percent, assuming a portion of future demand will be captured by additional retail development. The 2.0 percent increase in sales is applied annually with 2013 being the base year.
STAR Bond Revenue Collection Projections
All of the tables in our analysis are based on the STAR Bond timeline with the starting date of November 6, 2012 with November 5, 2013 marking the end of the first full year. However, the STAR Bond period will end on October 31, 2032, so our projection tables include a November start and October year-end. An effective occupancy rate has been applied to the first four years of STAR Bond collections to account the initial months the STAR Bond will be in place, but stores are opening and ramping up sales as discussed above.
Adjustments have been made to the final revenue schedule. We have allowed for a two-month delay in the collection of economic activities taxes, which is typical for the market. Based on our discussion with administrators from Overland Park, neither the city nor state collects administration fees on the taxes pledged to the STAR Bond. Furthermore, there are no discounts for early or on-time payments of sales taxes by vendors which would reduce the overall collection.
The tables on the following pages summarize the retail sales projections and sales taxes captured for the junior anchors and inline retail for the STAR Bond over the 20-year life of the bond. A detailed sales projection over the 20-year life is included in the Appendix.
DEVELOPMENT STRATEGIES 44 Prairiefire at LionsGate STAR Bond Revenue Study
Projected Annual Sales Tax Revenues Available for STAR Bond Financing Obligations Prairiefire at LionsGate, Phase I (Retail, Anchors Only) STAR Year Taxable Sale Tax STAR Bond Starts: Nov. 2012 Year Taxable Sales Rate Subject STAR Elig. Sales Tax Ends: Oct. 2032 Ending Sales (2-month lag) to STAR Sales Taxes Base Sales Tax Collections 0Oct-12$ -$ - 6.76250%$ - -$ $ - 1 Oct-13 2,139,104 - 6.76250% - - - 2 Oct-14 44,633,552 39,363,487 6.76250% 2,661,956 - 2,661,956 3 Oct-15 60,097,177 57,530,215 6.76250% 3,890,481 - 3,890,481 4 Oct-16 68,235,936 66,884,902 6.76250% 4,523,091 - 4,523,091 5 Oct-17 70,047,966 69,747,169 6.76250% 4,716,652 - 4,716,652 6 Oct-18 71,448,926 71,216,366 6.76250% 4,816,007 - 4,816,007 7 Oct-19 72,141,764 72,026,753 6.76250% 4,870,809 - 4,870,809 8 Oct-20 73,584,599 73,345,088 6.76250% 4,959,962 - 4,959,962 9 Oct-21 75,056,291 74,811,990 6.76250% 5,059,161 - 5,059,161 10 Oct-22 76,557,417 76,308,230 6.76250% 5,160,344 - 5,160,344 11 Oct-23 78,088,565 77,834,395 6.76250% 5,263,551 - 5,263,551 12 Oct-24 78,837,578 78,713,242 6.76250% 5,322,983 - 5,322,983 13 Oct-25 80,414,330 80,152,589 6.76250% 5,420,319 - 5,420,319 14 Oct-26 82,022,616 81,755,641 6.76250% 5,528,725 - 5,528,725 15 Oct-27 83,663,068 83,390,753 6.76250% 5,639,300 - 5,639,300 16 Oct-28 85,336,330 85,058,568 6.76250% 5,752,086 - 5,752,086 17 Oct-29 85,248,354 85,262,958 6.76250% 5,765,908 - 5,765,908 18 Oct-30 86,953,321 86,670,297 6.76250% 5,861,079 - 5,861,079 19 Oct-31 88,692,388 88,403,703 6.76250% 5,978,300 - 5,978,300 20 Oct-32 90,466,235 90,171,777 6.76250% 6,097,866 - 6,097,866 TOTAL $ 97,288,579 Projected Annual Sales Tax Revenues Available for STAR Bond Financing Obligations Prairiefire at LionsGate, Phase I (In-line Retail Only) STAR Year Taxable Sale Tax STAR Bond Starts: Nov. 2012 Year Taxable Sales Rate Subject STAR Elig. Sales Tax Ends: Oct. 2032 Ending Sales (2-month lag) to STAR Sales Taxes Base Sales Tax Collections 0Oct-12-$ $ - 6.76250% -$ -$ $ - 1Oct-13- - 6.76250% - - - 2 Oct-14 16,556,882 13,808,439 6.76250% 933,796 - 933,796 3 Oct-15 27,964,443 26,070,788 6.76250% 1,763,037 - 1,763,037 4 Oct-16 31,820,046 31,180,016 6.76250% 2,108,549 - 2,108,549 5 Oct-17 33,286,176 33,042,798 6.76250% 2,234,519 - 2,234,519 6 Oct-18 33,951,899 33,841,389 6.76250% 2,288,524 - 2,288,524 7 Oct-19 34,281,130 34,226,477 6.76250% 2,314,566 - 2,314,566 8 Oct-20 34,966,752 34,852,939 6.76250% 2,356,930 - 2,356,930 9 Oct-21 35,666,087 35,549,998 6.76250% 2,404,069 - 2,404,069 10 Oct-22 36,379,409 36,260,998 6.76250% 2,452,150 - 2,452,150 11 Oct-23 37,106,997 36,986,217 6.76250% 2,501,193 - 2,501,193 12 Oct-24 37,462,921 37,403,838 6.76250% 2,529,435 - 2,529,435 13 Oct-25 38,212,180 38,087,803 6.76250% 2,575,688 - 2,575,688 14 Oct-26 38,976,423 38,849,559 6.76250% 2,627,201 - 2,627,201 15 Oct-27 39,755,952 39,626,550 6.76250% 2,679,745 - 2,679,745 16 Oct-28 40,551,071 40,419,081 6.76250% 2,733,340 - 2,733,340 17 Oct-29 40,509,266 40,516,205 6.76250% 2,739,908 - 2,739,908 18 Oct-30 41,319,451 41,184,960 6.76250% 2,785,133 - 2,785,133 19 Oct-31 42,145,840 42,008,659 6.76250% 2,840,836 - 2,840,836 20 Oct-32 42,988,757 42,848,833 6.76250% 2,897,652 - 2,897,652 TOTAL $ 45,766,270
DEVELOPMENT STRATEGIES 45 Prairiefire at LionsGate STAR Bond Revenue Study
Projected Annual Sales Tax Revenues Available for STAR Bond Financing Obligations Prairiefire at LionsGate, Phase I (All Retail: Anchors, Restaurants, Spec) STAR Year Taxable Sale Tax STAR Bond Starts: Nov. 2012 Year Taxable Sales Rate Subject STAR Elig. Sales Tax Ends: Oct. 2032 Ending Sales (2-month lag) to STAR Sales Taxes Base Sales Tax Collections 0Oct-12-$ $ - 6.76250% -$ -$ $ - 1 Oct-13 2,139,104 - 6.76250% - - - 2 Oct-14 61,190,434 53,171,926 6.76250% 3,595,752 - 3,595,752 3 Oct-15 88,061,620 83,601,003 6.76250% 5,653,518 - 5,653,518 4 Oct-16 100,055,982 98,064,918 6.76250% 6,631,640 - 6,631,640 5 Oct-17 103,334,142 102,789,967 6.76250% 6,951,172 - 6,951,172 6 Oct-18 105,400,825 105,057,755 6.76250% 7,104,531 - 7,104,531 7 Oct-19 106,422,893 106,253,230 6.76250% 7,185,375 - 7,185,375 8 Oct-20 108,551,351 108,198,027 6.76250% 7,316,892 - 7,316,892 9 Oct-21 110,722,378 110,361,988 6.76250% 7,463,229 - 7,463,229 10 Oct-22 112,936,826 112,569,228 6.76250% 7,612,494 - 7,612,494 11 Oct-23 115,195,562 114,820,612 6.76250% 7,764,744 - 7,764,744 12 Oct-24 116,300,499 116,117,080 6.76250% 7,852,418 - 7,852,418 13 Oct-25 118,626,509 118,240,392 6.76250% 7,996,006 - 7,996,006 14 Oct-26 120,999,040 120,605,200 6.76250% 8,155,927 - 8,155,927 15 Oct-27 123,419,020 123,017,303 6.76250% 8,319,045 - 8,319,045 16 Oct-28 125,887,401 125,477,650 6.76250% 8,485,426 - 8,485,426 17 Oct-29 125,757,620 125,779,164 6.76250% 8,505,816 - 8,505,816 18 Oct-30 128,272,772 127,855,257 6.76250% 8,646,212 - 8,646,212 19 Oct-31 130,838,228 130,412,362 6.76250% 8,819,136 - 8,819,136 20 Oct-32 133,454,992 133,020,609 6.76250% 8,995,519 - 8,995,519 TOTAL $ 143,054,849
DEVELOPMENT STRATEGIES 46 Prairiefire at LionsGate STAR Bond Revenue Study
MUSEUM OF PRAIRIEFIRE
Overview
The Museum of Prairiefire will serve as one of the main attractions at Prairiefire at LionsGate. The approximately 40,000 square foot museum will contain areas for a permanent collection, special exhibits, a café, and other educational areas. Through a unique collaboration with the American Museum of Natural History (AMNH) of New York City and other local cultural and educational institutions, the Museum of Prairiefire will feature world-class exhibitions, programming, and educational opportunities. In addition to the work with the AMNH, it is expected that the Museum of Prairiefire will collaborate with University of Kansas. The museum is scheduled to open in March 2014.
The following diagram details the first floor plan for the Museum of Prairiefire.
DEVELOPMENT STRATEGIES 47 Prairiefire at LionsGate STAR Bond Revenue Study
Approximately 8,500 square feet will be dedicated to special exhibitions, over 5,000 square feet will be dedicated to the Discovery Room, and the permanent exhibit will be contained in the lobby and alcove areas.
DEVELOPMENT STRATEGIES 48 Prairiefire at LionsGate STAR Bond Revenue Study
American Museum of Natural History
The American Museum of Natural History is located in New York City and was founded in 1869. AMNH is one of the world’s leading cultural and research institutions. Over 5 million visitors were recorded at AMNH in 2010. Zagat Survey ranked the AMNH as the third most popular family attraction in the United States behind Disney’s Magic Kingdom and Epcot Center.1 As part of their mission to “discover, interpret, and disseminate information about human cultures, the natural world, and the universe” a partnership with the Museum of Prairiefire was formed to expand the reach of the AMNH to the Midwest.2
The AMNH has a vast permanent collection that comes from all areas of the natural sciences. In addition to the permanent collection, the AMNH continually develops new and exciting special exhibitions featuring the latest information and technology to enhance the visitor experience. Special exhibits developed by AMNH are displayed in some of the world’s leading institutions including the Field Museum in Chicago, the Muséum National d’Histoire Naturelle in Paris, and the Azienda Speciale Palaexpo in Rome.
Partnership with the Museum of Prairiefire
AMNH has agreed to provide 10 traveling special exhibits to the Museum of Prairiefire over a five-year period with an option to renew for an additional 10 exhibits over another five years. The agreement allows the Museum of Prairiefire to be the exclusive host of AMNH special exhibits within a 300-mile radius of Overland Park and ensures that the Museum of Prairiefire will remain a regional draw. The permanent exhibition of the Museum of Prairiefire will feature some select materials provided by the vast resources of the AMNH. It is assumed that 80 to 90 percent of museum attendees will come from within the 300-mile museum catchment area. The following graphic details the 300-mile museum catchment area.
1 Zagat Survey. 2 http://www.amnh.org/about‐us
DEVELOPMENT STRATEGIES 49 Prairiefire at LionsGate STAR Bond Revenue Study
In addition to permanent and special exhibitions, AMNH will provide key assistance with designing and programming the Discovery Room at the Museum of Prairiefire. The Discovery Room offers children between five and twelve years of age a “hands-on, behind-the-scenes look” at the natural sciences. According to the staff of the AMNH, the Discovery Room at the Museum of Prairiefire will be larger than the Discovery Room at AMNH and feature more educational and exploratory programming. The quality educational programming to be offered at the Discovery Room is expected to attract school groups and families throughout the region.
DEVELOPMENT STRATEGIES 50 Prairiefire at LionsGate STAR Bond Revenue Study
Market Overview
Regional, Metro, & Local Tourism Market
The Kansas City metro area offers a wealth of tourist activities for families and individuals including shopping, museums, zoos, professional sports, amusement parks, and water parks. According to ESRI, individuals in the Kansas City metro spend approximately $634 per year on recreation and amusement while those within the 300 mile radius surrounding Overland Park spend $499 annually. This translates to a total market of $1.3 billion per year in the Kansas City metro and $9.6 billion per year within the 300-mile radius surrounding Overland Park.
Regional, Metro, & Local Competition
The Museum of Prairiefire will have exclusive access to the special exhibits and Discovery Room concept provided by the AMNH within a 300 mile radius of Overland Park. This effectively prohibits major cultural institutions in Kansas City, Oklahoma City, Omaha, and St. Louis and smaller museums from displaying AMNH special exhibits. These larger regional museums include the following:
Regional Museums
Museum Location
Sam Noble Museum Oklahoma City, Oklahoma
Science Museum Oklahoma Oklahoma City, Oklahoma
Omaha Children’s Museum Omaha, Nebraska
St. Louis Science Center St. Louis, Missouri
The Kansas City metro area contains many different museums focused on everything from art to science. However, no museum dedicated to natural history is located in Kansas City. The nearest natural history museum, the Museum of Natural History at the University of Kansas, is located approximately 45 miles from Overland Park. Science City, located near downtown Kansas City, Missouri, offers many different exhibits and activities including a planetarium, a dinosaur dig site, and an engineering lab.
The following table details museums reporting more than 10,000 visitors in the Kansas City metro.
DEVELOPMENT STRATEGIES 51 Prairiefire at LionsGate STAR Bond Revenue Study
2011 Museums in Kansas City Metropolitan Area AttendanceAdult Admission Child Admission Senior/ Museum Adult Student Kansas City, Kansas The Children's Musem of Kansas City 72,000 $7.00 $6.00 $4.00 Kansas City, Missouri Union Station N/A $10.00 $10.00 $0.00 Kansas City Zoo N/A $11.50 $10.50 $8.50 The Nelson‐Atkins Museum 410,050 $0.00 $0.00 $0.00 The American Jazz Museum and Baseball Museum N/A $15.00 $13.00 $8.00 Kemper Museum of Contemporary Art 84,000 $0.00 $0.00 $0.00 The Steamboat Arabia 67,000 $14.50 $14.50 $5.50 Kaleidascope 183,907 $0.00 $0.00 $0.00 National World War I Museum N/A $14.00 $12.00 $0.00 American Royal Museum N/A $0.00 $0.00 $0.00 Toy & Miniature Museum 25,103 $7.00 $6.00 $5.00 Airline History Museum N/A $8.00 $5.00 $4.00 University of Missouri ‐ Kansas City Gallery of Art 989 $0.00 $0.00 $0.00 Missouri Other Harry S. Truman Library ‐ Museum 62,015 $8.00 $7.00 $3.00 Mormon Visitors Center 365,000 $0.00 $0.00 $0.00 Liberty Jail Historic Site 40,000 $0.00 $0.00 $0.00 Harry S. Truman National Historic Site ‐ Truman Home 19,564 $0.00 $0.00 $0.00 Missouri Town 1855 N/A $5.00 $3.00 $3.00 National Frontier Trails Museum 15,520 $6.00 $5.00 $3.00 Fort Osage National Historic Landmark N/A $7.00 $4.00 $3.00 Community of Christ 9,569 $0.00 $0.00 $0.00 1859 Jail, Marshal's Home & Museum N/A $6.00 $5.00 $3.00 Vaile Mansion‐Dewitt Museum 6,588 $6.00 $6.00 $3.00 Average 97,236 $5.43 $4.65 $2.30 Median 51,008 $6.00 $5.00 $3.00 The graphic on the following page details the location of museums with attendance over 10,000 visitors in the Kansas City metro area.
DEVELOPMENT STRATEGIES 52 Prairiefire at LionsGate STAR Bond Revenue Study
Overland Park features some impressive cultural institutions. The Deanna Rose Children’s Farmstead has nearly 200 animals and birds, a fishing pond, pony rides, a replica country schoolhouse, and gardens. Operated by the City of Overland Park, the Farmstead expects around 400,000 visitors during its normal season from April through October. The Nerman Museum of Contemporary Art is located on the campus of the Johnson County Community College in Overland Park.
The graphic on the following page details the location of attractions in Overland Park.
DEVELOPMENT STRATEGIES 53 Prairiefire at LionsGate STAR Bond Revenue Study
DEVELOPMENT STRATEGIES 54 Prairiefire at LionsGate STAR Bond Revenue Study
Museum Demographics
Families & Individuals
Families and individuals will likely make up the majority of visitors to the Museum of Prairiefire. According to ESRI, there are approximately 532,477 families and a total of 2.1 million people living in the Kansas City metropolitan area. Per person, an average of $633.68 is spent annually on entertainment and recreation.
According to ESRI, there are approximately 4,985,059 families and a total of 19.2 million people living in the larger museum catchment area. Per person, an average of $498.88 is spent annually on entertainment and recreation.
The following table details demographic and recreational expenditure information for the Kansas City MSA and the museum catchment area.
Demographic & Recreation Expenditure Trends Kansas City Museum Description MSA Catchment Area Population 2016 Projection 2,141,252 19,820,606 2011 Estimate 2,051,278 19,227,089 2010 Census 2,035,334 19,116,979 2000 Census 1,836,038 5,595,211 Growth 2011-2016 4% 3% Growth 2010-2011 1% 1% Growth 2000-2010 11% 242% Household Size 2016 Projection 2.50 2.45 2011 Estimate 2.51 2.46 2010 Census 2.51 2.46 2000 Census 2.51 2.48 Growth 2011-2016 -0.4% -0.4% Growth 2010-2011 0.0% 0.0% Growth 2000-2010 0.0% -0.8% Educational Attainment Less Than 9th Grade 3% 4% 9th - 12th Grade 7% 8% High School Graduate 28% 33% Some College 23% 22% Associates Degree 7% 8% Bachelors Degree 21% 17% Graduate/Professional Degree 11% 9% Recreation Expenditure Entertainment/Recreation Fees and Admissions $634 $499 © ESRI, 2012
DEVELOPMENT STRATEGIES 55 Prairiefire at LionsGate STAR Bond Revenue Study
According to the Institute of Museum and Library Services, approximately 45 million adults and 21 million children, including school groups, visited a natural history museum in 2006.3 This number is a total and does not account for repeat visits. Therefore, approximately 23 percent of the total population of the United States in 2006 visited a natural history museum.
By applying the percentage of individuals visiting a natural history museum in 2006 calculated above to the current population of the Kansas City MSA, it shows that approximately 473,000 individuals would visit natural history museums. However, because Kansas City lacks a natural history museum it is likely that many individuals travel to museums elsewhere in the country or simply do not visit this type of museum.
Using the same percentage on the museum catchment area, approximately 4.4 million individuals within a 300-mile radius of Overland Park visited a natural history museum in 2011. Many of these visits likely occurred in other Midwestern cities or elsewhere in the country.
School Groups
Given the special exhibits, Discovery Room, and permanent exhibits to be offered at the Museum of Prairiefire, it is expected that many school districts, especially those in or close to Overland Park, will be interested in hosting field trips to the museum.
While it has been reported in the media that many schools have cut or eliminated field trip budgets, field trips remain an important source of visitors and revenues for museums. The Association of Science and Technology Centers reported that school groups account for 16.9 percent of total attendance, on average.4
Out of Area Tourists
The City of Overland Park contains a Convention Center that attracts local, regional, and national conventions. According to Amy Garton of the Overland Park Convention & Visitors Bureau (OPCVB), approximately 170,000 hotel room nights were reported in 2011, and these hotel rooms generally contained between one and four people. The Convention & Visitors Bureau estimates between 400,000 and 500,000 people stayed in hotels in Overland Park in 2011. Visitors generally stay in Overland Park for conventions, other business, sporting events, and to visit family in the area.
The OPCVB develops and distributes marketing materials that highlight attractions and amenities in Overland Park. In 2011, approximately 65,000 visitor guides were distributed and 88,000 hits were reported for the OPCVB website. Approximately 55 percent of the website hits, or 48,400 hits, came from Kansas and Missouri. Approximately 35 percent of those Kansas and Missouri website hits, or 17,000 hits, came from the Kansas City metro area.
3 IMLS. 2008. InterConnections: The IMLS National Study on the Use of Libraries, Museums and the Internet. Washington, D.C.: Institute of Museum and Library Services. Retrieved from www.interconnectionsreport.org. 4 http://astc.org/about/pdf/Backgrounders/2011%20Science%20Center%20Statistics.pdf
DEVELOPMENT STRATEGIES 56 Prairiefire at LionsGate STAR Bond Revenue Study
Because Overland Park lacks an entertainment, shopping, and dining development, OPCVB directs conventioneers and tourists to a town center development in Leawood, Kansas or other areas of the metro. Once Prairiefire at LionsGate is open, the Convention & Visitors Bureau plans to direct visitors and conventioneers to the Prairiefire at LionsGate development. In fact, the OPCVB indicated that convention planners have inquired about the availability of special event space in the Museum of Prairiefire and other entertainment providers in the development.
The OPCVB plans to reevaluate current marketing expenditures and may include the museum and other entertainment amenities at Prairiefire in future marketing efforts. The Developer is working with the OPCVB to include a “micro website” for the Museum on the CVB homepage.
Attendance Assumptions & Forecasts
Background Information
In 2006, a market study of the Museum of Prairiefire developed by Lord Cultural Resources estimated base year attendance to be 400,000. Since that time, the country has faced an economic recession and museums have suffered a decline in attendance and budgets. For example, the Field Museum in Chicago had a total attendance of 2.1 million in 2006. By 2010, attendance dwindled to 1.2 million.5 As the economic climate slowly improves, it is assumed that the original base attendance estimate for the Museum of Prairiefire is too high.
Attendance totals for traveling exhibitions developed by the AMNH were provided for many cities around the country. In general, annualized attendance at other AMNH exhibits ranged between 148,025 and 1,083,376 visitors. However, the available data only covered three exhibit types. Many, if not most, of the museums are larger and/or located in a dense urban center with other attractions nearby. The following table attendance at AMNH developed exhibitions. Because the annualized attendance at the Museum of Science in Boston is an outlier and the Museum of Prairiefire will not be located in a dense urban location, we averaged attendance both with and without the Boston Museum of Science.
5 http://www.chicagobusiness.com/article/20110514/ISSUE01/305149979
DEVELOPMENT STRATEGIES 57 Prairiefire at LionsGate STAR Bond Revenue Study
AMNH Special Exhibit Attendance Attendance per Reported Total Exhibition Annualized Metro Exhibit Venue Attendance Days Attendance* Population** Darwin Franklin Institute, Philadelphia 45,000 89 157,247 2.64% Einstein Dallas Museum of Nature & Science 79,000 135 181,993 2.86% Einstein Canadian Museum of Nature, Ottawa 75,335 91 257,464 20.82% Einstein Field Museum, Chicago 100,000 86 361,628 3.82% Einstein Museum of Science, Boston 299,583 86 1,083,376 23.80% Einstein Skirball Cultural Center, Los Angeles 200,000 259 240,154 1.87% Dinosaurs Houston Museum of Natural Science 68,063 143 148,025 2.49% Dinosaurs Field Museum, Chicago 189,398 158 372,802 3.94% Average 132,047 131 350,336 7.78% Average Excluding Boston Exhibit 108,114 137 245,616 5.49% *Assumes museums closed one day a week, Thanksgiving, and Christmas. **Based on US Census 2010 and Canadian Census data. In addition, data was provided for attendance to special exhibitions at the Science City museum in Kansas City, Missouri. Based on annualized attendance, approximately 21.0 percent of the population of the Kansas City metro, or nearly 424,000 people, attended a special exhibit at Science City or elsewhere in 2011. The following table details the exhibits, attendance, and annualized attendance of select special events at Science City.
Local Special Exhibit Attendance Attendance per Reported Total Exhibition Annualized Metro Exhibit Venue Attendance Days Attendance* Population** Dead Sea Scrolls Union Station, Kansas City 190,000 90 544,667 26.56% Titanic Union Station, Kansas City 282,372 155 470,013 22.92% Bodies Revealed Union Station, Kansas City 185,000 155 307,935 15.01% Sue T‐Rex Union Station, Kansas City 123,318 85 374,306 18.25%
Average 195,173 121 424,230 20.68% *Assumes museum closed two days a week, Thanksgiving, and Christmas. **Based on US Census 2010 data. According to the AMNH, total attendance to the Discovery Room in New York for fiscal year 2012 was 107,000. Given the total of 18.9 million, this indicates that 0.5 percent of the population visited the Discovery Room.
Attendance Assumptions & Forecasts - The data provided by the AMNH and Science City show that annualized attendance to special exhibits ranges from approximately 246,000 to 424,000. However, many of the exhibit examples are considered “blockbuster” events that typically enjoy a high number of visitors. Other exhibits, such as the Darwin exhibit, reported lower attendance. It is assumed that the Museum of Prairiefire will feature a mix of these different event types.
The location of the Museum of Prairiefire presents a unique situation in regards to attendance forecasts. While most museums are typically located in or very near an urban center, the Museum of Prairiefire will be located in fast-growing suburb. Out of town visitors, especially those staying in downtown Kansas City, may choose to attend a museum close to the downtown area in lieu of visiting the Museum of Prairiefire.
DEVELOPMENT STRATEGIES 58 Prairiefire at LionsGate STAR Bond Revenue Study
Furthermore, school districts located in the north or eastern portions of the metro area and facing ever- tightening budgets may consider the expense of transporting students to Overland Park too high.
The location, however, also presents some unique opportunities with regards to overall attendance. Overland Park is one of the fastest growing suburbs in the area and has consistently been ranked as one of the best places to live in the nation. The recent economic recession did not severely impact residents of this area, as seen through the high incomes and education levels reported in the demographics section of this report. These same residents are likely to value the wealth of programs and exhibitions offered at the museum. The OPCVB documented 170,000 hotel room nights in 2011 and plans to direct conference goers and other visitors to the Prairiefire development.
While it is not likely that attendance to the special exhibits will reach the 2006 estimate of 400,000, it is assumed that the strong economy in Overland Park, the adjacent shopping and dining amenities and the support of the local convention and tourism bureau will support special exhibit attendance. While some museums in the Kansas City area have shown an increase in visitors since 2006, many saw attendance remain flat or decline up to 44 percent. Given the high quality of the exhibitions and programs to be offered, it is reasonable to assume that 340,000 individuals will attend a special exhibition in the opening year.
The Museum of Prairiefire will hold a wide array of special events or lectures. Special events will include museum overnights, birthday parties, and family workshops. Based on the popularity of these programs at AMNH and other museums around the country, it is assumed that approximately 10,000 individuals will attend these events in the first twelve months of operation.
Approximately 0.5 percent of the population in the New York metro visited the Discovery Room in fiscal year 2012. It is assumed that the majority of visitors to the Discovery Room in New York consist of local school groups or families. Using the same 0.5 percent attendance rate applied the Kansas City metro population, approximately 10,300 individuals would likely visit the Discovery Room in the opening year.
Based on the natural history museum attendance estimates derived from the Institute of Museum and Library Services, the AMNH, and the Developer, it is assumed that attendance at the museum in the first twelve months of operation (March 2014 through February 2015) will be roughly 340,000.
Many of these 340,000 visitors will be lured by the novelty of a new museum and the expected “blockbuster” special exhibits in the first year. However, based on conversations with museum professionals in the Kansas City area and with Museum of Prairiefire management, it is not expected that this high rate of attendance during the first year of opening will be sustained in the future. Some special exhibits will not attract large crowds of people, and the “newness” of the museum may wane over time. According to the museum management, roughly 250,000 attendees, excluding special events visitors, are expected in a given year. Therefore, the model assumes that the number of yearly visitors will drop 10.0 percent in the second year of operation and continue to decline gradually until stabilizing during the sixth year of operation. Thereafter, it is assumed that the annual attendance growth rate will mirror the expected national population growth rate of 0.9 percent.
DEVELOPMENT STRATEGIES 59 Prairiefire at LionsGate STAR Bond Revenue Study
Attendance Estimates
Special Exhibits
Adults 160,000
Children 80,000
Seniors 25,000
School Groups 45,000
Other Groups 10,000
Discovery Room
Adults 1,500
Children 3,700
School Groups 3,000
Other Groups 1,800
Special Events & Lectures 10,000
Estimated Museum Sales & STAR Bond Capture
Assumptions - Based on information provided by the museum operator and data provided by the operator of the gift shop, it was assumed that 14.1 percent of all attendees would likely purchase an item at the gift shop and spend an average of $18.59each. The amount spent per retail customer is expected to grow 2.0 percent per year.
Because the Museum of Prairiefire will be located in a mixed-use redevelopment, it is highly likely that most museum visitors will go elsewhere for food. However, a small café will be available for those wishing to eat on site. It is assumed that 4.2 percent of all visitors will purchase food items and spend roughly $7 each. The amount spent per café customer is expected to grow 2.0 percent per year.
The following ticket prices were assumed:
DEVELOPMENT STRATEGIES 60 Prairiefire at LionsGate STAR Bond Revenue Study
Ticket Pricing
Special Exhibits
Adults $15.00
Children $9.50
Seniors $13.00
School Groups $8.00
Other Groups $9.50
Discovery Room
Adults $5.00
Children $5.00
School Groups $5.00
Other Groups $5.00
Special Events & Lectures $7.00
According to the museum operator, the museum will not give out free tickets for the exhibits or special events. Instead, tickets for low-income or other special populations will be subsidized through grants and charitable donations. Subsidized tickets will be subject to all applicable sales taxes.
Projected Annual Sales and STAR Bond Capture - Given the assumptions listed above, the museum portion of the STAR Bonds will generate a total of $5.5 million through the expiration of the bonds in 2032.
DEVELOPMENT STRATEGIES 61 Prairiefire at LionsGate STAR Bond Revenue Study
Projected Annual Museum Sales Tax Revenues Available for STAR Bond Financing Obligations Prairiefire at LionsGate, Phase 1 STAR Year Taxable Sale Tax Starts: Nov. 6, 2012 Year Taxable Sales Taxable Sales Taxable Sales Total Sales Rate Subject STAR Elig. Base Incremental Ends: Nov. 5, 2032 Ending Tickets Gift Shop Concessions Sales (2-month lag) to STAR Sales Taxes Sales Tax Sales Taxes 0 11/5/12$ - $ - $ - -$ $ - 6.7625% $ - $ - $ - 1 11/5/13 - - - - - 6.7625% - - - 2 11/5/14 2,780,822 635,075 71,232 3,487,129 2,615,346 6.7625% 176,863 - 176,863 3 11/5/15 3,781,918 880,976 98,813 4,761,706 4,839,871 6.7625% 327,296 - 327,296 4 11/5/16 3,466,295 823,602 92,378 4,382,274 4,445,513 6.7625% 300,628 - 300,628 5 11/5/17 3,264,198 791,095 88,731 4,144,025 4,183,733 6.7625% 282,925 - 282,925 6 11/5/18 3,155,970 780,163 87,505 4,023,639 4,043,703 6.7625% 273,455 - 273,455 7 11/5/19 3,130,679 789,389 88,540 4,008,608 4,011,113 6.7625% 271,252 - 271,252 8 11/5/20 3,149,977 810,140 90,868 4,050,985 4,043,922 6.7625% 273,470 - 273,470 9 11/5/21 3,178,327 833,780 93,519 4,105,626 4,096,520 6.7625% 277,027 - 277,027 10 11/5/22 3,206,932 858,110 96,248 4,161,290 4,152,013 6.7625% 280,780 - 280,780 11 11/5/23 3,235,795 883,149 99,057 4,218,001 4,208,549 6.7625% 284,603 - 284,603 12 11/5/24 3,264,917 908,920 101,947 4,275,783 4,266,153 6.7625% 288,499 - 288,499 13 11/5/25 3,294,301 935,442 104,922 4,334,665 4,324,851 6.7625% 292,468 - 292,468 14 11/5/26 3,323,950 962,738 107,983 4,394,671 4,384,670 6.7625% 296,513 - 296,513 15 11/5/27 3,353,865 990,831 111,134 4,455,830 4,445,637 6.7625% 300,636 - 300,636 16 11/5/28 3,384,050 1,019,743 114,377 4,518,171 4,507,781 6.7625% 304,839 - 304,839 17 11/5/29 3,414,506 1,049,500 117,715 4,581,721 4,571,129 6.7625% 309,123 - 309,123 18 11/5/30 3,445,237 1,080,124 121,150 4,646,511 4,635,712 6.7625% 313,490 - 313,490 19 11/5/31 3,476,244 1,111,642 124,685 4,712,571 4,701,561 6.7625% 317,943 - 317,943 20 11/5/32 3,507,530 1,144,080 128,323 4,779,933 4,768,706 6.7625% 322,484 - 322,484 TOTAL $ 5,494,293 Summary
The Museum of Prairiefire is well positioned to attract visitors from both the Kansas City metropolitan area and the greater region. We conclude that the Museum of Prairiefire will be successful for the reasons identified below:
Over the next five years, the Museum of Prairiefire will have exclusive rights, within a 300 mile radius of Overland Park, to special exhibits developed by the American Museum of Natural History in New York City. The agreement between the Museum of Prairiefire and the American Museum of Natural History will include an option to extend the contract for an additional five years. No museum of natural history currently is located in the Kansas City metro. Documented attendance to special exhibits held at other museums in the Kansas City metro is high The presence of other entertainment, shopping, and dining amenities at the Prairiefire at LionsGate development will attract additional museum visitors The Overland Park Convention & Tourism Bureau plans to direct visitors and conventioneers to the Museum of Prairiefire
DEVELOPMENT STRATEGIES 62 Prairiefire at LionsGate STAR Bond Revenue Study
COMBINED STAR BOND REVENUE COLLECTION FROM RETAIL AND MUSEUM COMPONENTS
The following table combines the revenue collect from the STAR Bond from both the retail and museum components, which were calculated separately in the previous sections.
Projected Annual Sales Tax Revenues Available for STAR Bond Financing Obligations Prairiefire at LionsGate, Phase I (Retail and Museum Revenue) STAR Year STAR Bond Sales Tax STAR Bond Sales Tax STAR Bond STAR Bond Starts: Nov. 2012 Year Collections From Collections From Collections From Sales Tax Ends: Oct. 2032 Ending Retail Anchors In-line Retail Museum Component Collections 0Oct-12$ -$ - $ - $ - 1Oct-13 - - - - 2 Oct-14 2,661,956 933,796 176,863 3,772,614 3 Oct-15 3,890,481 1,763,037 327,296 5,980,814 4 Oct-16 4,523,091 2,108,549 300,628 6,932,268 5 Oct-17 4,716,652 2,234,519 282,925 7,234,096 6 Oct-18 4,816,007 2,288,524 273,455 7,377,986 7 Oct-19 4,870,809 2,314,566 271,252 7,456,626 8 Oct-20 4,959,962 2,356,930 273,470 7,590,362 9 Oct-21 5,059,161 2,404,069 277,027 7,740,257 10 Oct-22 5,160,344 2,452,150 280,780 7,893,274 11 Oct-23 5,263,551 2,501,193 284,603 8,049,347 12 Oct-24 5,322,983 2,529,435 288,499 8,140,916 13 Oct-25 5,420,319 2,575,688 292,468 8,288,475 14 Oct-26 5,528,725 2,627,201 296,513 8,452,440 15 Oct-27 5,639,300 2,679,745 300,636 8,619,681 16 Oct-28 5,752,086 2,733,340 304,839 8,790,265 17 Oct-29 5,765,908 2,739,908 309,123 8,814,939 18 Oct-30 5,861,079 2,785,133 313,490 8,959,702 19 Oct-31 5,978,300 2,840,836 317,943 9,137,079 20 Oct-32 6,097,866 2,897,652 322,484 9,318,002
TOTAL $ 97,288,579 $ 45,766,270 $ 5,494,293 $ 148,549,143
DEVELOPMENT STRATEGIES 63
APPENDIX
A Detailed Retail Sales Projection (All Retail Tenants)
B. Detailed Retail Sales Projection (Anchor Tenants, Only)
C. Detailed Retail Sales Projection (In-Line Tenants, Only)
DEVELOPMENT STRATEGIES APPENDIX Prairiefire at LionsGate STAR Bond Revenue Study
DEVELOPMENT STRATEGIES APPENDIX B Prairiefire at LionsGate STAR Bond Revenue Study
DEVELOPMENT STRATEGIES APPENDIX B Prairiefire at LionsGate STAR Bond Revenue Study
DEVELOPMENT STRATEGIES APPENDIX C
APPENDIX B THE MUSEUM
4848-0467-6625.6
A. Overview Museum. The 41,000 square foot destination Museum of Prairiefire will serve as the Project’s principal attraction. Conceptual renderings of the Museum of Prairiefire building and the floor plan of the Museum are found at “B. MUSEUM OF PRAIRIEFIRE AND MUSEUM OWNER.” As the cornerstone of the development, the Museum of Prairiefire will host one-of-a-kind, on-going exhibits from The American Museum of Natural History (“AMNH”). AMNH, located in New York, New York, is one of the world’s largest and most celebrated museums. Despite its storied history as one of the world’s most widely respected institutions, and despite the longstanding demand for expansion, AMNH has never before entered into an ongoing collaborative agreement for permanent and traveling exhibits such as the current agreement with Prairiefire. Throughout its history, AMNH has remained an exclusive establishment, maintaining its only permanent exhibitions in New York City. See “C. INFORMATION ON AMERICAN MUSEUM OF NATURAL HISTORY” below.
The AMNH has selected Kansas and specifically the Prairiefire development as the first continuous venue outside of New York for a traveling exhibition program. Under the terms of an agreement (the “Museum-AMNH Agreement”) with the Museum Owner, described below under “B. MUSEUM OF PRAIRIEFIRE AND MUSEUM OWNER – Agreement Between the Museum Owner and the American Museum of Natural History,” AMNH has committed to provide 10 traveling exhibits over a 5-year period, with an option to renew for an additional 5-year period with 10 additional traveling exhibits. In return for such exhibits, the Museum Owner will provide AMNH with regular and committed rental payments over the term of the Agreement.
The AMNH currently develops two, 7,000 square foot temporary exhibits per year. The traveling exhibits are often organized by the AMNH in collaboration with other major national and international institutions such as, the Field Museum in Chicago, the San Diego Natural History Museum, the Abu Dhabi Authority of Culture & Heritage (United Arab Emirates), Expographic (Spain), Korea Green Foundation (Seoul South Korea), Royal Ontario Museum (Toronto, Canada), Natural History Museum of London, Australian National Maritime Museum (Sydney, Australia), Singapore Science Center and Papalote Museo del Nino (Mexico City, Mexico). The exhibit on display at AMNH as of the date of this Official Statement, “Creatures of Light,” is presently scheduled to be displayed at the Museum of Prairiefire in the Spring of 2017.
In addition to the traveling exhibitions, AMNH will provide permanent content for the Museum of Prairiefire by lending original specimens from its vast and growing collection at AMNH. These fossils and artifacts will be on continuous display, with some specimens rotating regularly, keeping the Museum of Prairiefire’s experience fresh and exciting. One of the most awe-inspiring elements of the permanent content at the Museum of Prairiefire will be a full-scale cast of the famous Tyrannosaurus Rex at the AMNH in New York. The AMNH in New York contains many more programs than simply exhibits, and the Museum of Prairiefire will, too. In addition to the semi-annual AMNH exhibits, the Museum of Prairiefire will house a Discovery Room targeted to attract children ages 5 to 12 and patterned after the existing Discovery Room in the New York City AMNH facility. The Discovery Room is described by AMNH in New York as an area that provides “an interactive gateway to the wonders of the Museum and a hands-on, behind-the scenes look at its science. Every major field of Museum science and research, from anthropology to zoology, is represented. Children, accompanied by adults, can explore an array of artifacts and specimens, puzzles, and scientific challenges.” The Discovery Room will provide school children, teachers and parents an ongoing interactive learning experience unlike any available today in Kansas or the region.
The agreement also provides that AMNH Science Bulletins will be streamed electronically from New York City. Prairiefire will display AMNH’s Science Bulletins, a four-part program featuring the
B-A-1 4848-0467-6625.6
AstroBulletin, EarthBulletin, BioBulletin, and HumanBulletin. These monthly Science Bulletins consist of live video downloaded to high definition screens, broadcasting the most current science and natural history discoveries to visitors at the Museum of Prairiefire and designated locations in Arbor Plaza. The AMNH Science Bulletins are an innovative online and exhibition program that offers the public a window into the excitement of scientific discovery. It is a video program that will deliver directly to Kansas the latest developments in the fields of astrophysics, Earth science, biodiversity and human biology and evolution through documentary feature stories about scientists in the field and regular brief research updates using scientific visualizations and imagery. The AMNH was founded in 1869 and is one of the world’s pre-eminent scientific and cultural institutions. Zagat Survey rates the AMNH as the third most popular attraction in the United States, behind only Disney’s Magic Kingdom and Epcot Center. The Museum of Prairiefire will be the first with an exclusive agreement with the AMNH that grants it a 300-mile radius exclusive market area and will host an estimated 400,000 annual visitors. The unique destination attraction is expected to generate demand for on-site shopping, dining and entertainment. Additional information on the American Museum of Natural History is included in APPENDIX C. The full scope of the educational, scientific and cultural programs available through the AMNH may be found at its website, www.amnh.org.
Native Wetlands, Interpretive Nature Walk and Prairie Gardens. Project amenities will include a unique Native Wetlands, a trail around the perimeter of Phase 1 and an interpretive nature trail around the Wetlands (the “Interpretive Nature Walk”), an Arbor Plaza (Prairiefire’s central park) and Prairie Gardens. In addition to these natural amenities, Prairiefire will also include extensive art, audio art, and a sculpture program.
These amenities throughout the Prairiefire development will define the natural Kansas landscape through identification of grasses, flowers and trees, a sunflower garden and butterfly habitat and a one-acre central park (the Arbor Plaza) for music and events. These features are a celebration of the Kansas prairie and of culture and heritage unique to Kansas and are key elements of the destination attraction. These features, as with the Museum of Prairiefire, will also include educational aspects of not only the Kansas Prairie and native wetlands, but also environmental conservation and sensitivity.
The Prairiefire Native Wetlands, Interpretive Nature Walk, Timber Bridge and Prairie Gardens are meant to not only promote and educate the public about the natural wonders of Kansas and its Tallgrass Prairie National Preserve, but to meaningfully engage the public resulting in more lengthy visits to Prairiefire. Dr. Ted Cable, a professor in the Horticulture Department of Kansas State University, is internationally renowned for wetlands and prairie interpretive walks as well as themed story boards. Dr. Cable will be coordinating this unique trail experience, guiding visitors in exploring the native plants, flowers, trees, and wildlife through an entertaining narrative of Kansas prairie heritage. A primary objective of the Wetlands and Interpretive Nature Trail is to introduce the broader public to the Tallgrass Prairie National Preserve and inspire visits to the Flint Hills of Kansas.
The Native Wetlands will be developed in accordance with Wetlands Mitigation Plan for Prairiefire authored by Olsson Engineers. Implementation of this wetlands plan will re-establish and maintain the natural wetlands and also be a living educational experience for visitors. The benefits preserving the wetlands at Prairiefire are described in the plan prepared by Olsson Engineers as follows:
Prairiefire at Lionsgate incorporates the enhancement of an existing stream channel and the creation of a wetland complex that together provide a biologically functional natural system in the context of a suburban development setting. Intended to serve as both a community amenity and a feature for water quality enhancement, the stream channel incorporates a series of weirs built of natural stone materials to promote shallow pool complexes that will sustain hydrophytic wetland vegetation. These shallow wetland cells
B-A-2 4848-0467-6625.6
reduce stormwater velocities by creating a broad conveyance area to manage stormwater runoff while capturing the first flush of pollutants as they pass through the native plant materials. This natural system will treat stormwater runoff by removing excess sediments, filtering out typical urban contaminants, and allowing for an increase in groundwater recharge due to improved infiltration capacity. Each of these benefits promotes improved water quality on-site and for downstream neighbors while limiting the potential for further uncontrolled erosive conditions that exist today.
Prairiefire will include a Timber Bridge, a project amenity that further assists in distinguishing Prairiefire as an authentic destination replicating the original manner of transportation across Kansas rivers and creeks. The wood construction will utilize natural materials that are in concert with the wetlands area it spans as well as adhering to the Prairiefire theme of celebration of nature and Kansas heritage.
New plant and flower species will be displayed in a designated Research Flower and Plant Garden monitored by student interns from the Kansas State University Horticulture Department. This will allow the public to see new species of plant materials representing the latest research and breeding of plants and flowers.
The Arbor Plaza will be an outdoor, interactive area for patrons of Prairiefire to meet and congregate. Additionally, this area will be used to stage outdoor festivals, art exhibits, concerts, special museum related events, museum advertising and “Coming Soon” attractions. The Arbor Plaza will join with the museum as a location receiving and then broadcasting AMNH’s Science Bulletins.
Prairiefire will also be home to a Sunflower Garden and Butterfly Garden. The Sunflower Garden will display the many varieties of Kansas’ state flower. This attraction will be designed to bring tourists to witness the short sunflower blooming season and learn more about this beautiful Kansas treasure. The Butterfly Garden will be a unique planting area containing specifically selected material which will attract an extraordinary number of butterfly species. The Butterfly Garden will include illustrated story boards to assist visitors in identifying the many butterfly species and their characteristics, as well as providing information on some of the most recent and amazing scientific discoveries in the world of butterflies. The garden will be patterned after the Butterfly Garden in the Gardens complex at Kansas State University.
An extensive program of art and sculpture will be procured and installed for public viewing throughout the Prairiefire development. The project-wide gallery will consist of locally and nationally celebrated artists and sculptors, featuring a diverse range of painting, photography, clay, sculpture and audio works. One aim of the collection is to create a draw for both national and international art audiences.
B-A-3 4848-0467-6625.6
B. INFORMATION ON MUSEUM OF PRAIRIEFIRE AND MUSEUM OWNER Information about the Museum of Prairiefire
As indicated in “A. OVERVIEW” above, the Museum of Prairiefire will host two traveling exhibits from AMNH each year. The Museum of Prairiefire will also have a Discovery Room, space for permanent exhibits with fossils and artifacts, and streaming Science Bulletins from AMNH.
Architectural drawings of the Museum are presented at the end of this subsection B.
Information about the Museum Owner
The Museum of Prairiefire will be owned by the Museum of Prairiefire Foundation (the “Museum Owner”), a Kansas not-for-profit corporation which has been designated as an Internal Revenue Code Section 501(c)(3) organization. The Museum Owner was established in December 2010 in Overland Park, Kansas to provide the greater Kansas City region with new educational opportunities and access to the highest quality science and natural history resources through an unprecedented collaboration with one of the largest and most celebrated museums in the world, the American Museum of Natural History (AMNH). The Museum Owner will continue that esteemed institution’s 140 year old mission: to foster the study of science.
The members of the Board of Directors of the Museum Owner are as follows:
Name Employer
Mary Birch Lathrop and Gage, L.C. Overland Park, Kansas Dr. Michael Engel University of Kansas Biodiversity Unit, Division of Entomology Lawrence, Kansas Michael Grossman Great Plains Trust Company Overland Park, Kansas David Hill Hill Financial Advisory Service Kansas City, Missouri Candy Merrill Merrill Companies Overland Park, Kansas Fred L. Merrill, Jr. Merrill Companies Overland Park, Kansas Bill Snyder Kansas State University Manhattan, Kansas Debbie Sosland-Edelman The Sosland Foundation Kansas City, Missouri
The Executive Director of the Museum is Linda Segebrecht. Ms. Segebrecht graduated from the University of Kansas in 1973 with a B.S. in Biology, Education. She obtained her M.S. degree, cum laude, in Curriculum and Instruction, Biology, from the University of Kansas in 1975. She did post graduate work in 1978 with the University of Kansas, University of California, Scripps Institute Post Graduate. After ten years as a high school biology teacher, Linda Segebrecht left the classroom to become the executive director of Science Pioneers, a nonprofit organization that provides educational programming in science and math to schools. From there Ms. Segebrecht designed and implemented the EarthWorks, an interactive environmental focused program through the Learning Exchange, and later
4848-0467-6625.6
worked on creating the White House Decision Center at the Truman Presidential Library. In 2002, Ms. Segebrecht co-founded Project Explore Inc., which was behind the design of such full-scale projects as Union Station’s DinoLab, KC Rail Experience, Greensburg Big Well Museum, and the Dead Sea Scrolls exhibition. She has also worked with the Kansas City Zoo, Deanna Rose Farmstead, Drury University, and Kansas Regional Prisons Project, and has created curriculum packages for the Liberty Memorial, Powell Gardens, Starlight Theater, Eisenhower Presidential Center, Cerner, and the Winston Churchill Memorial Library.
The Development Director of the Museum is Karin Cox. Karin Cox has a Master of Fine Arts in Creative Writing, and was one of the founding principals of Hartsook Companies, a leading national fundraising company. Her experience has spanned the field of several different areas: in higher education, as key participant in a more than $100 million campaign; in health care as one of America's top spokespeople in the field of child abuse prevention; in K-12 education as the key communications and public relations role; in human services, she grew a small nonprofit from two people with less than $100,000 budget to 11 people with a $1.2 million budget. The author of numerous articles, Ms. Cox has written the chapter on fundraising events in the fundraising text published by Jossey-Bass, Fundraising Practices and Principles.
Museum Fundraising Efforts
Fundraising efforts and discussions for the Museum have been ongoing for some time. Fundraising efforts are led by Hartsook Companies and Linda Segebrecht. Hartsook, one of the leading fundraising companies in the country, has raised over $2 billion for 3,000 different organizations. Linda Segebrecht has extensive contacts for sponsorship of specific AMNH exhibitions. In addition, the Board of Directors and steering committee of the Museum Owner includes several leading civic leaders in the community who have successfully raised millions of dollars for various organizations in the Kansas City metropolitan area.
It is expected that $2,700,000 of the Museum's Discovery Room costs will be funded through private equity, which will be provided via private donations. So far, approximately $1,000,000 in donations has been received. A portion of these funds have been used to make payments to AMNH under the Museum Agreement described below, relating to the Discovery Room.
The fundraising efforts have also identified donors interested in giving approximately $10 million in support to the Museum for items such as the Discovery Room, naming opportunities, etc. Most of these institutions and other donors have indicated that they will wait to officially commit to making donations until Museum construction is underway.
Financing of Museum Operating Costs
Ongoing Museum operations will be funded primarily through ticket sales, memberships and concessions. Such amounts are estimated to be sufficient to fund all operating costs with revenues to spare. The Museum Owner also desires to purchase blocks of tickets each year to provide to certain groups and individuals to make their attendance possible. Ongoing fundraising will fund these costs, as well as provide additional operating funds generally for the Museum.
Agreement Between the Museum Owner and the American Museum of Natural History
Museum Agreement. The Museum of Prairiefire Foundation (the “Museum Owner”) and the American Museum of Natural History (“AMNH”) have entered into that certain Exhibition Agreement (the “Museum Agreement”).
4848-0467-6625.6
Under the Museum, the Museum Owner agrees to license Exhibitions and Science Bulletins (as defined therein) from AMNH and AMNH agrees to loan Exhibitions and Science Bulletins to the Museum Owner, for the annual fee set forth in the Museum Agreement.
Terms of Museum Agreement. The Museum Agreement provides for the following to be available to the Museum Owner for the Museum:
Exhibitions. AMNH agrees to lend and the Museum Owner agrees to borrow ten AMNH Exhibitions over five years for a total of ten venue showings starting in the fall of 2013 (the “Term”), upon payment of the annual fee provided in the Museum Agreement. The Museum Owner and AMNH may extend the Term for an additional five years with an additional ten venue showings with 24 months’ notice prior to the end of the original term.
Science Bulletins. The Museum Owner will be a subscriber to four Science Bulletin streams for each year starting in the fall of 2013 for the duration of the Term, including any additional Term. The streams included are: AstroBulletin, BioBulletin, EarthBulletin and HumanBulletin. The cost of the Museum Owner’s subscription will be included within the annual fee set forth in the Museum Agreement.
Intellectual Properties. AMNH has licensed intellectual properties (“Properties”) of the “Discovery Room” to the Museum Owner. Intellectual properties of the “Discovery Room” designed and owned by AMNH, are comprised of design drawings for furniture, graphic production files, label text, software and video media. Also included are intellectual properties of select displays, media, or interactives from AMNH traveling exhibitions hosted by the Museum. The Properties are licensed solely for adaptation into an education and scientific exhibition to be displayed starting in the spring of 2014 until the end of the term of the __ Agreement over a 10 year period. The Museum Owner is currently in possession of the entire “Discovery Room” intellectual property content package.
Gift Shop. A gift shop will sell AMNH licensed merchandise for a license fee. The gift shop will be run by Event Network. The proceeds from the gift shop will be split between Event Network and the Museum Owner.
Scheduled Exhibits. Information on the exhibitions currently scheduled through the fall of 2017 is set forth on the following page. There may be changes in the schedule of exhibitions during the Term.
4848-0467-6625.6
Scheduled AMNH Exhibitions at Museum of Prairiefire As of December 1, 2012
Museum of Prairiefire American Museum of Natural History Exhibitions Schedule
Note: Dark time between Exhibitions = approximately 8 weeks = 1 week to load in + 3 weeks installation + 1 week until public opening + 2 weeks installation + 1 week to load out
2013 2014 2015 2016 2017 Race to the End of the Spring Water Spring Horse Spring Spring Creatures of Light Earth World's Largest Fall Mythic Creatures Fall Dinosaurs: Ancient Fossil, Fall Brain Fall Beyond Planet Earth Fall Dinosaurs New Discoveries
The Museum is not scheduled to open until spring of 2014. The “World’s Largest Dinosaurs,” an AMNH exhibition scheduled to open in the fall of 2013, will be displayed by the Museum in space 26A of Phase I of the Project in the Museum District, which will be a completed shell space in which a retail tenant will not yet have been installed. The 8,480 square foot space is suited for the exhibition because of its physical attributes, such as ceiling height, layout and access, as well as its “on-site” location near the Museum which will be under construction during the World’s Largest Dinosaurs exhibition showing.
The “World’s Largest Dinosaurs” exhibition will be presented as a “Museum of Prairiefire Preview Event.” Visitors will not only have the opportunity to enjoy the exhibition itself, but also be granted a “sneak peek” of the Museum and Prairiefire’s many other amenities and activities.
4848-0467-6625.6
[3 pages of architectural drawings plus a page with Museum floor plan are inserted here]
B-B-1 4848-0467-6625.6
C. INFORMATION ON AMERICAN MUSEUM OF NATURAL HISTORY
The following information has been provided by the American Museum of Natural History.
B-C-1 4848-0467-6625.6
AMERICAN MUSEUM OF NATURAL HISTORY
[To be updated by AMNH]
The American Museum of Natural History (“AMNH” or the “Museum”) is organized as a nonprofit, educational corporation, chartered in 1869 by a special act of the Legislature of the State of New York. It operates under the auspices of the Regents of the State of New York. The AMNH mission, which reflects a close integration of science and education, is “to discover, interpret, and disseminate—through scientific research and education knowledge about human cultures, the natural world, and the universe.”
AMNH is a museum of anthropology, biological, and physical sciences with exhibits built upon collections that are among the largest and most comprehensive in the world. It has a center for earth and space that includes one of the most technologically advanced planetariums and a research program in astrophysics. The newly launched graduate school confers the Ph.D. degree in comparative biology, making AMNH the first and only museum in the United States authorized to do so, and its scientific assets include one of the largest research libraries in natural history. Its cross-disciplinary research centers include an institute for molecular and microbial biology and genomics and a conservation center that uses applied science to address the loss of biodiversity worldwide.' Educational offerings include professional development courses for K-12 teachers, both online and on-site, and a range of educational resources, programs, and curricular materials. AMNH also is a creator and distributor of award-winning museum exhibitions, science bulletins, and planetarium shows, which are presented around the world. Finally, it is also a convener of international conferences on scientific, environmental, cultural, and educational topics.
The AMNH campus sits in the middle of the approximately 18-acre Theodore Roosevelt Park of the City of New York on Manhattan's Upper West Side, with a complex of 27 interconnected buildings totaling 1.6 million square feet. The premises of AMNH are exclusively occupied by AMNH under rent-free leases from the City of New York that endure indefinitely so long as the premises are used consistently with the Museum's chartered purposes.
The Museum is open to the public 363 days a year. Its permanent exhibitions are displayed in 45 halls and are supplemented with special temporary exhibitions during the year. Exhibitions are almost entirely designed and built by AMNH staff. Over the past thirteen years, AMNH built or renovated 13 permanent exhibition halls, which incorporate the display of specimens, artifacts, and scientific models, high-definition video and photography, interactive hands-on exhibits, and diorama art, which AMNH pioneered. To its permanent exhibitions AMNH adds special temporary exhibitions, space shows and science video bulletins which then travel to other venues to reach millions more.
In the fiscal year ending [June 30, 2008], the Museum set an attendance record of over [3.6] million on-site visitors. International visitors made up over a third of the visitors. The number of school groups visiting the Museum also increased. AMNH was voted the most popular family attraction in New York City and the third most popular family destination in the United States by the Zagat Survey U.S. Family Travel Guide (2004). More than [7 million] people visited the Museum's website during the fiscal year ending [June 30, 2008].
AMNH has a full-time scientific staff of approximately 225 that conducts research in genomics, astrophysics, zoology, paleontology, earth sciences, and anthropology. Its scientists undertake an average of more than 120 expeditions annually and results are frequently analyzed in the Museum's state-of-the-art laboratories. The scientific staff publishes its work in major peer-reviewed journals at the rate of approximately 500 publications each year. Their work is partially funded by some 14 different federal agencies including the National Science Foundation, the National Institutes of Health, and the National Aeronautics and Space Administration. Its scientists also work worldwide to survey and study biological diversity, provide educational programs, and to
B-C-2 4848-0467-6625.6
mitigate threats to the Earth's ecosystems. AMNH scientists conduct research on more than 120 expeditions each year, in state-of-the-art laboratories at AMNH, supported by the AMNH Research Library.
AMNH scientists steward collections of over 32 million specimens and artifacts. Collections are designed to allow deep understanding of 4.5 billion years of change in earth's geology, climate, and life forms, and research remains the strongest factor shaping additions to the collections. These collections increase an average of 90,000 specimens and artifacts a year. In addition, new collection areas include the Museum's frozen tissue collection of DNA and tissue samples and access to large scientific digital databases of genomic and astrophysical data. The collections and research assets are enriched by continued exploration of areas such as Mongolia, Peru, Madagascar, Chile, Argentina, Bolivia, Brazil, Vietnam, Mexico, Republic of Congo, Thailand, India, the Arctic of Canada and Russia, New Guinea, and Australia. The Museum's extensive research program provides research material for other institutions with typically over 1,500 loans of over 300,000 specimens to other institutions at any given time.
Consistent with generally accepted accounting principles and museum practice, the value of the Museum's collections is not reflected in its financial statements, and the collections should be considered unavailable to satisfy the indebtedness of the Museum. The land and buildings occupied by AMNH are restricted to uses by AMNH consistent with its chartered purposes. The lease and occupancy are therefore not assignable to pay the indebtedness of the Museum.
In 2007, the Board of Regents of the State of New York amended the AMNH charter to establish a graduate school to grant the Ph.D. and Master of Philosophy degrees to duly qualified graduates completing registered curricula at the Graduate School. AMNH received pledges of over $50 million designated for endowment to support the Graduate School. The Graduate School admitted its first class in comparative biology in the fall of 2008 and then applied for accreditation from the Board of Regents of the State of New York, which is pending. To cultivate and train the next generation of scientists, the Graduate School also conducts a doctoral and postdoctoral training program for approximately 100 students and trainees each year in collaboration with four universities, Cornell, Columbia, New York University, and the City University of New York. In addition, the AMNH undergraduate training program provides a select number of undergraduate students with intensive research experience in such subjects as evolutionary biology, earth and planetary sciences, and astrophysics.
AMNH works with the formal K-12 education system to provide resources to school programs, train science teachers, and foster science literacy in New York City and in several other urban areas in the United States, Organized school groups of approximately 530,000 students and teachers visit each year and many more participate in after-school programs. Professional development programs provide over 7,000 educators annually with content knowledge in science and social studies. Many of these programs offer teachers the opportunity to earn certificates of continuing professional education and credits toward advanced degrees in science education through the City University of New York and other universities. AMNH also offers the public a broad an-ay of educational programs throughout the year for audiences of all ages and authors and publishes scientific publications, curriculum materials, and educational resource materials to schools, libraries, and community organizations.
AMNH further extends the reach of its educational programs through its auxiliary services. Among other activities, auxiliary services operate after-hours events and conferences for fund-raising and to increase the audience for Museum exhibitions. It also distributes exhibitions, science bulletins, and planetarium shows to museums, science centers, and planetariums. AMNH operates several shops on its premises that provide visitors a selection of books, videos, and utilitarian goods that are related to permanent and special Museum exhibitions and educational programs.
[Add paragraph with additional information on the travelling exhibits.]
B-C-1 4848-0467-6625.6
[INSERT AMNH BROCHURE]
B-C-1 4848-0467-6625.6 OVERVIEW OF THE THE AMERICAN MUSEUM OF NATURAL HISTORY is a on of a kind - a must-visit for New Yorkers and tourists alike. - Dan R., via Facebook
The American Museum of Natural History, located on the Upper West Side of Manhattan in New York City is one of the largest and most celebrated museums in the world. Located in park-like grounds across the street from Central Park, the Museum comprises 25 interconnected buildings that house 46 permanent exhibition halls, research laboratories, the Discovery Room, and its renowned library.
A VAST COLLECTION The collections contain over 32 million specimens, of which only a small fraction can be displayed at any given time. The Museum has an education staff of more than 100, sponsors some 120 expeditions and field projects each year throughout the world, and averages approximately five million visitors annually.
SCIENCE AND CULTURE Founded in 1869, the American Museum of Natural History is one of the world's preeminent scientific and cultural institutions. The Museum supports research programs in anthropology, paleontology, zoology, astrophysics, earth and planetary sciences, molecular biology, and conservation with a scientific staff of more than 200, including 40 curators. The Museum's research scientists work with the exhibition team to develop award-winning, topical exhibitions and are supported in their work by the Museum's state-of-the-art research laboratories, the largest independent natural history library in the world, and a world-renowned collection of specimens and cultural artifacts. The Museum became the first American museum with the authority to grantthe Ph.D. degree with the launch of the Richard Gilder Graduate School in 2006. Long celebrated for the depth of its collections and the wide scope of its halls, the Museum has continuously been at the forefront of scientifc discovery and interpretive programming. The Museum is dedicated both to acquiring scientific knowledge and to sharing that information with the broadest audience possible. By combining research and educational efforts, the Museum seeks to expand public understanding of the cosmos and the diversity of life on Earth. WHERE DINOSAURS REIGN Generations of children have flocked to the Fossil Halls, where the famous dinosaurs reign. The museum, which has the world’s largest collection of vertebrate fossils, renovated the Fossil Halls in the mid 1990s to create a continuous loop on the fourth floor that tells the story of vertebrate evolution through more 600 specimens (nearly 85 percent are real fossils, not casts).
SCIENCE MEETS ART Among the most impressive sights at the museum are its internationally renowned dioramas, where science meets art. Painters, photographers, naturalists and taxidermists recreate geographically precise scenes from nature and then populate them by mounting anatomically correct specimens: thundering elephants, the American bison, African lions, the wading birds of the Everglades and many others.
EDUCATION INNOVATION Stop by the the Discovery Room at the American Museum of Natural History and the line is probably snaked down the hall and around the corner. Parents and their children eagerly wait to enter this magical place that offers an interactive gateway to the wonders of the Museum and a hands-on, behind-the-scenes look at its science. Every major field of Museum research, from anthropology to zoology, is represented. Children explore an array of artifacts and specimens, puzzles, and scientific challenges.
2010 Annual Report
The American Museum of Natural HistoryTHE isAMERICAN ranked by MZagatUSE UMas the oF third NATU mostRAl popularHISToRY attraction HAS A lo NGin theTRADITI UnitedoN States, oF E xPloRATIoN, including the anthropological work of the Jessup North Pacific Expedition of 1897, the zoological and ethnographic work undertaken by Herbert lang and James just behind Disney World and Epcot Center,Chapin in theand Congo ahead Basin from of 190 Disneyland,9 to 1915, the multidisciplinary California. Central Asiatic Expeditions of the 1920s led by Roy Chapman Andrews, and the seven Archbold Expeditions to New Guinea and Australia that took place between 1933 and 1964. Fieldwork is a core component of the Museum’s research and collection development activities. The Museum sends out approximately 120 field expeditions each year and offers students in the Richard Gilder Graduate School the opportunity to participate in expeditions as part of their training.
Selected FY2010 expeditions are highlighted below. THE AMERICAN PHysICAl sCIeNCes INVerteBrAte Palomar Mountain, California MUSEUM OF ZooloGy Australia Chile Ecuador NATURAL HISTORY India Mexico Mona Island Namibia HAS A LONG Peru Puerto Rico South Africa South Dakota Venezuela TRADITION OF US Virgin Islands
EXPLORATION, PAleoNtoloGy Arkansas China France including the anthropological Madagascar Mongolia Romania work of the Jessup North Pacific CeNter for Peru BIoDIVersIty AND CoNserVAtIoN ANtHroPoloGy Expedition of 1897, the zoo- Bahamas Nubia Bolivia Papua New Guinea British Columbia logical and ethnographic work Oaxaca Valley, Mexico Laos South Korea Madagascar VerteBrAte St. Catherines Island, Georgia Palmyra Atoll Peru ZooloGy undertaken by Herbert Lang and Solomon Islands Congo Vietnam Madagascar Mauritius soUtHwesterN Seychelles James Chapin in the Congo Basin Vietnam reseArCH stAtIoN from 1909 to 1915, the multidis- Arizona ciplinary Central Asiatic Expedi- 21 tions of the 1920s led by Roy Chapman Andrews, and the seven Archbold Expeditions to New Guinea and Australia that took place between 1933 and 1964. Fieldwork is a core component of the Museum’s research and collection development activities. The Museum sends out approximately 120 field expeditions each year and offers students in the Richard Gilder Graduate School the opportunity to participate in expeditions as part of their training. SCIENCE
AMNH KNOWS HOW TO MAKE CUTTING-EDGE SCIENCE interesting, relevant and accessible to the general public. - Anthony Z., via Facebook
A leading research institution, the Museum is home to more than 200 scientists working across the broad disciplines of anthropology, biology, paleontology, earth and planetary sciences, and astrophysics, and a world-class collection of more than 32 million specimens and artifacts. Through its Richard Gilder Graduate School, it is also the only U.S. museum to award the Ph.D. degree. SCIENCE
Museum scientists continue to pursue research within the core divisions of Anthropology, Invertebrate Zoology, Paleontology, Physical Sciences, and Vertebrate Zoology, as well as under the auspices of the Sackler Institute for Comparative Genomics and the Center for Biodiversity and Conservation. An active fieldwork program, conducted at sites all over the world, contributed to the Museum’s extraordinary collections and to research that produced more than 400 publications. The Museum’s scientific work was also supported by its superb collections, laboratories, research library, and imaging facility. In addition to the support described below, several activities, including expeditionary work, were supported by the Altman Endowment Fund for Scientific Research. EDUCATION
WE LOVE THE DISCOVERY ROOM... the hands-on displays are set up so that exploration is totally natural, and even though we visit often, there is always something new to discover. - Christine E.
The Museum’s work in education represents an innovative leap forward in defining how science-rich cultural institutions can support lifelong science learning in 21st-century America. EDUCATION
Children as young as two meeting small vertebrates. Teens receiving mentoring while working on scientific research projects. Teachers mastering the art of imparting the process of scientific inquiry, and adults of all backgrounds keeping the Museum’s doors open late into the evening with conversations about astronomy, world cultures, or the eroding Arctic icecap and its impact on global security. Each year, learners of all ages and backgrounds find relevance and rigor in the wide slate of educational offerings at the Museum that supports their academic progress, their careers, their interests, and their role as informed citizens. EXHIBITION
I LOVE THIS PLACE. I COULD SPEND THE WHOLE DAY HERE getting lost among the exhibits. - Karen S., via Yelp
The Exhibition Department interprets the work of the Museum’s scientists and highlights the Museum’s world-class collections using the latest technology and design approaches to explore important scientific and cultural subjects in major temporary exhibitions. EXHIBITION
Visitors of all ages, learning levels, and backgrounds visit the permanent and special exhibitions created by the Museum’s Exhibition Department each year. Numerous exhibitions, Space Shows, the Digital Universe Atlas, and Science Bulletins produced by Museum scientists and staff are seen in more than 20 countries annually, broadening the reach of the Museum’s exhibitions and educational content far beyond its walls.
Find dinosaurs, legless lizards and a human brain . . . all In the heart of the Kansas prairie. The American Museum of Natural History will show two highly acclaimed exhibitions each year at the Museum of Prairiefire in Overland Park, Kansas beginning in the fall of 2013. OVERVIEW: AMERICAN MUSEUM OF NATURAL HISTORY EXHIBITIONS
The American Museum of Natural History is a leading provider of high-quality scientific content to museums, science centers and planetariums around the world. AMNH’s content packages include exhibitions, immersive digital planetarium shows, and Science Bulletins, a regularly updated high- definition video program. The AMNH can also create customized content packages based on the individual needs of an institution, drawing from Museum halls, media and expertise in space science, paleontology, ocean life, earth science, biodiversity, and many other areas. All content distributed by the AMNH is developed by our staff of over 200 research scientists in conjunction with our renowned design, media, engineering, and exhibition teams.
THE EXHIBITIONS
The award-winning and highly-acclaimed AMNH traveling exhibitions explore compelling scientific and anthropologic topics suitable for display at many different types of institutions.
Dinosaurs: Ancient Fossils, New Discoveries What did dinosaurs look like? How did they move and behave? And are they really extinct? Dinosaurs capture the imagination of children and adults, but public fascination and understanding of dinosaurs has not kept pace with scientific discovery. Dinosaurs showcases recent scientific discoveries about dinosaurs, including findings about their biology, behavior, and environments, as well as the latest information on the question of (non-bird) dinosaur extinction. Dispelling many misconceptions about these creatures, this exhibition separates dinosaur fact from dinosaur fantasy, and demonstrates what can and cannot be derived from the fossil evidence. Dinosaurs challenges the imagination of visitors while explaining why there is still much to discover and learn about dinosaurs.
The Horse The Horse will focus on the profound relationship between the horse and humans. Of all the species with which we have interacted over the past 100,000 years, none compares to the horse in cultural significance. We have preyed upon horses, domesticated them, and shaped them into the “animated machinery” that helped create the modern world. In this exhibition, we will explore how we have influenced horses, and how horses, in turn, have influenced us.
The Horse showcases spectacular fossils – including many from the extraordinary AMNH collection – as well as articulated skeletons showing the evolution of the modern horse, works of art both ancient and contemporary, and cultural objects from around the world. We will explore horses from a wide range of perspectives: from paleontology to anthropology, evolutionary biology to equestrianism, genetics to biomechanics.
Lizards & Snakes: Alive! Lizards & Snakes: Alive! showcases an astounding live collection of gliding, climbing, scuttling lizards, iguanas, chameleons, and snakes in an exhibition designed as a profound exploration of scientific concepts expressed in the fantastic diversity of reptiles.
Using fossils, models, video, photographs, sound recordings and anatomical specimens to complement the large selection of live animals, the exhibition presents its subject in an appealing, information-rich environment geared towards visitors of all ages and abilities. In addition to the sheer enjoyment of witnessing the remarkable diversity and adaptations of an exceptional array of lizards and snakes, visitors access a depth of information on themes including evolution, conservation and extinction.
Mythic Creatures: Dragons, Unicorns & Mermaids Mythic Creatures will delve into the world of fantastic creatures from the oceans, land, and air, such as dragons, mermaids, and unicorns, answering questions about their origins, their cultural importance, and their hold on the human imagination. This exhibition will teach audiences about diverse cultures from a wide range of geographies and time periods while exploring the evolution of scientific understanding about the natural world.
Mythic Creatures will use a combination of live animals (such as bats, frogs, owls and scorpions), taxidermy specimens, fossils, magnificent ancient and modern cultural objects, and absorbing multimedia and interactive technology to create a “blockbuster” project that will appeal to a wide range of audiences. Rigorous scientific consideration of these creatures will shed light on interpretations of natural history over time, investigating how some beasts have evolved as composites of living animals and, in some cases, were influenced by the appearance of fossils.
Water: H2O=Life Water is a natural resource more valuable than oil and more precious than gold. Life on Earth originated in it and cannot live without it. It commands a critical role in human cultures, and is home to the majority of the world’s biodiversity. It covers 75% of the Earth’s surface, yet most people know very little about it. This essential and little-understood resource is water. The exciting and informative new exhibition Water will trace water from its origins 4.5 billion years ago to the present day, following it as it carves landscapes, nurtures nature and shapes civilizations. As human populations grow and assaults on our water resources mount, we must confront some of the most pressing water questions of our day: Do we have enough? Can we get more? How will we manage the resources we have?
This compelling and visually stunning exhibition will forever change the way visitors of all ages think about and use water. Water’s phases and phenomena will be explored through cutting-edge technologies, hands-on exhibits, video and other media, cultural artifacts and free-flowing water. Specimens from the Museums’ and other collections, including live animals, taxidermy, and fossils will vividly demonstrate the amazing diversity of adaptations to water excess or scarcity. Water will give all visitors a deeper understanding about this infinitely precious resource without which we cannot live.
Creatures of Light Have you ever captured a glowing firefly? On a warm summer evening, a firefly’s light seems rare and magical. Yet the tree of life is spangled with organisms that blink, glow, flash, and glitter. Welcome to the world of bioluminescence—the generation of light by living things.
Creatures of Light: Nature's Bioluminescence is organized by the American Museum of Natural History, New York, in collaboration with the Canadian Museum of Nature, Ottawa, Canada, and The Field Museum, Chicago.
Generous support for Creatures of Light has been provided by the Eileen P. Bernard Exhibition Fund.
The World’s Largest Dinosaurs The huge dinosaurs called sauropods astound us. So massive! So tall! Such long necks and tiny heads! But more astounding is this: these strange giants rank among Earth’s great success stories, roaming the planet for 140 million years. Today, scientists from many fields have joined in an effort to figure out how they did it. Paleontologists, biologists, botanists, animal nutritionists and engineers all agree: the world’s largest dinosaurs were extraordinary creatures. The challenge is to discover what made them tick.
The exciting exhibition features cutting-edge research on super-sized sauropods--including the giant Mamenchisaurus, one of the largest animals to ever walk the Earth--and offers new insights into how their colossal bodies functioned. Visitors will have a chance to examine life-sized bones, muscles, internal organs, and more to discover the amazing anatomy of The World's Largest Dinosaurs.
Beyond Planet Earth: The Future of Space Exploration The Moon. Mars. An icy moon of Jupiter. A near-Earth asteroid. In the not too distant future, missions to these destinations will launch from Earth.
All would involve countless hours of planning and hard work, opportunity for scientific glory—and risk. But if the missions succeed, what adventures would unfold. So, tonight, look up. Above you: the universe.
Beyond Planet Earth: The Future of Space Exploration, a new exhibition that offers a vision of the future of space travel as it boldly examines humanity's next steps in our solar system and beyond.
Brain: The Inside Story As you read these words, your brain is taking in all kinds of sights and sounds, and zeroing in on a few. It is recalling what you have learned about the forms of letters, the meanings of words, and what information you hope to find on this website. Your brain is making decisions and forming new memories. All the while, it is helping you stay alert and steadily breathe. How does the brain do it all? We are only beginning to understand the inside story of this remarkable organ. Today, advances in biochemistry and new technologies that allow us to watch the brain in action are revealing more than ever before.
Brain: The Inside Story explores the way the human brain works, specifically as it relates to senses ("Your Sensing Brain"), emotions ("Your Emotional Brain"), thinking ("Your Thinking Brain"), how the brain ages ("Your Changing Brain"), and how technological advances may change our brains in the future ("Your 21st Century Brain").
Drawing on 21st-century research and technology, Brain: The Inside Story offers visitors a new perspective and keen insight into their own brains through imaginative art, vivid brain-scan imaging, and dynamic interactive exhibits for all ages.
Race to the End of the Earth Race to the End of the Earth recounts one of the most stirring tales in the annals of Antarctic exploration, the contest to reach the South Pole. This exhibition focused on the challenges that the two leaders—Roald Amundsen on the Norwegian side and Robert Falcon Scott on the British—faced as they undertook their separate 1,800-mile journeys from the edge of the Ross Ice Shelf to the South Pole and back.
Race to the End of the Earth vividly re-creates, through dioramas and period detail, how Amundsen and Scott prepared for their polar journeys. Nutrition, human endurance, equipment, logistics, and Antarctica's extreme weather were among the many factors that each team had to evaluate, often with far too little information to avoid tragedy and ensure triumph.
Traveling the Silk Road This exhibition brings to life one of the greatest trading routes in human history, and showcased the goods, cultures, and technologies from the far reaches of China through the cities and empires of Central and West Asia from AD 600 to 1200. Visitors embark on an unparalleled journey, exploring commerce, communication, and cultural exchange from four representative cities: Xi'an, China's Tang Dynasty capital; Turfan, a verdant oasis and trading outpost; Samarkand, home of prosperous merchants who thrived on the caravan trade; and Baghdad, a fertile hub of commerce and scholarship that became the intellectual center of the era. Take a journey across Asia and discover the secrets and wonders of the greatest trade route of ancient times.
Extreme Mammals With Extreme Mammals: The Biggest, Smallest, and Most Amazing Mammals of All Time, the American Museum of Natural History explores the surprising and often extraordinary world of extinct and living mammals.
Featuring spectacular fossils and other specimens from the Museum's collections, vivid reconstructions, and live animals, the exhibition examines the ancestry and evolution of numerous species, ranging from huge to tiny, from speedy to sloth-like, and displays animals with over-sized claws, fangs, snouts, and horns.
Through the use of dynamic media displays, animated computer interactives, hands-on activities, touchable fossils, casts, taxidermy specimens, and a colony of live sugar gliders—extreme marsupials from Australia—the exhibition will highlight distinctive mammalian qualities and illuminate the shared ancestry that unites these diverse creatures. The exhibition is divided into nine sections—Introduction, What is a Mammal?, What is Extreme?, Head to Tail, Reproduction, Mammals in Motion, Extreme Climates, Extreme Isolation, and Extreme Extinction—and offers extensive detail on the evolutionary history and great family tree of mammals.
Extreme Mammals: The Biggest, Smallest, and Most Amazing Mammals of All Time explores the surprising and often extraordinary world of extinct and living mammals.
Climate Change – and Its Consequences Climate change on a global scale is one of the most challenging and potentially catastrophic issues facing humanity. This exhibition presents clear scientific evidence for climate change, past and present, and its far-reaching consequences. It showcases leading climate experts, who introduce visitors to the tools and modeling they use in their work to predict how climate will change in the future. The exhibition reveals that we do have practical solutions for the short term as well as likely solutions for the long term. And it gives visitors crucial information to help them make decisions about our shared future.
Climate Change-and Its Consequences lays the evidence on the table, using dramatic data visualizations, media encounters with scientists in the field, time lapse animations, fossils, taxidermy, live animals, hands-on activities, computer interactives, and cultural artifacts. Although treatment of this topic is appropriately serious, Climate Change also celebrates Earth’s wonder and inspires visitors to take action.
Learn more about the American Museum of Natural History at www.amnh.org
APPENDIX C DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS
4848-0467-6625.6 KUTAK ROCK LLP DRAFT 11/15/12
APPENDIX C
DEFINITIONS AND SUMMARY OF PRINCIPAL FINANCING DOCUMENTS
The following are summaries of certain provisions of the Indenture, the Prairiefire at Lionsgate Development Agreement, the Museum Operation Agreement, the Residential Property-Acknowledgment and Assumption Agreement, the Grant of Permanent Conversation Easement, the and the Wetlands/Trails Maintenance Agreement, as well as certain defined terms used therein and in this Official Statement. The summaries do not purport to be complete, and reference is made to the full text of the Indenture and the Financing Agreement, respectively, for a complete recital of their terms, as well as a complete recital of the defined terms used therein.
Definitions
In addition to the words and terms defined elsewhere in this Official Statement the following words and terms shall have the following meanings, unless some other meaning is plainly intended.
“Accredited Investor” means an accredited investor as defined in Rule 501(a) of Regulation D promulgated by the Securities Exchange Commission under the Securities Act of 1933.
“Act” means the Constitution and statutes of the State including K.S.A. 10-101 to 10-125, inclusive (specifically including K.S.A. 10-116a), K.S.A. 10-620 et seq. and the STAR Bond Act, all as amended and supplemented from time to time.
“Additional STAR Bond Improvements” means STAR Bond Improvements to be financed with proceeds of Additional STAR Bonds.
“Additional STAR Bonds” means any additional parity STAR Bonds issued by the Issuer pursuant to the Indenture that stand on a parity under this Indenture with the Series 2012 STAR Bonds.
“Anchor” means the Museum.
“Approved Investor” means any investor that is a Qualified Institutional Buyer or an Accredited Investor.
“Authorized Denomination” means, as to the Series 2012 STAR Bonds, the original denomination of $100,000 or any integral multiple of $5,000 in excess thereof, subject to transfer rights by a beneficial owner of Series 2012 STAR Bonds which have been reduced to a lower principal amount as provided thereof, and means, as to any Additional STAR Bonds, the authorized denomination set forth in the Supplemental Indenture authorizing the issuance of such Additional STAR Bonds.
“Beneficial Owner” of STAR Bonds includes any Bondowner and any other Person who, directly or indirectly has the investment power with respect to any such STAR Bonds.
“Bond Counsel” means Kutak Rock LLP, or other firm of nationally recognized bond counsel.
“Bondowner” when used with respect to any STAR Bond means the Person in whose name such STAR Bond is registered on the Bond Register. Whenever consent of the Bondowners is required pursuant to the terms of this Indenture, and the Bondowner, as set forth on the Bond Register, is Cede & Co., the term Bondowner or Owner shall be deemed to be the Beneficial Owner of the STAR Bonds.
C-1
“Bond Purchase Agreement” means, with respect to a series of STAR Bonds, the Bond Purchase Agreement among the Issuer, the Original Purchaser and MCP I or MCP II, as applicable, with respect to such series of STAR Bonds.
“Bond Register” means the books for the registration, transfer and exchange of the STAR Bonds kept at the office of the Trustee.
“Bond Registrar” means the Trustee and any other commercial bank or trust institution organized under the laws of any state of the United States of America or any national banking association designated pursuant to this Indenture or any Supplemental Indenture as bond registrar for any series of STAR Bonds at which the principal of, redemption premium, if any, and interest on such STAR Bonds shall be payable.
“Business Day” means a day on which the Trustee or any Paying Agent shall be scheduled in the normal course of its operations to be open to the public for conduct of its banking operations.
“Capitalized Interest Fund” means the fund by that name created in the Indenture.
“Cede & Co.” means Cede & Co., as nominee of The Depository Trust Company, New York, New York.
“City Bond Finance Fund” means the account relating to the Redevelopment Project Area created within the City Bond Finance Fund created by K.S.A. 79-3620b, as amended, and established with the State Treasurer.
“Comparable Retailers” means tenants such as the retailers shown on the applicable exhibit to the Indenture, tenants that had leases in process with the Developer but not yet signed as of the date of the Bond Purchase Agreement for the Series 2012 Bonds that subsequently executed such leases, tenants that are comparable to the Other Retailers and/or substitute comparable retailers.
“Consultant” means an independent consultant qualified and having a favorable reputation for skill and experience in financial affairs selected by the Issuer for the purpose of carrying out the duties imposed on the Consultant by this Indenture.
“Continuing Disclosure Agreements” means collectively, the Issuer Continuing Disclosure Agreement, the Developer Continuing Disclosure Agreement and the Museum Continuing Disclosure Agreement.
“Costs of Issuance” means issuance costs with respect to the STAR Bonds described in the Internal Revenue Code and any regulations thereunder, including but not limited to the following:
(a) original purchaser’s spread, discount or fees;
(b) counsel fees (including bond counsel, underwriter’s counsel, Issuer’s counsel, as well as any other specialized counsel fees incurred in connection with the borrowing);
(c) financial advisor fees of any financial advisor to the Issuer incurred in connection with the issuance of the STAR Bonds;
(d) trustee, escrow agent and paying agent fees;
C-2
(e) accountant fees, feasibility consultant fees and other expenses related to issuance of the STAR Bonds;
(f) printing costs (for the STAR Bonds and of the preliminary and final official statement relating to the STAR Bonds); and
(g) fees and expenses of the Issuer incurred in connection with the issuance of the STAR Bonds.
“Costs of Issuance Fund” means the fund by that name created by the Indenture.
“Costs of the STAR Bond Improvements” means costs permitted under the STAR Bond Act with respect to the STAR Bond Improvements to be paid out of proceeds of STAR Bonds, and approved by the Issuer and the Kansas Secretary of Commerce, including the total of all reasonable or necessary expenses incidental to the acquisition, construction, reconstruction, repair, alteration, improvement and extension of the STAR Bond Improvements, including without limitation: the expenses of studies and surveys, land title and mortgage title policies, architectural and engineering services and the cost of legal, organization or marketing services; financial and underwriting fees and expenses; the cost of demolishing existing structures, developing the site of and constructing new facilities, constituting a part of the STAR Bond Improvements; and all other necessary and incidental expenses permitted under the STAR Bond Act, including interest during construction on STAR Bonds issued to finance the STAR Bond Improvements to a date subsequent to the estimated date of completion thereof, and any other costs permitted by the STAR Bond Act.
“Debt Service Fund” means the fund by that name created by the Indenture.
“Debt Service Reserve Fund” means the fund by that name created by the Indenture.
“Debt Service Requirements” means the aggregate scheduled principal payments (whether at maturity or pursuant to scheduled mandatory sinking fund redemption requirements), or as to STAR Bonds for which there are no scheduled principal payments or mandatory sinking fund payments, the base case projected principal redemptions, and interest payments on the STAR Bonds for the period of time for which calculated; provided, however, that for purposes of calculating such amount, principal and interest shall be excluded from the determination of Debt Service Requirements to the extent that such principal or interest is payable from amounts deposited in trust, escrowed or otherwise set aside for the payment thereof with the Paying Agent or other commercial bank or trust company located in the State and having full trust powers. The applicable exhibit attached to the Indenture sets forth the Projected Case 1 Debt Service Schedule that constitutes the Debt Service Requirements for the Series 2012 STAR Bonds. The base case projected principal redemptions set forth on the Projected Case 1 Debt Service Schedule for the Series 2012 STAR Bonds, and interest payments thereon, were calculated by the Original Purchaser based on the projected retail sales receipts within the Redevelopment Project Area for each applicable year derived from the Retail Sales Tax Report described in the Indenture.
“Debt Service Reserve Requirement” means, (a) with respect to the Series 2012 STAR Bonds, the amount of $______, representing the lesser of (i) maximum annual debt service on the Series 2012 STAR Bonds, (ii) 125% of average annual debt service on the Series 2012 STAR Bonds, and (iii) 10% of the original proceeds of the Series 2012 STAR Bonds; and (b) with respect to any Additional STAR Bonds that are entitled to the benefit of the Debt Service Reserve Fund, the lesser of (i) maximum annual debt service on such Additional STAR Bonds, (ii) 125% of average annual debt service on such Additional STAR Bonds, and (iii) 10% of the original proceeds of such Additional STAR Bonds.
C-3
“Defeasance Obligations” means, to the extent permitted by law:
(a) Government Obligations which are not subject to redemption prior to maturity; or
(b) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with Government Obligations); or
(c) pre-refunded municipal bonds rated in the highest rating category by Moody’s and Standard & Poor’s which have been refunded and defeased with obligations described in clause (a) or (b) and which are not subject to redemption prior to the respective maturity or Redemption Dates of the STAR Bonds being defeased with such pre-refunded municipal bonds.
“Developer” means collectively, MCP I and MCP II, their respective successors and assigns, as provided in the Development Agreement; provided that, as indicated in the Development Agreement, it is understood and agreed that MCP I shall be the developer of record for Phase 1 of the Project and MCP II shall be the developer of record for Phase 2 of the Project. Accordingly, MCP I is the Developer with respect to the 2012 STAR Bond Improvements.
“Developer Continuing Disclosure Agreement” means the Continuing Disclosure Agreement dated as of December 1, 2012 between the Developer and the Dissemination Agent.
“Developer Representative” means the individual designated as such to act on behalf of Developer as evidenced to the Trustee by a certificate, bearing such authorized officer’s signature and signed by an authorized officer of Developer.
“Development Agreement” means the Development Agreement dated as of November 12, 2012, between the Issuer and the Developer, as amended and supplemented from time to time.
“Dissemination Agent” means UMB Bank, n.a., as dissemination agent under the Continuing Disclosure Agreements, and its successors and assigns.
“DTC” means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors and assigns, including any successor securities depository duly appointed.
“Escrow Fund” means the Fund by that name established in the custody of the Trustee pursuant to the Tax Distribution Agreement, for the receipt and distribution of Issuer Sales Tax Revenues and State Sales Tax Revenues.
“Escrow Release Conditions” means as follows:
(a) 100% Release requires (1) the Anchor is open and fully operational, (2) the Junior Anchors are open for business with aggregate retail space (fully stocked) of at least 150,000 sq. ft. and (3) at least 50,000 square footage of the Other Retailers and/or Comparable Retailers are open for business.
(b) 75% Release requires (1) the Anchor is open and fully operational, (2) the Junior Anchors are open for business with aggregate retail space (fully stocked) of at least 150,000 sq. ft. and (3) at least 35,000 square footage of the Other Retailers and/or Comparable Retailers are open for business.
C-4
(c) 50% Release requires (1) the Anchor is open and fully operational, (2) the Junior Anchors are open for business with aggregate retail space (fully stocked) of at least 150,000 sq. ft. and (3) at least 30,000 square footage of the Other Retailers and/or Comparable Retailers are open for business.
“Escrowed Project Costs Fund” means the fund by that name created in the Indenture.
“Escrowed Project Costs Requirement” means, as to the Series 2012 STAR Bonds, an amount equal to $______.
“Event of Default” shall have the meaning set forth in the Indenture.
“Final Escrow Release Date” means May 15, 2014.
“Financing Documents” means, with respect to the STAR Bonds, this Indenture, the Tax Distribution Agreement, the Continuing Disclosure Agreements, the Bond Purchase Agreement, the Development Agreement, the Master Funding Agreement, the Tax Compliance Agreement and any and all other documents or instruments that evidence or are a part of the transactions referred to in this Indenture, the Development Agreement or the Official Statement or contemplated by this Indenture, the Development Agreement or the Official Statement; and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing; provided, however, that when the words “Financing Documents” are used in the context of the authorization, execution, delivery, approval or performance of Financing Documents by a particular party, the same shall mean only those Financing Documents that provide for or contemplate authorization, execution, delivery, approval or performance by such party.
“Fiscal Year” means the twelve month period ending on December 31.
“Fitch” means Fitch Ratings, a corporation organized and existing under the laws of the State of New York, and its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer.
“Government Obligations” means the following:
(a) bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed by, the United States of America; and
(b) evidences of direct ownership of a proportionate or individual interest in future interest or principal payments on specified direct obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in form and substance satisfactory to the Trustee.
“Indenture” means this Trust Indenture as originally executed by the Issuer and the Trustee, as from time to time amended and supplemented by Supplemental Indentures in accordance with the provisions of this Indenture.
C-5
“Individual Accredited Investor” means an Accredited Investor that is defined in Rule 501(a)(5) or (6) under the Securities Act of 1933.
“Interest Payment Date” means (a) with respect to the Series 2012 STAR Bonds, June 5 and December 5, of each year, commencing June 5, 2013; and (b) with respect to Additional STAR Bonds, the payment dates specified in the Supplemental Indenture authorizing the issuance of such Additional STAR Bonds.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and, when appropriate, any statutory predecessor or successor thereto, and all applicable regulations (whether proposed, temporary or final) thereunder and any applicable official rulings, announcements, notices, procedures and judicial determinations relating to the foregoing.
“Issue Date” means the date when the Issuer delivers any series of STAR Bonds to the Purchaser in exchange for the purchase price thereof. The Issue Date for the Series 2012 STAR Bonds is December __, 2012.
“Issuer” means the City of Overland Park, Kansas created pursuant to the laws of the State, and its successors and assigns or any body, agency or instrumentality succeeding to or charged with the powers, duties and functions of the Issuer.
“Issuer Continuing Disclosure Agreement” means the Continuing Disclosure Agreement dated as of December 1, 2012 between the Issuer and the Dissemination Agent.
“Issuer Representative” means the Mayor, City Manager and Deputy City Manager of the Issuer, and any other duly authorized officer of the Issuer whose authority to execute any particular instrument or take a particular action under the Indenture shall be evidenced to the satisfaction of the Trustee.
“Issuer Sales Tax Rate” means the percentage tax rate applied to taxable sales on an aggregate basis including (a) the city retail sales tax (currently 1.0%); (b) the Issuer’s share of the countywide retail sales tax; and (c) and any successor taxes to the taxes described in clauses (a) and (b), in each case with respect to retail sales within the Redevelopment Project Area and in each case excluding the percentage tax rate committed to special purposes and therefore not available under the STAR Bond Act.
“Issuer Sales Tax Revenues” means gross receipts of the Issuer received through the last day of October 2032 under K.S.A. 12-187 et seq., as amended, from (a) the city retail sales tax; (b) the Issuer’s share of the countywide retail sales tax; and (c) any successor taxes to the taxes described in clauses (a) and (b), in each case with respect to retail sales within the Redevelopment Project Area and in each case excluding sales taxes committed to special purposes and therefore not available under the STAR Bond Act.
“Junior Anchors” means REI, Fresh Market, Pinstripes and Cinetopia (as described in the Retail Sales Tax Report) or substitute comparable retailers approved by the Issuer, provided that (A) the square footage of any retailer proposed as a substitute for a Junior Anchor shall be comparable to the square footage of the previously identified Junior Anchor, and (B) the Issuer shall have received a supplement to the Retail Sales Tax Report from Development Strategies as the Consultant, or from another Consultant acceptable to the Issuer, to the effect that the projected Revenues to be received from the proposed substitute retailer is not less than the projected Revenues identified in the Retail Sales Tax Report to be received from the previously identified Junior Anchor.
C-6
“Master Funding Agreement” means, as to Phase 1 of the Project, the Master Funding Agreement among the Trustee, the Developer, the construction lender to the Developer named therein and the escrow agent named therein that describes procedures for the disbursement of the various funding sources for Phase 1 of the Project.
“Maximum Annual Debt Service” means, for purposes of the calculation of the Debt Service Reserve Requirement for a series of STAR Bonds and as otherwise may be provided in the Indenture and any Supplemental Indenture, the maximum amount of Debt Service Requirements as computed for the then current or any future Fiscal Year; provided that the Debt Service Requirements in the final Stated Maturity of any series of STAR Bonds shall be reduced by the value of cash and Permitted Investments on deposit in the applicable account of the Debt Service Reserve Fund, so long as the Debt Service Reserve Fund is maintained at the Debt Service Reserve Requirement. Reference is made to the definition of Debt Service Requirements for an explanation of the calculation of the Debt Service Requirements for the Series 2012 STAR Bonds and any Additional STAR Bonds.
“Maturity” when used with respect to any STAR Bond means the date on which the principal of such STAR Bond becomes due and payable, whether at the Stated Maturity thereof or at a call for redemption or otherwise.
“MCP I” means MC Prairiefire I, LLC, a Kansas limited liability company, its successors and assigns, as Developer of Phase 1 of the Project.
“MCP II” means MC Prairiefire II, LLC, a Kansas limited liability company, its successors and assigns, as Developer of Phase 2 of the Project.
“Moody’s” means Moody’s Investors Service, and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Moody’s shall be deemed to refer to any other nationally recognized securities rating agency which shall be nationally recognized as expert in matters pertaining to the validity of obligations of governmental issuers and the exclusion from federal gross income of interest on such obligations.
“Museum” means the approximately 41,000 square foot Museum of Prairiefire (or such other name as is given to the Museum upon completion) which will be constructed as a part of the Project and owned by the Museum Operator, which will, among other things, host on-going exhibits from The American Museum of Natural History (“AMNH”) during such period of time as the Museum Owner and AMNH shall agree.
“Museum Continuing Disclosure Agreement” means the Continuing Disclosure Agreement dated as of December 1, 2012 between the Museum Owner and the Dissemination Agent.
“Museum Owner” means Museum of Prairiefire Foundation, a 501(c)(3) corporation, its successors and assigns.
“Officer’s Certificate” means a written certificate of the Developer substantially in the form described in Section 12.04 hereof signed by the Developer Representative, which certificate shall be deemed to constitute a representation of, and shall be binding upon, the Developer with respect to matters set forth therein, and which certificate in each instance, including the scope, form, substance and other aspects thereof, is acceptable to the Trustee.
“Opinion of Bond Counsel” means a written opinion of Kutak Rock LLP or other legal counsel acceptable to the Issuer and the Trustee who shall be nationally recognized as expert in matters pertaining
C-7
to the validity of obligations of governmental issuers and the exclusion from federal gross income of interest on such obligations.
“Opinion of Counsel” means a written opinion of any legal counsel acceptable to the Trustee, and, to the extent the Issuer is asked to take action in reliance thereon, the Issuer, who may be an employee of or counsel to the Issuer, the Developer or the Trustee.
“Original Purchaser” means, (a) with respect to the Series 2012 STAR Bonds, Stifel, Nicolaus & Company, Incorporated; and (b) with respect to Additional STAR Bonds, the Persons who agree to purchase the STAR Bonds pursuant to the Bond Purchase Agreement.
“Other Retailers” means tenants, other than the Anchor and the Junior Anchors, that have signed leases with the Developer as of the date of the Bond Purchase Agreement for the Series 2012 Bonds, including Rock & Brews, [Bar Louie], [The Club], [the Paradise Diner], [Newport Grill], [The Pub], [Wasabi Sushi Bar], [Coco Bolos KC, LLC] and [Trendz, LLC] [LIST ANY OTHERS] or substitute comparable retailers.
“Outstanding” means, when used with respect to Bonds, as of the date of determination, all STAR Bonds theretofore authenticated and delivered under this Indenture, except:
(a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation as provided in the Indenture;
(b) Bonds for whose payment or redemption money or Defeasance Obligations in the necessary amount has been deposited with the Trustee or any Paying Agent in trust for the owners of such STAR Bonds as provided in the Indenture; provided that, if such STAR Bonds are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;
(c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under this Indenture;
(d) Bonds alleged to have been destroyed, lost or stolen which have been paid as provided in the Indenture; and
(e) Bonds held by the Issuer.
“Owner” means any Bondowner.
“Participants” means those financial institutions for whom the Securities Depository effects book-entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference.
“Paying Agent” means the Trustee and any other commercial bank or trust institution organized under the laws of any state of the United States of America or any national banking association designated pursuant to this Indenture or any Supplemental Indenture as paying agent for any series of STAR Bonds at which the principal of, redemption premium, if any, and interest on such STAR Bonds shall be payable.
C-8
“Permitted Investments” means any of the following securities and obligations, if and to the extent the same are at the time legal for investment of the Issuer’s moneys held in the funds and accounts referred to in the Indenture:
(a) Government Obligations;
(b) bonds or other obligations of the State of Kansas, or any political subdivision of the State of Kansas, that at the time of their purchase are rated in either of the two highest rating categories by a nationally recognized rating service;
(c) repurchase agreements with any bank, bank holding company, savings and loan association, trust company, or other financial institution organized under the laws of the United States or any state (including the Trustee and its affiliates), that are continuously and fully secured by any one or more of the securities described in clause (a) or (b) above and have a market value, exclusive of accrued interest, at all times at least equal to the principal amount of such repurchase agreement and are held in a custodial or trust account for the benefit of the Issuer;
(d) obligations of the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Financing Bank, the Federal Intermediate Credit Corporation, Federal Banks for Cooperatives, Federal Land Banks, Federal Home Loan Banks, Farmers Home Administration and Federal Home Loan Mortgage Corporation;
(e) certificates of deposit, time deposits or other deposits, whether negotiable or non–negotiable, issued by any bank or trust company organized under the laws of the United States or any state (including the Trustee and its affiliates), provided that such certificates of deposit or time deposits shall be either (1) continuously and fully insured by the Federal Deposit Insurance Corporation, or (2) continuously and fully secured by such securities as are described above in clauses (a), (b) or (d), which shall have a market value, exclusive of accrued interest, at all times at least equal to the principal amount of such certificates of deposit or time deposits;
(f) money market mutual funds that are registered with the Securities and Exchange Commission meeting the requirements of Rule 2a–7 under the Investment Company Act of 1940 and which invest in securities as are described above in (a), (b) or (d); and
(g) any other securities or investments that are lawful for the investment of moneys held in such funds or accounts under the laws of the State of Kansas.
“Person” means any natural person, firm, association, corporation, partnership, limited liability company, joint stock company, a joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body.
“Phase 1 of the Project” means that portion of the Project identified in the Development Agreement and the Redevelopment Project Plan as Phase 1 of the Project.
“Phase 2 of the Project” means that portion of the Project identified in the Development Agreement and the Redevelopment Project Plan as Phase 2 of the Project.
“Prime Rate” means, for any date of determination, the interest rate per annum publicly announced from time to time by the Trustee as its “prime rate.”
C-9
“Project” means the design, construction and operation of an integrated urban village to be located in the general vicinity of 135th Street between Lamar Avenue and Nall Avenue in the City of Overland Park, Kansas, featuring a mix of retail, museum, office, hotel and residential uses, a native wetlands, a park for music and events, and a hiking/biking trail. The Project has been designed to be completed in two separate phases, Phase 1 of the Project and Phase 2 of the Project.
“Project Fund” means the fund by that name created by the Indenture.
“Qualified Institutional Buyer” means a qualified institutional buyer as defined in Rule 144A promulgated by the Securities Exchange Commission under the Securities Act of 1933.
“Rebate Fund” means the fund by that name created by the Indenture.
“Record Date” means the first day (whether or not a Business Day) of the calendar month next preceding the month in which an interest payment on any STAR Bond is to be made.
“Redemption Date” when used with respect to any STAR Bond to be redeemed means the date fixed for such redemption pursuant to the terms of this Indenture.
“Redemption Price” when used with respect to any STAR Bond to be redeemed means the price at which such STAR Bond is to be redeemed pursuant to the terms of this Indenture, including the applicable redemption premium, if any, but excluding installments of interest whose maturity is on or before the Redemption Date.
“Redevelopment District” means the Prairiefire at LionsGate Redevelopment District created by the Issuer pursuant to the STAR Bond Act.
“Redevelopment Project Plan” means the Prairiefire at LionsGate STAR Bond Redevelopment Project Plan dated November 6, 2012, approved by the Issuer pursuant to the STAR Bond Act.
“Redevelopment Project Area” means the Redevelopment Project Area described in the Redevelopment Project Plan, which Redevelopment Project Area includes that portion of the property within the Redevelopment District as described on the applicable exhibit to the Indenture.
“Refunding Bonds” means any STAR Bonds issued pursuant to the Indenture.
“Replacement Bonds” means Bonds issued to the beneficial owners of the STAR Bonds in accordance with the Indenture.
“Responsible Officer” means, with respect to the Trustee, any officer or authorized representative in its corporate trust office or similar group administering the trusts thereunder or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers to whom a particular matter is referred by the Trustee because of such officer’s or authorized representative’s knowledge of and familiarity with the particular subject.
“Retail Sales Tax Report” means, as to the Series 2012 Bonds, the Sales Tax STAR Bond Revenue Study for the Proposed Prairiefire at LionsGate Development, dated November ___, 2012, prepared by Development Strategies, St. Louis, Missouri as the Consultant with respect thereto.
“Revenues” means the amounts required to be transferred to the Debt Service Fund pursuant to the Tax Distribution Agreement.
C-10
“Securities Depository” means, initially, DTC, and its successors and assigns.
“Series 2012 STAR Bonds” means the series of Sales Tax Special Obligation Revenue Bonds (Prairiefire at LionsGate Project), Series 2012, aggregating the principal amount of $[Principal Amount], issued pursuant to the Indenture.
“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Division of the McGraw- Hill Companies, Inc., and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Standard & Poor’s shall be deemed to refer to any other nationally recognized securities rating designated by the Issuer, with notice to the Trustee.
“STAR Bond” or “STAR Bonds” means the Series 2012 STAR Bonds and any Additional STAR Bonds issued pursuant to the Indenture.
“STAR Bond Act” means K.S.A. 12-17,160 et seq., as amended and supplemented from time to time.
“STAR Bond Improvements” means the facilities and costs eligible to be paid under the STAR Bond Act, to be financed with the proceeds of the STAR Bonds issued under the STAR Bond Act within the Redevelopment Project Area, including Museum construction and improvements, street construction and improvements, site acquisition and preparation, utility relocation, landscaping, parking, plazas and arcades, signage, engineering, architectural and all other costs permitted by law relating to the Redevelopment Project Area.
“STAR Bond Obligation” means, as of any date, the sum of the Outstanding principal amount of the STAR Bonds.
“State” means the State of Kansas.
“State Sales Tax Rate” means the percentage tax rate applied to taxable sales by the State of Kansas from the tax imposed by K.S.A. 79-3603, as amended, and K.S.A. 79-3703, as amended, with respect to sales and compensating use within the Redevelopment Project Area portion of the Redevelopment District.
“State Sales Tax Revenues” means receipts of the State received through the last day of October 2032 and credited to the City Bond Finance Fund by the State Treasurer in accordance with K.S.A. 79- 3620(d), as amended, from the tax imposed by K.S.A. 79-3603, as amended, and K.S.A. 79-3703, as amended, with respect to sales and compensating use within the Redevelopment Project Area portion of the Redevelopment District.
“State Treasurer” means the State Treasurer of the State or, if the functions and duties of the State Treasurer under K.S.A. 79-3620, K.S.A. 79-3620b and K.S.A. 79-3710d shall be given by law to any other person or entity, such person or entity.
“Stated Maturity” means when used with respect to any STAR Bond or any installment of interest thereon means the date specified in such STAR Bond and this Indenture as the fixed date on which the principal of such STAR Bond or such installment of interest is due and payable.
“Supplemental Indenture” means any indenture supplemental or amendatory to this Indenture entered into by the Issuer and the Trustee pursuant to the Indenture
C-11
“Tax Compliance Agreement” means the Tax Compliance Agreement, dated as of the Issue Date with respect to the STAR Bonds, among the Issuer, the Developer and the Trustee, as from time to time amended in accordance with the provisions thereof.
“Tax Distribution Agreement” means the Redevelopment District Tax Distribution Agreement dated as of December 1, 2012, among the Issuer, the Trustee and the State Treasurer relating to the disbursement of State Sales Tax Revenues and Issuer Sales Tax Revenues.
“Trust Estate” means the Trust Estate described in the Granting Clauses of this Indenture.
“Trustee” means UMB Bank, n.a., and its successor or successors and any other corporation or association which at any time may be substituted in its place pursuant to and at the time serving as trustee under this Indenture.
“2012 STAR Bond Improvements” means STAR Bond Improvements to be financed with proceeds of the Series 2012 STAR Bonds.
“Value,” as of any particular time of determination, means, (a) with respect to cash the face value thereof and (b) with respect to any investments, the lower of the cost of the investment or the market price of the investment on the date of valuation.
C-12
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
The following is a summary of certain provisions contained in the Indenture. The following is not a comprehensive description, however, and is qualified in its entirety by reference to the Indenture for a complete recital of the terms thereof.
Authorization, Amount and Title of STAR Bonds
The Issuer may issue Bonds in one or more series from time to time under the Indenture, but subject to the provisions of the Indenture and any Supplemental Indenture authorizing a series of STAR Bonds. No STAR Bonds may be issued under the Indenture except in accordance with the provisions of the Indenture. The total principal amount of STAR Bonds, the number of STAR Bonds and series of STAR Bonds that may be issued under this Indenture is not limited, except with respect to the Series 2012 STAR Bonds as provided thereof, and with respect to Additional STAR Bonds as provided thereof and in the Supplemental Indenture providing for the issuance thereof, and except as may be limited by law. The several series of STAR Bonds may differ as between series in any respect not in conflict with the provisions of the Indenture and as may be prescribed in the Supplemental Indenture authorizing such series. The general title of all series of STAR Bonds authorized to be issued under the Indenture shall be “Sales Tax Special Obligation Revenue Bonds (Prairiefire at LionsGate Project),” with such further appropriate particular designation added to or incorporated in such title for the STAR Bonds of any particular series as the Issuer may determine.
Method and Place of Payment
The principal of and interest on the STAR Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts; provided, however, that the Issuer may provide for any such payment by electronic transfer of funds. The principal of all STAR Bonds shall be payable by check or draft at Stated Maturity or upon earlier redemption to the Persons in whose names such STAR Bonds are registered on the Bond Register maintained by the Trustee at the Stated Maturity or Redemption Date thereof, upon the presentation and surrender of such STAR Bonds at the principal corporate trust office of the Trustee or of any Paying Agent named in the STAR Bonds.
The interest payable on each STAR Bond on any Interest Payment Date shall be paid by the Trustee to the registered owner of such STAR Bond as shown on the Bond Register at the close of business on the Record Date for such interest, (a) by check or draft mailed to such registered owner at his address as it appears on the Bond Register or at such other address as is furnished to the Trustee in writing by such owner, or (b) at the written request addressed to the Trustee by any owner of STAR Bonds in the aggregate principal amount of at least $1,000,000, by electronic transfer to such owner upon written notice to the Trustee from such owner containing the electronic transfer instructions (which shall be in the continental United States) to which such owner wishes to have such transfer directed and such written notice is given by such owner to the Trustee not less than 15 days prior to the Record Date. Any such written notice for electronic transfer shall be signed by such owner and shall include the name of the bank, its address, its ABA routing number and the name, number and contact name related to such owner’s account at such bank to which the payment is to be credited.
Subject to the provisions of the Indenture, each STAR Bond delivered under the Indenture upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond and each such STAR Bond shall bear interest from such date, that neither gain nor loss in interest shall result from such transfer, exchange or substitution.
C-13
The Trustee shall keep a record of payment of principal and Redemption Price of and interest on all STAR Bonds and at least annually shall forward a copy or summary of such records to the Issuer.
Execution and Authentication
The STAR Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk, and shall have the official seal of the Issuer affixed thereto or imprinted thereon. If any officer whose manual or facsimile signature appears on any STAR Bonds shall cease to hold such office before the authentication and delivery of such STAR Bonds, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such person had remained in office until delivery. Any STAR Bond may be signed by such persons as at the actual time of the execution of such STAR Bond shall be the proper officers to sign such STAR Bond although at the date of such STAR Bond such persons may not have been such officers.
No STAR Bond shall be secured by, or be entitled to any lien, right or benefit under, this Indenture or be valid or obligatory for any purpose, unless there appears on such STAR Bond a certificate of authentication substantially in the form provided for in the Indenture, executed by the Trustee by manual signature of an authorized officer or signatory of the Trustee, and such certificate upon any STAR Bond shall be conclusive evidence, and the only evidence, that such STAR Bond has been duly authenticated and delivered hereunder. At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Bonds executed by the Issuer to the Trustee for authentication and the Trustee shall authenticate and deliver such STAR Bonds as in the Indenture provided and not otherwise.
Payments Due on Saturdays, Sundays and Holidays
In any case where the date of maturity of principal of or interest on the STAR Bonds or the date fixed for redemption of any STAR Bonds shall be a day other than a Business Day, then payment of principal or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date.
Creation of Funds and Accounts
There are hereby created and ordered to be established in the custody of the Trustee the following special trust funds in the name of the Issuer to be designated as follows:
(a) City of Overland Park, Kansas—Prairiefire at LionsGate Project Fund, and within such fund separate accounts with respect to the Series 2012 STAR Bonds and any series or subseries of Additional STAR Bonds. On the date hereof, there is created in the Project Fund a 2012 Project Account.
(b) City of Overland Park, Kansas—Prairiefire at LionsGate Costs of Issuance Fund, and within such fund separate accounts with respect to the Series 2012 STAR Bonds and any series of Additional STAR Bonds. On the date thereof, there is created in the Costs of Issuance Fund a 2012 Costs of Issuance Account.
(c) City of Overland Park, Kansas—Prairiefire at LionsGate Debt Service Fund, and within such fund separate accounts with respect to the Series 2012 STAR Bonds and any series or subseries of Additional STAR Bonds. On the date thereof, there is created in the Debt Service Fund a 2012 Debt Service Account and a 2012 Redemption Account.
C-14
(d) City of Overland Park, Kansas—Prairiefire at LionsGate Debt Service Reserve Fund, and within such fund separate accounts with respect to the Series 2012 STAR Bonds and any series or subseries of Additional STAR Bonds. On the date thereof, there is created in the Debt Service Reserve Fund a 2012 Debt Service Reserve Account.
(e) City of Overland Park, Kansas—Prairiefire at LionsGate Escrowed Project Costs Fund.
(f) City of Overland Park, Kansas—Prairiefire at LionsGate Rebate Fund, and within such fund separate accounts with respect to the Series 2012 STAR Bonds and any series or subseries of Additional STAR Bonds.
(g) City of Overland Park, Kansas—Prairiefire at LionsGate Capitalized Interest Fund, and within such fund separate accounts with respect to the Series 2012 STAR Bonds and any series or subseries of Additional STAR Bonds. On the date thereof, there is created in the Capitalized Interest Fund a 2012 Capitalized Interest Account.
Project Fund
(a) Deposits. The Trustee shall deposit and credit to the Project Fund, as and when received:
(i) the amounts required to be deposited therein under Section 4.02 hereof;
(ii) interest earnings and other income on Permitted Investments required to be deposited in the Project Fund pursuant to the Indenture;
(iii) any amount required to be transferred to the 2012 Project Account from the Escrowed Project Costs Fund pursuant to the Indenture; and
(iv) any amounts required by a Supplemental Indenture authorizing the issuance of Additional STAR Bonds to be deposited in the Project Fund, as specified in such Supplemental Indenture.
(b) Disbursements. Moneys in the Project Fund shall be used solely for the purpose of paying the Costs of the STAR Bond Improvements as hereinbefore provided, in accordance with the plans and specifications therefor, including any alterations in or amendments to said plans and specifications approved in accordance with the Development Agreement.
The Trustee shall disburse moneys on deposit in the Project Fund from time to time to pay or as reimbursement for payment made for the Costs of the STAR Bond Improvements (other than Costs of Issuance), in each case within three Business Days after receipt by the Trustee of written disbursement requests of the Developer properly completed in all respects and in substantially the form attached to the Indenture, signed by the Developer Representative and approved by the Issuer Representative, following satisfaction of all requirements of the Development Agreement and the Master Funding Agreement for disbursal. All moneys disbursed from the Project Fund shall be applied as provided in the Development Agreement and the Master Funding Agreement.
C-15
In making payments pursuant to the Indenture, the Trustee may rely upon such written requests and accompanying certificates and statements and shall not be required to make any independent investigation in connection therewith. If for any reason the Issuer or the Developer should decide prior to the mailing or release of payment by the Trustee of any item not to pay such item, it shall give written notice of such decision to the Trustee and thereupon the Trustee shall not make such payment. If the Issuer so requests, a copy of each written disbursement request submitted to the Trustee for payment under this Section shall be promptly provided by the Trustee to the Issuer. The Trustee shall keep and maintain adequate records pertaining to the Project Fund and all disbursements therefrom, and shall file periodic statements of activity regarding the Project Fund with the Issuer and the Developer.
(c) Completion of the STAR Bond Improvements or Applicable Portion Thereof. The Developer, upon completion of the STAR Bond Improvements (or the applicable portion of the STAR Bond Improvements being financed with the proceeds of the applicable series of STAR Bonds from amounts on deposit in the Project Fund), shall deliver to the Trustee, the Issuer and the Original Purchaser within 90 days thereafter a written certificate of the Developer Representative:
(i) stating that the STAR Bond Improvements (or the portion of the STAR Bond Improvements being financed with the proceeds of the applicable series of STAR Bonds from amounts on deposit in the Project Fund) has been fully completed substantially in accordance with the plans and specifications for the STAR Bond Improvements or applicable portion thereof, and the date of completion of the STAR Bond Improvements or applicable portion thereof; and
(ii) stating that he or she has made such investigation of such sources of information as are deemed by him to be necessary, including pertinent records of the Developer, and that the Costs of the STAR Bond Improvements or applicable portion thereof have been fully paid for and no claim or claims exist against the Issuer or the Developer or against the STAR Bond Improvements or applicable portion thereof out of which a lien based on furnishing labor or material exists or might ripen; provided, however, there may be excepted from the foregoing statement any claim or claims out of which a lien exists or might ripen in the event that the Developer intends to contest such claim or claims, in which event such claim or claims shall be described; provided, further, that it shall be stated that moneys are on deposit in the Project Fund or are available through enumerated bank loans (including letters of credit) or other sources sufficient to make payment of the full amount which might in any event be payable in order to satisfy such claim or claims; and
(iii) stating if any item was added to, deleted from or substituted for the STAR Bond Improvements or applicable portion thereof and providing any documentation, certificates or opinions required by the Development Agreement and the Master Funding Agreement.
If after payment by the Trustee of all disbursement requests theretofore tendered to the Trustee under the provisions of this Section and after receipt by the Trustee of the Officer’s Certificate required by the preceding paragraph of this Section and after all rebatable earnings have been transferred to the Rebate Fund pursuant to Section 4.07 hereof, there shall remain any moneys in the applicable account of the Project Fund with respect to a series of STAR Bonds, such moneys shall be deposited and applied in the following order of priority: (a) in the applicable account of the Debt Service Reserve Fund to the extent necessary to attain the amount required to be on deposit therein as of the date of such deposit; (b) in the applicable Redemption Account of the Debt Service Fund and used to redeem the applicable series of STAR Bonds at the earliest permissible date under Section 3.02(b) of this Indenture, or, (c) in the discretion of the Issuer, shall be applied for any other purpose that, based on an Opinion of Bond Counsel, will not cause the interest on any STAR Bonds to be includible in gross income for federal income tax purposes.
C-16
(d) Loss of Entitlement to Distribution of STAR Bond Proceeds. If an Issuer Representative certifies to the Trustee that an event has occurred or a condition exists under the Development Agreement or the Master Funding Agreement, for which the Developer has had at least 60 days’ notice, which (if able to be cured pursuant to the terms and conditions of such document) has not been cured in accordance with the applicable provisions thereof, and which event or condition has as a consequence that the Developer is no longer entitled to the distribution of proceeds of a series of STAR Bonds to be applied to the payment of Costs of STAR Bond Improvements, all subject to any rights which the Developer may have under the applicable agreement, any balance remaining in the applicable account of the Project Fund, other than amounts required to be transferred to the Rebate Fund pursuant to Section 4.07 hereof, and any balance remaining in the Escrowed Project Costs Fund, shall be transferred to the applicable Redemption Account of the Debt Service Fund and used to redeem the applicable series of STAR Bonds at the earliest permissible date under Section 3.02(b) of this Indenture, or, (c) in the discretion of the Issuer, shall be applied for any other purpose that, based on an Opinion of Bond Counsel, will not cause the interest on any STAR Bonds to be includible in gross income for federal income tax purposes.
Debt Service Fund
The Trustee shall deposit and credit to the applicable account of the Debt Service Fund, as and when received, the following amounts:
(a) the amounts required to be deposited therein pursuant to the Indenture;
(b) the amount required to be transferred thereto from the Capitalized Interest Fund pursuant to the Indenture;
(c) the Revenues required to be transferred thereto from the Escrow Fund pursuant to the Tax Distribution Agreement;
(d) any amount required to be transferred from the Debt Service Reserve Fund pursuant to the Indenture;
(e) any amount required to be transferred from the Project Fund to the applicable Redemption Account of the Debt Service Fund upon completion of the STAR Bond Improvements or applicable portion thereof pursuant to Section 4.03 hereof, and any amount required to be transferred from the Escrowed Project Costs Fund to the 2012 Redemption Account of the Debt Service Fund pursuant to Section 4.08 hereof;
(f) interest earnings and other income on Permitted Investments required to be deposited in the Debt Service Fund pursuant to Section 6.02 hereof;
(g) any amounts required by a Supplemental Indenture authorizing the issuance of Additional STAR Bonds to be deposited in the Debt Service Fund, as specified in such Supplemental Indenture; and
(h) all other moneys received by the Trustee under and pursuant to any of the provisions of this Indenture or any other Financing Document, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into the Debt Service Fund.
The moneys in the Debt Service Fund shall be held in trust and shall be applied solely in accordance with the provisions of this Indenture to pay the principal of and redemption premium, if any, and interest on the STAR Bonds as the same become due and payable. Except as otherwise provided herein, moneys in the Debt Service Fund shall be expended solely as follows: (1) to pay interest on the
C-17
STAR Bonds as the same becomes due; (2) to pay principal of the STAR Bonds as the same mature or become due and upon mandatory sinking fund redemption thereof; and (3) to pay principal of, redemption premium, if any, on the STAR Bonds as the same become due upon redemption (other than mandatory sinking fund redemption) prior to maturity.
The Trustee is authorized and directed to withdraw sufficient funds from the applicable account of the Debt Service Fund to pay principal of, redemption premium, if any, and interest on the STAR Bonds as the same become due and payable at maturity or upon redemption and to make said funds so withdrawn available to the Trustee and any Paying Agent for the purpose of paying said principal, redemption premium, if any, and interest.
The Trustee, upon the written instructions from the Issuer, shall use excess moneys in the Debt Service Fund to redeem all or part of the STAR Bonds Outstanding and to pay interest to accrue thereon prior to such redemption and redemption premium, if any, on the next succeeding redemption date for which the required redemption notice may be given or on such later redemption date as may be specified by the Issuer, in accordance with the provisions of the Indenture, and to the extent said moneys are in excess of the amount required for payment of STAR Bonds theretofore matured or called for redemption. The Issuer may cause such excess money in the Debt Service Fund or such part thereof to be applied by the Trustee on a best efforts basis to the extent practical for the purchase of STAR Bonds in the open market for the purpose of cancellation at prices not exceeding the principal amount thereof plus accrued interest thereon to the date of such purchase.
After payment in full of the principal of, redemption premium, if any, and interest on the STAR Bonds (or after provision has been made for the payment thereof as provided in the Indenture), and the reasonable fees, charges and expenses of the Trustee, any Paying Agents and the Issuer, and any other amounts required to be paid under this Indenture, all amounts remaining in the Debt Service Fund shall be paid to the Issuer.
Rebate Fund
There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to this Indenture or the Tax Compliance Agreement. All amounts on deposit at any time in the Rebate Fund shall be held by the Trustee in trust to the extent required to pay rebatable arbitrage to the United States of America, and neither the Developer, the Issuer nor the owner of any STAR Bonds shall have any rights in or claim to such money. All amounts held in the Rebate Fund shall be governed by this Section and by the Tax Compliance Agreement (which are incorporated herein by reference).
Pursuant to the Tax Compliance Agreement, the Trustee shall remit all required rebate installments and a final rebate payment to the United States. The Trustee shall have no obligation to pay any amounts required to be rebated pursuant to this Section and the Tax Compliance Agreement, other than from moneys held in the Rebate Fund created under the Indenture as provided in the Indenture or from other moneys provided to it by the Issuer. Any moneys remaining in the Rebate Fund after redemption and payment of all of the STAR Bonds and payment and satisfaction of any rebatable arbitrage and payment of all fees, charges and expenses of the Trustee, shall be withdrawn and paid to the Issuer.
The obligation to pay arbitrage rebate to the United States and to comply with all other requirements of the Indenture and the Tax Compliance Agreement shall survive the defeasance or payment in full of the STAR Bonds until all rebatable arbitrage shall have been paid.
C-18
Nonpresentment of STAR Bonds
In the event any STAR Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, if funds sufficient to pay such STAR Bond shall have been made available to the Trustee, all liability of the Issuer to the owner thereof for the payment of such STAR Bond, shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds in trust in a separate trust account, without liability for interest thereon, for the benefit of the owner of such STAR Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on such owner’s part under the Indenture or on or with respect to said Bond. If any STAR Bond shall not be presented for payment within five years following the date when such STAR Bond becomes due, whether by maturity or otherwise, the Trustee shall repay to the Issuer the funds theretofore held by it for payment of such STAR Bond without liability for interest thereon, and such STAR Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Issuer, and the owner thereof shall be entitled to look only to the Issuer for payment, and then only to the extent of the amount so repaid, and the Issuer shall not be liable for any interest thereon and shall not be regarded as a trustee of such money.
Investment of Moneys
Moneys held in each of the funds and accounts under the Indenture shall, pursuant to written directions of the Issuer Representative, or in the absence of such direction at the discretion of the Trustee, be invested and reinvested by the Trustee in accordance with the provisions of the Indenture and the Tax Compliance Agreement in Permitted Investments which mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be needed. The Trustee may make any investments permitted by the provisions of the Indenture through its own bond department or short-term investment department or that of any affiliate of the Trustee and may pool moneys for investment purposes, except moneys held in any fund or account that are required to be yield restricted in accordance with the Tax Compliance Agreement, which shall be invested separately. Any such Permitted Investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the fund or account in which such moneys are originally held.
The interest accruing on each fund or account and any profit realized from such Permitted Investments (other than any amounts required to be deposited in the Rebate Fund pursuant to the Indenture) shall be credited to such fund or account, and any loss resulting from such Permitted Investments shall be charged to such fund or account; provided, that interest accruing on amounts on deposit in the Escrowed Project Costs Fund shall be credited to the Project Fund and interest accruing on amounts on deposit in the Capitalized Interest Fund and the Debt Service Reserve Fund shall be credited to the Debt Service Fund. The Trustee shall sell or present for redemption and reduce to cash a sufficient amount of such Permitted Investments whenever it shall be necessary to provide moneys in any fund or account for the purposes of such fund or account and the Trustee shall not be liable for any loss resulting from such investments.
Issuer To Issue Bonds and Execute Indenture
The Issuer covenants that it is duly authorized under the constitution and laws of the State of Kansas to execute the Indenture, to issue the STAR Bonds and to pledge and assign the Trust Estate in the manner and to the extent therein set forth; that all action on its part for the execution and delivery of the Indenture and the issuance of the STAR Bonds has been duly and effectively taken; and that the STAR Bonds in the hands of the owners thereof are and will be valid and enforceable obligations of the Issuer according to the import thereof, subject to bankruptcy, insolvency, reorganization, moratorium and other
C-19
similar laws affecting creditors’ rights to the extent applicable and their enforcement may be subject to the exercise of judicial discretion in appropriate cases.
Limited Obligations
The STAR Bonds and the interest thereon shall be special, limited obligations of the Issuer payable (except to the extent paid out of STAR Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate including, with respect to the STAR Bonds, the Revenues, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the STAR Bonds, as provided in the Indenture. The STAR Bonds and interest thereon shall not be deemed to constitute a debt or liability of the Issuer, the State or of any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the Issuer, the State or of any political subdivision thereof, but shall be payable solely from the Trust Estate. The issuance of the STAR Bonds shall not, directly, indirectly or contingently, obligate the Issuer, the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The State shall not in any event be liable for the payment of the principal of or interest on the STAR Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach by the Issuer of any such pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State or any charge upon its general credit or against its taxing power.
Payment of STAR Bonds
The Issuer shall duly and punctually pay, but solely from the Trust Estate, the principal of, redemption premium, if any, and interest on the STAR Bonds in accordance with the terms of the STAR Bonds and the Indenture.
Performance of Covenants
The Issuer shall (to the extent within its control) faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Indenture, in all Financing Documents to which it is a party, in the STAR Bonds and in all proceedings pertaining thereto.
Inspection of Books
The Issuer covenants and agrees that all books and documents in its possession relating to the STAR Bonds, the Indenture and the other Financing Documents, and the transactions relating thereto shall at all reasonable times be open to inspection by such accountants or other agencies as the Trustee may from time to time designate. The Trustee covenants and agrees that all books and documents in its possession relating to the STAR Bonds, the Indenture and the other Financing Documents, and the transactions relating thereto, shall be open to inspection by the Issuer during business hours upon reasonable notice.
Enforcement of Rights
The Issuer agrees that the Trustee, as assignee, transferee, pledgee, and owner of a security interest under this Indenture in its name or in the name of the Issuer may enforce all rights of the Issuer and the Trustee and all obligations of the Developer under and pursuant to any Financing Documents for and on behalf of the STAR Bondowners, whether or not the Issuer is in default hereunder. Copies of all Financing Documents shall be delivered to and held by the Trustee.
C-20
Provisions of Tax Distribution Agreement to Control
Notwithstanding anything to the contrary contained herein, in the event of a conflict between the provisions of the Indenture and the provisions of the Tax Distribution Agreement, the provisions of the Tax Distribution Agreement shall control.
Tax Covenants
The Issuer (to the extent within its power or direction) shall not use or permit the use of any proceeds of STAR Bonds or any other funds of the Issuer, directly or indirectly, in any manner, and shall not take or permit to be taken any other action or actions, which would cause the interest on any STAR Bond to be included in gross income for federal income tax purposes.
The Issuer agrees that so long as any of the STAR Bonds remain Outstanding, it will comply with the provisions of the Tax Compliance Agreement applicable to the Issuer.
The Trustee agrees to comply with the provisions of the Tax Compliance Agreement, and may rely upon the Tax Compliance Agreement and any Opinion of Bond Counsel which sets forth such requirements, to comply with any statute, regulation or ruling that may apply to it as Trustee thereunder and relating to reporting requirements or other requirements necessary to preserve the exclusion from federal gross income of the interest on the STAR Bonds. The Trustee from time to time, in its sole discretion, may cause a firm of attorneys, consultants or independent accountants or an investment banking firm to supply the Trustee, on behalf of the Issuer, with such information as the Trustee, on behalf of the Issuer, may request in order to determine in a manner reasonably satisfactory to the Trustee, on behalf of the Issuer, all matters relating to (a) the actuarial yields on the STAR Bonds as the same may relate to any data or conclusions necessary to verify that the STAR Bonds are not “arbitrage bonds” within the meaning of Section 148 of the Internal Revenue Code; and (b) compliance with rebate requirements of Section 148(f) of the Internal Revenue Code. Payment for fees, charges, costs and expenses incurred in connection with supplying the foregoing information shall be paid by the Developer.
Notwithstanding any provision of the Indenture, if the Issuer provides to the Trustee an Opinion of Bond Counsel to the effect that any action required under the Indenture is no longer required, or to the effect that some further action is required, to maintain the exclusion of interest on the STAR Bonds from federal gross income, the Trustee may conclusively rely on such opinion in complying with the provisions of the Indenture, and the covenants under the Indenture shall be deemed to be modified to that extent.
The foregoing covenants of the Section shall remain in full force and effect notwithstanding the defeasance of the STAR Bonds pursuant to Article XI of the Indenture or any other provision of the Indenture, until the final maturity date of all STAR Bonds Outstanding and payment thereof.
Events of Default
Subject to the provisions of the Indenture, the term “Event of Default,” wherever used in the Indenture, means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) as it applies to the STAR Bonds:
(a) default in the payment of any interest on any STAR Bond when such interest becomes due and payable; or
C-21
(b) default in the payment of the principal of (or premium, if any, on) any STAR Bond when the same becomes due and payable (whether at maturity, upon proceedings for redemption or otherwise); or
(c) default of the Issuer in the performance, or breach, of any covenant or agreement contained in the Indenture (other than a covenant or agreement a default in the performance or breach of which is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given to the Issuer and the Developer by the Trustee or to the Issuer, the Developer and the Trustee by the owners of at least 10% of the STAR Bond Obligation, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the Issuer shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch.
Exercise of Remedies by the Trustee
Upon the occurrence and continuance of any event of default under the Indenture, unless the same is waived as provided in the Indenture, the Trustee shall have the following rights and remedies in addition to any other rights and remedies provided under the Indenture or by law:
(a) Right To Bring Suit, Etc. The Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of and interest on the STAR Bonds Outstanding, and any other sums due under this Indenture, to realize on or to foreclose any of its interests or liens under this Indenture, the Tax Distribution Agreement or any other Financing Document, to enforce and compel the performance of the duties and obligations of the Issuer as set forth in this Indenture and to enforce or preserve any other rights or interests of the Trustee under this Indenture with respect to any of the Trust Estate, under the Tax distribution Agreement, or otherwise existing at law or in equity.
(b) Exercise of Remedies at Direction of Bondowners. If requested in writing to do so by the owners of not less than a majority of the STAR Bond Obligation and if indemnified as provided in Section 9.02(e) of this Indenture, the Trustee shall be obligated to exercise one or more of the rights and remedies conferred by this Article as the Trustee shall deem most expedient in the interests of the Bondowners.
(c) Appointment of Receiver. Upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bondowners under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate, pending such proceedings, with such powers as the court making such appointment shall confer.
(d) Suits To Protect the Trust Estate. The Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of this Indenture and to protect its interests and the interests of the Bondowners in the Trust Estate, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security under this Indenture or be prejudicial to the interests of the Bondowners or the Trustee, or to intervene (subject to the approval of a court of competent jurisdiction) on behalf of the Bondowners in any judicial proceeding to which the Issuer or the Developer is a party and which in the judgment of the Trustee has a substantial bearing on the interests of the Bondowners.
C-22
(e) Enforcement Without Possession of STAR Bonds. All rights of action under this Indenture or any of the STAR Bonds may be enforced and prosecuted by the Trustee without the possession of any of the STAR Bonds or the production thereof in any suit or other proceeding relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and subject to the provisions of Section 9.07 hereof, be for the equal and ratable benefit of the owners of the STAR Bonds in respect of which such judgment has been recovered.
(f) Restoration of Positions. If the Trustee or any Bondowner has instituted any proceeding to enforce any right or remedy under this Indenture by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Bondowner, then and in every case the Issuer, the Trustee and the Bondowners shall, subject to any determination in such proceeding, be restored to their former positions and rights under this Indenture, and thereafter all rights and remedies of the Trustee and the Bondowners shall continue as though no such proceeding had been instituted.
Trustee May File Proofs of Claim
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Issuer or any other obligor upon the STAR Bonds or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the STAR Bonds shall then be due and payable, as therein expressed or by declaration or otherwise, and irrespective of whether the Trustee shall have made any demand on the Issuer for the payment of overdue principal, premium or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Outstanding STAR Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Bondowners allowed in such judicial proceeding; and
(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each bondowner to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Bondowners, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under the Indenture.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any bondowner any plan of reorganization, arrangement, adjustment or composition affecting the STAR Bonds or the rights of any owner thereof, or to authorize the Trustee to vote in respect of the claim of any bondowner in any such proceeding.
C-23
Limitation on Suits by Bondowners
No owner of any STAR Bond shall have any right to institute any proceeding, judicial or otherwise, under or with respect to this Indenture, or for the appointment of a receiver or trustee or for any other remedy under the Indenture, unless:
(a) such owner has previously given written notice to the Trustee of a continuing event of default;
(b) the owners of not less than a majority of the STAR Bond Obligation shall have made written request to the Trustee to institute proceedings in respect of such event of default in its own name as Trustee under the Indenture;
(c) such owner or owners have offered to the Trustee indemnity as provided in the Indenture against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the owners of a majority of the STAR Bond Obligation; it being understood and intended that no one or more owners of STAR Bonds shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to affect, disturb or prejudice the lien of the Indenture or the rights of any other owners of STAR Bonds, or to obtain or to seek to obtain priority or preference over any other owners or to enforce any right under the Indenture, except in the manner therein provided and for the equal and ratable benefit of all Outstanding STAR Bonds.
Notwithstanding the foregoing or any other provision in the Indenture, however, the owner of any STAR Bond shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and interest on such STAR Bond on the respective stated maturities expressed in such STAR Bond (or, in the case of redemption, on the Redemption Date) solely from the Trust Estate, and nothing contained in the Indenture shall affect or impair the right of any owner to institute suit for the enforcement of any such payment.
Control of Proceedings by Bondowners
Subject to the provisions of the Indenture, the owners of a majority of the STAR Bond Obligation shall have the right, during the continuance of an event of default, provided indemnity has been provided to the Trustee in accordance with the Indenture:
(a) to require the Trustee to proceed to enforce the Indenture, either by judicial proceedings for the enforcement of the payment of the STAR Bonds and the foreclosure of the Indenture, or otherwise; and
(b) to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture, provided that:
(i) such direction shall not be in conflict with any rule of law or the Indenture;
C-24
(ii) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and
(iii) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the owners not taking part in such direction.
Application of Moneys Collected
Any moneys collected by the Trustee pursuant to the Indenture (after the deductions for payment of costs and expenses of proceedings resulting in the collection of such moneys) together with any other sums then held by the Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the STAR Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST, to the payment of all undeducted amounts due the Trustee under the Indenture;
SECOND, to the payment of the whole amount then due and unpaid upon the Outstanding STAR Bonds for principal, and interest, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the STAR Bonds) on overdue principal (and premium, if any) and on overdue installments of interest; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such STAR Bonds, then to the payment of such principal and interest, without any preference or priority, ratably according to the aggregate amount so due; and
THIRD, to the payment of the remainder, if any, to the Issuer or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.
Whenever moneys are to be applied by the Trustee pursuant to the provisions of the Indenture, such moneys shall be applied by it at such times, and from time to time, as the Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any unpaid Bond until such STAR Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.
Rights and Remedies Cumulative
No right or remedy herein conferred upon or reserved to the Trustee or to the Bondowners is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
C-25
Delay or Omission Not Waiver
No delay or omission of the Trustee or of any owner of any STAR Bond to exercise any right or remedy accruing upon an event of default shall impair any such right or remedy or constitute a waiver of any such event of default or an acquiescence therein. Every right and remedy given by the Indenture or by law to the Trustee or to the Bondowners may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Bondowners, as the case may be.
Waiver of Past Defaults
Before any judgment or decree for payment of money due has been obtained by the Trustee as provided in the Indenture, the owners of a majority of the STAR Bond Obligation may (subject to the provisions of the Indenture), by written notice delivered to the Trustee and the Issuer, on behalf of the owners of all the STAR Bonds waive any past default hereunder and its consequences, except a default;
(a) in the payment of the principal of or interest on any STAR Bond; or
(b) in respect of a covenant or provision under the Indenture cannot be modified or amended without the consent of the owner of each Outstanding STAR Bond affected.
Upon any such waiver, such default shall cease to exist, and any event of default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to or affect any subsequent or other default or impair any right or remedy consequent thereon.
Acceptance of Trusts; Certain Duties and Responsibilities
The Trustee accepts and agrees to execute the trusts imposed upon it by the Indenture, but only upon the following terms and conditions:
(a) Except during the continuance of an event of default:
(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in the Indenture, and no implied covenants or obligations shall be read into the Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture.
(b) If an event of default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent corporate trustee would exercise or use under the circumstances in the conduct of its own affairs.
(c) No provision of the Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
C-26
(i) this subsection (c) shall not be construed to limit the effect of subsection(a) above;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the owners of a majority of the STAR Bond Obligation relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under the Indenture; and
(iv) no provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties thereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of the Indenture relating to the conduct or affecting the liability of or conveying insights and duties or affording protection to the Trustee, whether in its capacity as Trustee, Paying Agent, Bond Registrar or any other capacity, shall be subject to the provisions of the Indenture.
Notice of Defaults
The Trustee shall not be required to take notice or be deemed to have notice of any default hereunder except failure by the Issuer to cause to be made any of the payments to the Trustee required to be made by the Indenture, unless the Trustee shall be specifically notified in writing of such default by the Issuer, the Developer, or the owners of at least 10% of the STAR Bond Obligation, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no default except as aforesaid. Within 30 days after the Trustee has received notice of any default or the occurrence of any default hereunder of which the Trustee is deemed to have notice, the Trustee shall give written notice of such default by first class mail to all owners of STAR Bonds as shown on the Bond Register maintained by the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of, or interest on any STAR Bond, the Trustee shall be protected in withholding such notice to the Bondowners if and so long as the Trustee in good faith determines that the withholding of such notice is in the interests of the Bondowners. For the purpose of the Indenture, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default.
Compensation and Reimbursement
The Trustee shall be entitled to payment or reimbursement:
(a) from time to time for reasonable compensation for all services rendered by it thereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, upon its request, for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision
C-27
of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Trustee’s negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any action, suit, demand, judgment, claim or liability in connection with the exercise or performance of any of its powers or duties thereunder.
All such payments and reimbursements shall be made by the Issuer, but only from the City Sales Tax Revenues pursuant to the terms of the Tax Distribution Agreement.
Corporate Trustee Required; Eligibility
There shall at all times be a Trustee thereunder which shall be a bank or trust company organized and doing business under the laws of the United States of America or of any state thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by federal or state authority, and having a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of the Indenture, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in the Indenture.
Resignation and Removal of Trustee
(a) The Trustee may resign at any time by giving written notice thereof to the Issuer, the Developer, the Original Purchaser and each owner of STAR Bonds Outstanding as shown by the list of Bondowners required by the Indenture to be kept at the office of the Trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(b) If the Trustee has or shall acquire any conflicting interest, it shall, within 90 days after ascertaining that it has a conflicting interest, or within 30 days after receiving written notice from the Issuer or the Developer (so long as the Developer is not in default under the Indenture) that it has a conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in the Indenture.
(c) The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Issuer and the Trustee signed by the owners of a majority of the STAR Bond Obligation, or, so long as the Issuer is not in default and no condition that with the giving of notice or passage of time, or both, would constitute a default hereunder, by the Issuer. The Issuer or any Bondowner may, at any time petition any court of competent jurisdiction for the removal of the Trustee for cause.
(d) If at any time:
C-28
(i) the Trustee shall fail to comply with the Indenture after written request therefor by the Issuer or by any bondowner; or
(ii) the Trustee shall cease to be eligible under the Indenture and shall fail to resign after written request therefor by the Issuer or by any such bondowner; or
(iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, the Issuer may remove the Trustee or any bondowner may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(e) The Trustee shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the registered owners of STAR Bonds as their names and addresses appear in the Bond Register maintained by the Trustee and to the Original Purchaser. Each notice shall include the name of the successor Trustee and the address of its principal corporate trust office.
(f) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to the Indenture shall become effective until the acceptance of appointment by the successor Trustee under the Indenture.
Appointment of Successor Trustee
If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuer or the owners of a majority of the STAR Bond Obligation (if an event of default hereunder has occurred and is continuing), by an instrument or concurrent instruments in writing delivered to the Issuer and the retiring Trustee, shall promptly appoint a successor Trustee. In case all or substantially all of the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such receiver or trustee, by written instrument, may similarly appoint a temporary successor to fill such vacancy until a new Trustee shall be so appointed by the Issuer or the Bondowners. If, within 30 days after such resignation, removal or incapability or the occurrence of such vacancy, a successor Trustee shall be appointed in the manner herein provided, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the retiring Trustee and any temporary successor Trustee appointed by such receiver or trustee. If no successor Trustee shall have been so appointed and accepted appointment in the manner herein provided, any bondowner may petition any court of competent jurisdiction for the appointment of a successor Trustee, until a successor shall have been appointed as above provided. The successor so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided. Every such successor Trustee appointed pursuant to the provisions of the Indenture shall be a bank or trust company in good standing under the law of the jurisdiction in which it was created and by which it exists, meeting the eligibility requirements of the Indenture.
Acceptance of Appointment by Successor
Every successor Trustee appointed thereunder shall execute, acknowledge and deliver to the Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the estates, properties, rights, powers, trusts and
C-29
duties of the retiring Trustee and the duties and obligations of the retiring Trustee shall cease and terminate; but, on request of the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument conveying and transferring to such successor Trustee upon the trusts herein expressed all the estates, properties, rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such estates, properties, rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under the Indenture.
Merger, Consolidation and Succession to Business
Any corporation or association into which the Trustee may be merged or with which it may be consolidated, or any corporation or association resulting from any merger or consolidation to which the Trustee shall be a party, or any corporation or association succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee thereunder, provided such corporation or association shall be otherwise qualified and eligible under the Indenture, and shall be vested with all of the title to the whole property or Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any STAR Bonds shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger or consolidation to such authenticating Trustee may adopt such authentication and deliver the STAR Bonds so authenticated with the same effect as if such successor Trustee had itself authenticated such STAR Bonds.
Co-Trustees and Separate Trustees
At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Trust Estate may at the time be located, or in the enforcement of any default or the exercise any of the powers, rights or remedies herein granted to the Trustee, or any other action which may be desirable or necessary in connection therewith, the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the owners of at least 25% in principal amount of the STAR Bonds Outstanding, the Issuer shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, of all or any part of the Trust Estate, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such person or persons in the capacity aforesaid, any property, title, protection, immunity, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Issuer does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case an event of default has occurred and is continuing, the Trustee alone shall have power to make such appointment.
Supplemental Indentures Without Consent of Bondowners
Without the consent of the owners of any STAR Bonds, the Issuer and the Trustee may from time to time enter into one or more Supplemental Indentures for any of the following purposes:
(a) to correct or amplify the description of any property at any time subject to the lien of the Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of the Indenture, or to subject to the lien of the Indenture additional property; or
C-30
(b) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of STAR Bonds or of any series of STAR Bonds, as herein set forth, additional conditions, limitations and restrictions thereafter to be observed; or
(c) to authorize the Issuance of any series of Additional STAR Bonds and, make such other provisions as provided in the Indenture; or
(d) to evidence the appointment of a separate trustee or the succession of a new trustee under the Indenture; or
(e) to add to the covenants of the Issuer or to the rights, powers and remedies of the Trustee for the benefit of the owners of all STAR Bonds or to surrender any right or power herein conferred upon the Issuer; or
(f) to cure any ambiguity, supply any omission or cure or correct any defect or inconsistent provision in the Indenture; or
(g) to insert such provisions clarifying matters or questions arising under the Indenture as are necessary or desirable and are not contrary to or inconsistent with the Indenture as theretofore in effect; or
(h) to make such modifications or changes herein that are not materially adverse, in the discretion of the Trustee, to the interests of bondholders.
Supplemental Indentures With Consent of Bondowners
With the consent of the owners of not less than a majority of the STAR Bond Obligation affected by such Supplemental Indenture, the Issuer and the Trustee may enter into one or more Supplemental Indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the owners of the STAR Bonds under the Indenture; provided, however, that no such Supplemental Indenture shall, without the consent of the owner of each Outstanding STAR Bond affected thereby;
(a) change the stated maturity of the principal of, or any installment of interest on, any STAR Bond, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, any STAR Bond, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date); or
(b) reduce the percentage of the STAR Bond Obligation, the consent of whose owners is required for any such Supplemental Indenture, or the consent of whose owners is required for any waiver provided for in the Indenture of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences; or
(c) modify the obligation of the Issuer to make payment on or provide funds for the payment of any STAR Bond; or
(d) modify or alter the provisions of the proviso to the definition of the term “Outstanding”; or
C-31
(e) modify any of the provisions of the Indenture, except to increase any percentage provided thereby or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the owner of each STAR Bond affected thereby; or
(f) permit the creation of any lien ranking prior to or on a parity with the lien of the Indenture with respect to any of the Trust Estate or terminate the lien of the Indenture on any property at any time subject hereto or deprive the owner of any STAR Bond of the security afforded by the lien of the Indenture.
The Trustee may in its discretion determine whether or not any STAR Bonds would be affected by any Supplemental Indenture and any such determination shall be conclusive upon the owners of all STAR Bonds, whether theretofore or thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for the required percentage of owners of STAR Bonds under the Indenture to approve the particular form of any proposed Supplemental Indenture, but it shall be sufficient if such act shall approve the substance thereof.
Execution of Supplemental Indentures
In executing, or accepting the additional trusts created by, any Supplemental Indenture permitted by the Indenture or the modification thereby of the trusts created by the Indenture, the Trustee and the Issuer shall be entitled to receive, and, subject to the Indenture, shall be fully protected in relying upon, an Opinion of Bond Counsel addressed and delivered to the Trustee and the Issuer stating that the execution of such Supplemental Indenture is authorized and permitted by and in compliance with the terms of the Indenture and the Act and that the execution and delivery thereof will not adversely affect the exclusion from federal gross income of interest on the STAR Bonds. The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee’s own rights, duties or immunities under the Indenture or otherwise.
Payment, Discharge and Defeasance of STAR Bonds
Bonds will be deemed to be paid and discharged and no longer Outstanding under the Indenture and will cease to be entitled to any lien, benefit or security of the Indenture if the Issuer shall pay or provide for the payment of such STAR Bonds in any one or more of the following ways:
(a) by paying or causing to be paid the principal of and interest on such STAR Bonds, as and when the same become due and payable;
(b) by delivering such STAR Bonds to the Trustee for cancellation; or
(c) by depositing in trust with the Trustee or other Paying Agent moneys and Defeasance Obligations in an amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such STAR Bonds at or before their respective maturity or redemption dates (including the payment of the principal of, premium, if any, and interest payable on such STAR Bonds to the maturity or redemption date thereof); provided that, if any such STAR Bonds are to be redeemed prior to the maturity thereof, notice of such redemption is given in accordance with the requirements of this Indenture or provision satisfactory to the Trustee is made for the giving of such notice.
C-32
The STAR Bonds may be defeased in advance of their maturity or redemption dates only with Defeasance Obligations pursuant to the Indenture, subject to receipt by the Trustee of (i) a verification report in form and substance satisfactory to the Trustee prepared by independent certified public accountants, or other verification agent, satisfactory to the Trustee; and (ii) an Opinion of Bond Counsel addressed and delivered to the Trustee in form and substance satisfactory to the Trustee to the effect that the payment of the principal of, and interest on all of the STAR Bonds then Outstanding and any and all other amounts required to be paid under the provisions of the Indenture has been provided for in the manner set forth in the Indenture and to the effect that so providing for the payment of any STAR Bonds will not cause the interest on the STAR Bonds to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Indenture.
The foregoing notwithstanding, the liability of the Issuer in respect of such STAR Bonds shall continue, but the owners thereof shall thereafter be entitled to payment only out of the moneys and Defeasance Obligations deposited with the Trustee as aforesaid.
Moneys and Defeasance Obligations so deposited with the Trustee pursuant to the Indenture shall not be a part of the Trust Estate but shall constitute a separate trust fund for the benefit of the Persons entitled thereto. Such moneys and Defeasance Obligations shall be applied by the Trustee to the payment (either directly or through any Paying Agent, as the Trustee may determine) to the Persons entitled thereto, of the principal of and interest for whose payment such moneys and Defeasance Obligations have been deposited with the Trustee.
Satisfaction and Discharge of Indenture
The Indenture and the lien, rights and interests created by the Indenture shall cease, determine and become null and void (except as to any surviving rights of transfer or exchange of STAR Bonds herein provided for) if the following conditions are met:
(a) the principal of, and interest on all STAR Bonds has been paid or is deemed to be paid and discharged by meeting the conditions of the Indenture;
(b) all other sums payable under the Indenture with respect to the STAR Bonds are paid or provision satisfactory to the Trustee is made for such payment;
(c) the Trustee receives an Opinion of Bond Counsel (which may be based upon a ruling or rulings of the Internal Revenue Service) to the effect that so providing for the payment of any STAR Bonds will not cause the interest on the STAR Bonds to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Indenture; and
(d) the Trustee receives an Opinion of Counsel to the effect that all conditions precedent in the Indenture to the satisfaction and discharge of the Indenture have been complied with.
Thereupon, the Trustee shall execute and deliver to the Issuer a termination statement and such instruments of satisfaction and discharge of the Indenture as may be necessary and shall pay, assign, transfer and deliver to the Issuer, or other Persons entitled thereto, all moneys, securities and other property then held by it under the Indenture as a part of the Trust Estate, other than moneys or Defeasance Obligations held in trust by the Trustee as herein provided for the payment of the principal of, and interest on the STAR Bonds.
C-33
Acts of Bondowners
Any notice, request, demand, authorization, direction, consent, waiver or other action provided by the Indenture to be given or taken by Bondowners may be embodied in and evidenced by one or more substantially concurrent instruments of similar tenor signed by such Bondowners in person or by an agent duly appointed in writing. Except as therein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is thereby expressly required, to the Issuer or the Developer. Proof of execution of any such instrument or of a writing appointing any such agent, or of the ownership of STAR Bonds other than the assignment of the ownership of a STAR Bond, shall be sufficient for any purpose of the Indenture and conclusive in favor of the Issuer and the Trustee, if made in the following manner:
(a) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof, or by the affidavit of a witness of such execution. Whenever such execution is by an officer of a corporation or a member of a partnership on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority.
(b) The fact and date of execution of any such instrument or writing and the authority of any Person executing the same may also be proved in any other manner which the Trustee deems sufficient; and the Trustee may in any instance require further proof with respect to any of the matters referred to in the Indenture.
(c) The ownership of STAR Bonds and the amount or amounts, numbers and other identification of such STAR Bonds, and the date of holding the same, shall be proved by the Bond Register maintained by the Trustee.
In determining whether the owners of the requisite principal amount of STAR Bonds Outstanding have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Bonds registered on the Bond Register in the name of the Issuer shall be disregarded and deemed not to be Outstanding.
Any notice, request, demand, authorization, direction, consent, waiver or other action by the owner of any STAR Bond shall bind every future owner of the same Bond and the owner of every STAR Bond issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such STAR Bond.
C-34
SUMMARY OF PRAIRIEFIRE AT LIONSGATE DEVELOPMENT AGREEMENT
The following is a brief summary of the above-referenced Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to these documents, as amended, for a complete recital of the terms thereof.
Parties
The City of Overland Park (the “City”) and MC Prairiefire I, LLC (“MCP I”) and MC Prairiefire II, LLC (“MCP II”). MCP I and MCP II are both new, single-purpose limited liability companies that were formed by developer in connection with this Agreement. Both MCP I and MCP II are affiliates and under common control with the owner of the property that is subject to this Agreement -- MC Prairiefire, LLC (the “Owner”). The Owner will continue to own the land and has executed and joined this document in order to consent to the terms and conditions thereof and to further agree that MCP I and MCP II will have the development rights to Owner’s property to perform all of the obligations set forth in the Agreement. The term “Developer” as used in the Agreement means both MCP I and MCP II collectively, but it is understood and agreed that MCP I shall be the developer of record for Phase 1 of the Project and MCP II is the developer for Phase 2.
Guarantor
Given that MCP I and MCP II are both new entities without significant net worth, Developer agrees in Section 9.01 of the Agreement to provide a guaranty of certain obligations thereunder for each Phase of the Project, and pursuant to Section 3.01(g) and 3.02(e), the City has a right to review and approve the financials of the Merrill Companies, the proposed guarantor for Phase 1. The City will also have similar rights to review and approve the guarantor entity and financials for Phase 2. The guaranty covers (a) completion of the improvements for each respective Phase, and (b) certain fundamental performance/operational obligations, including the following: Indemnification (Section 2.05), Insurance (2.06), the Relocation Clauses (Sections 4.02(j) and 4.03(h)), Continuing Disclosures and Reporting Sales Tax (Section 7.05), Maintenance and Use (Section 7.06) and payment of the Administrative Fees (Section 9.02). The guaranty for each Phase shall terminate on that date that is three (3) years after Developer completes all of the improvements for the particular Phase and 80% of the improvements for that Phase are leased and occupied by tenants who are open for business.
The Project Site
The Project Site includes approximately 56 acres generally located at 135th Street between Lamar and Nall Avenue, along with 5.5 acres of right of way. The Project Site will be overlaid with a STAR Bond District and two (2) separate CID Districts.
The Project
Developer agrees to design, construct and operate an integrated urban village featuring a mix of retail, museum, office, hotel and residential uses including approximately 357,000 square feet of retail space, a 35,000 square foot natural history museum, approximately 290,000 square feet of office space, approximately 89,000 square feet of hotel space and approximately 475 residential units, a native wetlands, a one-acre park for music and events, and a hiking/biking trail. The Project shall be designed to be completed in two (2) separate phases as follows (and as set forth in more detail in Section 2.03 of the Agreement:
a. Phase 1:
C-35
i. the 35,000 s.f. natural history museum which will be completed by Developer and then transferred to the Museum of Prairiefire Foundation, a 501(c)(3) entity that shall thereafter operate the museum with exhibits from the American Natural History Museum in New York.
ii. approximately 200,000 s.f. of retail attractions, including REI, Fresh Market, Cinetopia, Pinstripes and Rock & Brews.
iii. approximately 300 residential units to be constructed and owned by an entity called PrairieFire Apartments, LLC.
iv. a native wetlands area.
iv. other attractions/amenities, including a sunflower garden and butterfly garden.
b. Phase 2:
i. a high-end boutique hotel with between 80 and 120 rooms.
ii. approximately 157,000 s.f. of additional retail.
iii. approximately 280,000 s.f. of office space.
iv. approximately 175 residential units.
Timing/Project Milestones
The performance milestones are generally described in Section 2.04 and set out on Exhibit G to the document; and generally, Developer commits to complete Phase 1 by December 31, 2014 and Phase 2 by an outside date of December 31, 2020. If Developer fails to meet the performance milestones and fails to “show cause” to the City about why it failed to timely perform, Developer would be in default of the Agreement.
Public Financing
The City agrees to provide certain public incentives to finance the Project, including issuing special obligation bonds at the outset of the Project. Though Developer will have to provide security/credit enhancement to make these bonds marketable, Section 4.06 of the Agreement specifically says that the City will not guaranty, backstop or otherwise credit-enhance these bonds.
a. STAR Bonds. The City will issue sales tax and revenue (STAR) bonds to be paid with 100% of the state and local incremental sales taxes from the Project for up to 20 years. It is anticipated that approximately $58M of STAR Bonds will be issued for Phase 1 (yielding a net to Developer of approximately $45M), and that approximately $46M of STAR Bonds could be issued for Phase 2 (yielding net proceeds of approximately $36M). However, the parties agree that no more STAR Bonds will be issued than the amount necessary to yield $81M of net STAR Bond proceeds to Developer.
b. CID. The City also agrees to allow two (2) separate Community Improvement Districts (“CIDs”) for 22 years each that will allow the Developer to impose a 1.5% additional sales tax within the boundaries of the respective CID Districts, all of which shall be pledged to pay eligible reimbursable costs. It is anticipated that approximately $16M of CID Bonds will be issued for Phase 1 (yielding
C-36
approximately $12.5M of net proceeds to Developer), and that for Phase 2, approximately $14M of CID Bonds, yielding approximately $11M of net proceeds to Developer. However, the CID Bonds shall be capped at a principal amount of $30M. Developer will have a limited ability to receive CID funds on a pay-as-you-go basis if less than $30M of CID Bonds are issued.
c. Use of Bond Proceeds: The proceeds from the STAR Bonds and CID financing may be used by Developer to pay or reimburse eligible Project Costs, which costs are to be identified with specificity in Exhibits K, L and M of the Agreement. However, Developer does have rights to increase or reduce costs within line items on these exhibits. These funding sources may not be commingled. In other words, the STAR Bond proceeds may only be used to pay the costs set forth in Exhibit K, while the CID proceeds from CID District 1 may only be used to pay the eligible costs identified on Exhibit L (and not those for costs incurred in CID District 2 on Exhibit M).
d. Percentage Limitation. The parties have generally agreed that the public incentives provided to the Project should be spent in a manner that it is appropriately proportionate to the Developer’s investment of its private resources into the Project. Accordingly, in Section 4.02(e) of the Agreement Developer provides the City an opportunity to review costs and disbursements at intervals of 6 months, 12 months and at the end of the construction of each Phase to make certain that the ratio of public versus private spending is appropriate and in accordance with the Project Budget. If the ratio is not relatively proportionate at any such review (within 5%), then Developer agrees that it will not draw additional public funds unless and until its investment of private funding is back to being appropriately proportionate (within 5%). Section 4.02(e)(iii) provides the following illustrative example of this Percentage Limitation. It says that if the ratio for public versus private funding for Phase 1 in the Project Budget is 38% from Public Financing Proceeds, and 62% from Private Funds, and as of July 15, 2013, Developer has spent $100,000,000 for Project Costs, of which $55,000,000 were paid with Private Funds and $45,000,000 were paid with Public Financing Proceeds, then Developer’s disbursement of Private Funds as of that date would be deemed to be materially (more than 5%) less than the 62% private funds target as set forth in the Project Budget. Accordingly, in this example, the City would not be obligated to disburse any further Public Financing Proceeds to Developer unless and until Developer has demonstrated to the City that it has compensated for the difference by spending enough Private Funds to constitute at least 57% of the Project Costs at the time of such demonstration.
e. EDRBs. The City also agrees to issue Economic Development Revenue Bonds for the limited purpose of providing the Developer an exemption on sales taxes for construction materials, equipment and furnishings for the Project. These EDRBs will not provide property tax abatements for the Developer.
Conditions to Closing
Prior to closing the bonds for either Phase, the City must be satisfied with each of the following conditions, among others:
a. After a confidential review of the Developer’s private financing, the City must be satisfied that Developer has enough private funds to pay for its part of the Project Costs.
b. Developer must have executed leases for 80% of the retail space for the Phase.
c. Developer must have a guaranteed maximum price contract with a general contractor for the improvements in the Phase, and payment and performance bonds.
C-37
d. After a confidential review of the financials for the guarantor of the Phase, the City must be satisfied with the financial net worth of the Guarantor.
e. Developer must deliver executed copies of certain other ancillary documents, including (i) the Museum Owner Agreement between the City and the Foundation (as described in Section 7.02(b) and attached as Exhibit Q), (ii) the Residential Owner Agreement between the City and PrairieFire Apartments, LLC for the Phase 1 residential units (as described in Section 7.02(d) and attached as Exhibit R), and (iii) the Conservation Easement and Wetlands Maintenance Agreement (attached as Exhibit D and Exhibit O, respectively).
Use and Operation Requirements
Article 7 of the Agreement provides many of the ongoing performance/operational obligations of Developer after completion of construction. These obligations include:
a. Requirements for Developer to deliver to the City a Museum Operation Agreement between the City and the Prairiefire Museum Foundation for the operation of the Museum – which agreement will provide the City with a direct contractual relationship with the Foundation.
b. Similarly, requirements for Developer to deliver to the City a Residential Project Acknowledgement and Assumption Agreement between the City and PrairieFire Apartments LLC for the operation of the Phase 1 residential units – which agreement will provide the City with a direct contractual relationship with the PrairieFire Apartments LLC.
c. Use restrictions as set forth in 7.04 – these property restrictions are designed to maintain the quality of the project by prohibiting certain uses that would be inconsistent with the nature of the project as agreed to by the parties – including, for example, a restriction against pawn shops, pay-day loan facilities and discount tobacco shops.
d. Requirements to maintain the Project in good condition and repair during the Term of the Agreement, as set forth in 7.06.
e. Requirements that the Developer, the Owner and all of their affiliates pay all property taxes on the Project and in the City as set forth in Section 7.08.
Term
The Term of the Agreement (the “Term”) shall expire upon that date on which both of the following shall have occurred:
a. the earlier of (i) twenty (20) years from the date that the Project Plan is approved by the City; or (ii) amortization and payment in full of all STAR Bonds; and
b. the earlier of: (i) twenty two (22) years from the date that CID Sales Tax is first collected in CID District 1, or twenty two (22) years from the date that the CID Sales Tax is first collected in CID District 2, whichever occurs last; and (ii) the payment in full of all CID Bonds and termination of any Pay-As-You-Go CID Financing.
Assignment Rights
C-38
In Section 6.01, the parties generally agree that Developer may not assign this Agreement without the approval of the City’s governing body (in the governing body’s sole discretion) and this requires analysis of a proposed assignee’s qualifications, experience and financial condition. However, Section 6.03 allows certain assignments by Developer without City consent or approval – namely, (a) a transfer of the Museum to the Prairiefire Museum Foundation, (b) sale of the residential components of the Project Site to residential developers, (c) transfers to Developer’s affiliates (as long as they have net worth at least as strong as that of Developer), (d) security interests granted to construction or permanent lenders, and (e) sales or leases to retail tenants and operators in the normal course of business (provided that any such sales to retail tenants may not exceed 50% of the land area in the Project Site without City consent).
Default and Remedies
The City has the right to terminate this Agreement, stop any further disbursements to Developer and the right to sue the Developer at law or equity. However, the City does not have the right to cut off the flow of money, which must continue to flow to the bond holders. Additionally, Section 8.04(a) specifically says that if a default occurs prior to Phase 2, the City may elect not to provide any Public Financing or EDRBs for Phase 2. However, Section 8.04(e) also makes clear that if there is a default on Phase 2 that does not really affect Phase 1 of the Project, then the City’s remedies against the Developer shall be limited to Phase 2 and Phase 1 will be unaffected.
Relocation Provisions
There are two separate sections in the Agreement that include a prohibition on Developer relocating tenants to the Project from within a certain radius around the Project. Section 4.02(j) governs the STAR Bond District and runs to both the City and the State. It prevents the Developer from leasing or selling space within the STAR Bond District to any store which is closing and relocating a store that is 10,000 square feet or larger within a fifty (50) mile radius inside the State of Kansas. This STAR Bond restriction “burns off” after five (5) years from the date the Agreement is signed. Separate and apart from the STAR Bond relocation restriction, in Section 4.03(h), there is also a CID District relocation restriction that only runs to the City (the State is not involved in the CID part of the Project). The CID relocation restriction is an absolute prohibition against closing and relocating a store (of any size) within a 6.5 mile radius of the Project.
C-39
SUMMARY OF MUSEUM OPERATION AGREEMENT
The following is a brief summary of the above-referenced Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to these documents, as amended, for a complete recital of the terms thereof.
Parties
The City of Overland Park (the “City”) and the Museum of Prairiefire Foundation, a 501(c)(3) corporation (the “Foundation”).
Nature of the Agreement. Pursuant to the terms and conditions of the Development Agreement, MC Prairiefire I, LLC (“MCP I”), the developer of Phase 1 of the project, shall have responsibility for construction of the 35,000 s.f. natural history museum (the “Museum”). However, upon completion of the Museum by MCP I, the Museum shall then be transferred to the Foundation, which shall thereafter operate the museum.
Term
This Agreement shall commence upon the conveyance of the Museum to the Foundation by the MCP I (and/or MC Prairiefire LLC, the owner of the property) and shall terminate upon the expiration of the Development Agreement.
Use and Operation of the Museum
The Foundation agrees that at all times during the Term it will, at its expense, except as otherwise required to maintain its current tax exempt status:
a. Conduct its operations at all times in a dignified quality manner and in conformity with the first class industry standards and maximize visitation and Museum usage to help establish and maintain a high reputation for the Museum.
b. Occupy the Museum as soon as possible and thereafter continuously operate and conduct Museum and related services and operations in one hundred percent (100%) of the Museum, and without interruption (except for transition of exhibits, etc.); and operate in accordance with first-class industry standards for similarly situated museums or similar attractions in the greater metropolitan Kansas City area.
c. Have an agreement with the renowned American Museum of Natural History from New York City (the “AMNH”) for the exhibits of the Museum (the “AMNH Agreement”), and provide a unique destination science and cultural experience for its patrons. The AMNH Agreement shall provide, among other things: (i) an exclusive radius of three hundred (300) miles in which the Museum shall be the only venue for exhibition of AMNH exhibits, (ii) maintenance of permanent exhibits and approximately 7,000 square feet of traveling exhibits which shall rotate twice per year, and (iii) AMNH Science Bulletins or other similar educational correspondence and amenities for the patrons of the Museum. The AMNH Agreement is initially for a five (5) year term, with one optional (5) year renewal term. However, the Foundation agrees in Section 3(c) that in the event that AMNH Agreement shall expire, terminate or otherwise not be renewed during the Term of this Agreement, the Foundation shall use best efforts to secure a substantially similar contractual agreement to provide exhibits for the Museum from a similar institution or educational facility (the “Substitute Agreement”), which Substitute Agreement shall be approved by the City in its reasonable discretion.
C-40
d. Cause the Museum to feature a connection to an interpretive walk, prairie gardens, a discovery room providing an interactive learning experience for children, event space and possible art installations.
Reports/Meetings with the City
In Section 20, the Foundation also agrees to report to the City Manager on an annual basis about the operation of the Museum, its visitation numbers and the ongoing relationship with AMNH. Also, upon a request from the City, the Foundation will arrange a meeting with the administrative officers for AMNH in New York City to talk about the ongoing relationship between the parties.
Property Taxes/Sales Taxes
During the Term of this Agreement, the Foundation shall pay when due any real estate taxes and assessments applicable to any portion of the Museum. Also, the Foundation agrees not take any actions or adopt any practices or procedures which are designed to, or which may or will have the effect of, eliminating, reducing or diverting in any way any sales taxes or use taxes payable to the City or the State in connection with sales made or services from, in or on and about the Museum, including without limitation, using its 501(c)(3) status to try to avoid any payment of sales taxes or use taxes by it or any other business operating within the Museum. The Foundation further agrees to provide the City and/or State with documentation of sales tax receipts for each business within the Museum, indicating the type and amount of the sales taxes and/or use taxes paid within or in connection with the Museum (and not in the aggregate).
Continuing Disclosures
The Foundation agrees in Section 6 to execute and deliver Continuing Disclosure Agreements with the Dissemination Agent named therein in connection with the STAR Bonds and the CID Bonds, in which the Foundation will agree to provide information during the Term of this Agreement about the status of the AMNH Agreement or any Substitute Agreement, the touring exhibits which have been presented at the Museum, the touring exhibits scheduled to be presented at the Museum and comparable matters
C-41
SUMMARY OF RESIDENTIAL PROJECT
ACKNOWLEDGEMENT AND ASSUMPTION AGREEMENT
The following is a brief summary of the above-referenced Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to these documents, as amended, for a complete recital of the terms thereof.
Parties
The City of Overland Park (the “City”) and Prairiefire Apartments, LLC, an Indiana limited liability company (the “Residential Developer”).
Nature of the Agreement
Pursuant to the terms and conditions of the Development Agreement, MC Prairiefire I, LLC (“MCP I”), the developer of Phase 1 of the project, and/or its affiliates shall transfer and convey a portion of the property to Residential Developer so that Residential Developer will develop, construct and operate three hundred (300) residential units, including condominium units and/or apartment units (collectively, the “Residential Project”). This document provides the City with a direct contractual relationship with the Residential Developer. In general, the Residential Developer acknowledges, assumes and agrees to perform the obligations and agreements of the Developer under the Development Agreement, at least to the extent that those obligations and agreement pertain to the design, construction, completion and operation of the Residential Project.
Term
This Agreement shall terminate upon the expiration of the Development Agreement.
Exceptions to Assumption of Obligations
Certain noteworthy exceptions to the blanket acknowledgement and assumption of the Residential Developer are set forth in Section 4. Specifically, in Section 4(b), Residential Developer says that the general contractor for the Project will be Hearthview Construction – an affiliated entity – and therefore, their contract will not include a guaranteed completion date or payment and performance bonds. However, Residential Developer does agree to commence construction within 90 days of the purchase of the property and covenants to complete by December 31, 2014. Also, in Section 4(c), the City will not have any right to approve any assignment or transfer of the Residential Project after the same is Substantially Completed. Finally, in Section 4(d)(ii), in the event of a fire or other casualty or condemnation, the obligation to rebuild is subject to approval and consent from the Residential Developer’s lender if and to the extent the damage affects more than 20% of the gross floor area of the improvements that constitute the Residential Project.
C-42
SUMMARY OF GRANT OF PERMANENT CONSERVATION EASEMENT
The following is a brief summary of the above-referenced Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to these documents, as amended, for a complete recital of the terms thereof.
Parties
The City of Overland Park (the “City”) and MC Prairiefire, LLC, a Kansas limited liability company, the owner of the 56 acre Prairiefire site (“Owner”).
Nature of the Easement
The Development Agreement provides that the Project shall include a wetlands area and trail area (collectively, the “Wetlands/Trails Area”) which shall include (i) a native wetlands area comprising a biologically functional natural system that includes a stream channel, natural stone and natural vegetation (the “Wetlands”), all in accordance with a final Wetlands Mitigation Plan dated as of February, 2007, which plan is attached to the Wetlands/Trails Maintenance Agreement, (ii) a bridge featuring natural materials which traverse the Wetlands (the “Bridge”), and (iii) a perimeter nature trail (the “Perimeter Trails”) and (iv) internal trails within the Wetlands (the “Internal Trails”). The parties to this document recognize and agree that the Wetlands/Trails Area possesses natural resource conservation values associated with ecological diversity, wildlife habitat and watershed protection, among other things. In this document, the Owner agrees to conserve and protect the Wetlands/Trails Area and grants the City a right to enforce and preserve the conservation values for this property and grants the community public access to this property.
Term
This Agreement is intended to run in perpetuity.
General Obligations
Owner agrees to keep and retain the property forever predominately in its ecological, scenic and open space condition and prevent uses which would significantly impair or interfere with the conservation values identified therein.
Educational Activities
In Section 2 of the Easement, the Owner agrees that the property shall be made accessible to the public to enjoy the open spaces, aesthetic and conservation benefits thereof as well as to learn about the benefits of wetlands and conservation areas.
Conservation Easement Act
Pursuant to Section 3 of the Easement, the parties agree that this document is intended to be “conservation easement” as defined by the Kansas Uniform Conservation Easement Act, K.S.A 58-3810 et. seq. and that the City shall be the only “holder” of this Easement as set forth therein.
C-43
Prohibited Uses and Activities
Section 7 prohibits any use of the property which would be inconsistent with the purposes of this Easement, but more specifically, the following uses and activities are prohibited: (i) structures, including buildings, signs, cell towers, utility poles, storage tanks or other improvements, (ii) mining of rock, sand, gravel or soil, (iii) the separation or use of any water rights, (iv) alteration of water sources or natural flow of water, (iv) waste, dumping or storing of garbage or other materials, (v) roads, (vi) commercial harvesting of timber or removal of vegetation, (vii) use of fertilizer or spraying of chemicals and pesticides (with certain limited exceptions), (viii) use of cars or other motorized vehicles (except for motorized devises to aid the handicapped, elderly or disabled), (ix) commercial activities, (x)
Maintenance
In Section 9 of the Easement, Grantor agrees to maintain and keep the property in good condition and repair and as more specifically required by the Wetlands/Trails Maintenance Agreement.
Taxes
Section 11 requires that Owner pay and be responsible for all property taxes and assessments for the property.
Indemnification
In Section 14 of the Easement, the Owner provides broad indemnification to the City for violation of the terms of the Easement, injury or damage which occurs on the property and environmental concerns relative to the property.
C-44
SUMMARY OF WETLANDS/TRAILS MAINTENANCE AGREEMENT
The following is a brief summary of the above-referenced Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to these documents, as amended, for a complete recital of the terms thereof.
Parties
The City of Overland Park (the “City”) and MC Prairiefire I, LLC, a Kansas limited liability company, the developer of Phase 1 of the Project (“Developer”).
Nature of the Agreement
The Development Agreement provides that the Project shall include a wetlands area and trail area (collectively, the “Wetlands/Trails Area”) which shall be developed by Developer in accordance with a wetlands mitigation plan (the “Wetlands Plan”) which Wetlands Plan is attached to the Agreement as Exhibit C, and which Wetlands/Trails Area shall include (i) a native wetlands with streams, rocks and vegetation (the “Wetlands”), (ii) a bridge featuring natural materials which traverse the Wetlands (the “Bridge”), and (iii) a perimeter nature trail (the “Perimeter Trails”) and (iv) internal trails within the Wetlands (the “Internal Trails”. Developer agrees in this document design, develop, construct, manage, maintain and operate the Wetlands/Trails Area pursuant to the terms and conditions thereof.
Term
This Agreement is executed in concert with a Conservation Easement in favor of the City which is intended to run in perpetuity and this document shall terminate, if at all, upon the expiration of the Conservation Easement.
General Construction and Maintenance Obligations
Developer covenants, at its expense, to construct the Wetlands as set forth in the Wetlands Plan and thereafter, Developer shall at all times during the Term, manage, maintain and operate the Wetlands/Trails Area. Additionally Developer shall (a) manage the Wetlands/Trails Area in a dignified quality manner and in conformity with as good or better standards of practice for other similar-type amenities in Johnson County, Kansas, and (b) manage, maintain and operate the Wetlands/Trials Area in accordance with all of the terms and conditions set forth in the Development Agreement, the Conservation Easement and the Wetlands Plan.
Specific Obligations
Among other things, this Agreement provides that:
a. Developer shall maintain, repair and/or replace, including without limitation, the Bridge and the vegetation, rocks structures, berms, drainage systems, and markers and signs (if any) constituting a part of the Wetlands.
b. Developer shall (i) keep the Bridge in good condition and repair, including without limitation, repair and replacement of surfaces resulting from normal wear and tear, accidents, weathering, vandalism, or material failure including providing replacement of material and all other incidental materials; (ii) maintain landscaping of the Wetlands in accordance with the Wetlands Plan; and (iii) keep the Bridge and Wetlands free of debris and litter.
C-45
c. Developer shall perform maintenance measures, including but not limited to: (i) removal and disposal of accumulated sediment and debris that is preventing the flow of water, (ii) elimination of noxious weeds, nuisance trees and shrubs in the wetland and native grass buffer, (iii) late season mowing in the native grass buffer and the Wetlands, if necessary, as well as landscaping in the native grass buffer and wetland to prevent seeding of nuisance species, (iv) grading to repair water control structures, resetting of outfall structures and removal of excess sediment that would otherwise prevent the flow and circulation of water (but not in excess of the original as-built elevations), (v) transplanting of species in critical areas, reseeding, and tree maintenance, and (vi) biannual site monitoring as set forth in the Wetlands Plan.
Wetlands Plan
Exhibit C to this document is the Wetlands Plan by Olsson Engineers which is incorporated by reference and provides significant details regarding the Developer’s mitigation work plan and wetlands design, lists of wetlands species to be used, the planting plan, and site monitoring.
City Setback Ordinance
The Wetlands shall be included in the City’s stream setback ordinance, which will include at least a fifty (50) foot wide buffer on either side of the mitigated channel.
Consulting Services
Section 5.5 of the document requires Developer to retain Kansas State’s Department of Horticulture, Forestry & Recreation Resources or a similar expert to serve as Developer’s consultant on the design, operation and maintenance of the Wetlands.
Signage Systems
Section 6 of the document provides for the educational and directional signage systems that Developer contemplated in the Project Plan.
C-46
APPENDIX D FORMS OF CONTINUING DISCLOSURE AGREEMENTS
4848-0467-6625.6
APPENDIX E FORM OF OPINION OF BOND COUNSEL
4848-0467-6625.6
APPENDIX F ECONOMIC AND DEMOGRAPHIC INFORMATION OF THE ISSUER
[TO BE UPDATED]
Economic conditions and Outlook
A commercial hub of the Kansas City metropolitan region, Overland Park is home to an estimated daytime population of over 200,000. With a diverse business community, Overland Park remains strong despite the national economic downturn, as evidenced by a continued development, population growth and an unemployment rate significantly lower than the national rate.
In 2009, construction values exceeded $241 million, including residential construction valued at $183 million.
In December of 2009, the City of Overland Park had an unemployment rate of 6.1% compared to a state unemployment rate of 6.3% and national unemployment rate of 10.0%.
The City’s retail activity has continued to be one of the best in the Kansas City metropolitan area. As a direct result of several large shopping malls and an effective street and traffic-way system, retail customers are drawn from the entire metropolitan area as well as the rest of the eastern half of Kansas and the western half of Missouri. Retail sales have exhibited a strong growth during the past two decades, increasing from $181 million in 1970 to $3.74 billion in 2009.
Major corporations which have chosen Overland Park as the site of their world headquarters include Sprint Nextel, Black & Veatch Engineers and GE Reinsurance Company. Major corporations which have national or regional headquarters in Overland Park include Yellow Roadway, Universal Underwriters, Prescription Solutions and Quintiles.
Population
Since the incorporation of Overland Park in 1960, population has grown from 28,085 to an estimated 2010 population of 175,943.
According to 2000 census data, Overland Park experienced a 33.4% increase in population between 1990 and 2000. Currently, Overland Park represents approximately one-third of Johnson County’s total population. Census data indicates Johnson County has grown from a population of 270,269 in 1980 to an estimate of 553,341 in 2010.
The remainder of this page has been left blank intentionally.
F-1 4848-0467-6625.6
Major Employers
Table 1 presents a listing of the major employers within the City in 2010.
Table 1 Mayor Employers within Overland Park
Firm/Organization Product/Service Estimated Employees
Sprint/Nextel Telecommunication 9,500 Shawnee Mission School District Elementary and Secondary Schools 4,166 Black & Veatch Engineering Services 3,247 Blue Valley School District Elementary and Secondary Schools 3,153 Embarq Telecommunications 2,800 Overland Park Regional Medical Center General Medical and Surgical Hospitals 2,000 YRC Worldwide Trucking, Except Local 1,259 Johnson County Community College Junior Colleges and Technical Institutes 930 Quintiles Clinical Research 900 Waddell & Reed Financial Security Brokers 886
Source: Overland Park Chamber of Commerce Economic Development Council.
Labor Force and Unemployment Rates
Table 2 lists the labor force and annual average unemployment rates for the City as compared to the annual average unemployment rates for the State of Kansas and the United States for the years 1999 through 2009. The information presented in this table has not been seasonally adjusted.
Table 2 Labor Force and Unemployment Rates
City of Overland Park State of Kansas United States
Labor Unemployment Unemployment Unemployment Year Force(1) Rate(1) Rate(1) Rate(2)
2009 99,374 6.4% 6.7% 9.3% 2008 99,126 4.5% 4.4% 5.8% 2007 97,421 4.0% 4.1% 4.6% 2006 95,110 4.2% 4.5% 4.6% 2005 92,384 3.9% 4.3% 5.1% 2004 92,875 5.0% 5.5% 5.5% 2003 90,895 4.0% 5.4% 6.0% 2002 89,091 3.9% 5.1% 5.8% 2001 86,338 3.0% 4.3% 4.7% 2000 88,319 2.1% 3.7% 4.0% 1999 88,448 1.7% 3.0% 4.2%
(1) Kansas Department of Labor, Labor Market Information Services. Source: (2) U.S. Department of Labor – Bureau of Labor Statistics.
F-2 4848-0467-6625.6
Building Permits
During 2009 the City issued 3,250 building permits for a combined estimated value of construction of more than $241 million. Table 3 highlights building permit statistics for 2000 through 2009.
Table 3 Building Permits Total Multiple Total Construction Year Single Family Dwelling Commercial Other Permits Costs 2009 114 56 44 3,306 3,250 $241,162,392 2008 155 67 56 3,190 3,468 333,463,751 2007 312 40 60 3,315 3,712 441,147,673 2006 443 68 73 3,661 4,245 448,941,802 2005 469 216 72 3,324 4,081 461,493,716 2004 640 207 68 3,235 4,150 351,901,499 2003 731 161 687 2,929 4,508 385,059,468 2002 706 126 673 2,747 4,252 381,240,834 2001 849 235 737 26,90 4,511 603,355,554 2000 735 276 949 3,769 5,729 679,385,166
F-3 4848-0467-6625.6
APPENDIX G
BOOK-ENTRY ONLY SYSTEM
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2012 STAR Bonds. The Series 2012 STAR Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Series 2012 STAR Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the “Indirect Participants” and collectively with the Direct Participants, the “Participants”). DTC has Standard & Poor’s highest rating: “AAA.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at http://www.dtcc.com and http://www.dtc.org.
Purchases of Series 2012 STAR Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2012 STAR Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2012 STAR Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2012 STAR Bonds, except in the event that use of the book-entry system for the Series 2012 STAR Bonds is discontinued.
To facilitate subsequent transfers, all Series 2012 STAR Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2012 STAR Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series
G-1 4848-0467-6625.6
2012 STAR Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2012 STAR Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. So long as Cede & Co., as nominee for DTC, is the owner of the Series 2012 STAR Bonds, the Issuer shall treat Cede & Co. as the only owner of the Series 2012 STAR Bonds for all purposes under the Resolution, including receipt of all principal of and interest on the Series 2012 STAR Bonds and receipt of notices.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Series 2012 STAR Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2012 STAR Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Series 2012 STAR Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Payments with respect to the Series 2012 STAR Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Series 2012 STAR Bonds at any time by giving reasonable notice to Issuer or Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.
The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered.
THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC’S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM DTC. NEITHER THE ISSUER NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS OR ANY BENEFICIAL OWNER WITH RESPECT TO: (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT OR ANY INDIRECT PARTICIPANT; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT
G-2 4848-0467-6625.6
PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF, OR INTEREST ON THE SERIES 2012 STAR BONDS; (3) THE DELIVERY OR TIMELINESS OF DELIVERY BY DTC OF ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE RESOLUTION; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDOWNER. THE BENEFICIAL OWNERS OF THE SERIES 2012 STAR BONDS WILL RELY ON PARTICIPANTS FOR TIMELY PAYMENT AND OTHER NOTICES AND FOR OTHERWISE MAKING AVAILABLE TO THE BENEFICAL OWNER THE RIGHTS OF A BONDOWNER. NO ASSURANCES CAN BE PROVIDED THAT, IN THE EVENT OF BANKRUPTCY OR INSOLVENCY OF DTC OR A PARTICIPANT THROUGH WHICH A BENEFICIAL OWNER HOLDS BENEFICIAL INTERESTS IN THE SERIES 2012 STAR BONDS, PAYMENT WILL BE MADE BY DTC OR THE PARTICIPANT ON A TIMELY BASIS.
(Remainder of page intentionally left blank)
G-3 4848-0467-6625.6
APPENDIX H FORM OF INDIVIDUAL ACCREDITED INVESTOR INVESTMENT LETTER City of Overland Park, Kansas Sales Tax Special Obligation Revenue Bonds Series 2012 (Prairiefire at LionsGate Project)
______, 20__
City of Overland Park, Kansas Overland Park, Kansas
Stifel, Nicolaus & Company, Inc. St. Louis, Missouri
Ladies and Gentlemen:
In connection with the purchase by the undersigned (the “Purchaser”) of $______in principal amount of the above-described Bonds (the “Series 2012 STAR Bonds”) of the City of Overland Park, Kansas (the “Issuer”), the Purchaser hereby represents and agrees to the terms of this Investment Letter. The Series 2012 STAR Bonds are authorized and issued under the Trust Indenture dated as of December 1, 2012 (the “Indenture”), by and between the Issuer and ______(the “Trustee”). The undersigned acknowledges receipt and review of the Official Statement dated ______, 2012 (the “Official Statement”) relating to the Series 2012 STAR Bonds. The undersigned hereby certifies in conjunction with its purchase of the Series 2012 STAR Bonds that:
1. The Purchaser is an Individual Accredited Investor (as defined in Rule 501(A)(5) or (6) under the Securities Act of 1933, as follows (check the applicable box(es)):
A natural person whose individual net worth as of the date hereof (including the net worth of the Purchaser’s spouse if the Purchaser is married) exceeds $1,000,000. For purposes of this document, the term “net worth” shall not include the value of, or the amount of indebtedness secured by, the primary residence of the Purchaser; provided, however, if the primary residence is secured by indebtedness in an amount in excess of the value of such residence, such excess indebtedness shall be deducted from the Purchaser’s net worth.
A natural person who had an individual income that exceeded $200,000 or joint income with his or her spouse in excess of $300,000 in each of the two most recent years and reasonably expects that in the current year his or her or their income will reach the same level. For purposes of this document, the term “income” shall mean adjusted gross income, as reported or to be reported for Federal income tax purposes, less any income attributable to a spouse or to property owned by a spouse, increased by the following amounts (but not including any amounts attributable to a spouse or to property owned by a spouse): (i) amounts contributed to an Individual Retirement Account (as defined by the Internal Revenue Code (the “Code”)) or Keough retirement plan, (ii) any deductions for depletion (pursuant to Section 611 et seq. of the Code), (iii) the
H-1 4848-0467-6625.6
amount of any tax-exempt interest (pursuant to Section 103 of the Code) received, (iv) any losses claimed as a limited partner of a limited partnership (as reported in Schedule E of Form 1040); (v) alimony paid, and (vi) any elective contributions to a cash or deferred arrangement under Section 401(k) of the Code.
2. The Purchaser understands and acknowledges that the Series 2012 STAR Bonds may be sold, transferred or otherwise disposed of only to an entity that is a “Qualified Institutional Buyer” (as defined in Rule 144A of the Securities Act of 1933 or an “Accredited Investor” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. Purchaser further understands and acknowledges that until such time as the conditions for release of moneys from the Escrowed Project Costs Fund to the Project Fund set forth under the definition of Escrow Release Conditions – 100% Release have been satisfied in full, any Individual Accredited Investor purchasing any Series 2012 STAR Bond must deliver, or cause to be delivered by the Underwriter, to the Trustee an investor letter substantially in the form of this Investment Letter.
3. The Purchaser understands and acknowledges that the Series 2012 STAR Bonds have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any other applicable securities law, are being offered for sale in transactions not requiring registration under the Securities Act, and may not be offered, sold, pledged or otherwise transferred except in compliance with terms of the Indenture and the registration requirements of the Securities Act or any other applicable securities laws or pursuant to an exemption therefrom.
4. The Purchaser understands that no credit rating has been sought or obtained with respect to the Series 2012 STAR Bonds, and the Purchaser acknowledges that the Series 2012 STAR Bonds are a speculative investment and that there is a high degree of risk in such investment.
5. The Purchaser has been provided with such information concerning the Project and the Developer (as such terms are defined in the Official Statement) as it has requested and that it deems necessary in its decision to purchase the Series 2012 STAR Bonds. The Purchaser has reviewed the Official Statement. The Purchaser has had an opportunity to make inquiries of such officers, employees, agents and attorneys of the Developer and the Issuer as it considers appropriate in connection with its purchase of the Series 2012 STAR Bonds.
6. The Purchaser understands that the Series 2012 STAR Bonds are secured only by the Revenues, as described in the Indenture, that the Series 2012 STAR Bonds will never constitute a general obligation of the Issuer, the State of Kansas or any political subdivision thereof, and that no right exists to have taxes levied by the Issuer, the State of Kansas or any political subdivision thereof for the payment of principal of or interest on the Series 2012 STAR Bonds. The Series 2012 STAR Bonds are special, limited obligations of the Issuer payable (except to the extent paid out of STAR Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate including, with respect to the STAR Bonds, the Revenues, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the STAR Bonds, as provided in the Indenture.
7. The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of prospective investments. In reaching the conclusion that it desires to acquire the Series 2012 STAR Bonds, the Purchaser has carefully evaluated all risks associated with this purchase and acknowledges that it is able to bear the economic risk of this purchase.
H-2 4848-0467-6625.6
8. The Purchaser understands that it may need to bear the risks of this investment for an indefinite time since any sale prior to the maturity of the Series 2012 STAR Bonds may not be possible or may be at a price below that which the Purchaser is paying for the Series 2012 STAR Bonds.
9. The Series 2012 STAR Bonds have been purchased for the Purchaser’s own account for investment and not with a view to the distribution, transfer or resale thereof, provided that the disposition of the Series 2012 STAR Bonds shall at all times be within the Purchaser’s sole control.
10. The Purchaser acknowledges that the Issuer, Bond Counsel, the Underwriter and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements.
11. This Investment Letter will constitute an agreement with respect to the matters herein contained as of the date hereof.
The foregoing representations shall survive the execution and delivery of the Series 2012 STAR Bonds to the Purchaser and the instruments and documents contemplated thereby.
Sincerely yours,
[INVESTOR]
Name
H-3 4848-0467-6625.6