GENERAL Ordinance Fact Sheet 150357 Ordinance Number Reason: To provide for the development of a downtown convention center headquarters hotel. Brief Title: Approval Deadline: Authorizing the execution of an MOU and related agreements. Details Positions I Recommendations Reason for Legislation Sponsor(s) Mayor James Authorizing the City Manager to execute a Memorandum of Understanding with Burke Swerdling Associates, LLC, for the purposes of advancing the development a new downtown convention center headquarters hotel; authorizing the City Manager to execute such further agreements as may be necessary for the purposes of developing, ?nancing, constructing and operating the convention hotel in the manner contemplated by the Memorandum of Understanding; and recognizing this ordinance as having an accelerated effective date. Programs, Departments, or Groups Affected Applicants/Proponents Applicant City Department Other Discussion (including relationship to other Council actions) Approval of the ordinance will authorize the City to execute an MOU and related agreements with respect to the development of a new downtown convention center headquarters hotel to be owned and operated by a major global hotel brand. The MOU would establish the framework for the various development/?nancing agreements to be executed within the next 4 to 13 month period. Those agreements would provide for the following: A cash contribution by City of $35,000,000. Funds to be derived from a bond issuance and the debt serviced by the City?s convention tourism taxes. City?s obligation is contingent on securing the balance of the financing needed to construct the project. Opponents Groups or Individuals Basis of Opposition Staff Recommendation 1: For Against Reasons Against: Board or Commission Recommendation For Ci Against El No Action Taken El For, with revisions or conditions Council Committee Action El Do Pass Do Pass (as amended) - Approval of a Tax Increment Financing plan/project continuing for 23 years. City to redirect, subject to appropriation, its economic activity taxes (as de?ned by the TIF Act) for the duration. Jackson County and Kanas City Zoological District to redirect their portion of the economic activity taxes for the duration. 0 Approval of a Super continuing for 30 years. City to redirect, subject to appropriation, a de?ned portion of the incremental economic activity taxes not otherwise redirected under the TIF Act. Commitment of the sales tax revenues will require the consent of VisitKC. to approve sales tax exemption on construction materials and 100% real/personal property tax exemption pursuant to a sale/leaseback structure under which it would own all real/personal property and lease the same to an entity for 30 years. Property to be conveyed to lessee at lease?s termination. a Transfer of existing project land owned by City and assistance with acquisition of additional project parcels, as needed. Property to be held by 0 Approval of a community improvement district that is anticipated to impose a 1% sales tax and special assessment. 0 City to provide standard City services with respect to zoning, permits, inspections, and reviews. City?s fees for such services will be capped at $800,000. 0 City will not, for a period 30 years, construct or provide ?nancial assistance for the construction of any conference facility that would have a material adverse impact on this project. 0 City will maintain the existing Convention Center to its current standards, will continue to designate it as the City?s principal convention center, and will not transfer ownership or management functions without the hotel owner?s consent. These obligations have no ?xed duration; to be negotiated in ?nal documents. 0 City will not, for a period of 10 years after the hotel?s opening, provide subsidies for any competing hotel as defined by the MOU, unless such hotel would not have a material adverse impact as de?ned by the MOU. Certain existing buildings/projects are exempted from the exclusion. Committee Substitute I: No Recommendation Hold [1 Do Not Pass Details Policy! Program Impact - City will grant the hotel owner exclusive catering policyor program No [Was rights in the Grand Ballroom for a period of 15 years Change pursuant to a QMA so long as the hotel continues to be operated by a major global hotel brand approved by City. Catering rights may be competitively bid Operational Impact afterwards, provided that no one other than the hotel Assessment owner will be given exclusivity for not less than 50 years. Management fee payable to hotel owner will be ?xed pursuant to an agreed-upon schedule. Management fees equal $62,363,816 over 15-year period (present value of City will retain 4% F'nances of the gross revenues for replacement, and 14% Cost and Revenue Cost of Legislation of the gross revenues (starting at $800,000 plus Projections in?ation) as its share. (City will have the right to retain a de?ned portion of the Super TIF revenues increaselDecrease in Revenue generated by the hotel project in any given year if Expected Annually gross catering revenues less expenses are insuf?cient to fully pay the management fee payable to hotel owner.) 0 City will not be held responsible for funding any cost overruns or closing any ?nancing gaps except to Fund sources the extent intentionally caused by City without good cause. BSA exclusively responsible for securing private capital/debt needed to ?nance the project. 0 City and BSA will perform pursuant to an agreed- upon timetable for approval of the public incentives and execution of any documents required in conjunction with the project. Both parties have certain rights to terminate the MOU if certain timeframes are not satis?ed. In the event any portion of the project ?nancing provided by the public sector or the agreements contemplated to be executed by them are not approved, or, in the event BSA is not selected as the developer by the TIF Commission and the City will be precluded from negotiating with any other developer of a competing project or providing ?nancial assistance for 24 months. Depending on the nature of the failure, the City may additionally be obligated to pay BSA liquidated damages in the amount of $250,000 or condition the approval of any competing project on the requirement that any future developer reimburse, as a project expense, all administrative fees, consultant expenses, and legal fees paid by BSA to the TIF Commission and Applicable Dates: Fact Sheet Prepared By: Brian T. Rabineau, Assistant City Attorney Reviewed By: Reference Numbers Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 This Memorandum of Understanding is entered as of this day of May, 2015 between the City of Kansas City, Missouri (?City?) and Burke Swerdling Associates, LLC (?Developer?) for a convention center headquarters hotel. This MOU outlines certain terms and conditions under which the Developer would develop the Project (defined below) and seek approval of certain incentives for development of the Project. This MOU is not intended to be, and is not, binding and creates no obligations or liabilities of any kind other than as expressly set forth in Part HI below. As soon as practical following the execution of this MOU, Developer will further engage its legal counsel to assist with the preparation of de?nitive Transaction Documents and seek approval of certain incentives for the Project. PART TERMS AND EXHIBITS DEFINED TERMS. As used in this MOU the capitalized terms shall have the following meaning: 1. ?Agency Bonds? shall have the meaning given such term in Part II, Section E3 of this MOU. 2. ?Agency Expenses? shall have the meaning given such term in Part 111, Section of this MOU. 3. ?Approved Brand/Operator? shall have the meaning given such term in Part II, Section C3 of this MOU. 4. ?Banquet Kitchen? means the existing banquet kitchen which may be improved by the Developer at its discretion, and subject to the City?s consent, within the Convention Center as provided pursuant to the terms of the Transaction Documents. 5. ?City? means the City of Kansas City, Missouri. 6. ?City Contribution? means the $35 million contribution to be made by the City from proceeds of bonds to be issued by the City, the debt service of which will be paid from the City?s convention and tourism taxes. 7. ?Connector? means the structural connection from the Hotel to the Convention Center. 8. ?Construction Agreement? means the construction agreement to be entered into by the Owner with a general contractor for the construction of the Project. 498318648 49831864.10 Kansas City Convention Hotel Dra? Memorandum of Understanding May 18, 2015 9. ?Convention Center? means the Bartle Hall Convention Center. 10. ?Convention Meeting Space? means the combined 101,000 net leasable square feet of meeting space referred to as the Grand Ballroom and the Conference Center located in the Convention Center as shown on Exhibit A, the front and back of house function space associated with the Grand Ballroom and Conference Center located in the Convention Center as shown on Exhibit A, the ?xtures and furniture currently located Within and/or used in conjunction with the operation of such meeting space and front and back of the house function space pursuant to an inventory list to be provided by City prior to execution of the Exclusive Catering Agreement (defined below), and the Banquet Kitchen and its equipment. 11. ?County? means Jackson County, Missouri. 12. ?County shall have the meaning give such term in Part II, Section E4 of this MOU. l3. means any entity with whom the City has contracted pursuant to Section 92.3360), RSMO, for the purpose of promoting the City as a convention, visitors and tourist center. 14. ?Developer? means Burke Swerdling Associates, LLC and, to the extent assigned by Burke Swerdling Associates, KC Hotel Developers, LLC or such other entity designated by Burke Swerdling Associates, LLC. 15. ?Development Agency? means the Planned Industrial Expansion Authority of Kansas City, Missouri or such other appropriate development authority or agency of the City, as determined by the City. 16. ?Development Agreement? shall have the meaning given such term in Part II, Section .5 of this MOU. 17. ?District? shall have the meaning given such term in Part II, Section E6 of this MOU 18. ?District Financing? shall have the meaning given such term in Part II, Section 13.6 of this MOU. 19. ?Due Diligence Period? shall have the meaning given such term in Part 111, Section of this MOU. 498318648 49831864.10 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 20. ?Exclusive Catering Agreement? shall have the meaning given such term in Part II, Section C5 of this MOU. 21. ?Hotel? means a headquarters convention center hotel as described in the Project Program with approximately 800 rooms, but not less than 790 rooms. 22. ?Hotel Site? means the area generally bounded by 16th Street to the south, Truman Road to the north, Wyandotte Street to the west, and Baltimore Avenue to the east as shown on the Hotel Site Aerial attached as Exhibit B. 23. ?Lease Purchase and Financing Agreement? shall have the meaning given such term in Part II, Section E5 of this MOU. 24. ?Management Agreement? means corporate or franchisee management agreement for the operation of the Hotel entered into by the Owner with an Approved BrandJOperator. 25. ?Mortgage Financing? shall have the meaning given such term in Part II, Section E5 of this MOU. 26. means this Memorandum of Understanding. 27. ?Owner? means the entity which is formed by the Developer or identi?ed by the Developer to hold the leasehold interest in the Project Property pursuant to the Lease Purchase and Financing Agreement. 28. ?Private Capital? means the Mortgage Financing and the Private Equity. 29. ?Private Equity? shall have the meaning given such term in Part II, Section E2 of this MOU. 30. ?Project? means the acquisition and site preparation of the Hotel Site, acquisition, construction and equipping of the Hotel on the Hotel Site, and acquisition and construction of the Connector. 31. ?Project Financing? means the Agency Bonds, District Financing, and Private Capital. 32. ?Project Program? means the Project components described in the Project Program attached as Exhibit C. 33. ?Project Property? shall have the meaning given such term in Part II, Section 13.5 of this MOU. 498318648 49831864. 10 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 7 90 34. ?Project means the County TIF and 50% of the incremental tax 91 revenues resulting ?om tax levies imposed by the City and generated by economic 92 activities on the Property redirected to a Special allocation fund pursuant to the TIF Act. 93 35. ?Public Contribution? shall have the meaning given such term in Part II, 94 Section E3 of this MOU. 95 36. ?Public Incentives? shall mean the Public Contribution and District 96 Financing. 97 37. ?Special Assessment? shall have the meaning given such term in Part 11, 98 Section E6 of this MOU. 99 38. ?Special Sales Tax? shall have the meaning given such term in Part II, 100 Section E6 of this MOU. 101 39. ?Super means a certain portion of the incremental tax revenues 102 resulting from tax levies imposed by the City and generated by economic activities on the 103 Property and not otherwise redirectable to a special allocation fund pursuant to the TIF 104 Act, and as further identi?ed on Exhibit to this MOU. 105 40. Act? means the Real Property Tax Increment Allocation 106 Redevelopment Act, Sections 99.800 et. a1 107 41. Commission? means the Tax Increment Financing Commission of 108 Kansas City, Missouri. 109 42. ?Transaction Documents? means those documents to be executed by the 110 Developer, Owner, City, TIF Commission, CVA, Development Agency and, as required 111 by the Owner or Developer, the County, or combinations thereof, necessary to set forth 112 the agreements of such parties to acquire, develop, ?nance, construct and operate the 113 Project as provided in this MOU. 114 EXHIBITS. The following Exhibits are attached to and made a part of this MOU: 115 Exhibit A Convention Meeting Space Site Plan 116 Exhibit Hotel Site Aerial 117 Exhibit Project Program 118 Exhibit Exclusive Catering Agreement Terms 4 498 3 1 864.8 4983186410 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 Exhibit Capital Plan Exhibit Public Contribution of Taxes PART BINDING PROVISIONS A. PURPOSE 1. The Developer has made a proposal to the City for the ?nancing and development of the Project. This MOU is entered into with the understanding by all parties that the primary reason for the City?s participation in the Project is to meet the public purpose of maximizing the community bene?t of the Convention Center. Although Part II of this MOU is non-binding it is the intent of the parties that the Project would be pursued on the basis of the terms set forth in this Part II and incorporated into the Development Agreement and Transaction Documents upon and in accordance with the statutory review and approval processes of the Development Agency and the TIF Commission. B. THE PARTIES The parties anticipated to be involved in the transaction include: 1. Developer 2 City 3 Development Agency 4. TIF Commission 5 Owner 6 Approved Brand/Operator 7. Architect/Engineer?HNTB or such other parties chosen by Developer and its ?nancial partners, including any lender, and approved by the City, which approval will not be unreasonably withheld. 8. General Contractor?JE Dunn and/or other recognized general contractor with experience constructing major projects of this nature as chosen by the Developer and its ?nancial partners, including any lender, and approved by the City, which approval will not be unreasonably withheld. 498318648 4983186410 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 C. THE PROJECT PROGRAM 1. The Project and Hotel. The Project is to be designed and constructed according to the brand standards of the Approved Brand/Operator, but shall include the components as set forth in the Project Program attached as Exhibit C. 2. Hotel Site. The Hotel will be constructed on the Hotel Site shown on the Hotel Site Aerial attached as Exhibit B. The Developer, the City, the Development Agency and/or the TIF Commission will cooperate to obtain control of and acquire the portion of the Hotel Site not controlled by the City, including the exercise of eminent domain if necessary. It is anticipated that Development Agency or TIF Commission will exercise the power of eminent domain if such portion of the Hotel Site cannot be acquired by negotiation at a price not to exceed the budgeted purchase price. The cost of acquisition and purchase price of such portion of the Hotel Site, whether acquired by voluntary sale or through condemnation, will be included in the Project budget and funded by the Developer. Fee title to the Hotel Site, including the portion to be acquired and the portion currently owned by the City, is to be transferred free and clear of any and all encumbrances, except those encumbrances expressly permitted by the Developer in writing, in ?as is? physical condition to the Development Agency for the Project and leased to, for acquisition by, the Owner pursuant to the Lease Purchase and Financing Agreement. Notwithstanding the foregoing, the City is not representing and warranting that title to the Hotel Site is free and clear of encumbrances, however, the City will directly or through the TIF Commission or Development Agency use reasonable means, including the exercise of the power of eminent domain, to clear any and all encumbrances on the Hotel Site, at Developer?s sole expense, except those encumbrances expressly permitted by the Developer in writing. 3. Hotel Management Branding. The Hotel will be ?agged and operated by a major global hotel brand. For as long as the City, directly or through the Development Agency or the TIF Commission, has any Public Contribution continuing to be provided to the Project, the Hotel must be a quali?ed brand with experience in sales, marketing and operating headquarters hotels including, but not limited to, Hyatt, Hilton, Marriott, Marriott Marquis, Renaissance, Omni, Westin, Hyatt, or Sheraton (similar in ?nish and quality to the Chicago Sheraton), which 498318648 4983186410 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 approved list of hotel operators shall be updated periodically as agreed to by the Owner and the City (each, an ?Approved 4. Convention Center Operations. As a condition to the private investment and Hotel management and branding provisions of this MOU, the City, for as long as the City, directly or through the Development Agency or the TIF Commission, has any Public Contribution continuing to be provided to the Project, will not except with the approval of Owner, construct, cause to be constructed or provide funding or ?nancial incentives for the construction of any conference facility that would compete with or have a material adverse economic impact on the Hotel and Convention Meeting Space (excluding any conference facilities or improvements to conference facilities within the Convention Center) as determined by a third party consultant acceptable to Developer and City. Unless it has been determined by a third party consultant acceptable to Owner and the City that there would be no material adverse economic impact on the Hotel, the City will: continue to maintain and operate, or provide for the operations and management of the Convention Center, in a manner consistent with its current condition, with a future goal of making reasonable improvements as reasonably determined by the City based on the success of the Project and city wide conventions; maintain the Convention Center at its current location; continue to designate and operate the Convention Center as the City?s principal convention center; and not transfer ownership or management of the Convention Center to any third party without the Owner?s consent which shall not be unreasonably withheld. ?Material adverse economic impact? as used in this Section shall mean (1) the projection of an average 3% or greater reduction in occupancy of the Hotel over a single 3?year term assuming no reduction in the Hotel?s room rate during such term from the date of any action by the City in contradiction with any requirement set forth in through above, or (2) for as long as the City, directly or through the Development Agency or the TIF Commission, has any Public Contribution continuing to be provided to the Project, the projection of an average 10% of greater reduction in gross catering revenues over a single 3-year term from the date of any action by the City in contradiction with any requirement set forth in through above. In the event the City engages a third party operator of the Convention Center, it will be a quali?ed private operator chosen by the City, which operator shall operate and manage the Convention Center to the standard specified in herein and which operator shall not be 498318648 4983186410 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 Kansas City Convention Hotel Draft Memorandum of Understanding May 1 8, 2015 af?liated with any other hotel or other party for whom operating the Convention Center would give rise to a con?ict of interest. 5. Convention Meeting Space. The City and the Owner will enter into an Exclusive Catering Agreement meeting the requirements of quali?ed management agreements providing the exclusive right to provide catering services on behalf of the Owner to the Convention Meeting Space (?Exclusive Catering Agreement?) generally consistent with the terms set forth in the attached Exhibit it being understood by the parties that such Exclusive Catering Agreement must be in conformance with IRS Rev Proc 97?13 such that bond counsel selected by the City shall provide its written opinion that such Exclusive Catering Agreement will not cause any currently outstanding bonds related to the Convention Center to become taxable, and it being further understood that the Developer, Owner, Approved Brand] Operator, or any combination of the same, will not take any action to cause the City to carry and record the obligations of the City under the Exclusive Catering Agreement as debt of the City. The parties agree to negotiate in good faith the Exclusive Catering Agreement and agree that such negotiation will require projections of income and may result on a modest impact on the financial interests of the parties and the terms of this MOU may be modified by mutual agreement of the parties to accommodate such impact; notwithstanding such impact no modi?cation will cause the general terms to be other than substantially similar to the terms set forth in this MOU. The gross revenues from the catering services provided under the Exclusive Catering Agreement will be distributed consistent with the terms set forth in the attached Exhibit D, it being understoOd by the parties that such Exclusive Catering Agreement must be in conformance with IRS Rev Proc 97-13 such that bond counsel selected by the City shall provide its written opinion that such Exclusive Catering Agreement will not cause any currently outstanding bonds related to the Convention Center to become taxable. The City will provide a con?rmed list updated regularly (based on industry standards) of events booked for the Convention Meeting Space. The City can terminate the Exclusive Catering Agreement if the Hotel is not operated by an Approved Brand/Operator, in addition to exercising any other lawful remedies available to City, and City shall not be liable for any losses or damages of any kind incurred by Owner and/or Approved Brand/Operator in connection therewith, provided however that this clause shall not preclude the City from terminating the Exclusive Catering Agreement for any other additional cause provided for 498318648 49831864.10 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 therein. Likewise, the Owner will have the option to terminate the Exclusive Catering Agreement for any reason with a reasonable notice period and for cause in the event the City is in breach of its obligations to the Owner and/or Approved Brand/Operator regarding the Convention Center, in addition to exercising any other lawful remedies available to Owner, and Owner and/or Approved Brand/Operator shall not be liable for any losses or damages of any kind incurred by City in connection therewith. The City will covenant, represent and warrant pursuant to a binding agreement that for a period of not less than 50 years following the opening of the Hotel, that neither the City, nor any assignee of the City or any city department or agency, will grant to any party other than the Owner and/or Approved Brand/Operator, an exclusive right to provide catering services to the Convention Meeting Space. Notwithstanding the foregoing, following the expiration of the Exclusive Catering Agreement the City may authorize multiple parties to bid to provide non?exclusive catering services to each separate event held at the Convention Meeting Space; it also being understood that the Owner and the Approved Brand/Operator shall have the same opportunity to bid for such non-exclusive catering services. The City will cooperate with the CVA, Owner and Approved Brand/Operator, to their mutual bene?t, regarding the marketing of the Convention Meeting Space. Notwithstanding anything herein to the contrary, the Exclusive Catering Agreement shall be subject to the provisos that the exclusive right to provide catering services on behalf of the Owner to the Convention Meeting Space shall not be applicable with regard to any alternative catering arrangements in place prior to the date this MOU is executed by the parties, and shall, through June 1, 2018, be subordinate to the City?s existing concessions agreement with Aramark Sports and Entertainment Services, LLC. D. DEVELOPMENT BUDGET 1. Preliminary Project Costs Budget. Preliminary project costs are approximately $302,500,000. The Preliminary Project Cost Budget will be provided under separate cover. 2. Cost Overruns. The Developer will be responsible for all costs to design, permit and construct the Project, subject to the commitment of all Public Incentives. The Developer 498318648 49831864.10 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 Kansas City Convention Hotel 7 Draft Memorandum of Understanding May 18, 2015 will be responsible for cost overruns except to the extent such overruns are, without good cause, intentionally caused by the City. 3. Financing Gap. The City shall not be responsible for any gap in ?nancing caused by a change in the type or amount of the Public Incentives unless such change is caused by the City. Notwithstanding the foregoing, with the exception of the City Contribution, the City shall not be obligated to cover a ?nancing gap which results from any change in revenues from sources included in the Public Incentives which are a result of any change in the current system of the payment and collection of such revenues, including without limitation the reduction or elimination of any such revenues, judicial action concerning any such tax or voter initiative, referendum or action with respect to any such tax. It is understood there can be no assurance that the current system of collection and distribution of such revenues will not be changed by any competent authority having jurisdiction to do so, including without limitation the state, county, the City, school district, the courts or voters; it is further understood that any taxing district imposing any applicable assessment or levy as a basis for such revenues could lower its tax rate, which would have the impact of reducing the projected amount of the Public Incentives and such reduction in rates could be result of the governing body of the taxing district?s desire to lower tax rates, taxpayer initiative, or in response to state or local litigation or legislation affecting the broader taxing structure. E. CAPITAL PLAN 1. Sources of Funds. For a description of the sources of funds see the Capital Plan attached as Exhibit E. 2. Private Capital. The Developer will be responsible for obtaining the Private Capital in an amount suf?cient, when added to the Public Incentives, to ?nance the Project. Subject to adverse market conditions which are materially adverse to the Developer or Owner, the Developer, along with their other equity partners and participants, will be prepared to fund, subject to the Public Incentives, Mortgage Financing and the execution of the Transaction Documents, Construction Agreement and Management Agreement, the amount of private equity necessary to complete the ?nancing of the Project costs (?Private Equity?). Prior to the 10 498318648 4983186410 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 Kansas City Convention Hotel Draft Memorandum of Understanding I May 18, 2015 execution of the Transaction Documents, the Developer shall provide, at the City?s request, documentation of funds necessary to fund the Private Capital, subject to reasonable and ordinary conditions, including the finalization of all material agreements for the transaction. The City shall have the right, prior to execution of the Transaction Documents, to perform and] or cause its consultants to perform a ?nancial due diligence review on equity partners and to determine whether the documentation of funds has been established to the City?s reasonable satisfaction. 3. Public Contribution. The City will: contribute the existing City owned property within the Hotel Site to the Development Agency for the Project to be leased by the Development Agency to the Owner pursuant to a Lease Purchase and Financing Agreement; enter into a ?nancing agreement pursuant to which it will make the City Contribution to the Project which City Contribution will be conditioned on the closing of all components of the Project Financing; (0) redirect through its annual budget the City?s portion of the Project TIF for a period of 23 years and Super TIF for a period of 30 years generated from the Project?s tax revenue sources as described in the Public Contribution of Taxes attached as Exhibit provide to the County and the Kansas City Zoological District a statement for the amount of the County TIF held by each such entity expected to be transferred to the special allocation fund established for the Project; and agree to a lump sum amount for all City construction permit and inspection fees in an amount not to exceed $800,000. If and as requested by Developer, a Development Agency, subject to the applicable Development Agency?s approval processes, will issue one or more series of bonds secured solely from the Project TIF and Super TIF described in Exhibit (?Agency Bonds?); and (2) enter into the Lease Purchase and Financing Agreement as described in Part II, Section E5. The TIF Commission and the Developer, subject to the approval of tax increment financing, shall enter into a development agreement for the reimbursement of project costs with TIF revenues pursuant to the TIF Act. (The assistance provided by City, TIF Commission and Development Agency as described above shall be collectively referred to as the ?Public Contribution?). It is anticipated that the proceeds from the Agency Bonds, together with the District Financing, will be expended first, then the Private Capital and City Contribution shall be expended on a dollar for dollar basis, i.e. for each dollar of Private Capital released for expenditure a dollar of the City Contribution shall be released for expenditure, and then the remainder of the Private Capital. The District Financing may be 11 498318648 4983186410 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 structured as separate capital facilities or included in the Agency Bonds at the request of the Developer and subject to approval of the Development Agency and District. The City, Developer, Developer?s lender and title company (or escrow agent) will enter into a master funding agreement that governs the respective financial contributions to fund the Project. The 23 years of the Project and the 30 years of Super TIF are to begin in the first year of operation of the Hotel. There will be an acknowledgement of the value of the City owned portion of the Hotel Site to be contributed to the Project; such value shall not be a credit against the City Contribution but will be credited as an equity contribution by the City in calculating the public participation as provided in Part II, Section E7 of this MOU. The City?s obligation to redirect the Super TIF through its annual budget shall be subject to the proviso that the City shall, for each and every year during the term of the Exclusive Catering Agreement, be entitled to deduct and retain from the Super TIF revenues transferrable to the TIF Commission an amount not to exceed ten percent of the amount of any Fixed Fee Payment (as de?ned in Exhibit D) during the first three years, thirteen and one?half percent of the amount of any Fixed Fee Payment during years four through six, twenty percent of the amount of any Fixed Fee Payment during years eight through ten, and thirty percent of the amount of any Fixed Fee Payment during years eleven through ?fteen. To the extent there are no funds available in the Catering Revenue Reserve Fund (as defined in Exhibit D), the City shall draw upon such Super TIF revenues retained by the City solely for the purpose of making itself whole in the event the gross catering revenues less expenses in any given year are insufficient to fully fund any Fixed Fee Payment, the 4% to be reserved for as described in Exhibit and the City Share (as defined in Exhibit D) due during such year pursuant to the terms of the Exclusive Catering Agreement, and shall release any remaining Super TIF revenues retained by the City to the Developer on an annual basis. 4. County TIF. City and Developer anticipate that the County and the Kansas City Zoological District will collect or cause to be collected all sales tax revenues generated on the Property resulting from sales tax levies imposed by the County, excluding the stadium tax levied by the County, for a period of 23 years beginning in the ?rst year of operation of the Hotel, and will cause 50% of the total incremental sales tax revenues resulting from tax levies imposed by 12 498318648 4983186410 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 the County and generated by economic activities on the Property to be deposited to a special allocation fund established for the Project (?County 5. Real, Personal Property and Sales Taxes. Pursuant to a sale leaseback arrangement through the Development Agency, subject to the approval of the Development Agency, the City and the Developer anticipate that the Hotel Site, Hotel and furniture, ?xtures and equipment within the Hotel (?Project Property?) will be exempt from real and personal property taxes to the extent permitted by state law and subject to such approvals by such entities as may be required in connection therewith. The acquisition of construction materials and the furniture, ?xtures and equipment for the Project will be exempt from sale taxes to the extent permitted by state law and subject to such approvals by such entities as may be required in connection therewith. The Development Agency will own the Project Property and enter into a lease purchase agreement with the Owner pursuant to which the Owner will lease the Project Property ?om the Development Agency during the construction period and for 30 years following the completion of construction of the Project (?Lease Purchase and Financing Agreement?). Pursuant to the Lease Purchase and Financing Agreement, the Development Agency will issue mortgaged backed ?nancing (?Mortgage Financing?) for the Project non- recourse to the Development Agency, the Owner will be obligated to make lease payments in an amount suf?cient to pay debt service on the Mortgage Financing and all other costs associated with the ownership and operation of the Project Property, and the Development Agency will transfer title to the Project Property to the Owner upon payment in full of such lease payments and the Mortgage Financing. The Owner will have the right to pre?pay the lease payments and Mortgage Financing in part or full. The Developer, in cooperation with the Owner, the City and the Development Agency, will have the obligation to obtain the Mortgage Financing for the Project. 6. Special District. In cooperation with the City, the Developer will form a community improvement district or similar entity (?District?) to impose a special assessment (?Special Assessment?) and to impose an additional 1% sales tax (?Special Sales Tax?). The revenues from the Special Assessment and Special Sales Tax will be used to ?nance a portion of the project costs pursuant to such credit facility to be determined by the Developer (?District 13 498318648 4983186410 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 Financing?). The Developer, in cooperation with the Owner, the District and the Development Agency, will have the obligation to place the District Financing. 7. Public Participation. For so long as the City, directly or through the Development Agency or the TIF Commission, has any Public Contribution continuing to be provided to the Project, in the event the Owner?s realize in any calendar year a cumulative unleveraged annual yield greater than 18% from annual net operating income from the Hotel, the Owner will share with the City 13.5% of that portion of the Owner?s realized gain in excess of such 18% yield for such calendar year. For so long as the City, directly or through the Development Agency or the TIF Commission, has any Public Contribution continuing to be provided to the Project, in the event the Owner sells the Hotel, the Owner will share with the City 13.5% of that portion of the Owner?s realized gain from the sale of the Hotel in excess of an 18% unleveraged internal rate of return; provided, however, the City will not receive from the subsequent owner of the Hotel the public participation set forth in subsection of this Section 7. The Owner shall calculate the cumulative unleveraged annual yield and unleveraged internal rate of return, as applicable, in a manner consistent with industry standards for hotel operations and shall not deviate therefrom in a manner that would diminish the City?s pro rata share of any realized gain without the City?s written consent. F. ROLE OF THE 1. Development of the Project. The Developer is to finance, design, develop, construct and cause to be operated and maintained the Hotel substantially consistent with the brand standards of the Approved Brand/Operator and the requirements set forth this MOU, subject to the terms of a Development Agreement. 2. Financing. As stated above, the Developer will be responsible for obtaining and negotiating the terms of the Private Capital. Developer is prepared, subject to Public Incentives approval and the execution of the Transaction Documents, the Construction Agreement and the Management Agreement, to obtain the Mortgage Financing and fund the amount of Private Equity necessary to complete the Project. The Developer is working in the capital markets to 14 498318648 4983186410 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 place special limited revenue bonds secured solely from the Project TIF and Super TIF revenues as described in Exhibit F, as redirected by the City, County and the Kansas City Zoological District to the TIF Commission through their respective annual budgets, and to place special limited revenue bonds secured from the District Financing. The Approved Brand/Operator will participate in the ?nancing of the Hotel in an amount to be negotiated by the Developer and the Owner. 3. Af?rmative Action. The Developer will comply with the City?s current af?rrnative action policies, including but not limited to construction workforce and requirements. It is understood that such policies require the use of good faith efforts to reach participation goals established. 4. Room Block Agreement. Subject to negotiation with the Approved Brand/Operator, Owner will enter into a Room Block Agreement acceptable to the City and the Owner. 5. Development Agreement. Developer shall enter into a Development Agreement with the City, the Development Agency, the TIF Commission and, as appropriate, such other development agencies of the City (?Development Agreement?). 6. Hotel Design. The Developer shall develop and implement a design review process that will provide the City and professional staff input into the architectural design of the Hotel exterior and Connector. Once approved, no material changes changes that would cause the design not to conform to the Project Program or that would otherwise materially impair the ability of the Hotel to function as a convention center hotel) may be made without the approval of the City or the Development Agency. 7. Construction Coordination. The Developer shall use commercially reasonable efforts to coordinate with the City during the construction of the Project to minimize the impact on events at the Convention Center. 8. Developer Selection. The Developer?s role is subject to ?nal selection of the Developer, as the designated developer, pursuant to the TIF Act and the statutes governing the Development Agency. 15 498318648 4983186410 433 434 435 436 437 438 439 440 441 442 443 444 445 446 447 448 449 450 451 452 453 454 455 456 457 458 459 460 461 Kansas Convention Hotel Draft Memorandum of Understanding May 18, 2015 G. ROLE OF CITY 1. City Contribution. The City will make the City Contribution as described in Part II, Section E3 above. 2. Diligence Materials. In order to con?rm that the portion of the Hotel Site owned by the City is delivered free and clear of encumbrances not approved by Owner, the City will deliver to Developer copies of the following materials, to the extent in the City or any Development Agency?s possession or reasonable control: all existing environmental, engineering, soils, water or other consulting reports and studies of the Hotel Site; (ii) all surveys, maps and drawings of the Hotel Site; and any title policies, title commitments or title reports of the Hotel Site, and all easements, licenses, leases, and other rights affecting the Hotel Site. As necessary, the City will release or relocate utility and other easements affecting the Hotel Site at the Developer?s sole expense. The costs of any actual utility relocation shall be included within the Estimated Project Costs Budget. The City will coordinate with Developer to ensure that all site investigations and tests required by Developer are performed, including a geotechnical survey, Phase 1 environmental study and, if required by Developer, Phase 2 environmental study, all of which shall be at the Developer?s sole expense. 3. Zoning, Permits and Inspections; Governmental Approvals. The City will process or cause to be processed the zoning, permitting, and inSpectionS for all phases of the Project in good faith. By execution of this MOU, the City directs the City Manager, Director of City Planning and Development, and encourages the City?s development agencies, including but not limited to the Development Agency and the TIF Commission, to proceed in good faith with the review and approval process for all zoning, permitting, inspections and review and approvals for all phases of the Project. The City will cooperate in good faith with and assist Developer in obtaining all federal, state and local governmental approvals necessary for the Project, including but not limited to the Federal Aviation Administration, the Missouri Department of Economic Development, the DevelOpment Agency, the TIF Commission, the CVA, and the County. The City will designate one city staff person as the lead point of contact to facilitate all such governmental and agencies reviews and approvals for the Project, including but not limited to zoning, permitting, inspections and Public Incentives. 16 498318648 4983186410 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488 489 490 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 4. Subsidy for Other Hotels. The City agrees by contract and by policy to no public subsidy on any ?competing hotel? for a period of 10 years from the date of the opening of the Hotel. ?Competing hotel? shall include any hotel located within two miles of the Hotel Site with more than 25 square-feet of meeting space per room, and more than 350 rooms, unless it has been determined by a third party consultant acceptable to Owner and the City that such hotel would result in no material adverse economic impact on the Hotel. ?Material adverse impact? as used in this Section shall mean the projection of a 3% or greater reduction in occupancy of the Hotel assuming no reduction in the Hotel?s room rate for a period of 3 years from the date of the opening of the potential ?competing hotel.? Notwithstanding the foregoing, this Section 4 shall not apply to the redevelopment of the old Federal Reserve Building as a hotel or the Savoy Hotel by 21C development group, or the redevelopment of any other hotel existing and operating as of the date of this MOU, or any portion of such hotel property, regardless of whether such portion is in operation as of the date of this MOU. H. OPERATION AND TRANSFER OF THE PROJECT PROPERTY For as long as the City, directly or through the Development Agency or the TIF Commission, has any Public Contribution continuing to be provided to the Project, the Hotel will be operated by an Approved Brand/Operator with experience in operating large meeting hotels as provided more fully in Part II, Section C3 of this MOU. Except for transfers and collateral pledges to any project lender or bond trustee, transfers to a Quali?ed Owner, transfers which do not result in the principals of the Owner owning less than a majority in such entity, and other minor transfers, none of which will require the consent of the City, the Developers will not, so long as the City, directly or through the Development Agency or the TIF Commission, has any Public Contribution continuing to be provided to the Project, transfer ownership of the Hotel without the consent of the City, which consent will not be unreasonably withheld. A ?Qualified Owner? shall include any person or entity that: (1) has obtained a corporate management agreement or franchise agreement for the Hotel that continues its association with an Approved Brand/Operator, and (2) has obtained a ?nancing commitment which ?nancing commitment is acceptable to the City which acceptance shall not be withheld in the event such ?nancing commitment is commercially reasonable. 17 498318648 4983186410 491 492 493 494 495 496 497 498 499 500 501 502 503 504 505 506 507 508 509 510 511 512 513 514 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 I. MILESTONE TARGETS 1. Public Approvals. All City approvals for Public Incentives, developer selection, zoning and permitting will be processed in good faith, provided however, that the City shall not be obligated to process any matter until such time as those documents reasonably required to be submitted in connection therewith shall have been submitted in their entirety to the City. 2. Transaction Documents. Transaction Documents are expected to be negotiated immediately following execution of this MOU and ?nalized concurrent with the approval of the Public Incentives. The following is a preliminary list of Transaction Documents anticipated to be entered into and the time frame to enter into those agreements: a. Development Agreement (Between the City, TIF Commission, Development Agency and Developer and/or Owner, to be executed following the completion of the TIF Act statutory approval process and statutory Development Agency process.) b. Exclusive Catering Agreement (To be executed at the time of entering into the Development Agreement) c. Hotel Room Block Agreement (To be executed at the time of the Development Agreement) d. Financing Agreement for Public Incentives (To be executed at the time of the closing of the ?nancing for the Project within 60 days after the execution of the Development Agreement) e. Lease Purchase and Financing Agreement (To be executed at the time of the closing of the financing for the Project within 60 days after the execution of the Development Agreement) 3. inancing: As soon as practical following the approval of the Public Incentives 18 498318648 4983186410 515 516 517 518 519 520 521 522 523 524 525 526 527 528 529 530 531 532 533 534 535 536 537 538 539 540 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 4. Begin Design/Construction: As soon as practical following the approval of the Public Incentives. 5. Pre?Selling Hotel Center: As soon as practicable consistent with industry standards, the Owner, Approved Brand/Operator, and the CVA shall cooperate to begin to pre- sell the Hotel and Convention Meeting Space. 6. Hotel Opens: Construction Agreement will provide for a projected opening date 30 months following commencement of construction. PART PROVISIONS The following provisions, contained in this Part 111, are intended to be and are binding upon each of the parties hereto: A. Part 111 Binding. The provisions of this Part of this MOU shall be binding upon the parties. B. Part 11 Not Binding. The parties agree that Part II of this MOU is intended to serve only as an expression of the parties' mutual intent with respect to the transaction contemplated hereby. C. Application Process. The Developer will file applications with the TIF Commission for the requested Project TIF and Super TIF and make application with the Development Agency for the statutory process required to provide authority to the Development Agency to enter into the Lease Purchase and Financing Agreement and pursue such applications diligently and in good faith. The City will convey its support of the Developer in its processing of all such applications. D. Agency Expenses and Costs. The Developer shall fund the reasonable administrative costs, consultant expenses and legal expenses of the Commission and the Development Agency pursuant to a separate funding agreement with the TIF Commission and the Development Agency (collectively, ?Agency Expenses?). Agency Expenses are anticipated to be TIP reimbursable expenses. Except as otherwise provided in this Part 111, each party will 19 498318648 4983186410 541 542 543 544 545 546 547 548 549 550 551 552 553 554 555 556 557 558 559 560 561 562 563 564 565 566 567 568 569 570 Kansas City Convention Hotel Draft Memorandum of Understanding May 1 2015 be responsible for and each bear all of its own costs and expenses incurred at any time in connection with pursuing or consummating the transaction proposed in this MOU. This Section shall survive termination of this MOU. E. Due Diligence Period and Termination. There shall be a period of 120 days (the ?Due Diligence Period?, during which time the City and the Developer shall use their best faith efforts to cooperate as provided in this MOU to obtain approval of the Public Incentives and enter into the Development Agreement. If the Public Incentives are not approved and the Development Agreement entered into as provided in this MOU or to the satisfaction of the Developer and the City, the parties shall have the right to extend the Due Diligence Period by mutual written agreement of the parties or either party shall have the right to elect to terminate this MOU by giving written notice to the other party within 30 days following the expiration of the Due Diligence Period, as may be extended. In the event the Public Incentives are approved and the Development Agreement is executed and the Developer has obtained commitments to ?nance the Project Financing from private sources, but either the City, the Development Agency, TIF Commission, County, CVA or such other entity required to provide approval of Project Financing, as applicable, fails to enter into the Transaction Documents within 60 days following the approval of the Public Incentives, execution of the Development Agreement and the Developer obtaining the commitments for Project Financing from private sources, the Developer may elect to terminate this MOU and the Development Agreement; provided however, such 60 day period shall be extended at the City?s request for a period of up to 60 days in the event the City, the Development Agency, TIF Commission, County, CVA or such other entity required to provide approval of Project Financing, as applicable, is diligently pursuing the ?nalization of all Transaction Documents. In the event the Public Incentives are approved and the Development Agreement is executed and the Developer has obtained commitments to ?nance the Project Financing from private sources, but the Developer fails to enter into the Transaction Documents within 90 days following the approval of the Public Incentives, execution of the Development Agreement and the Developer obtaining the commitments for Project Financing from private sources, the City may elect to terminate this MOU and the Development Agreement; provided however, such 90 day period shall be extended at the Developer?s request for a period of up to 90 days in the event the Developer is diligently pursuing the finalization of all Transaction 20 498318648 4983186410 571 572 573 574 575 576 577 578 579 580 581 582 583 584 585 586 587 588 589 590 591 592 593 594 595 596 597 598 599 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 Documents. In the event the Developer fails to secure any portion of the Project Financing within 180 days following the approval of the Public Incentives and the execution of Development Agreement, the City may elect to terminate this MOU and the Development Agreement; provided however, such 180 day period shall be further extended at the Developer?s request for an additional period of up to 90 days in the event the Developer continues to be diligently pursuing the ?nalization of all the Transaction Documents. In the event the Developer fails to secure any portion of the Project Financing within 270 days following the approval of the Public Incentives and the execution of the Development Agreement, the City shall have the right to terminate this MOU and the Development Agreement. F. Governing Law. This MOU shall be governed by and construed in accordance with the laws of the state of Missouri. This MOU sets forth the entire agreement between the parties in regard to the subject matter hereof and supersedes any and all prior agreements between the parties in regard to the subject matter hereof. G. No Representations. Except as expressly set forth in the Transaction Documents, neither party shall be deemed to have made any representations, warranties or guaranties to other regarding the Project, including, without limitation, any future financial performance to be derived from investment in the Project. H. Exclusivitv; Con?dentiality; Suspension of Negotiations. Following execution of this MOU until the earlier of the termination of this MOU pursuant to Part 111, Section of this MOU, or (ii) the election by Developer to discontinue the pursuit of the Public Incentives and the Development Agreement or negotiation of the Transaction Documents, the parties agree to negotiate exclusively in good faith to pursue the approval of the Public Incentive, and to ?nalize, execute and deliver the Transaction Documents on or before the target dates set forth in in this MOU. Except to the extent of terms disclosed in a public meeting, the Project information and negotiations shall be maintained con?dential by the parties and private consultants to the parties which confidentiality requirement shall survive termination of this MOU. Notwithstanding the foregoing the Developer may in its sole discretion disclose terms of negotiations in the pursuit of the financing for the Project and discussion with the Owner and potential Approved Brand/Operator, and the City, as required by Chapter 610 of the Revised Statutes of Missouri, 21 498318648 4983186410 600 601 602 603 604 605 606 607 608 609 610 611 612 613 614 615 616 617 618 619 620 621 622 623 624 625 626 627 628 Kansas Convention Hotel Draft Memorandum of Understanding May 18, 2015 may provide copies of open records provided a request is made for of such open records pursuant to Chapter 610, and such records are not otherwise exempt from disclosure. The City will require all consultants to the City having access to ?nancial information, and direct the TIF Commission and the Development Agency to require all of their consultants having access to ?nancial information, to execute a Non-Disclosure and Non-Compete Agreement acceptable to Developer prior to performing such due diligence or consultant work related to this MOU or the approval process of the Project, which agreements shall survive termination of this MOU for a period of 24 months following the termination of this MOU. The Non?Compete Agreement shall preclude a consultant from collaborating with third parties on a project that would be regarded as a ?competing hotel? as described in Part II, Section G.4 of this MOU had the Project been completed, but shall not preclude a third party consultant engaged by the City or any of its development agencies from providing or continuing to provide its services to the City; notwithstanding the foregoing, the City or any of its development agencies shall not engage such consultant in a manner inconsistent with any applicable provision of Part 111, Section of this MOU. 1. Laws in Full Force and Effect. This MOU contains multiple provisions related to design review, zoning, permitting, inspections, and public approvals required for the Project. Notwithstanding anything to the contrary in this MOU, nothing herein shall be construed in a way that would limit, usurp or otherwise impair the governmental authority and police power of the City or otherwise waive or modify any provision of law. J. Obligations of Development Agency and Commission. This MOU contains multiple provisions contemplating that certain actions will be taken by entities not party to this MOU and not bound thereby, including but not limited to, the Development Agency, the TIF Commission, the County and the CVA. The City and the Developer acknowledge and agree that the City has no authority to obligate or bind any such entity and that the City shall not be held liable for the actions or inactions of the Development Agency, the TIF Commission, the County or the CVA in the performance or non-performance of anything contemplated herein. K. Restriction Period. It is understood by the parties that the Developer and its investment partners will be making a substantial investment during the Due Diligence Period. 1n 22 498318648 4983186410 629 630 631 632 633 634 635 636 637 638 639 640 641 642 643 644 645 646 647 648 649 650 651 652 653 654 655 656 657 658 Kansas City Convention Hotel Dm? Memorandum of Understanding May 18, 2015 order to induce Developer and its investment partners to make such substantial investment, the parties have agreed to the following provisions which provisions will survive termination of this MOU: 1. So long as the Developer does not terminate this MOU during the Due Diligence Period, in the event the Public Incentives are not approved or the Developer is not selected as the developer of the Project pursuant to the selection process of the Commission, the Development Agency or the City, for a period of 24 months following the execution of this MOU, the City shall neither provide any city subsidy or annual appropriation guaranty to ?nance a project that would be regarded as a ?competing hotel? as described in Part II, Section G.4 of this MOU had the Project been completed, nor through the City Manager, any Assistant City Manager, the Director of Finance, the City Attorney, any Assistant City Attorney or third party consultant engaged by the City or any of its development agencies, negotiate or consult with any potential deveIOper for any public assistance for any ?competing hotel? as described in Part II. Section (3.4 of this MOU had the Project been completed. Furthermore, in the event Within three (3) years following the date of this MOU a third party is selected as the developer of the Project or a project having a hotel that would be regarded as a ?competing hotel? as described in Part II, Section (3.4 of this MOU had the Project been completed, the City shall immediately upon the selection of such third party as developer require and cause the selected developer to reimburse the Agency Expenses and condition such third party?s selection as developer upon such reimbursement, and shall not provide any ?nancial incentive to such developer unless and until such developer reimburses the Developer for the Agency Expenses. 2. In the event the Developer is selected as the developer pursuant to the selection process of the TIF Commission, the Development Agency and the City and in the event the Developer performs pursuant to this MOU, but either the City, the TIF Commission, the Deve10pment Agency, or the CVA (the parties expressly intend that no other entities be included in this immediately preceding list for purposes of this Part fails to enter into the Transaction Documents necessary to ?nance the Project within 60 days following the approval of the Public Incentives as the same may be extended pursuant to 23 498318648 49831864.10 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 659 Part 111, Section of this MOU, the City shall, provided Developer has elected to 660 terminate this MOU, pay to the Developer $250,000 as liquidated damages, and for a 661 period of 24 months following the selection of the Developer as the developer by the TIF 662 Commission, the Development Agency and the City, the City shall neither provide any 663 city subsidy or annual appropriation guaranty to ?nance a project that would be regarded 664 as a ?competing hotel? as described in Part 11, Section G.4 of this MOU had the Project 665 been completed, nor (ii) through the City Manager, any Assistant City Manager, the 666 Director of Finance, the City Attorney, any Assistant City Attorney or third party 667 consultant engaged by the City or any of its development agencies, negotiate or consult 668 with any potential developer for any public assistance for any ?competing hotel? as 669 described in Part 11. Section G.4 of this MOU had the Project been completed. 670 3. Notwithstanding anything in this Section K, in the event 1) the Developer 671 terminates this MOU, except as permitted under Part 111.K.2 or fails to secure any 672 portion of the Project Financing in a manner consistent with this MOU within 270 days 673 following the approval of the Public Incentives and the execution of the Development 674 Agreement, and the City has elected to terminate this MOU, or (2) the City reasonably 675 determines prior to full execution of the Transaction Documents that one or more persons 676 materially involved in the Private Equity are generally recognized in the community as 677 being of ill repute with whom a prudent business person would not wish to associate in a 678 commercial venture, or would be considered by regulators in the gaming industry to be 679 unsuitable business associates, and notifies Developer in writing of such determination 680 and Developer fails to exclude such person or persons from participating in the Private 681 Equity within thirty (60) days thereafter or elects not to execute the Transaction 682 Documents because a ?nancial due diligence review on equity partners fails to establish 683 the documentation of funds to the City?s commercially reasonable satisfaction, there shall 684 be no restriction period or liquidated damages owed to Developer by City. 685 4. This Section shall survive termination of this MOU. 686 24 4983 1864.8 4983186410 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 687 PAGES 688 25 498318648 49831864.10 689 690 691 692 693 694 695 696 697 698 699 700 701 702 703 704 705 706 707 708 709 710 711 712 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 DEVELOPER BURKE SWERDLING ASSOCIATES, LLC a Missouri limited liability company By: Name: Title: DATE: 2014 CITY CITY OF KANSAS CITY MISSOURI By: Name: Title: DATE: 2014 498318648 4983186410 26 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 713 EXHIBIT A 714 CONVENTION MEETING SPACE SITE PLAN 715 716 27 498318648 4983186410 717 718 719 720 721 722 723 724 725 726 Kansas City Convention Hotel Draft Memorandum of Understanding EXHIBIT HOTEL SITE AERIAL May 18, 2015 498318648 49831864.]0 28 Kansas City Convention Hotel Dra? Memorandum of Understanding May I 8, 2015 727 EXHIBIT 728 PROJECT 729 730 Kansas City Convention Headquarters Hotel 800 Room and 72-75k Meeting Space Program Rooms--approx 800 460,671 Ballroom - APPROXIMATELY 25,000 (incl below) Junior Ballroom - Approx 12,500 nsf?ncl below) Break out space and board rooms Approx. 12,500 (incl below) TOTAL Meeting Space/Prefunction 75,000 Winter Garden, Ent Space Terrace 9,000 Restaurant, Coffee, Bar Lounge, various misc. food beverage outlets 15,460 Recreational Facilities 9,913 Public Circulation 41,742 Admin/Service/Mech 54,469 666,255 Total Garage 450 500 cars 731 732 CONNECTION TO BARTLE 7 3 3 734 CONVENTION CENTER IMPROVEMENTS 735 SUBJECT To REVIEW BY THE SELECTED OPERATOR 29 498318648 4983186410 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 736 EXHIBIT 737 EXCLUSIVE CATERING AGREEMENT TERMS 738 739 l. The Exclusive Catering Agreement will be for a period of 15 years beginning upon the 740 opening of the Hotel. An operating year for the Exclusive Catering Agreement shall be 741 the calendar year and if there is a mid-year Opening the fee schedule shall be adjusted 742 accordingly. 743 744 2. The provider of the catering services shall be the Approved Brand] Operator or such other 745 service provider selected by Owner (?Caterer?). 746 747 3. The Exclusive Catering Agreement shall be in conformance with Treasury Regulations 748 and published IRS guidance relating to quali?ed management contracts (including 749 Revenue Procedure 97?13, Revenue Procedure 2001?39 and Notice 2014-67) (the 750 Rules?). The Exclusive Catering Agreement will provide for the Fixed Fee Payment 751 (defined below) as set forth in Section 7(d) below, which amounts were established based 752 on the historical catering use of the Convention Meeting Space. 753 754 4. The City agrees to maintain the Convention Meeting Space in accordance with the terms 755 set forth in Part II.C.4 of the MOU. 756 757 5. The City may terminate the Exclusive Catering Agreement for cause with a reasonable 758 cure period. Language to be negotiated in ?nal agreement. 759 760 6. The Owner and the City shall work cooperatively to ensure that the booking of the 761 Convention Meeting Space will be managed in a mutually bene?cial manner. To ensure 762 cooperation, regular meetings will be held and attended by a representative of the Owner, 763 Approved Brand/ Operator, the CVA and Convention and Entertainment Facilities 764 Department of the City. 765 766 7. Gross revenues from the catering services (?Gross Revenues?) shall be transferred each 767 calendar month by the Caterer to the City and the City shall deposit the Gross Revenues 768 to a special revenue account. Funds in such special account shall be applied as follows: 769 770 City shall reimburse expenses incurred by Caterer from Gross Revenues. 771 Expenses include all third party reimbursable expenses as QMA Rules allow per 772 City?s bond counsel (?Expenses?). 773 774 The City shall deposit or cause to be deposited 4% of the annual Gross Revenues 775 into a fund to be used solely for the replacement for the Convention 776 Meeting Space and such funds shall be expended in accordance with an annual 777 budget to be mutually agreed upon each calendar year by the Owner, Approved 778 Brand/Operator, and the City. 779 30 4983 1 864. 8 4983186410 780 781 782 783 784 785 786 787 788 789 790 791 792 793 794 795 796 797 798 799 800 801 802 803 804 805 806 807 808 809 810 811 812 813 814 815 816 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 The City shall retain 14% of the annual Gross Revenues (?City Share?) to be used by the City as it sees ?t for any lawful purpose. The City Share shall be capped at $800,000.00 annually plus a three percent increase in the cap annually. City shall pay an annual ?xed fee to Owner (?Fixed Fee Payment?), payable in installments. In the event Gross Revenues are insuf?cient to pay the scheduled Fixed Fee Payment, as required by the QMA Rules, the City shall pay from any legally available City funds. The total dollar amount due each year for the Fixed Fee Payment will be as follows, subject to any adjustment in Year 1 as provided in Section 1: YEAR 1 $2,440,471 YEAR 2 $2,609,557 YEAR 3 $2,933,035 YEAR 4 $3,766,292 YEAR 5 $3,892,001 YEAR 6 $4,021,481 YEAR 7 $4,154,846 YEAR 8 $4,292,21 1 YEAR 9 $4,433,697 YEAR 10 $4,579,428 YEAR 11 $4,729,531 YEAR 12 $4,884,137 YEAR 13 $5,043,381 YEAR 14 $5,207,403 YEAR 15 $5,376,345 After payment of items through above, any excess shall be set aside in a reserve fund (?Catering Revenue Reserve Fund?) to be held by the City to be used to cover any shortfalls in any year to pay items through Upon the termination of the Exclusive Catering Agreement and the payment in full of items through in accordance with the Exclusive Catering Agreement, the remaining funds in the Catering Revenue Reserve Funds shall be used at the City?s discretion. 3 4983 1 864.8 49831864. 10 817 818 819 820 821 822 823 824 825 826 827 828 829 830 831 832 833 834 835 836 837 838 839 Kansas City Convention Hotel Memorandum of Understanding SOURCES OF FUNDS DEVELOPER PLACED FINANCING Private Capital Project Contribution Subtotal CITY CONTRIBUTION TOTAL SOURCES OF FUNDS Dra? May 18, 2015 EXHIBIT CAPITAL PLAN $137,900,000* (mtg, investor equity, key money) 129 600 000 (private revenues IF) $267,500,000 35,000,000 $302,500,000 *includes reimbursable expenses a?er bonds payments USES OF FUNDS Project Costs $270,300,000 Financing Costs Reserves 32,200,000 TOTAL USES OF FUNDS $302,500,000 498318648 49831864.10 32 840 841 842 843 844 845 847 848 849 850 851 Kansas City Convention Hotel Draft Memorandum of Understanding Mayra, 2015 EXHIBIT PUBLIC CONTRIBUTION OF TAXES The City?s portion of the Project TIF and the Super TIF revenues will be pledged, subject to annual appropriation, pursuant to a ?nancing agreement by the City for a period of 23 years for the City?s portion of the Project TIF and 30 years for the Super TIF. The City and Developer anticipate that the County TIF revenues will be pledged, subject to annual appropriation, pursuant to a ?nancing agreement with the applicable entities for a period of 23 years. Sales Taxes-Generally Applicable City of Kansas City Capital Improvement 1.000% PUbllC M853 7.5% of goes to KCA TA and not captured by City?s portion of the Project TIF, and not Transit 0.500% subject to Super TIF Public Mass Transit 0.375% Exempt from capture by City?s portion of the Project TIF and not subject to Super TIF Firefighters 0.250% Police 0.250% Parks Tax3 0.500% Not subject to Super TIF Subtotal 2.8750% City Portion Not Subj to City Portion Subj TIF 2.465125% Super TIF 1.375% City Portion Subj to Super 1.5000% Subject to County TIF (County Stadium Sales Tax of 0.375% not included as exempt by Jackson County 0.8750% statute from County TIF. 50% of tax captured via City?s portion of Project TIF and other 50% captured via Food Beverage Tax 2.000% Super Not subject to City?s portion of Project TIF, but imposed by city and avaiiable via Super Howl/0&1. TIF. Assumes only 90% captured, Le. no capture of tourism portion. Capture subject to Tax 7.500% CVA approval. Utilities Tax 10.000% 50% included in City?s portion of Project TIF and other 50% captured via Super TIF. 50% captured via City's portion of Project TIF and other 50% Earning Tax 1.000% captured via Super The sales taxes identified herein and their availability for City?s portion of the Project TIF and Super TIF purposes are based upon circumstances as they exist at the time this MOU is executed. The City makes no representation that one or more of these taxes will continue to exist or that the rates thereof will remain unchanged for the duration of any City?s portion of the Project TIF or Super TIF obligation. The City will 498318648 4983186410 33 852 853 Kansas City Convention Hotel Draft Memorandum of Understanding May 18, 2015 not be obligated to redirect any sums in excess of those actually collected or any sums the redirection of which would otherwise be unlawful. 34 498318648 4983186410