pages: CityCouncil/2012-05-08.pdf, 4
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CityCouncil | 2012-05-08 | 4 | million gross and potentially $6 million net lease revenue; inquired about the debt service. The Chief Operating Officer - Alameda Point stated the debt service estimate is $475,000. Councilmember Tam inquired whether the debt from the first year would be rolled over, to which the Chief Operating Officer - Alameda Point responded in the affirmative; stated amortizing the first year debt service is common. Mayor Gilmore stated staff was to bring something financially feasible; the first pad is financially feasible; the entire project and the three different zones independently are not financially feasible; the bonds are 3% of gross lease revenues, but are 79% of the net lease revenues, which is really different; that she would guess the reason the debt service would be amortized the first year is because there is not sufficient cash flow; people need to understand the debt payment cannot be made the first year; there is not a lot of cash; further stated that she has questions about the nature and types of commercial leases; 67 of the 81 commercial leases are less than two years, which tends to be more risky; inquired whether the short terms of the leases affects the interest rates; and whether bond purchasers would be looking for covenants or assurances. Sarah Hollenbeck, Public Financial Management, Inc., responded any investor would perform due diligence; stated detailed information would be laid out in the official statement; the portfolio has been reviewed and the interest cannot be guaranteed at this point; the conservative estimate is about 61/2% on an average life of 16 years; the margin is fairly generous; the history and track record of Alameda Point is important; the revenue stream is 30% higher than it was when bonds were issued in 2003; there is also a much longer performance history; the success of leasing the property balances the shorter leases; projections did not include any lease revenue growth; coverage figures provided are fairly conservative. Mayor Gilmore inquired whether the debt coverage ratio would make this the only opportunity to issue bonds unless lease revenues grow significantly. Ms. Hollenbeck responded the bond issuance would include an additional bond test; stated a threshold has to be met in terms of coverage of existing and future bonds; outlined coverage requirements; stated money in excess of debt service has to be generated, but is not tied up in the debt. Mayor Gilmore inquired whether said funds [required coverage amounts] could be spent as cash, but could not be bonded against, to which Ms. Hollenbeck responded additional bonds could only be issued on a subordinate basis. Councilmember Tam stated that she is struggling with deciding whether the City should bond, not if the City can bond; the staff report indicates the development is not feasible Special Meeting Alameda City Council 4 May 8, 2012 | CityCouncil/2012-05-08.pdf |