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PICKERING WHARF HOTEL ENTITY AMENDED MEMORANDUM CITY OF SALEM, MASSACHUSETTS r STANLEY J. USOVICZ,JR. MAYOR AMENDED MEMORANDUM OF UNDERSTANDING between the PICKERING WHARF HOTEL ENTITY and the CITY OF SALEM This document will serve as an Amended Memorandum of Understanding between the City of Salem and the Pickering Wharf Hotel ENTITY. The items included outline the expectations of the two signatory parties. The City of Salem, (CITY)and the Chase House (ENTITY), agree that this Amended Memorandum of Understanding reflects the status of the project as of 11/5/02. Whereas,the ENTITY has an interest in building a new hotel at Pickering Wharf, and Whereas,the CITY agrees that in order to make the project feasible it must provide public development assistance to the developer, Now therefore,the CITY and the ENTITY, agree to the following: If the Hotel Entity does the following: 1. Purchases and demolishes the Eastern Bank building. 2. Relocates Eastern Bank on site-at Pickering Wharf. 3. Develops a hotel according to the plans approved by the Salem Planning Board on 7/29/99 and as revised on 11/15/00 (and any subsequent amendments). 4. Provide retail space on the first floor of the Project/Hotel. 5. Improves accessibility to the waterfront by utilizing State grant funding to rebuild the sea-walk around Pickering Wharf(from Congress Street to the Chase House). Then the City agrees to provide the following assistance: 1. TIF Plan In order for the hotel project to be economically viable, the developer requires a multi-year TIF for the hotel portion of the site only. All newly constructed retail space, including the relocated Eastern Bank,will be taxed at full valuation. The new retail located in the development will increase the city's tax base over what is currently received in taxes for the existing retail. TIF AGREEMENT The TIF Agreement is applicable only to the use of the structure as a hotel. Should more than ten(10) percent of the total hotel rooms be changed, altered or reconfigured into non-hotel uses by the developer or subsequent owner after the structure has received an occupancy permit, than the City reserves the right to renegotiate the TIF Agreement individual as it relates to the hotel rooms that are A changed to non-hotel uses. However, owner may change, alter or reconfigure more than ten(10) percen for any hotel use, including a restaurant, lounge, gymnasium, pool, lobby,without effecting this ' agreement. At no time, however, shall there be fewer than 75 hotel rooms. The Developer also agrees that the ownership structure and operation of the hotel is totally separate and distinct from the Pickering Wharf Condominium Association. The TIF schedule: *(see attached TIF expiration schedule) Year %Exempted 1-5 100 6-8 90 9 80 10 60 11 40 12 20 The hotel will also generate room tax calculated at 4%of projected room revenue. The long-term impact of the hotel's presence on the city's economy in terms of property tax, room tax and parking fees will justify the structure of this TIF plan. The location of the hotel will generate more business for local retailers, restaurants and tourist destinations. The Planning Department will begin working with the project proponent to assemble necessary materials for a TIF package. 2) Parking Garage The developer requires the lease of at least one parking space per hotel room on second and third floors of the South Harbor Garage. The lease rate per parking space will be $45.00 per month or a prepaymond rate of $325 Annually and increase at the rate of other City Parking facilities. The lease will be in effect for. the life of the hotel. The -terms of the lease will be determined by the City of Salem and the Pickering Wharf Hotel Entity. No parking spaces shall be reserved. 3) Waterfront Walkway The City pledges to work with the Entity in a public/private partnership to secure other state and federal funds such as CDAG and PWED funds for items such as increasing public access to the waterfront between Congress Street and the Finz Restaurant. This would complete the link from Congress Street to the NPS at Derby Street. In City Council November 21, 2002 Adopted as amended .Approved by the Mayor on December 2, 2002 4ATTEST: BRA — CITY CLERK Exhibit A TAX INCREMENT FINANCING AGREEMENT AMENDMENT November 21, 2002 by and between City of Salem and Pickering Wharf/Congress and Derby Street Realty Trust This amendment is made this 2155 day of November, 2002,by and between the City of Salem, a municipal corporation duly organized under the laws of the Commonwealth of Massachusetts having a principal place of business at 93 Washington Street, Salem, MA 01970, acting through its Mayor and City Council and Pickering Wharf/Congress and Derby Street Realty Trust a trust with a principal place of business on 190 Pleasant Street,Marblehead, MA 01945. This amendment will take effect immediately upon final approval by the Massachusetts Economic Assistance Coordinating Council. WHEREAS, Pickering Wharf/Congress and Derby Street Realty Trust(Pickering Wharf Hotel) submitted an application to the City of Salem for designation as a Certified Project under the Massachusetts Economic Development Incentive Program created by Chapter 23A of the Massachusetts General Laws WHEREAS,the City Council of Salem approved the Certified Project application of Pickering Wharf Hotel through a Resolution adopted by the City Council on June 11, 1998; and WHEREAS,the Resolution was forwarded to the Massachusetts Economic Assistance Coordinating Council and was approved by that body on June 25, 1998; and WHEREAS,the Pickering Wharf Hotel encountered unanticipated delays in moving forward with the project under the timetable originally planned; and WHEREAS,the Mayor of the City of Salem has prepared a Tax Increment Financing Agreement Amendment in accordance with Chapter 40 and 751 CMR 11.0; and WHEREAS, there is strong support for using Tax Increment Financing to encourage the development of a Hotel at Pickering Wharf on the property owned by Pickering Wharf Realty Trust; and WHEREAS, the subject property is located in the Salem Economic Opportunity Area; BE IT HEREBY OPRDERD THAT: In light of the above, the Tax Increment Financing Agreement and Resolution approved by the Salem City Council on June 11, 1998 and by n t the Massachusetts Economic Assistance Council on June 25, 1998, shall be amended as follows: Amendment #1 The parcel covered by the TIF shall now be Parcel 1 A is shown on a plan entitled ,PROPOSED PROPERTYSUBDIVISIONPLAN OFLAND CREATING PARCELS 1A & 1 B" and dated July 12,2000, (see attached). Reference to Parcel l A as shown on the attached plan shall supercede the legal description included in the original RESLOLUTION APPROVING CERTIFIED PROJECT APPLICATION OF PICKERING WHARF REALTY TRUST, approved July 11, 1998. Amendment #2 The effective date of increment exemption shall be amended by eliminating, July 1'`, 1999 as the effective date and replacing with: The effective date of increment exemption shall be the date of issuance of a Certificate of Occupancy for the Pickering Wharf Hotel by the Salem Building Inspector. In City Council November 21, 2002 Adopted by roll call vote of 11 Yeas, 0 Nays, 0 Absent Approved by the Mayor on December 2, 2002 ATTEST: B CITY CLERK City of Salem TIF Expiration Schedule (ITFAuthority Expires in 2095) Date of Issuance of Certificate of D4aximum Number of Years Left on TIF Occupancy Post Certificate of Occupancy ul 1, 2003 12 uly 1, 2004 11 ul 1, 2005 10 uIv 1, 2006 9 July 1, 2007 8 July 1, 2008 7 July 1, 2009 6 July 1, 2010 5 July 1, 2011 4 July 1, 2012 3 July 1, 2013 2 July 1, 2014 1 JxAy 1, 2015 0 CITY OF SALEM, MASSACHUSETTS STANLEY J. USOVICZ, JR. MAYOR AMENDED MEMORANDUM OF UNDERSTANDING between the PICKERING WHARF HOTEL ENTITY and the CITY OF SALEM This document will serve as an Amended Memorandum of Understanding between the City of Salem and the Pickering Wharf Hotel ENTITY. The items included outline the expectations of the two signatory parties. The City of Salem, (CITY) and the Chase House (ENTITY), agree that this Amended Memorandum of Understanding reflects the status of the project as of 11/5/02. Whereas,the ENTITY has an interest in building anew hotel at Pickering Wharf, and Whereas, the CITY agrees that in order to make the project feasible it must provide public development assistance to the developer, Now therefore, the CITY and the ENTITY agree to the following: If the Hotel Entity does the following: 1. Purchases and demolishes the Eastern Bank building. 2. Relocates Eastern Bank on site- at Pickering Wharf. 3. Develops a hotel according to the plans approved by the Salem Planning.Board on 7/29/99 and as revised on 11/15/00 (and any subsequent amendments). 4. Provide retail space on the first floor of the Project/Hotel. 5. Improves accessibility to the waterfront by utilizing State grant funding to rebuild the sea-walk around Pickering Wharf(from Congress Street to the Chase House). Then the City agrees to provide the following assistance: 1. TIF Plan In order for the hotel project to be economically viable, the developer requires a multi-year TIF for the hotel portion of the site only. All newly constructed retail space, including the relocated Eastern Bank, will be taxed at full valuation. The new retail located in the development will increase the city's tax base over what is currently received in taxes for the existing retail. TIF AGREEMENT The TIF Agreement is applicable only to the use of the structure as a hotel. Should more than ten(10) percent of the total hotel rooms be changed, altered or reconfigured into non-hotel uses by the developer or subsequent owner after the structure has received an occupancy permit, than the City reserves the right to renegotiate the TIF Agreement individual as it relates to the hotel rooms that are changed to non-hotel uses. However, owner may change, alter or reconfigure more than ten (10) percen for any hotel use, including a restaurant, lounge, gymnasium, pool, lobby, without effecting this agreement, At no time, however, shall there be fewer than 75 hotel rooms. . The Developer also agrees that the ownership structure and operation of the hotel is totally separate and distinct from the Pickering Wharf Condominium Association. The TIF schedule: *(see attached TIF expiration schedule) Year %Exempted 1-5 100 6-8 90 9 80 10 60 11 40 12 20 The hotel will also generate room tax calculated at 4% of projected room revenue. The long-term impact of the hotel's presence on the city's economy in terms of property tax, room tax and parking fees will justify the structure of this TIF plan. The location of the hotel will generate more business for local retailers, restaurants and tourist destinations. The Planning Department will begin working with the project proponent to assemble necessary materials for a TIF package. 2) Parking Garage The developer requires the lease of at least one parking space per hotel room on second and third floors of the South Harbor Garage. The lease rate per parking space will be $45.00 per month or a prepaymond rate of $325 Annually and increase at the rate of other City Parking facilities. The lease will be in effect for. the life of the hotel. The -terms of the lease will be determined by the City of Salem and the Pickering Wharf Hotel Entity. No parking spaces shall be reserved. 3) Waterfront Walkway The City pledges to work with the Entity in a public/private partnership to secure other state and federal funds such as CDAG and PWED funds for items such as increasing public access to the waterfront between Congress Street and the Finz Restaurant. This would complete the link from Congress Street to the NPS at Derby Street. In City Council November 21, 2002 Adopted as amended Approved by the mayor on December 2, 2002 ATTEST: CITY CLERK Exhibit A TAX INCREMENT FINANCING AGREEMENT AMENDMENT November 21, 2002 by and between City of Salem and Pickering Wharf/Congress and Derby Street Realty Trust This amendment is made this 2151 day of November, 2002, by and between the City of Salem, a municipal corporation duly organized under the laws of the Conunonwealth of Massachusetts having a principal place of business at 93 Washington Street, Salem, MA 01970, acting through its Mayor and City Council and Pickering Wharf/Congress and Derby Street Realty Trust a trust with a principal place of business on 190 Pleasant Street,Marblehead, MA 01945. This amendment will take effect immediately upon final approval by the Massachusetts Economic Assistance Coordinating Council. WHEREAS, Pickering Wharf/Congress and Derby Street Realty Trust(Pickering Wharf Hotel) submitted an application to the City of Salem for designation as a Certified Project under the Massachusetts Economic Development Incentive Program created by Chapter 23A of the Massachusetts General Laws WHEREAS, the City Council of Salem approved the Certified Project application of Pickering Wharf Hotel through a Resolution adopted by the City Council on June 11, 1998; and WHEREAS, the Resolution was forwarded to the Massachusetts Economic Assistance Coordinating Council and was approved by that body on June 25, 1998; and WHEREAS,the Pickering Wharf Hotel encountered unanticipated delays in moving forward with the project under the timetable originally planned; and WHEREAS, the Mayor of the City of Salem has prepared a Tax Increment Financing Agreement Amendment in accordance with Chapter 40 and 751 CMR 11.0; and WHEREAS, there is strong support for using Tax Increment Financing to encourage the development of a Hotel at Pickering Wharf on the property owned by Pickering Wharf Realty Trust; and WHEREAS,the subject property is located in the Salem Economic Opportunity Area; BE IT HEREBY OPRDERD THAT: In light of the above, the Tax Increment Financing Agreement and Resolution approved by the Salem City Council on June 11, 1998 and by the Massachusetts Economic Assistance Council on June 25, 1998, shall be amended as follows: Amendment #1 The parcel covered by the TIF shall now be Parcel 1 A is shown on a plan entitled "PROPOSED PROPERTY SUBDIVISION PLAN OF LAND CREATING PARCELS 1A & IB"and dated July 12, 2000, (see attached). Reference to Parcel l A as shown on the attached plan shall supercede the legal description included in the original RESLOLUTION APPROVING CERTIFIED PROJECT APPLICATION OF PICKERING WHARF REALTY TRUST, approved July 11, 1998. Amendment #2 The effective date of increment exemption shall be amended by eliminating, July 151 1999 as the effective date and replacing with: The effective date of increment exemption shall be the date of issuance of a Certificate of Occupancy for the Pickering Wharf Hotel by the Salem Building Inspector. In City Council November 21, 2002 Adopted by roll call vote of 11 Yeas, 0 Nays, 0 Absent Approved by the Mayor on December 2, 2002 � . 4�� ATTEST: B CITY CLERK City of Salem TIF Expiration Schedule (FIF Authority Expires in 201 S) Date of Issuance of Certificate of Maximum Number of Years Left on TIF Occupancy Post Certificate of Occupancy July 1, 2003 12 July 1, 2004 11 July 1, 2005 10 July 1, 2006 9 July 1, 2007 8 Luly 1, 2008 7 July 1, 2009 6 July 1, 2010 5 July 1, 2011 4 July 1, 2012 3 July 1, 2013 2 ul 1, 2014 1 July 1, 2015 0 ` 3.,A. Fw ra r$4 y4d - `tONA ,�j Q� ; ��{�q7`} v�k7�� j.�` je + •e. ,ami h .f'�,.,`•75{l y�t7.�{ N 4 �Sii rl�f �� YytCk ��' �yyt •ht fiy •f. y � 1�nKfSf �fi . �. a �+' I ✓F r y i r.t{�r .t x 4 d.""\ar �@^ - -�' i J,�$u � ,y+ k�',yaR�'1 Ll r� ;�j .rv'" S v v.fw• �C_' +w h�� {,�g � �`,y�;� Sr"yi�� l?��' a��Y,h�•a�'r� �`'S^.�� FY''u }'� Yr - .y} r < 't k� ° 'n Y fi �t to g'K' e5 i i T r i (.`' S r>•� y j e �'+}�r 1t ! J Ri At �.i�.aAJ�t�r. ��.�,�'�w��• r m:�. � f� .. rata lr��.j. a�� rG`na qz VII }y i ,r 4�' ¢i{.�r,.J4 ,�} �. ttfisrny�+n, sh� Jd� r 111, A 4F'/[,y4 _ 1, 1 .� e&a$'"r a`�f �+ " syrw` � 1 i 3 v � t r.• t)r� - i r(� t : "n fS�uhiiY��i`�jY�FY.3�t�`v'xYP�Y."'•'r :1 r�-,� a w F C+% w1x §`�i C"��i, y L< a+nYal j y� +a rye• a ,.��. ,ti.�,r;+�j�ek.�, dR` Pickering Wharf Hotel Application for Certified Project Designation Tax Increment Financing Plan CITY OF SALEM, MASSACHUSETTS STANLEY J. USOVICZ, JR. -- --- - - MAYOR June 15, 1998 Economic Assistance Coordinating Council Sean Calnan, Director Massachusetts Office of Business Development One Ashburton Place, Room 2101 Boston, MA 02108 To the Members of the Economic Assistance Coordinating Council: In June 1996, the Trustees of Pickering Wharf Realty Trust acquired two thirds ownership of the well known Pickering Wharf in Salem. Members of the Trust own Rockett Management and Realty, a successful realty management firm. Approximately two years ago, representatives of Pickering Wharf Realty Trust expressed an interest in developing a hotel at Pickering Wharf. The proposed location for the hotel is at the corner of Congress and Derby Streets. At this site there are two office/retail buildings that are 90 percent vacant and a bank. The buildings will be demolished, with the bank being relocated on site. One of the first actions I undertook as the newly elected Mayor was to enter into negotiations with the Trust representatives to offer an economic incentive package that was mutually beneficial. I welcomed the interest of Pickering Wharf Realty Trust and sought to provide development assistance to encourage the construction of a hotel on Salem's waterfront. My administration has closely followed the economic impact that has occurred due to a lack of hotel accommodations. Extensive studies support the need for additional hotel rooms in the City. The hotel project at Pickering Wharf is an appropriate candidate for the Economic Development Incentive Program. The company proposes to create 60 new jobs and replace a vacant property with a productive, attractive property that will serve as an anchor to Salem's waterfront. The Trust plans to make a significant, highly visible investment, complementing the City's own plans for the area, which include extensive harbor planning and the construction of an attractive garage with retail space. EACC Page 2 June 15, 1998 The timing of the hotel project is ideal for the City of Salem. The City is experiencing an exciting time of-growth as important projects are completed and planning for new opportunities is ongoing. There is a demonstrated need for a hotel and we believe that this endeavor will be successful in Salem and that its success would help to improve the stability and image of the area and attract the interest of investors. On June 11, 1998, the Salem City Council voted to designate the hotel a certified project and endorsed a thirteen-year tax increment financing (TIF) plan. The enclosed TIF plan and application for certified project status describe the City's reasons for offering incentives and the many benefits which the Pickering Wharf hotel project will bring to the waterfront area. The City of Salem has used the Economic Development Incentive Program to assist five growing Salem companies. I appreciate your support of our economic development efforts and hope that, once again, you will vote to certify a Salem project. Sincerely, Stanley J. Usovicz,Jr. Mayor me\cif\picke ring\eaccsj u ROCKETT MANAGEMENT& REALTY CO., INC. 190 PLEASANT STREET MARBLEHEAD,MASS,01945 TEL.(781)631-3070 FAX(781)639-2290 J.HILARY ROCKETT,JR. Vice President June 15, 1998 Economic Assistance Coordinating Council C/o Sean Calnan, Director Massachusetts Office of Business Development One Ashburton Place, Room 2101 Boston, MA 02108 To the Members of the Economic Assistance Coordinating Council: I am writing to express the commitment of Pickering Wharf Realty Trust to help revitalize the Salem waterfront/downtown area with our plans to build a hotel. As evidence of our commitment, we have filed an application for certified project status with the EACC. We would like to start construction this summer and hope to open in the summer of 1999. Our commitment to do business in Salem is based on an agreement with city officials in which the city will offer property tax credits to make this redevelopment project economically feasible. In addition, Pickering Wharf Realty Trust will take advantage of state investment tax credits offered through the Commonwealth's Economic Development Incentive Program primarily to build a seawalk to allow the public access to the waterfront. The numerous economic and community benefits of this project are described in our application for certified project status. It has been projected that an additional 50,000 people will visit Salem due to this hotel, which will give a tremendous boost to Salem's downtown/waterfront. If you have any questions about this matter or if you need further evidence of our commitment to Salem, please contact me at (781) 6 3070. Sin er ly; i J. ilarye , Jr. V)ce Presiden JHR:nh I The Massachusetts Economic Development Incentive Program Certified Project Application Applicant Information 1. Name and address of business(es) submitting this application: Pickering Wharf Realty Trust J. Hilary Rockett, Trustee 190 Pleasant Street Marblehead, MA 01945 Fiscal year end is: December 31 2. Name and address of project (if different from above): Pickering Wharf Hotel Corner of Congress Street & Derby Street Salem, MA 01970 3. Location of ETA: Beverly & Salem Regional ETA 4. Location of EOA: Salem 5. Authorization: I/We (print) of c.l�j(kLA the entity applying fo Certified Project des ignation,1 hereby certify that the information within this application is true and accurate, and reflects the project's intentions for job creation and investment. I understand that the information provided within s licatio shall be bindingfor the duration of the project ceific 'on. Signature (Date) Signature (Date) 1 6. Nature and purpose of project: INTRODUCTION AND HISTORY OF PROJECT DEVELOPMENT Pickering Wharf Realty Trust seeks Certified Project designation for the Pickering Wharf Hotel to be developed at the corner of Derby and Congress Streets. Salem is a major New England tourist destination that draws over 650,000 visitors annually to its cultural, historic and maritime attractions. Due to a limited supply of overnight accommodations, tourist and business visitor dollars are spent in communities such as Danvers and Peabody which have numerous hotels with easy access to major highways. The trustees of Pickering Wharf Realty Trust recognized the need for additional hotel accommodations in Salem and that the potential space available at Pickering Wharf was an ideal location. The developers conducted an extensive financial analysis of the project and concluded that the development would not be economically feasible without property tax relief through a TIF agreement. Their findings were supported by a Hotel Study conducted by Landauer Group that indicated the Pickering Wharf hotel site was the most suitable location in Salem for new development and the one most likely to be supported by the market. Their analysis also concluded that the cash flow generated by the project for debt service would not be sufficient to attract private sector developers without economic assistance from the community. Rockett Management & Realty Company was established in 1968. The company develops, manages and owns several commercial and residential properties, including 400 Highland Place, Route 107 in Salem, the Village Plaza in Marblehead and several apartment buildings. The Pickering Wharf Realty Trust was established prior to the purchase of Pickering Wharf on May 2, 1996. Pickering Wharf Realty Trust acquired Pickering Wharf in June 1996 and initiated the successful revitalization of this popular waterfront destination. Pickering Wharf Realty Trust owns 67% of the condominiums in the form of commercial space. The remaining 33% of the space is comprised of residential condominiums. Twelve of the 54 residential condominiums are owned by Pickering Wharf Realty Trust. Pickering Wharf had been for sale since 1991 and had begun to show signs of neglect that have since been reversed under Rockett Management Company's ownership. As a part of the owner's plans for a major redevelopment of Pickering Wharf, a hotel development was proposed to be located at the corner of Derby and Congress Streets. Pickering Wharf Realty Trust plans to construct an eighty +/- room, three story hotel containing standard 14' x 36' rooms featuring kitchen facilities. The ground floor will offer 18,000 square feet of retail space. The development will be a total of four stories. The development cost of the hotel portion of the project is $3,541,100. The hotel will be approximately 50,000 square feet. 2 The overall project cost is $4,441,100. The retail portion of the project is estimated to cost $900,000. Please refer to the chart on page 4 for a cost breakdown. The project is projected to employ 60 persons in net, new permanent jobs for the ETA. The existing conditions of the hotel site include retail and office space contained in two buildings and an Eastern Bank. Ninety percent of the retail and office space has been abandoned for over two years. The two buildings housing retail and office will be demolished and the retail uses will be relocated to the ground floor of the hotel. The bank will be demolished and relocated next to the hotel site. The applicant seeks certification for the hotel portion of the project only. All newly constructed retail space, including the relocated Eastern Bank, will be taxed at full valuation. In addition, the City and the developer have entered into a Memorandum of Understanding in which each party has pledged to work in a public/private partnership to secure state and federal funds for items such as increasing public access to the waterfront. There is an unfinished segment of a seawalk from Congress Street to the Chase House restaurant to be addressed with the use of grant funds. 7. Is this business new to Massachusetts? d Yes ❑ No If no: • Where are the existing Massachusetts facilities? • Will this project require/trigger the closing or consolidation of any Massachusetts facilities? If yes, please explain. 8. Is this project an expansion of an existing business? ❑ Yes I No If yes, check the appropriate box: ` ❑ at existing location ❑ at new location in same municipality 11 at new location in different municipality f Budget for Project Soft Costs Budget Architecture Fees 150,000 Structural/Mechanical Engineering 38,000 21 E Site Report 10,000 Legal Fees 18,000 General Conditions 85,000 Business Relocation Costs 125,000 Bank Loan Fees 150,000 Permit 15,000 Site Superintendent 75,000 Office Expense 30,000 Hard Costs Demolition 145,000 Site Preparation 45,000 Piles/Caps 160,000 Grade Beams 129,000 1st Floor Structural Slab 106,000 Structural Plank/Steel Structure 513,000 Concrete Slabs (3) 94,000 Roofing 145,000 Towers/Light Steel Framing 0 Staircases 51,000 Elevator 125,000 Exterior Wall System 397,000 Glass & Glazing 150,000 Misc. Exterior Allowance 50,000 4 Sprinkler System 130,000 Electrical 197,000 Plumbing 175,000 HVAC 365,000 Interior Demising Partitions 157,000 Interior Allowance 215,000 Fire Alarm System 56,000 Excavation 86,000 Materials 22,000 Grading/Compaction 26,000 Curbing 22,000 Landscaping 27,000 Sprinkler System 7,100 Paving 61,000 Walkway 49,000 Sidewalk Pavers 25,000 Special Landscaping 15,000 Total 4,441,100 Breakdown of costs Hotel 3,451,100 Retail 900,000 9. Job creation In order to qualify for Certified Project status, the governing statute and regulations require the creation of net, new, permanent full-time employees in Massachusetts. On the chart provided (see next page), please fill in the blanks provided. 5 Work Force Analysis and Job Creation Plan Current TOTAL NEW JOBS NEWJOBS NEW JOBS NEWJOBS NEW JOBS NEW JOBS employment projected new Year I Year 2 Year 3 Year 4 Year S Years 6-13 permanent jobs Total Employees at Certified Project 0 60 45 8 7 0 0 0 Facility Total Employees at Other Sites in 0 0 0 0 0 0 0 0 Mass. #of Employees at Certified Project 0 45 35 3S 35 35 35 35 Location who live in the ETA #of Permanent Full-Time Employees 0 45 35 5 5 0 0 0 #of Permanent Part-Time Employees 0 15 10 3 2 0 0 0 #of Temporary Full-Time Employees 0 70 0 0 0 0 0 0 construction #of Temporary Part-Time Employees 0 10 0 0 0 0 0 0 construction #of Management Positions 0 4 0 0 0 0 0 0 Average Salary of Management 0 $50,000 Positions #of Professional Positions 0 10 0 0 0 0 0 0 Average Salary of Professional 0 $40,000 Positions #of Technical Positions 0 4 0 0 0 0 0 0 Average Salary of Technical Positions 0 $30,000 #of Skilled Positions 0 18 0 0 0 0 0 0 Average Salary of Skilled Positions $30,000 #of Unskilled Positions 0 24 0 0 0 0 0 0 Average Salary of Unskilled Positions $15,000 6 10. Certification for Abandoned Buildings: Does the proposed project involve the renovation and reuse of an abandoned building? ❑ Yes d No ❑ Unsure If yes or unsure, please answer the following questions: (a) How long has the building been vacant? (If known, state date) (b) During this period of time, what percentage of the building was vacant and unused? If the percentage varied during this time period, provide information for each change in the percent of vacant space and the applicable time period. 11. Local Employment: What actions will you take to recruit employees from among residents of the ETA? The hotel developers believe that the majority of new employees will be ETA residents, as the company will advertise new positions exclusively in the Salem Evening News. Pickering Wharf Realty Trust has the intention and capacity to achieve the anticipated level of new permanent full-time jobs for residents of the municipality and the ETA. The local labor supply is well qualified for the nature of the positions that will be available in the hotel development. The hotel is located within walking distance of several neighborhoods which will assist in reaching the anticipated level of new permanent full-time jobs for residents of the municipality and the ETA. 12. Affirmative Action Statement: It is the policy and practice of Pickering Wharf Realty Trust to hire and promote that person determined to be the best qualified without regard to race, color, religion, sex, age, marital status, or national origin. 13. Agreement between the Business and Area Banks: Describe briefly the business' local banking relationship(s), if any. Does the institution with which the business banks participate in the Massachusetts Capital Access Program, which is designed to commit a portion of the business' deposits to fund loans to local businesses? Pickering Wharf Realty Trust banks with Eastern Bank, who participates in the Massachusetts Capital Access Program. 7 14. Economic benefits of project certification: Provide a description of the economic benefits that are anticipated for the business and the project, if the project is certified. Also, provide any information, documentation or studies demonstrating any additional benefits (i.e. reduction of blight, reuse of abandoned buildings, clean up of contaminated property, job training, provision of day care, any contributions to the community, etc.) likely to accrue to the area as a result of Certified Project designation. - Please describe: Economic benefits to applicant The benefits of project certification are summarized below: • Development is economically feasible with the receipt of investment tax credits and property tax benefits • The developer will receive approximately $1,369,964 in local property tax benefits over 13 years • The construction of a $3,873,400 hotel will entitle the company to $193,670 in State 5%o investment tax credits • The developer will receive additional state investment tax credits as a result of investment in equipment for the hotel • Project provides an anchor for the Pickering Wharf development and orients the visitor to Pickering Wharf and the waterfront • a 90 % abandoned building is removed from the site • quantity and quality of retail is greatly improved within Pickering Wharf Economic benefits to the City of Salem • The City's tax base will be expanded; room taxes in the amount of $968,927 will be received and parking fees in the amount of$451,710 will be generated • The reconfigured retail will generate additional tax revenue • After all local property tax exemptions expire, this project will generate $185,121 per year in property tax revenues • 60 new jobs will be generated through the staffing of the hotel • The hotel is to be located in the heart of Salem's waterfront area on one of Salem's main entrance corridors. The City has launched several initiatives to improve the appearance of commercial properties on Salem's entrance corridors. This project will be a catalyst for additional development and rehabilitation of the waterfront area • The City has historically suffered a loss of tourist revenue due to a limited supply of hotel rooms. The new hotel and retail property taxes, coupled with room tax and parking fees, will have a significant impact on 8 the City's economy. The waterfront location of the hotel will generate more business for local retailers, restaurants and tourist destinations. Special Requirements for Real Estate Projects 1. Will the business own or lease/rent the facility? d Own ❑ Lease/Rent If leasing/renting, please identify the developer/landlord, and state who will be the taxpayer of record for the purpose of paying local real estate taxes. If owning, will the business fully occupy the space? d Yes ❑ No If no, does the business intend to lease/rent the remaining space? 2. Describe how the various tax benefits and other economic incentives that will result from Certified Project designation will be allocated among the business(e's) developing the project (i.e. a developer or landlord) and the business(e's) intending to purchase, lease or rent space at the facility (i.e. tenant or tenants). N/A Supplemental Information 1. Name(s) of business(e's) intending to take advantage of state tax incentives: Business Name: Pickering Wharf Realty Trust Federal Employer ID:04-6805953 Address: 190 Pleasant Street Marblehead, MA 01945 Phone: (781) 631-3070 Fax: (781) 639-2290 Contact Person: J. Hilary Rockett, Jr., Trustee Type of Organization (check that which applies): ❑ Corporation: ❑ For profit; ❑ S Corp.; ❑ Non-Profit I Business Trust ❑ Partnership: ❑ General Partnership; ❑ Limited Partnership ❑ Individual 9 Level of interest: (Indicate the benefits the company seeks) 15% Investment Tax Credit ❑ 10% Abandoned Building Tax Deduction (if applicable) I Local Real Estate Tax Incentive Beneficiary 2. Names and Addresses of Organization (please respond according to type) Business Trust Beneficiaries: J. Hilary Rockett and M. Denise Rockett 10 Foster Street Marblehead, MA 01945 J. Hilary Rockett, Jr. 5 Corn Point Road Marblehead, MA 01945 T. Michael Rockett-- 36 36 Roosevelt Avenue Marblehead, MA 01945 Richard P. Rockett 7 Dunns Lane Marblehead, MA 01945 Pamela M. Rockett 14 Roosevelt Avenue Marblehead, MA 01945 3. Please provide names, addresses, phone numbers and contact persons for organizations which may own or control or be affiliated with the applicant organization: Not Applicable 4. Certificate of Good Standing: A Certificate of Good Standing is attached with this application. mcc:\tif\form s\cpap.wpd 10 Commonwealth of Massachusetts Department of Revenue Taxpayer Service Division Certificate Unit P.O.Box 7066 July 2, 1996 Boston,MA 02204 PICKERING WHARF REALTY TRUST PICKERING WHARF PICKERING WHARF SALEM, MA 01970 LETTER OF COMPLIANCE In response to your request for a certificate of good standing, please be advised that the statutory authorization for the issuance of Certificates of Good Standing extends only to incorporated entities. However, we have researched Department records relative to the filing and payment of the following taxes: ID# 046805953 REALTY TRUST. The research discloses no assessed liabilities at this time. This statement is not a waiver issued under Massachusetts General Laws, Chapter 62C, Section 52, or a tax certificate issued under M.G.L., Chapter 1568, Section 99 or 100, and cannot be used for such purpose. Very Truly Yours, AV- ( — 4 / Assistant Chief, ` Collections Bureau NO. 44532 5055 - 59032 _r..'..evsi• . Mitchell Adams Commissioner ®c^meca re lee xxr �CONUIT,� CITY OF SALEM n � I 1, it �rnwe In City Council, May 14 , 1998 RESOLUTION - - - APPROVING CERTIFIED PROJECT APPLICATION OF PICKERING WHARF REALTY TRUST WHEREAS, Pickering Wharf Realty Trust has applied for designation as a Certified Project under the Massachusetts Economic Development Incentive Program created by Chapter 23A of Massachusetts General laws; WHEREAS, Pickering Wharf Realty Trust meets the minimum standards of the Economic Development Incentive Program and the local economic development goals and criteria established as part of the documents creating the Beverly & Salem Regional Economic Target Area and the Salem Economic Opportunity Area; WHEREAS, the proposed certified project is located at the comer of Congress and Derby Streets, within the boundaries of the Salem Economic Opportunity Area. The legal description is as follows: The following condominium unit in the Pickering Wharf Condominium (the "Condominium") in Salem in the County of Essex and Commonwealth of Massachusetts, created by and described in the Master Deed of Pickering Wharf Condominium dated August 3, 1979 recorded with Essex South Registry of Deeds in Book 6624, Page 141, as amended by a First Amendment to Master Deed dated November 9, 1979, recorded with Essex South Registry of Deeds in Book 6653, Page 99, by a Second Amendment to Master Deed dated December 28, 1979, recorded with Essex South Registry of Deeds in Book 6667, Page 39, and as further amended by a Third Amendment to Master Deed dated April 4, 1980, recorded with Essex South Registry of Deeds in Book 6692, Page 336 (said master deed as so amended is hereinafter referred to as the "Master Deed"): Building Unit Percentage Interest Derby ° A 10.8775 said unit A, Derby Building being a part of the total Master Deed described above. Together with the undivided percentage interests in the common areas and facilities of the Condominium described in the Master Deed as set forth for the unit above. Subject to and with the benefit of all easements, rights, reservations, restrictions, agreements and provisions contained in the Master Deed, in the Agreement and Declaration of Trust of the Pickering Wharf Condominium Trust dated August 3, 1979, recorded with Essex South Registry of Deeds in Book 6624, Page 168, in the By-Laws of Pickering Wharf Condominium recorded with Essex South Registry of Deeds in Book i 6624, Page 179, and in any rules and regulations promulgated pursuant thereto, as any of the foregoing may be amended from time to time. Subject to and with the benefit of the provisions of Massachusetts General Laws Chapter 183A as now in force and as amended from time to time. The foregoing unit is intended to be used for any purpose allowed by applicable law, zoning law, license, permit, use regulation, special permit, exception or variance. WHEREAS the City of Salem has agreed to offer Pickering Wharf Realty Trust a Tar Increment Financing Agreement; WHEREAS, Pickering Wharf Realty Trust will invest approximately $3,541,100 to develop a hotel at Pickering Wharf, an investment which creates approximately 60, new, permanent jobs for residents of the Beverly & Salem Regional Economic Target Area. WHEREAS, the construction of a hotel at Pickering Wharf will substantially improve the aesthetic appearance of the property and reduce blight on one of Salem's entrance corridors; NOW THEREFORE BE IT RESOLVED that the Salem City Council approves the Certified Project application of Pickering Wharf Realty Trust, designating this project as a certified project for a period of thirteen years, and forwards said application for certification to the Massachusetts Economic Assistance Coordinating Council for its approval and endorsement. Adopted this 11th day of June, 1998, by the Salem City Council. Stanley J. Usov'c , Jr., Mayor Date lZ l Atte Deborah E. Burkinshaw, City Clerk SEAL CITY OF SALEM Yieu and Nay Vote of City Council Upon the Question of - - eZ� e Aw Zk - / 1�f= Date // 1998 Yea y lPrc& Ahsent Mat E Blair Join J.Donahoe . Regina R.Flymo Thomas H.Faey J Kevin R.Havey Sarah ML Hayes William A.Kelley Joan W Lovely Scott J.McIAagttm . Peter L,Pasitowsb Leonard F.O'Leary,Pres. TOTAL / W CITY CLERK A TRUE COPY ATTEST 41CITY CLERK SALEM. MASS. Massachusetts Economic Development Incentive Program Tax Increment Financing Plan I. Location A. Economic Opportunity Area (EOA): Salem EOA B. Municipality: City of Salem C. Tax Increment Financing (TIF) Zone: Attached are: • map of the ETA • map showing the general location of the proposed private project • parcel by parcel map • property lines and the outline of each building • map indicating infrastructure improvements, all thoroughfare, public rights of way and easements _ • zoning map • location of proposed private and public projects Common description of TIF Zone: The proposed TIF Zone is located at the corner of Congress and Derby Streets in the Salem Economic Opportunity Area (EOA). The tax parcel is Map 34, Lot 446. Legal description of TIF Zone: The following condominium unit in the Pickering Wharf Condominium (the "Condominium") in Salem in the County of Essex and Commonwealth of Massachusetts, created by and described in the Master Deed of Pickering Wharf Condominium dated August 3, 1979 recorded with Essex South Registry of Deeds in Book 6624, Page 141, as amended by a First Amendment to Master Deed dated November 9, 1979, recorded with Essex South Registry of Deeds in Book 6653, Page 99, by a Second Amendment to Master Deed dated December 28, 1979, recorded with Essex South Registry of Deeds in Book 6667, Page 39, and as further amended by a Third Amendment to Master Deed dated April 4, 1980, recorded with Essex South Registry of Deeds in Book 6692, Page 336 (said master deed as so amended is hereinafter referred to as the "Master Deed"): Buildine Unit Percentage Interest Derby A 10.8775 1 said unit A, Derby Building being a part of the total Master Deed described above. Together with the undivided percentage interests in the common areas and facilities of the Condominium described in the Master Deed as set forth for the unit above. Subject to and with the benefit of all easements, rights, reservations, restrictions, agreements and provisions contained in the Master Deed, in the Agreement and Declaration of Trust of the Pickering Wharf Condominium Trust dated August 3, 1979, recorded with Essex South Registry of Deeds in Book 6624, Page 168, in the By-Laws of Pickering Wharf Condominium recorded with Essex South Registry of Deeds in Book 6624, Page 179, and in any rules and regulations promulgated pursuant thereto, as any of the foregoing may be amended from time to time. Subject to and with the benefit of the provisions of Massachusetts General Laws Chapter 183A as now in force and as amended from time to time. The foregoing unit is intended to be used for any purpose allowed by applicable law, zoning law, license, permit, use regulation, special permit, exception or variance. D. Narrative Description of TIF Zone: Needs, Problems and Opportunities: Designation of this TIF Zone meets the needs of, solves problems for and creates opportunities for Pickering Wharf Realty Trust and the City of Salem. DESCRIBE BELOW: Solving problems and meeting the needs of Pickering Wharf Realty Trust: The trustees of Pickering Wharf Realty Trust made a major investment in Salem upon the purchase of Pickering Wharf The trustees were seeking an opportunity to enhance this important investment and recognized that one of the problems facing Salem was the need for additional hotel accommodations. The potential space available at Pickering Wharf was considered an ideal location. The developers conducted an extensive financial analysis of the project and concluded that the development would not be economically feasible without property tax relief through a TIF agreement. Their findings were supported by a Hotel Study conducted by Landauer Group that indicated the Pickering Wharf hotel site was the most suitable location in Salem for new development and the one most likely to be supported by the market. Their analysis also concluded that the cash flow generated by the project for debt service would not be sufficient to attract private sector developers without economic assistance from the community. 2 Creating Opportunity for Pickering Wharf Realty Trust: This project provides Pickering Wharf Realty Trust with an ideal opportunity to enhance the value of Pickering Wharf and to establish an anchor in the heart of Salem's busy waterfront district. In addition, the ground floor of the hotel will showcase an improved quality and quantity of retail shops that will further enliven Pickering Wharf. Pickering Wharf Realty Trust plans to construct an eighty +/- room, three story hotel containing standard 14' x 36' rooms featuring kitchen facilities. The ground floor will offer 18,000 square feet of retail space. The development will be a total of four stories The cost of the hotel portion of the project is $3,451,100. The construction timeframe is expected to be approximately one year, with construction commencing in August of 1998 and ending in June of 1999. The project is anticipated to employ 60 permanent, net, new jobs in the ETA. Solving problems and meeting the needs of the City of Salem: The hotel is to be located in the heart of Salem's waterfront area on one of Salem's main entrance corridors. The City has launched several initiatives to improve the appearance of commercial properties on Salem's entrance corridors. This project will be a catalyst for additional development and rehabilitation of the waterfront area The City has historically suffered a loss of tourist revenue due to a limited supply of hotel rooms. The new hotel and retail property taxes, coupled with room tax and parking fees, will have a significant impact on the City's economy. The waterfront location of the hotel will generate more business for local retailers, restaurants and tourist destinations. In addition, the City and the developer have entered into a Memorandum of Understanding in which each party has pledged to work in a public/private partnership to secure state and federal funds for items such as increasing public access to the waterfront. There is an unfinished segment of a seawalk from Congress Street to the Chase House restaurant to be addressed with the use of grant funds. Creating Opportunity for the.City of Salem: Designation of the TIF Zone and approval of this TIF Plan will help Pickering Wharf Realty Trust establish a new hotel in Salem, which will generate jobs, room taxes, parking fees, and property taxes of$185,121 at the expiration of the TIF. The waterfront location of the hotel will generate more business for local retailers, restaurants and tourist destinations. 3 E. Property owners within the proposed TIF Zone: The property owner within the proposed TIF Zone is the Pickering Wharf Realty Trust. The Trustees are: J. Hilary Rockett M. Denise Rockett J. Hilary Rockett, Jr. T. Michael Rockett Richard P. Rockett Pamela M. Rockett II. Time The TIF Plan and TIF Zone described here will be in effect for a period of thirteen years. III. TIF Zone & Economic Development A. Economic Opportunities and Economic Benefits to the Community: Approval of the proposed TIF Zone will create the following economic development opportunities and benefits: • Creates jobs: 60 net, new permanent jobs • Generates tax revenue: see attached spreadsheet entitled "13 Year Tax Increment Financing Plan" • Improves appearance of 90% abandoned property through demolition • The City's tax base will be expanded; room taxes and parking fees will be generated, please see attached spreadsheet entitled "13 Year Tax Increment Financing Plan" • The reconfigured retail will generate approximately $20,000 in additional tax revenue per year in property tax revenues • The hotel is to be located in the heart of Salem's waterfront area on one of Salem's main entrance corridors. The City has launched several initiatives to improve the appearance of commercial properties on Salem's entrance corridors. This project will be a catalyst for additional development and rehabilitation of the waterfront area • The City has historically suffered a loss of tourist revenue due to a limited supply of hotel rooms. The new hotel and retail property taxes, coupled with room tax and parking fees, will have a significant impact on the City's economy. The waterfront location of the hotel will generate more business for local retailers, restaurants and tourist destinations. 4 B. Proposed and Potential Land Uses: (analyze how the land uses are appropriate for anticipated economic development) The developer will construct a hotel and retail development at Pickering Wharf on the waterfront in downtown Salem. There is a demonstrated need for additional hotel accommodations due to Salem's popularity as a tourist destination. C. Zoning in the TIF Zone: The TIF Zone is located in district B-5, Central Development District. D. Hazardous Waste: (identify any parcels, public or private, in zone which are confirmed hazardous waste disposal sites, in accordance with chapter 21E, MGL. Describe any public or private site remediation activities and any reuse plans) Not Applicable IV. TIF Zone Projects A. Planned Private Project: Pickering Wharf Realty Trust will construct a 50,000 square foot, four story, approximately 80 room hotel,with the ground floor to be occupied by 18,000 square feet of retail uses. Existing retail and office buildings will be razed and a bank will be relocated on site. B. Provide Documentary evidence of the level of the developer's commitment to the proposed and required construction in the TIF project: The developer has retained architects, engineers, surveyors and attorneys for the development of this project. ` 5 C. Budget for Project: The costs of completing the project are as follows: Soft Costs Budget Architecture Fees 150,000 Structural/Mechanical Engineering 38,000 21 E Site Report 10,000 Legal Fees 18,000 General Conditions 85,000 Business Relocation Costs 125,000 Bank Loan Fees 150,000 Permit 15,000 Site Superintendent 75,000 Office Expense 30,000 Hard Costs Demolition 145,000 Site Preparation 45,000 Piles/Caps 160,000 Grade Beams 129,000 1 st Floor Structural Slab 106,000 Structural Plank/Steel Structure 513,000 Concrete Slabs (3) 94,000 Roofing 145,000 Towers/Light Steel Framing 0 Staircases 51,000 Elevator 125,000 Exterior Wall System 397,000 Glass & Glazing 150,000 6 Misc. Exterior Allowance 50,000 Sprinkler System 130,000 Electrical 197,000 Plumbing 175,000 HVAC 365,000 Interior Demising Partitions 157,000 Interior Allowance 215,000 Fire Alarm System 56,000 Excavation 86,000 Materials 22,000 Grading/Compaction 26,000 Curbing 22,000 Landscaping 27,000 Sprinkler System 7 100 P Y , Paving 61,000 Walkway 49,000 Sidewalk Pavers 25,000 Special Landscaping 15,000 Total 4,441,100 Breakdown of costs Hotel 3,451,100 Retail 900,000 D. Relevant business plans: Time schedule for development: Scheduled construction commencement: August 1998 7 Scheduled construction completion: June 1999 Expected increases in job creation: 75 temporary construction jobs 60 permanent hotel jobs Estimates of tax revenue based upon increased valuation of parcel: E. Participation in other federal, state and local economic development programs and initiatives: The City intends to pursue grant funding such as CDAG or PWED. F. Planned Public Projects: The City and the developerhave entered into a Memorandum of Understanding in which each party has pledged to work in a public/private partnership to secure state and federal funds for items such as increasing public access to the waterfront. There is an unfinished segment of a seawalk from Congress Street to the Chase House restaurant to be addressed with the use of grant funds. The details of this project will be forthcoming. V. Financing for TIF Zone Projects A. Anticipated Financing for Private Projects: Source: Amount 7 Unknown $4,000,000 B. Anticipated Financing for Public Projects: Source: Amount: PWED TBD CDAG TBD 8 C. Detailed Projection of Costs of Public Construction: TBD D. Will Betterments be used to finance any public-private projects, now or,within the proposed life of the TIF Plan? N/A E. If Betterments or Special Assessments are a part of the TIF Plan: N/A Schedule for defrayal of construction costs: Agreement of all participating parties in the betterment: F. Describe how private projects will be financed: Evidence of private-financing commitments: Project proponent is investigating financing alternatives with local banks and lending institutions. VI. TAX INCREMENT FINANCING A. Authorization to use TIF: The attached City Council resolution dated March 9, 1995 authorizes the City of Salem to use TIF in the Salem EOA. Also attached is a City Council resolution approving this TIF Plan for Pickering Wharf Realty Trust. B. Amount of proposed tax increment exemptions from property taxes: As the attached spreadsheet shows, the Chairman of Salem's Board of Assessors estimates that property tax benefits will total approximately $1,369,964 over thirteen years. Also, see the description of the proposed TIF Plan in part D of this section. < C. Maximum percentage of public project costs that can be recovered through betterments or special assessments: N/A 9 D. TIF exemption from property taxes: As the attached spreadsheet shows, the City estimates the tax benefits to total approximately $1,369,964 over 13 years. The exemption plan works as follows: Year Pickering Wharf Rea4 Trust Pays 1 - 5 Only the base tax bill 6 -8 10% of the increment, plus the base tax bill 9 20% of the increment, plus the base tax bill 10 40% of the increment, plus the base tax bill 11 60% of the increment, plus the base tax bill 12 80% of the increment, plus the base tax bill 13 100% of the increment, plus the base tax bill The effective date of increment exemption is July 1, 1999 (Fiscal Year 2000). Term of the exemption: 13 years VII. Approval of TIF projects TIF projects are approved by the Salem City Council. The Mayor and his staff are responsible for negotiating TIF Plans and, after Council approval, executing those plans. Evidence of local approvals of the proposed TIF Zone and TIF Plan is provided here in the form of a resolution authorizing a TIF agreement passed by the Salem City Council on June 11, 1998. mc:6f\f0MS\tifplan 10 I PICKERING WHARF HOTEL 13-YEAR TAX INCREMENT FINANCING PLAN Base Value $332,300 Tax Rale $34.50 Value After Hotel Constructed $3,873,400 Levy Percent Growth 2.5% Increment in Value $3,541,100 Base Year 1998 Year Property Tax Taxes at TIF %* Base Tax Taxes on Taxes Paid Tax Benefit Room <, Parking Total Tax Value ;Rate 100% Value Bill Increment Each Year* Each Year*** Tax Fees Benefit to Cit BASE $332,300 $34.67 $11,521 0% $11,464 $0 $11,464 $0 $0 $37,800 $49,264 1 $3,873,400 $35.54 $137,648 0% $11,809 $0 $11,809 $125,839 $55,188 , $38,934 $105,931 2 $3,873,400 $36.43 $141,089 0% $12,104 $0 $12,104 $128,985 $59,686 $40,068 $111,858 3 $3,873,400 $37.34 $144,616 0% $12,407 $0 $12,407 $132,210 $65,324 ` $41,202 $118,933 4 $3,873,400 $38.27 $148,232 0% $12,717 $0 $12,717 $135,515 $70,181 ' $42,336 $125,234 5 $3,873,400. $39.23 $151,938 0% $13,035 $0 $13,035 $138,903 $72,112 $43,470 $128,617 6 $3,873,400 $40.21 $155,736 10% $13,361 $14,238 $27,598 $128,138 $74,0441 $44,604 $146,246 7 $3,873,400 $41.21 $159,630 10% $13,695 $14,593 $28,288 $131,341 '$75,975 $45,738 $150,002 8 $3,873,400 $42.24 $163,620 10% $14,037 $14,958 $28,995 $134,625 $77,907. $46,872 $153,774 9 $3,873,400 $43.30 $167,711 20% $14,388 $30,665 $45,053 $122,658 $79,8391 $48,006 $172,897 10 $3,873,400 $44.38 $171,904 40% $14,748 $62,862 $77,610 $94,294 $81,770 : $49,140 $208,520 11 $3,873,400 $45.49 $176,201 60% $15,116 $96,651 $111,767 $64,434 $83,702 $50,274 $245,743 12 $3,873,400 $46.63 $180,606 80% $15,494 $132,090 $147,584 $33,022 $85,633 $51,408 $284,625 13 $3,873,400 $47.79 $185,121 100% $15,882 $169,240 $185,121 $0 $87,565 , $52,542 $325,228 TOTALS $2,095,573 $725,552 $1,369,964 $968,927 $632,394 $2,326,873 NOTES *TIF % = Percent of increment that is taxed Room Tax at 4% of Projected Room Revenue(based on 84 rooms) "Taxes Paid Each Year = Base Tax Bill plus Taxes on Increment Parking Fees for 84 spaces @ $450/space increase 3% per year. . ***Tax Benefit Each Year= Benefit to Hotel Developers Value of Hotei=cost of construction plus base value Base Value consists of FY98 Assessed values of 5 condos: 221 Derby, 225 Derby(uhb), 225 Derby(uhc), 3 Pickering Way, 7 Pickering Way Does not include enhanced value of ground floor retail which will be fully taxed. pakrnml,4 RESOLUTION AUTHORIZING THE USE OF TAX INCREMENT FINANCING IN THE SALEM ECONOMIC OPPORTUNITY AREA WHEREAS,.the City of Salem is part of the area designated the Beverly & Salem Regional Economic Target Area and the Salem Economic Opportunity Area; WHEREAS, there is strong support for economic development and the use of Tax Increment Financing as an economic development tool to create jobs and encourage business expansion and relocation to the City of Salem; NOW THEREFORE BE IT RESOLVED by the City Council of the City of Salem that: (1) Tax Increment Financing may be used as a tool to encourage economic development within the Salem Economic Opportunity Area. (2) The Mayor is hereby authorized to execute and implement Tax Increment Financing agreements. .adopted this 9 � day of ��GGn� 19by the Salem City Council at a regular City Council meeting with a quorum present. Neil J. Harrington, Mayor Date .-ATTEST: Deborah E. Burkinshaw, City Clerk ' SEAL ' CITE' OF SALEM 9BG Bm RESOLUTION AUTHORIZING A TAX INCREMENT FINANCING AGREEMENT _ For Pickering Wharf Realty Trust Ordered:WHEREAS,the City of Salem is part of the�area designated the Beverly & Salem Regional Economic Target Area and the Salem Economic Opportunity Area; . WHEREAS, the Mayor of the City of Salem has prepared a Tax Increment Financing Agreement in accordance of Chapter 40 and 751 CMR 11.00; WHEREAS, there is strong support for economic development and the use of Tax Increment Financing as an economic development tool to encourage business expansion in and relocation to the City of Salem; WHEREAS, there is strong support for using Tax Increment Financing to encourage the development of a Hotel at Pickering Wharf, the property owned by Pickering Wharf Realty Trust; WHEREAS,this property is located in the Salem Economic Opportunity Area; NOW THEREFORE BE IT RESOLVED by the Salem City Council that: ( 1 ) The Tax Increment Financing Agreement be adopted as it has been substantially submitted to the City Council. A copy of said Tax Increment Financing Agreement is attached as Exhibit A, and made part of this Resolution. (') The area to be designated as a Tax Increment Financing Zone is: The following condominium unit in the Pickering Wharf Condominium (the "Condominium") in Salem in the County of Essex and Commonwealth of Massachusetts, created by and described in the Master Deed of Pickering Wharf Condominium dated August 3, 1979 recorded with Essex South Registry of Deeds in Book 6624, Page 141, as amended by a First Amendment to Master Deed dated November 9, 1979, recorded with Esser South Registry of Deeds in Book 6653, Page 99, by a Second Amendment to Master Deed dated December 28, 1979, recorded with Essex South Registry of Deeds in Book 6667, Page 39, and as further amended by a Third Amendment to Master Deed dated April 4, 1980, recorded with Essex South Registry of Deeds in Book 6692, Page 336 (said master deed as so amended is hereinafter referred to as the "Master Deed"): Building unit Percentage Interest Derby A 10.8775 said unit A, Derby Building being a part of the total Master Deed described above. Condominium described in the Master Deed as set forth for the unit above. Subject to and with the benefit of all easements, rights, reservations, restrictions, agreements and provisions contained in the Master Deed, in the Agreement and Declaration of Trust of the Pickering Wharf Condominium Trust dated August 3, 1979, recorded with Essex South Registry of Deeds in Book 6624, Page 168, in the By-Laws of Pickering Wharf Condominium recorded with Essex South Registry of Deeds in Book 6624, Page 179, and in any riles and regulations promulgated pursuant thereto, as any of the foregoing may be amended from time 19 time. Subject to and with the benefit of the provisions of Massachusetts General Laws Chapter 183A as now in force and as amended from time to time. The foregoing unit is intended to be used for any purpose allowed by applicable law, zoning law, license, permit, use regulation, special permit, exception or variance. (3) A map of the Tax Increment Financing Zone is hereby attached as Exhibit B and made part of this Resolution. (4) The Tax Increment Financing Agreement shall be binding on all subsequent owners of the property in the Tax Increment Financing Zone. The City of Salem reserves the right to review and renegotiate the Tax Increment Financing Agreement if the business activity ceases to be fully operational during the life of the Tax Increment Financing Agreement, as specified in the Tax Increment Financing Agreement. (5) A copy of the adopted Tar Increment Financing Agreement shall be forwarded to the Massachusetts Economic Assistance Coordinating Council for its approval. (6) The effective date of the Tax Increment Financing Agreement shall be July 1, 1999 (Fiscal Year 2000), whichever is later. (7) The Mayor is hereby authorized to execute and implement the Tax Increment Financing Agreement. Adopted this 11th day of June, 1998 by the Salem City Council at a regular City Council meeting with a quorum present. p� I Z ( 1 l8 Stanley J. Usovl , Jr., Mayor U Date ATTEST: z42 Deborah E. Burkinshaw, City Clerk SEAL EXHIBIT A: Tar Incrcmcnt Financing Agreement EXHIBITB: NIapofTa<Incmmcnt Financing Zonc CITY OF SALEM Yea and Nay Vote of City.Coundf Upon the Question of Zkx e e i Date Yea Nay Pres. Absent Mat E Blair John J.Danahac . Regina R.Flynn Thomas H.F*ey Kevin R_Harvey Sarah hL.Hayes . WiM m A.KeBey Joan B.Lovety Soon J.McLaaghbin Peterd: PaskowsW. Lenard F O'Leary,R+rv. TOTAL i CIPY CLERK TRUE COP ATTEST TAX INCREMENT FINANCING AGREEMENT CITY OF SALEM, MASSACHUSETTS - — - and PICKERING WHARF REALTY TRUST This agreement is made this day of ✓Un-f, 1998, by and between the CITY OF SALEM, a municipal corporation duly organized under the laws of the Commonwealth of Massachusetts, having a principal place of business at City Hall, 93 Washington Street, Salem, Massachusetts, 01970, acting through the Mayor, Stanley J. Usovicz, Jr., (hereinafter called "the CITY"), and PICKERING WHARF REALTY TRUST, with a principal place of business at 190 Pleasant Street, Marblehead, Massachusetts, 01945 (hereinafter called "the COMPANY") . This Agreement will take effect as of July 1, 1999 (Fiscal Year 2000). WHEREAS, the COMPANY wishes to construct a hotel at Pickering Wharf in Salem; and WHEREAS, the CITY is willing to grant tax concessions in return for guarantee of the construction of the hotel property and the creation of employment opportunities for local workers; and WHEREAS, the Salem City Council resolved on November 9, 1995 to allow the use of Tax Increment Financing as a tool to encourage economic development within the Salem Economic Opportunity Area; and WHEREAS, the Salem City Council resolved on June 11, 1998 to endorse the Tax Increment Financing Plan negotiated by the CITY and the COMPANY. NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties do mutually agree as follows: A. THE COMPANY'S OBLIGATIONS L The COMPANY shall develop the hotel property at Pickering Wharf in Salem. "The FACILITY" as used herein means a building containing approximately 50,000 square feet plus site improvements and refers to the Hotel portion only of the project. 2. During the life of this agreement, if the COMPANY decides to sell the FACILITY or the business or to otherwise transfer control of the FACILITY or business and/or operations thereof, the COMPANY shall give the CITY at least three months notice of said sale or transfer. Said notice shall be given by certified mail, return receipt requested, to the Mayor, City Hall, 93 Washington Street, Salem, Massachusetts, 01970. B. THE CITY'S OBLIGATIONS 1. The CITY shall grant a tax increment financing exemption to the COMPANY in accordance with Massachusetts General Laws, Chapter A, Section 3E, Chapter 40, Section-59, and Chapter 59, Section 5. Said exemption shall be granted on the improvements to the FACILITY. Said exemption shall be valid for a period of thirteen (13)years, beginning with fiscal year 2000 (July 1, 1999) and ending with fiscal year 2013. During each year of this agreement, the company will pay taxes based on the base value of the FACILITY and on that portion of the value of the FACILITY which is not exempted under the agreement. The base value is established by the Board of Assessors (the Board) and is the current value of the FACILITY unless an abatement is approved by the Board. The exemption schedule on the value of the FACILITY works as follows: For the first five (5) years, the COMPANY will pay only the base tax bill and will be granted an exemption of 100 percent of the full value of improvements to the FACILITY. The full value of improvements to the FACILITY is hereinafter called "the INCREMENT". In years six, seven and eight, the COMPANY will pay taxes on 10% of the full value of the INCREMENT, plus the base tax bill. In year nine, the COMPANY will pay taxes on 20% of the full value of the INCREMENT, plus the base tax bill. In year ten, the COMPANY will pay taxes on 40% of the INCREMENT, plus the base tax bill. In year eleven, the COMPANY will pay taxes on 60% of the INCREMENT, plus the base tax bill. In year twelve, the COMPANY will pay tares on 80% of the INCREMENT, plus the base tax bill. In year thirteen, the COMPANY Nvill pay taxes on the full value of the FACILITY. C. OTHER CONSIDERATIONS I. This Tax Increment Financing Agreement shall be binding on all subsequent owners of the property. The City of Salem reserves the right to review and renegotiate the Tax Increment Financing Agreement if the business activity ceases to be fully operational during the life of the Tax Increment Financing Agreement. 2. If the COMPANY decides to expand the facility at any time during the life of the Tax Increment Financing Agreement, the CITY and the COMPANY may renegotiate the Tax Increment Financing Agreement to exempt all or part of the value of the expansion from property tares. The exact amount of that exemption will be determined at the time of expansion. Executed as a sealed instrument on the day and year first above written. CITY OF SALEM PICKERING WHARF REALTY TRUST Stanley J. U.sovi ., Mayor J. Hilary I2oEkett, Trustee Notary Public My commission expires 6 4 ref-•Z'N,r, 37' N>x"-Y•� I i z.,, i "p _ t�,•s�� t�:1 Y&• P.t ,ym jn,�'a5IIJ3/rte ` i .�4 sH"'§•r. .. 1 ��ti•= ��t�.'"_n }'.v�� 1 a ��'•-1 � rt�li' r t :'rvh :�,.t. �'�_�`�a,,:,' pf'I Y1.3ta 7 X`s`� s �`''.�i'S-�Aa. • �'�gr � r �J8 7,� I�i-��-F'�¢ D oq�s"-,. •v,. �.�yy.?` �� _ ��>: �,yr .`a� �9r � �,;`k"�C Ir'R"}s.rd'i,'�Aa�a'-a zg \ s ........... .. � _ 'S � m5.,,�C, }rr`ytt % 1 1- J' �a4I r '1 ;u�vLry"Z�yt'z i jd��%�•,. Ot ✓ .?�'"�� 1 �'�'�� a� ' �- ��Y + Ii J.eC'rs'E� � `*� fix' �,+•` `� 4' i.T t ` ' tYw.t . 'f•: # L-f t • � �! il� 1 jjL�j- Ft'�t�{ #h� .r r'�4tk'_;r "�� F / ayAs= Tal •� Aa. 'ra t 15��. `Fi'" '.T '?q r;f. '�w� 1�' f I ��a� Gui1 r Nowa} .k+ t � r�•.""�.;`� r 7 J,t� i'�1 ,1z� *�syd ,K.rd ,7a:s"� a 3 �rWtA 1 y��e asc��;l(fttd'•aCf ew�"Y"e'...X94 4 e I � b A Beverly & Salem Regional Economic Target Area I \\ ESSEX 7�OTYej� y 4� r1, • r :DERBY 2 { r; YYS�TY7,, ee Q`p�E�`Nu G gp IS♦ r Sty- , 'p 60 ap 1 u 144THORH[ 4Z9 'o FS AL.EM , MASSACHUSETTS ' 1 40 N �9 `pa a 445f.` 'i 25m �� PSG Ada ASSESSORS MAPS tie, , 46' I6 \ m 'V ,240 ,95 G V e N N Lee N 37100 5 O -� o weowa M r �8 o O OF 9pEHT 4O •� - e \ B \ � e,O 1 1 3 e Y lPR at sda S Lee C� Y7A © ° 9 �y0 - \8,Tp1GKEa� - �j g�RIVATEER 039 20600 N Z W e e 408 �. P Leo 19248 a to C) o e o 431 m 441 S N W g� 4.55 AC \ ° 440 15, 523 n. 12,600r HARF 25,453 - N o / a2 tea 1 lA m i\ °EHip RANO URR 441 Public Project ° 21, 200 - ie Q so O X611 e+ g6 go � N y 70 H 1 S 0 U R V E R I � -�-1t- f J RA MA Ln 436 W a 435 ° P e zs� N 16,5/6 r041V81r°R �^ \ e MfR 1 A � 10. j4 3e :e S, gl -3 4 Y e+385 Y. n R R 0 Yo'YY 1 3 '� T E E y k 4,0 e 6 °70 384 3264 reoo 368081 T so � �� Sd 5600 i6 10,227 9) 3y 33 396 397 39 z 9 z? �3 394 284oea 102 2672 3690 399 4 226e „ _4, 11 965 Assessors' Map '- R M !le .."t Y4 30 31-74 31 4 oe-b'o E YE04T 0e-00 e0 44 TO u Public Project Indicated Y 47 6O 42 63 62 4Y - :3�4C3 0 35 J` 6 I ;g 359 1 q60 357 356 ao0o 3�6 4�2 351 X49 348 568'0 3039 - 5�60 4690 x560 1� 3750 3660 ,�-. 3476 xRQ I 13/31 r--- _n �! %' ° J y�T/ � 4 ` __ fir"".n.�....... . Tf • n " U A'OODIUT IN WN ° � 'I )FLMn /J BC9TNiM fIELD�./ �• t L O \ \ � aP 4 �t = D� J F i L O �V L J' t -�'T J r4 of ' , J' � ��J r, � � a M1 i• M•L � Q IM> >) �. SALEM ^°r• ` 1'Q��rr � >t '9^ Jr f4' � � M1 L �IirC+Jr ^ \ _ �__l� • r.,L +ioy. ,r4 Y � �� a ' y, ' ° ti•, ,r r � � ; " - �\ tLP�li i1 ///n/+ ,r' fy, I vwY11MeTON ie.NDIfTN tI COMMON— n MM JL, L 1, ' D S y .� • 4 _ 1 F '� ' TIF ZONE a c 44M4 4 Y a4• J D 44`.. �'{ri f` ` 4 n LN. rM1y,C1C•tL �� 4• Ln _ t. St' S•1^ ° �.y ., k!?L� 4 c e aT. �++ vLwlwc / f P M1 • T r M ++'�4 'c' + Y" J L.i�as' °°Y°4> � 'S. � �y •�� L_J ,L �+ •rd !°I°,r ,°. .. i � RILL T C j Y- " , til Ne'!�� ••M, / / b wluowa �I , / Il ar. fin, roeT +rC PA I1N ` O o h aV a4[YICM iOWER Co. + P PALMERPAL MER COVE ucnT rwu ' ,�'Ay/PER °44•+ 4YL, �� J °r," 4 ,. r I l i POOL COVE J , 7 ENOALE G GL J COVE \t4a i J U 1)I 1 fpR AAq R/VER 1 _/ � ,11 R \•`�� ~ u O ic ' � ecxT n°u \.. C� 04 0y F .1 General Location Map @&ALE OR FF-F-7 Pickering Wharf Hotel Tif Zone Indicated > , , 197E 19TO 1981 1989 1995 aTr LxclNux (: it"' I� I�t Itix171 ;1�1a1. (111 1 7i 1 i b 1 5. 51 1 r '[ E il. •,� : it c z1J f ( t 1 'Vull a n t �.1 a j I�V:i y t�..jlop 1 r t a+ 1 a� 1 �.+" • • st ar 1 ll�J a l Y ai 1 .. Int +`, {F i't �'n y r m I �,� t� aac,�t�ya� '¢ ��1 1 y � ,i o �: a w° 9 �i�i'4. til .• i a L1R is �`" 1 a > n! yvif I) � fI � 1�1�1, 1111 k`;1 1 11 t , Attachments Letter from Project Proponent's Accountant Salem Evening News Article Excerpt from Landauer Hotel Study ' CEC-03-97 21 : 33 FROM: ID• ISOG740S729 PACE 2/ NOW s aae+R•vases Mcrday,,NCVerv--r 17,1997 store co , . airee News-tarr 1( S ..t... T., -... . ;Sal RhS—Arw - week.va D ti lx aha dvrmnai^ - a?tioivanz knowm0r- theiri i e In t I1a�Y .S the 18h�t : �d3i:iicfo :BoIrperwirr rs' . nod now s. _ Face cfhs ,. bx' v-: tge:siS2' .��St.!•iII:.: 71i150,f1C0._2p - .fitles�tm'` 5cai ' : 'We'.�c.:trestvl-a �astrvly ; ' WiII ru:I snore With but . ➢a1 eui a=Mt thr r '13esfrir N-;,.,<to thetl'st c(r; ib Qd-+a QMr m or=tion staCcrn,The siitioris are ready - daze•h7¢SPe1kv ands Wbuch crsmmr,s =rid as a voice-over , the work �eYve Lhmen and Placa..in ]n_sic Tfsfi}ry. .. ThQ narrative hrg'ylight rhe recognized cjA5 ic3, lop ar".ab mad wmrYs lhzji have had 1rdior impact on 0M; bird r cC L arm 0CW m st geu�.coften . to try_ It C¢COrZrnba PcoDie a l T.aTih�CO m d i LQ0pWd am 10f'the ti 16Ct( P�?0ieJ�tleGy ydy{pi 2,li1<Y he YjyS, e Sys ^•`�] �• .'.• r O{LtXOC11'ltit6tc bipP w>Il btP FeWle al=g ' eve tem h ' x'eoa. PaaYecablish com>#ct dixi as - 'd :s:.•':�. .• ..: ecmomlc tern Ctitcmom'Balm 1�'nn�rnSa�ca "5a]�ai'jSePuttpvd C�Cn wIDed tie �1.^..^. drvLvvrs bo ❑iTT✓1P �F..�L-_ �y� ]e12S b= I 1155 P(Y}a min ^vro$Oj' ` �VmS OT[S t0aSIf0l� •�ll. Ill .._.. .• r.. ash 5Matthe>mw�a termtvthe 'bz ahs dix�cra taf mrsic IAchmera t...ctys:'With'fhe chyad:ainr,He hclpcvithe oum- SiLeopc9d apn�e Ems•sy�8eer'SLc' -'Scvas the�trect: �f Ilhly� the com- Leom7d s7s paciGoe ' °� '' y.ai_- Tat _.. .. an l0am'` ... , W}razf,7taeemed a grAdYuIIH t0lry ihiL"' Excerpts from Landauer Hotel Study Introduction The primary goals of the study were threefold as outlined below: To determine the market and financial feasibility of hotel development at three identified locations within the city: s_ * The former site of the Parker Brothers manufacturing plan; * A site at Pickering Wharf, at the intersection of Derby and Congress Streets; * A site at the current location of the Hawthorne Hotel on its rear parking lot; To assess the economic benefits of the hotel and prospects for public sector financing; and, To develop a report and recruitment package which the city can use in the marketing of the project to both private and public sector entities. Hotel Projects Under-Construction (p. 6) 1. 120- Room Hampton Inn on Rt. 1 2. 85 Room Homewood Suites on Rt. 1 3. 97 Room Mainstay Suites in Centennial Park - 4. 66 Room Microtel Hotel on Rt. 1 5. 115 Room Extended Stay America in Danvers Note - 500 Rooms are being built within five (5) miles Prospective Financial Investment Analysis (p. 6) A prospective financial analysis was conducted on each of the facility profiles outlined above (a 120 room full service facility and 66 room limited service facility). The result of this analysis indicated, that cash flow available for debt-service and investor return was not sufficient enough to generate private sector developer interest in either project. However, the cash flow generated by the limited service hotel scenario was closer to supporting the development costs associated with such a project. The gap which existed between the cashflows development supportability against industry supplied development costs was close enough to investigate public sector Financing- options which could be pledged as low cost of capital mezzanine financing. Site and Facilities Analysis (p. 6 & 7) Our analysis has concluded that the Pickering Wharf location is the most suitable for hotel development utilization at this time. Land availability will be a limiting factor in the potential project's scale and range of facilities. Development Potential Analysis (p. 8) A small 66-room limited service hotel at-Pickering Wharf appears market supportable. Significant concessions will be required from the City of Salem and a potential developer in order to render the project financially feasible. Initially, a franchise affiliation would be recommended. Potential affiliations include: Comfort Inn, Days Inn, Hampton Inn or a Holiday Inn Express. Conversely, an independently run hotel allied with a strong nationally or regionally recognized operator may be an alternative. Economic Benefits and Prospective Financing (p. 8 & 9) Employing discounted cash flow techniques to evaluate the financial viability of a 66-room limited-service hotel built in Salem provides indications of development supportability of approximately 548,500 to $51,500 per room. This level of estimated development supportability indicated that the prospective project is not financially feasible based on an anticipated development cost of$4.3 million to $4.6 million, less approximately 5900,000 for retail space development or$51,500 to S56,000 per room, and probably would not attract private sector hotel developers or investors. However, a major stakeholder in Salem may be motivated to develop the project for other purposes such as: An opportunity to enhance the overall value of an existing major real estate investment; and The hotel use will create an anchor and provide additional synergy for a total redevelopment program. In any event, it will be necessary for the City of Salem to offer significant incentives in order to attract additional hotel development in Salem. These incentives might include, but are not limited to, real estate tax abatement or suspension, participation in below market financing such as bond or available government finance programs. Economic benefits may result from the development of a hotel in Salem include: * Increased City revenue generated from hotel occupancy taxes and real estate taxes. r * Provide a catalyst to attract additional development interest within Salem * Redevelopment catalyst for waterfront * Increased area employment * Enhanced visitation and greater expenditures Proposed Hotel Development(p. 55) The hotels located in Salem will be particularly vulnerable to the hotel expansion currently taking place on the North Shore's highways (including 500 rooms now under construction). In most instances, these locations offer higher visibility, greater accessibility and closer proximity to the major demand generators in the North Shore market. As a result, expansion of the hotel supply in the future will have a greater impact on hotels with secondary locations such as Salem. Market Position (p. 64 & 65) Despite its waterfront location and close proximity to Salem's many attractions including tourist destinations, restaurants and shopping, the prospective hotel will still have a locational disadvantage when compared to the competitive hotels located on the area's highways. The prospective hotel will have a particular advantage in attracting vacationing families visiting the area due to envisioned amenities and waterfront location. The region's seasonal tourism pattern combined with the relatively low level of corporate hotel demand generated within the immediate Salem area will preclude large- scale hotel development in Salem. Financial analysis of$ 120 room full-service hotel developed on either the Pickering Wharf or Parker Brothers site was deemed unfinancable due to relatively low revenue potential and high development costs associated with the meeting and dining facilities required to attract group business in the shoulder and off-season periods. Expansion of the Hawthorne Hotel does not appear financially feasible due to the high cost of replacing the current and expanded parking requirements of the hotel with structured and/or underground parking. Project Financing Analysis (p. 77 & 78) A comparison of what the prospective cashflow analysis would yield on a supportable development basis per room, against the costs provided by Miller Dyer Spears and national chain representative, indicate that the proposed project, as proposed, is not financially feasible under conventional private sector terms. Not only would the prospective cash flow not support the hard development costs associated with the above referenced costing, it would not begin to cover the costs associated with the underlying real estate or other hard and soft cost including, but not limited to planning, design, construction management, construction loan interest, permits, bond and developers fees, and legal services. Further, it would not address the typical private sector return on investment rates which range between 15% and 20%, on a cash basis. This scenario,would make it nearly impossible to entice private sector investment interest in the project, due to the inability to secure conventional mortgage loan financing and the lack of a suitable return. Conventional mortgage loan financing requires, amongst other things, a 50%to 70% loan to value, and a debt coverage ratio of approximately 1.35%to 1.45%. A detailed summary of equity and debt parameters are included in "The Hotel Investment Outlook"publication included as an addendum to this report. Despite the financing hurdles that appear.to face the proposed project, and assuming that the City of Salem wants to continue to investigate ways in which to bring a hotel project to fruition, there may be some creative ways of structuring a transaction by bringing public sector financing to the project that may make it more palatable for a private sector developer. However, it is also implied in this scenario, that the private sector developer identified would need to be flexible in their return expectations, and more probably, have other financial incentives for participating in the project. Should private sector developer interest be identified despite these project hurdles, participation and/or contingent participation on the city side could include the pledging of all or part of the following financing vehicles and/or incentives: * Urban Development Action Grant (UDAG) * Tax Increment Financing * Community Development Action Grant * Public Works Economic Development Grants We believe that the proposed hotel development project can meet the general private match requirements for the UDAG and that the project will generate construction jobs, and will create long term employment opportunities for low and moderate income families in the region. Provided that the UDAG is still available to the City we propose that it be made available, along with the City's funds, as a loan to the developer on, terms similar to those in the original UDAG Agreement. This will make available 51,094,180 to the owners or approximately S 18,000 per room. The loan would have the meet HUD requirements for job creation and meet the match requirements of the UDAG program. The minimum private match for UDAG was generally 2.5 to 1 (private dollars to public). This would mean that to retain the UDAG the project would need to see at least 52.4 million in private investment, which the hotel project can meet.