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24-415
ORDINANCENO. 24-415 AN ORDINANCE APPROVING AN ECONOMIC DEVELOPMENT AGREEMENT UNDER CHAPTER 380 OF THE LOCAL GOVERNMENT CODE TO PROMOTE ECONOMIC DEVELOPMENT, INCREASE FOOT TRAFFIC, STIMULATE BUSINESS ACTIVITY AND ECONOMIC GROWTH OF THE CITY OF DENTON BETWEEN THE CITY OF DENTON AND FINE ARTS THEATER OF DENTON, LLC FOR AN AMOUNT NOT TO EXCEED $1,620,869 OF TAX INCREMENT REINVESTMENT ZONE ONE FUNDS; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Fine Arts Theater of Denton, LLC (the “Applicant”), on or about April 14, 2023, applied for an economic development incentive under Chapter 380 of the Texas Local Government for a construction and redevelopment grant to renovate the historic Fine Arts Theater located at 115-116 N. Elm Street, Denton, TX to increase foot traffic in the city to stimulate economic development activity and growth (“Grant Request”); and WHEREAS, on February 28, 2024, the Tax Increment Reinvestment Zone No. One Board recommended entering into an agreement with the Applicant to provide an incentive in an amount not to exceed $1,620,869 of Tax Increment Reinvestment Zone No. One Funds for the renovation and continued operation of the historic Fine Arts Theater; and WHEREAS, City and Fine Arts Theater of Denton, LLC have negotiated a Chapter 380 Economic Development Agreement to reflect the terms of the incentive, a copy of which is attached hereto and made a part hereof by reference (the “Agreement”); and WHEREAS, the City Council of the City of Denton hereby finds that the contemplated use of the premises and the performance of the Agreement will promote economic development, preserve a historic site, increase foot traffic, stimulate business and commercial activity, and help to reduce barriers that impair the sound growth of the City and Tax Increment Reinvestment Zone No. One; and WHEREAS, the Agreement is necessary and convenient to implement the Tax Increment Reinvestment Zone Number One project and finance plans and is for the benefit of the public and therefore meets the requirements under Chapter 380 of the Texas Local Government Code and Chapter 3 11 of the Texas Tax Code; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON, TEXAS HEREBY ORDAINS: SECTION 1. The recitals and findings contained in the preamble of this Ordinance are found to be true and are incorporated into the body of this Ordinance. SECTION 2. The City Manager, or their designee, is hereby authorized to execute the Agreement attached hereto on behalf of the City of Denton and to carry out the City’s responsibilities and rights under the Agreement, including without limitation the authorization to make the expenditures of Tax Increment Reinvestment Zone One funds as set forth in the Agreement. Page 1 SECTION 3. This Ordinance shall become effective immediately upon its passage and approval. S e C O n d er:y rr1 0 tF : ct 0 a A =\T :1S 1[11bp q•) r d i n IarE ew MT TeX diIL: : SP tHIS : P proved?the following vote H -a : Aye Nay Abstain Absent Mayor Gerard Hudspeth:U/ L/ J V/ Vicki Byrd, District 1 : Brian Beck. District 2: Paul Meltzer, District 3 : Joe Holland. District 4:L/ Brandon Chase McGee, At Large Place 5 :LZ / 26J Chris Watts, At Large Place 6: PASSED AND APPROVED this the day of a 'f il £zZ/ 2024 GERARD HUDSPETH, MAYOR ATTEST: JESUS SALAZAR, CITY SECRETARY APPROVED AS TO LEGAL FORM: MACK REINWAND, CITY ATTORNEY g#% .7908:21:2‘BY: u -05'OO' Page 2 THE STAT£ OF TEXAS COUNTY OF D£NTON ECONOMIC D£VELOPM£NT AGREEMENT BETWEEN THt CITY OF DENTON AND FIN£ ARTS TnEATER OF DENTON, LLC This Economic Development Agreement (this “Agreement”) is made and entered into as of the Effective Date as defined herein by Fine Arts Thmter of Denton, LLC, a Texas limited liability company with its principal place of business at 212 S. Elm Street, Denton, Texas (“Grantee’), and the City of Denton, a Texas home-rule municipal corporation located at 215 E. McKinney St., Denton, Texas (“City”), for the purposes and considerations stated below. Grantee and the City may each be individually referred to as a “Party” and collectively as the 'Parties.” The City and Grantee, for and in oonsidaation of the promises contained herein, do hereby contract, covenant, and agree as follows: RECITALS TIle Parties agree and acknowledge that the following premises and recitals are true. 1. This Agreement is authorized pursuant to Article III, Section 52-a of the Texas Constitution, Chapter 380 of the Texas Local Government Code (the “Act”), and Chapter 311 of the Texas Tax Code to promote local economic development; preserve a historic structure; stimulate business and commercial activity; and help to reduce baniers that impair the sound growth of the City and eliminate blight in the Downtown Tax Incranent Reinvestment Zone WRZ) No. One and the City of Denton. 2. Grantee intends to renovate and operate the vacant historic Fine Arts Theater entertainment facility in the City of Denton, 3. On or aU)ut April 14, 2023, Grantee submitted to the City a request for economic development incentives pursuant to the Act (the “Grant Request” as shown in Exhibit B attached hereto and incorporated herein for all purposes). 4. The Grant Request was reviewed by the Downtown Tax Increment Reinvestment Zone No. One Board of Directors (the “Downtown TIRZ Board”) in acoordance with Chapter 311 of the Texas tax Code, and the Downtown TIRZ Board found the Grant Request meets the qualifications for financial incentives and rwommended approval of the proposed incentives M. 5. The City desires to provide an incentive in the form of a grant to the Grantee for the construction and renovation of the vacant historic Fine Arts Theater entertainment faci]ity to increase foot traffic and stimulate economic and business activity in the City of Denton Page 1 of 15 THE STATE OF TEXAS COUNTY OF DENTON EcoNOMIC DEVELOPM£NT AGREEMENT BETWEEN THE CITY OF DENTON AND FINE ARTS THEAT£R OF DENTON, LLC This Economic Development Agreement (this “Agreement”) is made and entered into as of the Effective Date as defined herein by Fine Arts Theater of Denton, LLC, a Texas limited liability company with its principal place of business at 212 S. Elm Street, Denton, Texas (“Grantee”), and the City of Denton, a Texas home-rule municipal corporation located at 215 E. McKinney St., Denton, Texas (“City”), for the purposes and considerations stated below. Grantee and the City may each be individually referred to as a 'Party” and collectively as the “Parties.” The City and Grantee, for and in consideration of the promises contained herein, do hereby oontracl covenant, and agree as follows: RECITALS The Parties agree and acknowledge that the following premises and recitals are true. 1. This Agreement is authorized pursllant to Article m, Section 52-a of the Texas Constitution, Chapter 380 of the Texas Local Government Code (the “Act”), and Chapter 311 of the Texas Tax Code to promote local economic development; preserve a historic structure; stimulate business and commercial activity; and help to reduce barriers that impair the sound growth of the City and eliminate blight in the Downtown Tax Increment Reinvestment Zone WIZ) No. One and the City of Denton. 2. Grantee intends to renovate and operate the vacant historic Fine Arts Theater entertainment facility in the City of Denton. 3. On or about April 14, 2023, Grantee submitted to the City a request for economic development incentives pursuant to the Act (the “Grant Request” as shown in Exhibit B attached hereto and incorporated herein for all purposes). 4. The Grant Request was reviewed by the Downtown Tax Increment Reinvestment Zone No. One Board of Directors (the 'Downtown TIRZ Board ’) in accordance with Chapter 311 of the Texas tax Code, and the Downtown TIRZ Board found the Grant Request meets the qualifications for financial incentives and recommended approval of the proposed incentives M). 5. The City desires to provide an incentive in the form of a grant to the Grantee for the construction and renovation of the vacant historic Fine Arts Theater entertainment facility to increase foot traffic and stimulate economic and business activity in the City of Denton Page 1 of 15 6. The contemplated use of funds to be provided will promote economic development, incrmse employment, and stimulate business and commercial activity within the City of Denton for the benefit of the public and therefore meets the requirements under the Act. ARTICLE I - DEFINITIONS Capitalized terms in this Agreement shall have the following definitions: 1.1. “The Agreement” means this document and any incorporated attachments, as may be amended pursuant to its terms. 1.2. “Certificate of Occupancy” or “CO” means a Certificate issued by the Building Official for the use of a building, structure or land, when it is determined by the Building Official that the building, structure or proposed land use complies with the provisions of all applicable Codes of the City of Denton pursuant to the Denton Development Code Subchapter 23-5. 1.3. “City” means the City of Denton, a home-rule municipal corporation located at 215 E. McKinney, Denton, Texas 76201. 1.4. “Grant Request” means the request for economic development incentives submitted to the City by Grantee, a copy of which is attached hereto as Exhibit B. 1.5.“Grantee” has the meaning provided in the preamble of this Agreement. 1.6. 'Historic Tax Credits” means income tax credits awarded to Grantee through the National Park Service program and Texas Historical Commission that supports private investment in the form of a historic tax credit for the rehabilitation of historic structures. 1.7. “Permanent Loan” is a loan from a financial institution with a long term financing structure, that is used to replace the construction loan that the developer/Grantee utilized to redevelop the facility. 1.8. “Program Effective Year” means the first calendar year during which Grantee requests that a TIRZ Grant One payment be made and the applicable conditions and requirements in this Agreement have been met by Grantee to receive the TIRZ Grant One. 1.9. The “Property” means the historic Denton Fine Arts Theater located at 115-1 16 N. Elm St., Denton, Texas 76201, more paIticularly described in Exhibit E. 1.10. “TIRZ Grant One” means a grant in the amount not to exceed $1,076,366 for eligible reimbursable expenses, if the applicable conditions and requirements in this Agreement are met. 1.11. “TIRZ Grant One Eligible Reimbursable Expenses” means expenses made by the Grantee during the term of this Agnement as part of the renovation process including utilities costs (including internet and cloud storage), purchase of furniture, fixtures, and Ecornrnic lkveloprrnrR Agreement Between City of 1halen md Fine Arts TInHer ofDenbn, LLC Page 2 of 15 equipment (including computers, office equipment, and other materials necessary to operate the business), construction and improvement costs, of which the Grantee can provide documentation of making such expense during the term of this Agreement. 1.12. “TIRZ Grant Two” means a grant in the amount not to exceed $544,503 for eligible nimbursable expenses, if the applicable conditions and requirements in this Agreement are met 1.13. “TIRZ Grant Two Eligible Reimbursable Expenses” means expenses made by the Grantee during the term of this Agreement as part of the costs associated with the operation of the theater including payroll, interest and carrying costs, film/performance and concession expenses, advertising, insurance, accounting, legal expenses, and sales taxes for fUrniture, fixtures, and equipment (including computers, office equipment, and other materials necessary to operate the business), of which the Grantee can provide documentation of making such expense during the term of this Agreement. ARTICL£ II - GRANT CONDITIONS Grantee shall satisfy the following conditions to receive the grant payments from the City provided in Articles IV and V, and except as otherwise expressly provided in Section 2.7, to avoid termination of this Agreement pursuant to the terms of Article VIII, subject to the notice and cure provisions contained herein: 2.1. Grantee covenants and agrees with the City that the City’s obligations under this Agreement are subject to the fulfillment of the Grantee’s obligations under this Agreement, and Grantee hereby agrees to perform and comply with the terms, conditions, and provisions of this Agreement and in all other instruments and agreements, if any, between Grantee and the City with respect to the financial or other incentives provided herein. 2.2. Grantee exists and is duly authorized and in good standing under the laws of the state of its formation and is registered to do business in the State of Texas. 2.3. In the event of any conflict tntween the City of Denton Code of Ordinances and federal, state, or other local regulations in effect on the Effective Date of this Agreement, and this Agnemenl such ordinances and/or regulations shall control. 2.4. In accordance with Chapter 22 Gt of the Texas Government Code, Grantee covenants and certifies that Grantee shall not knowingly employ any person who is not lawfully admitted for permanent residence to the United States or who is not authorized under law to be employed in that manner in the United States (“Undocumented Worker”). During the term of this Agreement, Grantee shall notify the City of any complaint brought against Grantee alleging that Grantee has knowingly employed Undocumented Workers. In accordance with section 22Gt.052 of the Texas Government Code, if Grantee is convicted of a violation of 8 U.S.C. section 1324a(f) for employing an Undocumented Worker, all grant payments shall be terminated, and Grantee shall repay the amount of all grants with interest of ten percent (10%) per annum from the date the grant payment(s) was Eca>omic Development Agrnmart Between City of [hIlton and Fine Arts Tlnater of Den&xI, LLC Page 3 of 15 made. Repayment shall be paid within 120 days after the date Grantee receives notice of such conviction from the City. 2.5. For the term of this Agreement, Grantee must maintain its principal place of business within the corporate limits of the City of Denton. For the avoidance of doubt, nothing herein precludes Grantee from maintaining satellite offices in any location, provided the principal place of business remains within the corporate limits of the City of Denton. 2.6. Improvements to the Property shall be made in substantial compliance with the description of the project as set forth in the updated incentive request referenced in the Underwriting Report (Exhibit C). Notwithstanding anything contained in this Agreement to the contrary, no grant or payment shall be made to the Grantee under this Agreement unless and until grantee has completed the improvements to the property no later than 36 months after the Agreement effective date, subject to force majeure delays as outlined herein, which improvements include but are not limited to: a restored main theater with approximately 200 seats and V.I.P. mezzanine (25-30 seats), a smaller movie theater on the second level with approximately 50 seats, a new concession area at the entrance and a bar that overlooks the downtown courthouse open to theater patrons and the public. As a grant condition, Grantee shall invest at least $5,800,000 (excluding pre-development costs) of funds for TIRZ Grant One Eligible Expenses from non-city sources for the development of the project. Grantee is responsible for cooperating in the provision of any receipts or books to determine compliance with this section. 2.7. Annual appraisals of the Property by the Denton Central Appraisal District Grantee must meet or exceed $1,500,000 above the 2023 base valuation in Year 1, a total of $3,000,000 in Year 3 and the appreciation amounts shown in Table I for Years 4 through 10 For the purposes of this section, Year 1 refers to the calendar year following the receipt of a Certificate of Occupancy and after grant initiation, and Years 2-10 refer to the subsequent calendar years. Failure to meet the minimum appraised value for any year during the term of this Agreement shall constitute a default by Grantee for only the year in which such failure occurs and shall not constitute an event of default for which this Agreement may be terminated by City as provided in Article VIII. In the event of such an occurrence, Grantee shall be ineligible for the TIRZ Grant Two payment for only the year in which the minimum appraised value requirement of Table I has not been met. TABLE I Threshold A1 :ciation N/A 0% 0% 0% 3% 3% Threshold Numerical Increase N/A 1 ,500,000 SO $800,000 $90,000 $1 ,700 Valuation after Numerical Increase & }rociationA $700,000 2'oo,000 $2,200,000 $3,000,000 $3,090,000 $3, 182,700 Ecornmic Development Agrnment Between City of[hntar and Fine Arts Ttnater of Den&xI, LLC Page 4 of 15 3% 3% 3% 3% 3% $95,481 $98,345 SI 01 ,296 $ 104,335 $ 107,465 $3278,181 $3.376,526 $3,477,822 $3 157 $3,689,622 A 3% cpprecialion is applied/ollawing $3 million in val8ation, yews 4-10 2.8 The Property shall be operated and maintained for the purposes set forth herein so that the uses of the premises shall be consistent with the public purpose and welfare of the community to preserve a historic structure; provide educational opportunities; stimulate business and commercial activity; increase foot traffic, sales taxes, mixed beverage taxes, and revenues from the historic theater and surrounding businesses; help to reduce barriers that impair the sound growth of the City and eliminate blight in the Downtown TIRZ No. One and, except as otherwise authorized or modified by this Agreement. The City shall have the right to terminate the Agreement if the Grantee does not occupy and operate the premises continuously for the purposes set forth in this Agreement for the entire term of the Agreement. 2.9 Grantee shall not fail to render for taxation any property located within the City of Denton, nor shall it allow the ad valorem taxes owed to the City on any property owned by the Grantee and located within the City of Denton to become delinquent beyond the last day they can be paid without assessment of penalty, as such date is generally extended to allow for any appeal. 2.10 Grantee shall not allow any other municipal fees, levies, assessments, bills, or fines to become delinquent. 2.11 Grantee shall not discriminate in employment and contracting based on race, sex, sexual orientation, gender identity, age, disability, creed, color, genetics, or national origin, and shall not violate any applicable anti<liscdmination laws in connection with Grantee’s business. 2.12 Grantee agrees to use good faith efforts to purchase and select goods, services, and contractors from businesses located in the City of Denton whenever such goods, services, and contractors are comparable in availability, quality, and price. In the selection of contractors, suppliers, or other persons proposed for work on this Agreement, Grantee agrees to use its good faith efforts to select and employ historically underutilized businesses for work on this Agreement, whenever such vendors are comparable in availability, quality and price; however, Grantee is not required to use such vendors. Grantee is not required to but may submit information related to any good faith eKorts as it relates to the local procurement of goods and services or the use of historically underutilized businesses with its annual Certificate of Compliance. Ecornmic Development Agreement Between City of ChIlton and Fine Arts Theater of Denton, LLC Page 5 of 15 ARTICLE III - TERMS OF GRANTS 3.1. The City agrees to provide TIRZ Grant One to the Grantee following the construction and rehabilitation of the facility, subject to all other terms of this Agreement. TIRZ Grant One shall not exceed One Million Seventy-Six Thousand Three Hundred and Sixty.Six Dollars ($1,076,366) over the term of this Agreemmt. Grantee shall tn eligible for payment of TIRZ Grant One following confirmation to City of the following: 1. receipt by Grantee of a Certificate of Occupancy, 2. issuance of Historic Tax Credits by Grantee, as demonstrated by an approved National Park Service Part 3 and Texas Historical Commission Part C, 3. that Grantee has met the investment threshold of non-City funds for the project, and 4. demonstration of the Permanent Loan in a document deemed acceptable by the City. 3.2. TIRZ Grant Two will be provided in an amount not to exceed Five Hundred and Forty-Four Thousand Five Hundred and Three Dollars ($544,503) over the term of this Agreement. TIRZ Grant Two payments shall be made annually in installments over a seven (7) year term or until $544,503 has been paid, whichever comes first. Payment of TIRZ Grant Two shall commence on the calendar year immediately following the date Grantee becomes eligible for payment of TIRZ Grant One. 3.3. The calculation of the TIRZ Grant Two payment amount for any year as shown in Table II and the schedule of payments shall be made in accordance with Articles IV and V 3.4. To receive a TIRZ Grant Two payment for a year the Grantee must submit the annual Certificate of Compliance (as shown in Exhibit A attached hereto and incorporated herein for all purposes) for the prior year in accordance with the dates provided in Table II, along with all documentation required to certify compliance with the terms and conditions of this Agreement, including but not limited to total revenue. 3.5. If for any year during the term of this Agreement Grantee fails to maintain at least 40% of the projected revenue in Table II, the Grantee is ineligible for the TIRZ Grant Two payment for that year. 3.6. The total amount of the TIRZ Grant One and TIRZ Grant Two shall not exceed One Million Six Hundred and Twenty Thousand Eight Hundred and Sixty-Nine Dollars ($ 1 ,620,869). 3.7. Payment of TIRZ Grant One and TIRZ Grant Two as provided for in this Agreement shall be paid exclusively from funds Bom the Tax Increment Reinvestment Zone No. One, City of Denton Tax Increment Fund and shall not constitute a general obligation of the City or indebtedness under the constitution or laws of the State of Texas. Econmnic lkvelopment Agreement Between City oflhnton axl Firn Arts Ttnater oflhnton, LLC Page 6 of 15 3.8. Grantee shall not sell, convey, or assign its property interests in the Property during the term of this Agreement without prior written authorization from City. Grantee shall execute, deliver to City, and cause to be recorded in the real property records of Denton County, Texas restrictive covenants in the form provided in Exhibit D, attached hereto, prohibiting the sale, conveyance, or assignment of Grantee’s ownership interests in the Property during the term of this Agreement without authorization from the City. Notwithstanding the foregoing, if during the term of this Agreement, there is a default by Grantee resulting in termination and/or a Recapture Event (defined in Section 8.2.3), and Grantee has repaid City all sums due and owing as a result of the Recapture Event, Grantee shall be entitled to sell, convey or assign any and all interest in the Property in its sole discretion. ARTICLE IV - PAYMENTS OF GRANTS 4.1. The TIRZ Grant One payment will be paid as a lump sum to Grantee within sixty (60) days of City’s receipt of a written request from Grantee with appropriate documentation evidencing eligibility for payment as provided in Article VI. At Grantee’s option, a portion of TIRZ Grant One may be paid instead of a lump sum upon request. Grantee may only submit a written request for payment from TIRZ Grant One once per year until the entire TIRZ Grant One amount is paid or until the end of the term of this Agreement, whichever is sooner. 4.2. Grantee must provide the City with a written request to commence the Program Effective Year at least thirty (30) days prior to the last day of the requested Program Effective Year. The Grantee shall be entitled to payments of TIRZ Grant Two payments in accordance with the requirements and schedule set forth on Table II below and the terms of this Agreement. TABLE II EHnt va: Year 9 TotalYear 10Year 4 Year 7 year 8Year 5Year 3Year 2ye8r Total 1,671,688 14,745,9501,484,412 IJ 14,1001,333,8301230,880 1,455306 mr 544,5033824354,077 21,723 ARTICLE V . CALCULATION OF INSTALLMENT PAYMENTS 5.1. TIRZ Grant Two payments shall be made each year for seven (7) years beginning with the Program Effective Year in the minimum amounts per year as shown in Table II, provided, however, that no payment shall be made once the TIRZ Grant Two cap provided in Section 5.3 has been met. Payment may also be withheld in accordance with Section 2.7 above. Grantee may receive, upon request, an increase in each annual payment of TIRZ Ecormnic Ekvelopment Agreement Between City of[hnton and Fire Ads TtBater of Denton, LLC Page 7 of 15 Grant Two funds by showing, to the City’s satisfaction, that Grantee has met certain percentages of the revenue projections in Table II, as follows: 1. If 90% of the projected revenue is met, then the disbursement for that year may be increased by up to 15% of the minimum. 2. If 80% of the projected revenue is met, then the disbursement for that year may be increased by up to 10% of the minimum. 3. If 75% of the projected revenue is met, then the disbursement for that year may be increased by up to 10% of the minimum. 5.2. Payment of TIRZ Grant Two for the Program Eaective Year will be prorated by the number of months that the theater is open during that year (e.g. six months of operation is 50%). Any balance remaining from the minimum al)m the Program Effective Year following the proration will be allocated to Year Two in Table II. 5.3. TIRZ Grant One shall have a cap not to exceed One Million Seventy-Six Thousand Three Hundred and Sixty-Six Dollars ($1,076,366) over the term of this agreement. 5.4. TIRZ Grant Two shall have a cap not to exceed Five Hundred and Forty-Four Thousand Five Hundred and Three Dollars ($5zH,503). The minhnum annual TIRZ Grant Two payment shall be reduced for any year where payment of the minimum would cause the total amount ofTIRZ Grant Two payments to exceed the TIRZ Grant Two cap. 5.5.Payments shall be made payable to Fine Arts Theater of Denton, LLC. ARTICLE VI - OTHER GRANTEE OBLIGATIONS 6.1. In order to receive payment of any portion of TIRZ GIant One or TIRZ Grant Two for the applicable year, Grantee must submit the Annual Certificate of Compliance form attached hereto as Exhibit A certifying compliance with the obligations set forth in this Agreement not later than March 31 of the year following the year for which the request for payment is made. 6.2. Grantee shall submit to the City documentation supporting Grantee’s request and demonstrating proof of investment of non-City funds in accordance with the terms of this Agreement adequate to justify Grantee’s receipt of any payment of TIRZ Grant One or TIRZ Grant Two. A failure to provide the Certificate of Compliance and supporting documentation by the date set forth in Section 6.1 may, in the sole discretion of the City, result in Grantee being ineligible to receive aTIRZ Grant One or TIRZ Grant Two payment for the applicable year. Ecolnaic Developmen Agrwmaa Between City oflhnton and Fine Arts Theater of DaMon, LLC Page 8 of 15 ARTICLE VII - AUDITS AND MONITORING During the term of this Agreement, the City reserves the right to conduct audits of the business records of the Grantee related to this Agreement if, in the sole opinion of the City, such action is determined to be necessary. Grantee agrees upon reasonable advance request to furnish the City with additional records and information reasonably requested to support that the terms and conditions of this Agreement have been satisfied. Failure to provide such assistance shall be grounds for default, and City may withhold any TIRZ Grant One or TIRZ Grant Two payment until such assistance is provided. During the term of this Agreement, the City will keep, or cause to be kept, copies of the Certificates of Compliance and all documentation or employment records provided by the Grantee, payments made to Grantee, and any other calculations, allocations, and payments required by this Agreement. ARTICLE VIII - DEFAULT AND TERMINATION 8.1. If a party fails to perform any of its obligations under this Agreement and such failure is not cured within sixty (60) days after written notice by the City, the failure of the non-performing party to cure within such sixty (60) day period (or to commence and continue diligently to cure such default if the nature of the failure cannot reasonably be cured within 60 days in the exercise of all due diligence) shall constitute a default under this Agreement. A default by Grantee shall entitle the City to all remedies available at law or in equity, including but not limited to, termination of this Agreement, injunctive relief, specific performance, and suspending or withholding TIRZ Grant One and TIRZ Grant Two payments. A default by the City shall entitle Grantee as its sole remedy to seek specific performance of the terms of this Agreement. 8.2. If Grantee is in default of this Agreement or fails to meet the conditions hereof, the following terms apply : I. If this Agreement is terminated, TIRZ Grant One and TIRZ Grant Two payments shall be terminated with respect to the year in which notice of termination is given and all future years thereafter. 2.If this Agreement is terminated by the City within the first year following the first payment of any portion of TIRZ Grant One or TIRZ Grant Two, Grantee shall refund to the City all TIRZ Grant payments received prior to termination. If this Agreement is terminated by City in any subsequent year, the amount of TIRZ Grant One or TIRZ Grant Two that Grantee shall be required to refund to City will be reduced each year following initial payment, as shown in Table III below. RefUnds required by this section shall be made within thirty (30) days of termination. Economic Ehvelopm€nt Agreetnent Between City of [hIlton and Fine Arts Tlnater of Denton, LLC Page 9 of 15 TABLE III Blaalalnr 3.In the event of a default by Grantee for which the recapture provisions of this Agreement are triggered (“Recapture Event”), City shall have a lien against the Property and improvements on the premises for the amount of payment and interest due and owed by Grantee; such lien shall be placed upon the Property only as an enforcement mechanism to secure repayment of grant payments due under this section during the time period beginning on the date such payment obligation accrues and continuing until the date it is paid. Upon payment by Grantee of all sums due and owing as a result of a Recapture Event, City shall take all necessary aGtion to release the lien on the Property. Notwithstanding any other term of this Agreement, any lien placed upon the Property and improvements thereon by City pursuant to this Section shall be subordinate to a lien for a Permanent Loan, prior construction loan, or any lien placed upon the Property that is related to or arises from Historic Tax Credits. ARTICLE IX - INDEMNITY IT IS UNDERSTOOD AND AGREED THAT GRANTEE IN PERFORMING ITS OBLIGATIONS HEREUNDER IS ACTING INDEPENDENTLY AND THE CITY ASSUMES NO RESPONsiBuiTms OR LiABiLiTms nv CONNECTION THEREWITH TO THIRD PARTIES AND GRANTEE AGREES TO DEFEND, nVDEMVEFY, AND HOLD HARMTIESS THE CITY FROM AND AGAINST AIW AND ALL DIRECT DAMAGES H{CURRED BY THE CITY RESULTING FROM CLAms, SUITS, AND CAUSES OF ACTION OF AIW NATURE WHATSOEVER BROUGHT BY ANY THIRD PARTY ARISnVG our OF GRANTEE’S OBLIGATIONS HEREUNDER. ARTICLE X - REPRESENTATIONS AND WARRANTIES BY TH£ CITY The City represents and warrants that: 10.1. The City is a home rule Texns municipal corporation that has the power to enter into and has taken all actions to date required to authorize this Agreement and to carry out its obligations hereunder, and the person executing this Agreement on behalf of City has been authorized to act on behalf of and to bind the City to the terms of this Agreement; and 10.2. The City knows of no litigation, proceedings, initiative, referendum, investigation, or threat of any of the same contesting the powers of the City or its officials with respect to this Agreement that has not been disclosed in writing to Grantee; and Ecornmic Development Agreement Between City of [hIlton and Fine Alts Tlnateroflknbn, LLC Page 10 of 15 10.3. The City knows of no law, order, rule, or regulation applicable to the City or to the City’s governing documents that would be contravened by, or conflict with, the execution and delivery of this Agreement; and 10.4. This Agreement constitutes a valid and binding obligation of the City, enforceable according to its terms, except to the extent limited by governmental immunity and bankruptcy, insolvency, and other laws of general application affecting creditors’ rights and by equitable principles, whether considered at law or in equity; and 10.5. The funds granted by the City are derived from sources lawfully available to the City and are not proceeds of bonds or other obligations of the City payable from ad valorem taxes ARTICLE XI - R£PRESENTATIONS AND WARRANTIES BY GRANTEE Grantee represents and warrants that: 11.1. Grantee is a Texas limited liability company duly registered and validly existing under the laws of the State of Texas and is, or will prior to the Effective Date of this Agreement, be qualified to do business in the State of Texas; has the legal capacity and the authority to enter into and perform its obligations under this Agreement; and 11.2. The execution and delivery of this Agreement and the performance and observance of its terms, conditions and obligations have been duly and validly authorized by all necessary action on its part to enter into this Agreement; and 11.3. Grantee knows of no litigation, proceeding, initiative, referendum, or investigation or threat of any of the same contesting the powers of the City of Grantee or any of its principals or officials with respect to this Agreement that has not been disclosed in writing to the City. Grantee has the necessary legal ability to perform its obligations under this Agreement and has the necessary financial ability, through borrowing or otherwise, to construct improvements on the portions of the property that Grantee may acquire or improve in accordance with this Agreement. This Agreement constitutes a valid and binding obligation of Grantee, enforceable according to its terms, except to the extent limited by bankruptcy, insolvency and other laws of general application affecting ueditors' rights and by equitable principles, whether considered at law or in equity. ARTICLE XII - RIGHTS OF LENDERS AND INTERESTED PARTIES The City is aware that financing for Grantee may be provided, in whole or in part, from time to time, by one or more third parties, including, without limitation, lenders, major tenants, equity partners and purchasers or developers (individually, an “Interested Party“ and collectively, “Interested Parties”). In the event Grantee fails to perform any of its obligations under this Agreement, all notices to which Grantee is entitled under Article XVIII of this Agreement shall be provided to the Interested Parties at the same time they are provided to Grantee (provided the Interested Parties have previously been identified to E,,norDic lkYelopmcnt Ag,Ban,nt B,Iww. Page 11 of 15 City ofthnton ard Fine Arts Tln8ter of DarkxI, LLC the City and provided their notice addresses to the City). If any Interested Party is permitted under the terms of its agreement with Grantee to cure the event of default and/or to assume Grantee's position with respect to this Agreement, the City agrees to recognize such rights of the Interested Party and to otherwise permit the Interested Party to cure the event of default and to assume all of the rights and obligations of Grantee under this Agreement. The City shall, at any time upon reasonable request by Grantee, provide to any Interested Party an estoppel certificate or other document evidencing that this Agreement is in full force and effect and that no event of default by Grantee exists hereunder (or, if appropriate, specifying the nature and duration of any existing event of default). Upon request by any Interested Party and with written consent of Grantee, the City will enter into a separate assumption or similar agreement with such Interested Party, consistent with the provisions of this Article. Grantee’s consent to such an assumption or similar agreement may not be withheld if Grantee’s denial of consent would violate the terms of any agreement between Grantee and the Interested Party. Upon execution of an assumption or similar agreement by City and an Interested Party pursuant to this Section, City agrees to fully release Grantee from Grantee’s obligations under this Agreement to the extent such obligations have been assumed by the Interested Party. ARTICLE XIII - COMPLIANCE This Agreement shall be conditioned upon and subject to compliance with applicable federal, state, and City laws, ordinances, rules, and regulations. ARTICLE XIV - NO VESTED RIGHTS The Grantee shall be subject to all applicable ordinances of the City, whether now existing or in the future arising; provided however that future ordinances shall only be binding as allowed by law. This Agreement shall confer no vested rights, as defined and referenced in Chapter 245 of the Texas Local Government Code, as amended, on the Grantee or property where Grantee conducts business. The foregoing shall not be construed as a waiver by Grantee of any claims to vested rights under Chapter 245, or other law, conferred by a permit issued by the City subsequent to the execution of this Agreement or any claim of vested rights that arose prior to the execution of this Agreement. Article XV - Entire Agreement; Changes and Amendments This Agreement constitutes the entire agreement of the Parties with regard to the subject matter hereof Except as specifically provided otherwise in this Agreement, any alterations or deletions to the terms of this Agreement shall be by written amendment executed by both Parties to this Agreement. ARTICLE XV - SUCCESSORS AND ASSIGNS This Agreement shall be binding on and inure to the benefit of the Parties, their respective successors, and assigns. Grantee may not assign any part of its rights and/or obligations in Economic Dwelopmeat Agreement Between City oflhnton arxl Fine Arts Tbeater of Denton, LLC Page 12 of 15 or under this Agreement except with written authorization from City or as otherwise expressly provided in this Agreement. ARTICLE XVI - NOTICE Any notice and/or statement required or permitted to be delivered shall be deemed delivered five business days after being deposited in the United States mail, certified with return receipt requested, postage prepaid, addressed to the appropriate party at the following addresses, or at such other addresses provided by the Parties in writing. Any such notice and/or statement shall also be deemed delivered when delivered by a nationally recognized delivery company (e.g., FedEx or UPS) with evidence of delivery signed by anyone at the delivery address. If to Grantee: Fine Arts Theater Of Denton, LLC ABn: Brad Andrus and Michael Payne 212 S. Elm St. Denton, Texas, 76201 If to the City:With a copy to: City of Denton Attn: City Manager 215 E. McKinney Denton, Texas 76201 Phone: (940) 349-8307 Fax: (940) 349-8596 City of Denton Attn: City Attorney 215 E. McKinney Denton, Texas 76201 Phone: (940) 349-8333 Fax: (940) 382-7923 ARTICLE XVII - APPLICABLE LAW This Agreement shall be governed by and construed in accordance with the laws and court decisions of the State of Texas. Venue for any action under this Agreement shall be the State’s District Court of Denton County, Texas. This Agreement is performable in Denton County, Texas. ARTICLE XVIII - BENEFIT OF AGREEMENT This Agreement is executed solely for the benefit of the Parties and their successors and assigns, and nothing in this Agreement is intended to create any rights in favor of or for the benefit of any third party. Economic lkvclopment Agreement Between City oflhntar and Fine Arts Tbeater of Denton, LLC Page 13 of 15 ARTICLE XIX - LEGAL CONSTRUCTION; PARTIAL INVALIDITY OF AGREEMENT In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not afFect any other provision thereof and it is the intention of the Parties to this Agreement that in lieu of each provision that is found to be illegal, invalid or unenforceable, upon written, mutual agreement of both parties and approval of the City Council, a provision be added to this Agreement which is legal, valid and enforceable and is as similar in terms as possible to the provision found to be illegal, invalid or unenforceable. ARTICLE XX - TERM This Agreement shall be effective as of the Eaective Date. This Agreement will terminate on the earlier to occur of (a) December 3 lst of the final year of the 10-year term beginning thirty-six (36) months following Program Effective Year; (b) December 31, 2037 or (c) the date of termination for default in accordance with Article VIII. After termination of this Agreement, the City shall not be liable to make any further payments to Grantee except, if applicable, the payment for “Agreement Year 7” as provided in Table II for which Grantee is eligible. [Signature page follows] Economic lkvelopnrera Agreement Between City oftkntm arxl Fine Arts Theater oflhnton. LLC Page 14 of 15 :)I:itISt:::::11Htye !!::: :: : :::\;1][:1hs %y::I[ £yap dd yahrE : same by action of the City Council, and by Grantee, acting through its duly authorized officials. CITY OF DENTopf 'EXAS Approved as to legal form: FINE ARTS THEATER OF DENTON, LLC a Texas limited liability company //&%+64/ Economic lkvelopment Agreement Between City ofEkntar and Fin Arts Theater of Denton, LLC Page 15 of 15 EXIHBIT A CITY OF DENTON JOBS-BASED nvcENFivE ANNUAL CERT]BICATE OF COMPLIANCE Fine Arts Theater of Denton, LLC A. Investment Information Section 2.6 of the Economic Development Agreement requires the capital investment of $5,800,000. January 1, 20_Start of Coverage Period (date) 2. December 31, 20End of Coverage Period (date) 3Total Investment at Start of Coverage Period > eosts at End of Year Total (line 4 minus line 3) lwestment for the develoDwtent of the project of at least $5,800,000 (excluding pre-development costs). including but not limited to: a restored main theater with approximately 200 seats and V.I.P. mezzanine (25-30 seats) , a smaller movie theater on the second level with approximately 50 seats, a new concession area at the entrance and a bar that overlooks the downtown courthotlse open to theater patrons and the public. B. Valuation Information Section 2.7 of the Economic Development Agreement requires the real property valuation in accordance with Table 1. Start of Coverage Period (date) End of Coverage Period (date) Total Prior Valuation Total Valuation of the tax year at the start of the coverage period r nus line 3) 4. December 31, 20 3 4 5 Economic lkvelopment Agreement Between City of [haIm aIXI Firn Arts T}Bater oflkn&xI, LLC Exhibit A - Page 1 of 3 C. TIRZ One Grant Terms • Section 3.1 of the Agreement requires that a Certificate of Occupancy (CO) is received tnfore contract initiation. CO was approved on: @ Section 3.1 of the Agreement requires the issuance of Historic Tax Credits. Historic Tax Credits were issued on: • Section 3.1 of the Agreement requires demonstration of the Permanent Loan, in a document deemed acceptable by the City. The Permanent Loan was received on D. Calculation of TIRZ Grant Two 20.1. Sections 3.2 and 5.3 of the Agreement state that TIRZ Two Grant shall not exceed Five Hundred and Forty-Four Thousand Five Hundred and Three Dollars ($544,503) over the term of the Agreement. TIRZ Grant Two shall be calculated for the appropriate year of the TIRZ Grant Two minimum in Table II. Grantee may receive, upon request, an increase in each annual payment of TIRZ Grant Two funds by showing, to the City’s satisfaction, that Grantee has met certain percentages of the revenue projections in Table II, as follows: • if 90% of the projected revenue is met, then the disbursement for that year may be increased by up to 15% of the minimum. • if 80% of the projected revenue is met, then the disbursement for that year may be increased by up to 10% of the minimum. • if 75'Y, of the projected revenue is met, then the disbursement for that year may be increased by up to 10% of the minimum. Total Revenue for the prior year Total Expenses for the prior year Percent of the projected revenue TIRZ Two Grant (annual) Minimum _% of projected revenueAdditional Total Amount of Raidency Bonus (Add Line C4 to Line C5) Economic [hvelopment Agnanaa Between City ofEhrron arxl Firn Arts Theater of Denton, LLC Exhibit A - Page 2 of 3 E. Total Payment Request Total Amount of Annual TIRZ One Grant (Line B9) Total Amount ofTIRZ Two Grant (Line C5) Total Amount of Payment Requested (Add Dl and D2) F. Required Attachments Grantee to submit Certificate of Comp]iance to include CO, Historic Tax Credit issuance documentation and Permanent Loan document. Grantee should indicate in which year the grant is coverIng. I hereby certify that, to the best of my knowledge and belief, the information provided herein is accurate and in compliance with the terms of the Economic Development Agreement with the City of Denton, Texas. I have provided a copy of all documentation needed to substantiate the number of Eligible Jobs added and to establish the residency requirement for those positions for which I am requesting a Residency Bonus payment. Printed Name and Title ofCertifring Officer Signature of Certifying Officer Date Note: This form is due by March 31 of each year after the commencement date, and as long as this Agreement is in eJect. Attach CO, Historic Tm Credit issuance, as demonstrated by an approved National Park Service Part 3 and Texas Historical Commission Part C and Permanent Loan document as required Iv Economic Development Agreement. This Certificate of Compliance should be mailed to: City of Denton Attn: Economic Development 401 N. Elm St. Denton, TX 76201 Economic Dwelopnnnt Agnannrt Between City ofthntar and Fine Arts Theater of Den&xl, LLC Exhibit A - Page 3 of 3 EXHIBIT B Grant Request Economic Dweloprnent Agreement Between City oflknbon and Fine Alts Tlnatcr of Denton. LLC Exhibit B Brad Andrus FIne Arts Theater of Denton, LLC 212 S. Elm St Denton, TX 76201 Wayne Emerson DIrector of Economic Development City of Denton 401 N. Elm Street Denton, TX 76201 RE: City of Denton request later for FIne Arts Theater of Denton, LIC Protect DesaiqtIQn We are pleased to present the followIng rehabilitatIon plan for the revival and improvement of the Fine Arts Theater on Denton’s Square. In May of 2018, Fine Arts Theater of Denton, LLC was formed by local forward-thinkIng, civIc minded Denton enthusIasts with a plan of purchasing and rehabIIItating the Fine Arts Theater. nIe theater has remained vacant since 2014 and deteriorated due to previous fire damage and subsequent weather effects. Since the purchase in 2018, a substantial amount of plannIng and predevelopment work has been completed Including: • e • • • e • Engaged Archttexa5, a Dallas-based historic preservation architectural firm. Remediated asbestos and mold throughout the structure. Completed demolition of the Interior in preparation for the full renovation. Completed constructIon of a new roof. Worked wIth Rudick Construction Group to value engIneer and devise a full renovatIon budget. Completed renovation plans and specifications and obtaIned CIty of Denton permit approval; and Obtained approval for the Federal HIstorIc Tax CredIt Application and Texas Historic Tax Credit AppIIcation. Alex Payne, Brad Andrus, Jason Reimer, Barak Epstein, and Martin Isles are all experIence Investors and promotors represent the ownership group, which is intent on returnIng the Fine Arts Tbeater back to the community in its most vIable functIon as a multi.use entertainment venue. The rehabilitation plan includes a restored maIn theater with approximately 200 seats and V.I.P. mezzanine (25-30 seats), a smaller movIe theater on the second level wIth approximately 50 seats, and a new concessIon area at the entrance wIth a bar that overlooks the downtown courthouse open to theater patrons and casual vIsitors alike. Alignment with the City’+ Strategic Plan As a recognized arts leader invested in the continued development of the City of Denton as a stron& vIbrant, and healthy communIty, the Historic Fine Arts Theater is committed to expanding opportunItIes to improve the lives in Denton’s underserved neighborhoods and to ensure that theater arts experiences are accusible to all members of the community and aligns with the CIty of Denton’s strategic plan. TIle Fine Arts Theater will contribute to this vision as follows: e e • • • • Generate additional new revenue (sales and mixed beverage) and drive tourism and visIts to Denton Square and the city. Increase Denton Square’s value as a unique business and promote investment in other non- competing businesses due to increased visIts. Enhance the creative arts culture of Denton. Provide new jobs and training in the theater arts wIth plans to partner with UNT’s media arts and hospitality management departrnents. Locally owned by people with a vested interest in Denton and the Fine Arts Theater history. ContInue to revItaIIze Denton Square by bringing another newly rehabilitated bUIldIng up to code CIty Subshfy RequIrement The total Rehabilitation budget for the Fine Arts Ttreater is $9.969M. The ownershIp group has secured financing for both the rehabilitation and permanent financing through AmerIcan NatIonal Bank & Trust. Based on our current projection of free cashflow, the project once stabilized can support debt service on a loan no greater than $3.195M. The financing plan requires the construction loan to be paId down from $8.566M to $3.19SM with funding from the sale of Historic Tax credIts and the Denton Downtown Econ Fagade Grant. Tbese paydowns leave a fundirB gap of approximately $2.6m. £c5#MI £lready invested Deferred develoner fee Construction Loan Proceeds Appraised Value - As Com 75%LTV Loan on Historic Tax Credits 75% LTV Pledged collateral 75% LTV Funding GAP Construction Loan Amount otal Fun Sources ,152.260 $250,000 $3.195,000 $2,000,000 $744,918 $2,627,054 $8,566.972 166,972 $9,969, 232 post ConstructIon loan P.own Construction Loan Historic Tax credits Denton Downtown Econ Fagade Grant (Estimated) Loan Balance 5,939,918 :2,694,918) SO,000 3,195,000 Request for FundIng FIne Arts Theater of Denton, LLC requests an economic development grant of $2.OM from the City of Denton, which will be used to pay down the existing construction loan at completion of work Thank you for your consIderation of this request and feel free to reach out to me with any questions or concerns. Sincerely Brad Andrus Date: &fejttpIt> EXHIBIT C Underwriting Report Ecornalic [kvelopment Ageement Between City of [hIlton and Fine Arts Tlreater ofDmton, LLC’ Exhibit C Date: December 6, 2023, 2023 T c) : R e : Christine Taylor, Assistant City Manager, City of Denton Ralph Bishop, Fine Arts Tbeater of Denton, llC. Final Revised UnderwritIng Report 3 incentive options – Fine Arts Tbeater of Denton, LLC. From: Grow America, formerly National Development Council Underwriter: Sheldon Bartel, CEcD, EDFP, HDFP STATUS: The City of [hrRr>n (“City") and Fine Arts Theater of Denton, LLC (“Dweloper") retained Grow Ameriato underwrite Fine Arts Theater of [knton, LIC request for a $2,m,OCD City economic development incentive. Afinal urxlerwrtt@ report was delivered (8/16/23) as a guide to assist the City in determining the type(s), timing, and amount(s) of incentives to commit, if any. The requested incentIves will support the development of IB115 N. Elm Street, Denton TX (“Project"). The expected outcome is a rehabilitated historic theater with approximately 200 seats and V.I.P. mezzanine (25-30 seats), a smaller movie theater on the second level with approximately 50 seats, and a new concession area at the entrance with a bar that overlooks the downtown courthouse open to theater patrons and casual visitors alike. The developer believes the Project will contribute to the City as follows: Generate new revenue (sales and mixed beverage as well as property taxes) and drive tourism and visits to Denton Square and the City. Increase Denton Square’s value as a unique business and promote investment in other non- competIng businesses due to increased visits. • • • Enhance the creative arts culture of Denton. Provide new jobs and training in the theater arts with plans to partner with UNT’s media arts and hospitality management departments. Continue to revitalize Denton Square by bringing another newly rehabilitated building up to • • code. nIe City provided a term sheet to the Developer post underwriting report. Following a meeting between the City and Developer where the Developer provided revised project financial information includIng: • A revIsed operating model including proposed sales tax and property rebates, • Updated Project development costs, sources and uses, based on the 8/31 balance sheet, • corrections to the lender’s cash reserve requirement for debt service coverage after clarifying our projections of operating losses during the first few years, as well as the interest alculation. Developer finds that because of the above changes and the assumption that the Project is approved for property and sales tax rebate incentives for 10 years: e the initial cash needed at the openin& (year 1) is reduced to $193,107. • additional cash of$121,371to cover losses in years 2-4. • The total cash requirement for working capital and debt service coverage is $314,478. 1 With this information the Developer presented to the City three (3) incentive options as follows : Option 1 - $1,076,366 City of Denton Incentive at CO, this can be a grant for 5 to 7 years . No tax rebates. An additional $544,782 City of Denton incentive funded at opening or annually as needed, as a grant for 5 to 7 years s. Option 2 - $1,076,366 City of Denton incentIve at CO, this can be a grant or forgivabte loan over 10 years. Annual rebates for property, sales, and beverage taxes for IO years. An additional $314,478 City of Denton incentive funded at opening or annually as needed, as a grant or forgivable loan over 10 years. Option 3 - Developer is not eligible for Option 3. Only non-profits are eligible for HOT funds. Developer pointed out that options 1 and 2 will require an additional capital contribution from its ownership group of approximately $555,(XX), bringing their total investment to approximately $1,837,000. 1. 2. 3. On 10/16/23 the CIty asked Grow America to review the new information and 3 incentIve options for the Project provided by the Developer. REViEW OF PROJECr COSTS: Developer is proposing the rehabiIItation of a Historic Theater into a mutti-use entertainment facility. Existing 9,900 sqft structure is situated on 6,tX)0 sqft footprint located at 113-115 N. Elm in the Denton Square. This is in a 2023 Qualified Census tract. Developer has site control via fee simple ownership of the property since 2018. The building was originally constructed as a furniture store in the 1890’s and converted to a movie theater in 1935. The building ceased operation as a movie theater in 1982. From 1982 to 2014 the space was utilized as a church and performance space. It has been vacant since 2014 and sustained considerable interior damage due to a small fire and weather-related Issues due to a faulty roof. The Developer acquired the Project site in 2018 has restored the building to shell condition which included replacing the roof, asbestos removal and abatement, and demolition of the damaged areas along with architectural services at a cost of approximately $2,146,714. The ownership intends to completely renovate the building and convert it into a multi'use entertainment facility. Examples of its actIvity wIll involve assorted options including movies, film festIvals, concerts, live performance, and rentals such as receptions, seminars, and worshIP services, as well as various community-based rentals. The renovated facility will have three interior levels and includes a restored maIn theater with approximately 200 seats and V.I.P. mezzanine (2S.30 seats), a smalter movie theater on the second level with approximately 50 seats, a new concession area at the entrance and a bar that overlooks the downtown courthouse open to theater patrons and the public. The table below shows the total rehabilitation budget, sources and uses of funds, and permanent financing for Fine Arts Theater at 3/21/23 (application) and 8/31/23. The table includes post construction proposed investments by Developer and City (Option 1). III FINE lu%: MI T WHa $769,442, taM Wan $70,441 IXffenne (0) [p@elopme8aas CdM)$W7,272, $1146714. $t4©,025, SlaM: q7S3 6l753Pod Pre'lkwlcwltt CM 'hbilitdin cbd We Furniture & fixtures lgMsts interest & related elisE GTaiarm)MWkRleqiMeR "Totd Projelted RehabilitationcosB M®® gland; ©£4® $924.634Ma W SH 0 0 187 (924,634:Mm gRaIflalploRbai@iiiis@ iMg,dil Fundn£hures: Cash Jai-ina dISh-sled- Deferred developer fee Construction Loan nr ceeds: hipr£iseM:AhMed m }Loan on HistodcTaxCredits 75% LW Pledgedcotlatm IFJriing GAp Construction Loan Amount , Total Fundiig-Sourtei ML $250,om; SU&M jL50,am 9llslcxx> $2,m,w 3744,918: $2,Q7,64 $8,566,972 0 33:217 WgaM L614,447 r&627,054)mrMl [P& Construction Lian RstoricTaxaedmdl ,linton hwntawn Econ Fagade (/ant{E£hmaaf COD RehabCashln@ntive !Funding Up funded by paanii ®£r®l–EaRca s,B-ghb ( 16%918) (KIm) 7,w,sn (2,710,956) 150,M) (1,076,M) (555,M) , M:PQ_MI ! ml (555,260] ti Notes: Rehabilitation/Construction. • The 8/31/23 projected total rehabilitation/construction cost is reasonable. Total cost per square foot is 5921. • Total predevelopment costs Increased $62,753. These have been funded by a combination of $1.2 million Developer cash and $1.0 million loan. • Total RehabIlitation costs (uses of funds) are 59,119,623 – a decrease of $849,609. Urls is primarily due to removal of cash reserve to meet Lender OWC/DSR requirement. This is a post rehabilitation cash need. • Total Funding sources are $9,119,623 – a decrease of $849,609. Expected proceeds from sale of Project Historic Tax Credits Increased $33,217, proceeds from Developer pledged collateral increased $1,614,447, and the rehabilitation funding gap decreased $2,627,054. TIle Developer is filling the gap. Post Construction The City will only be involved post construction. Lender requires the Developer pay down the construction loan to 75% of “as completed" appraised value of $4,260,OOO = $3,195,000. Sources of funding to pay down the Lender are sale of Project Historic Tax Credits, proposed City Rehabilitation Cash Incentive ($1,076,366), Denton Downtown Reinvestment Grant ($50,CDa), and $555,260 additional Developer cash. DiscussIon of City post construction incentives follows. Option I Post Construction Permanent Financing (Spreadsheet Option 1 Project Cost Worksheet and Sources of Funds tabs) • The City will only be involved post construction. • Project Development Budget is a breakdown of the rehabiIItation/construction costs. • Source of Funds is the breakdown of post construction permanent financing including the Lender loan ($3,195,(XX)), the City’s proposed Rehab Cash Incentive ($ 1,076,366), Downtown ReInvestment grant ($SO,(X30), Historic Tax Credit equity (calculated by Project consultants Architexas @ $2,710,685), and Developer equity investment ($1,837,(Hl) into the Project as well as Developer Deferred Loan ($250,000). o Sources of funds exceed uses of funds by $529 (insignificant). Operating and Debt Service Reserve Needs (Spreadsheet Option 1 Proforma tab) The Proforma shows the projected revenues and expenses for 10 years for the Project. Revenues and expenses were provided by Project Consultant ACI North LLC who has operated the Texas Theater in Dallas since 2010. Add backs to Net Profit include: Proposed/requested City Operating and Debt Reserve Grants totaling $544,503 that includes: o $465,701 over 7 years to cover projected shortfall between project Net Profit and Debt Service that results in required debt service coverage ratio of 1:1. These funds are Included in the Add Backs to Cash Flow section of the Option 1 Proforma. o TIle Lender requires an additional $0.25 of cash flow for debt service be maintained in a reserve account at the lending bank. This amounts to $78,802 and is identified as Bank Required DSC Reserve (0.25%) on the Proforma. The source of the $78,802 is the proposed City operating reserve incentive. The funds will only be drawn down should they be needed, that is, actual operations demonstrate cash flow for debt service is lower than projected. These funds are included in the Bank Required DSC Reserve line on the Option 1 Proforma. In summary, the projected total value of City operating and debt reserve incentives under OptIon 1 is $544,503. When the City Rehab Cash ($1,076,366) and City Downtown Reinvestment grant {§SO,000) incentives are added to the operating and debt reserves ($544,503) IncentIves the total City incentive package totals $1,670,869. • • OptIon 2 Post Construction Permanent Financing (Spreadsheet Option 2 Project Cost Worksheet and Sources of Funds tabs). nIe City will only be involved post construction. e Project Development Budget is a breakdown of the rehabilitation/construction costs. 4 •Source of Funds is the breakdown of post construction permanent financing Including the Lender loan {$3,195,CXX)), the CIty’s proposed Rehab Cash Incentive ($1,076,366), Downton Reinvestment grant ($50,000), Historic Tax Credit equIty (calculated by Project consultants Archttexas @ $2,710,685), and Developer equity investment ($1,837,041) into the Project as well as Developer Deferred Loan ($250,000). o Sources of funds exceed uses of funds by $529 (insigntfiant). Operating and Debt Service Reserve Needs (Spreadsheet Option 2 Proforma tab) Add backs to Net Profit include: Proposed/requested CIty Operating and Debt Reserve Grants totaling $301,947. o $223,145 over 4 years to cover projected shortfall between project Net Profit and Debt Service that results in required debt service coverage ratio of 1:1. These funds are included in the Add Backs to Cash Flow section of the Option 2 Proforma. The Lender requires an addItional $0.25 of cash flow for debt service be maintained in a reserve account at the lending bank. Tbis amounts to $78,802 and is identified as Bank Required DSC Reserve (0.25%) on the Proforma. The source of the $78,802 is the proposed City operating reserve incentive. The funds will only be drawn down should they be needed, that is, actual operations demonstrate cash flow for debt service is lower than projected. These funds are included in the Bank Required DSC Reserve line on the Option 2 Proforma. • 0 • Proposed CitY real estate tax rebate equal to 100% of the estimated property taxes of the Project o This is calculated on an estimated assessed value of $3,195,m (75% of the “As completed" appraised value of $4,260,(X)0) increasing 3% per year over 10 years. Total property tax rebate over 10 years = $205,362 These funds are included in the Add Backs to Cash Flow section of Option 2 Proforma along with the following: Proposed City Sales Tax rebate 1.5% of total revenues over 10 years. Total sales tax rebate over 10• years = $225,837. • Proposed City Mixed Beverage Gross Receipts Tax over 10 years calculated using 50% of projected concession revenue. Total MBGRT tax rebate over 10 years = $24,626 • Proposed CIty Mixed Beverage Sales Tax over 10 years calculated usIng 50% of projected concession revenue. Total MBST rebate over 10 years = $30,322 In summary, the projected total value of City operating and debt reserve incentives under Option 2 is $788,094, When the City Rehab Cash ($1,076,366) and City Downtown Reinvestment grant ($50,CXJO) incentives are added to the operating and debt reserves {$788,094) incentives the total City incentive package totals $1,914,460. OptIon 3 Developer is not eligible for HOT Funds. ;ed for the ProjectThe Table highlights the 2 Options of incentives prol caD $Option 1 $1,076,366mmm $50,000Downtown Reinvestment Grant $465,701Operating Reserve AhALySIS OF D£VELOPER PROPOSED INCENTIVES Option 2 $1,076.366 $50,000 $223,145 $78,802 Cash Rebates+ Hot Funds Total Developer E, $486,147 N/A $1,914,460 $ 1,837,041 • Property, Sales, MBGRT, & MBST Rebates Option 1: $1,076,366 City of Denton Rehab Cash incentive at CO, this can be a grant for 5-7 years. No tax rebates. An addItional $544,782 City of Denton incentive funded at opening or annually as needed, as a grant over 10 years. This includes $465,701 City operating incentive over 7 years and $78,802 debt service reserve. This is sufficient to produce cash flow sufficient to repay Lender loan at 1:1 ratio as well as fund the Lender required 0.25:1 debt service coverage reserve. When the CIty Rehab Cash ($1,076,366) and City Downtown Reinvestment ($50,000) incentives are added to the operating and debt reserves {$544,782) incentives the total City incentive package totals $1,670,869. This option is the least expensive option. Under Option 1, the Developer begins to receive a cash-on-cash return on $1,837,041 equity (Cash Flow Available for Distribution divided by equity investment) starting in year 8. There is no return on the Deferred Developer loan until year 11. Option 2: $1,076,366 City of Denton incentive at CO, this can be a grant over 10 years. An additional $709,292 City of Denton incentive funded at opening or spread annually as needed, as a grant over 10 years. This includes $223,145 City operating incentive over 4 years and $78,802 debt service reserve. This is sufficient to produce cash flow sufficient to repay Lender loan at 1:1 ratio as well as fund the Lender required 0.25:1 debt service coverage reserve. In addition, the City provides $486,147 real estate, sales, and beverage taxes rebates over 10 years. When the City Rehab Cash ($1,076,366) and City Downtown Reinvestment ($50,tX)0) incentives are added to the operating ($223,145) and debt reserves ($78,802) as well as property, sales, MBGRT, and MBST rebates ($486,147) incentives the total City incentive package totals $1,914,460. Under this Option, the Developer only receives a cash-on-cash return on $1,837,CHI equity (Cash Flow Available for Distribution divIded by equity investment) starting in year 5. There is no return on the Deferred Developer loan until year 11. FIRST PEOPLE SJ Exterior View: Front It I +rn'EI *ig a bPHq q gilly l b +HP bB Location 7 KiT;Inn iii 3: i lig}{Eiiii Interior View EXEHBIT D NOTICE OF CONFIDENTIALITY RiGHrs: n YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOwnqG nqFORMATiON FROM ANY nqSTRUMENT THAT TRANSFERS AN INTEREST N REAL PROPERTY BEFORE IT IS FILED FOR RECORD Dq THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER RESTRICTIVE COVENANTS STATE OF TEXAS COUNTY OF DENTON THESE RESTRICTIVE COVENANtS (as amended from time to time, the “Restrictive Covenants”) are impressed upon the property described below by Fine Arts Theater of Denton, LLC (the “Owner”) a Texas limited liability company, the owner of said real property situated in Denton County, Texas, and any improvements located thereon, more particularly described as all that certain lot, tract or parcel of land lying and being situated in the City and County of Denton, State of Texas and being known as Lot Three (3), in Block Three (3), of the Original Town of Denton), and more specifically described in Exhibit E (the “Property“). RECITALS WHEREAS, on April 3, 2024, the City of Denton (the “City”), a Texas municipal corporation, and the Owner entered into an Economic Development Agreement which is incorporated herein by reference (the “Agreement”), pursuant to which the Owner is prohibited hom conveying its interest in the Property during the term of the Agreement; and WHEREAS, it is a condition of the Agreement that Owner execute and impress these Restrictive Covenants upon the Property and Owner’s execution of the Restrictive Covenants with all of the covenants, restrictions, conditions, and other provisions set forth herein is a material inducement to the City to grant Owner funds pursuant to the Agreement; and WHEREAS, the Restrictive Covenants are entitled to run with the land because (i) the Restrictive Covenants touch and concern the land by, among other things, benefitting and controlling the use of the Property, (ii) privity of estate exists by reason of Owner holding legal and equitable title to the land subject to the Restrictive Covenants, (iii) notice is given of the Restrictive Covenants contained herein when this instrument is filed in the Official Property Records of the county in which the Property is located, and (iv) the Restrictive Covenants are reasonable in light of their public purpose of securing performance of the Agreement; and WHEREAS, Owner intends that the Restrictive Covenants shall run with the land and shall be binding upon Owner and its representatives, successors, and assigns, including, without limitation, all successive owners of each Unit of the Property and that any person, by acceptance of title, legal or equitable, to any Unit or other portion of the Property shall abide by and perform Economic lkvelopment Agnemerrt Between City of Denton and Fine Arts Tb£ater of Denton, LLC Exhibit D - Page 1 of 5 all of the covenants, restrictions, conditions, and other provisions set forth herein regardless of whether or not the Restrictive Covenants are included in or otherwise referenced in the sales contract, deed or other instruments of conveyance; and WIEERFdtS, capitalized terms contained herein shall have the meaning set forth in the Agreement unless otherwise specifically provided herein; NOW, THEIUFORE, the foregoing Recitals are inoorporated herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Owner hereby establishes the following Restrictive Covenants. USE RESTRICTIONS AND RESALE RE(WIREMEMS 1. The Property shall be used and occupied solely by Owner for the purposes established in the Agreement for its entire term. 2.If the Property or any part of it is sold or otherwise made available for purchase during the term of the Restrictive Covenants, then the Owner shall affirmatively disclose to potential purchasers the existence and nature of the Restrictive Covenants and of the Agreement. The proceeds of any such sale shall be paid first to the City to satisfy the reimbursement requirements of the Agreement before the remaining balance, if any, may be distributed to the Owner or any third party to the Agreement. 3. Before the Property may be sold, bansfened, or conveyed to another owner, the City must give written consent of the sale, transfer, or conveyance of the Property and any attempted sale without said prior written consent is void. 4. The Property and any part thereof shall be maintained to and fully comply with all City codes. COVENANT TERM The covenants contained in these Restrictive Covenants shall remain in full force and effect for ten (10) years from the first distribution of grant funds pursuant to the Agreement (the “Covenant Term”). All of the covenants, restrictions, conditions, and other provisions set forth in these Restrictive Covenants shall be covenants running with the land and binding upon the Property, Owner, and their respective heirs, legal representatives, successors, and assigns for the duration of the Covenant Term. Notwithstanding the foregoing, if the Agreement is terminated pursuant to any of its terms prior to the end of the Covenant Term, the covenants, restrictions, conditions, and other provisions set forth in these Restrictive Covenants shall automatically terminate upon the later of (1) the date that the Agreement terminates, or (2) in the event that termination results in a Recapture Event as defined in the Agreement, the date that Grantee has repaid City all sums due and owing as a result of the Recapture Event (“Final Termination”). Upon Final Termination, Grantee shall be entitled to sell, convey or assign any and all interest in the Property in its sole discretion in its sole discretion, and this Restrictive Covenant shall terminate automatically without need or requirement for further action by either party. City agrees to execute a written release of Economic Development Agreement Between City oflknton and Fine Arb Ttnater of Denton, LLC Exhibit D - Page 2 of 5 the Property from these Restrictive Covenants within ten (10) business days of City’s receipt of written request of Owner. ENFORCEMENT 1.All of the covenants, restrictions, conditions and other provisions set forth in these Restrictive Covenants shall be binding upon Owner, Owner’s successors, heirs, legal representatives and assigns, and all parties claiming by, through, or under Owner, including but not limited to all subsequent owners of the Property, each of whom shall be obligated and bound to observe the covenants, restrictions, oonditions, and other provisions set forth in these Restrictive Covenants as to their respective Property until the expiration of the Covenant Term or Final Termination, whichever occurs first. By accepting any deed or other instrument of conveyance after the execution and recording hereof, a party is conclusively deemed to have accepted and agreed to be bound by and assumed the covenants, restrictions, conditions, and other provisions set forth in these Restrictive Covenants as to the portion of the Property conveyed and acquired. 2.In the event any provision of these Restrictive Covenants is violated by Owner or its successors and assigns, the City may first give to Owner or its heirs, legal representatives, successors and assigns written notice of violation and sixty (60) days opportunity to cure same (or to commence and continue diligently to cure such default if the nature of the failure cannot reasonably be cured within 60 days in the exercise of all due diligence), City shall have the right to every remedy either public or private, available to it at law or equity against the Owner and its successor and assigns. The terms and provisions of these Restrictive Covenants shall be specifically enforceable against Owner and Owner’s heirs, legal representatives, successors and assigns as the owner of the Property from time to time. All remedies provided under these Restrictive Covenants including those at law or in equity shall be cumulative and not exclusive. No failure on the part of the City to enforce the terms and provisions of these Restrictive Covenants shall be deemed a waiver of the operation or enforcement of such provisions or any other provision of these Restrictive Covenants. The right of the City to enforce the Restrictive Covenants may not be waived, expressly or otherwise, and the City’s forbearance or failure to pursue any violation or breach of these Restrictive Covenants shall in no event waive or preclude the City from enforcing said violation or breach in the future or any new violation or breach. The City shall not be liable for failure to enforce these Restrictive Covenants. The City may enforce this instrument and the covenants, restrictions, conditions, and other provisions set forth herein by proceedings at law or in equity against Owner or any person violating or attempting to violate any term or provision hereof. Said proceedings may include but shall not be limited to temporary restraining orders, temporary and permanent injunctive relief and/or suits for damages as may be appropriate. If the City substantially prevails in a legal or equitable proceeding to enforce the Restrictive Covenants, the City shall be entitled to recover damages, reasonable attorney’s fees, and court costs from the oaending party. 3 Ec:onoatic lkvelopmeat A8rwarart Between City oflkraon arxl Firn Arts Tteater ofDentDn. LLC Exhibit D - Page 3 of 5 RaSCELLANEOUS 1. The Restrictive Covenants shall not nstdct the right of the Denton City Council to exercise its legislative or governmental duties and powers, including but not limited to zoning of any part of the Property or the exercise of the City’s right of eminent domain regarding any part of the Property. 2. This instrument shall be subject to and governed by the laws of the State of Texas. The venue of any litigation concerning this instrument shall be in a court of competent jurisdiction sitting in Denton County, Texas. 3.If any one or more of the provisions contained in this instrument shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenfoneability shall not affect any other provision hereof and this instrument shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein 4. Whenever required by the context, as used in this instrument, the singular shall include the plural and the neuter shall include the masculine or feminine, and vice versa. 5. The Section headings appearing in this instrument are for convenience of reference only and are not intended to limit or define the text of any section. 6. The provisions of these Restrictive Covenants inure to the benefit of the City. 5. These Restrictive Covenants may be amended only by written instrument signed by Owner and the City and recorded in the Official Real Property Records of the county in which the Property is located. Owner covenants and agrees to execute such other instruments and take such further actions as the City may deem reasonably necessary or convenient to implement and effectuate the covenants, restrictions, conditions, and other provisions herein contemplated. EXECUTED on a 2024. FHqE ARTS THEATER OF DENTON, LLC a Texas limited liability company NaM Title: ytM@ Economic Ihvelopment Agreement Between City ofthntm and Fire Arts Tte8tn oflhnton, LLC Exhibit D - Page 4 of 5 STATE OF TEXAS § §COUNTY OF DENTON nIgraal , 2024 by of Denton Fine Arts Theater, LLC= T;xas limited m MRIltImtIREM Notary Public, State of Texas Comm. Expires 07.02-2024 Notary ID 132550559 re (J Notary public, State of Texas City of Denton Economic Development Department, 401 N. Elm Street, Denton, Texas 76201. Economic Ekvelopment Agrument Between City of 1>Non and Fine Arts Ttn8ter oflhnton, LLC Exhibit D - Page 5 of 5 EXHIBIT E Legal DescriptIon The following real property, together with all improvements, with a street address of 1 13-1 IS North Elm Street, Dalton, Texas, 76201, and more particularly descritnd as follows: All that certain lot tract or panel of land lying and bing situated in the City and County of Denton, State of Texas, and Ring known as Lot Three (3), in Block Three (3), of the ORIGINAL TOWN OF DENtON, and being more particularly described as follows: BEGINNING in the West line of Elm Street, 100 feet South of its intersection with the South line of Wat Oak Street; THENCE South 50 feet; THENCE West 120 feet; THENCE North 50 feet; THENCE East 120 feet to the Place ofBegimring.