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9/10/2007
Is Richmond Terrace going down?
“Request to terminate and release development agreement for Richmond Terrace due to foreclosure proceedings.”
That’s an agenda item for Wednesday’s meeting of the Appleton Common Council’s Finance Committee. Agenda working papers include a faxed request by Deboarah Tomczyk, Reinhart Boerner Van Deuren (Milwaukee) to consider terminating the Development Agreement which provides for payment of the city’s $5M loan to Richmond Terrace.
A paragraph of the proposed termination agreement says “PCRL Investments, L.P., a Texas limited partnership and Rapid Funding, LLC, a Colorado limited liability company have begun foreclosure proceedings against Richmond and the Condominium and have requested the City and ARA to terminate the Development Agreement and release the Property…from the terms of the Development Agreement….”
Richmond Terrace developer Robert Niebauer recently went into receivership on a similar property he co-owned in Oshkosh. A July 24, 2007 Post-Crescent article stated that the financers of the Oshkosh property sought court approval “to sell the project free of all encumbrances, including the $2.2M in tax incremental financing funds loaned to the project by Oshkosh.” (emphasis is mine.)
It would seem that’s exactly what’s occurring with Appleton’s Richmond Terrace investment; its receivers are seeking to shed the encumbrance of the city’s TIF loan.
The same Post-Crescent article interestingly offered a rosy picture of Richmond Terrace occupancy; Pete Hensler, Appleton Community Development Director, is quoted saying “property tax collection procedures assure the city will recoup its investment in Richmond Terrace, although at a longer time than the 14 years originally envisioned.”
Cancellation of the Agreement would seem to put any assurance in question.
Personal Obligation Agreement
A portion of the loan payments for Richmond Terrace, as calculated in 2002, were over and above expected tax payments. This portion of the obligation to the city was personally guaranteed by the developer, Robert Niebauer. The Finance Committee agenda item mentions (reassuredly?) that termination of the loan agreement will have “no effect on the pursuit or enforcement of the person al obligation agreement….
This same type of agreement was in place in the Oshkosh deal. Working papers for the Oshkosh Common Council this week include mention that the city’s ability to collect the personally guaranteed portion of their loan would be affected by the financial guarantee of the developer (duh). It then calmly notes that the City Attorney’s office has been advised a bankruptcy for said developer will be filed this month.
It would follow that payments for the personally guaranteed portion of the Richmond Terrace loan would be impacted by the bankruptcy as well.
What next?
Here’s what’s happening in Oshkosh – and what seemingly the Appleton Council will be faced with if (when) the Richmond Terrace Development Agreement is terminated. The big question – how does the City come up with the loan payments?
Oshkosh is “evaluating” their situation. Three alternatives to cover shortfalls were suggested (the 2nd option was chosen): - General Fund revenues (i.e., more tax levy)
- A Donor TIF – money provided from another TIF – one generating more cash than it currently needs
- Financial support from the developer – noting however, his impending bankruptcy. Hmmm.
So, the buck stops in our wallets. Nuts. Community development is important. A certain amount of risk-taking is important. And TIFs can be effective community development tools. Easy to say, I know – especially with hindsight. But taking too much risk is way too easy to do. With the second default in as many years, hopefully city leadership is getting the message.
(In the interest of full disclosure, while on the Appleton Common Council, I voted to support the $5M TIF loan to Niebauer’s PRDC.)
COMMENTS
Well, just like the Big Picture (which I believe was the other TIF to which you referred, I see these as opportunities for adaptive re-use.
Richmond Terrace (RT) is designed on the residential street (State Street) side along the lines of what city redevelopment has evolved for TND (Traditional Neighborhood Development).
This means no setbacks, front stairs and stoops (to watch the parades) and parking on the sides and rear.
It's a good project. It's just marketed to the wrong income level.
Good point. Interesting. JE
Lon Ponschock (Mon Sep 10 11:45:47 2007)
The thing I thought about Richmond Terrace when it first opened is that it was going to be just a really big apartment complex, perhaps akin to the Fox River Mills with less scenery. I've never been inside it but I've seen pictures online that made it look very much like small, but nice, apartments. I agree with Lon that it's a great project but they were going for the wrong income level. If they were semi-affordable apartments, I think there'd be more people living there, perhaps myself included. There may even be retail tenants in those long vacant spaces along Richmond Street.
I also agree that the Big Picture is a very attractive place for re-use but the price tag is probably too prohibitive. I could see Marcus subdividing out the space and moving the Valley Value Cinemas there. Without a mall attached, I don't think they'll keep it open at its current space much longer. (Or maybe Landmark or another arthouse chain could come in and turn it into a really nice arthouse theater! There's wishful thinking for you! Yes, an arthouse theatre! But I just don't think the market could support it. Booo. What type of retail tenants might make money in the first floor retail spaces of Richmond Terrace? JE
Mark (Mon Sep 10 14:30:48 2007)
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