Discussion and possible action to adopt VCFD RES. 2021-03 approving and authorizing the execution of the First Amendment to the Amended and Restated District Development, Financing Participation, and Intergovernmental Agreement (Vistancia CFD Agreement).

The Vistancia CFD Agreement is the primary agreement between the CFD, the City of Peoria and the developer providing for the manner in which the CFD will finance and acquire infrastructure from the developer and the rights and obligations of the developer. 

On April 30, 2021, the Vistancia development was sold to new developers VP Vistancia Holdings LLC (95% ownership) and Vistancia Investors LLC (5% ownership). 

            - VP Vistancia Holdings LLC  is 100% owned by Varde Fund Complex, a real estate investment fund managed by Varde Partners, a privately owned global investment firm providing investment services to foundations, pension funds, endowments, insurance companies and private clients. Varde Partners was founded in 1993 and is headquartered in Minneapolis.  

            - Vistancia Investors LLC is owned by IHP Opportunity Investors II LLC (42%), Chenco Redrock Management LLC (42%), Scarborough Vistancia Partners LLC (10%), and Mark Hammon/ LRI Team (6%).  These entities are investment and/or real estate development firms headquartered in California, Nevada, Texas and Arizona respectively.  The managing partner is IHP Opportunity Investors II LLC owned by IHP Capital Partners. IHP Capital Partners, located in Newport Beach, CA, was founded in 1992 and is part of the Real Estate Investment Trusts (REITs) Industry. 

The new owners/developers have created a new single purpose entity Vistancia Development LLC to own, manage and continue development of the properties in Vistancia.

The parties desire to assign all rights and obligations under the Vistancia CFD Agreement to the new entity Vistancia Development LLC and release the existing entities (Vistancia Master Holdings LLC and Vistancia Residential LLC) from all rights and obligations.

In accordance with the CFD Development Agreement, assignment of rights and obligations require the written consent of the City and the CFD.  The CFD Board is asked to consider the attached Resolution, approving and authorizing the execution of the attached First Amendment to the Amended and Restated District Development, Financing Participation and Intergovernmental Agreement to effect such assignment.

The First Amendment to the Amended and Restated Agreement will also be presented to the City Council for approval on June 15, 2021.

The Vistancia CFD was formed by the City Council in 2002 with voter authorization to issue up to $100 million in bonds to finance public water and wastewater infrastructure projects. To date $67.6 million of debt has been issued through three bond transactions (series 2002, 2005, and 2006).

A target tax rate of $2.10 per $100 of assessed value was established for the repayment of debt, with the developer making annual contributions for any shortfall in tax collections to pay debt service. The developer is obligated to make such contributions via a Standby Contribution Agreement (SCA) that is secured by a letter or credit.

In 2015, the series 2002, 2005 and 2006 bonds were refunded (refinanced) to generate debt service savings of approximately $1.1 million  per year. The refunding allowed the developers to reduce their annual shortfall contributions by approximately $1.1 million. The $2.10 target tax rate remained unchanged.

In FY2019/20, the developers SLFIII - Vistancia LLC (Stratford) sold their interest in the development to new developers Vistancia Master Holdings LLC and Vistancia Residential LLC (owned by Andrew Klein and Scarborough Lane Development).

In September 2020, Council approved a Resolution authorizing the following:

1. Refunding of the outstanding series 2015 bonds and issuance of additional bonds of up to approximately $2 million to fund improvements constructed by the developer that benefit the district. 

2. Replacing existing developers, guarantors and indemnitors (Vistancia Land Holdings LLC, Shea Homes LP and SLFIII-Vistancia LLC) with the new developer, guarantors and indemnitors (Vistancia Master Holdings LLC and Vistancia Residential LLC) as the new parties to the Development Agreement

3. Adding new conditions, terms and requirements including requirements for the developer to provide a Letter of Credit Indemnity Deposit of $1.5 million for the first year and $1.0 million thereafter.

This assignment and amendment does not change the financial arrangement or obligations under the CFD Agreement for the Vistancia CFD.  The following key tenets of the CFD remain unchanged if the CFD Board approves the assignment and amendment to the CFD Agreement:

 Separate Legal Entity

The Vistancia CFD is a separate legal entity within the boundaries of the City.  Any debt or other legal obligations of the CFD are strictly obligations of the CFD. They are not obligations of the City of Peoria. The financial obligations primarily include the debt service payments necessary to meet semi-annual principal and interest payments.

$1 Million Indemnity Deposit

The new developer, guarantor and indemnitor of the CFD, Vistancia Development LLC is a new single purpose limited liability company created by the investors and managing members for the sole purpose of managing and developing the Vistancia project.  The ability of this entity to fully indemnify the CFD and City against claims and losses is limited, creating risks for the CFD and City. To mitigate  such risks, the developer is required to provide a letter of credit deposit of $1.5 million. The deposit will automatically be reduced to $1.0 million in the second year and will remain in place until all debt is paid off and the CFD is inactive for five consecutive years. The CFD has the authority to assess an operation and maintenance tax of up to $0.30 per $100 of assessed valuation for expenses but has not assessed this tax since inception and does not plan to do so. 

Target Tax Rate of $2.10 Is Not A Maximum Rate

The debt service obligations of the CFD are the ultimate responsibility of the property owners within the CFD. They are not obligations of the City of Peoria.  The CFD is legally obligated to establish the property tax rate at whatever tax rate is necessary to generate property tax revenues necessary to meet the debt service in any given year. The targeted $2.10 tax rate is not a maximum rate. As discussed above, the developer is required to make shortfall contributions under a Standby Contribution Agreement (SCA). If the developer fails to make the required contributions, the CFD can draw upon the letter of credit security for the SCA and the letter of credit deposit for indemnity.

No Additional Debt Issuance

Under the existing Vistancia CFD Agreement, no additional or new debt will be issued. Existing debt is scheduled to mature in 2026 and the tax rate of $2.10 is expected to expire when all debt is paid off.