Title
Ninety 7 Fifty on the Park Line of Credit/Term Loan Provider - Approval
History
As previously approved by the Board and as per the terms of the Redevelopment Agreement between the Village of Orland Park (Village) and Flaherty & Collins (F&C), the Village will obtain financing for the total cost (less F&C’s equity contribution) of the Ninety 7 Fifty on the Park development.
Upon determining that the most cost efficient method was the establishment of a bank line of credit that converts to a term loan, with the subsequent issuance of a minimum of two (2) series of taxable general obligation bonds, the Village reached out to a number of financial institutions to gauge their interest in providing the line of credit/term loan financing.
After discussions with a number of financial institutions, we narrowed our selection to Fifth Third Bank and PNC Bank. A summary of the terms and conditions offered by each is attached to this agenda item. Many of the terms and conditions listed by Fifth Third and PNC that relate to the structure of the financing are the same. One significant difference is that Fifth Third is requesting that we maintain our non-credit banking relationship with them for a minimum of five (5) years. This request is not listed as a term and/or condition, but was requested in conversation and will be built into the contract extension that will be brought to the Board in the coming months. Based upon this request, staff asked Fifth Third to provide proposed fee increases over the five (5) year extension term. Fifth Third’s proposal included a 3% fee increase in year one (1) of the extension, no increase in years two (2) and three (3) and a 2% increase in years four (4) and five (5). Staff also advised Fifth Third that should the Village agree to a contract extension, the Village would need language added to our extension agreement that allowed the Village to cancel the contract should Fifth Third not continue to enhance its services and technologies. PNC is only requesting that we establish and maintain a Purchase Card Program with them in the immediate future and consider expanding our non-credit banking relationship in future years.
Another variance between the two proposals lies in the interest rate applied to the line of credit as well as the subsequent term loan. Fifth Third Bank provides for the lowest cost of funds over the ten (10) year life of the line of credit/term loan (three (3) year line of credit/seven (7) year term loan) based upon the current level of the floating rates proposed. As shown on the attached analyses, and based upon the current construction draw schedule provided by F&C, as well as the current rates proposed by each bank, the interest savings over the ten (10) year term amounts to approximately $542,000 when comparing Fifth Third Bank to PNC Bank. Approximately $156,000 of this amount is savings to the Village and approximately $386,000 is savings to the developer.
Both Fifth Third and PNC offered the services of a Banker’s Representative, at the Village’s expense. The Banker’s Representative will act as an owner’s agent for the Village and provide preconstruction, construction and close-out management services, including but not limited to project and developer oversight, design review, construction bid document review, project budget tracking, pay request processing and approval, change order review and tracking, schedule monitoring and management of project punch lists at close-out of project. The services provided by the Banker’s Representative offered by Fifth Third were more formalized and broad as this is a usual and customary service provided by Fifth Third.
Based on the above, staff recommends that the Village enter into an agreement with Fifth Third Bank to provide financing for the Ninety 7 Fifty on the Park project. Upon approval by the Board, Fifth Third will finalize the financing documents and we will bring these documents to the Board on a future date for formal approval. In addition, we will bring the Fifth Third Banking Services contract renewal to the Board prior to expiration of the current contract (November 2011).
Financial Impact
Attached is a cash flow statement for the ten (10) year financing term. The interest rates as quoted by Fifth Third are factored in to this cash flow.
Recommended Action/Motion
I move to approve entering into an agreement with Fifth Third Bank to provide financing for the Ninety 7 Fifty on the Park project.