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Legislation #: 170753 Introduction Date: 9/21/2017
Type: Ordinance Effective Date: none
Sponsor: None
Title: Authorizing the Director of the General Services Department to execute a Sublease, including an option to purchase Property, by and between HRB Deployment _ Support, LLC, as the Sublandlord, and the City, as the Subtenant, for that certain premises and parking in and upon the building commonly known as 4400 East Blue Parkway and implement those undertakings; appropriating $821,000.00 from the Unappropriated Fund Balance of the Capital Improvements Sales Tax Fund to the 4400 E. Blue Parkway project account for $371,000.00 in rental and associated occupancy costs through April 30, 2018, and $450,000.00 for moving costs and necessary IT improvements for leasehold space; and recognizing an accelerated effective date.

Legislation History
DateMinutesDescription
9/21/2017 Filed by the Clerk's office
9/21/2017 Referred to Finance and Governance Committee
9/27/2017 Hold On Agenda (10/4/2017)
10/11/2017 Hold On Agenda (10/18/2017)
10/18/2017 Hold On Agenda (11/15/2017)
11/8/2017 Hold On Agenda (11/29/2017)
11/29/2017 Hold On Agenda (12/6/2017)
12/6/2017 Advance and Do Pass as a Committee Substitute, Debate
12/7/2017 Held on Docket (12/14/2017)
12/14/2017 Held on Docket (12/21/2017)
12/21/2017 Re-Referred Finance and Governance Committee
1/10/2018 Hold On Agenda (1/17/2018)
1/24/2018 Hold On Agenda (1/31/2018)
1/31/2018 Hold On Agenda (2/14/2018)
2/14/2018 Hold On Agenda (2/28/2018)

View Attachments
FileTypeSizeDescription
170753 Exhibit A.pdf Exhibit 327K Exhibit A
170753.pdf Advertise Notice 1178K Presentation
170753 Fact Sheet .pdf Fact Sheet 20K fact sheet

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COMMITTEE SUBSTITUTE FOR ORDINANCE NO. 170753

 

Authorizing the Director of the General Services Department to execute a Sublease, including an option to purchase Property, by and between HRB Deployment & Support, LLC, as the Sublandlord, and the City, as the Subtenant, for that certain premises and parking in and upon the building commonly known as 4400 East Blue Parkway and implement those undertakings; appropriating $821,000.00 from the Unappropriated Fund Balance of the Capital Improvements Sales Tax Fund to the 4400 E. Blue Parkway project account for $371,000.00 in rental and associated occupancy costs through April 30, 2018, and $450,000.00 for moving costs and necessary IT improvements for leasehold space; and recognizing an accelerated effective date.

 

WHEREAS, pursuant to a Commercial Office and Warehouse Building Lease dated October 14, 1999, between Swope Community Builders, a Missouri nonprofit corporation, formerly known as Midtown Community Development Corporation, whose interest is now held by CBKC Commercial L.L.C., a Delaware limited liability company (“Landlord”), H&R Block Tax Services, Inc., the predecessor-in-interest to H&R Block Tax Services, LLC (“Tenant”), and H&R Block, Inc., as guarantor, as amended by that certain First Amendment to Commercial Office and Warehouse Building Lease dated August 1, 2004 (collectively, the “Lease”), Tenant leased from Landlord all of the rentable space consisting of approximately 84,282 square feet in the building located at 4400 East Blue Parkway, Kansas City, Missouri 64130 (“Building”) and the parking areas and other improvements adjoining the Building (collectively referred to hereinafter as the “Property”); and

WHEREAS, H&R Block Tax Services, LLC, the successor by merger to Tenant, assigned and transferred all of its right, title, interest and estate in the Lease to HRB Deployment & Support, LLC (the “Sublandlord”), on April 6, 2015; and

WHEREAS, the Landlord is the fee simple owner of the Property, and

WHEREAS, the Property is located within the Brush Creek Corridor TIF Plan (“TIF Plan”), the expiration of which TIF Plan is the calendar year end of 2023; and

WHEREAS, the Property, and Landlord’s control and disposition thereof, pursuant to the Lease, is subject to: (a) approvals by Principal Life Insurance Company and the Ewing Marion Kauffman Foundation (together, the “Lenders”), (b) the terms and conditions of that certain Trust Indenture by and between First Bank of Missouri (“Trustee”) and the Industrial Development Authority of Kansas City, Missouri (“Issuer”) dated November 1, 2015, pertaining to $1,325,000.00 Refunding and Project Revenue Bonds (Swope Community Builders Project) Series 2015, and (c) the Tax Increment Financing Commission of Kansas City, Missouri (the “TIF Commission”), pursuant to various agreements related to the TIF Plan;

 

WHEREAS, the Sublandlord holds an option from the Landlord to purchase the Property pursuant to the terms and provisions set forth in Sections 1.8 and 32.2 of said Lease (the “Option”); and

WHEREAS, the Sublandlord and the City, as the Subtenant, propose to enter into a Sublease, concerning the sublease of approximately 69,357 square feet of space in the Building, along with the parking areas and other improvements which constitute the Property (the “Sublease Premises”), but excluding approximately 14,926 square feet of the Building, which, pursuant to the terms and provisions of said Sublease, will continue to be used by the Sublandlord; and

WHEREAS, the City desires (a) that the Landlord, Lenders, Trustee, Issuer, and TIF Commission, if and as required: (i) consent to the Sublease; and (ii) authorize the Sublandlord’s assignment of its Option to purchase the Property to the City; and (b) to assume all right, title and interest in the Option, including all rights to exercise, from the Sublandlord; NOW, THEREFORE,

 

BE IT ORDAINED BY THE COUNCIL OF KANSAS CITY:

 

Section 1. That the Director of the Department of General Services (“Director”) is hereby authorized to further negotiate and execute a Sublease between the City of Kansas City, Missouri and HRB Deployment & Support, LLC, for (a) the lease of approximately 69,357 square feet of space in the Building and the associated parking and other improvements located at 4400 East Blue Parkway, Kansas City, Missouri, and (b) the assumption of Sublandlord’s Option to purchase the Property directly from the Landlord, in accordance with the terms and provisions of the Sublease, which Sublease shall be substantially in the form of Exhibit A attached hereto, for an initial term commencing January 1, 2018 through May 17, 2023 (“Sublease”), with the final signed form of Sublease to be maintained on file with the Director.

 

Section 2. That the Director is hereby authorized to further negotiate and execute one or more Consent, Nondisturbance and Attornment Agreements (the “Consents”) with the Landlord, the Lenders, the Trustee, the Issuer, and the TIF Commission, if and as applicable, confirming the right of the (a) Landlord to consent to (i) the Sublease between the Sublandlord and the City, and (ii) the assignment by Sublandlord of its Option to purchase the Property to the City, and (b) City to assume the Sublandlord’s right, title and interest in the Option, with the right to exercise directly with the Landlord, with the final signed forms of Consents to be maintained on file with the Director, provided, however, the form of the Consents offered to the Lenders shall be substantially in the form of Exhibit 1 attached to the Sublease.

 

Section 3. That the the City Manager is directed to conduct further financial feasibility analysis from time to time, and if supported by a such future analysis, then the City Manager will account for and budget (a) a future available appropriation in such amount as may be appropriate to exercise the Option to purchase of the Property, pursuant to the Option terms set forth in the Sublease, not later than January 17, 2023, for a closing of the purchase to occur in accordance with the Real Estate Contract appended to the Lease, not later than May 17, 2023, with the understanding that the amount of the purchase price if computed as of July 1, 2017, would have been calculated to include (1) $8,261,897.00 of outstanding indebtedness secured by the Property, (2) an $870,000.00 prepayment penalty included in the loan documentation secured by the Property, (3) $250,000.00 payable to the to the Landlord pursuant to the Lease, and (4) any other obligations due the Landlord pursuant to the Lease and other indebtedness presently secured by the Property as included in the purchase as to be computed pursuant to the Lease; and (b) for payment to the applicable taxing authority in accordance with the TIF Plan, an annual payment of taxes (or payments in lieu of taxes) (“PILOTS”) in the amount of $75,000.00, to be paid by the City, prior to delinquency, commencing upon the date on which the City becomes the owner of the Property pursuant to the exercised Option, and thereafter continuing for the duration of the TIF Plan, projected to end in 2023, and the Director is hereby authorized to assume Sublandlord’s Option to purchase the Property in the Sublease, and thereafter may cause the purchase of the Property in the name of the City, and execute all necessary documents to acquire the Property from the Landlord, subject to a future available appropriation for such purchase amount. The City acknowledges that its annual $75,000.00 PILOT is a partial payment of what will be due annually under the TIF Plan, and that pursuant to the Sublease and the Consents, the Sublandlord is annually obligated to pay to the appropriate taxing authority, prior to delinquency, the difference between the City’s PILOT payment and the actual taxes or PILOTs due, commencing upon the date the City becomes the owner of the Property, and continuing through the duration of the TIF Plan, the “PILOT Payment Period,” as defined in the Sublease, projected to end in 2023; however, with the express understanding that the City is not obligated to exercise the Option unless and until there is a future appropriation by the City Council at the time of such future exercise and the appropriation for such purchase is set aside for that purpose.

 

Section 4. That the aggregate sum of $821,000.00, of which $371,000.00 is attributable for the rental and occupancy cost through this current fiscal year, and $450,000.00 is attributable to the moving costs of City Neighborhoods and Housing Service Department employees from the structure at 4900 Swope Parkway and the installation of IT related appurtenances for connectivity to City’s central servers and support services, is hereby appropriated from the Unappropriated Fund Balance of Capital Improvements Sales Tax Fund to the following account:

 

18-3090-078025-07001311 4400 E. Blue Parkway $821,000.00 

 

Section 5. That the Director of General Services is hereby designated as requisitioning authority for Account No. 18-3090-078025.

 

Section 6. That the City Manager is authorized for the fiscal year commencing May 1, 2018, and each fiscal year thereafter that the City remains a party to the Sublease, to allocate any costs under the Sublease from one or more of the following sources: the City wide allocation within the Capital Improvements Program administered by the Public Improvements Advisory Committee; provided, however, any such allocation shall be limited by eligibility due to regulations applied to such funding sources.

 

Section 7. That this ordinance is recognized as having an accelerated effective date within the provisions of Section 503(a)(3)(C) of the City Charter in that it appropriates money, and shall take effect in accordance with that section.

 

____________________________________

 

I hereby certify that there is a balance, otherwise unencumbered, to the credit of the appropriation to which the foregoing expenditure is to be charged, and a cash balance, otherwise unencumbered, in the treasury, to the credit of the fund from which payment is to be made, each sufficient to meet the obligation hereby incurred.

 

 

______________________________

Randall J. Landes

Director of Finance

 

Approved as to form and legality:

 

 

______________________________

Amelia McIntyre

Associate City Attorney