To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Frank Gray, President, Castle Rock Economic Development Council
Title
Resolution Approving an Economic Incentive Loan from the Town of Castle Rock to Brinkerhoff Restaurants, LLC, to Facilitate the Development and Construction of the Hummingbird Event Center [located in the Promenade, adjacent to La Loma restaurant]
Body
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Executive Summary
The purpose of this memorandum is to provide an overview of the Hummingbird Event Center and their request for Town support through the Castle Rock Economic Incentive Program. The project is being proposed by Brinkerhoff Hospitality, an established restaurant group that owns and operates the La Loma and Sierra brands.
The project is located adjacent to La Loma on Lot 1A-3A Block 2 Promenade at Castle Rock. The site is 2.458 acres and boasts tremendous views providing the community with an opportunity to have a truly special development. Dating back to 2020, Brinkerhoff Hospitality was presented with the opportunity to purchase the site (Through first right of refusal), as Alberta Development had received an offer to purchase from a quick serve restaurant. With a desire to protect the site and maintain its highest and best use for the community, Brinkerhoff Hospitality worked with the Castle Rock EDC and the Town’s Development Services on a concept that included a 9,052 SF restaurant and a 2,633 SF event center (5,572 SF when including the indoor/outdoor 4 season patio). The site development plan (SDP) was approved this past May and is attached as part of this request.
Despite the long-standing history and success of Brinkerhoff Hospitality, financing has been a challenge, specific to the free-standing event center. Rather than abandon the event center component, Brinkerhoff Hospitality has offered to self-finance the Hummingbird estimated at $2.5 MM provided the Town extends a $500,000 short term (5 year) loan.
Incentive Request
Brinkerhoff Restaurants LLC is requesting a $500,000 loan, of which $300,000 will be provided from the Town’s Economic Development Fund and $200,000 will be provided in the form of deferment of Town permit and fees, land use application fees, system development fees, and development impact fees (“Town Fees”) but not including Town or County use tax. The loan is designed to help mitigate the impact of having to either abandon the event center component or self-finance to keep it intact.
The term of the loan is for 5 years. It contains annual escalation clauses that adjust the interest rate from 1% over the first 36 months to 3.5% for months 37 through 48 and finally 5% for months 49 through 60. The note will be secured by a deed of trust subordinated to the bank of record and the SBA (if applicable). The Town Attorney’s office is comfortable with the project secured in second position (or third if SBA) on the loan and supports the recommended deal structure (Deal Terms attached).
Event Space Needs
Castle Rock has very limited event space available for the community to celebrate graduations, weddings, retirements, business meetings and other gatherings. Events intended to be held in Castle Rock are ultimately moved outside of the community due to the lack of available space and services.
The event facilities that do exist in Castle Rock report that they are operating at a capacity, providing limited scheduling opportunities for our residents. For example, the Philip S. Miller Park Millhouse reports that as of April 1 of this year 73% of their weekends (Thursday - Sunday) are booked for the remainder of the 2023 calendar year. This is one of many examples that demonstrate the need for additional event space in Castle Rock.
Incentive Structure Recommendation (EDC)
It is the EDC’s position that the Brinkerhoff Hospitality incentive request warrants the support of the Town’s economic development incentive fund. Economic vitality is a critical factor in ensuring Castle Rock’s long-term success in achieving its vision of being a self-sufficient standalone community. With increasing regional competition, it is important to Castle Rock to remain competitive and maintain an exceptional business climate.
Retail plays a vital role in community development. The balance between national, regional, and local offerings ensures that the Town of Castle Rock captures the necessary sales tax while also benefiting from high quality, unique and authentic retail experiences that enhance community character. As the community grows and developable ground becomes scarce, the opportunities to support unique local businesses becomes exponentially more challenging, making it important to get it right the first time. The project, as proposed, offers the community one of the highest and best uses for a unique site that offers exceptional views.
By supporting Brinkerhoff Hospitality, the Town would ensure that:
1. The Hummingbird Event Center is developed as part of the Project
2. Additional sale tax growth
3. Supports highest and best use
4. Supports a community need for additional event space
5. Support comes in the form of a loan so will be paid back to the Economic Development Fund within five years
In order to achieve the Town’s economic development objectives of supporting unique and authentic gathering experiences for the community, the EDC and Town staff recommend the approval of this project.
Timing
Brinkerhoff Hospitality has agreed that should the Town support their request for financing, they will commit to pulling all building permits by the end of the year (2023). Construction of the project would then be complete with 18 months of receiving permits.
Attachments
Attachment A - Brinkerhoff Hospitality - Incentive Request
Attachment B - Site Development Plan (SDP)
Attachment C - Loan Term Sheet
Attachment D - Agreement