PURPOSE

The purpose of this report is to present a second proposal for prepayment of an outstanding note held by Strategic Hotel Capital pursuant to the Fourth Implementation Agreement dated September 1988 (later amended in August 1989, and May 1991), by and between the Redevelopment Agency of the City of Burbank and Strategic Hotel Capital as assigned (Hilton Hotel); and to receive direction from the Agency Board on said offer.

BACKGROUND

On September 16, 2003, staff presented a proposal from Strategic Hotel Capital (SHC) for a lump sum payment of $3.6 million in return for complete and final release of all liabilities under the Note and the Agreement.  While the offer was contingent upon the Participant receiving final SHC Board approval, the offer was to pay the Burbank Redevelopment Agency $3.6 million within 10 business days after the necessary approvals are obtained, and the appropriate documentation evidencing the agreement was completed (Exhibit A � Staff Report of September 16, 2003).  The Redevelopment Agency Board did not accept the offer, and appointed Mr. Dave Golonski and Mr. Jef Vander Borght to a City Council subcommittee to discuss prepayment with SHC and Hilton representatives.

ANALYSIS

Staff received a letter on December 22, 2003 from SHC stating that after several meetings and discussions with the City Council subcommittee, SHC has agreed to a payoff amount of $6,000,000 on the Note (Exhibit B).  The offer is contingent upon SHC receiving internal Board approval.  SHC expects this approval will be granted in advance of the Agency Board meeting date of January 6, 2004.

Based on the previous Keyser Marston and Associates (KMA) analysis of the $3.6 million offer, KMA estimates the current balance of the Note to be $8.8 million, and the net present value of the Note to be within the range of $803,000 to $7.79 million.  The prepayment offer of $6,000,000 falls at the high-end of the range of the present value of the Note.  Written documentation that the SHC Board has approved the $6,000,000 offer is required.  If the offer is accepted by the Redevelopment Agency Board, the approval will expire within 30 days if no written documentation is received.

FISCAL IMPACT

If the Redevelopment Agency Board accepts the offer, the Agency will receive $6.0 million that will be deposited in the Golden State Redevelopment Project Area fund.

RECOMMENDATION

Staff recommends the Agency Board approve the Agency Resolution accepting the lump sum offer of $6.0 million for payment in full of the Participant Repayment Note, and authorize the Assistant Executive Director to deliver the appropriate documents to the developer to be prepared by the City Attorney�s Office.

EXHIBITS

Exhibit A - Staff Report of September 16, 2003

Exhibit B - REVISED Prepayment Offer Letter from Strategic Hotel Capital, L.L.C.