In November 2007, the City, the Downtown Billings Partnership (DBP) and The Babcock LLC entered into a Development Agreement to use $1.9 million of Downtown Tax Increment Financing District (TIFD) funds as part of $3.9 million plan to acquire and renovate the historic Babcock Theater at 124 28th St. into a mixed theater, residential and commercial project.  The original agreement called for a 3-phase reconstruction project, with Phase 1 of construction and a Letter of Commitment for Phases 2 and 3 of the project both to be completed by Feb. 1, 2010.  The Babcock LLC developers (Kay Foster, Mike Mathew and Don and Kim Olsen) now are requesting an extension of the Phase 1 deadline to February 1, 2011, and are offering a Letter of Commitment for Phases 2 and 3 that the City Council should acknowledge if it intends to continue with the project (Attachment 1).  An amendment to the Development Agreement to extend the deadline for the Phase 1 completion has been attached for Council approval (Attachment 2).

The original Development Agreement also called for completion by Feb. 1, 2010, of a Condominium Agreement separating the theater, retail and residential units into three separate units.  The paperwork for that agreement has been submitted to City and DBP staff for review, but will not be complete before Feb. 1, 2010.  Of the eight major components in Phase 1 of the renovations, half are complete and the remainder are ready for retail build-out once the Condominium Agreement has been completed and additional tenants and financing can be secured.  The theater currently is being operated by the developers.  All of the residential space and two of the existing retail spaces are leased. 

In addition, six of the eight projects in Phases 2 and 3 are at least half-complete.  A list of all projects and their status is included in Attachment 1.

The Council may:

• Approve the amendment extending completion of Phase I of the Development Agreement to Feb. 1, 2011, and acknowledge receipt of the developers' Letter of Commitment for Phases 2 and 3 of the Babcock Development Agreement.  This option will put a largely renovated Babcock Theater into the hands of the City or its designee by April 1, 2016, and leave the retail and residential space in private ownership; or
• Not approve the amendment and, 60 days after notifying the developers of a default, take control of the property.

The City has paid 100% of the $1.9 million of TIFD monies dedicated to the project.  If the City acquires the unfinished building, it would have to sell the property as is or expend additional money to complete the renovation.

Staff recommends that the Council approve an amendment to the Development Agreement, extending completion of Phase I to Feb. 1, 2011, and acknowledge receipt of the Letter of Commitment for Phases 2 and 3 from The Babcock LLC.