Background

The Smart Financial Centre at Sugar Land (SFC) - which opened on time and within budget in December 2016 (with a formal grand opening in January 2017) - was identified by a citizen-led Visioning Task Force and is funded through a unique package of special funding sources restricted for economic development and tourism purposes. ACE SL, LLC (ACE SL) - the City's tenured, award-winning partners who brought more than 175 years of combined experience to the project - also provided a $10 million equity contribution and are making substantial rent payments throughout the project's life. No general fund tax dollars were spent on the SFC. The Lease Agreement by and between City of Sugar Land, Texas, as Landlord, and ACE SL, LLC, as Tenant, was approved in October 2014. Recent changes to the monthly rent payments made by ACE SL, LLC, and the receipt of an updated letter of credit have required an amendment to the Lease to document the change.  

Third Amendment to Lease 

The Lease, approved in October 2014, amended for the first time in December 2018 and a second time in April 2020, requires ACE SL to pay a substantial monthly rent to the City, which is directly tied to the venue's debt service schedule. Additionally, the Lease establishes a Debt Service Reserve (DSR) that is funded through additional rent in monthly contributions from ACE SL (beginning May 2021) until the balance reaches an amount equivalent to the final four (4) years of rent payments. Until the reserve is fully funded at $6,407,955.00, ACE SL is required to have a letter of credit on file with the City in the amount of the remaining balance equal to the DSR for the last four (4) years of the term. 

ACE SL requested to pre-pay their payments to the DSR and update the letter of credit on file. With a prepayment of the additional rent of $357,579.64, the DSR balance was increased from $850,375.36 to $1,207,955. As a result, the letter of credit on file is authorized to be reduced to $5,200,000 from $6,400,000. Monthly rent payments will be reduced to the base rent (not including the additional DSR payment) starting with the May 2023 payment and through the March 2024 payment. For the April 1, 2024 payment, the base rent plus $9,236.75 in additional rent will be paid. The regular monthly base rent and DSR payment will resume for the May 1, 2024 payment. The City is remaining whole amidst the prepayment of the DSR contributions. This amendment shall document the temporary changes in the monthly rent schedule.

This item has been reviewed with the City Council Economic Development Committee. 

Staff recommends the City Council approve the Third Amendment to Lease by and between the City of Sugar Land and ACE SL, LLC.