The Des Moines City Council has agreed to the preliminary terms of a deal to push back the payoff of a 2007 federal loan used to trigger the development of Gray’s Landing to 2040. 

The city and Minneapolis-based Sherman Associates reached an agreement in 2007 to develop nearly 150 acres south of Martin Luther King Jr. Parkway between Southwest Ninth and Southwest 16th streets. 

The build-out was slowed by the recession and this will be the third amendment to the development agreement. The federal loan was made to the city and passed on to Sherman.

The goal was to repay the loan with tax increment finance revenues generated by new construction. Under an amendment in 2015, Sherman agreed to pick up payments on the loan and proceeded to deliver two apartment buildings and a hotel. 

Under the third amendment, Sherman plans an additional $154 million in construction with two senior living projects, an office building, another hotel and a commercial pad. 

It is estimated that the loan and interest payments will total $11.8 million through fiscal year 2029. After that date, Sherman will receive about $11.2 million in TIF revenues to cover the costs of development as well as the loan payments. 

The city also is attempting to renegotiate the terms of the federal loan to achieve a lower interest rate.

Taxable valuation in the area, which has been reduced nearly in half, is expected to be $95.7 million.

Meanwhile, Hubbell Realty Co. has acquired the southern half of the development area for its Gray’s Station neighborhood, which also will include a bridge providing access to Gray’s Lake. 

The City Council also has agreed to the preliminary terms of an amendment to the Gray’s Station development agreement that will boost the TIF payout to an estimated $14 million from $12.5 million because of higher than expected development costs.