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HomeMy WebLinkAboutCC RES 03-085 A RESOLUTION RELATING TO THE REDEVELOPMENT OF PROPERTY IN REDEVELOPMENT PROJECT AREA NO. 3 AND AUTHORIZING THE PREPARATION, EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT THEREOF Meeting Sheet IIIIIIVIIIVIIIVIIIVIIIVIIIIIIIIIII 104574 Box: 31 Folder: RES 2003 Document: CC RES 03-085 A RESOLUTION RELATING TO THE REDEVELOPMENT OF PROPERTY IN REDEVELOPMENT PROJECT AREA NO. 3 AND AUTHORIZING THE PREPARATION, EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT THEREOF THE CITY OF ST. ANTHONY RESOLUTION NO.03-085 RESOLUTION RELATING TO THE REDEVELOPMENT OF PROPERTY IN REDEVELOPMENT PROJECT AREA NO. 3 AND AUTHORIZING THE PREPARATION, EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT THEREOF WHEREAS, the City of St. Anthony (the "City") and the St. Anthony Housing and Redevelopment Authority (the "HRA") have identified an area located in the northwest portion of the City (the "Northwest Quadrant") for study regarding the area's decline and opportunities for potential redevelopment; and WHERAS, the City's HRA hired consultants and appointed a citizen-based task force to develop a planning framework for redevelopment of the Northwest Quadrant; and WHEREAS, the consultants and task force developed the Northwest Quadrant Redevelopment Plan ("Northwest Quadrant Plan"), dated July 2001, which describes the planning process, the existing conditions and provides redevelopment options for the Northwest Quadrant; and WHEREAS, the City and HRA reviewed the Northwest Quadrant Plan and agreed with the findings contained therein; and • WHEREAS, a portion of the property in the Northwest Quadrant is included in Redevelopment Project Area No. 3 established by the Redevelopment Plan for Redevelopment Area No. 3 of the HRA as modified(as so modified the"Redevelopment Plan"); and WHEREAS, the City and HRA have been proceeding with plans and discussions concerning the redevelopment of a portion of the property in Redevelopment Project Area No. 3 ; and WHEREAS, on April 23, 2002 the City Council ("Council") approved Resolution #2002- 042 authorizing the City to enter into a Pre-Redevelopment Contract with Pratt-Ordway-Dominium (Developer Limited Partnership) ("the Developer") for such redevelopment; and WHEREAS, the Developer is proposing to construct approximately 211,000 sq/ft of retail and office space, 220 market rate rental units, 336 owner-occupied flats, 26 three story town homes and 80 senior cooperative units on a portion of the property in Redevelopment Project Area No. 3; and WHEREAS, the City and HRA believe that such proposed redevelopment of the Redevelopment Property will result in increased housing units to meet the demands of the marketplace, the increase of employment opportunities for residents of the city, the increase of the value of property subject to taxation by the City and other local government units, and the increase of general economic activity in the City, all of which will reduce unemployment, improve living conditions, promote desirable redevelopment of land, remove blight and prevent the emergence of additional blighted property and areas, and encourage and enhance the general health and welfare of the residents of the City; and WHEREAS, representatives of the Developer and of the City and HRA have been discussing the proposed terms of such development by the Developer on the Redevelopment Property and the means by which such development will be undertaken and the extent of public assistance required for such development, which proposed terms are contained in a Term Sheet (the "Term Sheet") negotiated by such parties, a summary of which has been presented to and reviewed and discussed by this Council. 1 r • NOW,THEREFORE, BE IT RESOLVED,by the City Council of St.Anthony as follows: 1. The Council believes that the redevelopment of the Redevelopment Property as proposed by the Developer, are in the vital and best interests of the City and the proposed tax increment and other public assistance to be provided by the City and HRA to such redevelopment primarily serve a public purpose and are in the public interest by permitting the redevelopment of property in the City in a manner that meets the goals and objectives of the Redevelopment Plan and is in accordance with the provisions of applicable federal, state and local laws. 2. The City Manager is hereby authorized and directed on behalf of the City to negotiate a Contract for Private Development, by and among the City, the HRA and the Developer and related agreements (the Contract for Private Redevelopment and related agreements are herein together referred to as the "Redevelopment Agreement") the terms of which shall not, in his opinion, substantially alter or impair the rights and obligations of the City and HRA as set forth in the Term Sheet, and the form of which shall be approved by the City Attorney. 3. Neither the adoption of this resolution nor the Term Sheet shall constitute a contract or agreement on behalf of the City, and the Redevelopment Agreement shall not be deemed effective or legally enforceable against the City until approved by and executed and delivered on behalf of the City by the Mayor and City Manager. Adopted this 3 day of 2003. • Mayor ATTEST: �I o ��✓ City Clerk Reviewed for Administration: �4 / City NTanager • r EHLERS • & ASSOCIATES INC To: Mike Mornson—City Manager OCity Council and Housing and Redevelopment Authority(HRA) 2 From: Stacie Kvilvang—Associate Financial Advisor W Sid Inman—Executive Vice President Date: September 17, 2003 Subject: Northwest Quadrant Redevelopment - Development Proposal and Terms of Development Agreement The Development Team has refined their concept for redevelopment of the above referenced project area. This concept includes the acquisition and subsequent redevelopment of the following properties: Property Name PID Phase I—Commercial Apache Plaza 31-30-23-34-0016 1B—For Sale Housing • I—Rental Housing Vacant New Market Site 31-30-23-33-0002 I—Rental Housing Taco Bell 31-30-23-34-0018 I--Commercial SAV II/Tires Plus 31-30-23-34-0017 I—Commercial 2 Vacant HRA Parcels 31-30-23-34-0014 1—Commercial 31-30-23-34-0019 Vacant Parcel around Taco Bell 31-30-23-34-0015 1-Commercial Pond behind Cub Foods 31-30-23-31-0028 1- Commercial Pond Behind Mini Mall 31-30-23-31-0033 I- Commercial Cub Foods I- Commercial Apache Squares 31-30-23-33-0001 IA—For Sale Housing Apache Office 31-30-23-33-0011 IA—For Sale Housing JA Cadwallader Office 31-30-23-33-0012 IA—For Sale Housing Bakers Square&Parking Lot 31-30-23-33-0013 IIA—Housing 31-30-23-33-0014 Don's Car Wash 31-30-23-33-0005 IIA -Housing Firestone 31-30-23-33-0006 IIB—Town Homes Ed's Carwash 31-30-23-33-0010 IIB—Town Homes Vacant parcel on Stinson Blvd IIB—Town Homes Fuel Mart 31-30-23-33-0003 IIC—Housing Carwash on Stinson Blvd 31-30-23-33-0004 IIC - Housing LEADERS IN PUBLIC FINANCE 3060 Centre Pointe Drive Phone: 651-697-8506 Fax: 651-697-8555 Roseville, MN 55113-1105 skvilvang@ehlers-inc.com • Mike Morrison—Northwest Quadrant Redevelopment September 17,2003 Page 2 The Development will be divided into the following three phases: Square Development Desired Development Development Footage/#of Time Frame Start Date Default Date Valuation Units Phase I Big Box 142,000 Sq/Ft 2004-2005 Spring 2004 June 1,2005 Phase I Retail 56,000 Sq/Ft 2004-2005 Spring 2004 June 1,2005 $18.81 Phase I Office 25,000 Sq/Ft 2004-2005 Spring 2004 June 1,2005 Million Phase I SAV II 8,800 Sq/Ft 2004-2005 Spring 2004 June 1,2005 Phase I Market Rate 220 Units 2004-2006 Fall 2004 July 1, 2005 $19.8 Million Apartments Phase 1A Urban Flats 128 Units 2004-2006 Fall 2004 July 1, 2005 $30.72 Million Phase IB Urban Flats 128 Units 2005-2007 Fall 2005 July 1, 2006 $30.72 Million Phase IIA 80 Units 2005-2007 Fall 2005 July 1, 2006 $16 Million Senior Co-Op IIB 26 Units 2005-2006 Fall 2005 July 1, 2006 $9.75 Million 3-Story Town Homes • Phase IIC Urban Flats 1 80 Units 1 2006-2007 1 Fall 2006 1 July 1, 2007 $19.2 Million TOTAL I N/A I N/A I N/A I N/A $145 Million Based upon these options, Ehlers and the Development Team have estimated that the cost to acquire all the land, relocate existing businesses, demolish the structure and complete the public improvements will cost approximately $16 million for Phase I and $4 million for phase II. To assist in offsetting this cost, the Developer has proposed the following payment for land and special assessments for the Phase I Development: ;Commercial Phase IA Urban Phase IB Market Rate Total Flats Urban Flats Apartments: Land Cost $2,779,360 $960,000 $1,600,000 $2,249,940 $7,589,300 $3.54 /ft $7 500/unit $12 500/unit $10,227/Unit Special $1,705,000 $325,000 $0 $0 $2,030,000 Assessment ($2.17 sq/ft) ($2,539/Unit) Total $4,484,360 $1,285,000 $1,600,000 $2,249,940 $9,619,300 $5.71 sq/ft) The for sale urban flats will be paying an average of$10,000 per unit, but it is divided among the two phases to allow the initial phase to pay less for land up front to allow the Developer the flexibility to address any market issues and legal, financing & design issues occur disproportionately in the first phase. It should be noted that Phase II land prices have not been submitted yet and will be reviewed and compared to industry standards when our office receives them. Based upon the above referenced development program, following is a listing of the proposed business • terms for the final Development Agreement: 1. General a. Parties. The Redeveloper will be one or more single asset entities created by Pratt Ordway LLC to act as the Redeveloper. Pratt Ordway will assign its purchase agreement for the Ste. Marie Property and any other property it obtains purchase agreements upon, to this • Mike Morrison -Northwest Quadrant Redevelopment September 17,2003 Page 3 entity. The Redeveloper will subdivide the redevelopment area and sell various portions of the property to other entities (in which Pratt Ordway, its principals or affiliates may be participants,with the exception of the rental housing portion). 2. Tax Increment. a. Creation of a Redevelopment TIF District. The City and HRA are required to create a Redevelopment TIF District by September 30, 2003, to assist in offsetting the high costs associated with redevelopment. It is understood that the City and HRA will be holding public hearings on the creation of the District prior to this date, but that the City will not request certification of the District until a Development Agreement is executed. b. Amount of Increment: Based upon the latest Sources and Uses from the Development Team, it is anticipated that the Phase I development will generate approximately $13.3 million in present value tax increment. Of this increment, it is anticipated that the Commercial and For Sale Housing Development Elements will require approximately $7 to $8.5 million to complete the redevelopment and the Rental Housing Developer will require approximately$2.7 million. • The Sources and Uses Statements and the amount of TIF for Phase II development are in the process of being compiled. c. Fiscal Disparities. Fiscal Disparities will be paid inside the district. d. Administration Expense Allocation. Currently all TIF calculations show 5% of available Tax Increment being available for administration. To the extent that the development will require more than 95% of the TIF for actual redevelopment costs or coverage of bonds,the City may elect to subordinate its 5% administration until the entire development comes on line (it is anticipated that this will not be required at this time). In the alternative, if there is excess increment, the City may increase its administration amount to the statutory limit of 10%. e. TIF Notes. It is anticipated that the Development Team will finance their development costs up front and that they will request the City to "take them out' after the development is completed through the issuance of Tax Exempt TIF bonds. This is a tool that is used in many of the metropolitan communities to assist developers with development and is a low risk proposition for the City, since the developments will be constructed and paying taxes when the City is issuing these bonds. 3. Public Improvements. a. Roadway and Sanitary Sewer Improvements. 39`h Avenue will be reconstructed from Silver Lake Road to Stinson Boulevard and upgrades will be made to the sanitary sewer lines as well. It is anticipated that it will cost approximately $2.205 million to complete • these improvements and the cost will be assessed to and paid for by the development and other benefiting properties within the TIF District as follows: • Mike Morrison -Northwest Quadrant Redevelopment September 17,2003 Page 4 Large Retailer: $1,200,000 Paid up front or completion of roadway Small Commercial: $500,000 Assessed over term of bonds Phase IA For Sale Housing: $325,000 Paid at sale of units Benefiting properties: $175,000 Assessed over term of bonds TOTAL $2,205,000 The City will most likely be required to sell temporary bonds (1-year call date) to pay for the construction up front then refinance the bonds once any prepaid special assessments are received. Any amount in excess of the anticipated amount of$2.205 million will be paid through Tax Increment generated from the project. b. Site Improvements/Open Space. The Redeveloper will pay for the open space/ponding and site improvements, which are estimated to cost approximately $1,430,000. They will be reimbursed by the City and HRA for a portion or all of the site/ponding improvements through Park Dedication Fees generated from the development (estimated at $205,000), any grants the City may receive and from Tax Increment. The site improvements may be phased over a three (3) year period if the City does not receive the $900,000 in LCDA funds it requested from the Metropolitan Council. The phasing of the site improvements • will allow the Development Team to pay for the improvements as cash becomes available. The Development will be responsible for the costs associated with maintaining the storm water ponds and the City will be responsible for maintaining the open space around the storm water ponds. The City and Redeveloper are currently discussing coordination and responsibility for the maintenance,etc. 4. Miscellaneous. a. City Liquor Store. The Redeveloper will construct and furnish a new Municipal Liquor Store within the commercial development. It is anticipated that the Liquor Store will be constructed prior to demolition of the existing store so as to cause minimal disruption to the City's Liquor operation. Since Tires Plus will be required to relocate their business,the City will work with them to find a suitable site to relocate to. It should be noted that the City may need to condemn the Tires Plus lease if deemed necessary by the City Attorney. The Redeveloper will pay the cost to relocate the existing Tires Plus building and the cost to construct the new Liquor Store,up to an amount not to exceed$1,700,000. b. Cub Foods. The Redeveloper has a signed purchase agreement for the existing Cub Foods store for $10,850,000, inclusive of the restrictive property covenants. The Redeveloper intends to rehabilitate the store to upgrade its appearance to the quality of the new commercial development. It is estimated the cost of this "face lift" will be $580,000. The agreed upon purchase price of the store does not allow the Redeveloper to obtain any more debt on the property. • • Mike Morrison -Northwest Quadrant Redevelopment September 17, 2003 Page 5 In addition, the City agrees that absent this sale, the property was "under threat of condemnation" and would consider taking all necessary actions to acquire the site if the acquisition had not been negotiated. c. Commercial Property Acquisition. The Redeveloper has requested assistance in acquiring the three commercial properties that the Phase IA For Sale housing units will be located upon (Apache Squares, Apache Office and JA Cadawallader Office). The Development Team has had discussions with Fannie Mae to assist in providing the "up front" money needed to acquire these properties. Fannie Mae is willing to provide this assistance but will require, as collateral, the land, Developer Guarantee and a pledge funds from the City. It is anticipated that the City will utilize funds from the Water Filtration Fund to utilize as collateral for the loan and will not be required to provide its General Obligation Taxing Authority. The terms of the collateral are still be discussed with Fannie Mae and terms of a revolving fund for future property acquisitions is still being discussed with the Redeveloper. Any final loan agreement will be brought before the City Council and HRA for approval. The Redeveloper will be required to have 20% of the units in the first Phase IA building sold prior to the City advancing the loan funds from Fannie Mae. In addition the • Redeveloper will need to have obtained the commitment for construction financing for the Phase IA land prior to advancement of the loan. d. Profit Sharing on For Sale Urban Flats. The Developer of the For Sale housing units anticipates a twelve (12) percent profit on the development. Once the Developer obtains this profit margin, they will provide a prorated "pay back" to the City and HRA of 25% of the excess profit. If the project profit exceeds fifteen (15) percent, then the City and HRH's prorated share of the profit will be increased to 50%. It should be noted that the profit calculations exclude any unit"upgrades"requested by homeowners. e. Below Market Profit TIF Assistance Increase. Provided the For Sale Developer is not in default, in the event the return to the For Sale Developer is less than 12%, the City and HRA shall provide the For Sale Developer a subordinated Pay-As-You-Go (PAYG) Tax Increment Note in the amount needed to attain a 12% return. The Subordinated TIF Note shall be payable solely from the amounts of Available Tax Increment on the For Sale Element not utilized to pay the Tax Exempt TIF Refinancing or the City/HRA 5% administration, on the For Sale Element (i.e. coverage, inflation or excess TIF). We are still finalizing negotiations on when the subordinated TIF note would be paid to the Developer and anticipate we will have it finalized by the September 23, 2003 meeting. f. Look Back Provision. As an Exhibit to the Development Agreement, a mutually agreed upon preliminary development proformas for the For Sale Housing and Commercial Development will be attached. This will be the basis for determination of assistance for the developments. When the developments are completed the actual development proformas • will be compared with the preliminary development proformas. If the projects perform better than anticipated and the For Sale Developer receives their required profit amount of 12% and the Commercial Developer meets their construction and lease goals then the excess proceeds will be disbursed to the City and HRA as excess TIF and will be made available for Phase II developments within the TIF District. • Mike Morrison -Northwest Quadrant Redevelopment September 17, 2003 Page 6 g. Rental Housing Development. The City and HRA will enter into a separate redevelopment contract with the Rental Housing Developer. A separate But-For analysis will be completed for this portion. h. Condemnation. The Redeveloper will utilize reasonable efforts to acquire all property privately prior to requesting the City to initiate condemnation, including use, where appropriate of City sponsored mediation. The City will agree to undertake condemnation of all real properties located within the Redevelopment District, including any leaseholds, easements, restrictive covenants or other or other legal or equitable interest that encumber the Redevelopment District and would restrict redevelopment as contemplated. Condemnation shall be undertaken on a schedule mutually agreed to between the Redeveloper and the City. All costs of condemnation proceedings, including, but not limited to legal fees, filing fees, costs, appraisal fees and title work, shall be paid by the Redeveloper, subject to reimbursement of certain costs as a public redevelopment cost from Tax Increment in accordance with the Redevelopment Agreement. The Redeveloper shall enter into a Reimbursement Agreement with the City to reimburse the costs of condemnation proceeds, condemnation awards and relocation as incurred for acquisition of the Phase I property. • i. Advancement and Reimbursement to Redeveloper. The Redeveloper has reimbursed and agrees it will in the future continue to promptly reimburse the City and HRA for all costs of the City and Authority in advancement of the Project, including but not limited to the costs of the City Consultants, financial analysis of the Project and the Tax Increment Plan, Redevelopment and TIF District analysis and creation, legal fees, survey and title costs, environmental review costs, environmental site investigation costs and other similar costs. The Redeveloper will be reimbursed for these costs and costs associated with acquiring and holding the Apache Plaza property and other overhead as a qualified Tax Increment cost in an amount that is currently estimated to be $2,645,000 and individually listed as follows: Predevelopment Costs(Public/Private): $1,250,000 Apache Mall Holding Costs $355,000 Apache Capitalized Interest: $100,000 Developer Overhead/Administration $590,000 Redeveloper Capitalized Interest—Project Costs: $350,000 TOTAL $2,645,000 The Redeveloper shall cost certify all such private third party costs and expenses of the developer to the reasonable satisfaction of the City and HRA. Any cost savings will be considered available Tax Increment for other qualified costs in the Redevelopment District. j. Redeveloper Incentive Payment. Any costs savings by the Redeveloper on negotiating the purchase, relocation (only due to non statutory payments) and demolition of the three commercial properties for the Phase IA For Sale Housing component will be used to first cover any overruns in any other Redeveloper category and second shall be paid one-half to the Redeveloper and one-half shall be available to the City and HRA for other public • Mike Morrison -Northwest Quadrant Redevelopment September 17, 2003 Page 7 redevelopment costs. The Incentive Fee will not be payable to the Redeveloper if he is in default under the Redevelopment Contract. k. Grants. The City and HRA will provide the Redeveloper with the $586,000 grant it received from the Metropolitan Council for the Asbestos Abatement at Apache Plaza. The City and HRA will use it's best efforts to obtain LCDA and Tax Base Revitalization grant funding and any other available funding from Metropolitan, Sate and Federal Sources. 1. Master Redeveloper Fee. The Master Redeveloper will be paid a $1 million fee for the Phase I development. The fee will be paid as follows: Rental Housing Sale: $500,000 Commercial Sale: $300,000 For Sale Housing Sale: $200,000 The Redeveloper will be paid at the time of the closing of the land sale to each project element. At the land sale closing, one-half of the fee will be paid to the Developer and one- half of the fee shall be deposited with the City/HRA, until the City/HRA has received $250,000 as security against defaults and for Phase II of the project. The City/HRA may • use this $250,000 to fund public redevelopment costs on an interim basis until payable to the Redeveloper. No interest shall be paid by the City/HRA on this fee. If the Redeveloper defaults in any fashion of the Redevelopment contract, all Redeveloper Fee Hold Back shall be forfeited to the City/HRA. The Redeveloper shall be paid back the Hold Back Fee upon the earlier to occur of the following: a City/HRA decision not to proceed with Phase II, a determination by the City/HRA to proceed with Phase Il with a developer other than Redeveloper or as follows: $125,000 upon commencement of construction of the Phase IIA and$125,000 upon commencement of the Construction of Phase IIB by the Redeveloper. in. Default. In the event that the Redeveloper fails to commence an Element of the Project by the default dates set forth in the chart on page 2 of this memorandum, the City and HRA may terminate its obligations under the Redevelopment Contract as regards that Element of the Project. Upon any termination, Tax Increment from portions of the Project, which have not been commenced, shall, at the election of the City and HRA, no longer be pledged and available to repayment of any "pay as you go" tax increment. As part of the underwriting process, the parties and the underwriters, shall establish the terms of any Tax Increment obligations to both recognize this provision and allow effective issuance of the debt. Tax Increment from completed and under construction Elements of the Project shall remain available for outstanding Tax Increment debt. A default shall not prevent refinancing with Tax Exempt Take-out Debt on completed Elements of the Project. n. Assignment. The Redeveloper may create and assign its development rights and the right to enter into the Redevelopment Contract to a single purpose entity to undertake the Project, without the consent of the City and HRA, provided Len Pratt and John Ordway continue to hold a majority voting interest in the new entity. The Redeveloper may thereafter assign portions of the rights and obligations under the Redevelopment Contract to the Commercial,Rental and For Sale Developers, with the consent of the City and HRA, which shall not be unreasonably withheld. • Mike Mornson -Northwest Quadrant Redevelopment September 17,2003 Page 8 o. Land Purchase Price. Purchase price of land for each use will be reviewed and must be shown to be at market and similar to what other projects are paying. p. "But For"Analysis. Ehlers recommends that prior to final determination of Tax Increment assistance that will be provided that a "But For" analysis be preformed to ascertain appropriate level of assistance. The elements of this transaction are within industry standards that Ehlers and Associates have seen within the Metropolitan Area on these types of developments. At this time, we anticipate that a final Development Agreement will be brought before the City Council and HRA in October for consideration and approval. Please contact Sid Inman or I at 651-697-8500 with any questions. cc: Jerry Gilligan—City Attorney File •