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HomeMy WebLinkAbout1999/07/26 - ADMIN - Agenda Packets - Economic Development Authority - Regular7:00 p.m. - Economic Development Authority Special Meeting AGENDA CITY COUNCIL SPECIAL MEETING ST. LOUIS PARK, MINNESOTA July 26, 1999 7:10 p.m. 1) Call to order 1) Roll Call 1) Approval of agenda a) Agenda Action: Motion to approve - Motion to add item(s) 1) New Business 4a. Redevelopment Agreement relating to the Medical Office Development Proposal the Southwest Corner of Highway 7 and Louisiana Avenue. This report considers the terms and conditions of a redevelopment agreement by and among the St. Louis Park Economic Development Authority, the City of St. Louis Park and DRF L-7 LLC for the above referenced project. Recommended Action: Adopt Resolution approving a Redevelopment Agreement by and among the St. Louis Park Economic Development Authority, the City of St. Louis Park and DRF L-7 LLC. 1) Adjournment City of St. Louis Park City Council Item # 4a Meeting of July 26, 1999 4a. Redevelopment Agreement relating to the Medical Office Development Proposal the Southwest Corner of Highway 7 and Louisiana Avenue. This report considers the terms and conditions of a redevelopment agreement by and among the St. Louis Park Economic Development Authority, the City of St. Louis Park and DRF L-7 LLC for the above referenced project. Recommended Action: Adopt Resolution approving a Redevelopment Agreement by and among the St. Louis Park Economic Development Authority, the City of St. Louis Park and DRF L-7 LLC. The body of this report contains the same information as the July 26, 1999 Economic Development Authority Report. BACKGROUND The City Council/Economic Development Authority reviewed and discussed some of the basic terms and conditions of the aforementioned redevelopment agreement at its meeting on July 19, 1999. The City Council, School board and County board have each adopted resolutions approving the provision of tax abatement for the proposed project. The tax abatement and other financial terms for the development are outlined in this redevelopment agreement. REVIEW OF PRIMARY DEAL POINTS • Section 3.1 (b). The City will convey the City Parcel to the Authority and the Authority will convey the City Parcel to the Redeveloper for $1.00. The Authority will convey the City Parcel to the Redeveloper in accordance with Section 3.2 of the Agreement. • Section 3.4. The developer will hold harmless and indemnify the City and EDA of claims associated with the environmental conditions of the site (without limitation to the obligations of the parties under Section 8.3 of the agreement). • Section 3.5. The agreement requires that the Redeveloper, at its cost, cause the billboard to be relocated to facilitate the proposed development. Such relocation will be subject to all required permits and approvals from the City. • Section 3.6 (b). The Redeveloper shall reimburse the Authority, up to $150,000 for costs associated with the construction of signalization at the Lake St. and Louisiana Avenue intersection, intersection landscaping in the right of way and cross-walks, all in accordance with the PUD Resolution. • Section 3.7 and 3.8. The Authority will assist the Redeveloper in financing certain Public Redevelopment Costs on a pay-as-you-go basis. The Authority will issue a note, up to a maximum principal amount of $1,200,000. The note will bear interest at the rate of 7.75% from the accrual date described in the Agreement. The EDA will only be obligated to advance abatements that are collected from the project for a term of ten years, but no later than February 1, 2013. • Section 3.10. The Authority will lend the developer $164,000 for the project on a deferred basis at an interest rate of 5%. A loan agreement specifying the terms and conditions is attached. The purpose of the loan is to cover initial project costs that cannot be supported by project revenue. The loan will be secured by guarantees from the developer’s affiliate(s). • Section 3.10(a). The Authority will also, in consideration of providing the land, issuing a note and making the loan, receive a fifteen percent (15%) participation interest in the future increased value of the project. A form of participation agreement is attached as Schedule F. • Section 3.11. States that the project will create 150 new full time equivalent jobs, of which 10 will be net new jobs at an hourly rate of at lease $10.00 per hour. This provision is intended to comply with Minnesota Statute Section 116J.991. Sets forth provisions for the repayment of its assistance, the value of the land and the loan if it does not perform the requirements of this section. • Section 4.3. The developer will construct a 60,000 square foot medical office building on the site commencing May 31, 2000 to be completed by May 31, 2001. The redeveloper will complete the construction of a restaurant on the subject site by May 31, 2002. • Section 6.3. Sets forth a minimum market value of $7,550,000 for the project. Since this is a pay-as-you -go deal, any reduction in market value that translates into a shortfall of tax abatements is at the developer’s risk. The purpose of including a value agreement is mostly related to the City’s objectives for tax base enhancement. NEXT STEPS The planning and zoning reviews for this project are presently underway. The Preliminary PUD application is scheduled for review by the City Council on August 2, 1999. Staff will prepare an ordinance that authorizes transfer of the City Parcel to the Authority for the purpose of this project. The ordinance will be brought to the City Council for consideration and approval. Attachments: Redevelopment Agreement Submitted by: David M. Anderson, Economic Development Coordinator Approved by: Charles W. Meyer, City Manager UPDATED TERMS SHEET Description of Terms and Conditions of Redevelopment Agreement Project 60,000 square foot medical office building and 7,000 square foot restaurant building with surface parking constructed in two phases. Obligations for construction of the MOB and restaurant components will be subject to separate remedies of default under the contract. Total Estimated Development Cost $10,807,506 Minimum Estimated Market Value $7,550,000. Developer Financing Developer to finance estimated $9,500,000 in development costs through a combination of private debt and equity. Developer to finance up to $1,200,000 (pay-as-you -go) tax abatement note from the City of St. Louis Park/St. Louis Park EDA. Developer to finance $164,000 of project cost through defered loan from EDA. Participation Agreement EDA will take 15% participation in the appreciated value of the project. The appreciated value of the project will be equal to the difference between the original project cost, less the value of all EDA assistance, and the future value based on the net purchase price on the sale or appraised market value depending on the circumstances triggering the participation. The Redeveloper and EDA may not exercise the call provision in the first year of the project. In the event of sale, foreclosure or any action that eliminates the EDA’s participation interest, the principal balance of the $164,000 loan plus 5% interest shall become due and payable. Frauenshuh shall have the ability to repay this loan at any time but no later than year 15 after the project is completed. The loan will be secured by a corporate guarantee from the Developer. Developer call: In years 2-4, developer can call, and in years 5-15, developer can request an appraisal and buyout of EDA interest in the project. At any time, the EDA shall be paid a minimum of $164,000 plus 5% annual interest plus the remaining balance representing 15% of the appreciated value of the project. EDA Call: The EDA shall have the right, at its discretion; to entertain or reject the Developer’s right to call the participation in years 5- 15, except in the event that the Developer sells the project to an unaffiliated owner or the project forecloses. In years 10-15, EDA can, at its sole discretion, call for appraisal and buyout of EDA interest in the project. At any time, the EDA shall be paid a minimum of $164,000 plus 5% annual interest and the remaining balance representing 15% of the appreciated value of the project. The participation shall be a non-transferable agreement between the EDA and the Developer unless the third party transferee agrees to the terms of the participation. The EDA shall have the right to sell its participation in the project to a third party. If the property is subject to foreclosure, the EDA shall waive its right to any participation in the appreciated value of the project, subject to any rights or obligations otherwise stated (i.e. $164,000 loan). Land Deal The Developer will purchase the billboard property in fee from Fairway Advertising. The Developer will purchase the City site from the City through the St. Louis Park EDA for $1, plus consideration under the participation agreement if this is the agreed upon option of the developer and EDA. Tax Abatement Package Term: 10 years Interest Rate: 7.75% Developer and EDA to execute tax abatement agreement spelling out the terms and conditions of the abatement subject to the terms of the City, County and School District resolutions. Abatements to be secured by Developer. Environmental Developer will be responsible for all costs associated with obtaining assurance letters, RAP implementation and RAP preparation and sign off by the MPCA. The Developer will reimburse EDA for all costs incurred in preparing the Phase II environmental report and preparing RAP, meeting with PCA, etc. as per the preliminary development agreement dated June 3, 1998. Permits and Approvals Developer shall be responsible for obtaining all permits and approvals as necessary including planning, design, zoning, construction, signage, and other required permits for the project. Billboard Developer shall obtain all government approvals and billboard company authorization for the move of the billboard to a new location on the project site. EDA Approval Final All terms and conditions referenced in any discussion, negotiation or written documents are subject to the final approval of the Economic Development Authority Board of Commissioners.