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4.1. SR 06-30-1997.y of iver MEMORANDUM ITEM 4.1. TO: ~FROM: DATE: Mayor & City Council Paul T. Steinman, Director of Economic Development June 24, 1997 SUBJECT: EDA Request for Funds for Economic Development Activities II. PURPOSE OF MEMO The purpose of this discussion item is to bring forward from the EDA, a request to utilize the Council Contingency Fund in the amount of $3,780 to complete an economic development activity associated with implementation of the Strategic Plan. 0 VER VIEW With adoption of the Strategic Plan has come the implementation of specific items within the plan. One such item is the negotiation and execution of joint development agreements and/or cooperative marketing agreements with the three primary west Business Park property owners. The EDA has determined that it would be beneficial to have attorney Dave Sellergren team up with staff to negotiate and draft these agreements. As such, staff has asked Mr. Sellergren to prepare an estimate of his time and costs associated with completing this activity. A memo from Mr. Sellergren is attached to this report. At its last meeting, the EDA determined it would be appropriate to support a request for funding of this activity from the Council Contingency Fund. 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 III. PRIMARY ISSUES TO CONSIDER IV. What is to be accomplished through execution of joint development agreements and/or cooperative marketing agreements with these property owners? The end product is proposed to be an agreement which will provide certain price guarantees on the sale of the land to developers; in addition to streamlining the process of such sale to a developer. Also the agreements will hopefully provide the EDA with more flexibility in the marketing of such property to prospective developers. The agreements will help define closing costs, completion of environmental testing, surveys, title issues, and other various issues involved in a real estate transaction in order to generally make the process of closing on acquisition of such property easier to accomplish within a short time frame. · What other sources of funding are available to cover the anticipated costs? The EDA does have the ability to utilize a portion of its reserve for this purpose, however, they determined it would be appropriate to make this request to the Council to fund this activity. · What is the time frame for completion of these negotiations? Staff intends to initiate the negotiation process as soon as a funding source is determined. Staff is hopeful the first agreement with Tony Emmerich, Country Ridge Partnership, will be in place by mid September, 1997. Agreements with Bill Gagne and the Wilson family are, at this time, a second and third priority. However, staff intends to begin the negotiation process with these two property owners shortly after the initial meetings with Tony Emmerich. CONCLUSION In conclusion, staff recommends approval of $3,780 from the Council Contingency Fund to be used for economic development activities associated with the west Business Park. Staffs recommendation is supported by a unanimous vote of the EDA, whose meeting minutes are attached to this memo. V. ATTACHMENTS · Memo from Dave Sellergren and example of joint development agreement · Minutes from the June 9, 1997, EDA meeting \\elkriver\sys\shrdoc\council\expfunds.doc DOHERTY RUMBLE & BUTLER PRCq [ 5SIONAI_ ASS('~CIA~ ION 25,}d Minnt'sot~ kX, orid .[radc Center Saint Paul, Minnesota ~1¢1-4[*® Jclcph,me ~121 2'~1-u33; }:..XX (old 2'q-o313 2170 One Tabt~r Center 12t~l ~wcnteenth Stwct Dcm er, Colorado St121)2-~$23 Telephone (303~ 572-t,2(lil [:AX ~303) 572-{,203 Attorneys at Law V'/rtter s direct dim m. lmber: Reply to Mmneap,~hs otfitc MEMORANDUM To: From: Re: Date: Paul Steinman, Executive Director Elk River Economic Development Authority David Sellergren West Highway 10 Business Park -- Exclusive Negotiations Agreement May 22, 1997 We have discussed the issues and a rough concept which involves the EDA assuming an active role in fostering the development of approximately 120 acres of land in western Elk River along Highway 10. It is contemplated that this land be developed as a business park. The land is currently owned by at least three owners (the "Owners"). You desire to negotiate a contract with the Owners which will establish the EDA as an exclusive representative for the marketing and sale of the properties and will address, in part, the following issues: Establish the purchase price of the land if the EDA brings a buyer/business. Establish the parameters for marketing the properties. Establish closing mechanics and timing, which would address such things as survey, environmental issues, title, soils correction, etc. Address the installation of utilities, particularly facilitating early installation, possibly including a deferral of assessments. Determine necessary land dedication and easements for streets, utilities, and open space. Establish general design parameters for and target users in the business park. Other issues to be identified. I enclose an agreement between the Fridley Housing and Redevelopment Authority and an unnamed private entity. I represented the private entity in negotiating this agreement. It contains some, but not all, of the issues which you desire to address in your negotiations with the Owners. In some DOHERTY RUMBLE & BUTLER I'ROFE.C, SIOXA L ASSOCIATION respects, if you reverse the role of the private and public entities in this document, you have the beginning of what you seek to accomplish in Elk River. You have asked that I assist the EDA in approaching the Owners to ascertain whether it is possible to arrive at a contract document which addresses the above-listed issues. I would be pleased to do so. My experience in Fridley arrangement, as well as my current representation of the St. Paul Port Authority in sale of its many industrial parcels may prove beneficial in these negotiations. I would expect that we could ascertain whether achieving such a contractual arrangement would be possible after two or three meetings with the Owners. Preparatory to those meetings, we should work harder at identifying a more complete list of issues and the manner in which we wish to suggest they be approached. If we assume that each of the meetings will be separate meetings with the individual Owners and it requires two meetings each, I would estimate the following possible costs for my time: Three meetings, 3 hours each, times two = 18 hours Consultation and analysis = 10 hours Total: 28 hours times $135.00 = $3,780.00 I have not included any time for drafting the document, since it is premature to speculate whether the EDA will reach that point. If and when it does, then I will provide an estimate for drafting and assistance in negotiating the actual document. The enclosure gives some hint that there may be efficiencies in drafting based on prior experience. If you have questions or comments, please call. If necessary, I would be pleased to refine this memorandum after your review of it should you wish to provide some version of it to the members of the EDA. ~ cc: Peter Beck BeckPS18443.1 2 EXECUTION: December 1, 1995 CONTRACT FOR EXCLUSIVE NEGOTIATIONS THIS AGREEMENT, effective as of this !st day of December, 1995 is between the Housing and Redevelopment Authority in and for the City of Fridley, having its principal offices at 6431 University Avenue N.E., Fridley, Minnesota, 55432, and WHEREAS, the Redeveloper is proposing to develop the area identified on the map attached as Schedule A and is requesting that the Authority negotiate exclusively with the Redeveloper while the area is being studied, designed and marketed. WHEREAS, the Authority is willing to negotiate exclusively with the Redeveloper provided certain conditions described below are met. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: Section 1.1. Definitions. In this Agreement unless a different meaning clearly appears from the context: "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented. Authorzty means the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota. "City" means the City of Frid!ey, Minnesota. "Council" means the Council of the City. "Marketing Plan" means the program to market the Redevelopment Project. The Marke%zng Plan is further described on Schedule B attached to ~his Agreement. "Master Plan" means the plan detailing the overall development of the Redeve!oDment Project as a corporate office park with a commercial comDonent on the Commercial Tract'. The Master Plan shall be prepared by the Redeveloper and approved by the Authority and the City. "Minimum improvements" means as follows: For the Office Tract it is 5he construction of Class A office buildings of not less than 50,000 square feet and containing not less than three stories for each building. The office buildings may contain some ancillary space for service retail that is needed to promote and develop a Class A corporate office park. m o For the Commercial Tract it includes any use described for the Office Tract and further includes commercial uses such as restaurants, banks, day care centers, hotels, medical clinic, convention center and service retail but not general retail. "Party" means a party to this Agreement. "Purchase Price" means the amount no be paid by the Redeveloper for the Redevelopment Property. The Purchase Price for the Office Tract shall be an amount equal to fifty percent (50%) of the market value established by an independent appraiser selected by mutual agreement of the Authority and the Redeveloper, provided that the appraiser shall have determined the value within nine (9) months of the date of closing. Only the first building in the Office Tract will be eligible, provided that the building does not exceed 80,000 square feet, for the Purchase Price described above. Since subsequent buildings in the Office Tract will have structured parking, the Purchase Price shall be ten dollars ($!0.00) for each parcel. The Purchase Price for parcels in the Commercial Tract shall be an amount equal to seventy-five percent (75%) of the market value established by an independent appraiser selected by mutual agreement of the Authority and the Redeveloper, provided that the appraiser shall have determined the value within nine (9) months of the date of closing. "Purchase Price Payments" means payments received by the Authority for the Purchase Price. "Redeveloper" means a corporation organized and existing under the laws of the State of Delaware. "Redevelopment Contract" means the Contract for Private Redevelopment described in Section 4 of this Agreement. "Redevelopment Project" means the Redevelopment Properny and the Minimum Improvements. "Redevelopment Property" means the real property described in Schedule A of this Agreement. Than portion to the west compromising approximately 24.56 acres shall be referred to as the Office Tract. That ~ornion to the East comprising approximane!y 8.21 acres shall be referred to as the Commercial Tract. "State" means the State of Minnesota. "Tax Increment" means only that portion of the real estate taxes paid solely with respect to the Redevelopment Property (which is part of the property in the Tax Increment District) and which is remitted to the City as tax increment pursuant to the Tax Increment Act. "Tax Increment Act" means Minnesota Statutes, Sections 469.174 - 469.179. "Tax Increment District" means Tax Increment Financing District No. 6 created by the Council in connection with the Redevelopment Program. "Tax Increment Plan" means the tax increment financing plan adopted by the Authority in connection with the creation of the Tax Increment District. "Unavoidable Delays" means delays which are the direct result of strikes, other labor troubles, unusually severe or prolonged bad weather, Acts of God, fire or other casualty to the Minimum Improvements, litigation commenced by third parties which, by injunction or other similar judicial action, directly results in delays, or acts of any federal, state or local governmental unit which directly result in delays. Section. 2.1. Representations bv the Authority. Authority represents as follows: The (A) The Authority is a public body duly organized and existing under the laws of the State. Under the provisions of the Act, the Authority has the power to enter into this Agreement and carry out its obligations hereunder. (B) The Authority is the fee owner of the Redevelopment Property (C) The Authority shall use all Purchase Price Pavwnents to reimburse the Redeveloper for the costs of structured parking in the Office Tract. Section 2.2. Reoresentations by the Redeveloper. Redeveloper represents as follows: The (A) The Redeveloper is a Delaware corporation, organized and existing in good standing under the laws of Minnesota, is authorized to transact business in the State, has duly authorized the execution of this Agreement and the performance of its obligations hereunder, and neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and 3 conditions of this Agreement will constitute a breach of any obligations of the Redeveloper under the terms and conditions of any indebtedness, agreement or instrument of whatever nature to which Redeveloper is now a party or by which it is bound, which breach will materially adversely affect the ability of Redeveloper to perform its obligations under this Agreement. (B) The Redeveloper's mission for this Redevelopment Property is to develop multi-tenant, multi-story office buildings with support services commensurate with successful office parks. (C) The Redeveloper will pursue all prospective users including those interested in build-to-suit or land purchases which fulfill the economic and aesthetic vision described in B above and conform to the Master Plan. (D) While the Office Tract has priority for development, the Authority will not unreasonably withhold its approval of those projects in the Commercial Tract that are identified in the Master Plan and are essential in attracting users to the Office Tract. (E) The first office building may have temporary surface parking but will be designed to accommodate structured parking of two or more levels. With the development of a second building, the two buildings will be served by a combination of structured and surface parking. Subsequent buildings will be constructed with structured parking but may also have surface parking. Section 3.1. Redeveloper Resoonsibilities. The Redeveloper shall be responsible for ail costs associated with the marketing and development of the Redevelopment Project. The Redeveloper shall implement the Marketing Plan generally as follows: Ao Establish office market data on this location and determine the corporate users and amenities for space in the Redevelopment Project. Review any previous plans and design a Master Plan as necessary to maximize the site and meet the requirements of the corporate users (in building size, floor plate, quality, timing and market rate) for this location. The Master Plan will be presented to the City and Authority for their review and approval, and the Redeveloper shall.reasonably adjust the Master Plan consistent with market needs as requested by the City and Authority. Develop marketing materials such as fliers and brochures to assist in marketing efforts for mailings, advertising, proposals to coroorate users, broker parties, press releases, etc. Scheduled timing of these marketing events and materials are set forth in Exhibit B. Do The official announcement to the public of the Redevelopment Property would be achieved by the activities shown on Exhibit B including: Broker special event on site News releases Corporate user presentations Mailings to prospects E o Investigate the adequacy of soils, utilities, and street systems for the Master Plan. Review and comment upon the adequacy of the existing indirect source permit and environmental assessment worksheet for the Master Plan implementation. Review and comment upon the adequacy of existing ordinances to facilitate development of the Master Plan. Investigate the status of title, and review existing environmental reports furnished by the Authority regarding any hazardous substances on the Redevelopment Property. Every 90 days provide a written activities report to the Authority which describes the Redeveloper's activities pursuant to this Agreement. Coopera~e with the City and Authority in reasonable and appropriate ways. Section 3.2. Authority Resuonsibi!ities. shall be responsible for the following: The Authority Indirect source permit and associated traffic analyses (amended and/or reactivated original) for the Redevelopment Property. Prepare any necessary environmental assessment worksheet, environmental impact ssaUement or modification thereof. Conduce any additional required environmental investigation. Provide any necessary infras[ruc~ure changes, including street and intersection improvements, due to the Master Plan. 5 Refer all third party inquiries regarding use, availability, and development potential of the Redevelopment Property to the Redeveloper. Recommend changes to City ordinances to facilitate development consistent with the Master Plan. Cooperate with the Redeveloper in reasonable and appropriate ways. H o Conduct a comprehensive review of Redeveloper's performance under this Agreement on at least September 1, 1996 and March 1, 1997. Section 4.1. Contract for Private Redevelopment. Provided that this Agreement is not in default and any time after Authority approval of the Redeveloper's Master Plan, at either Party's request, the Parties shall negotiate in good faith and execute the Redevelopment Contract within forty-five (45) days after the request. The Redevelopment Contract shall address the issues involving the development of the Redevelopment Property including the following: A. The Purchase Price B. Timing of the Minimum Improvements C. Composition of the Minimum Improvements D. Timing of any site improvements or public improvements E. Redeveloper guarantees F. Duration Application of Purchase Price Payments to structured parking Section 5.1. as follows: Termination. This Agreement shall terminate If by August i, 1996 the Redeveloper has not completed the program elements as outlined in the Marketing Plan or this Agreement. m o If the RedevelOper, has not commenced construction of an office building in the Office Tract by August !, 1997, said time to be extended by Unavoidable Delays. The August !, 1997 date shall be extended to November i, 1997 if the Redeveloper has provided a letter of intent, lease or commitment ~o lease for an office building. C o If the Parties have not executed a Redevelopment Con~ract by August 1, 1997. Section 5.2. Effect. The Parties agree that upon termination of this Agreement they shall have no further obligation to each other except as provided for in this Agreement and the Par~ies further agree to execute any document reasonably necessary to give effect to a termination. Section 6.1. Additional Provisions: A. The Redeveloper shall not assign this Agreement. The Redeveloper shall hold the Authority and the City, their agents, officers and employees harmless from any of the Redeveloper's acts or the acts of those operating under its direction with regard to marketing, development, construction, sale and all other activities contemplated by this Agreement. The Parties are not partners in the development of the Minimum Improvements or in any activities contemplated by the Agreement. m o If requested by the Authority, the Redeveloper shall provide evidence of a general liability insurance policy in an amount of one million ($!,000,000) per person and two million ($2,000,000) per occurrence naming the City and the Authority as insured parties and which requires a 30-day written notice of cancellation to the City and the Authority. iN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf and the Redeveloper has caused this Agreement to be duly executed on or as of the date first above written. Dated: And by THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY, MINNESOTA Its Chairman Its Executive Director STATE OF MINNESOTA ) ) ss COUNTY OF ANOKA ) vOn this ~t day of _~C~~ , 199~before me, a ~-y publi~/J~i~in and fgr Anok~ C~Bnty, per~,~na~ty appeared personally known who by me duly sworn, did say that they are the Chairman and Executive Director of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota, a political subdivision of the State of Minnesota, and acknowledged the foregoing instrument on behalf of said Authority. NOTARY P,UBLIC - MI~';,'~ESOTA ~ ANO,(A ccurqTY ~otary Public Authority Signature Page -- Contract for Exclusive Negotiations Dated: December 15, 1995 TEXAS STATE OF HiI?.,JEEOTA COUNTY OF nALLA_¢ By By Its Senior Vice President Its Vice President Property Mgmt. On this lSth day of De-e~_ber , 199 before me, a 5 notary public within and for ~ County, personally appeared , the Senior Vice President of , a n~l=u=_re corporatmon, and acknowledged the foregoing insurumenu on behalf of said corporation. Redeveloper Signature Page - Redeve!ooment Contract SCHEDULE B FRIDLEY MARKETING PROGRA34 Press Release: Signage: Flyer Created and Mailed Users & Brokers: Upon execution of the Agreement Revise signage showing Redeveloper as contact January 1996 January 1996 Focus Group for Office Users: February 1996 Master Plan Review: Press Release: Direct Mail Piece to Brokers: Planning review would commence after information is provided by the first focus group. Redeveloper will then present the preliminary Master Plan to the City and Authority for Authority response and review by April 15, 1996, the Authority shall review and or approve or modify the preliminary Master Plan by May 15, 1996. Upon review and approval of preliminary Master Plan June 1996 Broker Event on Site: Quarterly Updates: July 1996 Redeveloper will provide updates to the Brokerage community on a quarterly basis. This development project will be in the annual Redeveloper vacancy update Redeveloper would meet with the Authority quarterly to provide project updates Continuing marketing efforts would be evaluated and put in place as needed after August 1, 1996. Excerpt from the June 9, 1997, EDA Minutes .... West Business Park Joint Development Agreement Discuss West Business Park - Joint Development Aqreement Paul indicated the mortgagee, Country Ridge Partnership, again has ownership of the business park property after the Sheriff's sale on May 22nd. After the six month redemption period, Country Ridge Partnership will be able to market the property. Negotiations with Mr. Emmerich will begin shortly on a marketing agreement to be in place at the end of the six month period. Paul indicated there is a desire to have another individual working with staff to negotiate such agreements with Mr. Emmerich, Mr. gagne and Mr. Wilson. Paul explained a Councilmember has suggested the EDA approach the City Council with a request for funds. Paul reviewed the memorandum from David Sellergren regarding an exclusive negotiations agreement for the West Highway 10 Business Park. Chair Dwyer felt the EDA should not be identified as an exclusive representative for marketing and sale of the properties, as is stated in Mr. Sellergren's draft materials. After discussion, members of the Commission were in agreement that David Sellergren has the background and experience to assist the EDA in negotiations for the business park. COMMISSIONER GONGOLL MOVED TO ENLIST THE SERVICES OF MR. DAVID SELLERGREN IN THE WEST HIGHWAY 10 BUSINESS PARK NEGOTIATIONS AT A COST NOT TO EXCEED $3,780.00, AND A REQUEST BE MADE TO THE CITY COUNCIL FOR FUNDING OF THESE SERVICES THROUGH THE CITY COUNCIL CONTINGENCY; AND FURTHER, THAT NEGOTIAIONS WITH COUNTRY RIDGE PARTNERSHIP BE GIVEN FIRST PRIORITY AND SECONDLY, THE GAGNE AND WILSON PROPERTY. COMMISSIONER HOLMGREN SECONDED THE MOTION. THE MOTION CARRIED 4-0. Commissioner Holmgren expressed concern that the frontage road project connecting Sherbume County Administration building be pushed forward as quickly as possible, due to safety issues at the county courthouse access on Highway 10.