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4.1. JFC SR 01-30-2018 1,.s Elk .., Request for Action VEY To Item Number joint Finance Committee 4.1 Agenda Section Meeting Date Prepared by General Business January 30, 2018 Amanda Othoudt, EDD Item Description Reviewed by Jackson Hill Residential Suites,LLC and Elk River Lodge and Residential Suites, LLC Housing TIF Reviewed by Application and Financial Review Action Requested Review application and provide a recommendation to the Housing and Redevelopment Authority to establish Tax Increment Financing District No. 25. Background/Discussion The Jackson Hills Residential Suites project is a proposed 40-unit market-rate and affordable housing project located at the intersection of 6th Street and Jackson. The developer applied for Tax Increment Financing assistance through the establishment of a Housing TIF District to finance the portion associated with affordable housing. In addition, the developer also submitted a request to pool increment generated by the Jackson Hills Residential Suites project to reimburse the developer for interior and exterior renovations to convert the existing Elk River Lodge site into affordable housing. The Jackson Hills Residential Suites Housing Project is estimated to generate $1,340,872 in total gross tax increment over 26 years, the maximum term for a Housing District. The net amount available for housing projects is $1,206,790 or 90 percent,with the city retaining 10 percent for administrative expenses over the term of the district. The developer requested$1,206,790, or 90 percent of increment over 25 years with an estimated present value of$677,707. Per the city policy, the total estimated gross increment available for housing projects is $773,580 over 15 years, or the maximum term allowed under the policy. The developer could receive 90 percent of the gross increment over 15 years of$696,225 at a present value of$480,523. The developer's proposed financial package for the Jackson Hills Residential Suites project includes long- term,private financing of$4,719,804 from Lakewood Mortgage, $1,179,804 in equity from the owner, for a total estimated project budget of$5,899,018. The developer's proposed financial package for the Elk River Lodge project includes long-term private financing of$1,250,000 from Klein Bank, $250,000 in equity from the owner,for a total estimated project budget of$1,500,000. The Elk River Vision A nvlcoming community Pith revolutionary and spirited resourcefulness, exceptional P"mi E �, service, and community engagement that encourages and inspires prosperity /�, U 'E The developer is proposing a pay-asyou go method for eligible costs as reimbursement. To qualify as a Housing TIF District, at least 20% of the units would be occupied by persons or families with incomes no greater than 50% of county median income or at least 40% of the units would be occupied by persons or families with incomes no greater than 60% of county median income for the duration of the district. Policy Review Staff completed a review of the application in accordance of the city's Tax Increment Financing Policy adopted on December 4,2017. Based on the Estimated Market Value of the project as calculated by Sherburne County, the project's EW is approximately$3,310,000 or$82,800 per unit. Taxes generated by this project would be approximately$64,277 or$1,610 per unit. Public Purpose The project must achieve one or more of the following public purpose statements: 1. Demonstrate long-term benefits to the community. 2. Retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits through: ■ Diversification of the local economy ■ Significant addition of permanent, high-wage, full-time jobs ■ Addition of jobs attractive to those unemployed or underemployed 3. Significantly increases the city's commercial and industrial tax base. 4. Demonstrates the ability to encourage unsubsidized private development through"spin off' development. 5. Facilitates the development process and achieves development on sites that would not develop "but for" the use of TIF. 6. Removes blight and/or encourages redevelopment of commercial and industrial areas resulting in high quality redevelopment and private reinvestment. 7. Offsets redevelopment costs (i.e. contaminated site cleanup) over and above the costs normally incurred in development. 8. Aids the implementation of the Mississippi Connections Plan. The proposed project meets public purpose objective #1. TIF District Term According to the city's policy adopted by Council on December 14, 2017,TIF Districts shall be limited to the minimum term necessary to meet the project needs. Only projects exceeding the objectives identified in the policy will be considered to exceed the maximum term allowed for Housing projects of 15 years (25 Max) for Housing Districts. ■ The developer is requesting a term of 25 years of tax increment,which exceeds the general term allowed by the policy for Housing Districts. Policy Considerations 1. Each Project is required to meet the butfor test to determine the need for and level of assistance. ■ Springsted completed a butfor analysis and determined without TIF assistance the project would not proceed due to the income restrictions of occupants and insufficient cash flow to finance monthly expenses and debt service. N:ADepartments\Community Development\Economic Development\EDA\Administrative\Agenda\EDA Finance Committee Agenda Packets\2018\Januaiv 30 2018\4.1 sr Jackson Hills and ER Lodge TIF Application Review.docx 2. Developers receiving TIF assistance shall provide a minimum of ten percent cash equity investment in the project. TIF is not to be used to supplement cash equity. ■ The developer indicated Owner Cash Equity in the Jackson Hills Housing project of $1,179,804, equivalent to 20 percent equity in the project. ■ The developer indicated Owner Cash Equity in the Elk River Lodge Housing project of $250,000, equivalent to 20 percent equity in the project. ■ The developer has indicated that a portion of the equity listed in in the performa is in the value of the land they currently own. 3. TIF will not be used in circumstances where land and property price is of fair market value. ■ The developer will be required to provide the city with recent appraisals, as required for financing,performed by a third-party, hired by Lakewood Mortgage and Klein Bank to determine the fair market value of the land. 4. The developer shall demonstrate a market demand for the proposed project. ■ The most recent housing study completed on December 4, 2015 indicates a need for 133 units of affordable rental. Financial Impact Per the city policy, the total estimated gross increment available over 15 years for housing projects is $773,580. The developer could receive 90 percent of the gross increment over 15 years of$696,225, or a present value of$480,523. It is at the city's discretion to capture the remaining 11 years of estimated surplus increment from this project to assist in future housing projects. Attachments ■ Jackson Hills Residential Suites, LLC TIF Application and Supporting Materials ■ Elk River Residential Suites, LLC TIF Application and Supporting Materials ■ Springsted's analysis and supporting documents dated January 25, 2018 N:ADepartments\Community Development\Economic Development\EDA\Administrative\Agenda\EDA Finance Committee Agenda Packets\2018\Januaiv 30 2018\4.1 sr Jackson Hills and ER Lodge TIF Application Review.docx N SII � %� 1////i s � // � r �r✓ir/r��l�o-��r� riy'11/id�rr j!�!/ff� �;,/i � Y � ' / r/ /i'�1✓moi l�'ii��)lf��. '�/1Yt 1/r1�i tr r rs r�i rs Nf !/r /lifirii/�/%�lflarfl��'�� %�Ir%, r%"I it a/rrf/ !ri/ Gi?/✓/ f(%'�� . ri' „' Jirrl%r�1)rrt / „r,,,,, y r ri//�/,r,f rrlirl r ✓ r//r / r y✓ff % '1f /fi1 '�l rrr�J(fr, /,r/;y r" ' r✓ `iiri'r/�rrl f %"' IlI r "1j�F Nj„ k f1Yir � !�✓/r 11, r i L�ri:-:%��'�j��+�Iy��r ,��JY'. ✓�rr>l(11'l/'� � f�Y��' ii%fir, �/ii°/r �� / ��/�� I t r fr rr r / �i t /! �✓� s � r ��p�!/��J/�'6�r�1 i � ' /,!� rr rir✓ r;% Ins�ir�lf��l � � f y y�j��/r�Yrjrf Fi// 11/�-�11',x(��r��r�i f` / !j/!,,;,i,-, :�JN'f,,. �, !,,,,r r� i, %�!1��G�/rf�� J7%jlf /� 'i' ii✓ j r /h/�„ ir. r rri /r riy✓��r�/ %IfJJ�� °�� iG 'i ( r rf�l I`Go ✓ IiA4 % r r r r��friNrrrlltf �i , rs/4i��f1 !. �Y r. rr f rf/f �1L�Ill r f r r 1 //r� rr�N r rrb 1,r fiirfi� r ✓ >7, ry it r r J !r U� s r 0/ii / /PI✓r r�p l�� / J �� ro- If^l�/✓ N G u Nh✓ r r r i J err rfr f,rs r r)rff j fr '/� rf4rff' rr�r� �rTy'� rl� � Il�i�� fifi� Tax Increment Financing Policy Purpose The purpose of this policy is to ensure development receiving Tax Increment Financing (111) is consistent with the long-term city Conpre&,nfille Plan, Strategic Plan, M1sq*,1-s1P'P1' Conneelions Part and/or most recent Housing Study. This is a guide for processing and review ofT11 4 applications, The Clity of Elk River shall utilize to encourage desirable development or redcM,opinent that would not otherwise occur but for TIF. ":'he city is empowered to utilize 'n I,,by the Minnesota "l"ax Increment 1"'Inaricing Act, as amended in Minnesota Statutes 469-174 through 469-1794. The city provides the in-initrium amount of at the shortest term required for a project to proceed. The city reserves the right to approve or reject projects on a case-by-case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Projects meeting policy criteria are not guaranteed the award of \pproval or denial of a certain project is not a precedent for approval or denial of another project, The City, Council and Fcononuic Development Authority and the Housing and Redevelopment Authority can deviate frorn this policy for projects that supersede the objectives, identified herein. Authority Minnesota Statutes 469-174 through 469-1794 gO%7ern the use of TIF and exceed any issues that conflict with this policy. Public Purpose "I'lic City of Ellk River will consider'I'll' for projects that achieve one or more of the following: 1. Demonstrate long-terra benefits to the COMMUnItY, 2. Retain local jobs and/or increase the number and diversity of jobs that offer stable employinent and/or attractive wages and benefits through: • Diversification of the local cconorny • Significant addition of permanent, high-wage, full-tithe jobs • Addition of jobs attractive to those unemployed or underemployed 3. Significantly increases the city's con-imercial and industrial tax base. "'0 4. Demonstrates the ability to encourage unsubsidized private development through ��spin off' development. 5. facilitates the developi-nent process and achieves development on sites that would not develop "but for" the use ofTlF. 6, Removes blight and/or encourages redevelopnient of cone mercial and industrial areas resulting ill high quality redeveloptrictit and private rcinvcstri-icrit. 7. Offscts redevelopment costs (i.e. contanunated site cleanup) over and above the costs nortnally incurred in development. 8. Aids the itnplcinci-itation of the AlissiSSippi Conneclions Plan. Policy Statements 1.. The primary intent ofTlF is direct funding for public improvements and secondarily for developer assistance. 2. The use offlFshall be in accordance with state law. The more restrictive language will apply when a conflict exists between this poky and state law. 3. Projects insist be consistent with the Colifprehensh.,e Plan and/or the Mifsissz. pi C,willeclions Plan. 4, Projects, must be consistent with the Strategic Plan for Econonuic, Development and/or the most recent Housing Study. 5. Preferred projects promote the conipletion, of major public inaproveinent projects within the city such as the installation of trunk sewer and water lines and major transportation projects. 6. The level of assistance provided will be determined oil a case-by-case basis as referenced in Public purpose. Based on the extent tel which the project achieves the policy statements (1-6 above), the ciry will consider TlF for projects in the following categories: • Nlanu fa ctu ring • Major office w archouse/prod uctio n facilities • research and development • Commercial projects encouraging substantial redevelopment of substandard properties • Housing needs identified in the most recent city housing study a 1, Assistance for"1 is required to meet the uses identified by statute including, but not tinvtcd to the following: M public improvetrictits Land acquisition and land write down Loans Site preparation and itriprovcrnent Demolition Legal, administration, and engineering 2. T'he preferred method of TIF is pay-as-you-go for eligible costs as ren'Tibursement, upfront financing maybe considered on a case-by-case basis. 3. A maximum of ten percent (10'"16) of any tax increment received from the district shall be rctaincd by the city to reiml)urse :adt-.Liiiu*stritiv-e costs. 4. All TIF assistance must be accompanied by a signed development agreerrictit including a minit"nurnaSsesSrtient value. The developer niust Provide additional financing guarantees to ensure completion of the project, including, but not limited to: letters of credit, personal guarantees, corporate guarantees, etc. 5. TlF District's shall be limited to the minimum term neccssary to meet the project needs. Only projects cx,cceding the objecciVes identified in this policy will be considered to exceed the following general thresholds: • redevelopment District 15 Years (Max is 26) • Housing District 15 Years (Nlax is 26) • Soils Condition District 15 Years (Max is 2 1) ® Renewal and. Renovation District 10 Years (N/Jax is 16) • E'conori-iic Development District 8 Years (Max is 9) 6. policy Considerations 0 F"ach project is reciuired to meet the "but-for" rest to determine the need for and level of assistance. This test and the amount of tax increment generated detenru*nes the district's term. It is difficult to facilitate a redevelopment, housing or soils condition district for less than the niaxii-num term as the extraordinary costs involved are usually significant, 9 '111c, term of the district could coincide with the amount of tax increment the city Mas tis spend on its priorities within a project area. ® Of all the,TIP districts, the Economic Development District is most often the one limited to a lesser terin. I...conomic Development Districts are really "incentive" districts where it is not so much the extraordinary costs as it is an 4"iJJCCJJt11Te" to get a business to locate in a community. In the other districts, the costs are easily identifiable and usually significant such as demolition, relocation, environn-lental remediation, and the cost differential between triarket rate and incorrie/rcrit restricted housing. qspgg ,aly)l'g, �2,- 7. Developers receiving T117 assistance shall provide as nairninuin of twenty percent cash equity investnient in the project. TIF will not be used to supplant Cash equity. 8. TIF will not be used in circumstances, where land and/or Property price Is in excess of fair triarker value. A third-party appraiser agreed upon by the city and developer -,.vd.1 determine the fair inarket value of the land. 9. The dew,eloper shall demonstrate a market demand for a proposed project. '111:^' shall not be used to support purely Sl-)CCUlative projects. M 'T'he developer )hall adeqUat.Clv demonstrate, to the city's sole satisfaction, an ability to complete the proposed project based on past developincrit experience, general reputation, and credit history, arnong other factors, including the size and scope of the proposed project. 11. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the city or its consultants. 1Z The, city of Elk River shall only use 'I'll, to encourage economic growth and dcvc1oprricrit within the city hriiits, Application Process 1. ApIlliCallt submits -,I complete application and a $10,000 application dCPO'Sit b)' the first Monday of the month. The application deposit %vill be used toward the cost of services Provided in the evaluation of financial feasibility, establishment or modification of the district, and preparation of legal documents and agreements. An additional deposit of$10,000 shall be required for projects requiring statutory redevelopment substandard tests. The applicant shall reiniburse the city for professional services in excess of the initial deposit. Deposit portions not utilized shall be refunded. 2, City staff reviews the application for completeness and submits the application to the city's financial consultant for review and preparation of<a financial analysis. 3, I'lieJoint Finance Committee shall review the proposal's financial strength and I-IrIakc a recorntriendation to the appropriate commission with findings of fact. 4, The appropriate authority rvvic%vs the proposal and the recommendation to determine conformance with this policy. The authority inakes a recommendation to the City Council. 5. After meeting the statutory requirements for establishing the Tax Increment District, the City Council holds a Public Hearing and takes action on the Proposal (Approxiinately 45-60 days). �W, APPLICATION FOR TAX INCREMENT FINANCING A. APPLICANTINFORMATION Name of Fruity Elk Itiver Lod.ge & Residential Suites,jj,(, &�i ins Address xxx 6"' Street Ptin-iary Contact Patrick Brigs Address 633 L' ]and Ave NW F'R. MK 55330 Phone 763-633-1080 Fax paltcdillrhebri , Scoin Brief description of the entity business, including history, principal product or service: Extended Stay & Multifamily Residential Housing Brief description of the proposed project: New Construction 40 units of Njultifigi22 LI ,.Housing ConversiSI)n of existing hotel to apartments, S-900.000.00 of inirwovements-as follows, Exterior: New sidewalks. drive Ton 1.5 inch MN .Mahoran v Rock. 14'x28' Maintenance Free F'loatinLy Deck. Interior: P-Tac Units tiles. tCXtUrc. MUM. hardware, CarDCt. light, Fixtures, flooringy-, Flire alarm Pariel, systerri Attorney Name /A �\ddrcss Phone Fax EA-riall Accountant Name Address Phone Fax Ernail C.ontraccor Name Address Phone Fax Email 1.,'i-191neer Natric See plan Address Phone Fax Email Architect Name See plan ry gg Address Pholle Fax 5 > i �� B. PROJECT INFORMATION 1, 111C.project: win be: Redevelopment District —X— Housing District So.ds Condition District Renewal and Renovation District E"'conorri.ic Development District 2. 'Fhe project will be: Owner Occupied —X 1.,cased Space 3. Project Address Legal Description & Parcel Identification Nurnber(s) 75-131--2303 & 75-134-2305 4, Site plan and Prefin-i-inary Construction Plans Attached: —X— 'Yes No 5. AmOUIV of Tax Increment Requested For: go(%, of rax Increment for 25 ),cars Land Purchase $ Public Improvement $ Site IrnproNernent $ C. Current Real Estate J'axes on project Site: 2748.00 1,1'stifriated Real Estate Taxes upon Completion: Phase 1 $55,000 ]-)base 11 $N/A- T Construction Start Date: March V-31st Construction ("onipletion Date: November 30th If Phased Project: Year Completed Year Completed 'M 1112 1 rJn0 mp C. PUBLIC PURPOSE It is the policy of the City of 1'-,'Ik River that the use ofTax Increment Financia-ig should result in a heneftto the public. please indicate how this project wil.1 serve a public purpose. xJob C rcation/Retcrition: ' –3—Nun-iber of existiiig lobs –3— Number of jobs created by project –15— Axerage hourly wage of jobs created/retained New industrial development, which will result in additional private investinent in the area. –X— F?,rihanccmerit or dlvci-sificat.lon of the city's econorilic base. J,he project contributes to the fulfilh-nent of the City's Plan. Removal of bl4Zht or the rehabilitation of a high profile or priority site. –X— Significantly increase the (,ity's tax base. –N— Other: lmr)rove/acld affordable safe, & Secure (,-;r.cen Rental H o u s it i x w i LI I i,I—\V 1111 U 1 111,21 distance of downtown, Lions Park and schools. 9"A uvr V, D. SOURCES & USES SOURCFS N.YkME ANIQUNT Bank Loan Lakewood Mortgjg—c $4,719,804.00 Othcr Private Funds $ Ownet Cash Fquitv $1 "17904,00 Fcd Grant/t,oan $ State Grant/Loan $ ED,.,� Micro Loan $ 'Fax Increment $ 11) Bonds $ TO1"AL $5,899,018.00 USES Z\MC)LJN'l" Land i" cqulsition $400,000,00 Sitc Do'cloplactil $834,070.52 Construction $4,316,772.46 Nlachincry & Equiptnent $ .,\rchitectural & I�ngiticcring Fees $75_,825,00, Legal Fees $10,000.00 Interest During Construction $82,350-00 Debt Service Reserve $ Contingencies $180,00W)o TOTAL $5,899,017.98 E. ADDITIONAL DOCUMENTATION AND CHECKLIST Applicants will also be required to provide the following documentation. Written business plan, including a description of the business, owlaersliip/m,,in,.i.geti-lei)t, date established, products and services, and future plans —13) Financial Statements fear Past'lwo Years Profit &Loss Statement Balance Sheet Current Financial Statements Ptofit &Loss Statement to Date Balance Sheet to Date —1)) Two Year f inancial Ptojections f", personal l"inaricial Statements of ail Ma)or Shareholders CurrentTax Return I Letter of Gorniniu-nent frorri Applicant fledging to, Corriplctc Duritig the Proposed ProjecrTIMelinc, —c"'), Letter of Comi-niti-nent from the Other Sources of financing, Stating'"I ernis and Conditions of their Participation in Project 11) Application deposit of$10,000, with any unused portion to be refunded. 1) ("onstruction Plans and Itemized Project CMISMICtlon Statement Attach the following documentation as Exhibits —['xhiblt A —F'Intity Documents —1�'xhibit B — Description of project Exhibit C —List of Shareholders/Partners —]-' xhlbit D —.13it/4"OrAnalysis —1:°exhibit E—List of prospective I.cssccs —l','xhibit F —Legal I.Description and PID Number(s) Note; ,Ul Nlajor shareholders will be required to sign personal guarantees if up front financing of the project is required. Ali ria i The iaridersigiied certifies that all information provided in this application is true and correct to the hest of the undersigned's knowledge. The undersigned authorizes the City of Elk River to check credit references and verify financial and other information. The undersigned also agrees to provide:any additional information as may he requested by the City after the filing of this application. Applicant Name � Ph Tax Increment Financing Policy History ..... Ado)tcd by: � ��7 clatc _ Item # C::ity Council 12/4/2()17 I?I 11/201/2017 [IRA 11/6/2017 r '(fr(,,/11(/ ,' +,.fr h ) � i r',r%' r, r rir � �r )r ori. 0 )';"Nr l 1i ;�i, ✓ ' �, /�/,,�/r�' / r r:r 1, �J /;�1� h� �� err✓r �+ : �1. l�/ rr�, 'u a0 �"� �i � + 'f '�,� l I�' y �� s�/%J J�//� ,r i ✓ ,,,r ��/�f,,�,1i 1� r + � r �ar ,/ �'l','1 � �{� �r�fr�lH IJr � 1,�r �,,,. /✓ .)' / r ti r �� / °�>y,. � i !l r i� ✓ „7 i .,,✓�� J��/l,/�� +` dib, fr✓(� �/�l �r!�. �y � i r.r .,/��+�1 / l� i. 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DEC--09-DF FR I 09;59 AM FAX K0. FA 01 TM BANK 01P EM Rai. MemW FDIC 1 AIN s'rPPET OFFICE-630 Maltr.Strect*Elk MVCT,to h:553.3C+(763)441.1000 Dee ber 1,2005 Patrick alld Carrie Briggs 19021 Freeport Ave,Suite#50013 Elk liver,MN 55330 Re: Lett ar of Rec gra mendation To Whom It May Coneerarl: 117 ave known Patrick and Carric Briggs for approximately 5 years, 'Tlyrou hout various "business deal-igs with P'atriok and Carrie Briggs and their related cntities, 1 have found tlt lr adions thoughtful,professional and well planned. Thelf entrepreneurial and visionary spirit has enhanc l the local economies by creating n v jabs,providing available housing, and a sigrlilacaiitty improving the tax base to such cities as Heckcr,Big Lake,. ina mmun, and Elk River. 1 would recon mend that you consider Patrick and C=de Briggs vwitli my of your b"iness endeavors. in=el LeRo rind.cnfelser Assistant Vice Pj-esiclent MAIN STREET c SCHOOL STREET -1 071,;ZGO ELIC RIVER'&a'"AL-MART -MAPLE GROVE WoA7,MART �, �rmTiiet3a»ko�[�[kl�aver.cc� 1��"�e�rtn)wt�fl;i[�li.v'e;r.cc�a� March 2007 To Whom It May Concern; Last summer I had the pleasure of meeting Pat Briggs. I need to tell you how. My two daughters and I were living in a house that we were renting. We were informed that the owner of the house was going to sell and he was going to accomplish this task by doing an auction. I was put up in limbo because I was unsure that if this were sold at this auction, would I still have a place to live. If I did not have a place to 'live, what was the time frame that I needed to be out by? If I did have a place to live (new owners continued it as a rental property), what was going to happen to my rent? I had had an agreement with the owner about my rent to keep it affordable for us, so I had a concern there as well. li was approached by a local business owner about their concern for my family and they recommended that I get in contact with Pat Briggs. They graciously contacted him for me and explained what was going on. i met Pat a few days later. I had never met him before and really did not know what to expect. At first I felt a little reserved because he was asking so many questions, almost like an interview, but more personal. [ came to realize that he had a genuine concern about who I was and who my girls were. He cared and wanted to, know how he could fit in to make this a positive experience. I believe that if it had come down to my famfly not being able to live there any longer, he would have tried to assist me in finding just as good of a place. If not better, Leading up to the sale, Pat and I had talked at great length about how this could be a win-win experience for both of us. I was fully aware that the idea of someone buying my home and allowing me to live in it at a great deal less in costs than what it costs to own: it was like winning the lottery (odds aren't real good). I was fully aware that if he were not able to change my occupancy somehow, he would not be able to go forward with my ideal. Pat is an extremely smart businessman and visionary. We had talked about a number of different scenarios. What happened? My home was purchased the day of the auction and Pat did purchase it. He sold the home a short time later, with the understanding to the buyer, my occupancy. He made it very clear to the buyers of my situation and intentions for occupancy and he also drew up the lease agreement. Pat is a very genuine, personable and detailed person in everything he does. I was very blessed to have had the opportunity to meet this person because there are not a iot of people like him out there! sincerely— Dawn L Doering MD1 Mando Devlelopmeiit Inc. June 15, ' 010 To Whom It May Concern: I have had the opportunity to work'%ith Briggs Companies for the past three years as a tenant in one of their properties, I have :fee mxd Pat Briggs and his staff to be professional and ethical in their business dealings, They were always quick to respond to any issue we presented and follow duough to an agreeable conclusion. 0 thyears I got to know Pat on a more personal level and find him to be a genuin and e ver t2st person. I can,be contacted for firther information as needed, boA Sincerely, William B. Divine President 0 f fi.a Fax Erna;1 9524-70 9286 952 470 99285 bldi ine(c and aa. 4935 Sussex Plaa Shoreweod IVLN 55331 r To whom it May Concern: RE:The Briggs Company I have been a tenant of The Landmark professional Building since May of 2013. From the moment I met Pat he had my best interest at heart. He listened to my vision, he believed in me and knew just what I needed. He helped me with the layout of my new office space and it turned out even better than I had expected. in the 4 years I have been in the space he has helped me to plan for future expansions before I even knew I needed it. He is a visionary and makes sure you get what you are looking for. Mr. Briggs professionalism has shown through in everything he does. i truly appreciate how he has helped me grow and expand when the time was right. He is very easy to work with and i would easily recommend him to anyone seeking commercial space. Sincerely, Jessie Norton,PA-C Owner of ReNew You Medicai Spa L. . VER E CLINIC, P A . �J,k ��iv,kr,PR BOK 44 30 ry' Optometrists: G,M, f-fol'faK'd O. ,,F,A.Ct,0. Pham (76�3)4,11-1055 R. J, 11ss O.D. Fax:(763)441-70?4 May 22, 2007 To Whone It May Concern: Pat Briggs can make it happen! 1 am an optometrist, who was in need of iie'wr optoractric clinic, l Imew wvlaerc l wanted the clinic to be locatcd nd a �—'M rM iclealaOW it NVOUld lay OUt. l joist �teecicd so:tteotae to laella aac tta�rt e it happen, arcl Pat made it happen. As you probably wotilcl know, this type of project is nothing all Optometrist woUld specialize in or feel comfortable doing. "l'hankf illy, Pat was sramcone ] could trust to get the job done right, Ile listened to our needs so that the project would be exactly as l envisioned and he MIS there tll1-OUgl1OL1t 011, entire process, He liellacd Us sec irc the land fog. the bUilding. He designed tlac builcling tO Lltili7C the lartd most efficiently, He even helped us through the finmeing and interior desi ia, We really appreciated let's ability to complete the whole project.. Now ] fiave an optoni3tric clinic that is very modem and efficient. i ala very proud of this clinic because. it was exactly as l euvisionc_d, All my thanks go to pat, Nvho m do it all 111::11apc,ti. Rodney J, Hess, O.D. Lfe, [3,4k, Godlf �.tt:�4i1!�Lr T & K APARTMENTS 36914 ELK AVENUE NORTH BRANCH, MN 55056 651-277-0334 August 24, 2009 RE: The Briggs Companies In January 2009 1 had the honor of meeting the staff at The Briggs Companies, I was looking to purchase an investment property to add to my current real estate portfolio. Pat Briggs and Tim Kratzke spent several hours with my spouse and I showing us the properties they had for sale. Every property that was owned and operated by Tile Briggs Companies was immaculate. The proper-ties that we looked at were in outstanding shape both inside and out. They were extremely clean and had a very professional appearance. You could tell as soon as walking into a building that The Briggs Companies takes a tremendous amount of pride in their properties and what they have to offer. In May of 2009 We purchased a Briggs Property located in Becker, Minnesota. Since our purchase I have continued to employ The Briggs Companies as the property management company for our investment. During this time I have had the additional pleasure of meeting the other staff at The Briggs Companies and have found every one of them to be of the extreme high quality that the company is. They have continued to manage our investment as if it were their own. Everyone is extremely professional and takes great pride in their work. We Currently are working on expanding Our real estate portfolio and are not considering any other properties other than a Briggs Property. I would recommend to anybody that is looking for an investment property to purchase, a commercial property to purchase or lease, or a property management company, to contact'"rhe Briggs Companies. I can assure you that they will be very happy that they did. I have been in the real estate business for 17 years and have never experienced an outstanding company like The ,Briggs Companies. Respectfully, Anthony Jackson O,wner/President . . November 291�12017 ToWhom UtMay [oncenm | have been leasing from the Briggs Companies for almost 3years. | have 3total units curnS0dy. I started with 2 with Snap Fitness, then expanded to the adjacent bay after 2 years, Being first-time business owner, the leasing process was very intimidating. | worked with Patand Marla 1Oset the lease mptotake over the keys tornynew business, They made mnefeel like we were partnering inthis venture which Uappreciated, When Ustarted rmybusiness, | opened with two locations which were under different ownership, The experience with Briggs was much more 1onnVliking. The experience with Briggs hasbeenrnoreofeSnma||-tovvnmzmnnunitvfee| compared to dealing with a large real estate conglomerate,, The issues | have had with rnyspace have been resolved quickly. | understand every commercial bui(dingisgoing tohave issues here and there, but |appreciate the dedication vue get from Ben who isthere main maintenance employee. Recently, they even dropped off a space heater tohelp with one ofthe chilly offices |nour building. I would consider continuing to do business with Briggs in the future and would recommend them, Please contact me at 612-232-8681 Luke Smith Snap Fitness | Fuse Fitness Coaching K 0vvmer Snap Fitness Elk R,iver | 19022 Freeport St N)N | Elk River, MN 55330 763-241~8387 | ^ PROFESSIONAL SERVICE p , BUREAU Licensetl P Dondeti ProfessimO Colli aions 111.10 Industrial Circle NW Suite B Etk River, Minnesotn ,55330 Local: 763-588.1202 Phone� 1-8010-388-0013 Fax: 763-588-1187 10/13/2017 To Whom It May Concern: I have had the pleasure of working with The Briggs Companies since 2006,starting as a tenant in one of their properties.All of the staff at The Briggs Companies takes pride in their buildings and keep the tenants'top of mind in every situation. Throughout the years, I have kept In contact with Pat and Marla,and continue to be impressed with the buildings they are managing. Please contact me for any further information, Sincerely, Rob Gibbs President Professional Service Bureau, Inc. 4r "r,, 1 OF' 4, R * ry Lake November 8, 2016 RE- The Briggs Companies To Whom It May Concern, The Briggs Companies constructed, owns, and manages two multi-family apartment developments in the City of Big Lake; Ashbury Residential Suites and Town Square Luxury Apartments. Both developments are beautifully constructed and adhere to the quality the City expects and appreciates. Mr. Pat Briggs is a visionary who understands the potential of growth in the City of Big Lake. We are hopeful that his ideas for future development will come to fruition and look forward to working with The Briggs Companies as part of the development team. Please contact me at 763-251-2979 or b kbrTimek,d)hjgLakqmrj_c�r .g with any questions or concerns, Best regards, Hja na Klimmek C munity Development Director 6ty of Big Lake MY OF ACKER 12060 SHERBURNE AvENUE PC)Box 250 BECKER MN 55308 PHONE: 7612614302 FAX: 7612614411 May 9, 200 A NNAw It May (Ancern: Please consider ON letter our recorn rn end ation for Briggos Properties, Inc. We ,vorked extensively with thern on a nnd64bmily pnject in the City ofBed, wWch inAlUded do aline vvhh some eXiSting unusual infraS1rL1CtLH-0 circumstonces and Ound therm to be professional, ethical and efficient. Dudng the course of this prtect, they met and exceeded all of To codes and requirements set 00i in. a Oniely and konvugh mannen We would not heshate U) con&idw their future developments in our city'. If you have any questions regarding their project please feel free to call meat 763-2614302. Sincerely, Kelli IOU, AICT ("ornmunity Development Director Of Zimmerman 12980 Frimilom Avenuc TelqVone 763-056-4666 tvlN 55398 Fax 76.5-8564787 TO Whom It lklay Concern: R& "Tile Pilles of Zia- mennall"—Brl�as Propr1'6 ' Brigg.A'roperties construcUA,0ylns and manapestwo in thi?i city, "Th2 flities otZimmerman", These apartnn�,:ritSzm WC41 Conr tfuded and voluntarily cxc,.-,F,,d the City's design criieria for multifamily sructuru-i. Architectiu,al ((:awn�s are nbovc and boyond tho city-desired.appearances. 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Total Project Cost) $. 5,899,--i Equity Contributions $ 1 . ....._.... Funning Requirement $ 4,719,214 ...... .. Rake Assumption_i. ... 4.50D°C� _ _- __ ..._. ., -L— - . TermAssumPtion in years) 330011 _.. Annual Debt Service $ 314,771 - ..... __. 'Monthty Debt Service L$ 26 2.31 Operating Imn..c.p 535,3..44 ...... ... ... ens Operating Ex P g_ P e .. ... �...$ _. 197,232 Income From Operation _,... _ $..._. 11 , 38 32 . Twice Ratio 1,0J7 aWithout Tiff Ava m.. _ w :.ebt Se _. .. i.__ F i Cash ilable For RO ll L$ 23 341 _ROI (cash on cash) 1 98°Cq7 _.,.. Cap Rate _ _ 5.73°C�I ... _.. _,I Page 1 " 7 k F � f } C,. � X w � tom.,.,_. _.,.. ... .. "„ ... ...... �,... ,. r . Irk- CA r C 7 _ D Vr-40 d � r + Al ®„ l RL JU t �' 4 d' �• d t .r"�J"kx� 4.�x «. ,a «"�z C< 1 ° �.•. 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J.. nr��rt1 ✓i '�GiJ r :/�� r riff��,�/lu / �' it%r� pr rg''pp�� pi/ °✓ (r ri�/%% SII i r� r, r M 1� vrii //IMi r� ��Ilr� �� r/ o Irl Y Y r� /� ✓GY/�f(f � i r f (Gw�`U u l ��rN III i WI iiIIIVm V!uu ;,/o///r ✓ i r / 1J ;�fj�� /r/l i��y�/%,r�//%r �s r q n r r I�r tf/r� ro"/ //�f✓r vu' . /iri r � r//✓i✓i r r/ /r% 9� � l/i,�j r i r f r!` ✓/! r r r r / /✓ / yr��iJ rrri�/ ��1 x %v �r� i (i1 'r w, + �, + r �✓/�%r % ///r rr;/r ff// �i � Fd 1��jln l ✓ r✓qi/ r/ rr rr/f�✓�P' � r l I r a J � ✓ / r r z r r�rJ/l r J�l/�! r JI iPr I vii t //i D y6ri i � fn %i✓'ri/f�/iii /�� rl/ (/ ��r +� �fh i l ,r �� r/1 flr�r /�2 ✓'(/y j r fr/l+ r i�/j� /a/� r✓ 1 � 1 Tax Increment Financing Policy Purpose "I"he purpose of this policy is to ensure development receiving Tax Increment I'mancing (TIF) is consistent with the long-term city Cmiprebenshv Plan, Strategic Plan, Nlississippl' C,onliedions Man and/or most recent Housing Study. This is a guide for processing and review ofTll-' applications. The City of Elk River shall utilize I'll" to encourage desirable de,velopment or redevelopment that would not otherwise occur but for TIF. The city is empowered to utilize TI F by the Minnesota Tax Incrernent Financing Act, as amended in Minnesota Statutes 469-174 through 469-1794. The city provides the minimum amount of TIF at the shortest term rcqWired for a project to proceed, The city reserves the right to approve or reject projects on a case-by-case basis, taping into consideration established policies, project criteria, and demand on city set-vices in relation to the potential benefits from the project. projects meeting policy criteria are not guaranteed the award of TIF. Approval or denial of a certain project is not a precedent for approval or denial of another project. I'lie City Council and Economic Development Authority and the Housing and Redevelopment Authority can deviate from this policy for projects that supersede the objectives identified herein.. Authority Minnesota Statutes 469-174 through 469-1794 govern the use of"FIF and exceed any issues that conflict with this policy. Public Purpose The Cir,y of 141k River will consider TIF for projects that achieve one or mare of the following: 1. Demonstrate long-term benefits to the con-irriunity. I Retain local jobs and./or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits through: • Diversification of the local economy • Significant addition of permanent, high-wage, full-time jobs • Addition of jobs attractive to those unemployed or underemployed 3. Significantly increases the city's commercial and industrial tax base. pp 4. Dernonstrares the ability to encourage unsubsidized private developinent through ,,spin off' development, 5. Facilitatcs the developtricnt process and achieves development on sites that would not develop "but for" the use of-FIF. 6. Removes blight and/or encourages redevelopment of cornniercial and industrial areas resulting in high qUality redevelopment and private reinvestment. 7. Offsets redevelopinent costs (i.e. contarninated site cleanup) over and above the costs normally incurred in development. 8, Aids the implementation of the Mississippi(-"0iYtzeaiorrs Plan. Policy Statement's 1, The primary intent oaf TIFis direct funding for public improvements and secondarily for developer assistance. 2, The use of TIFshall be in accordance with state law. The more restrictive language will apply when a conflict exists between this policy and state law. 3. Protects must be consistent with the (,onipieheYtsh)e Plan and/or the Alissis,4)'5pi C"'0111a'al'ons Wall. 4. projects must be consistent with the Strategic Plan for f.`.conornic Development and/or the most recent Housing Study. 5. Preferred projects promote the completion of major public improvement projects within the city such as the installation of trunk sewer anti water lines and major transportation projects. 6. The level of assistance provided will be deterinified on a case--by-case basis as referenced in Public Purpose. Based on the extent to which the project achieves the policy statements (1-6 above), the city will considerTIF for projects in the following categories: • Manufacturing • Major office warehouse/production facilities • Research and development • Corritnercial projects encouraging substantial redevelopment of substandard properties • Housing needs identified in the most recent city housing study Y PI1,0,7'011 ,IS, Ing R10111 1. i0ssistancc forTIF is required to) meet the uses identified 1)), statute including,but not limited to the fol.lowing: a Public improvements R I-and acquisition and land write down ®' Loan.s 0 Site preparation and ni-nprovement W Demolition a .1...,ega1, administration, and engineering 2. The preferred method of TIF is pay-as-you-go for eligible costs as reimbursement, upfront financing maybe considered on a case-by-case basis. 3. A triaximuria of ten percent (10%) of any tax increment received from the district shall be retained by the city to reimburse administrative costs. 4. All TIF assistance must be accompanied by a signed development agreement including a minimum asscsstrient value. The developer must provide additional financing guarantees tet ensurecorripletion of the project, including, but not limited to. letters of credit, personal guarantees, corporate guarantees, etc, 5. TlF' District's, shall be Bruited to the minii-nurn term necessary to meet the project needs. Only projects exceeding the objectives identified in this policy will be considered to exceed the following general thresholds: • Redevelopment District 15 Years (Max is 26) • Housing District 15 Years (Max is 26) ® Soils Condition District 15 Years (Max is 24) • Renewal and Renovation District 10 Years (Max is t 6) • 1"conornic Development District 8 Years (Max is 9) G. Policy Considerations • Each project is required to meet the "but-for" test to determine the need for and level. of assistance. This test.and the amount of tax increment generated determines the district's term. It is difficult to facilitate a redevelopment, housing or soils condition district for less than the maxiii-itim terns ;is the extraordinary, costs involved arc usually significant. • The term of the district could coincide with the -amount of tax increment the city has to spend on its priorities within a project area, ® Of all the'I"U' districts, the Economic Development District is most often the one limited to a lesser term. Economic Development Districts are really "incentive" districts where it is not so much the extraordinary costs as it is an "incentive" to get a business to locate in a con-irmintity. In the other districts, the costs are easily identifiable and usually significant such as demolition, relocation, environmental remediation, and the cost differential between market rate and income/rent restricted housing. of^lfg s , Ely, T Developers receivingTIF assistance shall provide: a minimum of twenty percent (10`,✓o) cash equity investment in the project. TH'will not be used to supplant cash equity. 8. TIF will not be used in circumstances where land and/or propertT price is in excess of fair market value. A tl-card-party appraiser agreed upon by the city and developer will determine the fair market value of the land. 9, The developer shall demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. 10. The developer shall adequately demonstrate, to the city's sole satisfaction, an ability to complete the proposed project based on past developi-nent experience, general reputation, and credit history, among other factors,including the sire and scope of the proposed project, 11. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the city or its consultants. 12. The city of Elk River shall only, use TIF to encourage economic growth and development within the cit.), litnits. Application Process 1, Applicant submits a complete application and $10,000 application deposit by the first Monday of the month. The application deposit,will be used toward the cost of services provided in the evaluation of financial feasibility, establishment or modification of the district, -and preparation of legal docurnents and agreements. An additional deposit of$10,000 shall be required for projects requiring statutory redevelopment substandard tests. The applicant shall reimburse the city for professional services in excess of the initial deposit. Deposit portions not utilized shall be refunded. I City staff reviews the application for completeness and submits the application to the city's financial consultant for review and preparation of a financial analysis. 3. The joint Finance Committee shallreview the proposal's financial strength and make a recommendation to the appropriate cornmission with findings of fact. 4, The appropriate authority reviews the proposal and the recommendation to determine conformance with this policy. The authority makes a recommendation to the City Council, 5. After ineeting the statutory,requirements for establishing the Tax Increment District, the City Council holds a Public Flearing and takes action on the proposal (Approxiinately 45-60 days). APPLICATION FOR TAX INCREMENT FINANCING A. APPLICANT INFORMATION Nance of Entit J y E k River Lodac,& Residential Suites, LLC & or Assigns Address 17432 Zane Street Primaiv Contact Patrick Bri") Ys I -- Address 633 Upland Ave N ER,NIA. 55330 Phone 763-633-1080 Fax L�mail 1.2at(L-i)tliebri ),sconil)atiie:s.cot-n Brief description of the entity business, including history, principal product or Service: Extended Stay & Nlultjfarnil> Residential Housing Brief description of the proposed project: Vacant Flotel Conversion to a 36 unit Apartment Building.. $500,000.00 of Jinprovernents as follows, Exteriov New sidewalks, driveway, garages. 25 year Caulk & Paint building sl-.tell., Irrigation,Landscaj2itig, Remove all existing rock. Re-gr,-,Ide-polv. 75 Ton o 1.5 inch MN Mateo ran v Rock. 14'x28'-m.-,tintenance Free Floating Deck. Interior: P-Tac Units Ceilitiv tiles in common areas texture,paint, Key Phob hardware car j2qrJJLD lioht fixtures flooring, f,ire alarm Panel. Fire sprinkler svstern. air handlern-milboxes, refuge area. Attorney Name NZA Address Rhone Fax Ernail -ACCOUntant Name— N/A Address Phone Fax 1.7,mail ("ontractor Name N 1A Address Phone Fax En-lail - Engineer Name See I)Ian Address phone Fax Email Architect Name...........See plan ow, Address . . .. . . . . . . . . . . . Phone Fax . . . . . Ern 2 " � �i SYM> . ::y> B. PROJECT INFORMATION 1. Thepr6ectwill be: Redevelopment District _X_Housing District Soils Condition District Renewal and Renovation District Economic Dcvcloprnent District 2. 'I"he project wi11 be: Owner Occupied _X—Leased Space 3. project Address 17432 Zane Street Legal Description & Parcel Identification Nurnber(s) 75-003-4401 4. Site plan and preliminary Construction Plans Attached: _X_Yes No 5. Arnount ofTax Increment Requested for: 90% of'Fax Increment for 10 years Land Purchase $ 200.000-00 Public Improvement$ Site Improvement $ 00 000.00 _3� Ci. Current Real Estate "faxcs on Project Site. $ 15,000,00 I'stiniated Deal F..lstate Taxes upon Completion: Phase 1 $17,000 Phase 11 $N/A" 7, Construction Start Data: March V-31st Construction Completion Date: June .30th If phased Project: Year _')/'O Completed Year "/o Completed irif "11hi N C. PUBLIC PURPOSE It is the policy, of the City of Elk River that the use of Tax Increment Financing should result in I benefit to the public. please indicate how this project will. serve a public purpose. X Job Ctea tion/Rete tition: .-3— Number of existing jobs —1— Number of jobs created by project _15 Average hourly wage of jobs creatcd/rctamcd New industrial development, which will result 11-i additional private invcstmcnt in the area. —X FInhanceirient or diversification of the city's economic base. —X The project contributes to the fulfillincm of the City's plan. —X— Removal of blight or the rehabilitation of a high profile or priority site. Significantly increase the City's tax base. X- Other; Improve/add affordable safe & Secure Rental Houslnll rrr Kill fvlffilll�1`1111", dam " D�. SOURCES & USES SQUJZCF'S NiNME Aa" IOUNT Bank 1,oan Klein $1.,250,,000.00 Other Private Funds $ Owner Cash Equity $250.000.00 F'cd C."rant/l,oan $ State Grqnt/l...oan $ ED2k Micro I-oan $ Tax Increment 5 11) Bonds $ TOTAL $1,500,0100.010, t.,rSFS AMOUNT I.,andAcquisition $200,000.00 Site Development $300,000M Construction $950,000,00 Machinery & 1,1quipment $ Architectural & Engineering Fees $20,000.00 I.,egal. F-ees $10,000.00 hitcrcst During Construction $20,000.00 Debt Service Reserve $ Contingencies $ TOTAL $1,500,000.00 "0 R I E. ADDITIONAL DOCUMENTATION AND CHECKLIST' Applicants will also be required to provide the following documentation. ri 1 1 if 'I —A) W sten business plan, includi iga desciiption of the business, ownership/managanent, date established, products and services, and future plans B) J-`inancial Statements for PastTwo Years Profit & Loss Statement Balance Sheet Current Financial Statements Profit&Loss Statement to Date Balance Sheet to Date —D) Two,Year Financial Projections —.E) Personal Financial Statements of all Major Shareholders Current Tax Return F) Letter of Comil-litment from Applicant Pledging to Complete During the Proposed Project Til-neliric (1) Letter of Corrin-iittricrit from the Other Sources of Financing. Stating'I I erms and Conditions of their Participation in Project H) Application deposit of$10,000, with any unused portion to be refunded. 1) Construction Plans and Itemized Project Clonstructio ii StatLrn.crit J) Attach the following documentation as Exhibits Exhibit A– Entity Documents Exhibit B –Description of Project Exhibit C List of Shareholders/Partners Exhibit 1) Bul-For Analysis —1,,xb1bit E–List of Prospective Lessees —1,"xhibit 1-`–Legal Description and PID Number(s) Note: All Major shareholders will be required to sign personal guarantees if up front financing of the project is required. MINI," N gl� The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the("Ity of Elk River to check credit references and verify financial and other information. The undersigned also agrees to provide any additional information as may be requested by the City after the filing of this application. Applicant Nam 14- Tax Increment Financing Policy History Adopted by: Oil-A-11 tc - ItCITI ("it), Council 12/4/2017 ED.A 11/20/2017 ..... .......... HRA 11/6/2017 INOn �g— KleinSank- 701 IS t539011Wx 7631841551 P I 00nmWAIM I BAMQ tura 55M3 I n5pkhhu I Cow May 16,2017 H& liver Uke& RevidemW SAWs, LLC Pauick Briggs 19021 Freeport ,)treet Suite 500-E, Ilk River, NIN 55330 Dear Nlr 13Q, Mein Bank is offering the tblln%ving thlancill.'a, oplioll for)(111 n) L:ollsidcv: FA 0 L a V ON E: Anwww S10511000D) PLITI)OSe: linin Werm Cmmnmkm Tam Wa"m Apwrnwrl:Wding llmv 5 yea mn,20 ymw anwrtDaW codhww: I" RuW WN N&wlpge cousing: Closing June l''' • flayoff ck"rent rnortgages (it' $670,000 + iip to $100,000 rovurds improvQnlellK • Advance $30,000 M closing w 5 Yaw CD Ibr rnerve /replacenlunts • Additional improveniQw advancessubject to 1,111: pay as you go apgoval by the city of River ot'not less alum a pram value ol'S300,000.00 III LT[A6kISANU('ONI)I IRA S OF I I W I DAN ARE SUB MCI ux Bur NO I' LWVFlJ)'D) I'9 OL L()UTV I NII) IN'If I IS LETTER TVIOSK NIA FI LRS THA r ARE N( I' Ll WLRH) IN OR NMI* (IFAR IN THN (KJLNE ARE SUM VC I TO MUIUAL AGREWEXI IFHS IRANS,%(l1(xN ILAS BEEN ANWDvKD BY KLIAN FrANK, I hope thai you twill find Own Ow lams and rates WWI hwAn W mum your approved. shcaely, Randy K IWAKs PresidQnt 19i Dwsli M,lvlr9W PER.TEN -AGREEMENT OF ELIC RJVER LOO E &RE,SIDENTIA.L SUITES LIMITED LIABILITY" COMPANY Copyright @ 20o5,The.Legal Protection Group,L.L,C. OPERATING AGREEMENT � OF �Y� T[}B�� SUITES, T~ COMPANY TABLE OF CONTENTS PAGE I FORMATION(}FCOMPANY ...............___................. .................. ........__ ....................... .... I l.01 Name and Principal Place ufBusiness................................................. _ ............................l 1.02 Iermnf ................................ ............ —.................... ........................-..... I lJBPurpose .................... .~.....~.~.................. ............___- ........... .................. ..l 1.04 Designated and Records...................._....... ................... .................. ..- 1 D FI�ANCING OF THE COMPANY.............................-_ ....... --....................... .................. .~_2 2.01 .......... —......._ .............................. 2.02 L*uom to Company.............. ...................... ..—._-----_--~__—_---.—~..—.2 1103 Reimbursement~..._.__--_-_.,__ _~—__..—.-....~----._..,~_.,2 22.1014Waiv�.of �rI&etmnmf C�tub� - ._--....._ __� I0 MANAGEMENT OF THE COMPANY........ .. ...... —_-----.............. ---_--..................3 9.01 _. ................. .................. —.... .......---_..................3 3.02 Limited Powers ofthe ........—. ............ ...................__. .....................,.,~_ .....^^3 3,03 Conveyances and Contracts ............. .............. ............ ........................... ....... ...... .............. —.5 3.04 Distributions tuMember_--..................... .......... ....... -- ...........................^....... ........3 � IV COMPANY ACCOUNTING,BOOKS AND RECORDS................................... ................. - ..........4 4.01 General Provisions .......... -_...... .-............ ....... 4 4.02 Income Tax Iofbnnaticn................ ............... ............................................--... ...................4 � V INVOLUNTARY ASSIGNMENTS OR]0R&NSlgSRS.~......... .......... ....................'...-~_- ............4 V7 DEATH,DISSOLUTION,INCAPAC=............................. ....... ........... ....................___...........4 l/D DISTRIBUTIONS UPON TERM1NATION{JFTHE COMPANY......-..._............................. —_.~5 VIII GENERAL PROVISIONS .................................. ~.......... ................___....................... ......... .5 8.01 ........ _.................. .......,~.~................ _ ............. .......................................5 8.02 ......... ................... .......... .................... ............................. .................5 810 ........... ...... ........................_._—........... ................ ...,~,,~,,.~,^^6 814 Successor IoInterest.................. ....... ............. .....^ .............._—,.,.,,,,~........_,^.^~___6 8CBOBI){ILE A—.-'..—_.-....._ ........... ........ ......-__.............. ^.~_--......... ......^..^.--_-.—__..7 - . — ' Copyright @ 2005,The Legal Protection Group,L.L.C. / �,_ ��.� �� r�_.. �..w..�� OPE RATING AG E ,'NT `° OF ELIC RIVED.LODGE & RESIDENTIAL SUITES, LIMITED LIABILITY COMPANY THIS OPERATING AGREEMENT(the "Agreement"') is made and adopted th s 22'd day of Feburary, 2011, by Patrick Bri gse, as the Manager ofELK RIVEP. LODGE RESIDENTIAL SUITES, LLC as the sole Member of ELK FIVER LODGE & RESIDENTIAL SUITES, LLC. This Agreement serves as the Company's operating agreement under the limited liability company laws of the State of Minnesota. FORMATION OF COMPANY 1.01 Nar ne and Principal Place of Business. The name of the Company is ELK RIVER LODGE &RESIDENTIAL SUITES, LLC,Siegle Member Limited Liability Company, and its principal place of business shall be at 10021`17,ieeport St, Suite 5000, :ilk River,Minnesota, or such other place or places as the Mai dgei may detern°anine from time to tin-e. 1.02 Term of Company. The Company shall corn nence operations as of the date of this Agreement and shall dissolve upon such everts as set fcrth.in the;Articles of Organization. 1.03 The purpose of the Company shall be to ovvai and operate residential apartment buildings, and to engage in any lawful investment or business for which a limited liability company may be fornned in the State of Min n; rota. 1.04 Registered Office and.Agent; Records. Tlae Marn4ger shall designiate and maintaiaa a "Registered Office" and a"Registered Agent" for service oaf Prone s oaa the C'oax-npany, which agent must be an individual resident of the State of Minnesota, or a corporation or a forei;gna corl)oration authorized to do business hi Minnesota. The Ma, ager shall beep (or cause to be kept) the following records at the principal place of business:. (a) a current list in alphabetical order of the full nan ie and last known business, residence or mailing address of each tanager and each Member; ` r; Copyright @ 2oo5,The Legal Protectio,R ropp,,L.L.C.. (b) a copy of the stamped Articles of Organization and all. certificates of amendment thereto, together with signed copies of all powers of attorney p-ursn�aut to which the Articles of Organization or any aincildinent has been signed; (c) a copy of this Operating Agreement plus all amendments thereto; (d) a copy of the Company's federal, state, and loqaj income tax returns and reports, if any, for the three most recent years; (e) copies of any financial statements of the Comppy for the three most recent years; a copy of the minutes, if any, of each meeting of the Members and of any written consents obtained from the Members; and (g) any other records required under State law. FINANCING OF THE COMPANY 101 Cavital. The initial capital of the Company shall consist of cash and property contributed to the Company. The assets which shall be transferred to the Company include,without liniitation, those assets described on Schedule A,which is attached and incorporated herein. 2.02 Loans to, Company, The Manager shall not be required to make loans to the Company Borany purpose, If the Manager deems it necessary or helpful to the'conduct of the Company's business,the Manager may loan funds to the Company but only with the prior written consent of the Member, All such loans Luiless otherwise specifically stated shall bepayable on demand and shall bear interest at the,rate of 12%per annum compounded monthly, and shall be repaid prior to any distribution to the Member, 2.03 Reimbursement. The.Company must reimburse the'Manager and all agents and employees of the Company for payments made and liabilities I reas6qiably incurred by each of then in. the ordinary and proper conduct of the Cornpany's business, or for the preservation of its business or property. However, all obligations to reimburse wider this Agrdoj4ont shall apply only to thd extent that the expenses, costs, fees and liabilities in question exceed,the I applicable insurance carried by the coirlpany. Copyright 20o5,The Legal Protection Group,L.L.C. 2.04 Waiver of Liabilijy for Return of Certain Distributions. The Mein er hereby pennanently and unanimously waives and eliminates, to the maximum extent permitted bylaw, any liability of any Member for the return of money or property to the Company which the Member rightfully received as a distribution of part or all of the Member's capital account. III ,o:" MANAGEMENT OF THE COMPANY 3.01 Desi ration of Maua ers. The management of the Company shall be.vestedin one Manager. Each.Manager shall hold that office until (a)his or her;resignation, incapacity,removal or death, or )upon the dissolution of the Company--whichever occurs first. The Member shall, appoint,remove, and replace the Manager from time to time (with or without cause)by filing an amendment to the Company's Articles of Organization.. 3.02 Limited Powers of the Manager. The Manager shall determine all matters and shall have the responsibility and authority to direct and manage the day-to-clay affairs of the Company. The Manager may also appoint such other officers with duties and compensation as the Manager deems appropriate from time to time. 3.03 Conve antes and Contracts. Each contract ofthc Cajnpany or any deed, bill of sale, mortgage, lease, contract of sale or other commitment of the Company purporting to bind the Company in any xray or purporting to convey or encumber the interest of the Company in.all or in any portion of any real or personal property at any time held in its name, must be signed by the Manager on behalf of the Company. 3.04 Distributions to Member. From time to time,the Manager shall make such.distributions .a of profits and assets to the Member as the Manager may detenmine.in the exercise of his or her reasonable discretion. IV COMPANY ACCOUNTING BOOKS AND RECORDS a , o 4,01: General Provisions. The fiscal year of the Company shall be the calendar year. The Company's boobs and records shall be maintained in accordance,with generally accepted accounting practices consistently applied and upon the:cash receipts and disbursements method of accounting.. f m 4.02 IncomeTax Information. The Company shall provide to the Member information on the Company's profits and losses and each class of income, gain, loss, deduction, or credit that is Ccpyright @ 2-005,The Legal Protectio qrp ,, .I.C, relevant to the Company's affairs. Pursuant to Treasury Regulation on 301.7741r3(a), the Manager elects -- solely for purposes of federal taxation--to have the Company'disregarded as a separate entity which would otherwise be required to file a separate tax return, The Company will or will not secure a separate taxpayer identification number at the discretion of the�nager; and, all items of income and lass attributable to the Company will be reported upon such forams and schedules as the Manager may select or develop, V INVOLUNTARY ASSIGNMENTS OR TRANSFERS Only trona-fide purchasers of the Member's interest in the.-Company may qualify as authorized recipients of said interest and thus act as a Member in the Coxnpa nr w No unauthorized recipient or assignee shall have any right to interfere or participate in the management or administration of the Company's business or affairs, to require any information regarding,or on account of the Company's !,slt1 transactions, or to inspect the Company's books. q VI ©EA'iII,DI SOLUTI�'fN,INCAI'ACTTY Upon the dearth,incapacity; or dissolution of the Member, the Company shall not dissolve or terminate--unless the Member"s successors in interest elect to discontinue the business of the Conip any within ninety(90) days following such death., etc. o:alfl16 affin native decision to discontinue,the Company will dissolve and wind up its affairs;the assets of the Company will be distributed pursuant to Article VTI of this operating agreement. "VII DISTRIBUTIONS UPON TERMINATION,0FT,HE COMPANY" Upon the termination of the Company, the Manager(or,4.special liquidator appointed by the Manager), ,shall(a) cause the assets of the.Company to be liquidated and distributed in an orderly and business-like manner so as not to involve undue sacrifice; .and(b)"establish such reserves as may be appropriate for any contingent or unforeseen liabilities of the Company. If, following a sale of I Company assets, the only asset held by the Company is a pronussory vote or nates or other contractual rights to receive payment for the assets sold, then in the absolute discretion of the Manager or the liquidator, the Company may either continue in existence for the purpose of collecting the notes, or dissolve and ten inate and assign, the note or notes to the Mernber who shall collect the note personally.. COPyright 2oo5,The Legal Protection,Group,.Y,L,C. -s: In liquidating the Company,the Manager or liquidator may either sell all orail of the Company's assets and distribute the Ip,. proceeds or may make distributions completely or partially in kind. The distribution of assets of the Company shall be made in the following order: First,to the creditors of the Company,in the aider and priority provided by law,and theca to the Member or his,her or its successor in interest. Vill GENERAL PROVISIONS 8,01 Captions, Any titles or captions to the articles or sections contained in this instrument are for convenience only and shall not be deemed part of the context of this Agreement, 8.02 binding Effect. Except as otherwise herein provided,this'Agreennent shall be binding upon and inure to the benefiit of the parties hereto,their heirs, executors,administrators,successors and all persons hereafter having or holding an interest in this Company,whether as assignees or otherwise, 8.0 A licable haw. This Agreement shall be governed byi and:cbnis ed in accordance with the,laws of the State of Minnesota. Unless expressly or by necessary implication contravened:by any provision of the Act;the provisions of this Agreement shall control the affairs of the Company and the rights and.duties of die Manager and the Member. 8.04 ;successor in Interest. The Member shall have the unrestricted`right to designate his successor(following death)as to his interests in the Company by delivering an acknowledged instrument in writing to a Manager. The Company designation or evidence of a g g bsence of any such. shall.honor such.designation as a contractual obligation here under,-fn.the u :•, contrary intent,the Company shall recognize the deceased Member's heirs at law as his or her.successors in interest hereunder(as determined by the Company according to the laws of the intestate succession of the deceased Member's state of domicile.) No such actual or deemed designation shall be treated as a testamentary transfer within the meaning of any statute's requirements for one's last will and testament. IN`W`lTl,"l~SS'4filHEREO E,the Manager and the Member have executed and delivered this document effective as of the day and year:first set forth above.��,y...--�-""�' �.i. (Member); Patric s e7ber Copyright 2oo5,The Legal Protection Group,L.L.C. MEMBER CONTROL AGREEMENT T141S MEMBER CONTROL AGREEMENT is made as of the 22 d day of Feburary 2011,by and an-iong each of the undersigned. RECITALS: ''WHEREAS,the undersigned constitute all of the current members of Elk River Lodge & Residential Suites,LLC, a Limited Liability Company, a Minnesota limited liability company; and WHEREAS, Section 32213. of the Minnesota limited liability company act authorizes a "member control agreement" as defined therein; and WHEREAS, each of the undersigned wishes to enter into such an agreement; and NOW,THEREFORE, each of the undersigned agrees as follows: ARTICLE I DEFINITIONS Ll Definitions. The terms defted in tWs Article I(except as may be otherwise expressly provided in this Agreement or unless the context otherwise requires) shall, for all purposes of this Agreement, have the following respective meanings: "Act"means the Minnesota limited liability company act contained in Minnesota Statutes, Chapter 32213. "Agreement"means this Member Control Agreement as hereafter amended from time to time,including any schedules to the Agreement. "Board" or"Board of Governors"rneans the board of governors of the Company. "Capital.Account"means the account of a Member which is maintained in accordance with the provisions of Section 3.7 hereof "Code"means the Internal Revenue Code of 1986„ as amended and any successor thereto. Any reference herein to specific sections of the Code shall be deemed to include a reference to any corresponding provisions of future law,, "Company"means Elk River Lodge&Residential Suites,LLC, a Minriesota limited liability company. "Diistribution"means a distribution to the Members of cash or other assets of the Company, made from time to time pursuant to the provisions of this Agreement. "Estimated Member Tax Liability"means 48%of the taxable income and gains of the Company as reported on the Company's federal partnership tax return for the fiscal year. "Financial Rights"means a member's rights to share in Net Income and Net Losses and Distributions with respect to a membersl-dp interest in accordance with the terms of t1iis Agreement, mid the power to assign Financial Rights. "Governance Rights""means all of a member's rights as a member in the company other than such member's Financial Rights. "Governor"means a natural person serving on the Board of Governors. "Managcr"means a person elected, appointed, or otherwise designated as a manager by the Board of Governors, and any other person considered elected.as a manger pursuant to the Act, "Member"means a person reflected in the required records of the Company as the owner of Governance Rights of a Membership Interest of the Company. "Membership Interest"means a Member's interest in the Company consisting of tile Member's Financial Rights and Govemance Rights with respect to the Company. "Net Income" and"Net Losses"mean the profits and losses of the Company, as the case may be, as determined for federal income tax purposes, as of the close of each of the fiscal years of the Company. "Percentage Interest" as to any Member means the ':'Percentage Interest"reflected on Schedule A for such Member. "Voting Interest" as to any Member means the"Voting Interest"reflected on.Schedule A for such Member. ARTICLE 11 FIRST GOVERNORS 2.1 First Governors. The first Governors of the Company shall be the following,vko are hereby elected to hold office until their successors are elected and qualified pursuant to the Operating Agreement of the Company: Elk River Lodge&Residential Suites,LLC. ARTICLE III MEMMERSHIEP INTERESTS 3.1 Membership Interests and Board Authority as to Additional Membership Interests. The names of the Members and.their respective contributions and the agreed value thereof are reflected on Schedule A,which is attached hereto and incorporated herein by reference. Other than as may be set forth in Section 3.8,no additional contributions shall be:accepted or Membership Interests granted by the Board without the consent of more than 1.00% of the outstanding Voting Interests. Upon such consent and the issuance of additional Membersliip hiterests, Schedule A shall be appropriately amended. 3.2 Terms of Membership hiterests, The original Membership Interests reflected in Schedule A are ordinary membership interests of one class, without series, and shall have the rights provided by law, subject to any statement in this Agreement of the specific rights or terms of such Memberslaip Interests. 2 ......................... 3.3 Allocation of Net Income and Net Losses. Unless the Members unanimously agree otherwise in a writing signed by all Members,Net Income and Net Losses shall be, allocated annually among the Members in proportion to their. Percentage Interests as reflected on Schedule A. 3.4 Operating Distributions. Any distributions authorized by the Board other than Liquidating Distributions pursuant to Section 3.5 shall be distributed among the Members based on their Percentage Interests as reflected on Schedule A, provided,however,that the Board shall annually distribute cash to the members based on their Percentage Interests reflected on Schedule A in an. amount equal to the:Estimated Member Tax Liability,to the extent such a distribution is legally permitted. 3.5 Liquidating Distributions. If the Company is dissolved and (i) dissolution is not avoided under Section 5.1 and (ii) its business is being liquidated in accordance with Section 322B.873, subd. 1,the Company shall cease to carry on its business, except to the extent necessary for the winding up of the business of the Company. The Company shall thereafter be wound up nd terminated as provided by the Act. All tangible or intangible property of the Company, including money remaining after the discharge of the debts, obligations, and liabilities of the Company shall be distributed to the Members as follows: (a) to the Members in proportion to, and to the extent of,the positive balances in their Capital Accounts; and,thereafter (b) to the Members in accordance with their Percentage Interests as set forth on. Schedule A. 3.6 Voting. Members shall be entitled to vote on all matters in proportion to their Voting Interests as set forth on Schedule A. 3.7 Capital Accounts. A Capital Account shall be established for each Member and shall be maintained in,accordance with Treasury Regulation § 1.704-1(b) (2) (iv). Any Member who shall receive any Membership Interest in the Company or whose Membership Interest shall be increased by means of the transfer to such Member of any financial interest in the Company from another Member shall have Capital Account that has been appropriately adjusted to reflect such, transfer. No interest shall be paid by the Company on capital contributions or on balances in Member's Capital Accounts. 3.8 Additional Cgpital Contributions. Other than as set forth in this Section 3,8,no Member shall have any obligation to make additional capital contributions to the Company or to fund,advance, or lend monies which may be necessary to pay deficits,if any, incurred by the Company during the term hereof. (a) Menibers,may make loans to the Company from time to time, as authorized by the Board. Any payment or transfer accepted by the Company fi-oni a Member which is not a capital contribution complying with Section 3.1 or this Section 3.8 shall be deemed a loan and shall neither be treated as a contribution to the capital of the Company for any purpose hereunder, nor entitle such Member(as such) to any increase in such Member's Percentage Interest. Any such loan shall be repaid at such times and with such interest(at rates not to exceed the maximum permitted by law) as the Board and the lending Member shall reasonably agree. 3 (b) If,with respect to any real estate investment of the Company, the Company receives'notice from the mangers of such investment that an additional contributio'n,to such investment is required (an"Additional Investment Contribution"), each Member of the Company shall timely contribute to the Company his pro rata share of such Additional Investment Contribution, determined in accordance with his Percentage Interest. In the event that a Member(the"Defaulting Member") fails to make any payment or installment thereof,when due, of any contribution or other obligation under Section 3.8(b),, the remaining Members, acting through a majority of their Literests,may enforce such obligation in such manner as may be pennitted by law. Without limiting the generality of the foregoing, such Members may,in their sole discretion, (i) bring an action at law or in equity to enforce such obligation; (ii) assess interest on the unpaid amount at the highest rate of interest then being charged to the Company by any lender; and (iii)require the Defaulting Member,provided such default shall not theretofore have been cured,unconditionally mid irrevocably to assign to one or more of the remaining Members(determined in accordance with the next succeeding sentence hereof)that portion of the Defaulting Mernber's Interest that bears the same ratio to all of the Defaulting member's Interest as the remaining amount of unpaid contributions,whether due or not yet due, of the Defaulting member bears to the total amount of contributions,paid and unpaid,required to be made by the Defaulting Member. IF the General Partner requires assignment of all or a portion of a Defaulting Member's interest pursuant to subdivision(iii) above, each remaining Member shall have the right to acquire such Interest, determined as aforesaid,in the proportion that its Interest bears to the aggregate interests of the remaining Members who desire to participate in such purchase, (c) If the Board of Governors unanimously agrees, at a duly noticed and held Meeting of Governors,that additional Contributions are required, each Member shall be required to contribute additional Contributions. The Board of Govemors shall set the total amount of additional investment required, and each Member shall contribute according to his or her respective Member's Percentage Interest, ARTICLE IV TAX MATTERS 4.1 Tax Characterization and Returns, The Members acknowledge that the Company will be treated as a"corporation": for federal and Minnesota state income tax purposes. Within 90 days after the end of each fiscal year, the Company will deliver to each person who was a Member at any time during such fiscal year a Forrn K-1 and such other information,if any,with respect to the Company as may be necessary for the preparation of such Member's fedei al or state income tax (or information)returns, including a statement showing each Member's share of income, gain or loss and credits for such fiscal year for federal or state income tax purposes. ,4.2 Accounting Decisions. All decisions as to accounting matters shall be made by the Board or the members pursuant to Section 322B.606, subd. 2, of the Act. The Company may make or revoke such elections as maybe allowed pursuant to the Code,including the election referred to in Section 754 of the Code to adjust the basis of Company property. 4.3 Tax Matters Partner. The Board shall designate a Member to act on behalf of the Company as the "tax matters partner""within the meaning of Section 6231 (a) (7) of the Code, 4 4,4 Special Allocations. Anything elsewhere contained in this Article IV to the contrary notwithstanding: (a) Minimum Gain Chargeback. If for any Company fiscal year,there is a net decrease in partnership minimum gain as detemained in accordance with Treasury Regulations § 1.704-2 (i) (5), each Member shall be allocated items of Company income and gain in accordance with Treasury Regulation § 1304-2 (f) (1) (a 'Minimurn Gain Chargeba&:') for such year(and, if necessary, for subsequent years) in an amount equal to such Member's share of such net decrease of partnership minimum gain. For this purpose, a Member's'share of the net decrease in partnership minimum gain shall be determined under Treasury Regulations § 1.704-2(g) (2), Thds Section 4.4,a is intended to comply with Treasury Regulation § 1.704-2(o (1) and shall be interpreted consistently therewith. (b) Qualified Income Offset. If any Member at any time unexpectedly receives any adjustment, alloca�-io—nor distribution described in Treasury Regulation §§ 1,704-1 (b) (2) (ii) (d) (4), 1.704-1(b) (2) (ii) (d) (5) or 1.704-1 (b) (2) (ii) (d) (6), and if ,such adjustment, allocation or distribution results in a negative balance in such 'Member's Capital Account in excess of the sunt.of(i)the amount such Member is obligated to restore to the Company under this Agreement and (ii) the amount such Member is deemed to be obligated to restore to the Company pursuant to the penultimate sentences of Treasury Regulations §§ 1.704-2 (g) (1) (ii) and 1.704-2 (i) (5),then items of Company income and gain shall be specially allocated to such Member so as to eliminate, to the extent required by Treasury Regulation § 1.704-1(b) (2) (ii) (d), such negative balance in his or her Capital Account as quickly as possible. (c) Gross Income Allocation. If any Member would have a negative balance in his or her Capital Account at the end of any Company taxable year in excess of the surri of(i)the amount such Member is obligated to restore to the Company under this Agreement and(ii), the amount such Member is deemed to be obligated to restore to the Company pursuant to the penultimate sentences of Treasury Regulations §§ 1.704-2 (g) (1) (ii) and 1.704-2 (i) (5), then such Member shall be specially allocated items of Company income(including gross income) in the amount of such excess asquickly as possible. (d) Curative Allocations. Any allocation to a Member under subparagraphs (a) through(c)of this Section 4.4. (a"Regulatory Allocation") shall be taken into account in determining subsequent allocations, so that he net amount of Regulatory Allocations and all other items allocated under the provisions of this Article IX shall., to the extent possible,be equal to the net amount that would have been allocated to such Member under the provisions of this Article IV if no Regulatory Allocation had been made. 4.5 Tax Allocations. hi accordance with Section 704(c)of the Code and the Treasury Regulations thereunder, income, gain,loss and deduction with.respect to any property contributed to the capital of the Company shall, solely for tax purposes,be allocated among the members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes,and its fair market value as of the date of contribution. 5 In the event any Company asset is adjusted as a result of a revaluation pursuant to Treasury Regulations § 1.704-1(b) (2)(f), subsequent allocations of income, gain, loss and. deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its fair market value as,of the date of such revaluation in the same manner as under Section 704(c) of the Code and the Treasury Regulations thereunder. Any election or other decision relating to such allocations shall be made by the Board in any manner that reasonably reflects the purpose and intention of thds Agreement Allocations pursuant to this Section 4.,5 are solely for purposes of federal, state and local taxes and shall not affect, Capital Account or share of income,profits, gains, losses, expenses, deductions, credits or other items or distributions pursuant to any provision of this Agreement. ARTICLE V AGREEMENT TO AVOID DISSOLUTION 5.1 Dissolution Avoidance Consent. At the request of the Company and no later than 90 days after the occurrence of an event that terminates the continued membership of another Member in the Company(including the events enumerated in Section 322B.80, subd. 1, clause (5) of the Act), each remaining Member shall be asked to consent to the continuation of the Company as a legal entity without dissolution and to the continuation of its business,pursuant to the power set forth in Article V of the Articles of Organization of the Company. 5.2 Status of Tenninated Member if Dissolution is Avoided. If dissolution is avoided under Section 5.1,then the Member whose interest has terminated shall lose all Governance Rights owned before the termination of Membership. 5.3 Status of Teii-niriated Member if Dissolution is Not Avoided. If dissolution is not avoided under Section 5.1, then the Member whose interest has terminated shall retain all Governance Rights and Financial Rights owned before the termination of the membership and may exercise those rights through the winding up and termination of the Company. 5.4 Restoration of Governance Fights in Certain Cases. If dissolution is avoided wider Section 5.1,but the event that terminated the continue membership of a Member in the Company was the death of such member or a transfer of such decedent member's Interest to or from.his estate or to or from a trust that has received such Interest by reason of such death, then the Governance Rights associated with such Interest shall be restored to such estate, trust or transferee thereof for all purposes under this Agreement. ARTICLE VI BUSINESS CONTINUATION AGREEMENT 6.1 Ageement to Continue Business. If an Event of Dissolution occurs, mid dissolutionis not avoided,the remaining Members shall have the right to transfer the Company's assets and business to a successor limited liability company and to continue its business in such successor as provided Minnesota Statutes, Section 322B.813., 6.2 Procedures to Transfer and Continue Business. If the remahiing Members agree to continue the business of the Company, the Board shall organize a new limited liability company i(the"Successor')under the Art and shall prepare a plan of merger pursuant to which the Company shall be merged into the Successor, which shall be the surviving company, and the 6 ............. Membership Interests of the Members in the Company who do not dissent from the plan of merger shall be converted on a pro rata basis into membership interests,in the Successor,having substantially identical terms. If the plan of merger is approved, each Member who does not dissent from the plan of merger agrees to execute any documents required to effect the merger and crate the membership interests in the Successor including,without limitation, a member control, agreement among the members of the Successor having terins substantially identical to the terms of this Agreement. When approved by the Members of the Company (including menibers voting pursuant to Section 3221 .306, Subd. 3, clause(2) of the Act), such merger shall be properly effected in accordance with law, ARTJCLE VII TRANSFERS OF INTERESTS 7.1 Transfers. A member may assign the Member's fall Meinberslx p Interest only by assigning all of the Member's Governance Rights coupled with a simultaneous assignment to the same assignee of all of the Member's Financial Rights. A Member's Governance Rights may be assigned,without the consent of any other Member, in,whole or in part,to another person already a Member at the time of the assignment, Any other assignment of any Governance Rights shall be effective only if(i) all the Members, other than the member seeking to make the assignment, approve the assignment by unanimous written consent,which consent may be given or withheld, conditioned or delayed as the remaining Members,maydetermine in their sole discretion, and (ii)the assignee executes this Agreement as amended to reflect such assignee's, interest in the Company and any other instrurrient or instruments that the Board may deem necessary or desirable to effect such.assignment. A Member's Financial Rights may be transferred, in whole or in part,without the consent of the Board or any other Member. 7.2 Nontransferabi lily of Interests. No party nor their heirs, executors, administrators, and assigns shall sell, assign, create a security interest in, pledge, or otherwise transfer or encumber the Interests issued or to be issued hereunder(except to their families which shall consist of spouse, issue, siblings and parents)without the prior written consent of all other Members, except that a Member shall have the right to sell his or her interests without such consent upon compliance with the Articles of Organization, Operating Agreement or other governing documents and the following terms and conditions, (a) Whoever shall desire to sell his or her Interests must cause the purchaser to make the same offer to purchase all the Interests of the Members on the same terms and conditions as made to the selling Member. The selling Member shall present the written offer made to him, and shall also produce evidence reasonably satisfactory to demonstrate that the potential purchaser is,financially able to complete the purchase. The.other Members shall have thirty days to accept or reject the offer, (b) If the other Members reject the offer,whoever shall desire to sell his or her Interests shall first offer the offer thereof, first to the LLC and second to the other Members on a pro rata basis upon the same terms,and conditions as made to the selling Member. Such offer shall be communicated by the one offering to sell his or her Interest to all other parties and the LLC by written notice. If either the LLC or the other Members do not wish to purchase the pro rata share,, the LLC or other Members may purchase all or any part of the Interests being sold. 7 (c) In the event that such offer shall not be accepted by written notice no later than thirty days after the date of the mailing of the offer by either the LLC or the other Members,whoever shall have offered the Interests shall be free to sell his or her Interests to any other person, firm, or entity, subject to any restrictions in the Articles of Organization, Operating Agreement, or other governing documents, except that the subsequent transfer of such Interests shall not be on different terms none favorable to the transferee than the terms upon which the transfer was initially offered to the LLC or other Members. (d) If,within thirty days after the expiration of the thirty-day period referred to in the preceding paragraph, the Member offering to sell his or her Interests shall fail to consununate a sale thereof to any other purchaser:, then no sale of such shares may be made thereafter by the, offeror without again reoffering the sane to the LLC or the other Members in accordance with the provisions of this paragraph. (e) Each Interest Certificate issued by the LLC to the Members, if any, shall bear an appropriate legend that the transfer of such Interests is restricted by the provisions of this Agreement. Any purchaser shall be bound by the terms of this Member Control Agreement. 7.3 Redemption of Interests on Death. Upon the death.or dissolution of any Member (or any partner if the Member is a partnership or limited partnership), the LLC shall offer to purchase and the legal representative and any other Member, or other person who has an ownership interest in the Interests owned by the deceased Member, shall each offer to sell the entire Interest they may have in.the Interests. The purchase price of such Interests shall be computed and paid in accordance with the provisions of this Agreement. 7.4 Determination of Purchase Price and PM M. ent for tion. (a) The price for Interests purchased pursuant to this Agreement shall be the Interest's net worth in the LLC, adjusted to reflect the fair market value of the LLC's contracts and potential contracts, of the LLC at the close of the fiscal quarter immediately preceding the occurrence of the event giving rise to the purchase. The Interest"s net worth shall be determined by unanimous agreement in writing agreed to within 90 days of the date of death arnong the Members, or if they cannot agree or there is no agreement within such 90 day period of the date of death,by a licensed commercial appraiser selected by the LLC, iii,accordance with.the accounting principles generally applied by the LLC. (b) If the selling Member's estate does not agree with the purchase price determined by the accountant selected by the LLC,the selling Member's estate shall select an independent licensed comineicial appraiser who shall,jointly with the accountant selected by the LLC, determine the purchase price of the Interests according to the terms of the preceding paragraph. In the event such appraisers cannot agree on the purchase price, a third independent licensed commercial appraiser will be ordered by the 1st lien holder. The purchase price determined by a majority of the three appraisals shall be final and binding, (c) In the event of the Member's death (as defined above) the LLC shall pay to the Member's legal representative, for application upon the purchase price of 8 the Member's Interest, at least twenty percent of the total purchase price of the Interest. Such initial payment shall be made on or before the thirtieth-day following the date upon which the accountants determine the purchase price of the Interest, (d) The LLC shall pay to the selling party the balance of the purchase price (hereinafter referred to as the "Balance")represented by the amount by which the aggregate purchase price of the Interest exceeds the amount of the initial payment, within 5 months from the date of death. The Balance outstanding shall bear interest from the date of death,payable monthly together with the principal, at 6 percent per annum. (e) The obligation to pay the Balance and interest thereon shall be evidenced by a duly executed promissory note,payable to the order of the selling party, secured by the Interest being sold which shall be held in escrow until the final payment, and containing the aforesaid terms and such other terms as are customary for such instrunients, including acceleration in the event of default, the right of prepayment in whole or part without penalty. ARTICLE V111 GOVERNOR MANAGE MENT 8.1 Management by Governors. The management shall be by Briggs Properties, inc. ARTICLE IX AMENDMENTS 9.1 Amendment of A. eern.erlt. No change,modification.or amendment of this Agreement shall be valid or biding unless such change, modification or amendment shall be in writing signed by 100%in Voting Interests of the Members;provided,however, in no event may tlais Agreement be,amended to provide for less than unanimous consent to, avoid dissolution under Section 5.1. ARTICLE X MISCELLANEOUS 10.1 Governing Law., This Agreement and the rights of the parties hereunder will be governed, interpreted and enforced in accordance with the law of the State of Minnesota. 10.2 Binding Effect. This Agreement will be binding upon and inure to the benefit of the Members, and their respective distributes, successors and assigns. 103 Sever If any provision of this Agreement is held to be illegal, invalid, or unenforceable under the present or future laws effective during the term of this Agreement, such provision will be,fully severable; this Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement; mid the remaining provision had never comprised a part of this Agreement; and the remaining provision s of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore,in lieu of such illegal, invalid, or unenforceable provision, there will be added 9 automatically as part of this Agreement a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal,valid and enforceable. 10.4 Making CounteWart . This Agreement may be executed in several counterparts, each.of which will be deemed an original but all of which will constitute one and fllie same instrument. However, in making proof hereof it will be necessary to produce only One copy hereof signed by the party to be charged. 10.5 Additional Documents and Acts. Each Member agrees to execute and deliver such additional-d-ocinuents and instruments and to perform such additional acts as maybe necessary orappropriate to effectuate, carry out and perform all of the terms,provisions, and conditions of this Agreement and the transactions contemplated hereby. 110.6 No Third Party Beneficiary. This Agreement is made solely and specifically among and for the benefit of the parties hereto, and their respective successors and assigns, and no other person will have any rights, interest, or claims hereunder,or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise. 10.7 Notices. Any notice to be given or to be served upon the Company or any parry hereto in connection with this Agreement must be in writing and will be deemed to have been given and received when delivered to the address specified by the Member at the address specified in the Company's Required Records. Any Member or the Company may, at any time by giving five (5) days' prior written notice to the other Members and the Company, designate any other address in substitution of the foregoing address to which such notice will be given. 10.8 Interests, This Agreement shall control the disposition of any Interest of the LLC now owned or hereafter acquired by the Members. IN WITNESS WHEREOF, the undersigned have executed this Agreement as, of the day and year first above written. Elk River Lodge &Residential Suites, LLQ By: Patrick L J�riggs Chief Mana er 10 SCHEDULE A NAME, OF CONTRIBUTION AGREED VALUE PERCENTAGE VOTING MEMBER OF CONTRIBUTION INTEREST(%m) INTEREST P t ick Briggs 570,000 S70,000 100% 100% .......... 1.1 / r f ✓ s` r - rr,�a. rr ,✓' � •`` rr t �.. � Fir �'ur� v :. +" P� w,....°cT"�.. :> �...ki,"ti..�`rr .; ,Yi�r"r'a}si� ,�r"�;`F.�r�.r�`r.: +;zr '°� ''��&� �y �s 55Ms °. ,°4 t:, ..rta ,""r a J..,r 5. .5', �`a '`a ^<y 7 r,°M,�3,�r arwlr Yw`'w�'�ri'E"r.♦ r;r'i r w t'rt.o rs,5ra.,P .G"ti .Y ra. '^ey :TF.'1111t. (.-rt d'r,4 }. e+�,, t r',J" 4y r..n,°o urr 'i5'7! 4 C"il+'r4 hrrprlr tY°}i rr e r a1� 7t rJiif Y a al r rr tr Aa l 9rti'r" rt'' "1"ra 'P r'1a ; N+ r� of II�� Pu�3+4"� �u'�l�if� f�efth��` ut of,Ste ,w Y RM SECRETARY OF STATE 01 r(r iMr Y r err i an,w 6 Certificate cf Organization M. I Mare r Ritchie, Secretary of State oiff Minnesota, do certify that : Articles of Organization, duly signed, have been filed on this date in the Office of the Secretary e ,A. of State, for the organization of the following limited �r liability compariy, under and in accordance with the provisions of the chapter of Minnesota Statutes listed below. may: This limited liability company is now legally � organized under the laws of Minnesota. . Yom, Name : Elly River Lodge & Residential Suites, LLC Charter Number: 4139135-2 r Chapter Formed Under: 3228 fw . C This certificate has been issued on 02/22/2011 . 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DEC--09-DF FR I 09;59 AM FAX K0. FA 01 TM BANK 01P EM Rai. MemW FDIC 1 AIN s'rPPET OFFICE-630 Maltr.Strect*Elk MVCT,to h:553.3C+(763)441.1000 Dee ber 1,2005 Patrick alld Carrie Briggs 19021 Freeport Ave,Suite#50013 Elk liver,MN 55330 Re: Lett ar of Rec gra mendation To Whom It May Coneerarl: 117 ave known Patrick and Carric Briggs for approximately 5 years, 'Tlyrou hout various "business deal-igs with P'atriok and Carrie Briggs and their related cntities, 1 have found tlt lr adions thoughtful,professional and well planned. Thelf entrepreneurial and visionary spirit has enhanc l the local economies by creating n v jabs,providing available housing, and a sigrlilacaiitty improving the tax base to such cities as Heckcr,Big Lake,. ina mmun, and Elk River. 1 would recon mend that you consider Patrick and C=de Briggs vwitli my of your b"iness endeavors. in=el LeRo rind.cnfelser Assistant Vice Pj-esiclent MAIN STREET c SCHOOL STREET -1 071,;ZGO ELIC RIVER'&a'"AL-MART -MAPLE GROVE WoA7,MART �, �rmTiiet3a»ko�[�[kl�aver.cc� 1��"�e�rtn)wt�fl;i[�li.v'e;r.cc�a� March 2007 To Whom It May Concern; Last summer I had the pleasure of meeting Pat Briggs. I need to tell you how. My two daughters and I were living in a house that we were renting. We were informed that the owner of the house was going to sell and he was going to accomplish this task by doing an auction. I was put up in limbo because I was unsure that if this were sold at this auction, would I still have a place to live. If I did not have a place to 'live, what was the time frame that I needed to be out by? If I did have a place to live (new owners continued it as a rental property), what was going to happen to my rent? I had had an agreement with the owner about my rent to keep it affordable for us, so I had a concern there as well. li was approached by a local business owner about their concern for my family and they recommended that I get in contact with Pat Briggs. They graciously contacted him for me and explained what was going on. i met Pat a few days later. I had never met him before and really did not know what to expect. At first I felt a little reserved because he was asking so many questions, almost like an interview, but more personal. [ came to realize that he had a genuine concern about who I was and who my girls were. He cared and wanted to, know how he could fit in to make this a positive experience. I believe that if it had come down to my famfly not being able to live there any longer, he would have tried to assist me in finding just as good of a place. If not better, Leading up to the sale, Pat and I had talked at great length about how this could be a win-win experience for both of us. I was fully aware that the idea of someone buying my home and allowing me to live in it at a great deal less in costs than what it costs to own: it was like winning the lottery (odds aren't real good). I was fully aware that if he were not able to change my occupancy somehow, he would not be able to go forward with my ideal. Pat is an extremely smart businessman and visionary. We had talked about a number of different scenarios. What happened? My home was purchased the day of the auction and Pat did purchase it. He sold the home a short time later, with the understanding to the buyer, my occupancy. He made it very clear to the buyers of my situation and intentions for occupancy and he also drew up the lease agreement. Pat is a very genuine, personable and detailed person in everything he does. I was very blessed to have had the opportunity to meet this person because there are not a iot of people like him out there! sincerely— Dawn L Doering MD1 Mando Devlelopmeiit Inc. June 15, ' 010 To Whom It May Concern: I have had the opportunity to work'%ith Briggs Companies for the past three years as a tenant in one of their properties, I have :fee mxd Pat Briggs and his staff to be professional and ethical in their business dealings, They were always quick to respond to any issue we presented and follow duough to an agreeable conclusion. 0 thyears I got to know Pat on a more personal level and find him to be a genuin and e ver t2st person. I can,be contacted for firther information as needed, boA Sincerely, William B. Divine President 0 f fi.a Fax Erna;1 9524-70 9286 952 470 99285 bldi ine(c and aa. 4935 Sussex Plaa Shoreweod IVLN 55331 r To whom it May Concern: RE:The Briggs Company I have been a tenant of The Landmark professional Building since May of 2013. From the moment I met Pat he had my best interest at heart. He listened to my vision, he believed in me and knew just what I needed. He helped me with the layout of my new office space and it turned out even better than I had expected. in the 4 years I have been in the space he has helped me to plan for future expansions before I even knew I needed it. He is a visionary and makes sure you get what you are looking for. Mr. Briggs professionalism has shown through in everything he does. i truly appreciate how he has helped me grow and expand when the time was right. He is very easy to work with and i would easily recommend him to anyone seeking commercial space. Sincerely, Jessie Norton,PA-C Owner of ReNew You Medicai Spa L. . VER E CLINIC, P A . �J,k ��iv,kr,PR BOK 44 30 ry' Optometrists: G,M, f-fol'faK'd O. ,,F,A.Ct,0. Pham (76�3)4,11-1055 R. J, 11ss O.D. Fax:(763)441-70?4 May 22, 2007 To Whone It May Concern: Pat Briggs can make it happen! 1 am an optometrist, who was in need of iie'wr optoractric clinic, l Imew wvlaerc l wanted the clinic to be locatcd nd a �—'M rM iclealaOW it NVOUld lay OUt. l joist �teecicd so:tteotae to laella aac tta�rt e it happen, arcl Pat made it happen. As you probably wotilcl know, this type of project is nothing all Optometrist woUld specialize in or feel comfortable doing. "l'hankf illy, Pat was sramcone ] could trust to get the job done right, Ile listened to our needs so that the project would be exactly as l envisioned and he MIS there tll1-OUgl1OL1t 011, entire process, He liellacd Us sec irc the land fog. the bUilding. He designed tlac builcling tO Lltili7C the lartd most efficiently, He even helped us through the finmeing and interior desi ia, We really appreciated let's ability to complete the whole project.. Now ] fiave an optoni3tric clinic that is very modem and efficient. i ala very proud of this clinic because. it was exactly as l euvisionc_d, All my thanks go to pat, Nvho m do it all 111::11apc,ti. Rodney J, Hess, O.D. Lfe, [3,4k, Godlf �.tt:�4i1!�Lr T & K APARTMENTS 36914 ELK AVENUE NORTH BRANCH, MN 55056 651-277-0334 August 24, 2009 RE: The Briggs Companies In January 2009 1 had the honor of meeting the staff at The Briggs Companies, I was looking to purchase an investment property to add to my current real estate portfolio. Pat Briggs and Tim Kratzke spent several hours with my spouse and I showing us the properties they had for sale. Every property that was owned and operated by Tile Briggs Companies was immaculate. The proper-ties that we looked at were in outstanding shape both inside and out. They were extremely clean and had a very professional appearance. You could tell as soon as walking into a building that The Briggs Companies takes a tremendous amount of pride in their properties and what they have to offer. In May of 2009 We purchased a Briggs Property located in Becker, Minnesota. Since our purchase I have continued to employ The Briggs Companies as the property management company for our investment. During this time I have had the additional pleasure of meeting the other staff at The Briggs Companies and have found every one of them to be of the extreme high quality that the company is. They have continued to manage our investment as if it were their own. Everyone is extremely professional and takes great pride in their work. We Currently are working on expanding Our real estate portfolio and are not considering any other properties other than a Briggs Property. I would recommend to anybody that is looking for an investment property to purchase, a commercial property to purchase or lease, or a property management company, to contact'"rhe Briggs Companies. I can assure you that they will be very happy that they did. I have been in the real estate business for 17 years and have never experienced an outstanding company like The ,Briggs Companies. Respectfully, Anthony Jackson O,wner/President . . November 291�12017 ToWhom UtMay [oncenm | have been leasing from the Briggs Companies for almost 3years. | have 3total units curnS0dy. I started with 2 with Snap Fitness, then expanded to the adjacent bay after 2 years, Being first-time business owner, the leasing process was very intimidating. | worked with Patand Marla 1Oset the lease mptotake over the keys tornynew business, They made mnefeel like we were partnering inthis venture which Uappreciated, When Ustarted rmybusiness, | opened with two locations which were under different ownership, The experience with Briggs was much more 1onnVliking. The experience with Briggs hasbeenrnoreofeSnma||-tovvnmzmnnunitvfee| compared to dealing with a large real estate conglomerate,, The issues | have had with rnyspace have been resolved quickly. | understand every commercial bui(dingisgoing tohave issues here and there, but |appreciate the dedication vue get from Ben who isthere main maintenance employee. Recently, they even dropped off a space heater tohelp with one ofthe chilly offices |nour building. I would consider continuing to do business with Briggs in the future and would recommend them, Please contact me at 612-232-8681 Luke Smith Snap Fitness | Fuse Fitness Coaching K 0vvmer Snap Fitness Elk R,iver | 19022 Freeport St N)N | Elk River, MN 55330 763-241~8387 | ^ PROFESSIONAL SERVICE p , BUREAU Licensetl P Dondeti ProfessimO Colli aions 111.10 Industrial Circle NW Suite B Etk River, Minnesotn ,55330 Local: 763-588.1202 Phone� 1-8010-388-0013 Fax: 763-588-1187 10/13/2017 To Whom It May Concern: I have had the pleasure of working with The Briggs Companies since 2006,starting as a tenant in one of their properties.All of the staff at The Briggs Companies takes pride in their buildings and keep the tenants'top of mind in every situation. Throughout the years, I have kept In contact with Pat and Marla,and continue to be impressed with the buildings they are managing. Please contact me for any further information, Sincerely, Rob Gibbs President Professional Service Bureau, Inc. 4r "r,, 1 OF' 4, R * ry Lake November 8, 2016 RE- The Briggs Companies To Whom It May Concern, The Briggs Companies constructed, owns, and manages two multi-family apartment developments in the City of Big Lake; Ashbury Residential Suites and Town Square Luxury Apartments. Both developments are beautifully constructed and adhere to the quality the City expects and appreciates. Mr. Pat Briggs is a visionary who understands the potential of growth in the City of Big Lake. We are hopeful that his ideas for future development will come to fruition and look forward to working with The Briggs Companies as part of the development team. Please contact me at 763-251-2979 or b kbrTimek,d)hjgLakqmrj_c�r .g with any questions or concerns, Best regards, Hja na Klimmek C munity Development Director 6ty of Big Lake MY OF ACKER 12060 SHERBURNE AvENUE PC)Box 250 BECKER MN 55308 PHONE: 7612614302 FAX: 7612614411 May 9, 200 A NNAw It May (Ancern: Please consider ON letter our recorn rn end ation for Briggos Properties, Inc. We ,vorked extensively with thern on a nnd64bmily pnject in the City ofBed, wWch inAlUded do aline vvhh some eXiSting unusual infraS1rL1CtLH-0 circumstonces and Ound therm to be professional, ethical and efficient. Dudng the course of this prtect, they met and exceeded all of To codes and requirements set 00i in. a Oniely and konvugh mannen We would not heshate U) con&idw their future developments in our city'. If you have any questions regarding their project please feel free to call meat 763-2614302. Sincerely, Kelli IOU, AICT ("ornmunity Development Director Of Zimmerman 12980 Frimilom Avenuc TelqVone 763-056-4666 tvlN 55398 Fax 76.5-8564787 TO Whom It lklay Concern: R& "Tile Pilles of Zia- mennall"—Brl�as Propr1'6 ' Brigg.A'roperties construcUA,0ylns and manapestwo in thi?i city, "Th2 flities otZimmerman", These apartnn�,:ritSzm WC41 Conr tfuded and voluntarily cxc,.-,F,,d the City's design criieria for multifamily sructuru-i. Architectiu,al ((:awn�s are nbovc and boyond tho city-desired.appearances. Thc, City, is wry plca.�ed with the minagement ofthe prDperti facility maintenailco sand lr,.,s.sce relations, To tho best of our Liowledgc,nciftr%ve uor law(nfovcemont havc third building in near fut=,- Plca,si.contact me al '763-856-4666 ext. 24 with aily queAioms or COZICC1,115, siflc�;rely, CITY OF ZIMMERMAN Randy Piasrzcki mlna ,r!Coordimtor Beacon - Sherburne County, MN Page I of') Beacon""" Sherburne County, MN Summary Parcel ID 75-003-4401 Parcelln/a Parcel Type RE Prop" 17432 ZANE ST NW,ELK RIVER MN Address Plat n/a Sec-Twp- Sec.3 T32N R26W Rng Legal TRACT A:THAT PT OF GOVT LOT I LYING N OF THE S 830.55 FT THEREOF, Description SWLY OF STATE OF MN R OF W&W OF A LINE BEARING N 19 DEG 58 MIN 27 SEC W FROM A PT ON THE N LINE OF SAID S 830.55 FT OF GOVT LOT 1 DIS 151.19 FT W OF WILY R OF W LINE OF US HWY 10 AS MEAS ON AN ASSUMED BEARING OF W ALONG SAID N LINE.TRACT B:THAT PT OF GOVT LOT I LYING N OF S 830.55 FT THEREOF,SWLY OF STATE OFMNR OF W&E OF A LINE BEARING N 19 DEG 58 MIN 27 SEC W FROM A PT ON N Ll NE OF SAID S 830,55 FT OF GOVT LOT I DIS 151.19 FT W OF W LY R OF W LINE OF US HWY 10 AS MEAS ON AN ASSUMED BEARING OF W ALONG N LINE.SUB TO EASEMENTS. (Note:Legal descriptions here are for tax purposes only.Do not use them for recording purposes.) Last A 839691 Date:06/08/2017 Recording Class 205-Apartment(4 or more units) Occupancy NON-HOMESTEAD Deeded 8.21 Acres Tax District ELK RIVER CITY School 728-ELK RIVER District Owner Owner Elk River Lodge&Res Suites LLC 633 Upland Ave NW Ste C Elk River MN 55330 Sales Document Sale Date Sale Price Adj Price A774487 06/2013 $970,000 $970,000 A736449 09/2011 $970,000 $970,000 A554699 06/2004 $1,354.966 $1,054,966 A 507887 02/2003 $1,403,000 $650,000 05/2001 $1,512,500 $1,512,500 Valuation 2017 Assessment 2016 Assessment 2015 Assessment 2014Assessment Estimated Land Value $157,500 $144,000 $144,000 $144,000 Estimated Building Value $700,000 $630,000 $612,000 $612,000 Total Estimated Value $857,500 $774,000 $756,000 $756,000 https://beacon.schnciderc:orp.com/Application.aspx?ApplD=133&LayerfD=1600&PageTyp,.. 1/8/2018 Beacon - Sherburne County, MN Page 2 of 3 Tax History 2017 Payable 2016 Payable 2015 Payable 2014 Payable Taxable Value $774,000 $756,000 $756,000 $738,000 Net Tax $15,030.00 $14,924DO $15,420.00 $15,881.32 Special Assessments $0.00 $0.00 $0,00 $1,056.68 Principle Balance of Spec.Assessments $0.00 $000 $0.00 $0,00 'Total Payable $15,030.00 $14,924.00 $15,420.00 $16,938.00 Penalty ty Due $0-pp $0.00 $uo $0.00 Cost Due&Fees $0.00 $0.00 $0.00 $0.00 interest Due $0.00 $0.00 $0.00 $0.00 Total Unpaid $0.00 $0.00 $0.00 $0.00 PenaftyAnterest amounts are valid only fora Onited time.Please call the,Ruditor/Treasurer to verify arnoonts due. Pay Taxes Online Click here for General Information&Payment Options For totals and payment information for past due taxes contact Auditor/Treasurer:763-765-4352 Tax Statement 2017 Tax Statement 2016 Tax Statement 2015 Tax Statement "The above tax statement links wilt often in a pop-up.iftheydo notopen,please disable your pap-up blocker." Photos o https://b,eacoii.schneidereorp.corfi/Application.aspx?ApplD=133&LayerlD=16OO&PageTyp... 1/8/2018 Beacon- Sherburne County, MN Page 3 of 3 75-003-4401 G5A- 19,808 Sq Ft. 561, 24' 4S' 41' 28' Apartment 211 1/0 54' 16424 Sq Ft. 3384 Sul.Ft. Bit 3.399 20" 26' 24' 10, 6' 112, 14' 42' 50, ...... .. .... No data available for the following modules:Residential,Commercial,Other Buildmgs. Sherburne County disclaims any and all flabRity fcrrdamages incurred directlyor indirectly as a result of errors,omissions or discrepancies and is not responsible for Misuse or misinterpretation. Schneider Last Data Upload Data:1/8/20181:15:34 AM Developed by The Schneider Corporation https://beacon.schneidercorp.com/Application,aspx?ApplD=133&Layei-,ID=1600&PageTyp... 1/8/2018 Springsted Incorporated 380 Jackson Street, Suite 300 Springsted Saint Paul,MN 55101-2887 - Tel: 651-223-3000 Fax: 651-223-3002 www.springsted.com MEMORANDUM — DRAFT FOR REVIEW TO: Amanda Othoudt, City of Elk River FROM: Mikaela Huot,Vice President/Consultant DATE: January 25, 2018 SUBJECT: Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC The City of Elk River has received two applications for financial assistance through Tax Increment Financing (TIF)to assist with financing a portion of the development costs related to the construction of two projects. One is a 40-unit residential rental multi-family affordable housing project to be constructed by Jackson Hills Residential Suites, LLC. The other is an additional residential rental multi-family affordable housing project managed by Elk River Lodge & Residential Suites, LLC that would include the renovation of the existing Elk River Lodge building to include interior improvements, construction of a 25-unit garage, new parking lot and other exterior improvements. The developer of both sites has requested tax increment assistance to finance a portion of the costs associated with construction and renovation of the projects to provide a portion of the residential units as affordable. The purpose of this memorandum is to provide a summary of Springsted's review of the proposed projects to determine project eligibility, financial feasibility and to understand the need for assistance. The review will be used to assist the City with making a determination if the projects as proposed would be unlikely to proceed "but-for" the requested Tax Increment Financing (TIF)assistance, and also to determine the appropriate amount, if any,of public assistance. The developer had submitted applications for assistance for both projects approximately 6 months ago under the City's previous TIF Policy and Application. Developer applications were resubmitted following City approval of an updated Policy and supplemental application. As a result, information analyzed has been a combination of originally submitted materials, as well as the documents provided in the newly submitted applications. Background: Jackson Hill Residential Suites Housing Project The developer submitted a request for TIF assistance related to the proposed construction of an approximate 40 unit multi-family housing project in which a portion of the units would be affordable. The Sherburne County Assessor provided a new assessed value of the building to be approximately $3,310,000 (land and building). Assistance has been requested for financing a portion of the costs associated with construction of the project. The developer has proposed the approximate $5.9 million project will be funded by an estimated $1.179 million of equity and $4.719 million of private financing with tax increment financing used to provide annual cash flow. The developer's submitted Public .Sector Advisors City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 2 information provides that the request for assistance would be pay-as-you-financing as reimbursement for extraordinary development costs. The developer has indicated the receipt of City financial assistance is necessary for the project to proceed to finance a portion of the project costs. The developer has requested 90%of the available tax increment for a 25 year term. Based on current projections, this would equate to approximately$1.2 million with an estimated present value of $677,000. See complete sources and uses below from the developer's supporting financial materials submitted to Springsted. Sources Amount Uses Amount Equity $1,179,804 Land Acquisition 400,000 Debt $4,719,804 Site Work 834,071 TIF Construction 4,316,772 Architectural &Engineering 75,825 Legal Fees 10,000 Interest during Construction 82,350 Contingencies 180,000 Total $5,899,018 Total $5,899,018 There was some discussion during the first application process at a previous EDA Finance Committee regarding the size of the proposed district (one or two properties) and related acquisition price. The acquisition price included in the project sources and uses is for the 1.76 acre parcel that will comprise the 40-unit housing project. Reducing the existing purchase price from $5.21/square foot to something less is expected to have a positive impact on the performance of the project. It could ultimately reduce the amount of assistance necessary but is not expected to eliminate the need for assistance. Tax Increment Assumptions(Jackson Hills) In order to estimate the amount of TIF revenues generated by the proposed project, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms. • Total project area(2 parcels) 0 75-134-2303(EMV of$71,900) 0 75-134-2305(EMV of$233,700) o Base value of TIF District o Estimated original net tax capacity of$3,820 ■ Classified as residential rental class rate • Estimated total market value upon completion 0 40 units at$82,750/unit o Total estimated completed value: $3,310,000 o Based on Assessor review City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 3 • Maximum term of housing district(26 total years) • Increment based on difference between existing land value and new land/building value • Construction commences in 2018 and is completed in 2018 o 100%assessed in January of 2019 for taxes payable in 2020 • Payable 2017 tax rates remain o City: 46.193% o County: 50.458% o School: 36.659% o Other: 4.509% o Total 137.819% • Class rates remain constant through term o Residential rental rate of 1.25% o Classification of existing property as rental • 0%annual market value inflator assumed • Present Value assumptions 0 4.5%discount rate 0 8/1/18 present value date • Developer PayGO 0 90% pledged to developer 0 10% retained by City Tax Increment Revenue Estimates(Jackson Hills) The tax increment revenue estimates are based on collection of revenues for the full term of the Jackson Hills housing TIF district. Based on the assumptions previously outlined, the projected tax increment revenues to be generated from the project are shown in the chart below. Actual revenues generated by the project will be based on realized assumptions once the project is constructed and may be altered. Jackson Hills Residential Suites Housing Project TIF Amounts Total Gross Tax Increment(26 years) $1,340,872 City Retainage(10%) $134,082 Net Amount Available for Project(s)(90%) $1,206,790 Developer Requested Terms 25 years of tax increment at 90% $1,206,790 Estimated Present Value at 4.5% $677,707 Total estimated maximum amount per City policy(15 years) $773,580 City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 4 15 years at 90% $696,225 Estimated Present Value at 4.5% $480,523 Estimated surplus increment(remaining 11 years) $510,565 Estimated Present Value at 4.5% $197,184 It is important to note that the maximum term of a housing district is 25 years after receipt of first increment for a total of 26 years. The application for assistance includes a request for 90% of tax increment revenues for 25 years with the City retaining 10%. The City's general policy provides for a maximum term of assistance of 15 years for a housing TIF district. It is our understanding that the request is for 15 years of tax increment revenues for the Jackson Hills project with the remaining 11 years pledged to the Elk River Lodge project site (as will be described in greater detail below). Background: Elk River Lodge and Residential Suites Redevelopment Project The developer submitted a request for TIF assistance related to the proposed renovation and redevelopment of the existing Elk River Lodge site as a housing district. The developer has currently provided financial information related to the project which would include interior and exterior improvements to the existing Elk River Lodge building, construction of a 25-unit garage and new parking lot. The developer has estimated the total cost of the project to be approximately $1.5 million and financed with a combination of debt and equity. The mini-perm financing would be used to refinance an existing mortgage and provide new proceeds to finance the identified improvements. Correspondence from the applicant's potential lender has indicated that financing for the new improvements is subject to receiving tax increment financing assistance as a means of repaying the debt. The applicant needs $750,000 to refinance the existing mortgage with $500,000 for improvements necessary for rehabilitating the current site. $200,000 of the improvements have already been completed and the applicant anticipates completing the remaining $300,000 following consideration for tax increment financing assistance. The developer has requested tax increment assistance for a 10 year term. Based on the current project and timing for improvements, it does not appear that the Elk River Lodge site would be a viable stand-alone housing TIF district. Any tax increment assistance would need to come from surplus available revenues from another funding source, and presumably based on the applications for assistance would be from the Jackson Hills site(if established). See complete sources and uses below from the developer's supporting financial materials submitted to Springsted for the Elk River Lodge project site. It is our understanding that the applicant has previously acquired the project site and the land acquisition price as listed is not a current expenditure of the project. Sources Amount Uses Amount Equity $250,000 Land Acquisition $200,000 Debt $1,250,000 Site Work $300,000 City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 5 TIF Construction $950,000 Architectural &Engineering $20,000 Legal Fees $10,000 Interest during Construction $20,000 Total $1,500,000 Total $1,500,000 The developer's submitted information provides that the request for assistance would be pay-as-you-financing as reimbursement for extraordinary development costs. The developer has also indicated that a portion of the units would be considered 'affordable' and meet the definition of a housing project to be eligible to receive tax increment assistance. Based on review of the project components and understanding of the improvements to be constructed, the project as proposed is not expected to generate tax increment revenues sufficient to support the request for assistance. The proposed improvements may result in minimal increases to the existing taxable value. Any building permits pulled prior to district approvals would be included in the 'base' value of the district. It is our understanding that the developer's intent would be to receive increment from the other proposed housing district(Jackson Hills) as a financing source to this project, capturing the remaining 11 years of increment following payment to the Jackson Hills TIF district. Prosect Financinq There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-as- you-go basis. With upfront financing, the City would finance a portion of the developer's initial project costs through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the developer would finance all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for repayment to the developer. If tax increment revenues are less than originally projected, the developer receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues. With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying itself in full if tax increment revenues are not sufficient. The developer's financial information for both applications includes pay-as-you-go financing as annual reimbursement. The City also has the ability to spend tax increments from a tax increment financing district on other eligible projects within the City. The type, location and amount of eligible projects that can be financed is subject to the district(s) from which the tax increments would be spent from. This spending is referred to as `pooling' of tax increments. City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 6 Revenues from a housing district may be spent anywhere within the City as long as the project that is being financed meets the statutory definition of a housing project. Revenues from a redevelopment district may be spent within the boundaries of a project area, subject to certain percentage limitations and timing restrictions. Based on the tax increment revenue analysis provided in the chart above, it is anticipated that should the Jackson Hills Residential Suites project proceed, there may be surplus revenues available that could be spent on other eligible housing projects. An example of this may include the improvements to the Elk River Lodge site, as well as any other affordable housing projects that may be identified within the City. Policy Application The City's tax increment financing policy and application has been under review by the EDA, EDA Finance Committee, HRA and City Council for the past year. Following review, the updated policy and application has been approved and is currently being utilized. The policy provides the public purposes for which the City will consider the use of TIF for projects, as well as the policy objectives to be considered with TIF projects. The policy also addresses the terms of TIF projects and indicates they will be limited to the minimum term necessary to meet the project needs. Only projects exceeding the objectives identified in the policy will be considered to exceed the policy's general thresholds. The public purpose objectives as listed in the policy and application are as follows: 1. Demonstrate long-term benefits to the community. 2. Retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits through: • Diversification of the local economy. • Significant addition of permanent, high-wage,full-time jobs. • Addition of jobs attractive to those unemployed or underemployed. 3. Significantly increases the city's commercial and industrial tax base. 4. Demonstrates the ability to encourage unsubsidized private development through "spin off' development. 5. Facilitates the development process and achieves development on sites that would not develop"but for" the use of TIF. 6. Removes blight and/or encourages redevelopment of commercial and industrial areas resulting in high quality redevelopment and private reinvestment. 7. Offsets redevelopment costs (i.e. contaminated site cleanup)over and above the costs normally incurred in development. 8. Aids the implementation of the Mississippi Connections Plan. The policy thresholds for a housing district are 15 years (maximum is 26 years), with consideration that each project must meet the "but for" test. Meeting this test and verifying the amount of assistance that is needed will assist with determining the ultimate term of a district. The applicant has requested tax increment revenues be captured for the maximum 26 year term of a housing TIF district with the first 15 years pledged for the Jackson Hills housing project and the remaining 11 years pledged to the Elk River Lodge housing project. City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 7 Developer Pro forma But-For Analysis In approving a TIF district and project, the City must make several findings, including the "but for" test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The developer has provided financial information showing that the operating cash flow requires financial assistance from the City to reduce the amount of debt and equity necessary to finance total project costs, as provided through the annual tax increment revenues from the projects, and provide a reasonable return on investment. The City also received letters from the anticipated financial lenders for both projects indicating that tax increment financing was necessary to obtain financing. The developer has stated the assistance is necessary due to the costs of developing the site as affordable housing and inability of the projects to support those costs upon completion. Based on the developer's stated position relative to the need for tax increment financing assistance, the City could make its"but for"finding and provide tax increment assistance. We recommend, however, that the City also consider an appropriate level and type of TIF assistance for the project based on the information submitted by the developer. The City's position relative to the use of tax increment will focus on financing of the extraordinary costs with a limited term of assistance. The level of assistance is in part dictated by the `extraordinary' costs of the project and inability of the project to support those costs. Initial discussions about the project indicate the assistance would be provided as reimbursement to assist the developer with the development of affordable housing in the community and a reduction in rental income resulting from the affordable housing units. Following thorough evaluation of the project as provided allows the City to be prepared to make an informed "but-for" decision based on the likelihood of the project needing assistance, as well as the appropriate level of assistance. The "but-for" test is used to determine whether a project is likely to proceed as proposed without the use of public dollars. Without the requested amount of tax increment assistance (15 years of TIF from the new project), the test is to determine if the proposed Jackson Hills site would be developed as an affordable housing project with at least 20% of the units occupied at 50% of the area median income. And alternatively, without assistance, review how the project would be constructed, if at all, and/or at non-income restricted levels or reduced amenities to lower project costs. The but-for test for the Elk River Lodge site is also to determine if the project as proposed would proceed but- for the City assistance. In the application for assistance, the developer has listed the planned improvements for the project site. It is our understanding that some of those improvements have commenced and are required by City code. The determination for the need for assistance (remaining 10 years of TIF from the Jackson Hills new project) is based on the likelihood of the project proceeding as proposed. This includes both the financing of the identified improvements, some of which may be required, as well as providing affordable housing units, as necessary to meet the definition of a housing project. We also reviewed varying documents including the developer's provided operating proforma and financial statements and also constructed similar ten-year project proformas, showing a result if the developer received assistance as pay-as-you-go(reimbursement for TIF eligible costs)and showing a result if the developer did not receive assistance. Our analysis of the proformas included a review of the development budget, projected operating revenues and City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 8 expenditures, and the project's capacity to support annual debt service on the first mortgage and any secondary notes. Conclusion The City has received two applications for tax increment financing assistance. Both projects involve multi-family affordable housing. The first application relates to the construction of a 40-unit multi-family affordable housing project with a request for tax increment assistance of 90% for 25 years. The second application relates to the renovation of an existing facility that will include affordable housing. The applicant has stated that both projects would meet the definition of a housing district with at least 20% of the units restricted for occupants at 50% of the area median income. The developer has provided financial information related to the construction of the 40-unit housing project referred to as Jackson Hills and for the renovation the existing Elk River Lodge indicating that financial assistance is necessary to provide annual cash flow and meet required debt coverage ratios and market returns. With assistance the projects are expected to generate returns that the developer has indicated are sufficient to allow the project to proceed, with tax increment necessary to obtain financing for both the Jackson Hills project construction and the additional improvements related to the Elk River Lodge housing project. An overall reduction in project costs and/or increase in revenues may assist with achieving greater market feasibility in the future, and/or reduce the need for tax increment financing assistance. Both projects as proposed would include a provision of affordable housing units within the City. By establishing a Housing TIF District for the Jackson Hills Residential Suites project, the developer would be agreeing to maintain a portion of the units as affordable (meeting the income requirements as outlined previously) over the life of district. Without tax increment assistance the developer is not required to maintain any affordable units. As shown in the estimated tax increment revenue section of this memorandum, there are projected to be surplus revenues available from the Jackson Hills Residential Suites project that could be used to finance other eligible affordable housing projects within the City. Further discussion regarding how those surplus funds could be used, whether through a pooling program or on an annual basis, is recommended to occur. In addition, the City's newly updated Tax Increment Financing Policy and Application provides a general limit on the term of a housing TIF district to 15 years. The request for assistance between the two submitted applications would be for a 25 year TIF district with 15 years applied to the Jackson Hills project site and the remaining 11 years pledged to the Elk River Lodge project site. We recommend further discussion on how the projects meet the City's policy criteria and the ability to extend beyond the desired minimum term. Attachments:Proiect Qualifications:Definition of Housing Districts City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC January 25,2018 Page 9 Project Qualifications: Definition of Housing Districts Housing districts are a type of tax increment financing district that consist of a project intended for occupancy, in part, by persons or families of low and moderate income. Low and moderate income is defined in federal, state, and municipal legislation. A project does not qualify if more than 20% of the square footage of buildings that receive assistance from tax increments consist of commercial, retail or other nonresidential use. In addition, housing districts are subject to various income limitations and requirements for residential property. For owner occupied residential property, 95%of the housing units must be initially purchased and occupied by individuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under section 143(f) of the Internal Revenue Code. For residential rental property, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(4)of the Internal Revenue Code which states the following: • at least 20%of the units will be occupied by persons or families with incomes no greater than 50% of county median income or • at least 40%of the units will be occupied by persons or families with incomes no greater than 60%of county median income. Tax increments derived from a housing district must be used solely to finance the cost of housing projects as defined in section 469.174, subd. II and 469.176 of the TIF Act. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the City may be included in the cost of a housing project. The City anticipates using tax increment revenues to finance a portion of the extraordinary costs associated with providing the affordable housing units. The term of a Housing District is 25 years after receipt of first increment.