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4.3. SR 02-03-2020Request for Action City of El To Item Number Mayor and City Council 4.3 Agenda Section Meeting Date Prepared by General Business February 3, 2020 Amanda Othoudt, ED Director Item Description Reviewed by Amendment to the Preliminary Development Cal Portner, City Administrator Agreement with Modern Construction of Reviewed by Minnesota, Inc. Action Requested Approve, by motion, an amendment to the Preliminary Development Agreement with Modern Construction of Minnesota, Inc. Background/Discussion At their October 4, 2019, meeting, the HRA and the Council entered into a preliminary development agreement with Modern Construction. The agreement allows the developer to explore the idea of a multi- family, mixed -use development concept in downtown Elk River. Attached is a letter from Jesse Hartung requesting an extension of his agreement with the city to allow him time to further develop his plans for downtown redevelopment. A joint meeting with the HRA and the Council will be scheduled for June 1, 2020. Financial Impact N/A Attachments ■ Letter of Request from Modern Construction of Minnesota, Inc. (January 16, 2020) ■ Executed Preliminary Development Agreement ■ Amendment to Preliminary Development Agreement The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional,` 01 e service, and community engagement that encourages and inspires pi ospei ly INAWRE1 M v MODERN CONSTRUCTION OF MINNESOTA Mayor, Council, Staff, I hope everyone had a good holiday season and I wish everyone the best for 2020. I'd like to provide an update on the Downtown development project. Over the last few months I have engaged with the majority of the primary stakeholders in the project, including but not limited to the Downtown Rivers Edge Business Association, The Elk River Chamber, The Bank of Elk River, First National Bank of Elk River, Elk River Lutheran Church, many of the downtown business owners and tenants. Work is well underway on -site designs that incorporate all of the feedback I received, which I am very please to share has been overwhelmingly positive. There is a strong community of business owners downtown working hard to beautify downtown for the city and its residents and I'm excited and honored to be a part of that. The primary concern of everyone I've spoken with both downtown and in the larger community is parking; not just availability of parking but the quality of parking, access to parking, and the proximity of the parking in relation to the front doors of the business's people are trying to visit. This has been the primary focus of site design at this time and I am happy to report with confidence after completing multiple iterations of the site design there will be a significant increase in parking stalls- and they will be closer to the business doors, safer, and more accessible. I'm very excited to be able to share designs with all of you once they are fully vetted. Movement on the project has been steady but slower than anticipated. With the large number of stakeholders involved coordinating meetings, gathering information, and then updating designs has not moved as quickly as hoped. Some of the building owners were unavailable to talk with until early this year and I believe it's important that everyone is involved in the process. I'd like to request from the mayor and council a 4-month extension to the development agreement we have in place so I can spend the next 30-60 days completing all of my community engagement and then have a couple of months to drill into the designs and preliminary engineering to insure my proposal is well vetted and sufficiently detailed. Thank you for your consideration, Jesse Hartung, President PRELIMINARY DEVELOPMENT AGREEMENT THIS AGREEMENT, made and entered into this 7 day of October, 2019 by and between the City of Elk River, a Minnesota municipal corporation (the "City"), the Housing and Redevelopment Authority of the City of Elk River, a public body corporate and politic under the laws of the State of Minnesota (the "Authority"), and Modern Construction of Minnesota, Inc., a Minnesota corporation (the "Developer"). RECITALS WHEREAS, the City and the Authority desire to promote redevelopment of certain property within the City of Elk River, which property is described on Exhibit A attached hereto (the "Property"); and WHEREAS, the Developer has requested the City and the Authority explore the use of certain public assistance, financial, and otherwise, to assist with the construction of multi -family housing and commercial buildings on the Property, hereafter referred to as the "Redevelopment"; and WHEREAS, the City and the Authority have determined that it is in their best interest that the Developer be designated sole developer of the Property during the term of this Agreement; and WHEREAS, the City, the Authority, and the Developer are willing and desirous to undertake the Redevelopment if: (i) a satisfactory agreement can be reached regarding the City or the Authority's commitment for public assistance necessary for the Redevelopment; (ii) satisfactory mortgage and equity financing, or adequate cash resources for the Redevelopment can be secured by the Developer; (iii) the economic feasibility and soundness of the Redevelopment can be demonstrated; (iv) satisfactory terms of conveyance of the Property to the Developer can be negotiated; and (v) satisfactory resolution of zoning, land use, site design, and engineering issues, and other necessary preconditions have been determined to the satisfaction of the parties; and WHEREAS, the City and the Authority are willing to evaluate the Redevelopment and work toward all necessary agreements with the Developer if the Developer agrees to reimburse the City for the City and the Authority's costs relating to the Redevelopment even if the Redevelopment is abandoned or necessary agreements are not reached under the terms of this Agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations set forth herein, the parties agree as follows: Section 1. Intention of Parties. It is the intention of the parties that this Agreement: (a) documents the present understanding and commitments of the parties; and (b) will lead to negotiation and execution of a mutually satisfactory Contract for Private Redevelopment (the "Contract"). The Contract (together with any other agreements entered into between the parties hereto contemporaneously therewith) if executed, will supersede all obligations of the parties hereunder. 614738v3EL185-54 Section 2. Outline of Negotiations. Negotiations between the parties shall proceed in an attempt to formulate a definitive Contract based on the following: (a) the Developer's proposal (when submitted) together with any changes or modifications required by the City or the Authority; (b) such documentation regarding economic feasibility of the Redevelopment as the City or the Authority may wish to undertake during the term of this Agreement; and (c) other terms and conditions of this Agreement. The parties agree and understand that negotiations regarding the Contract will proceed as soon as reasonably practicable after the date of this Agreement, as sufficient details for the Redevelopment become available. Section 3. Developer's Obliations. On February 3, 2020, the Developer must submit a proposal to the City and the Authority, which proposal must provide the following information: (a) Information about the Developer, including information that shows that the Developer is capable of handling a project of the scope and size of the Redevelopment. This information shall include information regarding the Developer's experience with similar types of large projects and references for the Developer who can be contacted. (b) Detailed site plans that show the proposed locations and sizes of all buildings and improvements. (c) Detailed renderings of the buildings that show the sample floor layouts, elevations, and other graphic or written explanations of the Redevelopment. (d) Detailed information about how all existing parking on the Property will be accommodated by the Developer both during and after construction along with information on any additional parking that will be needed by the Developer for the Redevelopment and how this additional parking will be accommodated, including whether or not the proposed additional parking will be private or available to the public. (e) A detailed concept of how traffic will flow within and around the Property that will be improved with the Redevelopment. (f) Detailed information on how adjacent businesses will be able to receive deliveries and shipments during the Developer's construction of the Redevelopment, in particular the businesses located along Jackson Street. 614738v3EL185-54 -2- (g) Information about how the construction of the Redevelopment will be staged, including information about measures that will be taken by the Developer in order to ensure that there is safety on the job site and the surrounding areas during construction. (h) A cost estimate for the design and construction of the Redevelopment. (i) Information on the status of the Developer's acquisition of the parcels within the Property that are not owned by the Authority and the City. 0) A time schedule for the starting and completion of all phases of the Redevelopment. (k) A financial pro forma showing income and expense projections, rates of return, and any other information requested by the Authority that is reasonably necessary to demonstrate the need for public financial assistance and the amount of assistance the Developer believes is required to make the Redevelopment financially feasible. (1) Satisfactory financial data to the Authority evidencing the Developer's ability to undertake the Redevelopment. (m) A determination by the City and the Developer of what land use and subdivision applications will be needed to be submitted to the City for the Redevelopment. (n) Evidence of support of the Redevelopment from other property owners and businesses located near the Property. Section 4. City and the Authorit x's ObIlLations., During the term of this Agreement, the City and the Authority agree to: (a) Commence the process necessary to undertake such public assistance as is necessary pursuant to the terms of the proposal. (b) Proceed to seek all necessary information with regard to the anticipated public costs associated with the Redevelopment. (c) Review zoning, planning, and subdivision implications of the Redevelopment, as appropriate. (d) Analyze the Redeveloper's pro forma and estimate the amount of public financial assistance, if any, that is needed to make the Redevelopment feasible. 614738v3EL185-54 -3- Section 5. Continuencies. It is expressly understood that execution and implementation of the Contract shall be subject to: (a) A determination by the Authority that any public financial assistance for the Redevelopment is feasible based on projected tax increment revenues or other public development revenues designated by the Authority, and that financial assistance is warranted based on the Redeveloper's pro forma and any other information provided to the Authority. (b) A determination by the Developer that the Redevelopment is feasible and in the best interests of the Developer. (c) A determination by the City and the Authority that the Redevelopment is in the best interests of the City and the Authority. (d) The ability of the City and the Authority and the Developer to agree upon terms for the conveyance of the parcels owned by the City and the Authority to the Developer. The Developer understands that this Agreement does not obligate the City or the Authority to sell their respective properties to the Developer. Section 6. Reimbursement of Costs. The Developer shall be solely responsible for all costs incurred by the Developer. In addition, the Developer shall reimburse the City for the following costs: (a) Upon execution of this Agreement, the Developer has deposited with the City funds in the amount of $1,100, receipt of which the City hereby acknowledges. The City may apply such deposit to pay any "Administrative Costs," which means: reasonable and necessary out -of pocket -costs incurred by the City or the Authority from and after the date of submittal of the Proposal, in each case based on actual time spent in connection with rendering assistance and advice to the City and the Authority as evidenced by itemized bills and invoices for (i) the City and the Authority's financial advisor in connection with the City or the Authority's financial participation in redevelopment of the Property, (ii) the City's and the Authority's legal counsel in connection with negotiation and drafting of this Agreement and any related agreements or documents, and any legal services related to the Authority's or City's participation in redevelopment of the Property; and (iii) consultants retained by the City or the Authority for planning, environmental review, and traffic engineering for development of the Property. At the Developer's request, but no more often than monthly, the City and Authority will provide the Developer with a written report on current and anticipated expenditures for Administrative Costs, including invoices or other comparable evidence. (b) If at any time during the term of this Agreement, the City determines that the amount deposited by the Developer is insufficient to pay the Administrative Costs and will exceed $1,100, the City will notify the Developer in writing as what 614738v3EL185-54 -4- additional Administrative Costs are necessary and the estimated amount of the Administrative Costs. If the Developer agrees to the expenditure of the additional Administrative Costs, the Developer must deposit such additional funds with the City in an amount agreed to by the Developer and the City. If the Developer does not agree to the expenditure of the additional Administrative Costs, the City is not obligated to incur these costs and the Developer understands that the City and the Authority may not be able to fulfill their review obligations under this Agreement. (c) Upon termination of this Agreement in accordance with its terms, the City will return to the Developer the balance of any funds deposited under this section that are on hand as of the date of receipt of the notice of termination, and less any Administrative Costs incurred through the date of receipt of the notice of termination. For the purposes of this paragraph, Administrative Costs are considered to be incurred if they have been paid, relate to services performed, or are payable under a contract entered into, on or before the date of receipt of the notice of termination. This Section 6 shall survive termination of this Agreement and shall be binding on the Developer regardless of the enforceability of any other provision of this Agreement. Section 7. Desi elation as Sole Developer, of Proper The City and the Authority hereby agree that for the term of this Agreement that they will not: (i) provide or enter into any agreement for the provision of financial assistance to any third party in connection with any proposed development within the Property; and (ii) condemn or agree to proceed with the condemnation of the Property to assist or facilitate development within such area by a third party. During such period the Developer shall have the exclusive right to work with the City and the Authority in negotiating a definitive Contract for the Property. The Developer may not assign its rights or obligations under this Agreement to any person or entity without prior written approval by the City and the Authority. Section 8. Term of A reement. This Agreement is effective until February 3, 2020. After such date, neither party shall have any obligation hereunder except as expressly set forth to the contrary herein. This Agreement may also be terminated upon ten (10) days written notice by the City or the Authority to the Developer if: (a) an essential precondition to the execution of a contract cannot be met; or (b) if, in the sole discretion of the City or the Authority, an impasse has been reached in 614738v3EL185-54 -5- the negotiation or implementation of any material term or condition of this Agreement or the Contract; or (c) the City or the Authority determine that Administrative Costs will exceed the amount initially deposited for such purpose under Section 6 and the Developer does not deliver additional security to the City. If the City or the Authority terminates the Agreement under this Section, the Developer shall remain liable to the City under Section 6 of this Agreement for Administrative Costs incurred by the City and the Authority through the effective date of termination. Section 9. Remedies. In the event that the Developer, its successors or assigns, fail to comply with any of the provisions of this Agreement, the City or the Authority may proceed to enforce this Agreement by appropriate legal or equitable proceedings, or other similar proceedings, and the Developer, its successors or assigns, agree to pay all costs of such enforcement, including reasonable attorneys' fees. Section 10. Severability. If any portion of this Agreement is held invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion of the Agreement. Section 11. Amendment and Waiver. In the event any covenant contained in this Agreement should be breached by one party and subsequently waived by another party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach. This Agreement may not be amended nor any of its terms modified except by a writing authorized and executed by all parties hereto. Section 12. Notice. Notice or demand or other communication between or among the parties shall be sufficiently given if sent by mail, postage prepaid, return receipt requested or delivered personally: (a) As to the Authority: Housing and Redevelopment Authority of the City of Elk River 13065 Orono Parkway Elk River, MN 55330 Attn: Executive Director (b) City of Elk River 13065 Orono Parkway Elk River, MN 55330 Attn: City Clerk (c) As to the Developer: Modern Construction of Minnesota, Inc. 17981 Concord Street NW Elk River, MN 55330 Attn: Jesse Hartung 614738v3EL185-54 -6- Section 13. Counter ,)arts. This Agreement may be executed simultaneously in any number of counterparts, all of which shall constitute one and the same instrument. Section 14. Governintz Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Minnesota. Any disputes, controversies, or claims arising out of this Agreement shall be heard in the state or federal courts of Minnesota, and all parties to this Agreement waive any objection to the jurisdiction of these courts, whether based on convenience or otherwise. 614738v3EL185-54 -7- IN WITNESS WMREOF, the parties to this Agreement have cause this Agreement to be duly executed as of the day and year first above written. MODERN CONSTRUCTION OF MINNESO' I" ; INC. By Its: 614738v3EL185-54 -8- HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER Y. Chan.;- w� .. ,.",ecutive Director,,°-�-11° 614738v3EL185-54 -9- CITY OF ELK RIVER Its: Mayor�� By Its: City Clerk 614738v3EL185-54 -10- EXHIBIT A Description of the Pro e� li,, Parcels: 75-405-0210 75-405-0272 75-405-0280 75-405-0350 75-405-0360 75-405-0240 75-405-0230 75-405-0235 75-405-0275 75-405-0205 King Ave ROW A-1 614738v3EL185-54 FIRST AMENDMENT TO PRELIMINARY DEVELOPMENT AGREEMENT This First Amendment dated January 16, 2020 (the "First Amendment"), to that Preliminary Development Agreement dated as of October 7, 2019 by and between the City of Elk River, a Minnesota municipal corporation (the "City"), the Housing and Redevelopment Authority of the City of Elk River, a public body corporate and politic under the laws of the State of Minnesota (the "Authority"), and Modern Construction of Minnesota, Inc., a Minnesota corporation (the "Developer"). The Preliminary Development Agreement is hereby amended as follows: 1. The first paragraph of Section 3 is amended to read as follows. The remainder of Section 3 (paragraphs (a) through (n) shall remain unchanged. Section 3. Developer's Obligations. On June 1, 2020, the Developer must submit a proposal to the City and the Authority, which proposal must provide the following information: 2. The first paragraph of Section 8 is amended to read as follows. The remainder of Section 8 shall remain unchanged. Section 8. Term of Agreement. This Agreement is effective until June 3, 2020. After such date, neither party shall have any obligation hereunder except as expressly set forth to the contrary herein. 3. Except as amended by this First Amendment, all other terms of the Preliminary Development Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties to this First Amendment have cause this document to be duly executed as of the day and year first above written. MODERN CONSTRUCTION OF MINNESOTA, INC. By Its: 635129v1BL185-54 _I_ HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER By: By: Its: Chair Its: Executive Director 635129v1BL185-54 _2_ CITY OF ELK RIVER By: Its: Mayor By: Its: City Clerk 635129v1BL185-54 _3_