4.6 SR 10-05-2020Request for Action
To
Item Number
Mayor and Ci T Council
4.6
Agenda Section
Meeting Date
Prepared by
Consent
October 5, 2020
Amanda Othoudt, EDD
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
On October 7, 2019, 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.
At their September 21, 2020, meeting, the City Council approved Jesse Hartung's request for 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 on January 4, 2021.
Financial Impact
N/A
Mission/Policy/Goal
Mississippi Connections Plan — Mid-term goals: City partnering with property owners and the development
community to implement redevelopment projects that meet the community vision. Continue to assist in the
recruitment of highly desirable businesses to the core downtown (e.g. hotel, fine dining, banquet facility).
Mississippi Connections Plan — On -going goals: Based on demand, work with property owners and development
community on redevelopment proposals.
Attachments
■ Executed Preliminary Development Agreement
■ First and Second Amendment to Preliminary Development Agreement
■ Third Amendment to the Preliminary Development Agreement
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires pi ospei ly.
M
TUREJ
Updated.• August 2020
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 ObliaXign ,. 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 Allreement. 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 shallremain 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:
635129v 1EL185-54 -1-
HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER
y
P.-
77,
Its: Chair
Its: Executive Director
63512WIEL185-54 _2_
CITY OF ELK RIVER
Its: Mayor
By:
Its: City Clerk
635129v1EL185-54 -3-
SECOND AMENDMENT TO PRELIMINARY DEVELOPMENT AGREEMENT
This Second Amendment dated April 29, 2020 (the "Second 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").
WHEREAS, on January 16, 2020, the parties entered into a First Amendment to Preliminary
Development Agreement (the "First Amendment");
WHEREAS, the First Amendment extended the deadline in which the Developer had to
submit its proposal and extended the term of the Agreement; and
WHEREAS, the parties wish to further extend these deadlines; and
NOW, THEREFORE, the parties agree as follows:
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) shallremain unchanged.
Section 3. Developer's Obli rations. On September 8, 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 September 8, 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 Second Amendment, all other terms of the Preliminary Development
Agreement shall remain in full force and effect.
635129v1EL185-54 -1-
IN WITNESS WHEREOF, the parties to this Second 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: President
635129v1EL185-54 -2-
HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER
By: �.
G
Its: Executive Ditector
635129v1EL185-54 -3-
CITY OF ELK RIVER
Byw..._.......�....................e_. .
Its: Mayor
Its: City Clerk
635129v 1 EL185-54 -4-
THIRD AMENDMENT TO PRELIMINARY DEVELOPMENT AGREEMENT
This Third Amendment dated October 5, 2020 (the "Third 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").
WHEREAS, on January 16, 2020, the parties entered into a First Amendment to Preliminary
Development Agreement (the "First Amendment"); and
WHEREAS, the First Amendment extended the deadline in which the Developer had to
submit its proposal and extended the term of the Agreement; and
WHEREAS, on April 29, 2020, the parties entered into a Second Amendment to Preliminary
Development Agreement to extend the deadline in which the Developer had to submit its proposal
and extended the term of the Agreement (the "Second Amendment"); and
WHEREAS, the parties wish to further extend these deadlines; and
NOW, THEREFORE, the parties agree as follows:
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 January 4, 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 January 4, 2021. 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 Third Amendment, all other terms of the Preliminary Development
Agreement shall remain in full force and effect.
635129v1BL185-54 _I_
IN WITNESS WHEREOF, the parties to this Third 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 _2_
HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER
By:
By:
Its: Chair
Its: Executive Director
635129v1BL185-54 _3_
CITY OF ELK RIVER
By:
Its: Mayor
By:
Its: City Clerk
635129v1BL185-54 _4_