4.3 SR 02-03-2025
Request for Action
To Item Number
City Council 4.3
Meeting Date Prepared By
February 3, 2025 Brent O'Neil, Economic Development Director
Item Description Reviewed by
Resolution 25-07: Release of Mortgage at 15725 Brent O'Neil
Jarvis Street NW Cal Portner
Tina Allard
Action Requested
Adopt, by motion, Resolution 25-07 authorizing the release of the mortgage at 15725 Jarvis Street NW.
Background/Discussion
The city holds a mortgage at 15725 Jarvis Street NW of $500,000. This property is owned by PLM Properties,
an affiliated company of Heritage Millwork, and houses some of Heritage's present operations. This mortgage
was granted to the city by PLM as part of the framework for the city's land sale to Heritage for its new facility
on Gateway Road and the use of Tax Increment Financing (TIF). There was a concern the city bore a
heightened financial risk in the short period between the transfer of the property to Heritage and the
construction of the new building, with the concern alleviating as the building reached completion. To address
this concern, the mortgage on Jarvis provides supplemental and temporary collateral to the city during the
construction period of Heritage's new facility.
With construction substantially complete, PLM has requested the mortgage be released in February. The
agreement with Heritage directed its release in conjunction with the final Certificate of Occupancy (CO)
being issued, which is expected this spring. This request also corresponds with an anticipated issuance of a
temporary CO of the Gateway building in February, with much of the work being finished.
As Heritage plans the transition from the current facilities to the new Gateway facility, it has an agreement to
sell the Jarvis facility and will after the mortgage is released. The concerns driving the need for the Jarvis
mortgage have been addressed, and we support the release of the Jarvis mortgage at this time.
The mortgage the city is holding on the Gateway Road property, equal to the land sale price of $1,378,020.60,
is not affected by this action and will remain in place until the city has received full payment for the land.
Financial Impact
N/A
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community
engagement that encourages and inspires prosperity
Mission/Policy/Goal
Support the growth and development of the community.
Attachments
1. Resolution Approving Release of Mortgage
2. Release of Mortgage - 15725 Jarvis Street NW
City of Elk River
City Council
Resolution 25-07
A Resolution of the City Council of the City of Elk River Approving a Release
of Mortgage for The Heritage Millwork Project
BE IT RESOLVED by the City Council (the “City Council”) of the City of Elk River,
Minnesota (the “City”) as follows:
Section 1. Recitals.
1.01.On August 19, 2024, the City conveyed certain property in the City (the
“Development Property”) to Jade Elk Properties LLC, a Minnesota limited liability company (the
“Developer”), pursuant to a certain Purchase Agreement for the purposes of constructing an
approximately 110,000 square foot industrial warehouse facility (the “Project”) to be operated by
Heritage Millwork, Inc., a Minnesota corporation (the “Company”). The City also executed a
Development Assistance Agreement (the “Development Assistance Agreement”), by and among the
City, the Developer, and the Company, pursuant to which the City has agreed to accept a purchase
price note in the amount of $1,378,020.60 as payment (the “Purchase Price Note”) for a portion of
the purchase price for the Development Property. The Purchase Price Note will be paid pursuant to
its terms and the terms of the Development Assistance Agreement by tax increments derived from
the Development Property and the improvements thereon. The Purchase Price Note is secured by a
subordinate mortgage on the Project.
1.02.To finance the Project, Developer received (i) construction loans from First Bank
Elk River, a Minnesota state banking corporation (the “Bank”), in the estimated principal amount of
$17,554,000 (collectively, the “Bank Loan”), and (ii) a loan (the “SBA Loan” and, together with the
Bank Loan, the “Bank Loans”) from Twin Cities-Metro Certified Development Company, a
Minnesota nonprofit corporation (the “SBA Lender” and, together with the Bank, the “Lenders”), to
be assigned to the U.S. Small Business Administration, in an amount not to exceed $4,824,000. The
City received a request to subordinate its Purchase Price Note to the Bank Loans. As a condition of
subordinating the Purchase Price Note, the City required PLM Properties, LLC, a Minnesota limited
liability company (the “Original Developer”) to deliver a Mortgage in the amount of $500,000 (the
“Mortgage”) on certain property int the City where the Company’s existing operations are located
(the “Current Facility”) to be released when the City delivers a certificate of occupancy for the
Project.
1.03.The Developer is making considerable progress on constructing the Project and has
requested that the City release the Mortgage on the property early so that the Current Facility can be
sold.
1.04. The City Council has been presented with a form of a Release of Mortgage (the
“Release”) releasing the Mortgage early.
1.05.The City finds that the execution of the Release and the release of the Mortgage by the
City and the performance of the City’s obligations thereunder are in the best interest of the City and its
residents and helps an existing business in the City maintain and expand its operations in the City.
Section 2. Release Documents Approved.
2.01.The City hereby approves the Release substantially in accordance with the form
presented to the City Council, together with any related documents necessary in connection therewith,
including without limitation all documents, exhibits, certifications or consents required by the title
company to effectuate the release of the Current Facility from the Mortgage (collectively, the “Release
Documents”), and hereby authorizes City Administrator and the Mayor to negotiate the final terms
thereof and, in their discretion and at such time as they may deem appropriate, to execute the Release
Documents on behalf of the City, and to carry out, on behalf of the City, the City’s obligations
thereunder when all conditions precedent thereto have been satisfied.
2.02.The approval hereby given to the Release Documents includes approval of such
additional details therein as may be necessary and appropriate and such modifications thereof, deletions
therefrom and additions thereto as may be necessary and appropriate and approved by legal counsel to
the City and by the City Administrator and the Mayor; and said officers are hereby authorized to approve
said changes on behalf of the City. The execution of any instrument by the appropriate officers of the
City herein authorized shall be conclusive evidence of the approval of such document in accordance with
the terms hereof. This Resolution shall not constitute an offer and the Release Documents shall not be
effective until the date of execution thereof as provided herein. In the event of absence or disability of
the officers, any of the documents authorized by this Resolution to be executed may be executed without
further act or authorization of the City Council by any duly designated acting official, or by such other
officer or officers of the City Council as, in the opinion of the City Attorney, may act in their behalf.
2.03.Upon execution and delivery of the Release Documents, the officers and employees of
the City are hereby authorized and directed to take or cause to be taken such actions as may be necessary
on behalf of the City to implement the Release Documents.
Adopted on February 3, 2025, by the City Council of the City of Elk River, Minnesota.
John J. Dietz, Mayor
ATTEST:
Tina Allard, City Clerk
RELEASE OF MORTGAGE
Dated: _____________, 2025
THAT CERTAIN MORTGAGE, dated August 22, 2024 (the “Mortgage”), from PLM
PROPERTIES, LLC, a Minnesota limited liability company (the “Mortgagor”), to the CITY OF
ELK RIVER, MINNESOTA a municipal corporation and political subdivision of the State of
Minnesota (the “Mortgagee”), recorded in the office of the Registrar of Titles, Sherburne
County, Minnesota, on August 27, 2024, as Document No. 62912, is hereby released and
satisfied.
(The remainder of this page is intentionally left blank.)
DOCSOPEN\\EL185\\40\\716882.v1-4/22/21
IN WITNESS WHEREOF, the undersigned has executed this Release of Mortgage as of
the date and year first written above.
CITY OF ELK RIVER, MINNESOTA
By:
Its: Mayor
By: ______________________________________
Its: City Clerk
STATE OF MINNESOTA)
) SS.
COUNTY OF SHERBURNE)
The foregoing instrument was acknowledged before me this ____ day of
______________, 2025, by ____________________________________ and
_______________________________, the Mayor and City Clerk, respectively, of the CITY OF
ELK RIVER, MINNESOTA, a municipal corporation and political subdivision of the State of
Minnesota, on behalf of the Mortgagee.
Notary Public
This Instrument was drafted by:
Kennedy & Graven, Chartered
150 South 5th Street, Suite 700
Minneapolis, MN 55402-1299
(612) 337-9300
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