HomeMy WebLinkAbout1991-08-19 HRA Regular Meeting MINUTES
• OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY
AUGUST 19, 1991
ROLLCALL Answering rollcall were Commissioners Kelly, Paulus, Rice, Smith and
Richards.
CONSENT AGENDA ITEMS ADOPTED Motion was made by Commissioner Smith and was
seconded by Commissioner Rice to adopt the BRA Consent Agenda items as
presented.
Rollcall:
Ayes: Kelly, Paulus, Rice, Smith, Richards
Motion carried.
*MINUTES OF THE MEETING OF AUGUST 5. 1991, APPROVED Motion was made by
Commissioner Smith and was seconded by Commissioner Rice to approve the HRA
Minutes of August 5, 1991.
Motion carried on rollcall vote, five ayes.
RESOLUTION ADOPTED CONVEYING PHASES V AND VI - CENTENNIAL LAKES CONDOMINIUMS
Presentation by HRA Director
Executive Director Hughes explained that on September 5, 1989, the Centennial
Lakes condominium developer, Laukka Development, appeared before the HRA to
discuss the conveyance of the Phase IV condominium property. The matter now
before the Council is almost exactly the same, only Phase V will introduce
more of a market-rate condominium element into the project, rather than a low
• or moderately priced unit as with Phases I through IV. Assuming that the HRA
is of the same opinion as two years ago, which was that the introduction of a
higher priced product made sense from both a market and development
standpoint, the issue again is to what extent should the HRA be involved
financially in the development.
In the first four buildings, the HRA participated by providing $650,000 of
direct unrecoverable write-down to the project. The HRA contributed an
additional $200,000 per phase to form the second mortgage pool used to assist
purchasers who otherwise could not afford the units. For Phase V Laukka
Development has requested permission to build a 28 unit market rate
development. The average floor area of each unit is proposed to be
approximately 1700 square feet, with an average sale price of $177,000.
Phases I and II are 46 unit, non-elevator buildings and Phases III and IV are
42 unit buildings with elevators. Laukka Development has requested the HRA
provide an unrecoverable subsidy towards Phase V of $450,000, which is
$200,000 less than was provided for the first four buildings. However, it is
$200,000 more than was approved by the HRA when it considered this in
September 1989.
In reviewing Laukka Development's request for Phase V, the HRA may wish to
consider the following, both pro and con:
1. Phase V would be identical in exterior appearance to previous phases.
Therefore, the floor plans for Phase V must be substantially modified to
accommodate the redesign. Laukka Development submits that this is expensive
and will increase cost which cannot be fully recovered in the unit selling
• price.
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Page 2
2. Phase V would be the first departure from offering housing
• opportunities for low and moderate income individuals. However, not all Phase
I through IV purchasers are low income. Although they do not qualify for a
second mortgage, they may purchase a unit and therefore benefit from the
unrecovered subsidy in the earlier phases.
3. Laukka Development's gross margin is capped at 25% of cost. Any
benefit realized from the additional unrecoverable subsidy would be in the
form of faster sales and resultant reduction in holding cost.
4. Phase V could provide a test market for more affluent housing for
future development of other Centennial Lakes housing sites.
5. Although land costs are somewhat higher than similar market rate
projects, staff cannot identify other site or design conditions that make the
Phase V site more difficult or costly to develop.
6. Due to the progressive nature of the property tax system, a 28 unit
building with average sales price of $170,000 would generate more tax
increment than either the 42 or 46 unit moderately priced buildings.
7. The market-rate condominiums would be directly competitive with other
market-rate condominiums in the City. Therefore, it may be difficult to
justify to the owners of such condominiums the reason for the unrecoverable
subsidy to this project.
8. The proposed subsidy would help facilitate the completion of the
initial condominium phase of Centennial Lakes. The HRA and the City would
benefit from this completion through the collection of tax increments, the
conveyance of property owned by the HRA and the completion of the edge between
the condominium development and the Park.
• If the HRA grants approval for Phase V as requested, it then is subject to
review and approval of the East Edina Housing Foundation. Director Hughes
mentioned that for Phase VI, Laukka Development plans to return to a 46 unit
elevator building, again directed at moderate income purchasers. The attempt
would be to use up all the second mortgage proceeds that were created for this
venture with completion of the Phase VI project.
Presentation by Developer
Larry Laukka, Laukka Development, stated that the Centennial Lakes market
focus has changed from Edinborough. Edinborough has 392 walk-up garden
condominium units. Centennial Lakes was designed to follow in that mode and
the first two phases were just that. At Edinborough and at the inception of
Centennial Lakes older prospective buyers showed interest in elevator service
which was provided in Phases III and IV. In each of those buildings, the
majority of the units were sold to people of modest incomes which was the
ultimate goal. One of the goals was to maintain a formula that suggested that
80% of the people residing in Edinborough and Centennial Lakes earn less than
110% of the median income for the region. After 176 units have been built at
Centennial Lakes, of which 163 are sold, the 80% formula still works. The age
mix has changed from that of Edinborough, e.g. , single women 25-35 who use the
second mortgage vehicle, single/divorced women 45-55 and the 65 plus group of
which many are widowed and yet want to own a home. The latter two groups
began to drive the need for the elevator building. The Housing and Urban
Development (HUD) has formally advised that the remaining buildings must
contain elevators to accommodate the Fair Housing Accessibility Standards
established nationally by HUD.
•
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Page 3
Mr. Laukka said the rationale for the market rate building previously proposed
• in September 1989, failed for a variety of reasons. In April 1991, he
proposed a market rate building of 32 units which also failed in pre-sales.
After listening to what prospective buyers wanted, the proposed Phase V
building was designed for 28 units which will be taken to the market place.
The exterior appearance would be identical to Phases I through IV. The
Phase VI building is proposed as an elevator building with 46 units. The plan
is to market and construct both Phase V and Phase VI buildings simultaneously.
He indicated that construction financing is not readily available for these
types of developments and has a commitment to build these two buildings that
will expire at the end of 1991. To take advantage of that Laukka Development
would have to fulfill pre-sale requirements this fall, begin construction of
both buildings and complete the development next year.
Commissioner Comment/Action
Chairman Richards asked for comment and action by the Commissioners on the
request to convey Phase V, Centennial Lakes condominiums. The policy question
to be addressed is the extent of the HRA financial participation.
Regarding land costs, Commissioner Rice said he knew of no comparatives with
this degree of density that would attract this level of buyer and he could
understand the need for some help with cost. Although, these market rate
units will be competitive with other similar rate condominiums in the City, he
felt there is a need for some upscale units in the Edinborough/Centennial
Lakes project. Commissioner Rice concluded that the Centennial Lakes housing
element is nearly finished, should be totally completed and he would support
• the conveyance and the subsidy as requested.
Commissioner Smith asked about the homeowner associations in the project.
Mr. Laukka explained that each building has its own association; however, the
individual associations get co-mingled into one board. Accordingly, there
will be one decision made for the maintenance of all the buildings.
Chairman Richards commented that, while Laukka Development is a known
commodity and he agreed the project should be completed, he could not in good
conscience spend public dollars for market rate housing. He stated he could
support a subsidy of $250,000 as was done prior but not the requested
unrecoverable subsidy of $450,000 based on the financial summary submitted.
Commissioner Paulus said she was concerned because the proposed average unit
price of $170,000 is far beyond the average home price in Edina now at
$145-150,000 and she could not support subsidizing that level of homeowner.
Mr. Laukka clarified that the strategy has been to do one building to expand
the market that does not compete with what is out there. By marketing and
constructing the Phase V and VI buildings simultaneously, the units can be
priced at the break point by trading dollars from building V to building VI.
Secondly, the second mortgage money will be parlayed into the Phase VI
building to provide a deeper subsidy for Phase VI. Also, the tax differential
between a 46 unit building and a 28 unit building is approximately $34,000.00.
Lastly, he pointed out that the future and last major segment of Centennial
Lakes, Outlot A, is also slated for some type of dense housing development.
isThere is an opportunity now to determine what it takes to move people into
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Page 4
that type of density which will be necessary in order to afford the land.
• That final phase will not be supported by subsidy because the laws have
changed. He concluded by asking that both Phase V and Phase VI, Centennial
Lakes condominiums be conveyed simultaneously.
Commissioner Smith made a motion to approve conveyance of property for
Phase V, Centennial Lakes Condominiums for construction of a 28 unit market
rate housing project and to provide an unrecoverable subsidy of $450,000.
Motion for approval was seconded by Commissioner Rice.
Rollcall:
Ayes: Kelly, Rice, Smith
Nays: Paulus, Richards
Motion carried.
Commissioner Paulus made a motion to approve conveyance of property for
Phase VI, Centennial Lakes Condominiums for construction of a 46 unit moderate
priced housing project and to provide an unrecoverable subsidy of $650,000.
Motion for approval was seconded by Commissioner Kelly.
Rollcall:
Ayes: Kelly, Paulus, Rice, Smith
Nays: Richards
Motion carried.
Commissioner Smith introduced the following resolutions and moved their
adoption:
RESOLUTION RATIFYING AND AUTHORIZING THE
• EXECUTION AND DELIVERY OF VARIOUS DOCUMENTS
BE IT RESOLVED by the Board of Commissioners of the Housing and Redevelopment
Authority of Edina, Minnesota, (the "BRA"), as follows:
1. Recitals. The BRA and the Edina City Council have previously approved a
redevelopment plan, as defined in Minnesota Statutes, Section 462.421,
subdivision 15, designated as the Southeast Edina Redevelopment Plan, and have
approved various amendments thereto (as so amended, the "Redevelopment Plan").
Acting pursuant to the Redevelopment Plan, the HRA has acquired certain land
in the area included in the Redevelopment Plan and it has been proposed that
the HRA sell and transfer a portion of such land to the East Edina Housing
Foundation (the "Foundation"), pursuant to a Land Sale Agreement by and
between the HRA and the Foundation (the "Agreement"). By a resolution adopted
March 7, 1988, the BRA approved the form of the Agreement and authorized any
two officers of the BRA to execute and deliver the Agreement on behalf of the
HRA with such modifications as were deemed appropriate and approved by the
Chairman and the Executive Director of the BRA. Pursuant to such
authorization, the Chairman and Vice Chairman of the HRA executed and
delivered the Agreement dated on or as of March 14, 1988. Subsequently, by
resolution dated September 12, 1988, the BRA approved execution and delivery
by any two officers of the HRA, on behalf of the HRA, of an Amended and
Restated Land Sale Agreement and Contract for Private Redevelopment between
the BRA and Foundation with such modifications as the attorney for the HRA and
Executive Director of the HRA should approve (the "Amended Agreement").
Pursuant to such authorization the Chairman and Secretary of the HRA executed
and delivered the Amended Agreement dated on or as of September 30, 1988. In
connection with the transactions contemplated by the Amended Agreement, it is
. now proposed that Phase V and Phase VI of the Condominium Development be
H.R.A. MINUTES - 8/19/91
Page 5
commenced on the property described as Lots 5 and 6, Block 1, The Homes of
• Centennial Lakes, according to the recorded plat thereof, Hennepin County,
Minnesota (the "Phase V and Phase VI Condominium Property"), and that the
Phase V and Phase VI Condominium Property be conveyed pursuant to the Amended
Agreement and on the same terms and conditions as the Phase IV property was
conveyed with such changes and modifications as may be approved by the
Executive Director and the attorney for the HRA, including those resulting
from the grant of an unrecoverable subsidy of $450,000.00 for Phase V and the
proposed sale of Phase V units as market rate units without the use of second
mortgages, and resulting from the development of Phase VI as a 46-unit
building with elevator service to all units.
2. Authorization for Execution and Delivery of Documents. Any two officers of
the BRA are authorized and directed to execute said instruments and agreements
as may be required or be desirable to accomplish the conveyance of the Phase V
and Phase VI Condominium Property pursuant to the Amended Agreement with such
changes and modifications as may be approved by the Executive Director and
attorney for the HRA as above provided. The execution of such instruments and
agreements by any two officers of the HRA shall be conclusive evidence of the
approval of such documents by the HRA in accordance with this Resolution.
Dated as of the 19th day of August, 1991.
RESOLUTION RATIFYING AND AUTHORIZING THE
EXECUTION AND DELIVERY OF VARIOUS DOCUMENTS
Authorization for Execution and Delivery of Documents. Any two officers of
• the Foundation are authorized and directed to execute such instruments and
agreements as may be required or be desirable to accomplish the conveyance of
the Phase V and Phase VI condominium property described as Lots 5 and 6,
Block 1, the Homes of Centennial Lakes, according to the recorded lot thereof,
Hennepin County, Minnesota. Such conveyance shall be made pursuant to the
Land Sale Agreement and Contract for Private Redevelopment, as amended, by and
between the Foundation and South Edina Development Corporation; with any such
changes and modifications as may be approved by the signing officers of the
Foundation and the attorney for the Foundation, including those resulting from
the grant of an unrecoverable subsidy of $450,000.00 for Phase V and the sales
of Phase V units as market rate units without the use of second mortgages, and
resulting from the development of Phase VI as a 46-unit building with elevator
service to all units. The execution of such instruments and agreements by any
two officers of the Foundation shall be conclusive evidence of the approval of
such documents by the Foundation in accordance with this resolution.
Motion for adoption of the resolutions was seconded by Commissioner Rice.
Rollcall:
Ayes: Kelly, Rice, Smith
Nays: Richards
Resolutions adopted.
*CLAIMS PAID Motion was made by Commissioner Smith and was seconded by
Commissioner Rice to approve payment of the following BRA claims as shown in
detail on the Check Register dated 8/19/91, and consisting of 2 pages
totalling, $98,381.58.
• Motion carried on rollcall vote, five ayes.
H.R.A. Minutes - 8/19/91
Page 6
There being no further business on the HRA Agenda, Chair n "chards declared
the meeting adjourned.
Ex'ellkq Director