HomeMy WebLinkAbout2018-12-13 HRA Regular Meeting Agenda PacketAgenda
Edina Housing and Redevelopment Authority
City of Edina, Minnesota
Edina City Hall Council Chambers
Thursday, December 13, 2018
7:30 AM
I.Call to Order
II.Roll Call
III.Approval of Meeting Agenda
IV.Community Comment
During "Community Comment," the Edina Housing and Redevelopment
Authority (HRA) will invite residents to share new issues or concerns that
haven't been considered in the past 30 days by the HRA or which aren't
slated for future consideration. Individuals must limit their comments to
three minutes. The Chair may limit the number of speakers on the same
issue in the interest of time and topic. Generally speaking, items that are
elsewhere on today's agenda may not be addressed during Community
Comment. Individuals should not expect the Chair or Commissioners to
respond to their comments today. Instead the Commissioners might refer the
matter to sta- for consideration at a future meeting.
V.Adoption of Consent Agenda
All agenda items listed on the consent agenda are considered routine and
will be enacted by one motion. There will be no separate discussion of such
items unless requested to be removed from the Consent Agenda by a
Commissioner of the HRA. In such cases the item will be removed from the
Consent Agenda and considered immediately following the adoption of the
Consent Agenda. (Favorable rollcall vote of majority of Commissioners
present to approve.)
A.Minutes: Regular Meetings, November 29 and December 4, 2018
B.Request for Purchase: Special Legal Services for Southdale 2 Tax Increment
Financing District
C.Approval of Inclusionary Housing Policy Program Guide
VI.Reports/Recommendations: (Favorable vote of majority of Commissioners
present to approve except where noted)
A.Appointment to Edina Housing Foundation Board
B.Redevelopment Agreement with Orion 4500 France, LLC
C.Proposed Strategy to use Tax Increment Financing for A-ordably-Priced
Housing
D.Approval of Multifamily A-ordable Housing Property Tax Relief and Energy
E?ciency Grant Pilot Program
E.7075 Amundson Status Report
VII.Correspondence
A.Correspondences
VIII.HRA Commissioners' Comments
IX.Executive Director's Comments
X.Adjournment
The Edina Housing and Redevelopment Authority wants all participants to be
comfortable being part of the public process. If you need assistance in the way of
hearing ampliBcation, an interpreter, large-print documents or something else,
please call 952-927-8861 72 hours in advance of the meeting.
Date: December 13, 2018 Agenda Item #: IV.A.
To:Chair & Commissioners of the Edina HRA Item Type:
Minutes
From:Sharon Allison, City Clerk
Item Activity:
Subject:Minutes: Regular Meetings, November 29 and
December 4, 2018
Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Motion to approve the regular minutes of November 29 and December 4, 2018.
INTRODUCTION:
See attached draft minutes.
ATTACHMENTS:
Description
Draft Minutes: November 29, 2018
Draft Minutes: December 4, 2018
Page 1
MINUTES
OF REGULAR MEETING
OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY
NOVEMBER 29, 2018
7:30 A.M.
I. CALL TO ORDER
Chair Hovland called the HRA meeting to order at 7:36 a.m.
II. ROLLCALL
Answering rollcall were Commissioners Fischer, Staunton, Brindle, Stewart, and Mayor Hovland.
III. APPROVAL OF MEETING AGENDA
Motion made by Commissioner Brindle seconded by Commissioner Fischer amending the agenda
by removing Reports/Recommendations Item VI.B. Appointment to Edina Housing Foundation
Board and approving the Meeting Agenda.
Ayes: Brindle, Fischer, Staunton, Stewart and Hovland
Motion carried.
IV. COMMUNITY COMMENT
No Community Comment was received.
V. CONSENT AGENDA ADOPTED
Motion made by Commissioner Fischer seconded by Commissioner Brindle approving the consent
agenda as follows:
V.A. Minutes: Regular Meeting, November 15, 2018
V.B. Policy Update: Tax Increment Financing
V.C. Receive Payment of Claims As Per: Claims Pre-List Dated 11/21/2018 TOTAL $703,047.90
V.D. Approve 2019 HRA Meeting Schedule
Ayes: Brindle, Fischer, Staunton, Stewart, Hovland
Motion carried.
VI. REPORTS/RECOMMENDATIONS – (Favorable vote of majority of HRA Board Members
present to approve except where noted).
VI.A. ACQUISTION OF PROPERTY AT 4100 W. 76TH STREET
Affordable Housing Manager Stephanie Hawkinson recommended that the HRA used Southdale 2 TIF funds to
acquire the property at 4100 W. 76th Street on behalf of Aeon and hold the property for Aeon until they apply
for Low Income Housing Tax Credits in 2019 (their 2018 application was not approved). Ms. Hawkinson
explained that Aeon, an affordable housing developer, plans to redevelop the property into approximately 80-
affordable units, and based on an agreement with Twin Cities Land Bank, the bank acquired the property for
Aeon; however, paying interests over 22 months would create a financing gap in Aeon’s development budget.
Ms. Hawkinson, Mr. Neuendorf, and Ms. Aubrey Gould of Aeon, answered questions of the Commissioners
related to the amount Aeon would pay the HRA for the land in 2020; costs for holding the property; owning
developable land; affordable housing as an exception for owning developable land; and maintenance of the vacant
building.
Motion made by Commissioner Staunton seconded by Commissioner Fischer directing staff to
prepare a purchasing agreement for 4100 W. 76th Street.
Ayes: Brindle, Fischer, Staunton, Stewart, Hovland
Motion carried.
VII. CORRESPONDENCE
VII.A. CORRESPONDENCE – None received.
Minutes/HRA/November 29, 2018
Page 2
IX. HRA COMMISSIONERS’ COMMENTS – Received.
X. EXECUTIVE DIRECTOR’S COMMENTS – None received.
XII. ADJOURNMENT
There being no further business on the HRA Agenda, Chair Hovland declared the meeting adjourned at 8:35
a.m.
Respectfully submitted,
Scott Neal, Executive Director
Page 1
MINUTES
OF REGULAR MEETING
OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY
DECEMBER 4, 2018
7:00 P.M.
IMMEDIATELY FOLLOWING THE REGULAR CITY COUNCIL MEETING
I. CALL TO ORDER
Chair Hovland called the HRA meeting to order at 11:10 p.m.
II. ROLLCALL
Answering rollcall were Commissioners Fischer, Staunton, Brindle, Stewart, and Mayor Hovland.
III. APPROVAL OF MEETING AGENDA
Motion made by Commissioner Brindle seconded by Commissioner Stewart approving the
Meeting Agenda.
Ayes: Brindle, Fischer, Staunton, Stewart and Hovland
Motion carried.
IV. COMMUNITY COMMENT
No Community Comment was received.
V. PUBLIC HEARINGS – (Favorable vote of majority of HRA Board Members present to approve
except where noted).
V.A. REVIEW 2019 BUDGET, ADOPT RESOLUTION NO. 2018-12: 2019 HRA OPERATING
BUDGET AND TAX LEVY
Director Uram referred to his presentation made earlier to the City Council.
Chair Hovland opened the public hearing. No public comment was received.
Motion made by Commissioner Brindle seconded by Commissioner Fischer to close the public
hearing.
Ayes: Brindle, Fischer, Staunton, Stewart, Hovland
Motion carried.
Motion made by Commissioner Brindle seconded by Commissioner Fischer adopting Resolution
No. 2018-12 setting 2019 Tax Levy and adopting the 2019 Operating Budget.
Ayes: Brindle, Fischer, Staunton, Stewart, Hovland
Motion carried.
VI. HRA COMMISSIONERS’ COMMENTS – None received.
VII. EXECUTIVE DIRECTOR’S COMMENTS – None received.
XII. ADJOURNMENT
There being no further business on the HRA Agenda, Chair Hovland declared the meeting adjourned at 11:15
p.m.
Respectfully submitted,
Scott Neal, Executive Director
Date: December 13, 2018 Agenda Item #: IV.B.
To:Chair & Commissioners of the Edina HRA Item Type:
Request For Purchase
From:Bill Neuendorf, Economic Development Manager
Item Activity:
Subject:Request for Purchase: Special Legal Services for
Southdale 2 Tax Increment Financing District
Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Approve the Request for Purchase with Messerli Kramer and authorize staff to implement the terms of the
contract.
INTRODUCTION:
This item pertains to professional services to be rendered on behalf of the Edina Housing and Redevelopment
Authority.
Staff lacks the expertise to conduct the type of work necessary to obtain special legislation and recommends that
special legal counsel be engaged to pursue this goal.
ATTACHMENTS:
Description
Request for Purchase: Messerli Kramer PA
Messerli Kramer Contract
City of Edina • 4801 W. 50th St. • Edina, MN 55424
Request for Purchase
Date: December 13, 2018
To: Chair and Commissioners of the Edina HRA
From: Bill Neuendorf, Economic Development Manager
Subject: Request for Purchase: Special Legal Services for Southdale 2 Tax
Increment Financing District
Purchase
Subject to:
☒List Quote/Bid
☐State Contract
☐Service Contract
The
Recommended
Bid is:
☒Within Budget
☐Not Within Budget
Staff recommends that Messerli & Kramer, P. A. be engaged for this work and be reimbursed for
the contract amount of $37,500.00.
This special legal counsel has the resources and expertise available to complete the work.
Date Bid Opened or Quote Received: Bid or expiration Date:
December 6, 2018 na
Company: Amount of Quote or Bid:
Messerli & Kramer, P. A. $37,500.00
Recommended Quote or Bid:
Page 2
City of Edina • 4801 W. 50th St. • Edina, MN 55424
Request for Purchase
Department Director Authorization: ________________________________________
Edina HRA Authorization Date: ______________________ (for purchases over $20,000 only)
Budget Impact
Funding for this work will come from the Southdale 2 Tax Increment Fund and is considered an
administrative expense.
Environmental Impact
None
Community Impact
• The goal of this work is to benefit the community by identifying a dedicated funding
source for the creation and retention of affordably-priced housing in various sites
through the City.
• This contract will be overseen by the HRA Executive Director, Economic Development
Manager, or Affordable Housing Development Manager, as necessary. This work can be
accomplished as the anticipated workload for 2019.
MESSERLI & KRAMER, P.A. and
EDINA HOUSING AND REDEVELOPMENT AUTHORITY
Contract for Government Relations Services 2019 Legislative Session Representation
This contract for the provision of government relations services is entered into between
Messerli & Kramer P.A. and the Edina Housing and Redevelopment Authority (HRA).
SERVICES TO BE PROVIDED
During the period December 13, 2018 through May 31, 2019, Messerli and Kramer will
provide government affairs services on behalf of the City of Edina for affordable housing
TIF legislation. In the event a Special Session is called by the Minnesota Legislature, Messerli and Kramer will continue to provide lobbying services on affordable housing
TIF legislation through July 31, 2019. Katy Sen will be lead lobbyist from Messerli and
Kramer. Services include:
1. Representation. Representation of the Edina HRA at the State Capitol
in passing affordable housing TIF legislation for the City.
Representation includes the 2019 legislative session, any interim
committee hearings of interest, floor sessions of the state Senate and
House, and meetings with individual legislators and local officials.
2. Lobbying. Legislative lobbying for affordable housing TIF
legislation for the City, including: drafting of bills, identification of authors,
assistance preparing testimony, and submission of hearing requests.
Messerli and Kramer will lobby committee members, committee chairs, legislative leadership, the Governor, commissioners and other policy
makers as needed.
3. Bill Tracking. Tracking legislation, including: the Governor’s Budget and
Bonding Bill Recommendations, House and Senate Budget and Capital Investment Bills, and any other pertinent legislation.
4. Liaison with State Administration Officials. Maintain liaison with the
Governor’s Office and state agency officials regarding affordable
housing TIF legislation for the City.
32650.1
PROPOSED FEES AND DISBURSEMENTS
The contract amount for the services outlined above is $37,500 for a six-month period
from December 13, 2018 through May 31, 2019 billed at $6,250 per month. Invoices
will be presented on a monthly basis, and payments will be due upon receipt.
CONFLICT OF INTERESTS
We have enclosed a copy of the Firm's Conflict of Interest policy and a list of current
government relations clients for the City’s review to make sure there are no conflicts of
interest. The Firm has performed an internal conflict of interest review and determined
no conflict of interest currently exists.
AMENDMENTS
Amendments to this contract may be made upon the request of either party and upon
their mutual consent of the same in writing.
TERMINATION
This contract may be terminated by either party upon 30 days written notice to the other
party.
This contract is entered into on the ________day of __________________ by
___________________________ ________________________________
James B. Hovland, Chair Robert J. Stewart, Secretary
Edina Housing & Redevelopment Authority Edina Housing & Redevelopment Authority
___________________________
Tom Poul, Shareholder Signed on behalf of
Messerli & Kramer, P.A.
32017.1
Messerli & Kramer P.A. is aware that conflicts between clients can negatively impact their legislative programs. We assume the responsibility to examine the issues presented by any potential client for conflict with existing client legislative initiatives. To that end, we have developed a Conflicts of Interest Policy which we include as part of all client representation agreements. It is our belief that most conflicts can be avoided through a commitment to early identification of issues and by notification of clients. Conflicts of Interest Policy Messerli & Kramer P.A. has an affirmative obligation to promptly detect and immediately report any potential conflict between the legislative objectives of its clients. Legislative clients also have an affirmative responsibility to detect potential conflicts and notify Messerli & Kramer P.A. regarding them. A conflict of interest will be deemed to exist whenever either a legislative client or the firm determines there is a conflict. Prospective clients are advised to review the aforementioned firm profile of current clients. We make every attempt to identify any potential conflict of interest with existing clients prior to being retained by a new legislative client. This process includes a full discussion within our Government Relations Department and disclosure of the potential conflict issues to existing legislative clients who may be affected. If any significant conflict becomes apparent that cannot be resolved at this stage, the firm will decline the new representation absent client consent. If a conflict of interest arises between two or more existing legislative clients, the following guidelines will apply: 1. An attempt will be made to resolve or compromise the conflict between the clients. A compromise must be agreed to by all affected clients. 2. If a client elects to withdraw the conflicting issue from its legislative program, the conflict of interest will be considered resolved. 3. If the conflict is not resolved by a client's withdrawal of the issue or mutual compromise of the conflicting points of view, Messerli & Kramer P.A. must withdraw from representation of all clients on that particular legislative issue. Messerli & Kramer P.A. will contact appropriate parties to explain the conflict and the firm's withdrawal from the issue. 4. The client, with the firm's assistance, will be responsible for making their own arrangements for legislative representation on the issue giving rise to the conflict and withdrawal. Messerli & Kramer P.A. will renegotiate any retainer or contract agreement with an affected client to reflect the withdrawal.
5. If a pattern of conflicts develops between legislative clients, the Firm will evaluate the situation with the affected clients. The Firm will cease representation as necessary to
eliminate any continuing conflict of interest and will explain the withdrawal to all affected
parties.
Updated 12.3.18
2019 Government Relations Clients
Abbott Laboratories
American Council of Engineering Companies of Minnesota
ACEC
Aflac
AIG
Alliance of Automobile Manufacturers
Animal Humane Society
Apple
Artspace
Association of Dental Support Organizations
Canterbury Park
Center for Diagnostic Imaging
City of Bloomington
City of Edina
City of Inver Grove Heights
City of Minnetonka
Community Associations Institute
Consumer Data Industry Association
CVS Health
Dakota County
Dakota County Community Development Agency
Delaware North
Diageo North America
Ecolab
Everytown
Family Tree Clinic
Ford Motor Company
Friends of White Bear Lake
Hennepin County
Hennepin County Regional Railroad Authority
I-494 Corridor Commission
IDOM
Insurance Auto Auctions
Kimberly-Clark
Minnesota Ambulatory Surgery Center Association
Minnesota Community Measurement
Minnesota County Attorneys Association
Minnesota Defense Lawyers Association
Minnesota District Judges Association
Minnesota Medical Group Management Association
Minnesota Newspaper Association
Minnesota Oncology
Minnesota Regional Railroads Association
Minnesota Society of Certified Public Accountants
Minnesota Society of Professional Engineers
Minnesota Twins
Minnesota Urban County Attorneys
Minnesota Valley Transit Authority
Minnesota Zoo
Minnesotans for Lawsuit Reform
Municipal Legislative Commission
North American Council on Adoptable Children
Oracle
Otter Tail Power Company
Pearson Education
Pediatric Home Service
Randy’s Sanitation
Restoration Hardware
Safe Passage for Children of Minnesota
SHI International Corp.
Signature Flight Support
Smart Start MN
StorageMart
SouthWest Transit
Suburban Transit Association
Takeda Pharmaceuticals
Twin Cities Orthopedics
US Bancorp
Volunteers of America – National and Minnesota
Date: December 13, 2018 Agenda Item #: IV.C.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Stephanie Hawkinson, Affordable Housing
Development Manager Item Activity:
Subject:Approval of Inclusionary Housing Policy Program
Guide
Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Motion to approve Inclusionary Housing Policy Program Guide.
INTRODUCTION:
The Program Guide supports the Affordable Housing P olicy by providing guidance to owners and property
managers.
ATTACHMENTS:
Description
Policy Program Guide
December 2018 Page 1 of 27
Inclusionary Housing Policy
Program Guide
December 2018
December 2018 Page 2 of 27
Table of Contents
Introduction to the Inclusionary Housing Program (AHP) .................4
Chapter 1 – Overview ......................................................................5
1.01 Period of Affordability (POA) ................................................................................................................. 5
1.02 Affordable Dwelling Units (ADUs) ........................................................................................................ 5
Affordability Standards – Rental Projects ........................................................................................................... 5
Affordability Standards – For Sale Projects ......................................................................................................... 5
1.03 Student Households ............................................................................................................................... 6
1.04 Inclusionary Housing Program (AHP) Rent Limits ................................................................................. 6
1.05 Rental Assistance .................................................................................................................................. 6
1.06 Allowable Fees and Charges .................................................................................................................. 6
1.07 Fixed or Floating Affordable Dwelling Units .......................................................................................... 7
1.08 Rent Increases ....................................................................................................................................... 7
1.09 Utility Allowances ................................................................................................................................. 7
1.10 Record Retention .................................................................................................................................. 8
1.11 Leases .................................................................................................................................................... 8
1.12 Income Certification .............................................................................................................................. 9
1.13 Increases in Income .............................................................................................................................. 9
1.14 Property Standards ............................................................................................................................... 9
1.15 Affirmative Marketing .......................................................................................................................... 9
1.16 Fair Lease and Grievance Procedures .................................................................................................. 10
Chapter 2 – Maintaining the Unit Mix ............................................ 11
2.01 Fixed Affordable Dwelling Units .......................................................................................................... 11
2.02 Floating Affordable Dwelling Units .................................................................................................... 11
Chapter 3 – General Occupancy Guidelines .................................... 13
3.01 Qualification of Applicants ................................................................................................................. 13
3.02 Eligibility Determination ..................................................................................................................... 13
3.03 Change in Household Composition ...................................................................................................... 14
3.04 Minimum Lease Requirements ............................................................................................................ 14
3.05 House Rules ......................................................................................................................................... 15
3.06 Number of Persons Per Unit ............................................................................................................... 15
December 2018 Page 3 of 27
3.07 Tenant Selection Plan ......................................................................................................................... 15
3.08 Government Data Practices Act Disclosure Statement Form ............................................................. 16
3.09 Income Verification ............................................................................................................................. 16
3.10 Gross Annual Household Income ........................................................................................................ 17
3.11 Factors that Affect Household Size ..................................................................................................... 17
3.12 General Income Verification Requirements ......................................................................................... 18
3.13 Corrections to Documents ................................................................................................................... 21
3.14 Effective Term of Verifications ............................................................................................................ 21
3.15 Over Income Households ..................................................................................................................... 21
3.16 Annual Recertification ........................................................................................................................ 21
3.17 Tenant Files ......................................................................................................................................... 22
Chapter 4 – Reporting Requirements ............................................. 23
4.01 Annual Owner/Agent Certifications .................................................................................................... 23
4.02 Compliance Reports ............................................................................................................................. 23
4.03 Utility Allowance Source Document ................................................................................................... 23
Chapter 5 – Compliance Inspections .............................................. 24
5.01 Physical Inspections ............................................................................................................................ 24
5.02 Review of Tenant Files and Property Records ..................................................................................... 24
5.03 Review of Ongoing Lead Based Paint Maintenance (24 CFR 35.1355) .... Error! Bookmark not defined.
Chapter 6 – Correction and Consequences of Non-Compliance ...... 25
6.01 Notice to Owner/Agent ....................................................................................................................... 25
6.02 Correction Period ................................................................................................................................ 25
6.03 Owner’s/Agent’s Response .................................................................................................................. 25
Chapter 7 – Requests for Action .................................................... 27
7.01 Sale or Transfer ................................................................................................................................... 27
December 2018 Page 4 of 27
Introduction to the Inclusionary Housing Program (AHP)
Properties developed using local funds or because of inclusionary policies are subject to specific
rules designed to ensure that affordability pledges made by owners and developers remain
available to low and very low income tenants throughout the required Period of Affordability
(the POA). This Guide is designed to assist owners and their agents with planning and
maintaining compliance with the local requirements associated with these assisted rental
properties. This guide does not pertain to Market Rate units.
It is the responsibility of City of Edina Housing and Redevelopment Authority (hereafter the
“HRA”) to monitor the continuing compliance of affordable units in accordance with local policy
and governing agreements throughout the POA. The following procedures apply to all rental
properties that received funds under the local Affordable Housing Policy (AHP). Any violation of
the AHP requirements could constitute a covenant default of the governing agreement(s) and
imposition of all local government rights and remedies.
While successful operation of an affordable property is management intensive, the
owner/agent is responsible for ensuring that the governing agreement requirements are
properly administered. Thorough understanding of requirements and compliance monitoring
procedures requires training of owners/agents. The owner/agent should ensure that it knows
and understands the requirements of the inclusionary housing policy and the compliance
requirements since failure to comply may have very serious consequences. The HRA
recommends that owners, management agents and site managers (collectively referred to as
“owner/agent” throughout this document) receive compliance training before certifying or
leasing any affordable units. At a minimum, training should cover key compliance terms,
determination of rents, household eligibility, file documentation, procedures for maintaining
the required unit mix and reporting. Record retention and property condition standards are
also key to maintaining compliance. Attending educational opportunities as offered is strongly
recommended to keep up with any procedural changes to the AHP.
Should the AHP assisted property also receive an allocation of Section 42 tax credits (Low
Income Housing Tax Credits or LIHTC), and the property is found to be compliant with the tax
credit program, then the HRA will consider the property compliant with the AHP.
Owners/Agents of AHP assisted properties must annually certify to the HRA that the property
is compliant with the Low Income Housing Tax Credit program.
The HRA’s determination to monitor the project for compliance with requirements of the AHP
does not make it liable for an owner’s/agent's noncompliance. This Guide will be made
available to the owner/agent at project financial closing and will be posted on the website of
the HRA. The HRA, in its sole discretion, may delegate its compliance reporting and monitoring
responsibilities to a third party. AHP assisted properties will have a compliance review at initial
lease up and every third (3rd) year thereafter. However, the HRA reserves the right to conduct a
compliance review annually.
December 2018 Page 5 of 27
Chapter 1 – Overview
The following is an overview the Affordable Housing Policy. It is not intended to be detailed or
comprehensive. The requirements of the AHP apply to market rate residential developments
that receive a PUD approval from the City of Edina and/or financial assistance from the HRA.
This includes new developments and mixed-used developments that create twenty (20) or
more multi-family dwelling units and/or any change in use of all or part of an existing building
from a non-residential use to a residential use that includes at least twenty (20) dwelling units.
1.01 Period of Affordability (POA)
Affordable units created under the Affordable Housing Policy (AHP) are rent and income
controlled for 15 years. This term is referred to as the Period of Affordability or POA.
Owners/agents should refer to the property’s governing agreements to determine the specific
terms and conditions that govern the property.
1.02 Affordable Dwelling Units (ADUs)
At least ten percent (10%) to twenty percent (20%) of the total number of dwelling units in a
development receiving a PUD and/or assisted with local funds under the AHP will be designated
as Affordable Dwelling Units (ADUs). The percentage applied is based on the affordability
standard of the development.
Affordability Standards – Rental Projects
If an AHP property is also assisted with Low Income Housing Tax Credits (LIHTC), the AHP
Affordability Standard is based on the LIHTC election (20/50 or 40/60).
If an AHP property is NOT assisted with LIHTC, then the HRA together with the owner
determine which affordability standard applies.
10% at 50%
At least ten percent (10%) of total units developed shall be occupied by households at or below
fifty percent (50%) of the MTSP (Multifamily Tax Subsidy Income Limits, i.e. tax credit income
limits).
20% at 60%
At least twenty percent (20%) of total units developed shall be occupied by households at or
below sixty percent (60%) of the MTSP.
Affordability Standards – For Sale Projects
At least ten percent (10%) of total units developed shall be affordable for households at eighty
(115%) of the Metropolitan Statistical Area (MSA).
December 2018 Page 6 of 27
1.03 Student Households
The AHP adopted the Low Income Housing Tax Credit (LIHTC) program restrictions on student
households and excludes any household where all members are full time students. A full-time
student household may qualify if one of the following exceptions is met:
1. Married and eligible to file joint tax return
2. Single parent with dependent child(ren)
3. Receives assistance (MFIP) under Title IV of Social Security Act
4. Enrolled in a job training program
5. At least one member was previously in foster care
1.04 Inclusionary Housing Program (AHP) Rent Limits
Every ADU is subject to maximum allowable rents based on bedroom size for the area in which
the property is located. These maximum rents are referred to as the AHP rents. These limits
represent the maximum that owners/agents can charge for rent, including an allowance for
tenant paid utilities, and other non-optional charges (i.e. required renter’s insurance).
In the event AHP rent limits decrease for an area, or utility allowances increase, an
owner/agent may be required to reduce the rent charged but will not be required to lower
rents below those in effect at the time of project commitment.
1.05 Rental Assistance
Tenant Based Section 8 Housing Choice Vouchers. Tenants with Section 8 vouchers, or similar
state or federal tenant based rental assistance (TBRA) subsidies tied to a tenant and not a unit,
cannot be charged rent that exceeds the applicable AHP rent for the unit. Rents charged must
be comparable to other ADUs not receiving rent assistance. For example, if the owner/agent
charges less than the maximum AHP rent for non-voucher holders, it cannot charge a higher
rent to voucher holders.
Tenants receiving rental assistance, including Section 8 subsidy, must not be refused tenancy in
an ADU based solely on the fact that they receive rental assistance.
1.06 Allowable Fees and Charges
Fees considered reasonable and customary may be charged, such as application fees and
parking fees, if such fees are customary for rental housing in the neighborhood. Fees for
services such as bus transportation or meals can only be charged if the services are voluntary
and are not a condition of occupancy. An eligible tenant cannot be charged a fee for the work
involved in completing the additional forms or documentation required for the AHP, such as the
Tenant Income Certification.
Down payment fees/rent deposit for the ADU should not exceed one month’s rent.
December 2018 Page 7 of 27
1.07 Fixed or Floating Affordable Dwelling Units
ADUs may be “fixed” or “floating” and are designated on a property-by-property basis. The
enforcement agreement must contain fixed or floating unit designations.
Fixed Units – The ADUs are identified by unit number and never change. Units in properties
where all units are ADUs are automatically considered fixed.
If units throughout a project are not comparable (as defined by the HRA) or are in several
scattered sites, the ADU unit designation must/should be fixed.
Floating Units – The ADUs may change over time as long as the total number of ADUs in the
property remains constant. If a property’s enforcement agreement does not specify floating
units, then the units that were initially designated as ADUs at project completion will be used to
determine comparable floating units.
See Chapter 2, Maintaining the Unit Mix, for more information.
1.08 Rent Increases
If ADU rents remain below the maximum allowed, an owner/agent may impose a rent increase
as allowed by the enforcement agreement no earlier than one year from the date the project
was completed and no more frequently than annually thereafter. If an owner/agent wishes to
increase rents, the request must be within reasonable limits to cover increases in expenses
such as real estate taxes or operating expenses. At no time can proposed rent increases exceed
the current MTSP (LIHTC rents) rent limits for that development.
If the owner/agent increases rents as provided above, tenants must be given a written notice in
accordance with lease provisions before implementation.
1.09 Utility Allowances
The AHP requires that an allowance for tenant paid utilities be considered as a housing cost to
the tenant and be factored in when determining rent for an ADU. The HRA approved the use of
Metro HRA’s Utility Allowance Schedule (effective 2/1/18) as the document to use to determine
an ADU’s utility allowance.
Utility allowance schedules are usually updated annually. It is the owner’s/agent’s
responsibility to obtain an updated utility allowance and retain in the property records.
Changes in utility allowances must be implemented within 90 days. If an increase in the utility
allowance causes the ADU rent to exceed the applicable AHP rent limit, the unit rent must be
adjusted (lowered) to bring the gross rent of the unit into compliance with the AHP rent limits.
However, at no time will the ADU rent be adjusted to an amount lower than the ADU rent in
place at project commitment.
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If the property is regulated by HUD, or another form of project based subsidy, the program
approved utility allowance may be used.
1.10 Record Retention
Owners/agents must retain project records for a minimum of five years beyond the property's
required POA. Tenant records, including income verifications, development rents, and unit
inspections must be retained for the most recent five year period, until five years after the
effective period terminates.
Owners/agents must maintain applicant and tenant information in a way to ensure
confidentiality. Any applicant or tenant affected by negligent disclosure or improper use of
information may bring a civil action for damages against the owner/agent and seek other relief,
as appropriate. Owners/agents must dispose of records in a manner that will prevent any
unauthorized access to personal information, e.g., burn, pulverize, shred, etc.
1.11 Leases
Each lease must include the legal name(s) of the parties to the agreement and all other
occupants, a description of the unit to be rented (address), the term of the lease, the rental
amount, the use of the premises, and the rights and obligations of each party. The lease shall
also inform the tenant that fraudulent statements and information are grounds for eviction and
that the tenant could become subject to penalties available under federal law.
Initial leases for ADUs must be for 12 months unless another term is mutually agreed to by
owner/agent and tenant. If tenant agrees to a shorter term, that agreement must be in writing
and kept in the tenant’s file. At no time can a lease term be for less than 30 days.
ADU leases must contain language that the owner/agent reserves the right to adjust tenant
rents in accordance with the AHP rent limits and/or in the event a tenant’s income increases
above the income limits of the AHP.
The lease must also contain a provision that the owner/agent retains the right to recertify the
tenant’s income and household composition on an annual basis. The tenant’s failure to
cooperate with the annual recertification constitutes a violation of the lease.
If the lease used for the ADU unit does not contain any of the required provisions and/or
contains any prohibited provisions, an AHP Lease Addendum must be signed by the tenant and
kept in the tenant’s file. If a new lease is executed, a new AHP Lease Addendum must also be
executed. Prohibited lease terms are defined in the AHP Lease Addendum (see Appendix B).
An AHP Lease Addendum is not required when the HUD model lease for subsidized housing is
used.
December 2018 Page 9 of 27
1.12 Income Certification
The owner/agent must verify and certify tenant income eligibility and student status at move in
and recertify at least annually thereafter. At initial move in, or when first being determined
eligible for an ADU and in every 3rd year of the affordability period (not tenancy), household
composition, income and income from assets must be verified via third party verification or
other forms of supporting documentation and kept in the tenant’s file. In other years, tenants
must, at a minimum, self-certify to their anticipated income (including income from assets),
family size, and composition.
As part of the monitoring process, tenant files will be reviewed at initial occupancy of the
project and every 3rd year thereafter.
1.13 Increases in Income
The owner/agent must ensure that any tenant whose income increases above the AHP income
eligibility guidelines pays not less than the market or similar rent as the other non-ADUs in the
development. A minimum notice of 60 days is required for increases to tenant rent. The unit
must be marketed to eligible tenants when vacated.
For units assisted with both AHP funds and Low Income Housing Tax Credits (LIHTC), a tenant is
not considered over income until income exceeds the applicable 140% LIHTC limit. When a
tenant’s income exceeds the LIHTC limit, the tenant’s rent is adjusted to the LIHTC rent limit if
the project is 100% LIHTC or, if the project is mixed income, the market rent for similar non-
ADUs in the property.
1.14 Property Standards
The owner/agent must keep all units in compliance with local codes and other applicable state
and local building codes to ensure the units are decent, safe, and sanitary at all times.
1.15 Affirmative Marketing
Owners/agents must adhere to Equal Opportunity, Affirmative Marketing, and Fair Housing
practices in all marketing efforts, eligibility determinations and other transactions. The Equal
Housing Opportunity logo or statement (We do business in accordance with the Federal Fair
Housing Law. It is illegal to discriminate against any person because of race, color, religion, sex,
handicap, familial status, or national origin.) must be used in all advertising of vacant units.
In addition to the federal protections mentioned above, the Minnesota Human Rights Act
makes it illegal to discriminate against any person with respect to housing and real property,
because of race, color, creed, religion, national origin, sex, marital status, disability, status with
regard to public assistance, sexual orientation or familial status.
A file must be maintained with all marketing efforts related to the property including
newspaper ads, social service contacts, photos of signs posted, etc. Records will be reviewed
December 2018 Page 10 of 27
during on site monitoring to ensure that all efforts follow federal requirements and are being
adequately documented.
1.16 Fair Lease and Grievance Procedures
Fair lease and grievance procedures should be objective. They should clearly state:
• To whom a tenant should direct a complaint;
• Who will investigate and/or respond to the complaint; and
• By when the tenant should expect to receive a response.
December 2018 Page 11 of 27
Chapter 2 – Maintaining the Unit Mix
2.01 Fixed Affordable Dwelling Units
Properties with units that are not comparable in terms of size, amenities and features must
have fixed ADUs. Fixed ADUs means specific units are designated as the ADUs for the duration
of the affordability period. Owner/Agent must maintain these specific units as the ADUs.
Maintaining the required number of ADUs, is called complying with the unit mix requirements.
At no time will non-ADUs be subject to AHP rent and income requirements when the ADUs are
fixed.
When an owner/agent recertifies a tenant’s income, he or she may find that the tenant’s
income has increased. A tenant is considered “over income” in the AHP when:
• The tenant occupies an ADU and the tenant income increases to 140% of the current
AHP income limit for that family size; or
• For ADUs that are also LIHTC units, a tenant is considered “over income” when its
income goes over 140% of the qualifying tax credit election (50% or 60%) for that unit.
When a tenant is over income, the unit that the tenant occupies is considered temporarily out
of compliance with the AHP’s occupancy and unit mix requirements. Temporary
noncompliance due to an increase in an existing tenant’s income is permissible if the
owner/agent takes specific steps to restore the correct unit mix in the property as soon as
possible. When the tenant’s income exceeds the AHP’s income limit (140%), its rent must also
be adjusted.
The owner/agent cannot immediately terminate the lease based on the tenant’s increase in
income to above the AHP income limit. Instead, the owner/agent may extend /renew the lease
for up to one year. If the tenant is still over income at the time of the next recertification, a 60-
day notice to vacate may be issued to the tenant. If the tenant is determined to be under the
AHP income limit at the time of recertification, the unit is considered back in compliance.
2.02 Floating Affordable Dwelling Units
Properties with units that are comparable in terms of size, amenities and features can have
floating ADUs. Properties with floating ADUs must maintain the required number of ADUs
throughout the POA, however the initial ADUs do not have to remain as ADUs throughout the
POA.
When ADUs float, the specific units that carry the ADU designation may change, or float, among
assisted and non-assisted units during the POA. If/when an initial ADU goes out of compliance
due to a tenant’s income going over the AHP (or LIHTC) income limit, a non-ADU can replace
the out of compliance ADU if the tenant income and unit rent of the non-ADU meet the ADU
requirements. In other words, the ADU designation “floats” to another unit.
December 2018 Page 12 of 27
For example, if a property has an over-income tenant in an ADU, when the next non-ADU
comparable unit becomes available, it will be designated as an ADU and rented to an income
eligible tenant. The unit occupied by the over income tenant is redesignated as a market rate
unit.
Maintaining the required number of comparable ADUs is called complying with the unit mix
requirements.
When recertifying a tenant’s income, an owner/agent may find that the tenant’s income has
increased. A tenant is considered “over income” when:
• The tenant occupies an ADU and the tenant income increases over the current AHP
income limit (140% AMI) for that family size; or
• In ADUs that are also LIHTC units, a tenant is considered “over income” when its income
increases to 140% or more of the qualifying tax credit election (50% or 60%) for that
unit.
When a tenant is over income, the unit that the tenant occupies is considered temporarily out
of compliance with the AHP’s unit mix requirements. Temporary noncompliance due to an
increase in an existing tenant’s income is permissible if the owner/agent takes specific steps to
restore the required unit mix in the property. The rents of the over income tenants can be
adjusted.
When redesignating units in a property with floating ADUs, owner/agent can choose to
substitute a unit that is equal or “greater” than the original ADU, but generally they cannot
substitute one that is “lesser”. A lesser unit can be substituted only when doing so preserves
the original unit mix. A greater unit is one that might be considered preferable because of
larger size or additional bedrooms. The goal is to maintain the same number and type of ADUs
as were originally designated. Therefore, if an owner/agent makes a substitution that is
“greater,” it can later substitute an available unit that is “lesser” to restore the original unit mix.
Once a comparable non-ADU unit is designated as the new ADU, the unit with the over income
tenant is redesignated as a non-ADU or market rate unit. At this point, the owner/agent may
adjust the tenant’s rent without regard to the AHP rent requirements (although requirements
from other funding sources may still apply). Rent increases are subject to the terms of the
lease.
Note, a tenant in a floating ADU whose income exceeds AHP income limit is not required to pay
more than the market rent for a comparable, unassisted unit in the property.
The owner/agent cannot terminate the lease based on the tenant’s increase in income.
December 2018 Page 13 of 27
Chapter 3 – General Occupancy Guidelines
3.01 Qualification of Applicants
Applicants for ADUs shall be advised early in their initial visit to the property that there are
maximum income limits that apply to these units. They will also be made aware that the
anticipated income of all persons expecting to occupy the unit must be verified and included on
a Tenant Income Certification form prior to occupancy, and that tenant income and student
status will be reviewed annually.
A tenant may not occupy an ADU in a property receiving AHP assistance if that tenant is
considered a “full-time student household”. If at least one occupant of the household living in
an ADU is a part-time student, the household is not considered a full-time student household
and is exempt from the student rule.
If every member of a household that occupies an ADU is, was, and/or will be a full-time student
during any part of any 5 calendar months (spanning previous, current and/or upcoming year),
and no exceptions apply, then the household is not eligible to occupy an ADU.
The Student Rule exceptions are:
1) Married and eligible to file a joint federal tax return
2) Single parent(s) with dependent child(ren)
3) Receive assistance under Title IV of Social Security Act
4) Enrolled in job training program
5) At least one member of the HH was previously in foster care
Verification of student eligibility must be maintained in the tenant file along with the income
certification (if mixed income property) and must be recertified annually.
3.02 Eligibility Determination
A fully completed Household Questionnaire is critical to an accurate determination of eligibility.
The information furnished on the application should be used as a tool to determine all sources
of anticipated income and assets.
After the tenant completes the Household Questionnaire, the owner/agent must have all
income verified by obtaining source documentation (award letters, offers of employment, W-
2’s, check stubs (not paycheck), bank statements, investment records, etc.) or by a third party
(public agency, employer, financial institution). If total cash value of assets is less than $5000,
assets can be self-certified using the HTC24 Under $5000 Certification. Assets exceeding $5000
must be third party verified. The application, income and asset verifications, and lease are to
be executed prior to move in. All occupants in an ADU must be certified and have a valid lease
on file. All household members age 18 and over must sign all required documents.
December 2018 Page 14 of 27
3.03 Change in Household Composition
If a tenant in an ADU (no LIHTC) wishes to have an additional person move into the unit within
the first 6 months of occupancy the following steps must be taken:
1. The prospective tenant must complete a Household Questionnaire and allow time for
verification of income and assets as required of the initial tenant; and
2. The prospective tenant's income must be added to the current tenant's certification and
a determination made as to whether the new household is still within the AHP income
guidelines. If the new household income exceeds the guidelines, then once proper
notice is given, the tenant must pay the market rate. If the ADU is floating, the ADU
designation must be floated to another eligible unit. The new rent of the now over
income household cannot exceed market rent for a comparable unassisted unit.
The tenant file shall also be documented when any household member vacates the unit.
3.04 Minimum Lease Requirements
Initial tenant leases, including a signed and dated AHP lease addendum (if applicable) must be
on file and must specify a term of at least 6 months. Subsequent lease terms may be of shorter
duration. Leases must not contain any of the prohibited lease terms. Any non-renewal or
termination of leases must be in accordance with the lease and/or AHP lease addendum.
The owner/agent must comply with AHP requirements on evictions as well as state law
regarding eviction procedures. There must be a written notice that gives a tenant at least 30
days to vacate its unit, regardless of whether tenant has violated the law or lease terms.
Under the AHP, tenancy may be terminated only for:
• Serious or repeated violation of the terms and conditions of the lease.
• Violation of applicable federal, state, or local law.
• Other good cause.
Owners/agents must comply with the lease requirements found in Section 601 of the Violence
Against Women Reauthorization Act (VAWA) of 2013. HRA highly encourages owners/agents to
use the VAWA Lease Addendum, form HUD-91067 or its successor VAWA Lease Addendum
form. In general, owner/agent may not construe an incident of actual or threatened domestic
violence, dating violence, sexual assault, or stalking as a serious or repeated violation of a lease
term by the victim, or threatened victim, as good cause for terminating tenancy. However, in
accordance with VAWA 2013, owner/agent may bifurcate a lease to terminate the tenancy of
an individual who is a tenant or lawful occupant and engages in criminal activity directly
relating to domestic violence, dating violence, sexual assault, or stalking against another lawful
occupant living in the unit or other affiliated individual as defined in the VAWA 2013.
December 2018 Page 15 of 27
Owner/Agent should include a copy of HUD form 91066 or its successor form with each tenancy
termination or eviction notice to allow an individual to certify that he or she is a victim of
domestic violence, dating violence, sexual assault or stalking. The form is to be completed and
submitted to owner/agent within 14 business days or an agreed upon extension date, for the
individual to receive protection under the VAWA.
3.05 House Rules
Developing a set of house rules is a good practice. The decision about whether to develop
house rules for a property rests solely with the owner/agent. If house rules are listed in the
lease as an attachment, then they must be attached to the lease. By identifying allowable and
prohibited activities in housing units and common areas, the owner/agent provides a structure
for treating tenants equitably and for making sure tenants treat each other with
consideration. House rules are also beneficial in keeping properties safe and clean and making
them more appealing and livable for the tenants. They are also extremely beneficial if it
becomes necessary to evict a tenant for inappropriate behavior. For more information on
House Rules, refer to Chapter 6-9 of the HUD 4350.3 REV 1, Change 4 Handbook.
3.06 Number of Persons Per Unit
There is no federal regulation governing the number of persons allowed to occupy a unit based
on size however ADU’s will have a minimum requirement of at least one person per bedroom.
It is important, though, to be consistent when accepting or rejecting applications. It is required
that the owner/agent determine the minimum and maximum number of people that will be
allowed to occupy each size unit and put that formula in writing as part of the Tenant Selection
Plan and submit to the HRA for approval. The owner/agent may refer to the HUD Handbook
4350.3 REV 1, Change 4, Chapter 3-23, regarding occupancy standards. By following the
standards described, owners/agents can ensure that applicants and tenants are housed in
appropriately sized units in a fair and consistent manner as prescribed by law.
3.07 Tenant Selection Plan
Owner/Agent must develop a formal written policy that clearly states the procedures and
criteria the owner/agent will consistently apply in drawing applicants from the waiting list,
screening for suitability for tenancy, and implementing income targeting requirements. The
Tenant Selection Plan must state if there is an elderly restriction (“seniors only” building).
In accordance with the VAWA of 2013, the selection criteria cannot deny admission on the basis
that the applicant has been a victim of domestic violence, dating violence, sexual assault or
stalking. Owner/Agent should provide to each applicant/tenant HUD form 91066 or its
successor form to allow the applicant/tenant to provide information regarding his or her status
as a victim of domestic violence, dating violence or stalking.
Owners/agents may refer to the HUD Handbook 4350.3 REV 1, Change 4, Chapter 4, when
developing a tenant selection plan. HRA will review the Tenant Selection Plan as part of its
monitoring process.
December 2018 Page 16 of 27
3.08 Government Data Practices Act Disclosure Statement Form
In working with applicants and tenants, the owner/agent warrants compliance with applicable
data privacy laws and regulations including the Minnesota Government Data Practices Act,
which sets policies on the information that can be obtained, stored and/or released in
connection with public programs. To comply with this law, the Inclusionary Housing Program
Government Data Practices Act Statement form must be kept in each tenant's permanent file.
Note that this is not a release authorization for verification of income and assets and must not
be used as such. Each adult household member’s name must be printed clearly at the top in
the box provided. An unsigned and/or undated form is not valid and will be noted as
insufficient at time of file inspection.
1. The form is to be signed one time and is valid as long as the resident lives at the
property and participates in the program(s) identified in item #2 on page 1 of the form.
If a resident moves from one unit to another, the original signed and dated form should
be moved to the file for the new unit. A copy should be kept in the move out file for the
old unit.
2. A valid form must include all relevant attachments. Some properties or units within a
property may require 2 or more attachments for multiple programs.
3. Only one form is needed per unit as long as the head of household, spouse, co-head,
and all household members over the age of 18 have signed and dated the form.
4. If an adult is added to the household or a minor reaches age 18, they must be added to,
sign, and date the original form. It is not necessary to complete a new form.
5. A copy of the form should be made available to the applicant/tenant. It is acceptable to
give them an unsigned copy.
6. For new residents, the form should be completed at the time of initial application.
A Government Data Practices Act Disclosure form that can be used for all ADUs is available on
the HRA website.
3.09 Income Verification
At initial occupancy, owner/agent must determine whether prospective tenant(s) of ADUs
qualify as low income households. Income eligibility is based on anticipated income as defined
at 24 CFR 5.609 (Section 8). When collecting income verification documentation, owner/agent
must consider any likely changes in income. Owner/Agent must follow appropriate steps in
determining whether households are eligible prior to admittance.
Minnesota Housing provides sample verifications and other forms to assist owners/agents in
qualifying eligible tenants. The release of information (at top of form) must be completed and
signed by the person who is the subject of the verification prior to sending the form to an
employer or other income source. Completed and returned verifications are used to calculate
and document income.
December 2018 Page 17 of 27
An Income and Asset Calculation Worksheet form is also available and can be used to assist in
showing the individual calculations of income and asset income. This is highly recommended
and will greatly assist an inspector during a file review. This form should be dated and signed
by the owner/agent.
3.10 Gross Annual Household Income
Gross annual income for households living in ADUs shall be determined in a manner consistent
with Section 8 of the U.S. Housing Act of 1937.
Note that the information below only provides a summary. The Technical Guide for
Determining Income and Allowances for the HOME Program is a good resource and can be
found on HUD’s website. The HUD Handbook 4350.3 is also an excellent resource.
The determination of annual income must include all types of income in the amount
anticipated to be received by the tenant in the 12 months following
certification/recertification. Owner/Agent should use current circumstances to project income,
unless verification forms or other verifiable documentation indicate that a change will occur
(increase/decrease in rate of pay and/or hours). However, if the owner/agent is unable to
determine annual income using current information because the family reports little to no
income, or because income fluctuates, the owner/agent may average past actual income
received or earned within the last 12 months before the certification date to calculate annual
income.
3.11 Factors that Affect Household Size
When determining family size for occupancy, the owner/agent must include the following
individuals who are not currently living in the unit:
• Children temporarily absent due to placement in a foster home;
• Children in joint custody arrangements who are present in the household 50% or more
of the time;
• Children who are away at school but who live with the family during school recesses;
• Unborn children of pregnant women. When a pregnant woman is an applicant, the
unborn child is included in the size of the household and is included for purposes of
determining the maximum allowable income. The rental application should ask the
following question: “Will there be any changes in household composition within the
next 12-month period?” If an applicant answers that a child is expected, the
owner/agent should explain to the tenant that to count the child as an additional
household member and use the corresponding income limit, a self-certification of
pregnancy must be provided.
• Children who are in the process of being adopted;
• Temporarily absent family members who are still considered family members. For
example, the owner/agent may consider a family member who is working in another
state on assignment to be temporarily absent. Persons on active military duty are
considered temporarily absent (except if the person is not the head, co-head or spouse
December 2018 Page 18 of 27
or has no dependents living in the unit). If the person on active military duty is the
head, co-head, or spouse, or if the spouse or dependents of the person on active
military duty resides in the unit, that person’s income must be counted in full;
• Family members in the hospital or rehabilitation facility for periods of limited or fixed
duration. These persons are temporarily absent as defined above.
Persons permanently confined to a hospital or nursing home are not considered household
members.
When determining family size for establishing income eligibility, the owner/agent must include
all persons living in the unit except the following:
• Live-in aides
• Children of live-in aides
o A live-in aide/attendant is a person who resides with one or more elderly persons,
near-elderly persons, or persons with disabilities, and who:
Is determined to be essential to the care and well-being of the person(s);
Is not obligated for the support of the person(s); and
Would not be living in the unit except to provide the necessary
supportive services.
While a relative may be a live-in aide/attendant, they must meet the above requirements,
especially the last. The live-in aide qualifies for occupancy only if the individual needing
supportive services requires the aide’s services and remains a tenant, and may not qualify for
continued occupancy as a remaining family member. The owner/agent must obtain verification
from the person’s physician, psychiatrist or other medical practitioner or health care provider
that the live-in aide is needed to provide the necessary supportive services essential to the care
and well-being of the person and should not add the attendant to the lease. The owner/agent
may not require applicants or tenants to provide access to confidential medical records or to
submit to a physical examination.
Some households may include other persons who are considered family members for the
purposes of determining household size and income eligibility, including:
• Foster adults
• Foster children
Please see Appendix A for more detail on whose income is counted, what is counted as income
and what is not, and how to account for income generated by assets.
3.12 General Income Verification Requirements
All income and asset sources must be disclosed on the eligibility application and verified. A
properly completed application must be used as the basis for determining what verifications
December 2018 Page 19 of 27
will be necessary. The application, along with all supporting documentation and the Tenant
Income Certification, will be reviewed by HRA staff or its agent during a tenant file review.
The following describes the types of third party verification in order of acceptability:
1. Third party verification from source (written):
a. An original or authentic document generated by a third-party source that is
dated within six months from the date of receipt by the owner/agent. Such
documentation may be in possession of the tenant (or applicant), and commonly
referred to as tenant provided documents. These documents are considered
third party verification because they originated from a third party source.
Examples of tenant provided documentation that may be used include, but are
not limited to: pay stubs, payroll summary report, employer notice/letter of
hire/termination, SSA benefit letter, bank statements, child support payment
stubs, welfare benefit letters and/or printouts, and unemployment monetary
benefit notices.
Owner/Agent must consider the following when using tenant provided
documentation:
i. Is the document current? Documentation of public assistance may be
inaccurate if it is not recent and does not show any changes in the
family’s benefits or work and training activities.
ii. Is the documentation complete? Owner/Agent may not accept pay stubs
to document employment income unless the applicant or tenant provides
the most recent two months of consecutive pay stubs to illustrate
variations in hours worked. Actual paychecks or copies of paychecks
should never be used to document income because deductions are not
shown on the paycheck.
iii. Is the document an unaltered original? The greatest shortcoming of
tenant provided documents as a verification source is their susceptibility
to undetectable change through the use of high quality copying
equipment. Documents with original signatures are the most reliable.
Photocopied documents generally cannot be assumed to be reliable.
2. Written documentation sent directly to the third party source by mail or electronically
by fax, email or internet.
Verification forms must contain a release authorization signed by the applicant/tenant.
Do not use a blanket release authorization as this entitles the owner/agent to obtain
information to which it is not entitled or needed for eligibility determination. The Data
Practices Act Disclosure Statement is not a verification release. Applicants should be
asked to sign two copies of each verification form. The second copy may be used if the
first request has not been returned in a timely manner.
December 2018 Page 20 of 27
Income verification requests must be sent directly to and from the source. They are
never given to the tenant to obtain signatures. It is suggested that a self-addressed
stamped envelope be included with a mailed request for verification. If the returned
verifications do not contain complete information (typical examples include failure to
indicate interest rates, dates of anticipated raises, amounts of anticipated raises, etc.),
owner/agent must follow up with the source to obtain complete information. All
pertinent information must be documented in the file and must also include the name,
phone number and title of the contact, the name of the person accepting the
information, and the date.
3. Third party verification from source (verbal).
When clarifying information over the telephone, it is important to be certain that the
person on the telephone is the party he or she claims to be. Generally, it is best to
telephone the verification source rather than to accept verification from a source calling
the property management office. Verbal verification must be documented in the file.
When verifying information by phone, the owner/agent must record and include in the
tenant’s file the following information:
a. Third party’s name, position, and contact information;
b. Information reported by the third party;
c. Name of the person who conducted the telephone interview; and
d. Date and time of the telephone call.
4. Self Certification
An owner/agent may accept a tenant’s notarized statement or signed affidavit regarding
the veracity of information submitted only if the information cannot be verified by
another acceptable verification method. In these instances, the owner/agent must
document the file why third-party verification was not available. The owner/agent may
witness the tenant signature(s) in lieu of a notarized statement or affidavit.
The following describes use of electronic information when used as third party
verification.
Electronic Verification. The owner/agent may obtain accurate third party written
verification by facsimile, email, or Internet, if adequate effort is made to ensure that the
sender is a valid third party source.
a. Facsimile. Information sent by fax is most reliable if the owner/agent and the
verification source agree to use this method in advance during a telephone
conversation. The fax should include the company name and fax number of the
verification source.
b. Email. Similar to faxed information, information verified by email is more
reliable when preceded by a telephone conversation and/or when the email
address includes the name of an appropriate individual and firm.
c. Internet. Information verified on the Internet is considered third party
verification if the owner/agent is able to view web-based information from a
December 2018 Page 21 of 27
reputable source on the computer screen. Use of a printout from the Internet
may also be adequate verification in many instances.
Steps used to obtain written verification as described in 1, 2 and 3 above must be documented
to show just cause for using other types of verification. The owner/agent must include the
following documents in the tenant file:
1. A written note explaining why third party verification is not possible.
2. A copy of the date stamped original request that was sent to the third party.
3. Written notes or documentation indicating follow up efforts to reach the third party
to obtain verification.
4. A written note indicating the request has been outstanding without a response from
the third party.
Note: If a tenant is employed by a business owned by the tenant's family or is employed by the
property owner/agent or the management company, a copy of a recent pay stub, verifying
year-to- date earnings, is also required.
Upon receipt of all verifications, owner/agent must determine if the resident is qualified for
participation in the AHP. All verifications should be reviewed and calculations made as
necessary.
3.13 Corrections to Documents
Sometimes it is necessary to make corrections or changes to documents. A document that has
been altered with correction fluid or "white out" will not be accepted by HRA. When a change
is needed on a document, the person making the correction must draw a line through the
incorrect information, write or type the correct wording or number, and have all parties initial
and date the change.
3.14 Effective Term of Verifications
Verifications of any kind are valid for 120 days prior to an ADU tenant’s move in date or
recertification date.
3.15 Over Income Households
When determining eligibility to occupy an ADU, the household's gross income must always be
considered. However, if a tenant goes over the income guidelines at recertification, the
owner/agent must raise the over income tenant’s rent as soon as the lease permits in
accordance with the terms of the lease (see Chapter 2). The AHP does not require interim rent
adjustments.
3.16 Annual Recertification
All households occupying an ADU must be recertified at least annually from the date of
occupancy. Annual recertifications must be effective on or before the occupancy anniversary
date of the previous certification. Owner/Agent may align recertification dates with other
December 2018 Page 22 of 27
program certifications or so that all units in the property are recertified at one time during the
year. However, if a period of twelve (12) months passes without a recertification being
completed for any ADU, the unit is considered out of compliance. If the requirement to
recertify is included in an ADU lease or addendum, tenant refusal to comply can be considered
a violation of the lease and is grounds for termination.
Income must be third party verified in every 3rd year of the affordability period, not tenancy.
3.17 Tenant Files
Owner/Agent must maintain a tenant file for each ADU. All permanent documents must be
kept together so they are accessible at each compliance review (income certification and
supporting documentation, lease/AHP addendum, etc.). Annual recertification information,
including the tenant questionnaires, release forms, verifications, and annual inspection reports
must be grouped together by year, with the most recent year on top for review.
The tenant files must contain the following:
• HRA Government Data Practices Act Statement
• Household Questionnaire
• Acceptable verifications of income and assets
• Verification of student eligibility
• Tenant Income Certification (Initial Certification and Annual Recertifications)
• Signed lease agreement and AHP addendum (if needed)
• Move in inspection report
• Lead based paint acknowledgements (rental rehabilitation only; built pre-1978)
All move out files should also contain the following:
• Written 30-day (or greater) notice to vacate (if not available – document in file)
• Move out inspection report (both parties signed and dated)
• Security deposit refund (check number and date) or letter of intent to withhold security
deposit within 14 days of move out
• Itemized list of costs charged to tenant within 45 days
Tenant records, including income verifications, development rents, and unit inspections must
be retained for the most recent five year period, until five years after the affordability period
terminates.
December 2018 Page 23 of 27
Chapter 4 – Reporting Requirements
The owner/agent must maintain a report of all tenants residing in each ADU at the time of
application through the end of the affordability period and submit annual reports to HRA in a
form and manner requested by HRA.
Annual compliance reports are due to HRA by March 1 or as otherwise specified by HRA, of
each year during the affordability period. If the due date falls on a weekend or a holiday,
reports are due the following business day. Reports and other required documents must be
submitted as directed by HRA on an annual basis.
4.01 Annual Owner/Agent Certifications
Complete the Owner/Agent Certification to certify compliance with AHP requirements for the
preceding calendar year. Owner/Agent Certifications must be printed, signed and dated by the
authorized Owner/Agent Representative, then scanned and submitted as directed by HRA on
an annual basis.
4.02 Compliance Reports
HRA will annually monitor AHP compliance by reviewing annual Owner/Agent Certifications and
analyzing compliance information submitted by the owner/agent. Failure to submit the
Owner/Agent Certification and/or update the report on all units and their related activity by
the due date will constitute noncompliance with the AHP and the related loan documents.
4.03 Utility Allowance Source Document
Owners/Agents must submit the utility allowance source documents applicable to the reporting
period. Multiple utility allowance source documents may apply to one reporting period.
December 2018 Page 24 of 27
Chapter 5 – Compliance Inspections
Compliance inspections (file reviews) will be conducted every 3 years. This coincides with the
tax credit monitoring schedule, if applicable. When possible, efforts will be made to combine
AHP reviews with tax credit monitoring.
Inspections may be conducted more frequently if HRA determines it to be necessary based on
concerns raised during a previous review or other information.
The compliance inspection includes, but is not limited to, an inspection of at least 20%, but up
to 50%, of the ADU tenant files (with a minimum of four (4) units). Additionally, owners/agents
of these properties must annually certify that each building and all units are suitable for
occupancy and in compliance with State and local health, safety, and other applicable codes,
ordinances and requirements.
HRA will contact the owner/agent in advance to schedule the tenant file review. The property
inspection and tenant file review may be conducted at the same time or may be conducted
separately by different HRA staff.
5.01 Physical Inspections
The goal of the physical inspection is to ensure that the property and units are being well
maintained and in compliance with State and local health, safety, and other applicable codes,
ordinances and requirements.
Owners/Agents should conduct routine property inspections and perform any needed
maintenance to ensure that the property continually complies with all applicable requirements.
5.02 Review of Tenant Files and Property Records
During the tenant file review, HRA staff will review tenant income certifications, third party
verifications or other forms of income documentation, leases, lead based paint disclosure
forms, and other management information for selected units.
HRA staff will also review the following property information:
• Utility Allowances and supporting documentation
• Current written tenant selection plan, occupancy policy and/or house rules if changes
were made since the last review
• Current lease and lease addenda
• Affirmative Fair Housing Marketing Plan (if applicable)
• Advertising
• Equal Housing Opportunity posters, logos
• Correspondence
• Marketing plans
• Tenant ledgers for all units inspected
December 2018 Page 25 of 27
Chapter 6 – Correction and Consequences of Non-Compliance
If HRA does not receive the required certifications and/or compliance reports when due, or
discovers by audit, inspection, or review, or in some other manner, that the property is not in
compliance with the requirements of the AHP, or with the property’s loan documents, including
the enforcement agreement, the HRA will notify the owner/agent as soon as possible.
6.01 Notice to Owner/Agent
HRA will provide prompt written notice to the owner/agent of an AHP assisted property if HRA
does not receive the annual Owner/Agent Certification and income and occupancy report by
the required due date. HRA will also notify the owner/agent if it does not receive or is not
permitted to inspect the tenant income certifications, supporting documentation, and rent
records, or discovers by inspection, review, or in some other manner, that the property is not in
compliance with the requirements of the AHP or with the property’s loan documents, including
the enforcement agreement.
6.02 Correction Period
The correction period will be established by the HRA and set forth in a Notice of Noncompliance
to the owner and its agent. HRA may extend the correction period if HRA determines there is
good cause for granting the extension. Requests for an extension must be in writing from the
owner/agent, must be received by HRA no later than the last day of the correction period
identified on the Notice of Noncompliance, and must include an explanation of the efforts to
correct the noncompliance and the reason the extension is needed.
6.03 Owner’s/Agent’s Response
HRA will review the owner’s/agent’s response and supporting documentation, if any, to
determine whether the noncompliance has been clarified, corrected or remains out of
compliance.
Clarified noncompliance is, for example, where income eligibility was not properly documented
and the inspector cannot make a reasonable determination that the unit is in compliance but
the owner/agent conducts a retroactive (re)certification which completely and clearly
documents the sources of income and assets that were in place at the time the certification
should have been effective, and applies income and rent limits that were in effect on that date.
If documentation is complete and it supports that the tenant was eligible as of the effective
date, the file is considered clarified.
Corrected noncompliance is when a violation is observed and there is a period of time during
which the unit is out of compliance, but the unit is brought back into compliance. For example,
a late certification or re-certification is out of compliance on the certification due date, and
back in compliance as of the date the last tenant signs the Tenant Income Certification.
December 2018 Page 26 of 27
Uncorrected noncompliance is a violation that is not corrected or clarified by the end of the
correction period.
Failure to correct all noncompliance could result in extension of the end of the POA, loss of Tax
Increment Financing, or other legal remedies and may also affect the owner’s/agent’s eligibility
for financing from the HRA under any or all its programs.
HRA reserves the right to conduct a follow-up inspection if documentation is not sufficient to
confirm that all life threatening health and safety violations and any other hazardous
deficiencies have been corrected.
December 2018 Page 27 of 27
Chapter 7 – Requests for Action
7.01 Sale or Transfer
Any property owner must provide prior written notice to the HRA before and sale or transfer of
the property.. The notice will provide that the new owner/agent acknowledges that the terms
and conditions of the Inclusionary Housing Program as set forth in the governing documents
recorded against the property remain in place.
Date: December 13, 2018 Agenda Item #: V.A.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Scott Neal, Executive Director
Item Activity:
Subject:Appointment to Edina Housing Foundation Board Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Motion to appoint ______________ to the Edina Housing Foundation Board to a 3-year term.
INTRODUCTION:
Commissioners Fischer and Staunton will make a recommendation to appoint a new board member to the Edina
Housing Foundation.
Date: December 13, 2018 Agenda Item #: V.B.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Bill Neuendorf, Economic Development Manager
Item Activity:
Subject:Redevelopment Agreement with Orion 4500 France,
LLC
Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Motion to approve the Redevelopment Agreement with Orion 4500 France, LLC and authorize staff to
implement the terms of the Agreement.
INTRODUCTION:
This item pertains to the redevelopment of the 1-acre site at the southwestern corner of Sunnyside Road and
France Avenue. With the assistance of legal and financial advisors, staff negotiated general terms and conditions.
Those terms were approved by the Edina Housing and Redevelopment Authority (HRA) on October 11, 2018
and the Edina City Council on October 16, 2018.
On behalf of the Edina HRA, special counsel Dorsey & Whitney prepared a full Redevelopment Agreement
based on those terms. The Agreement outlines the qualified expenses for which the developer will be reimbursed
after successful completion of the project and delivery of the public improvements.
The full Agreement will be distributed prior to the meeting.
Staff recommends that the Redevelopment Agreement be approved.
ATTACHMENTS:
Description
Staff Report 4500 France TIF Agreement
Approved Term Sheet October 2018
Redevelopment Agreement
Memorandum of Redevelopment Agreement
December 13, 2018
Chair and Members of the Edina Housing and Redevelopment Authority
Bill Neuendorf, Economic Development Manager
Redevelopment Agreement with Orion 4500 France, LLC
Information / Background:
Earlier this year, Ted Carlson of Orion Investments requested the use of Tax Increment Financing (TIF) to
support mixed-use redevelopment of the vacant property at 4500 France Avenue. The two primary
buildings have been vacant for nearly one year after Edina Cleaners sold their retail business and moved
their industrial operations to a different facility in Saint Louis Park.
In recent months, the developer has acquired the property, revised their preliminary pro forma and secured
grant funds from the Minnesota Department of Employment and Economic Development (DEED). With
grant funds and TIF support, the financial gap appears to be manageable. Staff and advisors (Ehlers
Associates) have reviewed the project financial pro forma and confirmed that without TIF support, the
project does not achieve a market-rate return and appears to be unfeasible.
A term sheet was prepared by staff and approved by the Edina HRA on October 11, 2018 and the Edina
City Council on October 16, 2018. A $2.95 million TIF Note is recommended to reimburse the developer
for extraordinary costs after the project has been successfully completed and the public benefits are
delivered. A copy of the approved terms is included in this packet.
On October 16, 2018, the City Council also established the 44th & France 2 TIF District to enable a financial
pledge. On behalf of the Edina HRA, special legal counsel Dorsey & Whitney prepared a full Redevelopment
Agreement. The Agreement is based on the approved terms.
The developer is agreeable to the Redevelopment Agreement and is prepared to begin work immediately.
Remediation is intended to begin in December with construction beginning in Spring 2019.
Staff recommends that the Redevelopment Agreement be approved.
4500 France Apartments
Proposed Term Sheet – Tax Increment Financing
October 11, 2018
1) Purpose and Scope
a. This “Term Sheet” identifies basic business points that establish the framework of the
potential use of public funds to support private redevelopment of vacant and
underutilized properties within the City of Edina and to provide certain public benefits
in and adjacent to the property. This document is intended to serve as the general
framework of a future Redevelopment Agreement that is executed by the Developer,
City and Edina HRA.
b. This document is intended for discussion purposes with the Board of the Edina HRA.
Based on the response and direction provided by the HRA Board, the City staff is
prepared to engage third-party legal and finance professionals to prepare a full legal
contract (the Redevelopment Agreement).
c. City and HRA Out of Pocket Costs – The Developer has completed the City’s TIF
Policy Form and agreed to pay for the City’s staff and out-of-pocket costs in evaluating
this request for Tax Increment Financing. The City has engaged Dorsey & Whitney,
Ehlers Associates and Stantec to provide assistance in preparing the necessary studies
and evaluations. Developer will submit funds in advance and held in escrow. These funds
will be used to pay third-party consultants. Any excess / un-used funds will be returned
to the Developer.
2) Project Ownership
a. Two developers are partnering on this project. The lead Developer is Orion
Investments - 4530 West 77th Street, Suite 365, Edina, Minnesota 55435. Ted Carlson is
the principal. Nino Pedrelli with State Street Realty Advisors, LLC is the co-developer.
3) Project Description
a. Location – Consists of five parcels located at the southwest corner of the France
Avenue and Sunnyside Road intersection. Addresses include: 4500 France and 3903
Sunnyside (formerly Edina Cleaners), 3905 and 3907 Sunnyside (single family residences).
The project site is approximately 1.05 acres in area.
b. Existing Conditions – the site consists of two vacant buildings, most recently occupied
by Edina Cleaners but vacant since late 2017. The site also includes two single-family
residences – one was owner-occupied, the other a rental property. The properties have
been inspected by Stantec and found to be in a condition that qualifies them as a
“Renewal and Renovation” TIF District as defined under MN Statutes.
4500 France Apartments Proposed Term Sheet October 11, 2018
Page 2
c. Redevelopment Project – The Project is described in the planning documents submitted
to the City of Edina and granted preliminary rezoning and site plan approvals on
October 2, 2018.
d. Minimum Improvements – construction of a new mixed-use structure as described in
the documents referenced by the preliminary rezoning and site plan approval by Edina
City Council on October 2, 2018, but generally consisting of approximately 46 new
housing units, approximately 7,000 square feet of commercial space with structured
parking and streetscape improvements.
Certain public improvements related to the project and required as part of the City
approvals will be installed, funded, and managed by the Developer with partial
reimbursement using incremental property taxes generated from the Project.
e. Public Benefits – address several of the goals identified in the 2018 Small Area Plan
including:
i. Remove vacant buildings from a prominent corner
ii. Construct a mixed-use building at a scale recommended by the Small Area Plan
iii. Remediate soil contaminants from previous users
iv. Improve storm water conditions on the site
v. Provide approximately 40 stalls of shared public parking located on the street
level of the Project
vi. Bury overhead utilities throughout the majority of the Neighborhood Node
vii. Improve the sidewalk and streetscape along portions of France Ave and
Sunnyside Rd
viii. Provide an outdoor public plaza for use by the community
ix. Provide public art
x. Provide 3 units of affordably-priced housing for at least 15-years
xi. Provide $160,000 in direct financial contribution to the Edina Affordable
Housing Fund
xii. Donate existing building elements that are salvageable to a non-profit or similar
group for re-use
4) Project Timeline
a. This timeline identifies the general time frame envisioned for the redevelopment
project. Firm deadlines will be included in the Redevelopment Agreement. Failure to
meet the ‘no later than’ deadlines will be considered a default of the Redevelopment
Agreement.
4500 France Apartments Proposed Term Sheet October 11, 2018
Page 3
Description of
Work
Commencement Date Completion Date
Anticipated No Later
Than
Anticipated No Later
Than
Final Zoning
Approvals
Summer 2018 10/31/2018 Fall 2018 12/31/2018
Real Estate Closing na na October 2018 3/31/2019
Demolition &
Salvage
Winter 2018/2019 3/31/2019 Spring 2019 6/30/2019
Site Remediation Winter 2018 / 2019 7/1/2019 Fall 2019 10/31/2019
Foundation Spring 2019 11/1/2019 Fall 2019 12/31/2019
Shell Construction Fall 2019 1/1/2020 Fall 2020 10/31/2020
Commercial
Tenant
Improvements
Fall 2020 Na Fall 2021 na
Certificate of
Occupancy
Na Na Summer 2020 3/31/2021
5) Project Budget
a. The Redevelopment Project is estimated to cost $28.7 million, including land assembly,
soft costs and hard costs.
b. Preliminary estimates of Sources and Uses are attached.
6) Project Financing
a. The equity partner has made a soft commitment with a firm commitment pending.
b. Several construction lenders – including Bridgewater Bank and Tradition Bank have
expressed interest in funding the Project. A firm commitment is pending.
c. Multiple grants will be pursued. To date, one grant has been awarded.
d. The limited scale and challenges associated with the site and its existing conditions
results in a financial gap. “But for” reimbursement of some eligible expenses using
incremental property taxes generated from the site, the project will not move forward.
e. The estimated financial gap is based upon the anticipated NOI calculated with an
estimated assessed market value of approximately $18.9 M upon stabilization.
7) New Tax Increment District
a. The HRA will engage third-party consultants to prepare the TIF-related documentation.
b. The City & HRA will consider the creation of a new 15-year Renewal & Renovation TIF
District on the project site.
c. The TIF District may be expanded or modified at the discretion of the City and HRA to
achieve more of the community goals expressed in the Small Area Plan provided that
any TIF Note awarded to the Project can be satisfied per the terms of the
Redevelopment Agreement.
4500 France Apartments Proposed Term Sheet October 11, 2018
Page 4
8) TIF Assistance
a. The Project as a whole must be evaluated and the “but for” must be demonstrated. The
Developer will provide all information necessary to demonstrate that the Project
satisfies the ‘but for’ test in MN Statute om the City’s sole determination.
b. Any TIF assistance issued will be in accordance with the City’s TIF Policy dated April 19,
2011.
c. Creation of the TIF District and any TIF Assistance provided shall comply with all
applicable MN Statutes.
9) Qualified Costs
a. The Project Budget includes many costs that are qualified as TIF-eligible expenses per
Minnesota Statute. These costs are summarized below. Note that only a portion of
“qualified” costs will actually be agreed to be “reimbursable” to the project.
Description of Qualified Cost Estimated Amount
1 Transit / Streetscape $100,000
2 Affordable Housing $0
3 Demolition $189,000
4 Structured Parking $1,430,000
5 Streetscape improvements (France Ave. and
Sunnyside Rd.)
$200,000
6 Environmental Remediation $170,000
7 Public Plaza $825,000
8 Removal of Overhead Utilities $400,000
9 TIF-related Professional Fees $150,000
Total = $3,464,000
10) Reimbursable Costs
a. Based on review of the project pro forma, up to $2.295 million of project costs are
intended to be reimbursable. This will be adequate to bridge the financial gap without
over-subsidizing the project.
b. The types of reimbursable costs include:
Description of Reimbursable Costs
1 Structured Parking
2 Demolition
3 Environmental Remediation
4 Streetscape and public realm improvements
5 Removal of Overhead Utilities
6 TIF-related Professional Fees
Total not to exceed $2,295,000
4500 France Apartments Proposed Term Sheet October 11, 2018
Page 5
11) Notice of Commencement – Developer to provide “go ahead” letter when all private financing
has been committed to allow the construction to proceed.
12) TIF Note – A single pay-as-you-go TIF Note will be issued only upon completion of the Project.
a. The preliminary principal value of the Note is based on preliminary estimates regarding
reimbursable costs and total project costs. The final principal value of the TIF Note shall
be based on the actual costs expended to complete the Project and shall not exceed
$2,295,000.00.
b. The Note shall bear interest at the same rate as the primary financing loan but shall not
exceed 5.0% (4.75% is anticipated).
c. The City/HRA will make payments on the Note using standard procedures: two annual
payments based on actual incremental property taxes generated from the site, paid and
received by the City. Assuming Project completion in 2020, the first payments would
occur in 2021.
d. The current estimate of incremental cash flow is based on an annual inflationary increase
of 1% of the assessed valuation of the property. This estimate is hypothetical and the
City does not guarantee that such funds will be available.
13) Certificate of Completion – A Certificate of Completion will be required as a condition of
awarding the TIF Note. Developer shall provide complete access to final costs so that City staff
can confirm the actual costs incurred to complete the Project. A Certificate of Occupancy,
executed public easements, and acceptance of public improvements (by City or County
engineers, as appropriate) shall also be required to earn the Certificate of Completion.
14) Look Back Provisions
a. Final level of assistance to be sized upon completion of the Project
b. Lookback required annually and upon a sale of any portion of the property
c. Annual yield on cost limited to 7.0%
d. Excess profits (above 7.0%), if any, will be deducted from the principal to retire the TIF
Note as early as possible
e. In the event of a sale prior to the termination of the TIF Note, the IRR shall not exceed
16%. Any overage will be considered “excess profits” and deducted from the principal
to retire the TIF Note as early as possible.
15) City Administrative Costs – City to retain standard 10% per Minnesota statute.
4500 France Apartments Proposed Term Sheet October 11, 2018
Page 6
16) Fiscal Disparities – the City’s ‘fiscal disparity’ obligation for the redevelopment site will be paid
for from property taxes generated from the Project. This will be included in the calculation of
available tax increment to pay off the TIF Note.
17) Other Terms and Conditions
a. Affordable Housing
i. The HRA or related entity shall have first right of refusal to purchase the
affordably-priced units in the event that the Project is converted from rental
units to condominiums. The purchase price would be based on affordability of a
30-year mortgage for a household earning 120% Area Median Income (AMI).
ii. The Developer and HRA agree to discuss the potential extension of the 15-year
affordability term about one-year in advance of the expiration of the affordability
term. Both parties agree to negotiate in good faith to lengthen the term of
affordability.
iii. In addition to the 15-year land use restriction placed on the affordably-priced
units, failure to lease these units at qualified rates to qualified households shall
be considered a default of the Redevelopment Agreement
b. Grants – the City/HRA agrees to sponsor grant applications that provide financial
support for the Projects. Costs of preparing the grant applications shall be borne by the
Developer. City staff shall have the final authority to review and submit the grant
applications to Metropolitan Council, Minnesota Department of Employment and
Economic Development and Hennepin County per the terms of the grant programs.
i. Hennepin County ERF is due November 1st
c. Public Easements – permanent public easements will be required for the public parking,
public plazas and public sidewalks
d. Maintenance District – the Developer is agreeable to the creation of a future
Maintenance District / Special Service District per MN Statute 428a.01 to 428a.101 to
address maintenance costs related to the sidewalks and streetscapes throughout the
neighborhood node. Such a District will not include the costs to operate and maintain
the public parking and public plaza. The scope and timing of this District requires
agreement of other commercial property owners.
e. City and HRA Approval of Significant Changes – changes to the Project that impact
scope or design are subject to City review using the typical City procedure.
f. Performance Bonds – bonds or other security will be required for work in the public
way and for the elements with a public easement.
g. The City shall not restrict the Developers’ ability to appeal property tax assessments
below the amount estimated in calculation of tax increment.
18) Default and Cure – standard default provisions will apply. Each default will have a cure period.
4500 France Apartments Proposed Term Sheet October 11, 2018
Page 7
Financial Sources
Amount Percent Comment
Developer Equity $ 1,091,000 4% Deferred fees
Partner Equity $ 8,774,650 30%
Financing $18,321,921 64%
Grants $ 535,000 2% DEED, Met. Council, Hennepin County, TBD
TOTAL $28,772,571 100%
Uses
Amount Percent Comment
Acquisition and Site Costs $4,550,000 15.8%
Hard Costs $20,710,866 72.6% includes Construction Costs, Permits & Fees
Soft Costs $2,486,205 8.6% Includes design and other Professional Services
Financing Costs $884,500 3.0%
TOTAL $28,772,571 100%
Prepared October 8, 2018
Redevelopment Agreement (4500 France) 4853-1077-8489\9
REDEVELOPMENT AGREEMENT
by and among
CITY OF EDINA, MINNESOTA,
HOUSING AND REDEVELOPMENT AUTHORITY
OF EDINA, MINNESOTA,
and
ORION 4500 FRANCE, LLC
Dated as of December 18, 2018
THIS DOCUMENT WAS DRAFTED BY:
Dorsey & Whitney LLP 50 South Sixth Street, Suite 1500
Minneapolis, MN 55402-1498
-i- Redevelopment Agreement (4500 France) 4853-1077-8489\9
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ............................................................................................................2
Section 1.1 Definitions..........................................................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES ..........................................................6
Section 2.1 Representations and Warranties of the City .......................................................6
Section 2.2 Representations and Warranties of the Authority ..............................................7
Section 2.3 Representations and Warranties of Developer ...................................................8
ARTICLE III LAND USE AND DEVELOPMENT CONTROLS .................................................9
Section 3.1 Restrictions on Development .............................................................................9 Section 3.2 Zoning and Land Use Approvals .......................................................................9
Section 3.3 Building and Construction Permits ..................................................................10
Section 3.4 City/Authority Approval ..................................................................................10
Section 3.5 Change to Legal Description of Minimum Improvements Area .....................10
ARTICLE IV CONSTRUCTION OF MINIMUM IMPROVEMENTS .......................................10
Section 4.1 Minimum Improvements .................................................................................10
Section 4.2 Submission and Approval of Evidence of Financing ......................................11
Section 4.3 Reserved ...........................................................................................................11
Section 4.4 Effect of Delay .................................................................................................11
Section 4.5 Additional Responsibilities of Developer ........................................................11 Section 4.6 Easements. .......................................................................................................11
Section 4.7 Public Art .........................................................................................................12
Section 4.8 Certificate of Completion ................................................................................12
ARTICLE V [RESERVED] ..........................................................................................................13
ARTICLE VI TIMELINE AND DEFAULT .................................................................................13
Section 6.1 Commencement and Completion of Minimum Improvements .......................13
ARTICLE VII DEVELOPER REIMBURSEMENT OBLIGATIONS; QUALIFIED
REDEVELOPMENT COSTS; PERFORMANCE REVIEW ...........................................14
Section 7.1 Developer Reimbursement Obligations ...........................................................14
Section 7.2 Qualified Redevelopment Costs ......................................................................14 Section 7.3 TIF Lookback...................................................................................................15
ARTICLE VIII TIF ASSISTANCE...............................................................................................17
Section 8.1 Creation of TIF District; Certification .............................................................17
-ii- Redevelopment Agreement (4500 France) 4853-1077-8489\9
Section 8.2 TIF Note; Limitations on Reimbursement of Qualified Redevelopment
Costs .................................................................................................................18
Section 8.3 Tax Increment Eligibility .................................................................................19
Section 8.4 Assignment of Note .........................................................................................19
ARTICLE IX ENCUMBRANCE OF THE MINIMUM IMPROVEMENTS AREA ..................20
Section 9.1 Mortgage of the Minimum Improvements Area ..............................................20
Section 9.2 Copy of Notice of Default to Mortgagee .........................................................21
Section 9.3 Mortgagee’s Option to Cure Events of Default ...............................................21
Section 9.4 Rights of a Foreclosing Mortgagee ..................................................................21
Section 9.5 Events of Default Under Mortgage ..................................................................22 Section 9.6 Subordination of Agreement ............................................................................22
ARTICLE X INSURANCE AND CONDEMNATION................................................................23
Section 10.1 Insurance ..........................................................................................................23
Section 10.2 Condemnation ..................................................................................................24
ARTICLE XI OTHER DEVELOPER COVENANTS..................................................................24
Section 11.1 Maintenance and Operation of the Minimum Improvements ..........................24
Section 11.2 Business Subsidy Agreement ...........................................................................24
Section 11.3 Affordable Housing .........................................................................................25
Section 11.4 Developer/Authority Grant Applications .........................................................26
ARTICLE XII TRANSFER LIMITATIONS AND INDEMNIFICATION .................................26
Section 12.1 Representation as to the Minimum Improvements ..........................................26
Section 12.2 Limitation on Transfers....................................................................................26
Section 12.3 Indemnification ................................................................................................27
Section 12.4 Limitation .........................................................................................................27
ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES ......................................................28
Section 13.1 Events of Default Defined ...............................................................................28
Section 13.2 Developer Events of Default ............................................................................28
Section 13.3 City and Authority Events of Default ..............................................................29
Section 13.4 Cure Rights ......................................................................................................29
Section 13.5 Authority Remedies on Developer Events of Default .....................................29 Section 13.6 City Remedies on Developer Events of Default ..............................................29
Section 13.7 Developer Remedies on City or Authority Events of Default .........................29
Section 13.8 No Remedy Exclusive......................................................................................30
Section 13.9 No Additional Waiver Implied by One Waiver ...............................................30
Section 13.10 Reimbursement of Attorneys’ Fees .................................................................30
ARTICLE XIV ADDITIONAL PROVISIONS ............................................................................30
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Section 14.1 Conflicts of Interest..........................................................................................30
Section 14.2 Titles of Articles and Sections .........................................................................30
Section 14.3 Notices and Demands ......................................................................................31
Section 14.4 Counterparts .....................................................................................................31
Section 14.5 Law Governing ................................................................................................31 Section 14.6 Consents and Approvals ..................................................................................31
Section 14.7 Representatives ................................................................................................31
Section 14.8 Superseding Effect ...........................................................................................32
Section 14.9 Relationship of Parties .....................................................................................32
Section 14.10 Term .................................................................................................................32 Section 14.11 Provisions Surviving Rescission or Expiration................................................32
Section 14.12 Memorandum of Agreement ............................................................................32
Section 14.13 Conflicts Between this Agreement and the Development Contract ................32
Section 14.14 Limited Liability ..............................................................................................32
Section 14.15 Time is of the Essence .....................................................................................33 Section 14.16 Estoppel Certificate ..........................................................................................33
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LIST OF EXHIBITS
EXHIBIT A-1 Legal Description of Minimum Improvements Area
EXHIBIT A-2 Depiction of Minimum Improvements Area and Release Parcel
EXHIBIT B Final Development Plan
EXHIBIT C TIF Pro Forma EXHIBIT D Form of Go-Ahead Letter
EXHIBIT E Form of Certificate of Completion
EXHIBIT F Memorandum of Redevelopment Agreement
EXHIBIT G Form of Plaza Easement Agreement
EXHIBIT H Form of Parking Easement Agreement EXHIBIT I Form of Annual Statement
EXHIBIT J Sample TIF Cash-On-Cost Return Annual Lookback Calculation
EXHIBIT K Sample TIF IRR Sale Lookback Calculation
EXHIBIT L Form of TIF Note
EXHIBIT M Inclusionary Housing Policy Program Guide EXHIBIT N Form of Affordable Housing Restrictive Covenant
EXHIBIT O Form of Right of First Purchase Option Agreement
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REDEVELOPMENT AGREEMENT (4500 France)
THIS REDEVELOPMENT AGREEMENT (this “Agreement”) is made and entered into
December 18, 2018 (“Effective Date”), by and among the CITY OF EDINA, MINNESOTA, a
Minnesota statutory city (the “City”), the HOUSING AND REDEVELOPMENT AUTHORITY OF EDINA, MINNESOTA, a public body corporate and politic organized and existing under the
laws of the State of Minnesota (the “Authority”) and ORION 4500 FRANCE, LLC, a Minnesota
limited liability company (the “Developer”).
RECITALS
A. Pursuant to and in accordance with Minnesota Statutes, Sections 469.174 to 469.1799, as amended (the “TIF Act”), the Authority is authorized to finance certain eligible
redevelopment costs of a redevelopment project with tax increment revenues derived from a tax
increment financing district established in accordance with the TIF Act.
B. The Authority has analyzed the current use of certain land generally located along
France Avenue South between West 44th Street and West 45th Street (the “Redevelopment Area”) (as such Redevelopment Area is more particularly described in the TIF Plan, defined
herein), including a building-by-building structural analysis, and determined that the
Redevelopment Area, is currently underutilized, with obsolete structures and physical
arrangements, substantial vacant areas and building vacancies, poor soils and potential
contamination, inconsistent legal restrictions on redevelopment and outdated and inadequate public infrastructure and circulation; and
C. Having analyzed the current land use in the Redevelopment Area, consistent with
the TIF Act, the Authority and the City and held public hearings after appropriate notices to
consider the need and desirability for adoption of a tax increment financing plan and the creation
and establishment of the Redevelopment Area as a tax increment financing district pursuant to the TIF Act, and determined that absent such authorization and the provision of certain funds to
undertake various qualified redevelopment activities, the redevelopment contemplated herein
would not be undertaken.
D. After such hearings, the Authority and the City, having determined that the
creation and establishment of the Redevelopment Area as a tax increment financing district is in the public interest, the Authority and the City established the Redevelopment Area as the 44th &
France 2 Tax Increment Financing District under the TIF Act (the “TIF District”) and adopted
the Tax Increment Financing plan (the “TIF Plan”) for the TIF District in accordance with
Minnesota Statutes, Section 469.175, pursuant to Authority Resolution No. 2018-100.
E. Developer owns that certain land within the Redevelopment Area defined in Section 1.1 as the Minimum Improvements Area, and proposes to redevelop and improve the
Minimum Improvements Area with a mixed use project consisting of (i) a 4-story, approximately
46 unit apartment building, (ii) approximately 6,500 square feet of ground-level restaurant and
retail space (excluding tenant improvements), (iii) approximately 69 below grade parking stalls,
(iv) at least 35 at-grade, enclosed public parking stalls for public, district parking (collectively,
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the “Public Parking”), which will be subject to the Parking Easement (as defined herein), (v) an
approximately 4,500 square foot plaza with a public art installation (the “Plaza”), which will be
subject to the Plaza Easement (as defined herein), and (vi) such other public and streetscape
improvements required under the terms of the City Approvals (as defined herein) (the foregoing
items described in clauses (i) through (vi) are collectively referred to herein as the “Minimum Improvements”), as such Minimum Improvements were approved by the City pursuant to City
Council Resolution No. 2018-137 (the “Project Approval Resolution”) and authorized by City
Ordinance No. 2018-09 (the “PUD Ordinance”), which establishes Planned Unit Development
District-15 for the Minimum Improvements.
F. The Authority and the City have adopted findings which include a determination that (i) the redevelopment to occur through the proposed Minimum Improvements would not
occur solely through private investment within the reasonably foreseeable future and that the
increased market value of the Minimum Improvements Area that could reasonably be expected
to occur without the use of the tax increment financing would be less than the increase in the
market value estimated to result from the proposed development after subtracting the present value of the Minimum Improvement’s tax increments for the minimum 15-year duration of the
TIF District, (ii) that the proposed Minimum Improvements conform to the general plan for the
development or redevelopment of the City as a whole, and (iii) that the proposed Minimum
Improvements afford maximum opportunity consistent with the sound needs of the City as a
whole, for the development or redevelopment of the TIF District by private enterprise.
G. Upon certification of the TIF District and the satisfaction of certain conditions set
forth in this Agreement, the Authority will provide Developer TIF Assistance (as defined herein)
in accordance with Article VIII of this Agreement in connection with Developer’s construction
and development of the Minimum Improvements.
H. The City and the Authority believe that the Minimum Improvements are in the best interests of the residents of the City.
NOW, THEREFORE, in consideration of foregoing Recitals, which are incorporated into
the provisions of this Agreement by this reference, and the mutual obligations of the parties
hereto, each of them does hereby covenant and agree with the others as follows:
ARTICLE I DEFINITIONS
Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
“Affordable Housing Requirements” has the meaning set forth in Section 11.3.
“Affordable Housing Restrictive Covenant” has the meaning set forth in Section 11.3.
“Affordable Units” has the meaning set forth in Section 11.3.
“Agreement” means this Redevelopment Agreement.
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“Annual Statement” has the meaning set forth in Section 7.3(b)(i).
“Authority” means the Housing and Redevelopment Authority of Edina, Minnesota.
“Authority Representative” means the Executive Director of the Authority or his or her
designee.
“Available Tax Increment” means up to 90% of the Tax Increment received and retained by the Authority from the County during any applicable time frame.
“Board” means the Board of Commissioners of the Authority.
“Calculation Date” has the meaning set forth in Section 7.3(b)(i).
“Certificate of Completion” means the certificate in substantially the form attached as
Exhibit E, signed by the Authority Representative, to be issued pursuant to the terms of Section 4.8.
“City” means the City of Edina, Minnesota.
“City Approvals” means, collectively, the PUD Ordinance, the Project Approval
Resolution, the Final Development Plan, and the Development Contract.
“City Consultants” means the financial, engineering, legal, TIF eligibility and other similar advisors to the City and the Authority.
“City Council” means the City Council of the City.
“City Parties” means the City and the Authority, and their respective members,
employees, agents, independent contractors and attorneys.
“City Easement(s)” has the meaning set forth in Section 4.6.
“Commencement” means (i) with respect to pre-construction aspects or elements
necessary for Commencement of the Minimum Improvements (e.g., demolition and
environmental remediation), actual physical activity related to such pre-construction aspect or
element and (ii) with respect to each aspect or element of the Minimum Improvements, the date
on which actual physical construction of such aspect or element of the Minimum Improvements begins.
“Completion” means (i) with respect to the Minimum Improvement, Developer’s receipt
of the Certificate of Completion from the Authority and (ii) with respect to the individual aspects
or elements of the Minimum Improvements described in the Minimum Improvements timeline
set forth in Section 6.1, substantial completion of such aspect or element such that Developer can proceed with Commencement of the next aspect or element in a manner consistent with normal
construction practices
“County” means the County of Hennepin, Minnesota.
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“Cure Rights” means the rights to cure a Default as specified in Section 13.4 before such
Default is deemed to be an Event of Default.
“Default” means an act or omission by the City, the Authority or Developer which
becomes an Event of Default under this Agreement if it is not cured pursuant to any applicable
Cure Rights.
“Development Contract” means that certain Site Improvement Performance Agreement
dated December 18, 2018 entered into by and between the City and Developer, and recorded
against the Minimum Improvements Area.
“Developer” means Orion 4500 France, LLC, a Delaware limited liability company.
“Effective Date” means the date first set forth above.
“Environmental Law” means any federal, state or local law, rule, regulation, ordinance,
or other legal requirement relating to (a) a Release or threatened Release of any Hazardous
Material, (b) pollution or protection of public health or the environment or (c) the manufacture,
handling, transport, use, treatment, storage, or disposal of any Hazardous Material.
“Event of Default” means any of the events by the City, the Authority or Developer described in Article XIII.
“Final Development Plan” means the final development plan for the Minimum
Improvements as approved by the City pursuant to the Project Approval Resolution, the same
being the plan set labeled [_____________], and titled as France Ave Apartments, 4500 France
Avenue S, Edina, MN 55410, prepared by ESG Architecture & Design, under project number 21752] dated [_______________], and listed in the attached Exhibit B.
“Final Plat” means the final plat or replat or lot combination or subdivision for the
Minimum Improvements Area approved by the City and the County, as needed to obtain a
building permit and to commence construction of the Minimum Improvements.
“Financial Advisor” has the meaning set forth in Section 7.3(b)(i).
“Financing Commitment” means a financing commitment, letter of interest or other
evidence of interest from a mortgage lender for the Minimum Improvements in a form
reasonably satisfactory to the Authority. The Authority acknowledges and agrees that a financing
commitment will be conditioned on items customarily required by lenders (including, without
limitation, adequate financial statements, environmental review, appraisals, surveys and title).
“Go-Ahead Letter” means Developer’s letter to the City and the Authority, substantially
in the form attached as Exhibit D, indicating that the Financing Commitment has been received
by Developer and Developer is prepared to proceed with the construction of the Minimum
Improvements.
“Hazardous Material” means petroleum, asbestos-containing materials, and any substance, waste, pollutant, contaminant or material that is defined as hazardous or toxic in any
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Environmental Law.
“IRR” means the internal rate of return for the Minimum Improvements as calculated in
the TIF Pro Forma attached as Exhibit C, where the IRR is calculated as the annualized return on
the annual cash flow over the applicable period.
“Law” means federal, state, or local governmental or quasi-governmental laws, ordinances, rules, codes, regulations, directives, orders and/or requirements.
“Memorandum of Agreement” means the document described in Section 14.12 and
substantially in the form shown in Exhibit F.
“Minimum Improvements” has the meaning set forth in Recital E.
“Minimum Improvements Area” means the land legally described on attached Exhibit A-1 and depicted on attached Exhibit A-2; which such Minimum Improvements Area may be
modified by release of the Release Parcel pursuant to Section 3.5 hereof.
“Mortgage” has the meaning set forth in Section 9.1.
“Parking Easement” has the meaning set forth in Section 4.6(a)(ii).
“Plaza” has the meaning set forth in Recital E.
“Plaza Easement” has the meaning set forth in Section 4.6(a)(i).
“Project Approval Resolution” means City Council Resolution No. 2018-137.
“Project Excess Return” has the meaning set forth in Section 7.3(c)(i)
“Project TIF Adjustment” has the meaning set forth in Section 7.3(c)(ii).
“Policy Guide” has the meaning set forth in Section 11.3(a).
“Public Parking” has the meaning set forth in Recital E.
“PUD Ordinance” means City Ordinance No. 2018-09.
“Purchase Right” has the meaning set forth in Section 11.3(b).
“Qualified Redevelopment Costs” has the meaning set forth in Section 7.2.
“Redevelopment Area” has the meaning set forth in Recital B.
“Related Party” means with respect to any person or entity (i) any other person or entity
controlling, controlled by or under common control with such person or entity; or (ii) any other
person or entity in which the majority equity interest is owned by the parties that have a majority
equity interest in such person or entity.
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“Release Parcel” has the meaning set forth in Section 3.5.
“Sale Pro Forma” has the meaning set forth in Section 7.3(c)(i).
“Sidewalks” has the meaning set forth in Section 4.6(a)(iii).
“Sidewalk Easement” has the meaning set forth in Section 4.6(a)(iii).
“State” means the State of Minnesota.
“Tax Increment” means the tax increment generated from parcels specifically within the
Minimum Improvements Area and remitted to the Authority pursuant to the TIF Act.
“TIF” means tax increment financing.
“TIF Act” has the meaning set forth in Recital A.
“TIF Assistance” means reimbursement of Qualified Redevelopment Costs through payments from the Authority to Developer of Available Tax Increment under the TIF Note,
pursuant to the terms and conditions of Article VIII of this Agreement and the TIF Act.
“TIF District” has the meaning set forth in Recital D.
“TIF Note” has the meaning set forth in Section 8.2.
“TIF Plan” has the meaning set forth in Recital D.
“TIF Pro Forma” means the detailed TIF pro forma attached as Exhibit D.
“Unavoidable Delays” means delays, outside the control of the party claiming its
occurrence, which are the direct result of (a) unusually severe or prolonged bad weather, (b) acts
of God, acts of war, civil unrest, terrorism, criminal conduct of third parties, fire or other
casualty to the Minimum Improvements, (c) litigation commenced by third parties which directly results in delays, (d) actions or inactions of any federal, State, or local government unit which
directly result in delays, (e) strikes, other labor trouble, (f) delays in delivery of materials, and (g)
concealed or unknown site conditions not revealed prior to the Effective Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the City. The City makes the
following representations and warranties:
(a) The City is a Minnesota municipal corporation and has the power to enter into this
Agreement and carry out its obligations hereunder. The City has duly authorized the execution,
delivery and performance of this Agreement.
(b) There is not pending, nor to the best of the City’s knowledge is there threatened,
any suit, action or proceeding against the City before any court, arbitrator, administrative agency
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or other governmental authority that may materially and adversely affect the validity of any of
the transactions contemplated hereby, the ability of the City to perform its obligations hereunder
or as contemplated hereby, or the validity or enforceability of this Agreement.
(c) To the best of the City’s knowledge and belief, no member of the City Council or
officer of the City, has either a direct or indirect financial interest in this Agreement, nor will any City Councilmember or officer of the City, benefit financially from this Agreement within the
meaning of Minnesota Statutes, Section 469.009, as amended.
(d) The City will reasonably cooperate with Developer with respect to any litigation
commenced by third parties with respect to the Minimum Improvements; however, this provision
does not obligate the City to incur costs, except as otherwise provided in this Agreement or elsewhere.
(e) The execution, delivery and performance of this Agreement, and any other
documents, instruments or actions required or contemplated pursuant to this Agreement by the
City does not, and consummation of the transactions contemplated therein and the fulfillment of
the terms thereof will not conflict with or constitute on the part of the City a breach of or default under any existing agreement or instrument to which the City is a party or violate any law,
charter or other proceeding or action establishing or relating to the establishment and powers of
the City or its officers, officials or resolutions.
Section 2.2 Representations and Warranties of the Authority. The Authority
makes the following representations and warranties:
(a) The Authority is a public body corporate and politic and a governmental
subdivision of the State, duly organized and existing under State law and the Authority has the
authority to enter into this Agreement and carry out its obligations hereunder.
(b) Except as provided in this Agreement, and provided that the Authority will fund
fiscal disparities from within the TIF District, in accordance with Minnesota Statutes, Section 469.177, subdivision 3, the Authority agrees to retain all of the captured net tax capacity of the
Minimum Improvements Area to finance the Qualified Redevelopment Costs as provided in this
Agreement, and will elect that the duration of the TIF District will be at least 15 years from the
first Tax Increment received by the Authority. The Authority will not voluntarily take any action
to reduce the amount of captured tax capacity retained to finance the Qualified Redevelopment Costs or to further reduce the duration of the District until the amount paid to Developer from
Available Tax Increment reaches the maximum amount specified in Section 8.2.
(c) The execution, delivery and performance of this Agreement and any other
documents or instruments required pursuant to this Agreement by the Authority does not, and
consummation of the transactions contemplated therein and the fulfillment of the terms thereof will not, conflict with or constitute on the part of the Authority a breach of or default under any
existing (i) indenture, mortgage, deed of trust or other agreement or instrument to which the
Authority is a party or by which the Authority or any of its property is or may be bound, (ii)
legislative act, constitution or other proceeding establishing or relating to the establishment of
the Authority or its officers or its resolutions, or (iii) any Minnesota statute or any provisions of
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any bond, debenture, loan agreement, regulation or order of the United States of America or the
State, or any agency or political subdivisions thereof or any court order or judgment in any
proceeding to which the Authority is or was a party by which it is bound.
(d) There is not pending, nor to the best of the Authority’s knowledge is there
threatened, any suit, action or proceeding against the Authority before any court, arbitrator, administrative agency or other governmental authority that may materially and adversely affect
the validity of any of the transactions contemplated hereby, the ability of the Authority to
perform its obligations hereunder or as contemplated hereby, or the validity or enforceability of
this Agreement.
(e) To the best of the Authority’s knowledge and belief, no member of the Board of the Authority or officer of the Authority, has either a direct or indirect financial interest in this
Agreement, nor will any Commissioner of the Authority or officer of the Authority, benefit
financially from this Agreement within the meaning of Minnesota Statutes, Section 469.009, as
amended.
(f) The Authority will reasonably cooperate with Developer with respect to any litigation commenced by third parties with respect to the Minimum Improvements; however, this
provision does not obligate the Authority to incur costs, except as otherwise provided in this
Agreement or elsewhere.
Section 2.3 Representations and Warranties of Developer. Developer represents
and warrants that:
(a) Developer is a limited liability company organized and in good standing under the
laws of the State of Delaware, is not in violation of any provisions of its operating agreement or
other organizational documents or the laws of the State, has power to enter into this Agreement
and has duly authorized the execution, delivery and performance of this Agreement by proper
action of its members.
(b) The execution and delivery of this Agreement and the consummation of the
transactions contemplated thereby, and the fulfillment of the terms and conditions thereof do not
and will not conflict with or result in a breach of any material terms or conditions of Developer’s
organizational documents, any restriction or any agreement or instrument to which Developer is
now a party or by which it is bound or to which any property of Developer is subject, and do not and will not constitute a default under any of the foregoing or to the best of the Developer’s
knowledge be a violation of any order, decree, statute, rule or regulation of any court or of any
state or Federal regulatory body having jurisdiction over Developer or its properties, including its
interest in the Minimum Improvements, and do not and will not result in the creation or
imposition of any lien, charge or encumbrance of any nature upon any of the property or assets of Developer contrary to the terms of any instrument or agreement to which Developer is a party
or by which it is bound.
(c) To the best of Developer’s knowledge and belief, the execution and delivery of
this Agreement will not create a conflict of interest prohibited by Minnesota Statutes, Section
469.009, as amended.
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(d) Developer currently holds fee title to the Minimum Improvements Area.
(e) Developer would not construct the Minimum Improvements, but for the execution
of this Agreement and the TIF Assistance for the Qualified Redevelopment Costs and other
public assistance contemplated to be made available hereunder.
(f) Developer shall reasonably cooperate with the City and the Authority with respect to any litigation commenced by third parties with respect to the Minimum Improvements;
however, this provision does not obligate Developer to incur costs, except as otherwise provided
in this Agreement or elsewhere.
(g) There are no pending or to the best of Developer’s knowledge, threatened legal
proceedings, of which Developer has notice, contemplating the liquidation or dissolution of Developer or threatening its existence, or seeking to restrain or enjoin the transactions
contemplated by the Agreement, or questioning the authority of Developer to execute and deliver
this Agreement or the validity of this Agreement.
(h) Developer has not received any notice from any local, state or federal official that
the activities of Developer or the Authority with respect to the Minimum Improvements Area may or will be in violation of any Environmental Law, except as has been identified in any
report, audit, inspection or survey, undertaken by or provided to the City and the Authority.
Developer represents that to the best of Developer’s knowledge: (i) it is not aware of any state or
federal claim filed or planned to be filed by any party relating to any violation of any local, state
or federal Environmental Law, regulation or review procedure; and (ii) it is not aware of any violation of any local, state or federal law, regulation or review procedure which would give any
person a valid claim under any Environmental Law, including the Minnesota Environmental
Rights Act or the Minnesota Environmental Policy Act.
(i) Developer reasonably expects that it will be able to obtain private financing in an
amount sufficient, together with funds provided by the Authority and any other public agencies, to enable Developer to successfully construct the Minimum Improvements, as provided herein.
ARTICLE III
LAND USE AND DEVELOPMENT CONTROLS
Section 3.1 Restrictions on Development. Developer may not construct or permit
construction of the Minimum Improvements until Developer satisfies the following conditions:
(a) Developer executes and records the Development Contract against the Minimum
Improvements Area, and causes any lien holder affecting any of the property to subject its
interest as provided in this Agreement and in the Development Contract;
(b) Developer satisfies all of the conditions established by the City in the City
Approvals; and
(c) Developer obtains the approvals needed for the Final Plat.
Section 3.2 Zoning and Land Use Approvals. Nothing in this Agreement shall limit
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the authority of the City with respect to zoning and land use approvals. Subject to the foregoing,
the staff of the City and the Authority shall cooperate with Developer and assist Developer in the
processing and obtaining of zoning and land use approvals. Developer shall be responsible for
applying for and obtaining all land use and zoning approvals necessary for the Minimum
Improvements, including, without limitation, any conditions contained in the City Approvals. All zoning and land use approvals shall be by the City Council or the City Planning Commission in
accordance with the ordinances of the City.
Section 3.3 Building and Construction Permits. Nothing in this Agreement shall
limit the governmental authority of the City with respect to its building and construction
permitting process for the Minimum Improvements. Developer shall comply with all applicable City building codes and construction requirements and shall be responsible for obtaining all
building permits prior to construction.
Section 3.4 City/Authority Approval. Unless the City Council determines otherwise
in its discretion, whenever this Agreement provides for approval by the City or the Authority,
such approval shall be given by, respectively, the City Manager or the Executive Director of the Authority (or in either case his/her designee), unless (a) this Agreement explicitly provides for
approval by the City Council or the Board of the Authority, (b) approval by the Council or Board
is required by law or (c) the approval, in the opinion of the City Manager or the Executive
Director, would result in a material change in the terms of this Agreement.
Section 3.5 Change to Legal Description of Minimum Improvements Area. The parties acknowledge and agree that, as part of the Final Plat, Developer will cause a portion of
the Minimum Improvements Area which is not necessary for the Minimum Improvements to be
legally subdivided and conveyed to the adjoining neighbor upon or after Completion of the
Minimum Improvements (the “Release Parcel”). The Release Parcel is depicted on Exhibit A-2.
Following Completion of the Minimum Improvements the parties agree to execute and record an amendment to this Agreement and/or its memorandum which releases the Release Parcel from
this Agreement and redefines the Minimum Improvements Area hereunder as the original
Minimum Improvements Area less the Release Parcel. So long as the actual Release Parcel is
consistent in all material respects with the Release Parcel depicted on Exhibit A-2, such
amendment may be executed by the Authority Representative and City Manager without further City Council or Authority board approval.
ARTICLE IV
CONSTRUCTION OF MINIMUM IMPROVEMENTS
Section 4.1 Minimum Improvements.
(a) Construction. Developer shall construct the Minimum Improvements in accordance with this Agreement and the City Approvals in all material respects. Prior to delivery
of the Certificate of Completion to Developer, upon the request of the Authority, Developer
shall, after reasonable advance notice from the Authority, provide the Authority and the City
with reasonable access to the Minimum Improvements Area to inspect the Minimum
Improvements. Prior to delivery of the Certificate of Completion, Developer will deliver monthly progress reports to the Authority.
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(b) Market Value of Minimum Improvements. It is anticipated that upon completion,
the Minimum Improvements will have an assessed taxable market value of approximately
$18,900,000.00.
Section 4.2 Submission and Approval of Evidence of Financing. No later than
issuance of the applicable construction or building permit for the Minimum Improvements, Developer shall provide the Go-Ahead Letter.
Section 4.3 Reserved.
Section 4.4 Effect of Delay. Developer acknowledges that if construction of the
Minimum Improvements is delayed due to Unavoidable Delays or for any other reason, this
could affect the amount of Available Tax Increment and thus the total amount which may be available to pay the TIF Note. Developer acknowledges that if the Completion of the
construction of the Minimum Improvements is delayed due to Unavoidable Delays or for any
other reason, there will be no compensation to Developer or any other party for any reduction in
the amount available to pay or refund the TIF Note.
Section 4.5 Additional Responsibilities of Developer. Subject to applicable Cure Rights:
(a) Developer will cause the Minimum Improvements to be constructed, operated and
maintained in substantial accordance with the terms of this Agreement, the Final Development
Plans and Development Contract, and all local, State, and federal laws and regulations
(including, but not limited to zoning, building code and public health laws and regulations).
(b) Developer will obtain, in a timely manner, all required permits, licenses, and
approvals, and will meet, in a timely manner, all requirements of all applicable local, State, and
Federal laws and regulations which must be obtained or met before the Minimum Improvements
may be lawfully constructed.
(c) Developer will not construct any building or other structures on, over, or within the boundary lines of any public utility easement unless such construction is: provided for in
such easement, approved by the utility involved, or approved by the City if no utility is then
utilizing the easement area.
(d) Developer will comply and cause its contractors to comply with all applicable
Environmental Law as it relates to the Minimum Improvements Area and the Minimum Improvements.
(e) Developer will record the Final Plat to create a separate tax parcel for the
Minimum Improvements Area.
Section 4.6 Easements.
(a) Prior to the issuance of the Certificate of Completion for the Minimum Improvements, Developer shall grant to the City the following easements with respect to the
Minimum Improvements (each a “City Easement”, and collectively the “City Easements”):
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(i) A permanent, public easement for access and use of the Plaza (the “Plaza
Easement”). The Plaza Easement shall be granted pursuant to an easement agreement in
the form attached as Exhibit G.
(ii) A permanent, public easement for access and use of Public Parking (the
“Parking Easement”). The Parking Easement shall be granted pursuant to an easement agreement in the form attached as Exhibit H.
(iii) A permanent, public easement for access and use of the sidewalks (the
“Sidewalks”) adjoining the Minimum Improvements and shown in the Final
Development Plan (the “Sidewalk Easement”). The Sidewalk Easement shall be in the
form reasonably required by the City attorney and negotiated with Developer in accordance with the City Approvals and shall be subject to the Authority’s prior written
approval to ensure that it conforms to the requirements of this Agreement.
(b) The City will not pay an acquisition cost to Developer for any of the City
Easements. Each City Easement must be recorded by Developer as a condition to issuance of the
TIF Note. Developer shall, at Developer’s sole cost and expense, cause a licensed surveyor to determine the final, actual legal description of the Plaza, the Public Parking, and Sidewalks for
the purpose of the granting the City Easements with respect to such elements. Such legal
descriptions will be consistent with the areas and boundaries of the Plaza, the Public Parking,
and Sidewalks as described and depicted in the City Approvals.
Section 4.7 Public Art. In addition to the requirements set forth in the City Approvals for the public art to be installed as part of the Plaza, such public art shall be a permanent
sculpture or similar art installation and Developer shall (a) engage a professional art consultant
experienced in public art visioning, commissioning, and implementation in connection with the
creation of such public art and (b) such installation shall have a value of no less than $10,000.00,
in the aggregate, in and for such public art (exclusive of fees paid to such professional art consultant and exclusive of costs for other aspects of the Plaza which are installed in connection
with or ancillary to such public art, but which do not directly form a part of such public art).
Section 4.8 Certificate of Completion. Developer shall notify the Authority when the
final certificate of occupancy is received for the Minimum Improvements. Upon receipt of each
such final certificate of occupancy and the Authority’s inspection of the Minimum Improvements for consistency with this Agreement as set forth in the Certificate of Completion, the Authority
will furnish to Developer a recordable Certificate of Completion. After notification from
Developer and written request from Developer for a Certificate of Completion, the Authority
will, within 45 days thereafter, inspect the Minimum Improvements and furnish the Developer
with an appropriate Certificate of Completion. Such Certificate of Completion by the Authority shall be a conclusive determination of satisfaction and termination of the agreements and
covenants in this Agreement with respect to the obligations of Developer to construct the
Minimum Improvements and the dates for the beginning and completion thereof. If the Authority
shall refuse to provide a Certificate of Completion in accordance with this provision, the
Authority shall promptly notify Developer within the same 45-day period following receipt of request by the Redeveloper for the Certificate of Completion, and such notification from the
Authority shall include a written statement, indicating in adequate detail in what respects
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Developer has failed to complete the relevant portion of the Minimum Improvements and what
measures or acts will be necessary, in the opinion of the Authority, for Developer to take or
perform in order to obtain such certification. If the Authority fails to issue such a written
statement within such 45-day period, the Authority shall be deemed to have waived its right to
do so and shall issue a Certificate of Completion to Developer. Developer shall have 60 days following receipt of the Authority’s written response to cure or agree to terms with the Authority
regarding issues to be resolved prior to Developer obtaining a Certification of Completion from
the Authority.
ARTICLE V
[RESERVED]
ARTICLE VI TIMELINE AND DEFAULT
Section 6.1 Commencement and Completion of Minimum Improvements.
The chart below is Developer’s current anticipated timeline for the Commencement and
Completion of the Minimum Improvements, and individual elements and aspects thereof. Such Commencement and Completion dates, as the same be extended pursuant to this Agreement as a
result of Unavoidable Delay, shall be substantially in accordance with the below timeline, and
failure to meet the dates described as a “Default Date” below, as extended pursuant to this
Agreement as a result of Unavoidable Delay, shall be a Default. Following Commencement,
construction or other activity associated any element or aspect of the Minimum Improvements must continue in a sequence consistent with normal construction practices.
Minimum Improvements Timeline
Description of
Work
Commencement Completion
Anticipated Default Date Anticipated Default Date
Final Development Plan and PUD
Approval
N/A N/A N/A December 31,
2018
Demolition Winter
2018/2019 March 31, 2019 Spring 2019 June 30, 2019
Site Remediation Winter
2018/2019 July 31, 2019 Spring 2019 October 31,
2019
Foundation Spring 2019 November 1, 2019 Fall 2019 December 31, 2019
Shell Construction Fall 2019 January 1, 2020 Fall 2020 October 31, 2020
Commercial Tenant Improvements Fall 2020 N/A Fall 2021 N/A
Certificate of
Occupancy N/A N/A Summer 2020 March 31, 2021
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ARTICLE VII DEVELOPER REIMBURSEMENT OBLIGATIONS; QUALIFIED REDEVELOPMENT
COSTS; PERFORMANCE REVIEW
Section 7.1 Developer Reimbursement Obligations. Developer is obligated to pay
all reasonable out of pocket costs of the City and the Authority for the City Consultants in connection with the Minimum Improvements and the TIF Assistance provided to Developer,
including but not limited to costs of the development of this Agreement, and the TIF Plan, the
creation of the TIF District, the Final Development Plan, the Development Contracts,
architectural and engineering studies for the Minimum Improvements, fiscal analysis, legal fees
and all costs and expenses related thereto. Developer shall pay such costs monthly upon presentation of invoices and other documentation of such costs, not more than 30 days after the
request for payment is delivered to Developer. All such costs will be Qualified Redevelopment
Costs pursuant to the TIF Pro Forma.
Section 7.2 Qualified Redevelopment Costs.
(a) Costs and expense for the items described in the table below, initially paid by Developer from Developer’s own sources and incurred in furtherance of the construction and
development of the Minimum Improvements, shall be eligible for TIF Assistance under the terms
and conditions of this Agreement (collectively, “Qualified Redevelopment Costs”):
Qualified Redevelopment Activities Estimated Cost
(i) Demolition of the existing structures and other improvements within the Minimum Improvements Area $239,000
(ii) The design and construction of the structured
parking elements of the Minimum Improvements $1,430,000
(iii) Public streetscape required in connection with this
Agreement and the City Approvals $200,000
(iv) Environmental remediation of the Minimum
Improvements Area as required by Environmental Law $170,000
(v) Removal of overhead utilities from within the
Minimum Improvements Area, as reasonably necessary for the
construction of the Minimum Improvements $450,000
(vi) TIF-related professional fees $150,000
$2,639,000.00
(b) The actual amount of Qualified Redevelopment Costs within each of the foregoing categories may be reallocated among such categories by an amount not to exceed
$200,000 for each category, provided that Developer provides reasonable evidence of the actual
amounts of Qualified Redevelopment Cost actually incurred or committed in each such category.
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Section 7.3 TIF Lookback.
(a) Generally. The financial assistance to Developer under this Agreement is based
on certain assumptions regarding likely costs and expenses associated with constructing the
Minimum Improvements. Specifically, the maximum aggregate principal amount of the TIF
Note has been determined based on the amount of assistance needed to make the Minimum Improvements financially feasible, as shown in the TIF Pro Forma. The Authority and Developer
agree that those assumptions will be reviewed at the times described in this section, and that the
amount of Tax Increment assistance provided herein may be adjusted in accordance with this
section.
(b) Annual Lookback.
(i) No later than April 1 of each calendar year (each a “Calculation Date”)
following the issuance of the TIF Note until the earlier to occur of the calendar year after
(A) the fifteen 15th anniversary of the Authority’s first receipt of Tax Increment, (B) the
TIF Note is paid in full, and (C) the TIF Note is terminated pursuant to Section 7(c)
below or otherwise in accordance with this Agreement (the “Maturity Year”), Developer shall provide to the Authority and the Authority’s designated financial advisor (the
“Financial Advisor”) any reasonable and relevant information and documentation as the
Authority and its Financial Advisor require in order to calculate the annual Cash-On-Cost
Return (as defined below) for the year immediately preceding the applicable Calculation
Date, including, without limitation, a certified cost and revenue analysis for the Minimum Improvements prepared in accordance with generally accepted accounting principles and
substantially in the same form as the sample analysis attached as Exhibit I (“Annual
Statement”). The Authority may retain an accountant to audit the submitted Annual
Statement, at Developer’s cost.
(ii) If, as of each Calculation Date, the demonstrated average Cash-On-Cost Return for the life of the Project, based on the most recent Annual Statement and each
prior Annual Statement, is below 7.0% in the aggregate, then the Authority shall make
payments under the TIF Note from Available Tax Increment to Developer during the
calendar year in which such Calculation Date occurs, in an amount up to, but not
exceeding, an amount which supplements Net Operating Income (including prior TIF Note payments) to cause the average Cash-On-Cost Return to reach 7.0% for all prior
years.
(iii) If, as of each Calculation Date, the demonstrated average Cash-On-Cost
Return for the life of the Project, based on the most recent Annual Statement and each
prior Annual Statement, exceeds 7.0%, then the Authority shall not make a payment under the TIF Note to Developer during the calendar year in which such Calculation Date
occurs. After the demonstrated average Cash-On-Cost Return for the life of the Project so
exceeds 7.0%, no further payments under the TIF Note will be required unless and until a
subsequent Annual Statement demonstrates that the average Cash-On-Cost Return for the
life of the Project is below a 7.0% in the aggregate, in which case payments under the TIF Note shall resume in accordance with clause (ii) above.
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(iv) The process set forth in clauses (ii) and (iii) above will continue until the
Maturity Year.
(v) For the purposes of this section, the following terms have the following
meanings:
(1) “Cash Flow” means Net Operating Income less debt service (principal and interest) with respect to the first priority Mortgage loan
encumbering the Minimum Improvements.
(2) “Cash-on-Cost Return” means Net Operating Income divided by
the sum of the total actual cost of the Minimum Improvements (less any grants or
City, Authority, federal or State funds received by Developer) as set forth in an updated TIF Pro Forma.
(3) “Net Operating Income” means total income and other project-
derived revenue, including payments under the TIF Note, less Operating
Expenses.
(4) “Operating Expenses” means reasonable and customary expenses incurred in operating the Minimum Improvements and any other improvements
and land within the Minimum Improvements Area or properly allocated to the
Minimum Improvements Area, including, but not limited to, all real estate taxes
and special assessments for the Minimum Improvements Area.
(vi) For purposes of clarity, an example calculation of the Cash-On-Cost Return adjustment pursuant to this Section 7.3(b) is attached hereto as Exhibit J.
(c) Sale Lookback.
(i) No later than 30 days after each sale of all or part of the Minimum
Improvements to any party other than a Related Party occurring prior to the date upon
which the TIF Note is paid in full or terminated hereunder, Developer shall submit to the Authority and its Financial Advisor any reasonable and relevant information and
documentation as the Authority and its Financial Advisor require in order to calculate the
IRR (as defined below) for such sale, including, without limitation, a certified cost and
revenue analysis for such sale prepared in accordance with generally accepted accounting
principles, which requirements will be satisfied if substantially in the same form as an updated TIF Pro Forma (“Sale Pro Forma”). This analysis will include, without
limitation, all acquisition costs, Qualified Redevelopment Costs, and all other
improvement and redevelopment costs incurred by Developer for the Project, each as
reasonably allocated to the Minimum Improvements, or part thereof, subject to a sale, as
well as historical Net Operating Income, debt service, and TIF Note payments. The Authority may retain an accountant to audit the submitted Sale Pro Forma, at Developer’s
cost. Developer shall pay to the Authority an amount equal to Developer’s proceeds of
such sale which causes Developer’s IRR for such sale of the Minimum Improvements, or
a part thereof, to exceed an IRR of 16.0% (the “Project Excess Return”).
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(ii) Developer shall pay the Project Excess Return to the Authority first, by a
reduction of the outstanding principal amount of the TIF Note in the amount of up to
100% of the Project Excess Return. In the event of any sale of the Minimum
Improvements (partial or full) in which the Project Excess Return exceeds the
outstanding principal balance of the TIF Note, Developer shall pay such excess (the “Project TIF Adjustment”) in lawful money of the United States within 30 days from the
date on which the Authority gives Developer notice of the amount of the Project TIF
Adjustment due to the Authority; provided, however, in no event shall the Project TIF
Adjustment exceed the aggregate sum of all payments (both principal and interest)
actually made by the Authority to Developer under the TIF Note. Until the Authority is paid the Project TIF Adjustment in full, the Authority shall have a lien in its favor upon
the Minimum Improvements to secure the amount of the Project TIF Adjustment. Such
lien shall attach and take effect from the date of the sale of the Minimum Improvements
contemplated by this section. Any such lien may be foreclosed as a mortgage on real
estate if the Project TIF Adjustment is not paid by the date required by this section. A lien under this section is prior to all other liens and encumbrances on the Minimum
Improvements except (1) the first priority Mortgage on the Minimum Improvement Area;
(2) liens for real estate taxes and other governmental assessments or charges against the
Minimum Improvements; and (3) all leases executed prior to the date that the lien
attaches and takes effect.
(iii) Immediately following the effective date of any full sale of all the
Minimum Improvements, the TIF Note and the Authority’s obligations to make payments
thereunder shall terminate, and upon Developer’s payment of any applicable Project
Excess Return, Developer’s obligations under Section 7.3(b) and this Section 7.3(c) shall
terminate.
(iv) For purposes of clarity, example calculations of the Project TIF
Adjustment pursuant to this Section 7.3(c) is attached hereto as Exhibit K.
(d) Exclusions for Related Parties. Sections 7.3(b) and 7.3(c) shall not apply to a
transfer of all or part of the Minimum Improvements to a Related Party of Developer.
(e) Foreclosure. Nothing in this Section 7.3 shall diminish the rights of a foreclosing mortgagee under Section 9.4 hereof.
ARTICLE VIII
TIF ASSISTANCE
Section 8.1 Creation of TIF District; Certification. The Authority and City shall
have taken all necessary actions to create and establish the TIF District as of the Effective Date. The TIF District, which as of the date hereof encompasses the entire Minimum Improvements
Area, has been created and established as a “renewal and renovation” district under the TIF Act.
The Authority will cause the TIF District to be certified prior to June 30, 2019, such that Tax
Increment will be available commencing in the tax year 2021. Developer acknowledges and
agrees that the Authority and the City may take appropriate steps to modify the TIF District in the future, including, without limitation, such modification necessary to convert the TIF District
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to a “redevelopment district” under the TIF Act. Developer shall cooperate with any such the
Authority and the City with any such future modification, including to execute and deliver any
supplements or modifications to this Agreement that are reasonably required in connection
therewith, provided that no such modification or supplement shall (a) increase any obligation of
Developer hereunder or (b) adversely affect any right of or benefit of Developer hereunder (except to a de minimis extent).
Section 8.2 TIF Note; Limitations on Reimbursement of Qualified
Redevelopment Costs.
(a) TIF Note. In order for Developer to obtain the TIF Assistance contemplated by
this agreement, the Authority shall issue, subject to the terms and conditions of this Agreement, one “pay-as-you-go” TIF note (“TIF Note”) in substantially the form attached as Exhibit L and
in the aggregate maximum principal amount of up to $2,295,000.00. The TIF Note shall bear
simple interest on the unpaid principal balance thereof at a fixed rate equal to the lesser of (i) the
rate of interest charged by the lender providing the initial permanent financing for the Minimum
Improvements which is secured by a first priority Mortgage on the Minimum Improvements Area, which rate shall be calculated once as of the date of permanent financing, or (ii) 5.0% per
annum. If permanent financing is not in place as of the date of issuance of the TIF Note, the
interest rate shall be fixed at 5.0% and not subsequently changed upon obtaining permanent
financing. Payments upon and accrual of interest on the unpaid principal balance of the TIF Note
will commence upon the Authority’s issuance of the TIF Note.
(b) Condition of Issuance. Before the Authority issues the TIF Note to Developer,
Developer shall have satisfied each of the following conditions:
(i) Developer shall have provided evidence satisfactory to the Authority that
Developer has actually incurred Qualified Redevelopment Costs in an amount equal to at
least the amount of the requested TIF Note;
(ii) Developer shall have provided an updated TIF Pro Forma sufficient to
demonstrate that the “but for” finding adopted by the City and the Authority, continues to
be satisfied and establish the total cost of the Minimum Improvements as the basis for
future Cash-on-Cost return calculations;
(iii) No Developer default or Event of Default exists under this Agreement or any of the City Approvals;
(iv) the Certificate of Completion shall have been issued by the Authority in
accordance with the terms and conditions of this Agreement;
(v) Developer shall have granted to the City each of the City Easements; each
of the Plaza Easement Agreement, the Parking Easement Agreement, and the Sidewalk Easement Agreement shall have been recorded against the Minimum Improvements
Area; and the Public Parking, Plaza, and Sidewalks shall have been open to the public
pursuant to the terms of each applicable easement agreement;
(vi) the Affordable Housing Restrictive Covenant (as defined in Section 11.3
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below) shall have been approved by the Authority in accordance with Section 11.3 below
and recorded against the Minimum Improvements Area; and
(vii) Developer shall have granted to the Authority the Purchase Right and it
shall have been recorded against the Minimum Improvements Area.
(viii) Developer shall have recorded the Final Plat to create a separate tax parcel for the Minimum Improvements Area.
(c) Issuance. Upon satisfaction of the conditions set forth in clause (b) above, the
Authority will issue the TIF Note to the Developer in accordance with this Agreement.
(d) No Representation or Warranty. Payments of principal and interest under the TIF
Note shall be payable solely from Available Tax Increment from the Minimum Improvements Area. The Authority does not represent or warrant the amounts of Available Tax Increment that
will be available for payment principal and interest under the TIF Note. The Authority will not
reimburse Developer for Qualified Redevelopment Costs from Authority revenues, other than
from Available Tax Increment, nor guaranty the amount of money which Developer will receive
as a reimbursement, such amount being payable solely from the Available Tax Increment in accordance with this section.
Section 8.3 Tax Increment Eligibility. If a Developer Event of Default occurs, the
Authority may withhold payments due under the TIF Note until the Developer has cured the
Default which gave rise to the Event of Default, but the Authority may not terminate the TIF
Note once issued as a result of a Developer Event of Default.
Section 8.4 Assignment of Note. Developer may, without the City’s or the
Authority’s consent (a) collaterally assign Developer’s rights and obligations under this
Agreement and the TIF Note to the holder of any Mortgage that is permitted under the terms of
Section 9.1 and/or (b) transfer the TIF Note to a Related Party. Except as set forth in clauses (a)
and (b) above, the TIF Note shall not be assignable nor transferable without the prior written consent of the Authority; provided, however, that such consent shall be provided if the assignee
or transferee executes and delivers to the Authority a certificate, in form and substance
reasonably satisfactory to the Authority, pursuant to which, among other things, such assignee or
transferee acknowledges and represents:
(i) the limited nature of the Authority’s payment obligations under the TIF Note;
(ii) that the TIF Note is being acquired for investment for such assignee’s or
transferee’s own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof;
(iii) that the assignee or transferee has no present intention of selling, granting any participation in, or otherwise distributing the same;
(iv) that the assignee or transferee, either alone or with such assignee’s or
transferee’s representatives, has knowledge and experience in financial and business
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matters and is capable of evaluating the merits and risks of the prospective investment in
the TIF Note and the assignee or transferee is able to bear the economic consequences
thereof;
(v) that in making its decision to acquire the TIF Note, the assignee or
transferee has relied upon independent investigations made by the assignee or transferee and, to the extent believed by such assignee or transferee to be appropriate, the assignee’s
or transferee’s representatives, including its own professional, tax and other advisors, and
has not relied upon any representation or warranty from the Authority, or any of its
officers, employees, agents, affiliates or representatives, with respect to the value of the
TIF Note;
(vi) that the Authority has not made any warranty, acknowledgment or
covenant, in writing or otherwise, to the assignee or transferee regarding the tax
consequences, if any, of the acquisition and investment in the TIF Note;
(vii) that the assignee or transferee or its representatives have been given a full
opportunity to examine all documents and to ask questions of, and to receive answers from, the Authority and its representatives concerning the terms of the TIF Note and such
other information as the assignee or transferee desires in order to evaluate the acquisition
of and investment in the TIF Note, and all such questions have been answered to the full
satisfaction of the assignee or transferee;
(viii) that the assignee or transferee has evaluated the merits and risks of investment in the TIF Note and has determined that the TIF Note is a suitable investment
for the assignee or transferee in light of such party’s overall financial condition and
prospects;
(ix) that the TIF Note will be characterized as “restricted securities” under the
federal securities laws because the TIF Note is being acquired in a transaction not involving a public offering and that under such laws and applicable regulations such
securities may not be resold without registration under the Securities Act of 1933, as
amended, except in certain limited circumstances; and
(x) that no market for the TIF Note exists and no market for the TIF Note is
intended to be developed.
Subject to the terms and conditions of this Section 8.4, the holder of the TIF Note may be
different than the owner of the Minimum Improvements Area or the party responsible for the
obligations of the Developer under the Redevelopment Agreement, provided, however, that such
holder will be subject to all limitations and conditions to payments under the TIF Note set forth
herein.
ARTICLE IX ENCUMBRANCE OF THE MINIMUM IMPROVEMENTS AREA
Section 9.1 Mortgage of the Minimum Improvements Area.
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(a) Until the Completion of the Minimum Improvements, neither Developer, nor any
successor in interest to Developer, may engage in any financing or any other transaction creating
any mortgage or other security interest in or lien upon the Minimum Improvements Area, or
portion thereof, whether by express agreement or operation of law (a “Mortgage”), or suffer any
Mortgage to be made on or attach to the Minimum Improvements Area except for the purpose of obtaining funds necessary for constructing the Minimum Improvements and paying the costs set
forth in the TIF Pro Forma.
(b) This restriction on encumbrance shall terminate upon Completion of the
Minimum Improvements. Developer or any successor in interest to the Minimum Improvements
or portion thereof, may sell or engage in financing or any other transaction creating a mortgage or encumbrance or lien on the Minimum Improvements or portion thereof after the Certificate of
Completion has been obtained, without obtaining the prior written approval of the Authority.
(c) Notwithstanding anything in this Agreement to the contrary, Developer is
authorized, without the approval of the Authority, to obtain construction financing to cover the
costs of construction of the Minimum Improvements and the costs set forth in the TIF Pro Forma and to mortgage the Minimum Improvements Area to provide security for construction
financing.
Section 9.2 Copy of Notice of Default to Mortgagee. If the Authority delivers any
notice or demand to Developer, or any successor in interest to Developer, with respect to any
Default under this Agreement, the Authority will use its best efforts to also deliver a copy of such notice or demand to the mortgagee of any Mortgage at the address of such mortgagee
provided in the recorded Mortgage or any other address thereafter provided to the Authority in a
written notice from Developer, any successor in interest to Developer or the mortgagee, provided
that failure of the Authority to give any such notice shall not limit the Authority’s ability to
exercise any of its remedies hereunder.
Section 9.3 Mortgagee’s Option to Cure Events of Default. Upon the occurrence of
an Event of Default, the mortgagee under any Mortgage will have the right at its option, to cure
or remedy such Event of Default within the cure periods set forth herein.
Section 9.4 Rights of a Foreclosing Mortgagee. Except as provided in Section 9.6,
an individual or entity who acquires title to all or a portion of the Minimum Improvements through the foreclosure of a mortgage or deed in lieu of foreclosure on such portion of the
Minimum Improvements Area remains subject to each of the restrictions set forth in this
Agreement and remains subject to all of the obligations of Developer, or any successor in interest
to Developer, under the terms of this Agreement, but neither the purchaser at a foreclosure sale,
the grantee under a deed in lieu of foreclosure, nor any subsequent transferee from a mortgagee shall have no personal liability for a breach of such obligations under this Agreement so long as:
(i) The party acquiring title through foreclosure or deed in lieu of foreclosure
observes all of the restrictions set forth in the Agreement;
(ii) The party who acquired title through foreclosure or deed in lieu of foreclosure
does not undertake or permit any other party to undertake any Minimum Improvements on the
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portion of the Minimum Improvements Area it owns;
(iii) The City has no obligation to approve any plans for Minimum Improvements of a
portion of the Minimum Improvements the foreclosing mortgagee (or mortgagee obtaining a
deed in lieu of foreclosure) owns or to issue any related building permits.
The purpose of this section is to permit a foreclosing lender (or mortgagee or purchaser obtaining a deed in lieu of foreclosure or a subsequent transferee) to hold title to the portion of the
Minimum Improvements Area it acquires through foreclosure or deed in lieu of foreclosure,
subject to, but without personal liability for the obligations under this Agreement, until it can sell
the portion it holds to a third party who will assume the obligations of Developer under the terms
of this Agreement and proceed with the construction of the Minimum Improvements pursuant to the terms of this Agreement. If, rather than passively holding title to the portion of the Minimum
Improvements Area it acquires through foreclosure or deed in lieu of foreclosure, the foreclosing
lender (or mortgagee obtaining a deed in lieu of foreclosure or subsequent transferee) or other
purchaser at a foreclosure sale desires to construct the Minimum Improvements, the purchaser at
the foreclosure sale must assume and perform each of the obligations of Developer, or the applicable successor to the interest of Developer, under this Agreement as to the portion of the
Minimum Improvements subject to foreclosure. This section does not restrict the authority of the
Authority to pursue its rights under any outstanding security, exercise remedies otherwise
available under this Agreement or suspend the performance of the obligations of the Authority or
Developer under this Agreement as otherwise allowed. The Authority agrees to reasonably cooperate with any foreclosing lender (or mortgagee obtaining a deed in lieu of foreclosure) or
other purchaser at a foreclosure sale in pursuing the Minimum Improvements in accordance with
this Agreement. Unless acting other than passively holding title as described above in this
section, a lender or an independent third party that purchases at a foreclosure sale will have no
liability for breach under this Agreement.
Section 9.5 Events of Default Under Mortgage. Developer, or its successor or
assign, will use commercially reasonable efforts to obtain an agreement from any mortgagee
under a Mortgage that in the event Developer is in default under any Mortgage, the mortgagee
will use commercially reasonable efforts, within 30 days after it becomes aware of any such
default and prior to exercising any remedy available to it due to such default, to notify the Authority in writing of (i) the fact of default; (ii) the elements of default; and (iii) the actions
required to cure the default. Developer, or its successor or assign, will use its commercially
reasonable efforts to obtain an agreement in any such Mortgage, that if, within the time period
required by the Mortgage, the Authority cures any default under the Mortgage, the mortgagee
will pursue none of its remedies under the Mortgage based on such default, provided that failure of Developer or its successors or assigns to obtain such an agreement from any such mortgagee
shall not constitute a breach of this Agreement.
Section 9.6 Subordination of Agreement. The City and the Authority will, upon the
request of the holder of a Mortgage, execute and record a subordination agreement pursuant to
which the City and the Authority agree that, upon a default by Developer under a Mortgage, the holder of the Mortgage may elect, in an instrument to be recorded in the Hennepin County land
records and delivered to the City and the Authority before the commencement of proceedings to
foreclose the Mortgage, to either (1) treat this Agreement as being subordinate to the lien of the
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Mortgage such that the foreclosure of the Mortgage and the failure to redeem from such
foreclosure will extinguish and terminate this Agreement and the TIF Note will automatically be
cancelled and rescinded; or (2) to treat this Agreement as having priority over the Mortgage in
which case this Agreement and the TIF Note will survive the foreclosure of the Mortgage and
this Agreement will be binding upon the holder of the Sheriff's Certificate issued in conjunction with the foreclosure of the Mortgage. If the holder of the Mortgage fails to notify the City and
the Authority of its election under this Section 9.6 on or before the commencement of
foreclosure proceedings, the holder of the Mortgage shall be deemed to have elected to treat this
Agreement as being subordinate to the lien of the Mortgage such that the foreclosure of the
Mortgage and the failure to redeem from such foreclosure will extinguish and terminate this Agreement and the TIF Note will automatically terminate. The City and Authority each further
agree that if the holder of a Mortgage elects to treat this Agreement as having priority over the
Mortgage, the City and Authority, upon the completion of the foreclosure without redemption,
agree that the time for the completion of the Minimum Improvements is extended to a date 12
months following the expiration of all applicable redemption periods.
ARTICLE X INSURANCE AND CONDEMNATION
Section 10.1 Insurance.
(a) Developer, and its successors or assigns, shall obtain and continuously maintain
insurance on the Minimum Improvements and, from time to time at the request of the Authority, furnish proof to the Authority that the premiums for such insurance have been paid and the
insurance is in effect. The insurance coverage described below is the minimum insurance
coverage that Developer must obtain and continuously maintain, provided that Developer shall
obtain the insurance described in clause (i) below with respect to the Minimum Improvements
prior to the Commencement of construction thereof and is only obligated to maintain the insurance described in clause (i) until Developer receives the Certificate of Completion:
(i) Builder’s risk insurance, written on the so-called “Builder’s Risk-
Completed Value Basis,” in an amount equal to 100% of the insurable value of the
Minimum Improvements at the date of Completion, and with coverage available in non-
reporting form on the so-called “all risk” form of policy.
(ii) Comprehensive general liability insurance (including operations,
contingent liability, operations of subcontractors, completed operations and contractual
liability insurance) together with an Owner’s/Contractor’s Policy naming the Authority,
and the City as an additional insured, with limits against bodily injury and property
damage of not less than $2,500,000 for each occurrence (to accomplish the above-required limits, an umbrella excess liability policy may be used), written on an
occurrence basis.
(iii) Workers compensation insurance, for employees of Developer if and to
the extent required by Law.
(b) All insurance required in this Article shall be obtained and continuously
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maintained by responsible insurance companies selected by Developer or its successors that are
authorized under the laws of the State to assume the risks covered by such policies. If available
on commercially reasonable terms, each policy must contain a provision that the insurer will not
cancel nor modify the policy without giving written notice to the insured at least 30 days before
the cancellation or modification becomes effective. Not less than 15 days prior to the expiration of any policy, Developer, or its successor or assign, must renew the existing policy or replace the
policy with another policy conforming to the provisions of this Article. In lieu of separate
policies, Developer or its successor or assign, may maintain a single policy, blanket or umbrella
policies, or a combination thereof, having the coverage required herein.
(c) Developer, its successor or assign, agrees to notify the Authority promptly in the case of damage exceeding $500,000 in amount to, or destruction of the Minimum Improvements
resulting from fire or other casualty.
Section 10.2 Condemnation. In the event that title to or possession of Minimum
Improvements Area or the Minimum Improvements, or both, or any material part thereof, is
threatened with a taking through the exercise of the power of eminent domain, Developer, or its successor or assign, will notify the Authority of the threatened taking with reasonable
promptness.
ARTICLE XI
OTHER DEVELOPER COVENANTS
Section 11.1 Maintenance and Operation of the Minimum Improvements. Developer, and its successors or assigns, will, at all times during the term of this Agreement,
maintain and operate the Minimum Improvements (or the applicable portion thereof) in a safe
and secure way and in compliance with this Agreement and applicable Law. Developer, or its
successors or assigns, will pay all of the reasonable and necessary expenses of the operation and
maintenance of the Minimum Improvements, including all premiums for insurance insuring against loss or damage thereto and adequate insurance against liability for injury to persons or
property arising from the construction of the Minimum Improvements as required pursuant to
this Agreement. During construction of the Minimum Improvements, Developer, or its
successors or assigns, shall not knowingly cause any person working in or attending the
Minimum Improvements for any purpose, or any tenant of the Minimum Improvements, to be exposed to any hazardous or unsafe condition; provided that such party shall not be in Default
hereunder if it has required the contractors employed to perform work on the Minimum
Improvements to take such precautions as may be available to protect the persons in and around
the Minimum Improvements from hazards arising from the work, and has further required each
such contractor to obtain and maintain liability insurance protecting against liability to persons for injury arising from the work. The expenses of operation and maintenance of the Minimum
Improvements shall be borne solely by Developer, its successors or assigns.
Section 11.2 Business Subsidy Agreement. The Authority and Developer have
determined that a business subsidy agreement within the meaning of the Minnesota Business
Subsidy Act, Minnesota Statutes, Sections 116J.993 through 116J.995 is not required in accordance with the exception contained in the Minnesota Business Subsidy Act, Minnesota
Statutes, Section 116J.993, subd. 3(17), because Developer’s investment in the purchase of the
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Minimum Improvements Area and site preparation thereon is 70% or more of the assessor’s
current year’s estimated market value for the Minimum Improvements Area.
Section 11.3 Affordable Housing.
(a) Developer covenants that at least three of the residential units within the
Minimum Improvements (the “Affordable Units”) will be leased at rates (inclusive of utilities) that are considered affordable to individuals or households earning less than 50% of the U.S.
Department of Housing and Urban Development’s Area Median Income for the Minneapolis-
Saint Paul-Bloomington Metropolitan Statistical Area for a period of 15 years commencing on
the date the Certificate of Completion is issued (the “Affordable Housing Requirements”). The
Affordable Housing Requirements shall also incorporate and include the following conditions and requirements: (i) no security deposit shall be required in excess of the amount of one month
of rent in connection with any Affordable Unit; (ii) Developer shall affirmatively market the
Affordable Units to one or more traditionally underserved populations (e.g., people with
disabilities) as affordable at the rates required hereunder; (iii) the Affordable Units shall be
subject to the terms and condition of the Inclusionary Housing Policy Program Guide (“Policy Guide”) to be adopted by the City, a current draft of which is attached hereto as Exhibit M,
provided, however, the Affordable Housing Requirements hereunder shall not include changes in
the final Policy Guide adopted by the City which differ from the Policy Guide attached hereto as
Exhibit M and which would increase Developer’s costs and/or other obligations beyond a de
minimis extent; (iv) Developer shall, upon annual invoicing, reimburse the City (or such subdivision of the City administrating the Affordable Housing Requirements) for third-party
expenses related to monitoring of Developer’s compliance with the Affordable Housing
Requirements, which such costs shall initially not exceed $500.00 per year (plus any additional
costs necessitated by re-inspections for noncompliance with the Affordable Housing
Requirements) and thereafter be subject to reasonable adjustment from time to time. The Affordable Housing Requirements will be set forth in a restrictive covenant in substantially the
form shown in the attached Exhibit N and to be recorded against the Minimum Improvements
Area prior to the issuance of the TIF Note (the “Affordable Housing Restrictive Covenant”). The
Affordable Housing Restrictive Covenant shall not be subordinated or junior to any Mortgage on
the Minimum Improvements, and if any Mortgage exists at the time the Affordable Housing Restrictive Covenant is to be recorded, Developer shall cause the mortgagee under such
Mortgage to subordinates the Mortgage and the lien thereof to the Affordable Housing
Restrictive Covenant.
(b) Prior to issuance of the TIF Note, Developer shall grant to the Authority the one-
time right to purchase one or more of the Affordable Units (the “Purchase Right”), which such Purchase Right shall be exercisable by the Authority in the event the Affordable Units are
converted from rental units to for-sale units. The Purchase Right shall be granted to Authority
pursuant to a Right of First Purchase Option agreement in the form attached as Exhibit O and on
the terms and conditions set forth therein.
(c) On or about the date which is one year before the original expiration of the Affordable Housing Restrictive Covenant, the Authority and Developer shall negotiate in good
faith the terms and conditions of an extension of initial 15-year term of the Affordable Housing
Restrictive Covenant .
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Section 11.4 Developer/Authority Grant Applications. Developer and the Authority
will cooperate in efforts to obtain available public grant funding to undertake the Minimum
Improvements, including but not limited to the Transit Oriented Development, Tax Base
Revitalization Account, and Livable Communities Demonstration Account grants from the
Metropolitan Council, Department of Employment and Economic Development funding for environmental remediation, and any other funding from metropolitan, state, county and federal
sources identified by the Authority or Developer as reasonably available. Costs of preparing the
grant applications shall be borne by Developer. City staff shall have the final authority to review
and submit the grant applications to the applicable agency. To the extent additional grant funds
not reflected in the TIF Pro Forma are obtained, the amount shall reduce the principal amount of the TIF Note.
ARTICLE XII
TRANSFER LIMITATIONS AND INDEMNIFICATION
Section 12.1 Representation as to the Minimum Improvements. Developer
represents to the City and the Authority that its undertakings under this Agreement are for the purpose of developing the Minimum Improvements and not for the purpose of speculation in
land holding. Developer acknowledges that, in view of the importance of the Minimum
Improvements to the general welfare of the City and the Authority, and the substantial financing
and other public aids that have been made available by the City and the Authority for the purpose
of making such Minimum Improvements possible, the qualifications and identity of Developer are of particular concern to the Authority. Developer further acknowledges that the City and the
Authority are willing to enter into this Agreement with Developer because of the qualifications
and identity of Developer.
Section 12.2 Limitation on Transfers.
(a) Until the Authority’s issuance of the Certificate of Completion, Developer shall not sell, assign, convey, lease or transfer in any other mode or manner any of its right, title, and
interest in and to this Agreement, all or any part of the Minimum Improvements Area or the
Minimum Improvements, without the express written approval of the Authority, provided that
the consent of the Authority shall not be required for any of the following:
(i) granting of a mortgage or other security interests in the Minimum Improvements Area as provided in Article IX hereof; and
(ii) leasing the Minimum Improvements in the normal course of business in a
manner consistent with this Agreement and the City Approvals; and
(iii) transfer to a Related Party.
After a Certificate of Completion has been issued, Developer or other transferor may freely, without the approval of the Authority sell or transfer all or any part of the Minimum
Improvements Area or the Minimum Improvements to any person at any time.
(b) If the Authority’s consent to a transfer is required pursuant to this Section 12.2,
the Authority shall be entitled to require, as conditions to its approval of any sale, assignment,
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conveyance, use or transfer of any rights, title, and interest in and to this Agreement, the
Minimum Improvements Area or the Minimum Improvements that:
(i) Any proposed transferee shall not be exempt from the payment of real
estate taxes and shall have the qualifications and financial responsibility, as determined
by the Authority, necessary and adequate to fulfill the obligations undertaken in this Agreement by Developer;
(ii) Any proposed transferee, by instrument in writing satisfactory to the
Authority and in form recordable among the land records shall, for itself and its
successors and assigns, and expressly for the benefit of the Authority have expressly
assumed all of the obligations of Developer (or such obligations of Developer as are applicable to the portion of the Minimum Improvements acquired) under this Agreement
and agree to be subject to all the conditions and restrictions to which Developer is
subject;
(iii) Developer must submit all instruments and other legal documents
involved in effecting transfer to the Authority; and
(iv) The transferee must demonstrate, in a manner satisfactory to the
Authority, its ability to perform all assumed obligations in this Agreement.
(c) In the absence of specific written agreement by the City and the Authority to the
contrary, neither the transfer of the Minimum Improvements, or any portion thereof, prior to the
issuance of the Certificate of Completion or the City’s or the Authority’s consent to such a transfer will relieve Developer of its obligations under this Agreement.
Section 12.3 Indemnification.
(a) Developer releases and covenants and agrees that the City Parties shall not be
liable for and agrees to indemnify and hold harmless the City Parties against any loss or damage
to property or any injury to or death of any person occurring at or about, or resulting from any defect in the Minimum Improvements constructed by Developer to the extent not attributable to
the negligence or intentional misconduct of the City Parties.
(b) Except for negligence or intentional misconduct of the City Parties, Developer
agrees to indemnify the City Parties, now and forever, and further agrees to hold the aforesaid
harmless from any claims, demands, suits, costs, expenses (including reasonable attorney’s fees), actions or other proceedings whatsoever by any person or entity whatsoever arising or
purportedly arising from the actions or inactions of Developer (or other persons under its
direction or control) under this Agreement, or the transactions contemplated hereby or the
acquisition, construction, installation, ownership, and operation of the Minimum Improvements,
where such claims, demands, suits, costs, expenses (including reasonable attorney’s fees), actions or other proceedings occur or arise at any time while the TIF Note remains outstanding.
Section 12.4 Limitation. All covenants, stipulations, promises, agreements and
obligations of the City, the Authority or Developer contained in this Agreement shall be deemed
to be the covenants, stipulations, promises, agreements and obligations of the City, the Authority
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and Developer, and not of any governing body member, officer, agent, servant, manager or
employee of the City, the Authority or Developer in the individual capacity thereof.
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES
Section 13.1 Events of Default Defined. Subject to applicable cure periods, “Events of Default” under this Agreement include any one or more of the events listed in Sections 13.2 and
13.3.
Section 13.2 Developer Events of Default. The following shall be Events of Default
for Developer:
(a) subject to Unavoidable Delays and Cure Rights, Developer’s failure to achieve Commencement and Completion of any aspect of the Minimum Improvements by the applicable
“Default Date” set forth in Section 6.1; provided that if a Certificate of Completion is issued by
the Authority, such failure shall no longer be an Event of Default;
(b) Subject to Unavoidable Delays and Cure Rights, the Developer shall Default in its
obligations with respect to the construction of the Minimum Improvements (including the nature and the date for the completion of the various elements thereof), or shall abandon or substantially
suspend construction work on the Minimum Improvements, and any such Default, violation,
abandonment or suspension is not cured, ended or remedied within 30 days after written notice to
do so; provided that if a Certificate of Completion is issued by the Authority, such failure shall
no longer be an Event of Default;
(c) There is, in violation of this Agreement, any conveyance, encumbrance or other
transfer of the Minimum Improvements Area or any part thereof, and such violation is not cured
within 30 days after written notice to do so;
(d) Subject to Unavoidable Delay and Cure Rights, failure by the Developer to
observe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement, and the continuation of such failure for a period of
30 days after written notice of such failure from any party hereto;
(e) If, prior to the delivery of the Certificate of Completion, the Developer shall (i)
file any petition in bankruptcy or for any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act of 1978, as amended or under any similar federal or State law; or (ii) make an assignment for the
benefit of its creditors; or (iii) become insolvent or adjudicated a bankrupt; or if a petition or
answer proposing the adjudication of the Developer, as a bankrupt or its reorganization under
any present or future Federal bankruptcy act or any similar Federal or State law shall be filed in
any court and such petition or answer shall not be discharged or denied within 90 days after the filing thereof; or a receiver, trustee or liquidator of the Developer, or of the Minimum
Improvements, or part thereof, shall be appointed in any proceeding brought against the
Developer, and shall not be discharged within 90 days after such appointed, or if the Developer
shall consent to or acquiesce in such appointment.
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Section 13.3 City and Authority Events of Default. Subject to Cure Rights and
Unavoidable Delays, the failure of the City or the Authority to observe or perform any covenant,
condition, obligation or agreement on its part to be observed or performed under this Agreement,
and the continuation of such failure for a period of 30 days after written notice of such failure
from any party hereto shall be an Event of Default for the City or the Authority.
Section 13.4 Cure Rights. If a Default occurs under Section 13.2(a), (b) or (d) or under
Section 13.3 which reasonably requires more than 30 days to cure, such Default shall not
constitute an Event of Default, provided that the curing of the Default is promptly commenced
upon receipt by the defaulting party of the notice of the Default, and with due diligence is
thereafter continuously prosecuted to completion and is completed within a reasonable period of time, and provided that the defaulting party keeps the non-defaulting party well informed at all
times of its progress in curing the Default; provided in no event shall such additional cure period
extend beyond 120 days.
Section 13.5 Authority Remedies on Developer Events of Default. Whenever any
Event of Default occurs by Developer, the Authority may take any one or more of the following actions:
(a) terminate this Agreement (but not the issued TIF Note);
(b) exercise its rights under Section 8.3 of this Agreement regarding Developer’s TIF
eligibility;
(c) suspend performance under this Agreement until it receives assurances from Developer or the holder of any Mortgage, deemed adequate by the Authority, that Developer or
the holder of any Mortgage will cure the Event of Default and continue its performance under
this Agreement,
(d) withhold the Certificate of Completion where such Event of Default relates to
Completion of the Minimum Improvements or issuance of the Certificate of Completion;
(e) take whatever action at law or in equity may appear necessary or desirable to the
Authority to collect any payments due under this Agreement, or to enforce performance and
observance of any obligation, agreement, or covenant of Developer under this Agreement; and
(f) the Authority shall have all remedies normally available at law and in equity to
enforce performance of this Agreement including a right to specific performance.
Section 13.6 City Remedies on Developer Events of Default. Whenever any Event of
Default of Developer occurs, the City may suspend performance of its obligations under this
Agreement and take whatever action at law or in equity may appear necessary or desirable to the
City to enforce performance and observance of any obligation, agreement, or covenant of
Developer under this Agreement, including an action for specific performance.
Section 13.7 Developer Remedies on City or Authority Events of Default. Whenever
any Event of Default of the City or the Authority occurs, Developer, may take whatever action at
law or in equity may appear necessary or desirable to enforce performance and observance of
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any obligation, agreement, or covenant of the City or the Authority under this Agreement,
including an action for specific performance.
Section 13.8 No Remedy Exclusive. No remedy herein conferred upon or reserved to
the City, the Authority or Developer is intended to be exclusive of any other available remedy or
remedies unless otherwise expressly stated, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise any right or power
accruing upon any Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time and as often as
may be deemed expedient. In order to entitle the Authority, the City or Developer to exercise any remedy reserved to it, it shall not be necessary to give notice, other than such notice as may be
required in this Article XIV.
Section 13.9 No Additional Waiver Implied by One Waiver. If any agreement
contained in this Agreement should be breached by any party and thereafter 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 hereunder.
Section 13.10 Reimbursement of Attorneys’ Fees. In the event of any enforcement
action hereunder following an Event of Default, the prevailing party, in addition to other relief,
shall be entitled to an award of attorney’s fees and costs. The City, Authority and Developer
waive their right to a jury trial on the issues of who is the prevailing party and the reasonable amount of attorneys’ fees and costs to be awarded to the prevailing party. Those issues will be
decided by the trial judge upon motion by one or both parties, such motion to be decided based
on the record as of the end of the jury trial augmented only by the testimony and/or affidavits
from the attorneys and their staff. The parties agree that, subject to the trial judge’s discretion,
the intent of this clause is to have all issues related to the award of attorneys’ fees and costs decided by the trial judge as quickly as practicable.
ARTICLE XIV
ADDITIONAL PROVISIONS
Section 14.1 Conflicts of Interest. No member of the Board or other official of the
Authority shall have any financial interest, direct or indirect, in this Agreement, the TIF District or the Minimum Improvements, or any contract, agreement or other transaction contemplated to
occur or be undertaken thereunder or with respect thereto, nor shall any such member of the
governing body or other official participate in any decision relating to the Agreement which
affects his or her personal interests or the interests of any corporation, partnership or association
in which he or she is directly or indirectly interested. No member, official or employee of the City or the Authority shall be personally liable to the City or the Authority in the event of any
Default or breach by Developer or successor or on any obligations under the terms of this
Agreement.
Section 14.2 Titles of Articles and Sections. Any titles of the several parts, Articles
and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions.
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Section 14.3 Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this Agreement by any party to any
other shall be sufficiently given or delivered if it is dispatched by reputable overnight courier,
sent registered or certified mail, postage prepaid, return receipt requested, or delivered
personally, and addressed to:
Developer at: Orion 4500 France, LLC
Attn: Ted Carlson
4530 West 77th Street, Suite 365
Edina, MN 55435
The Authority at: Housing and Redevelopment Authority of Edina, Minnesota Attention: Executive Director
4801 West 50th Street
Edina, MN 55424
with a copy to: Dorsey & Whitney LLP
Attention: Jay R. Lindgren 50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
The City at: City of Edina
Attention: City Manager
4801 West 50th Street Edina, MN 55424
with a copy to: Dorsey & Whitney LLP
Attention: Jay R. Lindgren
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this section.
Section 14.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 14.5 Law Governing. This Agreement will be governed and construed in accordance with the laws of the State of Minnesota.
Section 14.6 Consents and Approvals. In all cases where consents or approvals are
required hereunder, such consents or approvals shall not be unreasonably conditioned, delayed or
withheld. All consents or approvals shall be in writing in order to be effective.
Section 14.7 Representatives. Except as otherwise provided herein, all approvals and other actions required of or taken by the Authority shall be effective upon action by the
Authority Representative. All actions required of or taken by Developer shall be effective upon
action by a duly authorized officer of any of its managers.
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Section 14.8 Superseding Effect. This Agreement reflects the entire agreement of the
parties with respect to the items covered by this Agreement, and supersedes in all respects all
prior agreements of the parties, whether written or otherwise, with respect to the items covered
by this Agreement.
Section 14.9 Relationship of Parties. Nothing in this Agreement is intended, or shall be construed, to create a partnership or joint venture among or between the parties hereto, and
the rights and remedies of the parties hereto shall be strictly as set forth in this Agreement.
Section 14.10 Term. The term of this Agreement shall be effective from the Effective
Date above written until the earlier of (a) the date this Agreement is terminated pursuant to the
terms and conditions hereof, (b) payment in full of the TIF Note, or (c) the date which is the 16th anniversary of the first Tax Increment received by the Authority. Upon termination, the parties
agree to execute and record a document terminating this Agreement and providing for the release
of the obligations under this Agreement.
Section 14.11 Provisions Surviving Rescission or Expiration. Section 12.3 shall
survive any rescission, termination or expiration of this Agreement with respect to or arising out of any event, occurrence or circumstance existing prior to the date thereof.
Section 14.12 Memorandum of Agreement. Neither party shall cause this Agreement
to be recorded or filed in the real estate records of Hennepin County. However, Developer shall
cause a Memorandum of Agreement to be so recorded or filed in the form attached as Exhibit F,
and hereby incorporated herein by reference upon execution of this Agreement upon that portion of the Minimum Improvements Area owned by Developer. At the time of execution of this
Agreement the parties hereto will also execute and acknowledge the Memorandum of
Agreement. At such time as Developer further acquires fee title to any additional portion of the
Minimum Improvements Area, Developer shall cause the Memorandum to be recorded against
the additional portion of the Minimum Improvements Area and shall record such Memorandum of Agreement in the office of the County Recorder and/or Registrar of Titles in and for Hennepin
County, Minnesota, as the case may be.
Section 14.13 Conflicts Between this Agreement and the Development Contract. In
the event of any inconsistency or conflict between the requirements of this Agreement and the
Development Contract, the provisions of the Development Contract shall control; provided, however, that for the purposes of Section 8.3 of this Agreement regarding Events of Default that
authorize the Authority to withhold payments on any TIF Assistance, this Agreement controls.
Except with respect for such inconsistent provisions, neither agreement is intended to amend or
supersede the other agreement.
Section 14.14 Limited Liability. Notwithstanding anything to contrary provided in this Agreement, it is specifically understood and agreed, such agreement being the primary
consideration for the execution of this Agreement by Developer, that (a) there should be
absolutely no personal liability on the part of any director, officer, manager, member, employee
or agent of Developer or the City or Authority with respect to any terms, covenants and
conditions in this Agreement; (b) Developer and the City and the Authority waive all claims, demands and causes of action against the other parties’ directors, officers, managers, members,
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employees and agents in any Event of Default, by either party, as the case may be, of any of the
terms, covenants and conditions of this Agreement to be performed by either party; and (c)
Developer and the City or the Authority, as the case may be, shall look solely to the assets of the
other party for the satisfaction of each and every remedy in the Event of Default by any party, as
the case may be, of any of the terms, covenants and conditions of this Agreement such exculpation of liability to be absolute and without any exception whatsoever.
Section 14.15 Time is of the Essence. Time is of the essence of this Agreement and
each and every term and condition hereof; provided, however, that if any date herein set forth for
the performance of any obligations by Developer, City or Authority or for the delivery of any
instrument or notice as herein provided should not be on a business day, the compliance with such obligations or delivery shall be deemed acceptable on the next following business day.
Section 14.16 Estoppel Certificate. Each party shall, within fifteen (15) days after
request from the other party hereto, deliver a written statement which may be relied upon by the
requesting party, or any lender or transferee of the requesting party, setting forth (a) whether, to
the best knowledge of the party providing the written statement, that the requesting party is not in default and there exists no circumstance which with the giving of notice or lapse of time, or
both, would constitute a default (or if such party is aware of any such default or circumstance
specifying the same); and (b) such other factual certifications as may be reasonably requested by
the requesting party.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
[Signature Page to Redevelopment Agreement (4500 France)]
IN WITNESS WHEREOF, the City, the Authority and Developer have caused this
Agreement to be duly executed in their names and on their behalf, all on or as of the date first
above written.
CITY OF EDINA, MINNESOTA
By James B. Hovland, Mayor
By
Scott H. Neal, City Manager
STATE OF MINNESOTA )
) ss. COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of
_____________, 2018, by James B. Hovland and Scott H. Neal the Mayor and City Manager,
respectively, of the City of Edina, Minnesota, on behalf of the City of Edina.
Notary Public
[Signature Page to Redevelopment Agreement (4500 France)]
HOUSING AND REDEVELOPMENT
AUTHORITY OF EDINA, MINNESOTA
By
James B. Hovland, Chair
By
Robert J. Stewart, Secretary
STATE OF MINNESOTA )
) ss. COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of _____________, 2018,
by James B. Hovland and Robert J. Stewart, the Chair and Secretary, respectively, of the
Housing and Redevelopment Authority of Edina, Minnesota, on behalf of said Authority.
Notary Public
[Signature Page to Redevelopment Agreement (4500 France)]
ORION 4500 FRANCE, LLC,
a Delaware limited liability company
By: Orion Investments Edina II, LLC,
a Minnesota limited liability
company Its: Manager
By: _________________________________
Name: ______________________________
Its: _________________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of ______, 2018, by ________, the _________________ of Orion Investments Edina II, LLC, a Minnesota limited
liability company, as the manager of ORION 4500 FRANCE, LLC, a Delaware limited liability
company, on behalf of the limited liability companies.
Notary Public
A-1-1 4819-1611-3538\1
EXHIBIT A-1
Legal Description of Minimum Improvements Area
Parcel 1:
Lots 1 and 2 and that part of Lot 6 described as follows: Commencing at the most Northerly corner
of said Lot 6; thence South along the East line of said lot; 40.62 feet; thence Northwesterly 30.2 feet to a point on the Northerly line of said Lot 6, distant 27.19 feet Westerly from the point of
beginning; thence Northeasterly to the point of beginning, all in Block 2, “Fairbairn’s
Rearrangement” in Waveland and Waveland Park, including all of the vacated alley which lies
North of the South line of said Lot 2 extended West, Hennepin County, Minnesota.
(Abstract Property)
Parcel 2:
Lots 3, 4 and 5;
That part of Lot 6, described as follows: Commencing on the Easterly line of said Lot at a point
distant 40.62 feet
Southerly from the most Northerly corner of said Lot, thence Northwesterly 30.2 feet to a point on the Northwesterly line of said Lot distant 27.19 feet Southwesterly from the most Northerly corner
of said Lot; thence Southwesterly along the Northwesterly line of said Lot to the most Westerly
corner of said Lot, thence Southeasterly along the Southwesterly line of said Lot to the most
Southerly corner of said Lot, thence Northerly along the Easterly line of said Lot to the point of
beginning;
That part of the alley now vacated, described as follows: Commencing at the point of intersection
of the center line of alley, now vacated with the North line of Lot 3 extended Westward, thence
East on said extended line to the Northwest corner of said Lot 3, thence along the Easterly line of
said alley to the most Southerly corner of Lot 5, thence Southwesterly along an extension of the
Southeasterly line of said Lot to the center line of said alley, thence Northwesterly along the center line of said alley to a point of its intersection with a line erected to bisect the angle existing in the
Westerly line of said alley, thence Southwest along said line to the West line of said alley, thence
North along said West line to a point in said line 40.62 feet South of the most Northerly corner of
Lot 6, the same being the point of intersection to said West line of alley with the extension
Westward of the North line of Lot 3, thence East along said extended line to the point of beginning;
All in Block 2, "Fairbairn's Rearrangement" In Waveland And Waveland Park
(Torrens Property)
A-2-1
4819-1611-3538\1
EXHIBIT A-2
Depiction of Minimum Improvements Area and Release Parcel
B-1 4819-1611-3538\1
EXHIBIT B
Final Development Plan
[Final Development Plan to be inserted following approval by City Council]
C-1 4819-1611-3538\1
EXHIBIT C
TIF Pro Forma
[See attached.]
Debt A 18,321,921 63.8%398,303
Subtotal 18,321,921 63.8%398,303
Category
Equity 9,865,650 34.3%214,471
Local_Grant 335,000 1.2%7,283
Local_Grant 200,000 0.7%4,348
Subtotal 10,400,650 36.2%226,101
TOTAL SOURCES 28,722,571 100.0%
Amount % of Cost Per Sq. Ft. (Total)
ACQUISITION COSTS 4,641,000 16.2% 74.43
Land Cost n/a psf 4,550,000 15.8% 72.97
91,000 0.3%1.46
CONSTRUCTION COSTS 19,327,350 67.3% 309.97
Residential Building 18,000,000 62.7%288.68
Tenant Improvements: Total Commercial $50.28 psf 327,350 1.1%5.25
Construction Contingency 1,000,000 5.5%16.04
ENVIRONMENTAL ABATEMENT/SOIL CORRECTION 645,000 2.2% 10.34
170,000 0.6%2.73
400,000 1.4%6.42
75,000 0.3%1.20
PERMITS/FEES 683,516 2.4% 10.96
00.0%0.00
200,000 0.7%3.21
178,516 0.6%2.86
145,000 0.5%2.33
160,000 0.6%2.57
PROFESSIONAL SERVICES 1,226,205 4.3% 19.67
15,000 0.1%0.24
475,000 1.7%7.62
35,000 0.1%0.56
75,000 0.3%1.20
30,000 0.1%0.48
125,000 0.4%2.00
50,000 0.2%0.80
00.0%0.00
50,000 0.2%0.80
23,000 0.1%0.37
98,205 0.3%1.58
100,000 0.3%1.60
150,000 0.5%2.41
FINANCING COSTS 774,500 2.7% 12.42
100,000 0.3%1.60
300,000 1.0%4.81
7,500 0.0%0.12
90,000 0.3%1.44
10,000 0.0%0.16
30,000 0.1%0.48
12,000 0.0%0.19
200,000 0.7%3.21
25,000 0.1%0.40
DEVELOPER FEE 1,000,000 3.5% 16.04
Developer Fee 1,000,000 3.5%16.04
CASH ACCOUNTS/ESCROWS/RESERVES 425,000 1.5% 6.82
125,000 0.4%2.00
300,000 1.0%4.81
TOTAL USES 28,722,571 100% 460.65
Stabilization Interest
Operating Reserves
AmountDebt
USES
AmountOther Sources
Sources Percent
TIF Legal
TIF Consultant
Power Line Burial
Testing
Closing Fees
Environmental Abatement & Remed.
Marketing
Leasing Bonus
Retail - Leasing Brokerage Fees
Owners Representative
Soft Cost Contingency
Park Dedication
Permits/Inspection
Local SAC/WAC Connection Fees
Met Council Sewer Access Connection
FF&E
Legal - Development
Legal - Easement
Accounting
Architectural
Landscape Architect
Civil Engineering
Engineering
Title & Recording
Lender Legal
Mortgage Registration Tax
Bank Loan Fees
Construction Period Interest
Appraisals
Insurance - Builder's Risk
Affordable Housing Buyout
4500 France Redevelopment
City of Edina
Sources and Uses
46 Apartment Units; 6,511 (sf) Commercial Space
EXHIBIT C - TIF PRO FORMA
Developer Cash
DEED
Other (Met LCDA, TBRA, Etc.)
Percent
SOURCES
4500 France Redevelopment
City of Edina
46 Apartment Units; 6,511 (sf) Commercial Space
Sample Stabilized Operating Proforma
Stabilized
Income Year 1 Year 2 Year 3
Rental Income Inflator
Gross Potential Rent 1.5%1,835,763 1,863,299 1,891,249
Less: 5.0% Stabilized Vacancy (91,788) (93,165)(94,562)
Less: Additional Pre-stabilization Vacancy (241,369)
Total Rental Income 1,502,606 1,770,134 1,796,686
Other Residential Income Vacancy Rate Inflator
Structured/Underground Parking 5.0%1.5%124,200 126,063 127,954
Utility Recovery 5.0%3.0%28,000 28,840 29,705
Internet Sales 5.0%1.5%20,000 20,300 20,605
Cell Tower 0.0%1.5%12,000 12,180 12,363
Miscellaneous 5.0%1.5%27,536 27,949 28,368
Less: Vacancy (9,987) (10,158)(10,332)
Less: Additional Pre-stabilization Vacancy (26,262)
Total Other Residential Income 175,488 205,174 208,663
Net Residential Income (NRI)1,678,094 1,975,309 2,005,350
Inflator
Commercial Income Every 5 Yrs @ 5.0%216,050 216,050 216,050
Less: Commercial Vacancy - 5.0% (10,803) (10,803)(10,803)
Less: Expense on Commercial Vacancy Every Year @ 3.0%(8,191) (8,437)(8,690)
Net Commercial Income 197,056 196,811 196,558
Effective Gross Income (EGI) Residential + Commercial 1,875,150 2,172,120 2,201,907
Expenses Year 1 Year 2 Year 3
Rental Unit Expenses Inflator
Operating Expenses 3.00%217,000 223,510 230,215
Management Fee Fixed to EGI 0.00%79,224 80,429 81,652
Property Taxes 2.00%73,961 259,167 264,350
Reserves: $326 PUPY Every Year @ 3.00%15,000 15,450 15,914
Modified Rental Expense During Stabilization (10,416)
Total Expenses 374,769 578,555 592,131
NET OPERATING INCOME 1,500,382 1,593,564 1,609,776
Available Tax Increment Financing Receipts Up to Inflator:2%213,898 218,176 222,539
ADJUSTED NET OPERATING INCOME 1,714,280 1,811,740 1,832,316
Debt A 30 yr amortization @ 4.75%1,146,910 1,146,910 1,146,910
NET CASH FLOW 567,370 664,830 685,406
Special Assessments 12,000 12,000 12,000
NET CASH FLOW AVAILABLE FOR DISTRIBUTION 555,370 652,830 673,406
Returns Analysis
Net Cash to Developer 555,370 652,830 673,406
Net Cash to Developer (w/o assistance) 0 0 0
Cash on Cash Annual Return 5.6% 6.6%6.8%
Cash on Cash Average Annual Return Start From:Year 1 5.6% 6.1%6.4%
Cash on Cost Annual Return 6.0% 6.3% 6.4%
8-unit per month
D-1 4845-0323-5194\1
EXHIBIT D
Form of Go-Ahead Letter
[ORION 4500 FRANCE, LLC LETTERHEAD]
[Date]
[____________]
City Manager/City of Edina
Executive Director/ Housing and Redevelopment Authority of Edina, MN 4801 West 50th Street
Edina, Minnesota 55424
Dear [______]:
This letter is submitted pursuant to Section 4.2 of the Redevelopment Agreement by and among
the City of Edina, Minnesota, the Housing and Redevelopment Authority of Edina, Minnesota,
and Orion 4500 France, LLC, a Delaware limited liability company, dated as of December 18,
2018 (the “Contract”) and is provided as the “Go-Ahead Letter” required under the Agreement.
Capitalized terms used in this letter and not defined herein have the meaning given to them in the Contract.
The Financing Commitment has been received by the Developer, and the Developer is prepared
to proceed with the construction of the Minimum Improvements, in accordance with the
Contract.
Sincerely,
ORION 4500 FRANCE, LLC,
a Delaware limited liability company
By: _____________________
Name: __________________
Its: _____________________
E-1 4822-5266-3418\1
EXHIBIT E
Form of Certificate of Completion
CERTIFICATE OF COMPLETION
A. ORION 4500 FRANCE, LLC (“Developer”), pursuant to the Redevelopment Agreement by and among the CITY OF EDINA, MINNESOTA (the “City”), the HOUSING
AND REDEVELOPMENT AUTHORITY OF EDINA, MINNESOTA (the “Authority”), and
Developer, dated effective as of December 18, 2018 (the “Contract”), has agreed to complete
certain Minimum Improvements, as defined in and in accordance with the Contract, on that
certain real property (the “Property”) located in Hennepin County, Minnesota, described on the attached Exhibit A.
B. Developer has substantially completed construction of the Minimum
Improvements as required under the Contract.
C. The issuance of this Certificate of Completion by the City and the Authority is not
intended nor shall it be construed to be a warranty or representation by the City or the Authority as to the structural soundness of the Minimum Improvements, including, but not limited to, the
quality of materials, workmanship or the fitness of the Minimum Improvements for their
proposed use.
NOW THEREFORE, this is to certify that all construction and other physical
improvements specified to be done and made by Developer with regard to the Minimum Improvements have been substantially completed, and the provisions of the Contract imposing
obligations on Developer to construct the Minimum Improvements on the Property, are hereby
satisfied and terminated, and the County Recorder and Registrar of Titles in and for the County
of Hennepin and State Minnesota are hereby authorized to record this instrument, to be a
conclusive determination of the satisfactory termination of said provisions of the Contract.
Dated: ______________, 20___
[Remainder of page intentionally left blank; signature pages follow]
E-2
[Signature Page to Certificate of Completion] 4822-5266-3418\1
CITY OF EDINA, MINNESOTA
By ____________________________________
City Manager
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of _____________, 20___, by ___________, City Manager of the City of Edina, Minnesota, on
behalf of the City of Edina.
Notary Public
E-3
[Signature Page to Certificate of Completion] 4822-5266-3418\1
HOUSING AND REDEVELOPMENT AUTHORITY OF EDINA, MINNESOTA
By ____________________________________ Executive Director
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of
_____________, 20___, by ___________, the Executive Director of the Housing and
Redevelopment Authority of Edina, Minnesota, on behalf of said Authority.
Notary Public
THIS DOCUMENT WAS DRAFTED BY:
Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402-1498
F-1 4839-4506-5082\2
EXHIBIT F
Memorandum of Redevelopment Agreement
MEMORANDUM OF REDEVELOPMENT AGREEMENT
THIS MEMORANDUM OF REDEVELOPMENT AGREEMENT (this “Memorandum”) is entered into as of December 18, 2018, by and among the CITY OF EDINA, MINNESOTA, a
Minnesota statutory city (“City”); the HOUSING AND REDEVELOPMENT AUTHORITY OF
EDINA, MINNESOTA, a public body corporate and politic organized and existing under the laws
of the State of Minnesota (“Authority”); and ORION 4500 FRANCE, LLC, a Delaware limited
liability company (“Developer”).
RECITALS:
A. City, Authority, and Developer (collectively, the “Parties”) have entered into a
certain Redevelopment Agreement dated as of December 18, 2018 (the “Contract”), whereby the
Parties have agreed to various aspects of the redevelopment of certain real property more
particularly described on the attached Exhibit A, together with all improvements, tenements, easements, rights and appurtenances pertaining to such real property, lying and being in Hennepin
County, Minnesota (the “Property”).
B. The Parties wish to give notice of the existence of the Contract.
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. The above recitals are incorporated by reference as if fully set forth herein.
2. Capitalized terms, when not defined herein, shall have the meanings ascribed to
them in the Contract.
3. The Parties have entered into the Contract to set forth the terms and provisions governing the redevelopment of the Property.
4. This Memorandum has been executed and delivered by the Parties for the purpose
of recording and giving notice that a contractual relationship for the redevelopment of the Property
has been created between the Parties in accordance with the terms, covenants and conditions of
the Contract.
5. The terms and conditions of the Contract are incorporated by reference into this
Memorandum as if fully set forth herein.
F-2 4839-4506-5082\2
6. This Memorandum may be executed separately in counterparts which, when taken
together, shall constitute one and the same instrument.
[Remainder of page left blank intentionally; signature pages follow]
F-3 [Signature Page to Memorandum of Redevelopment Agreement (4500 France)]
IN WITNESS WHEREOF, the Parties have executed this Memorandum as of the date
first written above.
CITY OF EDINA, MINNESOTA
By
James B. Hovland, Mayor
By
Scott H. Neal, City Manager
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of _____________, 2018, by James B. Hovland and Scott H. Neal, the Mayor and the City Manager, respectively, of
the City of Edina, Minnesota, on behalf of the City.
Notary Public
F-4 [Signature Page to Memorandum of Redevelopment Agreement (4500 France)]
HOUSING AND REDEVELOPMENT
AUTHORITY OF EDINA, MINNESOTA
By
James B. Hovland, Chair
By Robert J. Stewart, Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF
The foregoing instrument was acknowledged before me this ____ day of ____________, 2018, by James B. Hovland and Robert J. Stewart, the Chair and Secretary respectively, of the
Housing and Redevelopment Authority of Edina, Minnesota, on behalf of said Authority.
Notary Public
F-5 [Signature Page to Memorandum of Redevelopment Agreement (4500 France)]
ORION 4500 FRANCE, LLC,
a Delaware limited liability company
By: Orion Investments Edina II, LLC,
a Minnesota limited liability
company Its: Manager
By: _________________________________
Name: ______________________________
Its: _________________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of ______, 2018, by ________, the _________________ of Orion Investments Edina II, LLC, a Minnesota limited
liability company, as the manager of ORION 4500 FRANCE, LLC, a Delaware limited liability
company, on behalf of the limited liability companies.
Notary Public
THIS DOCUMENT WAS DRAFTED BY:
Dorsey & Whitney LLP
50 South Sixth Street Suite 1500
Minneapolis, MN 55402-1498
G-1 4814-6275-4682\5
EXHIBIT G
Form of Plaza Easement Agreement
PLAZA EASEMENT AGREEMENT
between THE CITY OF EDINA, MINNESOTA
and
ORION 4500 FRANCE, LLC
Dated as of ________________ ___, 20____
THIS DOCUMENT WAS DRAFTED BY:
Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402-1498
G-2 4814-6275-4682\5
PLAZA EASEMENT AGREEMENT (4500 France)
THIS PLAZA EASEMENT AGREEMENT (this “Agreement”) is made and entered into
this ___ day of ____________, 20___ (“Effective Date”), by and between the CITY OF EDINA,
MINNESOTA, a Minnesota statutory city (the “City”), and ORION 4500 FRANCE, LLC, a Delaware limited liability company (“Owner”).
RECITALS:
A. The Housing and Redevelopment Authority of Edina, Minnesota, a public body
corporate and politic organized and existing under the laws of the State of Minnesota (the
“Authority”), the City, and Owner, as “Developer”, are parties to that certain Redevelopment Agreement dated December 18, 2018 (the “Contract”).
B. The Contract provides for the redevelopment by Owner of certain real property
legally described on the attached Exhibit A (referred to herein and in the Contract as the
“Redevelopment Area”) and located within the 44th & France 2 Tax Incremental Financing
District, established by the Authority pursuant to Resolution No. 2018-100, in coordination with the Authority and with the cooperation and assistance of the City.
C. The Contract provides for the expenditure of certain public funds to assist in the
redevelopment of the Redevelopment Area with certain “Minimum Improvements” consisting
generally of a new 4-story, mixed use project, including an approximately 46-unit apartment
building and approximately 6,500 square feet of ground-level restaurant and retail space.
D. The Minimum Improvements also include a ground-level, outdoor plaza and
amenity area (referred to herein and in the Contract as the “Plaza”), which such Plaza is located
on that portion of the Redevelopment Area legally described on the attached Exhibit B-1 and
depicted on the attached Exhibit B-2 (the “Plaza Property”).
E. The City and Owner have agreed in the Contract that Owner shall grant an easement to the City pursuant to which the Plaza will be permanently open and accessible to the general
public for its use and enjoyment pursuant to the terms and conditions of this Agreement.
F. Owner has agreed to own, operate, manage, and maintain the Plaza pursuant and
subject to the terms and conditions of the Contract and this Agreement.
G. The City and Owner deem it to be in their interests and in furtherance of the economic development and redevelopment plan for the Redevelopment Area reflected in the
Contract to enter into this Agreement.
H. All capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Contract.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the others as follows:
G-3 4814-6275-4682\5
ARTICLE I.
GRANT OF EASEMENTS
Section 1.1. Easement Premises. Owner hereby grants and conveys to the City, for the
benefit of the City and the general public:
(a) a non-exclusive, perpetual public easement over, across, upon and through
the Plaza Property, together with and including all (i) surface improvements now or
hereafter located thereon, including, without limitation, all paving, sidewalks, and
pathways, and (ii) all amenities, components, and fixtures now or hereafter located thereon,
including, without limitation, all benches, tables, chairs, and trash receptacles, all to the extent required by the Final Development Plan, Development Contract, and the Contract
(collectively, the “Plaza Premises”) for the purpose of the general public utilizing the Plaza
Premises and its components as a public plaza, in accordance with and subject to the terms
and conditions of this Agreement, and
(b) a non-exclusive, perpetual public easement over, across, upon and through all means of pedestrian and vehicular access to and from public rights of way, streets,
alleys, public spaces, and easements appurtenant and/or used in connection with the Plaza
Premises located on the Redevelopment Area and adjoining or contiguous to the Plaza
Premises, including all roads, driveways, parking lots, exterior concourses, passageways,
sidewalks and stairways providing such means of access, (collectively, the “Access Premises”, and together with the Plaza Premises, collectively the “Easement Premises”),
all in accordance with and subject to the terms and conditions of this Agreement.
ARTICLE II.
TERM
Section 2.1. Term. The easements granted hereby, and each reservation, covenant,
condition and restriction contained in this Agreement, shall be effective as of the date hereof, shall
be perpetual, and shall remain in effect until affirmatively released by the City. Such release shall
be evidenced by the recording of a release or termination of this Agreement in the real estate
records of Hennepin County, Minnesota, at which time this Agreement shall terminate, subject to reconciliation of expenses and obligations incurred through the date of release or termination and
the continuation of those provisions that specifically survive termination of this Agreement, and
the Plaza and any other areas of the Easement Premises shall thereafter belong to and be under the
sole control of Owner.
ARTICLE III. USE OF EASEMENT PREMISES
Section 3.1. Operation and Control of Easement Premises. During the term of this
Agreement, Owner shall operate the Easement Premises in accordance with this Agreement and
all applicable governmental laws, ordinances, regulations and orders, at Owner’s sole cost and
G-4 4814-6275-4682\5
expense. Subject to the terms of this Agreement, Owner has full authority and control over the
management, operation, and use of the Easement Premises. Owner is entitled to keep and retain as
its own property all income and revenue produced from the use and operation of the Easement
Premises during the term of this Agreement and shall have no obligation to report to or account to
the City for any such income or revenue or with respect to expenses incurred by Owner in its use and operation of the Easement Premises, provided, however, all use of the Plaza by the general
public shall be free of charge and Owner shall not charge any fee for the use of the Plaza pursuant
to this Agreement.
Section 3.2. Special Events. The easement rights granted hereunder include the right for
the City and/or members of the general public (including organizations not affiliated with the City) to reserve and use the Plaza Premises for periodic community special events (e.g., fundraising
walks/runs, art fairs, holiday events, community celebrations, etc.), provided that Owner may
establish an application and permit process for such special events and require that the sponsor of
such special event enter into a standard form license or similar agreement with Owner for the use
of the Plaza Premises containing certain conditions, requirements, and restrictions which must be met by the special event’s sponsor (e.g., insurance requirements, clean-up responsibilities, etc.).
The terms and conditions of any such permit/application process and all such license/use
agreements shall be commercially reasonable and applied to all users and special event sponsors
on a non-discriminatory basis.
Section 3.3. Waste, Nuisance, Damage, Disfigurement or Injury to Easement Premises. Neither the City nor Owner shall knowingly or willfully commit or suffer to be committed any
waste or damage in or upon the Easement Premises, or any disfigurement or injury to any
improvements hereafter erected or located upon the Easement Premises, or any part thereof, or the
fixtures and/or equipment thereof. Owner, in its use and occupancy of the Easement Premises,
shall not knowingly and willfully commit or suffer to be committed any act or thing which constitutes a nuisance. Usual and normal wear and tear, damage by the elements, unavoidable
casualty or depreciation and diminution over time shall not be considered “waste,” “nuisance,”
“damage, “disfigurement,” or “injury.”
Section 3.4. Owner’s Reservation of Certain Rights. The City’s easement rights under
this Agreement shall be subject to the following reservations, as well as the other applicable provisions contained in this Agreement:
(a) Owner reserves the right to close-off any portion of the Easement Premises
for such reasonable period of time as may be legally necessary, in the opinion of Owner’s
counsel, to prevent the acquisition of prescriptive rights by anyone; provided, however,
that prior to closing-off any portion of the Easement Premises, Owner shall give as much written notice as reasonably practicable of its intention to do so.
(b) Owner reserves the right at any time and from time to time to exclude and
restrain any private party from access to the Plaza for cause and on a non-discriminatory
basis.
(c) Owner reserves the right to temporarily erect or place barriers in and around areas on the Easement Premises which are being constructed and/or repaired in order to
G-5 4814-6275-4682\5
ensure either safety of persons or protection of property.
(d) Owner reserves the right to adopt and enforce reasonable rules and
regulations for the safe, efficient, and orderly use and operation of the Easement Premises,
so long as such rules and regulations are applied on a non-discriminatory basis, do not
adversely impact the City’s or the public’s rights to use of the Easement Premises as set forth in this Agreement, and are mutually agreed to by Owner and the City Manager. By
way of example and not limitation, Owner may establish the following hours of operation:
from April 15 to October 31, 7:00 a.m. – 10:00 p.m. and from November 1 to April 14,
7:00 a.m. – 8:00 p.m.
(e) Owner may impose reasonable time, place, and manner restrictions on the use of and activity within the Plaza, provided such restrictions are content neutral and
imposed to the extent necessary to ensure the safe operation of the Plaza and the Minimum
Improvements as a whole (e.g., promoting the safety of the residents of the residential
element of the Minimum Improvements).
ARTICLE IV. MAINTENANCE OF THE EASEMENT PREMISES
Section 4.1. Maintenance. At all times during the term hereof, Owner, at its cost and
expense, shall keep and maintain the Easement Premises and the other Minimum Improvements
in good condition and repair in a first-class manner, similar to that of other public plazas located within other first-class, multi-use projects in the Minneapolis-Saint Paul metropolitan area, which
such maintenance shall include, without limitation, the following:
(a) all repairs, replacements, renewals, alterations, additions and betterments
thereto, structural and non-structural, ordinary and extraordinary, and foreseen and
unforeseen, all as may be necessary to keep the Easement Premises and the other Minimum Improvements in the condition and repair required by this Agreement, and which are
consistent with the requirements of the Final Development Plan, Development Contract
and the Contract, and are not inconsistent with the City’s or the public’s rights to use of the
Easement Premises as set forth in this Agreement;
(b) the inspection, repair, replacement, and maintenance of all pedestrian surfaces to a smooth and evenly-covered condition, which obligation includes, without
limitation, the cleaning, sweeping, repairing and resurfacing of such pedestrian surfaces;
(c) periodic removal of all papers, debris, filth, refuse, ice and snow, provided
all sweeping shall be at appropriate intervals during such times as shall not unreasonably
interfere with the use of the Easement Premises;
(d) maintaining and replacing all landscaping and other vegetation;
(e) placing, keeping in repair, replacing and repainting any appropriate
directional signs or markers within or associated with the Easement Premises;
G-6 4814-6275-4682\5
(f) operating, keeping in repair, cleaning and replacing when necessary such
lighting facilities as may be reasonably required, including, without limitation, all lighting
necessary or appropriate for security of the Easement Premises; and
(g) maintaining in good working order, repairing, and replacing as necessary
all domestic water, sewer, storm water, gas, electricity, power, heat, telephone, other communications service and any and all other utility or similar services used, rendered, or
supplied, upon, at, from, or in connection with the Easement Premises.
Section 4.2. No Obligation of the City to Repair or Maintain. The City shall have no
obligation of any kind, expressed or implied, to repair, rebuild, restore, reconstruct, modify, alter,
replace, or maintain the Easement Premises or any part thereof.
ARTICLE V.
UTILITIES
Section 5.1. Utility Charges. During the term of this Agreement, Owner shall pay, or
cause to be paid, when the same become due, all charges for water, sewer usage, storm water, gas, electricity, power, heat, telephone, or other communications service and any and all other utility
or similar services used, rendered, supplied, or consumed in, upon, at, from, or in connection with
the Easement Premises, or any part thereof.
TAXES AND ASSESSMENTS
Section 6.1. Payment of Taxes and Assessments. Owner shall pay, or cause to be paid,
before becoming delinquent, all real estate taxes, charges, assessments, and levies, assessed and
levied by any governmental taxing authority during the term of this Agreement against the
Easement Premises and the other Minimum Improvements. Nothing contained in this Agreement
shall require Owner to pay any franchise, estate, inheritance, excise, succession, capital levy, or transfer tax of the City or any income, excess profits or revenue tax payable by the City under this
Agreement. Subject to the terms of the Contract, Owner shall have the right and option, at any
time but solely at Owner’s expense, to pay any real estate taxes or assessments in installments or
under protest or in a similar manner, or to contest the levy or amount of the same in appropriate
legal or administrative proceedings.
ARTICLE VII.
INDEMNIFICATION, INSURANCE
Section 7.1. Indemnification of the City. Except to the extent caused by the willful
misconduct or negligence of the City, its employees or agents, or the general public, or arising out of the default by the City and its officers, employees or agents of obligations made pursuant to a
contract with Owner, including this Agreement, Owner hereby covenants and agrees to assume
and to permanently indemnify and save harmless the City and its employees and agents from and
against any and all claims, demands, actions, damages, costs, expenses, reasonable attorneys’ fees,
and liability in connection with the loss of life, personal injury and/or damage to property, to the
G-7 4814-6275-4682\5
extent arising from or out of the design or initial construction, maintenance and operation of the
Easement Premises, or in connection with the use or occupancy of the Easement Premises, or any
part thereof, by Owner, or to the extent arising out of the breach of Owner’s obligations hereunder.
Section 7.2. Property Insurance. At all times during the term hereof, Owner, at its sole
cost and expense, shall keep the Easement Premises and the other Minimum Improvements, and all alterations, extensions, and improvements thereto and replacements thereof, insured, in the
amount of the full replacement cost thereof and with such deductibles as Owner deems appropriate,
against loss or damage by fire and against those casualties covered by extended coverage insurance
and against vandalism and malicious mischief and against such other risks, of a similar or
dissimilar nature, as are customarily covered with respect to improvements similar in construction, general location, use, and occupancy to such improvements.
Section 7.3. Personal Property. All property of every kind and character which Owner
may keep or store in, at, upon, or about the Easement Premises shall be kept and stored at the sole
risk, cost, and expense of Owner.
Section 7.4. Liability Insurance. During the term of this Agreement, Owner shall procure and maintain continuously in effect (or shall cause the same to occur), the following policies of
insurance of the kind and minimum amounts as are customarily maintained with respect to
facilities and improvements similar to those located on the Easement Premises, at commercially
reasonable coverage levels, to be reviewed from time to time by Owner: insurance against liability
for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the use, occupancy, or condition of the Easement Premises, or any part thereof,
including insuring the indemnification obligations set forth in Section 7.1 above. Such insurance
shall provide that the City is an additional insured.
Section 7.5. General Insurance Requirement. All insurance required in this Agreement
shall be placed with financially sound and reputable insurers licensed to transact business in the State of Minnesota. Owner shall promptly following the City’s request therefor, furnish the City
with copies of policies evidencing all such insurance or a certificate or certificates of the respective
insurers stating that such insurance is in force and effect. Each policy of insurance herein required
shall contain a provision that the insurer shall not cancel it without giving written notice to the
City at least 10 days before the cancellation becomes effective. The insurance coverage herein required may be provided by a blanket insurance policy or policies.
Section 7.6. No Obligation of the City for Insurance. At no time and under no
circumstances shall the City be required to take out, maintain in force and effect, or pay for any
type of insurance coverage with reference to the protection of and/or ownership of and/or
occupancy of and/or a suit relating to the Easement Premises and/or any improvements hereafter located thereon.
ARTICLE VIII.
ASSIGNMENT
Section 8.1. Assignment by the City. During the term of this Agreement, the City may
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not assign or transfer its interest under this Agreement without the prior written consent of Owner.
Section 8.2. Assignment by Owner. During the term of the Contract, Owner may not
assign or otherwise transfer its interest under this Agreement, except as provided in the Contract.
The City shall recognize and approve any successors or assigns of Owner in accordance with the
terms and provisions of the Contract. Following the full and final payment of the TIF Note issued under the terms of the Contract, Owner may assign this Agreement without consent of the City.
ARTICLE IX.
CASUALTY
Section 9.1. Destruction. In the event that all or any part of the Easement Premises and/or other portions of the Minimum Improvements are destroyed by fire or other casualty, and
subject to a determination by the relevant mortgage lender, Owner shall promptly rebuild or
reconstruct the same to the extent insurance proceeds are available or, in the event insurance
proceeds are not sufficient to reconstruct the same, to the extent insurance proceeds combined with
any contributions by Owner toward reconstruction are available.
ARTICLE X.
EMINENT DOMAIN
Section 10.1. Major Condemnation. If all of the Easement Premises is taken, acquired, or
condemned by eminent domain for any public or quasi-public use or purpose, this Agreement shall terminate as of the date of vesting of title in the condemning authority. Each party shall make its
own claim in the condemnation proceeding based upon the value of its respective interest in the
Easement Premises.
ARTICLE XI.
DEFAULT AND REMEDIES
Section 11.1. Default By Owner. If Owner fails to perform any of its obligations under
this Agreement, and fails to cure such default after 30 days’ written notice of such default or, if
such default cannot reasonably be cured within such 30 days, fails to commence curative action
and thereafter diligently complete the same, then, in such case, the City may pursue all available remedies at law and in equity.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Waiver. The waiver by any party hereto of any breach or default of any provisions anywhere contained in this Agreement shall not be deemed to be a waiver of any
subsequent breach or default thereof. No provision of this Agreement shall be deemed to have
been waived by any party hereto unless such waiver is in writing and signed by the party charged
with any such waiver.
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Section 12.2. Amendments. Except as otherwise herein provided, and not otherwise, no
subsequent alteration, amendment, change, waiver, discharge, termination, deletion, or addition to
this Agreement shall be binding upon either party unless in writing and signed by both parties.
Owner and the City agree to join in and consent to amendments to this Agreement, to the extent
such amendments are reasonably required by Owner’s relevant mortgage lender encumbering the Easement Premises, provided; however, that Owner and the City shall not be required to enter into
any amendment which does not adequately protect the legitimate interest and security of the
Authority or the City with respect to the redevelopment of the Redevelopment Area as
contemplated in the Contract.
Section 12.3. Joinder; Permitted Encumbrance. Except for the mortgagee consent attached hereto, this Agreement does not require the joinder or approval of any other person and
each of the parties respectfully has the full, unrestricted and exclusive legal right and power to
enter into this Agreement for the term and upon the provisions herein recited and for the use and
purposes hereinabove set forth. This Agreement shall constitute a permitted encumbrance under
any loan agreement heretofore or hereafter entered into between Owner and any construction lender or permanent lender.
Section 12.4. Dedication. Nothing contained in this Agreement will be deemed to be a
gift or dedication of any portion of the Easement Premises to the general public, except as
explicitly set forth in this Agreement.
Section 12.5. Notices. Except as otherwise expressly provided in this Agreement, a notice, demand or other communication under this Agreement by any party to any other shall be
sufficiently given or delivered if it is (a) dispatched by registered or certified mail, postage
prepaid, return receipt requested, (b) sent by recognized overnight courier (such as Federal
Express), or (c) delivered personally, as follows:
In the case of Owner: Orion 4500 France, LLC Attn: Ted Carlson
4530 West 77th Street, Suite 365
Edina, MN 55435
In the case of the City: City of Edina
Attn: City Manager 4801 West 50th Street
Edina, MN 55424
with a copy to: Dorsey & Whitney LLP
Attn: Jay Lindgren
50 South Sixth Street, Suite 1500 Minneapolis, MN 55402
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 12.6. No Third Party Beneficiary. This Agreement is not intended to give or
confer any benefits, rights, privileges, claims, action or remedies to any person or entity.
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Section 12.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 12.8. Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State of Minnesota.
Section 12.9. Consents and Approvals. In all cases where consents or approvals are required hereunder, such consents or approvals shall not be unreasonably conditioned, delayed or
withheld. All consents or approvals shall be in writing in order to be effective.
Section 12.10. No Additional Waiver Implied by One Waiver. If any agreement contained
in this Agreement should be breached by any party and thereafter 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 hereunder.
Section 12.11. Survival. The easements granted hereby and each reservation, covenant,
condition and restriction contained in this Agreement will run with the land and will be binding
upon, and inure to the benefit of, as the case may be, Owner and the City and their respective
successors and assigns.
[Remainder of page intentionally left blank; signature pages follow]
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[Signature Page to Plaza Easement Agreement (4500 France)] 4814-6275-4682\5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
CITY:
CITY OF EDINA, MINNESOTA
By:
Its:
Mayor
By:
Its:
City Manager
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of _____________,
20____, by ____________ and ____________, the Mayor and City Manager respectively, of the
City of Edina, Minnesota, on behalf of the City.
Notary Public
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[Signature Page to Plaza Easement Agreement (4500 France)] 4814-6275-4682\5
OWNER:
ORION 4500 FRANCE, LLC,
a Delaware limited liability company
By: Orion Investments Edina II, LLC, a Minnesota limited liability
company
Its: Manager
By:
Name:
Its:
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of _________, 20___, by ______________________, the _________________ of ORION INVESTMENTS EDINA II,
LLC, a Minnesota limited liability company, as the manager of ORION 4500 FRANCE, LLC, a
Delaware limited liability company, on behalf of the limited liability companies.
Notary Public
G-13
[Exhibit A to Plaza Easement Agreement (4500 France)] 4814-6275-4682\5
EXHIBIT A
Legal Description of the Plaza Property
G-14
[Exhibit B-1 to Plaza Easement Agreement (4500 France)] 4814-6275-4682\5
EXHIBIT B-1
Legal Description of Redevelopment Area
G-15
[Exhibit B-2 to Plaza Easement Agreement (4500 France)] 4814-6275-4682\5
EXHIBIT B-2
Depiction of the Redevelopment Area
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CONSENT AND SUBORDINATION
The undersigned, ___________________, a ___________________, holder of that certain
[Mortgage] executed by Orion 4500 France, LLC, a Delaware limited liability company, dated
________________, 20____, filed ________________, 201__, as Document No. ___________,
in the office of the County Recorder in and for Hennepin County, Minnesota, and filed ________________, 20____, as Document No. ___________, in the office of the Registrar of
Titles in and for Hennepin County, Minnesota, in favor of ________________ (the “Mortgage”),
hereby consents to the foregoing Plaza Easement Agreement (4500 France) (the “Easement
Agreement”), and hereby subjects and subordinates the Mortgage and all of its right, title and
interest in and to the Easement Agreement.
___________________________________,
a ___________________
By:
Name:
Title:
STATE OF ______________ )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of ____________,
20______, by ____________________, the _________________ of ___________________, a ___________________, on behalf of the ___________________.
Notary Public
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EXHIBIT H Form of Parking Easement Agreement
PARKING EASEMENT AGREEMENT
between
THE CITY OF EDINA, MINNESOTA
and
ORION 4500 FRANCE, LLC
Dated as of ________________ ___, 20____
THIS DOCUMENT WAS DRAFTED BY: Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402-1498
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PARKING EASEMENT AGREEMENT (4500 France)
THIS PARKING EASEMENT AGREEMENT (this “Agreement”) is made and entered
into this ___ day of ____________, 20____ (“Effective Date”), by and between the CITY OF
EDINA, MINNESOTA, a Minnesota statutory city (the “City”), and ORION 4500 FRANCE, LLC, a Delaware limited liability company (“Owner”).
RECITALS:
A. The Housing and Redevelopment Authority of Edina, Minnesota, a public body
corporate and politic organized and existing under the laws of the State of Minnesota (the
“Authority”), the City, and Owner, as “Developer”, are parties to that certain Redevelopment Agreement dated December 18, 2018 (the “Contract”).
B. The Contract provides for the redevelopment by Owner of certain real property
legally described on the attached Exhibit A (referred to herein and in the Contract as the
“Redevelopment Area”) and located within the 44th & France 2 Tax Incremental Financing
District, established by the Authority pursuant to Resolution No. 2018-100 in coordination with the Authority and with the cooperation and assistance of the City.
C. The Contract provides for the expenditure of certain public funds to assist in the
redevelopment of the Redevelopment Area with certain “Minimum Improvements” consisting
generally of a new 4-story, mixed use project, including an approximately 46-unit apartment
building and approximately 6,500 square feet of ground-level restaurant and retail space.
D. The Minimum Improvements also include [at least 35, but the actual quantity will
be inserted in the final easement agreement based on the total quantity constructed per the
approved Final Development Plan] at-grade, enclosed public parking stalls (referred to herein and
in the Contract as the “Public Parking”) which such Public Parking is located on that portion of
the Redevelopment Area legally described on the attached Exhibit B-1 and depicted on the attached Exhibit B-2 (the “Public Parking Area”).
E. The City and Owner have agreed in the Contract that Owner shall grant an easement
to the City pursuant to which the Public Parking will be permanently open and accessible to the
general public for parking purposes pursuant to the terms and conditions of this Agreement.
F. Owner has agreed to own, operate, manage, and maintain the Public Parking and Public Parking Area pursuant and subject to the terms and conditions of the Contract and this
Agreement.
G. The City and Owner deem it to be in their interests and in furtherance of the
economic development and redevelopment plan for the Redevelopment Area reflected in the
Contract to enter into this Agreement.
H. All capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Contract.
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NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the others as follows:
ARTICLE I
GRANT OF EASEMENTS
Section 1.1 Easement Premises. Owner hereby grants and conveys to the City, for the
benefit of the City and the general public:
(a) a non-exclusive, perpetual public easement over, across, upon and through
the Public Parking Area, together with and including all ancillary amenities, components,
and fixtures located thereon and therein for the users of the Public Parking in general and as required by the Final Development Plan, Development Contract and the Contract (e.g.,
bike racks, bike repair facilities and equipment, EV charging stations) (collectively, the
“Parking Premises”), for the purpose of the general public utilizing the Public Parking for
vehicular parking and utilizing such ancillary amenities, if any, all in accordance with and
subject to the terms and conditions of this Agreement; and
(b) a non-exclusive, perpetual public easement over, across, upon and through
all means of pedestrian and vehicular access to and from public rights of way, streets,
alleys, public spaces, and easements appurtenant and/or used in connection with the
Parking Premises, located on the Redevelopment Area and adjoining or contiguous to the
Parking Premises, including all roads, driveways, parking lots, exterior concourses, passageways, sidewalks and stairways providing such means of access (but excluding all
such areas or means of access intended to serve as exclusively private access to, or for the
sole benefit of, the other commercial and/or residential elements of the Minimum
Improvements) (collectively, the “Access Premises”, and together with the Parking
Premises, collectively the “Easement Premises”), all in accordance with and subject to the terms and conditions of this Agreement.
ARTICLE II
TERM
Section 2.1 Term. The easements granted hereby, and each reservation, covenant, condition and restriction contained in this Agreement, shall be effective as of the date hereof, shall
be perpetual, and shall remain in effect until affirmatively released by the City. Such release shall
be evidenced by the recording of a release or termination of this Agreement in the real estate
records of Hennepin County, Minnesota, at which time this Agreement shall terminate, subject to
reconciliation of expenses and obligations incurred through the date of release or termination and the continuation of those provisions that specifically survive termination of this Agreement, and
the Public Parking and any other areas of the Easement Premises shall thereafter belong to and be
under the sole control of Owner.
ARTICLE III
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USE OF EASEMENT PREMISES
Section 3.1 Operation and Control of Easement Premises. During the term of this
Agreement, Owner shall operate the Easement Premises in accordance with this Agreement and
all applicable governmental laws, ordinances, regulations and orders, at Owner’s sole cost and
expense. Subject to the terms of this Agreement, Owner has full authority and control over the management, operation, and use of the Easement Premises. Owner is entitled to keep and retain as
its own property all income and revenue produced from the use and operation of the Easement
Premises during the term of this Agreement and shall have no obligation to report to or account to
the City for any such income or revenue or with respect to expenses incurred by Owner in its use
and operation of the Easement Premises; provided, however, parking within the Public Parking by the general public shall be free of charge and Owner shall not charge any fee for the use of the
Public Parking pursuant to this Agreement.
Section 3.2 Signage. Owner shall install and maintain a prominent, permanent “Public
Parking” sign at or near each vehicular entrance to the Public Parking Area, which such signage
shall be subject to the City’s prior written approval, not to be unreasonably, or delayed. Owner shall also install and maintain in the main lobby or foyer of the Minimum Improvements a
permanent placard (to be no smaller than approximately 8 1/2 by 11 inches) which states that the
Public Parking is provided in partnership with the City and the Authority. The final design and
wording of such placard shall be subject to the prior reasonable approval of the City Manager.
Section 3.3 Waste, Nuisance, Damage, Disfigurement or Injury to Easement Premises. Neither the City nor Owner shall knowingly or willfully commit or suffer to be committed any
waste or damage in or upon the Easement Premises, or any disfigurement or injury to any
improvements hereafter erected or located upon the Easement Premises, or any part thereof, or the
fixtures and/or equipment thereof. Owner, in its use and occupancy of the Easement Premises,
shall not knowingly and willfully commit or suffer to be committed any act or thing which constitutes a nuisance. Usual and normal wear and tear, damage by the elements, unavoidable
casualty or depreciation and diminution over time shall not be considered “waste,” “nuisance,”
“damage, “disfigurement,” or “injury.”
Section 3.4 Owner’s Reservation of Certain Rights. The City’s easement rights under
this Agreement shall be subject to the following reservations, as well as the other applicable provisions contained in this Agreement:
(a) Owner reserves the right to close-off any portion of the Easement Premises
for such reasonable period of time as may be legally necessary, in the opinion of Owner’s
counsel, to prevent the acquisition of prescriptive rights by anyone; provided, however,
that prior to closing-off any portion of the Easement Premises, Owner shall give as much written notice as reasonably practicable of its intention to do so.
(b) Owner reserves the right at any time and from time to time to exclude and
restrain any private party from access to the Public Parking for cause and on a non-
discriminatory basis.
(c) Owner reserves the right to temporarily erect or place barriers in and around
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areas on the Easement Premises which are being constructed and/or repaired in order to
ensure either safety of persons or protection of property.
(d) Owner reserves the right to adopt and enforce reasonable rules and
regulations for the safe, efficient, and orderly use and operation of the Easement Premises,
so long as such rules and regulations are applied on a non-discriminatory basis, do not adversely impact the City’s or the public’s rights to use of the Easement Premises as set
forth in this Agreement, and are mutually agreed to by Owner and the City Manager. By
way of example and not limitation, Owner may:
(i) designate a reasonable number of parking stalls within the Public
Parking for short-term parking (e.g., 15 minute parking for delivery and pick-up in connection with the retail elements of the Minimum Improvements) taking into
consideration the types of and needs of the retail tenants occupying the Minimum
Improvements;
(ii) establish a maximum number of hours a vehicle can be parked in an
individual parking stall within the Public Parking of no less than two hours (other than the short-term stalls designated pursuant to in clause (i) above), and reserve the
right, by posted notice, to cause a vehicle exceeding such maximum parking time to be removed from the Public Parking at the expense of the vehicle’s owner;
(iii) establish reasonable hours of operation of the Public Parking which are less than 24 hours per day, taking into consideration the residents of the
residential element of the Minimum Improvements and the types of and needs of
the retail tenants occupying the Minimum Improvements;
(iv) prohibit overnight parking except by residents and/or guests of the
residential element of the Minimum Improvements;
(v) prohibit the passage or parking of any recreational vehicles,
campers, extended cab trailers or vans, tractors, trailers, buses and/or any other
vehicles of a shape, size or weight that would interfere with the parking circulation
of other vehicles within the Public Parking or that would exceed the design
capability of the Public Parking.
ARTICLE IV
MAINTENANCE OF THE EASEMENT PREMISES
Section 4.1 Maintenance. At all times during the term hereof, Owner, at its cost and
expense, shall keep and maintain the Easement Premises and the other Minimum Improvements in good condition and repair in a first-class manner, similar to that of other structured parking
facilities located within other first-class, multi-use projects in the Minneapolis-Saint Paul
metropolitan area, which such maintenance shall include, without limitation, the following:
(a) all repairs, replacements, renewals, alterations, additions and betterments
thereto, interior and exterior, structural and non-structural, ordinary and extraordinary, and
H-6 4826-1428-7482\5
foreseen and unforeseen, all as may be necessary to keep the Easement Premises and the
other Minimum Improvements in the condition and repair required by this Agreement, and
which are consistent with the requirements of the Final Development Plan, Development
Contract and the Contract, and which do not adversely impact the City’s or the public’s
rights to use of the Easement Premises as set forth in this Agreement;
(b) maintaining all drive and parking surfaces in a smooth and evenly-covered
condition, which maintenance work shall include cleaning, sweeping, restriping, repairing
and resurfacing the same;
(c) maintaining in good working order (including cleaning and painting as
necessary), repairing, and replacing as necessary the Access Premises;
(d) maintaining in good working order, repairing, and replacing as necessary
all ventilation and mechanical systems;
(e) maintaining in good working order, repairing, and replacing as necessary
any automated parking system;
(f) maintaining in good working order, repairing, and replacing as necessary all domestic water, sewer, storm water, gas, electricity, power, heat, telephone, other
communications service, commercially reasonable security and life safety systems, and any
and all other utility or similar services used, rendered, or supplied, upon, at, from, or in
connection with the Easement Premises;
(g) periodic removal of all papers, debris, filth, refuse, ice and snow, provided all sweeping shall be at appropriate intervals during such times as shall not unreasonably
interfere with the use of the Easement Premises;
(h) placing, keeping in repair, replacing and repainting any appropriate
directional signs or markers, within or associated with the Easement Premises;
(i) operating, keeping in repair, cleaning and replacing when necessary such Easement Premises lighting facilities as may be reasonably required, including without
limitation all lighting necessary or appropriate for security of the Public Parking;
Section 4.2 No Obligation of the City to Repair or Maintain. The City shall have no
obligation of any kind, expressed or implied, to repair, rebuild, restore, reconstruct, modify, alter,
replace, or maintain the Easement Premises or any part thereof.
ARTICLE V
UTILITIES
Section 5.1 Utility Charges. During the term of this Agreement, Owner shall pay, or
cause to be paid, when the same become due, all charges for water, sewer usage, storm water, gas, electricity, power, heat, telephone, or other communications service and any and all other utility
or similar services used, rendered, supplied, or consumed in, upon, at, from, or in connection with
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the Easement Premises, or any part thereof.
ARTICLE VI
TAXES AND ASSESSMENTS
Section 6.1 Payment of Taxes and Assessments. Owner shall pay, or cause to be paid, before becoming delinquent, all real estate taxes, charges, assessments, and levies, assessed and
levied by any governmental taxing authority during the term of this Agreement against the
Easement Premises and other Minimum Improvements. Nothing contained in this Agreement shall
require Owner to pay any franchise, estate, inheritance, excise, succession, capital levy, or transfer
tax of the City or any income, excess profits or revenue tax payable by the City under this Agreement. Subject to the terms of the Contract, Owner shall have the right and option, at any
time but solely at Owner’s expense, to pay any real estate taxes or assessments in installments or
under protest or in a similar manner, or to contest the levy or amount of the same in appropriate
legal or administrative proceedings.
ARTICLE VII INDEMNIFICATION, INSURANCE
Section 7.1 Indemnification of the City. Except to the extent caused by the willful
misconduct or negligence of the City, its employees or agents, or the general public, or arising out
of the default by the City and its officers, employees or agents, of obligations made pursuant to a contract with Owner, including this Agreement, Owner hereby covenants and agrees to assume
and to permanently indemnify and save harmless the City and its employees and agents from and
against any and all claims, demands, actions, damages, costs, expenses, reasonable attorneys’ fees,
and liability in connection with the loss of life, personal injury and/or damage to property, to the
extent arising from or out of the design or initial construction, maintenance and operation of the Easement Premises, or in connection with the use or occupancy of the Easement Premises, or any
part thereof, by Owner, or to the extent arising out of the breach of Owner’s obligations hereunder.
Section 7.2 Property Insurance. At all times during the term hereof, Owner, at its sole
cost and expense, shall keep the Easement Premises and the other Minimum Improvements, and
all alterations, extensions, and improvements thereto and replacements thereof, insured, in the amount of the full replacement cost thereof and with such deductibles as Owner deems appropriate,
against loss or damage by fire and against those casualties covered by extended coverage insurance
and against vandalism and malicious mischief and against such other risks, of a similar or
dissimilar nature, as are customarily covered with respect to improvements similar in construction,
general location, use, and occupancy to such improvements.
Section 7.3 Personal Property. All property of every kind and character which Owner
may keep or store in, at, upon, or about the Easement Premises shall be kept and stored at the sole
risk, cost, and expense of Owner.
Section 7.4 Liability Insurance. During the term of this Agreement, Owner shall procure
and maintain continuously in effect (or shall cause the same to occur), the following policies of
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insurance of the kind and minimum amounts as are customarily maintained with respect to parking
facilities and improvements similar to those located on the Easement Premises, at commercially
reasonable coverage levels, to be reviewed from time to time by Owner:
(a) insurance against liability (including passenger elevator liability) for
injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the use, occupancy, or condition of the Easement Premises, or any part
thereof, including insuring the indemnification obligations set forth in Section 7.1 above,
which such insurance shall provide that the City is an additional insured;
(b) garage keepers’ liability insurance including coverage for:
(i) Fire and explosion;
(ii) Theft (of entire vehicle); and
(iii) Riot, civil commotion, malicious mischief, and vandalism.
Section 7.5 General Insurance Requirement. All insurance required in this Agreement
shall be placed with financially sound and reputable insurers licensed to transact business in the
State of Minnesota. Owner shall promptly following the City’s request therefor, furnish the City with copies of policies evidencing all such insurance or a certificate or certificates of the respective
insurers stating that such insurance is in force and effect. Each policy of insurance herein required
shall contain a provision that the insurer shall not cancel it without giving written notice to the
City at least 10 days before the cancellation becomes effective. The insurance coverage herein
required may be provided by a blanket insurance policy or policies.
Section 7.6 No Obligation of the City for Insurance. At no time and under no
circumstances shall the City be required to take out, maintain in force and effect, or pay for any
type of insurance coverage with reference to the protection of and/or ownership of and/or
occupancy of and/or a suit relating to the Easement Premises and/or any improvements hereafter
located thereon.
ARTICLE VIII
ASSIGNMENT
Section 8.1 Assignment by the City. During the term of this Agreement, the City may
not assign or transfer its interest under this Agreement without the prior written consent of Owner.
Section 8.2 Assignment by Owner. Owner may assign or otherwise transfer its interest
under this Agreement in connection with any sale or transfer of the Minimum Improvements. The
City shall recognize and approve any successors or assigns of Owner.
ARTICLE IX
CASUALTY
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Section 9.1 Destruction. In the event that all or any part of the Easement Premises
and/or other portions of the Minimum Improvements are destroyed by fire or other casualty, and
subject to a determination by the relevant mortgage lender, Owner shall promptly rebuild,
reconstruct and/or restore the same to the extent insurance proceeds are available or, in the event
insurance proceeds are not sufficient to reconstruct the same, to the extent insurance proceeds combined with any contributions by Owner toward reconstruction are available.
ARTICLE X
EMINENT DOMAIN
Section 10.1 Major Condemnation. If all of the Easement Premises is taken, acquired, or condemned by eminent domain for any public or quasi-public use or purpose, this Agreement shall
terminate as of the date of vesting of title in the condemning authority. Each party shall make its
own claim in the condemnation proceeding based upon the value of its respective interest in the
Easement Premises.
ARTICLE XI DEFAULT AND REMEDIES
Section 11.1 Default by Owner. If Owner fails to perform any of its obligations under
this Agreement, and fails to cure such default after 30 days’ written notice of such default or, if
such default cannot reasonably be cured within such 30 days, fails to commence curative action and thereafter diligently complete the same, then, in such case, the City may pursue all available
remedies at law and in equity.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Waiver. The waiver by any party hereto of any breach or default of any
provisions anywhere contained in this Agreement shall not be deemed to be a waiver of any
subsequent breach or default thereof. No provision of this Agreement shall be deemed to have
been waived by any party hereto unless such waiver is in writing and signed by the party charged
with any such waiver.
Section 12.2 Amendments. Except as otherwise herein provided, and not otherwise, no
subsequent alteration, amendment, change, waiver, discharge, termination, deletion, or addition to
this Agreement shall be binding upon either party unless in writing and signed by both parties.
Owner and the City agree to join in and consent to amendments to this Agreement, to the extent
such amendments are reasonably required by Owner’s relevant mortgage lender encumbering the Easement Premises, provided; however, that Owner and the City shall not be required to enter into
any amendment which does not adequately protect the legitimate interest and security of the
Authority or the City with respect to the redevelopment of the Redevelopment Area as
contemplated in the Contract.
Section 12.3 Joinder; Permitted Encumbrance. Except for the mortgagee consent
H-10 4826-1428-7482\5
attached hereto, this Agreement does not require the joinder or approval of any other person and
each of the parties respectfully has the full, unrestricted and exclusive legal right and power to
enter into this Agreement for the term and upon the provisions herein recited and for the use and
purposes hereinabove set forth. This Agreement shall constitute a permitted encumbrance under
any loan agreement heretofore or hereafter entered into between Owner and any construction lender or permanent lender.
Section 12.4 Dedication. Nothing contained in this Agreement will be deemed to be a
gift or dedication of any portion of the Easement Premises to the general public, except as
explicitly set forth in this Agreement.
Section 12.5 Notices. Except as otherwise expressly provided in this Agreement, a notice, demand or other communication under this Agreement by any party to any other shall be
sufficiently given or delivered if it is (a) dispatched by registered or certified mail, postage prepaid,
return receipt requested, (b) sent by recognized overnight courier (such as Federal Express), or (c)
delivered personally, as follows:
In the case of Owner: Orion 4500 France, LLC Attn: Ted Carlson
4530 West 77th Street, Suite 365
Edina, MN 55435
In the case of the City: City of Edina
Attn: City Manager 4801 W. 50th Street
Edina, MN 55424
with a copy to: Dorsey & Whitney LLP
Attn: Jay Lindgren
50 South Sixth Street, Suite 1500 Minneapolis, MN 55402
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 12.6 No Third Party Beneficiary. This Agreement is not intended to give or
confer any benefits, rights, privileges, claims, action or remedies to any person or entity.
Section 12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 12.8 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State of Minnesota.
Section 12.9 Consents and Approvals. In all cases where consents or approvals are required hereunder, such consents or approvals shall not be unreasonably conditioned, delayed or
withheld. All consents or approvals shall be in writing in order to be effective.
H-11 4826-1428-7482\5
Section 12.10 No Additional Waiver Implied by One Waiver. If any agreement contained
in this Agreement should be breached by any party and thereafter 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 hereunder.
Section 12.11 Survival. The easements granted hereby and each reservation, covenant, condition and restriction contained in this Agreement will run with the land and will be binding
upon, and inure to the benefit of, as the case may be, Owner and the City and their respective
successors and assigns.
[Remainder of page intentionally left blank; signature pages follow]
H-12
[Signature Page to Parking Easement Agreement (4500 France)] 4826-1428-7482\5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
CITY:
CITY OF EDINA, MINNESOTA
By:
___________________, Mayor
By:
___________________, City Manager
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of _____________, 20___,
by ____________ and ____________, the Mayor and City Manager respectively, of the City of Edina, Minnesota, on behalf of the City.
Notary Public
H-13
[Signature Page to Parking Easement Agreement (4500 France)] 4826-1428-7482\5
OWNER:
ORION 4500 FRANCE, LLC,
a Delaware limited liability company
By: Orion Investments Edina II, LLC, a Minnesota limited liability
company
Its: Manager
By:
Name:
Its:
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of _________, 20___, by ______________________, the _________________ of ORION INVESTMENTS EDINA II,
LLC, a Minnesota limited liability company, as the manager of ORION 4500 FRANCE, LLC, a
Delaware limited liability company, on behalf of the limited liability companies.
Notary Public
H-14
[Exhibit A to Parking Easement Agreement (4500 France)] 4826-1428-7482\5
EXHIBIT A
Legal Description of the Redevelopment Area
H-15
[Exhibit B-1 to Parking Easement Agreement (4500 France)] 4826-1428-7482\5
EXHIBIT B-1
Legal Description of the Public Parking
H-16
[Exhibit B-2 to Parking Easement Agreement (4500 France)] 4826-1428-7482\5
EXHIBIT B-2
Depiction of the Parking Area
H-17 4826-1428-7482\5
CONSENT AND SUBORDINATION
The undersigned, ___________________, a ___________________, holder of that certain
[Mortgage] executed by ORION 4500 FRANCE, LLC, a Delaware limited liability company,
dated ________________, 20____, filed ________________, 20____, as Document No.
___________, in the office of the County Recorder in and for Hennepin County, Minnesota, and filed ________________, 20____, as Document No. ___________, in the office of the Registrar
of Titles in and for Hennepin County, Minnesota, in favor of ________________ (the
“Mortgage”), hereby consents to the foregoing Parking Easement Agreement (4500 France) (the
“Easement Agreement”), and hereby subjects and subordinates the Mortgage and all of its right,
title and interest in and to the Easement Agreement.
___________________________________,
a ___________________
By:
Name:
Title: STATE OF ______________ )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of ____________, 201___,
by ____________________, the _________________ of ___________________, a ___________________, on behalf of the ___________________.
Notary Public
I-1 4819-1611-3538\1
EXHIBIT I
Form of Annual Statement
[See attached.]
Residential Income
Rental Unit Income Monthly Unit Annual Size Rent/
Unit Type Rent Type Rent Count Revenue Sq. Ft.Sq. Ft.
1BR Market Rate $2,164 11 $285,681 787 $2.75
1BR Affordable $881 3 $31,716 782 $1.13
1BR+Den Market Rate $2,860 2 $68,640 1,040 $2.75
2BR Affordable $975 0 $0 1,197 $0.81
2BR Market Rate $4,839 8 $464,544 1,613 $3.00
2BR Market Rate $3,732 22 $985,182 1,357 $2.75
Gross Potential Rent 152,980 46 $1,835,763 55,841 $2.74
# of Stalls Annual $ Per Stall
Other Residential Income (if available)Revenue Per Month
Structured/Underground Parking 69 $124,200 $150
$28,000
$20,000
$12,000
$27,536
Total Other Income $211,736
Total Residential Income $2,047,499
Annual
Residential Vacancy Percent Loss
Gross Potential Rent 5.0%($91,788)
Structured/Underground Parking 5.0%($6,210)
Utility Recovery 5.0%($1,400)
Internet Sales 5.0%($1,000)
Cell Tower 0.0%$0
Miscellaneous 5.0%($1,377)
Total Vacancy ($101,775)
Net Residential Income $1,945,724
Utility Recovery
Internet Sales
Cell Tower
Miscellaneous
4500 France Redevelopment
City of Edina
Sample Annual Operating Pro Forma
EXHIBIT I - FORM OF ANNUAL STATEMENT
46 Apartment Units; 6,511 (sf) Commercial Space
Commercial Income
Rent Annual
Commercial Space Per Sq/Ft Revenue Sq/Ft
$37.00 $61,013 1,649
$37.00 $48,507 1,311
$30.00 $106,530 3,551
Total Commercial $216,050 6,511
Total Annual Per
Expense on Commercial Space (Recovered)Cost Sq/Ft
Property Taxes (Commercial Portion Only)$114,989 17.66
Common Area Maintenance (CAM)$48,833 7.50
Replacement Reserves $0 0.00
Total Recovered Expenses on Commercial Space $163,822 25.16
Annual Per
Commercial Vacancy/Expenses Percent Loss Sq/Ft
Commercial Vacancy 5.0%($10,803) (1.66)
Expense on Commercial Vacancy 5.0%($8,191) (1.26)
Total Commercial Vacancy/Expenses ($18,994) (2.92)
Net Commercial Income $197,056
Retail #1
Retail #2
Restaurant
Effective Gross Income (EGI) - Residential + Commercial $2,142,780
Expenses
Apartment Operating Expenses Amount Per Unit
$5,000 $109
$49,000 $1,065
$25,000 $543
$61,000 $1,326
$17,000 $370
$15,000 $326
$39,000 $848
$6,000 $130
Total Operating Costs $217,000 $4,717
Apartment Mgmt, Property Taxes, Reserves Amount Per Unit
Management Fees 4.07% of EGI $79,224 $1,722
Residential Property Taxes $254,085 $5,524
Replacement Reserves $15,000 $326
Total Management and Other Costs $348,309 $7,572
Total Rental Unit Expenses $565,309 $12,289
Net Operating Income (NOI)$1,577,471
Available Tax Increment Financing Receipts $213,898
Net Operating Income (with Assistance) $1,791,369
Cost of Minimum Improvements (Net of grants) $28,187,571
% Cash on Cost (NOI / Minimum Improvements) 6.36%
Administrative
Turnover
Maintenance and Repair
Other
Payroll
Marketing
Utilities
Insurance
J-1 4819-1611-3538\1
EXHIBIT J
Sample TIF Cash-On-Cost Return Annual Lookback Calculation
[See attached.]
EXHIBIT J - Sample TIF Cash-On-Cost Return Annual Lookback Calculation4500 France RedevelopmentCity of Edina46 Apartment Units; 6,511 (sf) Commercial SpaceStabilizedIncomeYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15Rental IncomeInflatorGross Potential Rent3.0%1,835,763 1,890,836 1,947,561 2,005,988 2,066,167 2,128,152 2,191,9972,257,757 2,325,490 2,395,254 2,467,112 2,541,125 2,617,359 2,695,8802,776,756Less: 5.0% Stabilized Vacancy (91,788) (94,542) (97,378) (100,299) (103,308) (106,408) (109,600) (112,888) (116,274) (119,763) (123,356) (127,056) (130,868) (134,794)(138,838)Total Rental Income 1,743,975 1,796,294 1,850,183 1,905,688 1,962,859 2,021,745 2,082,397 2,144,869 2,209,215 2,275,492 2,343,756 2,414,069 2,486,491 2,561,0862,637,918Other Residential IncomeVacancy RateInflator Structured/Underground Parking5.0%3.0%124,200 127,926 131,764 135,717 139,788 143,982 148,301 152,750 157,333162,053 166,914 171,922 177,080 182,392187,864Utility Recovery5.0%3.0%28,000 28,840 29,705 30,596 31,514 32,460 33,433 34,436 35,470 36,534 37,630 38,759 39,921 41,11942,353Internet Sales5.0%3.0%20,000 20,600 21,218 21,855 22,510 23,185 23,881 24,597 25,335 26,095 26,878 27,685 28,515 29,37130,252Cell Tower0.0%3.0%12,000 12,360 12,731 13,113 13,506 13,911 14,329 14,758 15,201 15,657 16,127 16,611 17,109 17,62218,151Miscellaneous5.0%3.0%27,536 28,362 29,213 30,089 30,992 31,922 32,879 33,866 34,882 35,928 37,006 38,116 39,260 40,43841,651Less: Vacancy (9,987) (10,286) (10,595) (10,913) (11,240) (11,577) (11,925) (12,283) (12,651) (13,031) (13,421) (13,824) (14,239) (14,666)(15,106)Total Other Residential Income 201,749 207,802 214,036 220,457 227,071 233,883 240,899 248,126 255,570 263,237 271,134 279,268 287,646 296,276305,164Net Residential Income (NRI) 1,945,724 2,004,096 2,064,219 2,126,145 2,189,930 2,255,627 2,323,296 2,392,995 2,464,785 2,538,729 2,614,890 2,693,337 2,774,137 2,857,3612,943,082InflatorCommercial IncomeEvery 5 Yrs @5.0%216,050 216,050 216,050 216,050 216,050 226,853 226,853 226,853 226,853226,853 238,195 238,195 238,195 238,195238,195Less: Commercial Vacancy - 5.0% (10,803) (10,803) (10,803) (10,803)(10,803) (11,343) (11,343) (11,343) (11,343) (11,343)(238,195) (238,195)(119,098) (11,910) (11,910)Less: Expense on Commercial VacancyEvery Year @3.0%(8,191) (8,437) (8,690) (8,951) (9,219) (9,496) (9,781) (10,074) (10,376) (10,688)(220,163) (226,768)(116,786) (12,029) (12,390)Net Commercial Income 197,056 196,811 196,558 196,297 196,028 206,014205,729 205,436 205,134 204,822 (220,163) (226,768) 2,312 214,256213,896Effective Gross Income (EGI) Residential + Commercial 2,142,780 2,200,906 2,260,776 2,322,442 2,385,958 2,461,642 2,529,026 2,598,431 2,669,919 2,743,551 2,394,727 2,466,569 2,776,449 3,071,6183,156,978ExpensesYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15Rental Unit ExpensesInflatorOperating Expenses 3.0%217,000 223,510 230,215 237,122 244,235 251,562 259,109 266,883 274,889283,136 291,630 300,379 309,390 318,672328,232Management FeeFixed to EGI0.00%79,224 81,601 84,049 86,570 89,167 91,842 94,598 97,436 100,359 103,369 106,470 109,665 112,954 116,343119,833Property Taxes2.0%254,085 259,167 264,350 269,637 275,030 280,530 286,141 291,864 297,701303,655 309,728 315,923 322,241 328,686335,260Reserves: $326 PUPYEvery Year @0.0%15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,00015,000Total Expenses 565,309 579,277 593,614 608,329 623,432 638,935 654,848671,182 687,949 705,160 722,828 740,966 759,586 778,701798,325NET OPERATING INCOME (NOI) 1,577,471 1,621,629 1,667,162 1,714,113 1,762,525 1,822,706 1,874,178 1,927,249 1,981,970 2,038,391 1,671,899 1,725,603 2,016,864 2,292,917 2,358,653Available Tax Increment Financing ReceiptsInflator:2.0%213,898 218,176 222,539226,990 231,530 236,161 240,884 245,702 0 0 0 265,955 164,969 0 0ADJUSTED NET OPERATING INCOME 1,791,369 1,839,805 1,889,702 1,941,103 1,994,055 2,058,867 2,115,062 2,172,951 1,981,970 2,038,391 1,671,899 1,991,558 2,181,833 2,292,917 2,358,653Minimum Improvements Cost:7.0% Annual Return on Cost Target:Cash on Cost Annual Return6.36% 6.53% 6.70% 6.89% 7.07% 7.30% 7.50% 7.71% 7.03% 7.23% 5.93% 7.07% 7.74% 8.13%8.37%Average Cash on Cost Return 6.36% 6.44% 6.53% 6.62% 6.71% 6.81% 6.91%7.01%7.01% 7.03% 6.93% 6.94% 7.00% 7.09% 7.17%TIF Adjustment:-$17,874Adjusted Cash on Cost Annual Return6.36% 6.53% 6.70% 6.89% 7.07% 7.30% 7.50% 7.71% 6.97% 7.23% 5.93% 7.07% 7.74% 8.13%8.37%Adjusted Average Cash on Cost Return 6.36% 6.44% 6.53% 6.62% 6.71% 6.81% 6.91% 7.01%7.00%7.03%6.93% 6.94%7.00%7.08% 7.17%Gross Tax Increment:237,664 242,418 247,266 252,211 257,256 262,401 267,649 273,002 278,462284,031 289,712 295,506 301,416 307,444313,593HRA Tax Increment (10% of Gross):23,76624,24224,72725,22125,72626,24026,76527,30027,84628,40328,97129,55130,14230,74431,359Available Tax Increment (90% of Gross):213,898 218,176 222,539 226,990 231,530 236,161 240,884 245,702 250,616255,628 260,740 265,955 271,274 276,700282,234Retained as excess above 7% Return on Cost:0 0000000250,616 255,628 260,740 0 106,305 276,700 282,234Commercial Vacancy - 100%28,187,5711,973,130Notes: Example TIF Adjustment for 7.0% Return on Cost Performance. In this example, annual TIF payments are made until the average Return on Cost exceeds 7.0% in Year 8. No TIF payments are necessary in Year 9 and an adjustment of $17,874 is made to the TIF Note balance. The project continues to exceed 7.0% Return on Cost until a significant commercial vacancy in Year 11. TIF payments are made in Year 12 and 13 sized to recover to a 7.0% average. Commercial vacancy stabilizes by Year 13 and no further TIF payments are made.
K-1 4819-1611-3538\1
EXHIBIT K
Sample TIF IRR Sale Lookback Calculation
[See attached.]
SALE ANALYSIS END OF YEAR Year 6 Year 7 Year 8 Year 9 Year 10
Net Operating Income (End of Year)2,058,867 2,115,062 2,172,951 1,981,970 2,038,391
Gross Sale Price 39,216,516 40,286,886 40,615,900 37,751,807 38,826,489
Minus Debt A 16,405,892 16,030,152 15,636,170 15,223,062 14,789,898
Net Sale Amount 22,810,624 24,256,734 24,979,729 22,528,745 24,036,591
Sales Expense 2.00% (784,330) (805,738) (812,318) (755,036)(776,530)
SALES PROCEEDS 22,026,294 23,450,997 24,167,411 21,773,709 23,260,062
Year 6 Year 7 Year 8 Year 9 Year 10
Potential Sales Cash Cash Cash Cash Cash
Year Proceeds Flow Flow Flow Flow Flow
Initial Investment (9,865,650) (9,865,650) (9,865,650) (9,865,650) (9,865,650)
2020 632,460 632,460 632,460 632,460 632,460
2021 680,895 680,895 680,895 680,895 680,895
2022 730,792 730,792 730,792 730,792 730,792
2023 782,194 782,194 782,194 782,194 782,194
2024 835,146 835,146 835,146 835,146 835,146
2025 22,026,294 22,926,251 899,957 899,957 899,957 899,957
2026 23,450,997 0 24,407,148 956,152 956,152 956,152
2027 24,167,411 0 0 25,181,452 1,014,041 1,014,041
2028 21,773,709 0 0 0 22,596,769 823,060
2029 23,260,062 0 0 0 0 24,139,543
Total 16,722,088 19,102,942 20,833,398 19,262,756 21,628,589
INTERNAL RATE OF RETURN 19.88% 18.72% 17.47% 15.07% 14.74%
Amount above (below) 16.0% IRR $4,426,771 $3,911,000 $2,393,434 -$2,816,830 -$4,512,422
$4,426,771 $3,911,000 $2,393,434 $0.00 $0.00
Outstanding TIF Note Principal ($1,615,027)($1,452,893)($1,277,672)($1,277,672)($1,277,672)
Remaining Excess Return: $2,811,745 $2,458,107 $1,115,762 $0.00 $0.00
Prior TIF Payments: $1,349,294 $1,590,178 $1,835,880 $1,835,880 $1,835,880
PROJECT TIF ADJUSTMENT: $1,349,294 $1,590,178 $1,115,762 $0 $0
EXHIBIT K - Sample TIF IRR Sale Lookback Calculation
4500 France Redevelopment
City of Edina
46 Apartment Units; 6,511 (sf) Commercial Space
Example Sales Sensitivity Analysis
PROJECT EXCESS RETURN:
IRR ANALYSIS END OF YEAR
*This is a hypothetical example to illustrate calculating a Project TIF Adjustment triggered by receipt of sales proceeds and hsitorical project cash
flows which exceed an Internal Rate of Return of 16.0%. For all examples where proceeds do not cause an IRR to exceed 16.0%, there is no
Project TIF Adjustment. When the IRR does exceed 16.0%, a clawback payment will be made equal to the sum of prior TIF payments up to the
Project TIF Adjustment amount after first deducting any unpaid TIF Note balance.
L-1 4843-0439-7690\3
EXHIBIT L
Form of TIF Note
LIMITED REVENUE TAXABLE TAX INCREMENT NOTE (4500 France)
No. R-_____ $[__________]
UNITED STATES OF AMERICA
STATE OF MINNESOTA
CITY OF EDINA
HOUSING AND REDEVELOPMENT AUTHORITY
OF EDINA, MINNESOTA
LIMITED REVENUE TAXABLE TAX INCREMENT NOTE
The HOUSING AND REDEVELOPMENT AUTHORITY OF EDINA, MINNESOTA (the “Authority”) acknowledges itself to be indebted and, for value received, promises to pay to
the order of ORION 4500 FRANCE, LLC, a Delaware limited liability company, or its assigns
(“Developer”), solely from the source, to the extent and in the manner hereinafter provided, up to
the principal amount of this Limited Revenue Taxable Tax Increment Note (this “Note”) as
provided herein, together with simple interest thereon accrued on the unpaid principal balance hereof from the date hereof, at the rate of interest of [________________] percent ([____]%) per
annum, on the Payment Dates (as hereinafter defined). This Note is executed and delivered in
accordance with the terms and conditions of a Redevelopment Agreement dated as of December
18, 2018, by and among the City of Edina, Minnesota (the “City”), the Authority and Developer
(the “Redevelopment Agreement”), and is subject to the terms, conditions, and limitations on payment set forth therein, including, without limitation, the provisions of Section 7.3 (TIF
Lookback) of the Redevelopment Agreement.
Each payment on this Note is payable in any coin or currency of the United States of
America which on the date of such payment is legal tender for public and private debts and shall
be made by check or draft made payable to Developer and mailed to Developer at its postal address within the United States which shall be designated from time to time by Developer.
This Note is a special and limited obligation and not a general obligation of the
Authority, which has been issued by the Authority pursuant to, and in full conformity with, the
Constitution and the laws of the State of Minnesota, including Minnesota Statutes, Sections
469.174 through 469.1794 (the “TIF Act”), and the terms and conditions of the Redevelopment Agreement and a resolution of the Board of the Authority, to aid in financing a “project” (as
defined in Minnesota Statutes, Section 469.174, subdivision 8) of the Authority within the 44th
& France 2 Tax Increment Financing District established by the Authority pursuant to Resolution
L-2 4843-0439-7690\3
No. 2018-100 (the “TIF District”). Capitalized terms used herein and not otherwise defined
herein shall have the meaning given to them in the Redevelopment Agreement.
The maximum principal amount of this Note attributable to Qualified Redevelopment
Costs shall not exceed $[_________________].
Principal of and interest on this Note shall be payable solely from and in the amount of Available Tax Increment (as hereinafter defined) on each February 1 and August 1 commencing
on the first February 1 or August 1 immediately following the date hereof (the “Payment
Dates”). On each Payment Date, the Authority shall apply Available Tax Increment to the
payment of principal of and interest on this Note then due (except as set forth in Section 7.3 of
the Redevelopment Agreement); provided, however, that in the event that Available Tax Increment is not sufficient to pay when due the principal of and interest on this Note, the failure
of the Authority to pay the entire amount of principal or interest on this Note on any Payment
Date shall not constitute a default under this Note as long as the Authority pays the principal of
and interest on this Note to the extent of Available Tax Increment.
To the extent that the Authority is unable to pay the total principal and interest due on this Note at or prior to [_________] 1, 20[__] [to be the Payment Date immediately preceding
the 15th anniversary of the Authority’s first receipt of Tax Increment] (the “Maturity Date”)
hereof as a result of its having received as of such date insufficient Available Tax Increment,
such failure shall not constitute a default under this Note and the Authority shall have no further
obligation to pay unpaid balance of principal or accrued interest that may remain after such Maturity Date.
All payments made by the Authority on this Note shall be applied first to accrued interest
and then to the principal amount of this Note. Interest shall be computed on the basis of a year of
360 days and charged for actual days principal is unpaid.
“Available Tax Increment” means up to 90% of the Tax Increment generated from parcels specifically within the Redevelopment Area and remitted to the Authority from the
County of Hennepin, Minnesota, pursuant to the TIF Act, for the six months before each
Payment Date.
EXCEPT AS TO THE OBLIGATION TO MAKE PAYMENTS FROM THE
AVAILABLE TAX INCREMENT, THIS NOTE IS NOT A DEBT OF THE AUTHORITY, THE CITY, OR THE STATE OF MINNESOTA (THE “STATE”), AND NEITHER THE
AUTHORITY, THE CITY, THE STATE NOR ANY POLITICAL SUBDIVISION THEREOF
SHALL BE LIABLE ON THIS NOTE, NOR SHALL THIS NOTE BE PAYABLE OUT OF
ANY FUNDS OR PROPERTIES OTHER THAN AVAILABLE TAX INCREMENT.
Upon an Event of Default by Developer under the Redevelopment Agreement, the Authority may exercise the remedies with respect to this Note described in the Redevelopment
Agreement, the terms of which are incorporated herein by reference, including, without
limitation, the suspension or termination of the Authority’s obligation to make any payments
under this Note.
The principal sum and all accrued interest payable under this Note is prepayable in whole
L-3 4843-0439-7690\3
or in part at any time by the Authority without premium or penalty. No partial prepayment shall
affect the amount or timing of any other regular payment otherwise required to be made under
this Note.
The outstanding principal balance due under this Note shall be subject to redemption and
prepayment, in whole or in part, at the option of the Authority and, if redemption is in part, installments of principal shall be applied to reduce the principal to become due on this Note in
inverse order of maturity, or, at the written direction of the Authority, pro rata from each
maturity.
Developer shall never have or be deemed to have the right to compel any exercise of any
taxing power of the Authority or the City or any other public body, and neither the Authority nor the City nor any director, commissioner, council member, board member, officer, employee or
agent of the Authority or the City, nor any person executing or registering this Note shall be
liable personally hereon by reason of the issuance or registration hereof or otherwise.
THE AUTHORITY MAKES NO REPRESENTATION, COVENANT, OR
WARRANTY, EXPRESS OR IMPLIED, THAT THE AVAILABLE TAX INCREMENT WILL BE SUFFICIENT TO PAY, IN WHOLE OR IN PART, THE PRINCIPAL OF AND INTEREST
ON THIS NOTE. NO HOLDER OF THIS NOTE SHALL HAVE RIGHTS AGAINST THE
AUTHORITY EXCEPT FOR DISTRIBUTION OF AVAILABLE TAX INCREMENT.
This Note shall not be assignable or transferable without the prior written consent of the
Authority; provided, however, that such consent shall not be unreasonably withheld or delayed if: (a) the assignee or transferee delivers to the Authority a written instrument acknowledging the
limited nature of the Authority’s payment obligations under this Note, and (b) the assignee or
transferee executes and delivers to the Authority a certificate, in form and substance reasonably
satisfactory to the Authority, pursuant to which, among other things, such assignee or transferee
represents (i) that this Note is being acquired for investment for such assignee’s or transferee’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, (ii) that the assignee or transferee has no present intention of selling, granting any
participation in, or otherwise distributing the same, (iii) [intentionally deleted], (iv) that the
assignee or transferee, either alone or with such assignee’s or transferee’s representatives, has
knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of the prospective investment in this Note and the assignee or transferee is able
to bear the economic consequences thereof, (v) that in making its decision to acquire this Note,
the assignee or transferee has relied upon independent investigations made by the assignee or
transferee and, to the extent believed by such assignee or transferee to be appropriate, the
assignee’s or transferee’s representatives, including its own professional, tax and other advisors, and has not relied upon any representation or warranty from the Authority, or any of its officers,
employees, agents, affiliates or representatives, with respect to the value of this Note, (vi) that
the Authority has not made any warranty, acknowledgment or covenant, in writing or otherwise,
to the assignee or transferee regarding the tax consequences, if any, of the acquisition and
investment in this Note, (vii) that the assignee or transferee or its representatives have been given a full opportunity to examine all documents and to ask questions of, and to receive answers from,
the Authority and its representatives concerning the terms of this Note and such other
information as the assignee or transferee desires in order to evaluate the acquisition of and
L-4 4843-0439-7690\3
investment in this Note, and all such questions have been answered to the full satisfaction of the
assignee or transferee, (viii) that the assignee or transferee has evaluated the merits and risks of
investment in this Note and has determined that this Note is a suitable investment for the
assignee or transferee in light of such party’s overall financial condition and prospects, (ix) that
this Note will be characterized as “restricted securities” under the federal securities laws because this Note is being acquired in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may not be resold without registration under the
Securities Act of 1933, as amended, except in certain limited circumstances, and (x) that no
market for this Note exists and no market for this Note is intended to be developed.
Notwithstanding the foregoing, Developer may assign and pledge this Note to secure any Mortgage that is permitted under the Redevelopment Agreement and may transfer this Note to (i)
any entity controlling, controlled by or under common control with Developer or (ii) any entity
in which the majority equity interest is owned by the parties that have a majority equity interest
in Developer.
This Note is issued pursuant to the Resolution of the Board of the Authority and is entitled to the benefits thereof, which Resolution is incorporated herein by reference.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things
required by the Constitution and laws of the State of Minnesota to be done, to have happened,
and to be performed precedent to and in the issuance of this Note have been done, have
happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the Authority or the City
outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause
the indebtedness of the Authority or the City to exceed any constitutional or statutory limitation
thereon.
[Remainder of this page intentionally left blank; signatures on following page]
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IN WITNESS WHEREOF, the Board of the Housing and Redevelopment Authority of
Edina, Minnesota, has caused this Note to be executed by the manual signatures of the Chair and
the Executive Director of the Authority, and has caused this Note to be dated as of the date of
original issue specified above.
Chair Secretary
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EXHIBIT M
Inclusionary Housing Policy
Program Guide
December 2018
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Table of Contents
Introduction to the Inclusionary Housing Program (AHP) .................4
Chapter 1 – Overview ......................................................................5
1.01 Period of Affordability (POA) ................................................................................................................. 5
1.02 Affordable Dwelling Units (ADUs) ........................................................................................................ 5
Affordability Standards – Rental Projects ........................................................................................................... 5
Affordability Standards – For Sale Projects ......................................................................................................... 5
1.03 Student Households ............................................................................................................................... 6
1.04 Inclusionary Housing Program (AHP) Rent Limits ................................................................................. 6
1.05 Rental Assistance .................................................................................................................................. 6
1.06 Allowable Fees and Charges .................................................................................................................. 6
1.07 Fixed or Floating Affordable Dwelling Units .......................................................................................... 7
1.08 Rent Increases ....................................................................................................................................... 7
1.09 Utility Allowances ................................................................................................................................. 7
1.10 Record Retention .................................................................................................................................. 8
1.11 Leases .................................................................................................................................................... 8
1.12 Income Certification .............................................................................................................................. 9
1.13 Increases in Income .............................................................................................................................. 9
1.14 Property Standards ............................................................................................................................... 9
1.15 Affirmative Marketing .......................................................................................................................... 9
1.16 Fair Lease and Grievance Procedures .................................................................................................. 10
Chapter 2 – Maintaining the Unit Mix ............................................ 11
2.01 Fixed Affordable Dwelling Units .......................................................................................................... 11
2.02 Floating Affordable Dwelling Units .................................................................................................... 11
Chapter 3 – General Occupancy Guidelines .................................... 13
3.01 Qualification of Applicants ................................................................................................................. 13
3.02 Eligibility Determination ..................................................................................................................... 13
3.03 Change in Household Composition ...................................................................................................... 14
3.04 Minimum Lease Requirements ............................................................................................................ 14
3.05 House Rules ......................................................................................................................................... 15
3.06 Number of Persons Per Unit ............................................................................................................... 15
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3.07 Tenant Selection Plan ......................................................................................................................... 15
3.08 Government Data Practices Act Disclosure Statement Form ............................................................. 16
3.09 Income Verification ............................................................................................................................. 16
3.10 Gross Annual Household Income ........................................................................................................ 17
3.11 Factors that Affect Household Size ..................................................................................................... 17
3.12 General Income Verification Requirements ......................................................................................... 18
3.13 Corrections to Documents ................................................................................................................... 21
3.14 Effective Term of Verifications ............................................................................................................ 21
3.15 Over Income Households ..................................................................................................................... 21
3.16 Annual Recertification ........................................................................................................................ 21
3.17 Tenant Files ......................................................................................................................................... 22
Chapter 4 – Reporting Requirements ............................................. 23
4.01 Annual Owner/Agent Certifications .................................................................................................... 23
4.02 Compliance Reports ............................................................................................................................. 23
4.03 Utility Allowance Source Document ................................................................................................... 23
Chapter 5 – Compliance Inspections .............................................. 24
5.01 Physical Inspections ............................................................................................................................ 24
5.02 Review of Tenant Files and Property Records ..................................................................................... 24
5.03 Review of Ongoing Lead Based Paint Maintenance (24 CFR 35.1355) .... Error! Bookmark not defined.
Chapter 6 – Correction and Consequences of Non-Compliance ...... 25
6.01 Notice to Owner/Agent ....................................................................................................................... 25
6.02 Correction Period ................................................................................................................................ 25
6.03 Owner’s/Agent’s Response .................................................................................................................. 25
Chapter 7 – Requests for Action .................................................... 27
7.01 Sale or Transfer ................................................................................................................................... 27
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Introduction to the Inclusionary Housing Program (AHP)
Properties developed using local funds or because of inclusionary policies are subject to specific
rules designed to ensure that affordability pledges made by owners and developers remain
available to low and very low income tenants throughout the required Period of Affordability
(the POA). This Guide is designed to assist owners and their agents with planning and
maintaining compliance with the local requirements associated with these assisted rental
properties. This guide does not pertain to Market Rate units.
It is the responsibility of City of Edina Housing and Redevelopment Authority (hereafter the
“HRA”) to monitor the continuing compliance of affordable units in accordance with local policy
and governing agreements throughout the POA. The following procedures apply to all rental
properties that received funds under the local Affordable Housing Policy (AHP). Any violation of
the AHP requirements could constitute a covenant default of the governing agreement(s) and
imposition of all local government rights and remedies.
While successful operation of an affordable property is management intensive, the
owner/agent is responsible for ensuring that the governing agreement requirements are
properly administered. Thorough understanding of requirements and compliance monitoring
procedures requires training of owners/agents. The owner/agent should ensure that it knows
and understands the requirements of the inclusionary housing policy and the compliance
requirements since failure to comply may have very serious consequences. The HRA
recommends that owners, management agents and site managers (collectively referred to as
“owner/agent” throughout this document) receive compliance training before certifying or
leasing any affordable units. At a minimum, training should cover key compliance terms,
determination of rents, household eligibility, file documentation, procedures for maintaining
the required unit mix and reporting. Record retention and property condition standards are
also key to maintaining compliance. Attending educational opportunities as offered is strongly
recommended to keep up with any procedural changes to the AHP.
Should the AHP assisted property also receive an allocation of Section 42 tax credits (Low
Income Housing Tax Credits or LIHTC), and the property is found to be compliant with the tax
credit program, then the HRA will consider the property compliant with the AHP.
Owners/Agents of AHP assisted properties must annually certify to the HRA that the property
is compliant with the Low Income Housing Tax Credit program.
The HRA’s determination to monitor the project for compliance with requirements of the AHP
does not make it liable for an owner’s/agent's noncompliance. This Guide will be made
available to the owner/agent at project financial closing and will be posted on the website of
the HRA. The HRA, in its sole discretion, may delegate its compliance reporting and monitoring
responsibilities to a third party. AHP assisted properties will have a compliance review at initial
lease up and every third (3rd) year thereafter. However, the HRA reserves the right to conduct a
compliance review annually.
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Chapter 1 – Overview
The following is an overview the Affordable Housing Policy. It is not intended to be detailed or
comprehensive. The requirements of the AHP apply to market rate residential developments
that receive a PUD approval from the City of Edina and/or financial assistance from the HRA.
This includes new developments and mixed-used developments that create twenty (20) or
more multi-family dwelling units and/or any change in use of all or part of an existing building
from a non-residential use to a residential use that includes at least twenty (20) dwelling units.
1.01 Period of Affordability (POA)
Affordable units created under the Affordable Housing Policy (AHP) are rent and income
controlled for 15 years. This term is referred to as the Period of Affordability or POA.
Owners/agents should refer to the property’s governing agreements to determine the specific
terms and conditions that govern the property.
1.02 Affordable Dwelling Units (ADUs)
At least ten percent (10%) to twenty percent (20%) of the total number of dwelling units in a
development receiving a PUD and/or assisted with local funds under the AHP will be designated
as Affordable Dwelling Units (ADUs). The percentage applied is based on the affordability
standard of the development.
Affordability Standards – Rental Projects
If an AHP property is also assisted with Low Income Housing Tax Credits (LIHTC), the AHP
Affordability Standard is based on the LIHTC election (20/50 or 40/60).
If an AHP property is NOT assisted with LIHTC, then the HRA together with the owner
determine which affordability standard applies.
10% at 50%
At least ten percent (10%) of total units developed shall be occupied by households at or below
fifty percent (50%) of the MTSP (Multifamily Tax Subsidy Income Limits, i.e. tax credit income
limits).
20% at 60%
At least twenty percent (20%) of total units developed shall be occupied by households at or
below sixty percent (60%) of the MTSP.
Affordability Standards – For Sale Projects
At least ten percent (10%) of total units developed shall be affordable for households at eighty
(115%) of the Metropolitan Statistical Area (MSA).
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1.03 Student Households
The AHP adopted the Low Income Housing Tax Credit (LIHTC) program restrictions on student
households and excludes any household where all members are full time students. A full-time
student household may qualify if one of the following exceptions is met:
1. Married and eligible to file joint tax return
2. Single parent with dependent child(ren)
3. Receives assistance (MFIP) under Title IV of Social Security Act
4. Enrolled in a job training program
5. At least one member was previously in foster care
1.04 Inclusionary Housing Program (AHP) Rent Limits
Every ADU is subject to maximum allowable rents based on bedroom size for the area in which
the property is located. These maximum rents are referred to as the AHP rents. These limits
represent the maximum that owners/agents can charge for rent, including an allowance for
tenant paid utilities, and other non-optional charges (i.e. required renter’s insurance).
In the event AHP rent limits decrease for an area, or utility allowances increase, an
owner/agent may be required to reduce the rent charged but will not be required to lower
rents below those in effect at the time of project commitment.
1.05 Rental Assistance
Tenant Based Section 8 Housing Choice Vouchers. Tenants with Section 8 vouchers, or similar
state or federal tenant based rental assistance (TBRA) subsidies tied to a tenant and not a unit,
cannot be charged rent that exceeds the applicable AHP rent for the unit. Rents charged must
be comparable to other ADUs not receiving rent assistance. For example, if the owner/agent
charges less than the maximum AHP rent for non-voucher holders, it cannot charge a higher
rent to voucher holders.
Tenants receiving rental assistance, including Section 8 subsidy, must not be refused tenancy in
an ADU based solely on the fact that they receive rental assistance.
1.06 Allowable Fees and Charges
Fees considered reasonable and customary may be charged, such as application fees and
parking fees, if such fees are customary for rental housing in the neighborhood. Fees for
services such as bus transportation or meals can only be charged if the services are voluntary
and are not a condition of occupancy. An eligible tenant cannot be charged a fee for the work
involved in completing the additional forms or documentation required for the AHP, such as the
Tenant Income Certification.
Down payment fees/rent deposit for the ADU should not exceed one month’s rent.
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1.07 Fixed or Floating Affordable Dwelling Units
ADUs may be “fixed” or “floating” and are designated on a property-by-property basis. The
enforcement agreement must contain fixed or floating unit designations.
Fixed Units – The ADUs are identified by unit number and never change. Units in properties
where all units are ADUs are automatically considered fixed.
If units throughout a project are not comparable (as defined by the HRA) or are in several
scattered sites, the ADU unit designation must/should be fixed.
Floating Units – The ADUs may change over time as long as the total number of ADUs in the
property remains constant. If a property’s enforcement agreement does not specify floating
units, then the units that were initially designated as ADUs at project completion will be used to
determine comparable floating units.
See Chapter 2, Maintaining the Unit Mix, for more information.
1.08 Rent Increases
If ADU rents remain below the maximum allowed, an owner/agent may impose a rent increase
as allowed by the enforcement agreement no earlier than one year from the date the project
was completed and no more frequently than annually thereafter. If an owner/agent wishes to
increase rents, the request must be within reasonable limits to cover increases in expenses
such as real estate taxes or operating expenses. At no time can proposed rent increases exceed
the current MTSP (LIHTC rents) rent limits for that development.
If the owner/agent increases rents as provided above, tenants must be given a written notice in
accordance with lease provisions before implementation.
1.09 Utility Allowances
The AHP requires that an allowance for tenant paid utilities be considered as a housing cost to
the tenant and be factored in when determining rent for an ADU. The HRA approved the use of
Metro HRA’s Utility Allowance Schedule (effective 2/1/18) as the document to use to determine
an ADU’s utility allowance.
Utility allowance schedules are usually updated annually. It is the owner’s/agent’s
responsibility to obtain an updated utility allowance and retain in the property records.
Changes in utility allowances must be implemented within 90 days. If an increase in the utility
allowance causes the ADU rent to exceed the applicable AHP rent limit, the unit rent must be
adjusted (lowered) to bring the gross rent of the unit into compliance with the AHP rent limits.
However, at no time will the ADU rent be adjusted to an amount lower than the ADU rent in
place at project commitment.
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If the property is regulated by HUD, or another form of project based subsidy, the program
approved utility allowance may be used.
1.10 Record Retention
Owners/agents must retain project records for a minimum of five years beyond the property's
required POA. Tenant records, including income verifications, development rents, and unit
inspections must be retained for the most recent five year period, until five years after the
effective period terminates.
Owners/agents must maintain applicant and tenant information in a way to ensure
confidentiality. Any applicant or tenant affected by negligent disclosure or improper use of
information may bring a civil action for damages against the owner/agent and seek other relief,
as appropriate. Owners/agents must dispose of records in a manner that will prevent any
unauthorized access to personal information, e.g., burn, pulverize, shred, etc.
1.11 Leases
Each lease must include the legal name(s) of the parties to the agreement and all other
occupants, a description of the unit to be rented (address), the term of the lease, the rental
amount, the use of the premises, and the rights and obligations of each party. The lease shall
also inform the tenant that fraudulent statements and information are grounds for eviction and
that the tenant could become subject to penalties available under federal law.
Initial leases for ADUs must be for 12 months unless another term is mutually agreed to by
owner/agent and tenant. If tenant agrees to a shorter term, that agreement must be in writing
and kept in the tenant’s file. At no time can a lease term be for less than 30 days.
ADU leases must contain language that the owner/agent reserves the right to adjust tenant
rents in accordance with the AHP rent limits and/or in the event a tenant’s income increases
above the income limits of the AHP.
The lease must also contain a provision that the owner/agent retains the right to recertify the
tenant’s income and household composition on an annual basis. The tenant’s failure to
cooperate with the annual recertification constitutes a violation of the lease.
If the lease used for the ADU unit does not contain any of the required provisions and/or
contains any prohibited provisions, an AHP Lease Addendum must be signed by the tenant and
kept in the tenant’s file. If a new lease is executed, a new AHP Lease Addendum must also be
executed. Prohibited lease terms are defined in the AHP Lease Addendum (see Appendix B).
An AHP Lease Addendum is not required when the HUD model lease for subsidized housing is
used.
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1.12 Income Certification
The owner/agent must verify and certify tenant income eligibility and student status at move in
and recertify at least annually thereafter. At initial move in, or when first being determined
eligible for an ADU and in every 3rd year of the affordability period (not tenancy), household
composition, income and income from assets must be verified via third party verification or
other forms of supporting documentation and kept in the tenant’s file. In other years, tenants
must, at a minimum, self-certify to their anticipated income (including income from assets),
family size, and composition.
As part of the monitoring process, tenant files will be reviewed at initial occupancy of the
project and every 3rd year thereafter.
1.13 Increases in Income
The owner/agent must ensure that any tenant whose income increases above the AHP income
eligibility guidelines pays not less than the market or similar rent as the other non-ADUs in the
development. A minimum notice of 60 days is required for increases to tenant rent. The unit
must be marketed to eligible tenants when vacated.
For units assisted with both AHP funds and Low Income Housing Tax Credits (LIHTC), a tenant is
not considered over income until income exceeds the applicable 140% LIHTC limit. When a
tenant’s income exceeds the LIHTC limit, the tenant’s rent is adjusted to the LIHTC rent limit if
the project is 100% LIHTC or, if the project is mixed income, the market rent for similar non-
ADUs in the property.
1.14 Property Standards
The owner/agent must keep all units in compliance with local codes and other applicable state
and local building codes to ensure the units are decent, safe, and sanitary at all times.
1.15 Affirmative Marketing
Owners/agents must adhere to Equal Opportunity, Affirmative Marketing, and Fair Housing
practices in all marketing efforts, eligibility determinations and other transactions. The Equal
Housing Opportunity logo or statement (We do business in accordance with the Federal Fair
Housing Law. It is illegal to discriminate against any person because of race, color, religion, sex,
handicap, familial status, or national origin.) must be used in all advertising of vacant units.
In addition to the federal protections mentioned above, the Minnesota Human Rights Act
makes it illegal to discriminate against any person with respect to housing and real property,
because of race, color, creed, religion, national origin, sex, marital status, disability, status with
regard to public assistance, sexual orientation or familial status.
A file must be maintained with all marketing efforts related to the property including
newspaper ads, social service contacts, photos of signs posted, etc. Records will be reviewed
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during on site monitoring to ensure that all efforts follow federal requirements and are being
adequately documented.
1.16 Fair Lease and Grievance Procedures
Fair lease and grievance procedures should be objective. They should clearly state:
• To whom a tenant should direct a complaint;
• Who will investigate and/or respond to the complaint; and
• By when the tenant should expect to receive a response.
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Chapter 2 – Maintaining the Unit Mix
2.01 Fixed Affordable Dwelling Units
Properties with units that are not comparable in terms of size, amenities and features must
have fixed ADUs. Fixed ADUs means specific units are designated as the ADUs for the duration
of the affordability period. Owner/Agent must maintain these specific units as the ADUs.
Maintaining the required number of ADUs, is called complying with the unit mix requirements.
At no time will non-ADUs be subject to AHP rent and income requirements when the ADUs are
fixed.
When an owner/agent recertifies a tenant’s income, he or she may find that the tenant’s
income has increased. A tenant is considered “over income” in the AHP when:
• The tenant occupies an ADU and the tenant income increases to 140% of the current
AHP income limit for that family size; or
• For ADUs that are also LIHTC units, a tenant is considered “over income” when its
income goes over 140% of the qualifying tax credit election (50% or 60%) for that unit.
When a tenant is over income, the unit that the tenant occupies is considered temporarily out
of compliance with the AHP’s occupancy and unit mix requirements. Temporary
noncompliance due to an increase in an existing tenant’s income is permissible if the
owner/agent takes specific steps to restore the correct unit mix in the property as soon as
possible. When the tenant’s income exceeds the AHP’s income limit (140%), its rent must also
be adjusted.
The owner/agent cannot immediately terminate the lease based on the tenant’s increase in
income to above the AHP income limit. Instead, the owner/agent may extend /renew the lease
for up to one year. If the tenant is still over income at the time of the next recertification, a 60-
day notice to vacate may be issued to the tenant. If the tenant is determined to be under the
AHP income limit at the time of recertification, the unit is considered back in compliance.
2.02 Floating Affordable Dwelling Units
Properties with units that are comparable in terms of size, amenities and features can have
floating ADUs. Properties with floating ADUs must maintain the required number of ADUs
throughout the POA, however the initial ADUs do not have to remain as ADUs throughout the
POA.
When ADUs float, the specific units that carry the ADU designation may change, or float, among
assisted and non-assisted units during the POA. If/when an initial ADU goes out of compliance
due to a tenant’s income going over the AHP (or LIHTC) income limit, a non-ADU can replace
the out of compliance ADU if the tenant income and unit rent of the non-ADU meet the ADU
requirements. In other words, the ADU designation “floats” to another unit.
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For example, if a property has an over-income tenant in an ADU, when the next non-ADU
comparable unit becomes available, it will be designated as an ADU and rented to an income
eligible tenant. The unit occupied by the over income tenant is redesignated as a market rate
unit.
Maintaining the required number of comparable ADUs is called complying with the unit mix
requirements.
When recertifying a tenant’s income, an owner/agent may find that the tenant’s income has
increased. A tenant is considered “over income” when:
• The tenant occupies an ADU and the tenant income increases over the current AHP
income limit (140% AMI) for that family size; or
• In ADUs that are also LIHTC units, a tenant is considered “over income” when its income
increases to 140% or more of the qualifying tax credit election (50% or 60%) for that
unit.
When a tenant is over income, the unit that the tenant occupies is considered temporarily out
of compliance with the AHP’s unit mix requirements. Temporary noncompliance due to an
increase in an existing tenant’s income is permissible if the owner/agent takes specific steps to
restore the required unit mix in the property. The rents of the over income tenants can be
adjusted.
When redesignating units in a property with floating ADUs, owner/agent can choose to
substitute a unit that is equal or “greater” than the original ADU, but generally they cannot
substitute one that is “lesser”. A lesser unit can be substituted only when doing so preserves
the original unit mix. A greater unit is one that might be considered preferable because of
larger size or additional bedrooms. The goal is to maintain the same number and type of ADUs
as were originally designated. Therefore, if an owner/agent makes a substitution that is
“greater,” it can later substitute an available unit that is “lesser” to restore the original unit mix.
Once a comparable non-ADU unit is designated as the new ADU, the unit with the over income
tenant is redesignated as a non-ADU or market rate unit. At this point, the owner/agent may
adjust the tenant’s rent without regard to the AHP rent requirements (although requirements
from other funding sources may still apply). Rent increases are subject to the terms of the
lease.
Note, a tenant in a floating ADU whose income exceeds AHP income limit is not required to pay
more than the market rent for a comparable, unassisted unit in the property.
The owner/agent cannot terminate the lease based on the tenant’s increase in income.
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Chapter 3 – General Occupancy Guidelines
3.01 Qualification of Applicants
Applicants for ADUs shall be advised early in their initial visit to the property that there are
maximum income limits that apply to these units. They will also be made aware that the
anticipated income of all persons expecting to occupy the unit must be verified and included on
a Tenant Income Certification form prior to occupancy, and that tenant income and student
status will be reviewed annually.
A tenant may not occupy an ADU in a property receiving AHP assistance if that tenant is
considered a “full-time student household”. If at least one occupant of the household living in
an ADU is a part-time student, the household is not considered a full-time student household
and is exempt from the student rule.
If every member of a household that occupies an ADU is, was, and/or will be a full-time student
during any part of any 5 calendar months (spanning previous, current and/or upcoming year),
and no exceptions apply, then the household is not eligible to occupy an ADU.
The Student Rule exceptions are:
1) Married and eligible to file a joint federal tax return
2) Single parent(s) with dependent child(ren)
3) Receive assistance under Title IV of Social Security Act
4) Enrolled in job training program
5) At least one member of the HH was previously in foster care
Verification of student eligibility must be maintained in the tenant file along with the income
certification (if mixed income property) and must be recertified annually.
3.02 Eligibility Determination
A fully completed Household Questionnaire is critical to an accurate determination of eligibility.
The information furnished on the application should be used as a tool to determine all sources
of anticipated income and assets.
After the tenant completes the Household Questionnaire, the owner/agent must have all
income verified by obtaining source documentation (award letters, offers of employment, W-
2’s, check stubs (not paycheck), bank statements, investment records, etc.) or by a third party
(public agency, employer, financial institution). If total cash value of assets is less than $5000,
assets can be self-certified using the HTC24 Under $5000 Certification. Assets exceeding $5000
must be third party verified. The application, income and asset verifications, and lease are to
be executed prior to move in. All occupants in an ADU must be certified and have a valid lease
on file. All household members age 18 and over must sign all required documents.
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3.03 Change in Household Composition
If a tenant in an ADU (no LIHTC) wishes to have an additional person move into the unit within
the first 6 months of occupancy the following steps must be taken:
1. The prospective tenant must complete a Household Questionnaire and allow time for
verification of income and assets as required of the initial tenant; and
2. The prospective tenant's income must be added to the current tenant's certification and
a determination made as to whether the new household is still within the AHP income
guidelines. If the new household income exceeds the guidelines, then once proper
notice is given, the tenant must pay the market rate. If the ADU is floating, the ADU
designation must be floated to another eligible unit. The new rent of the now over
income household cannot exceed market rent for a comparable unassisted unit.
The tenant file shall also be documented when any household member vacates the unit.
3.04 Minimum Lease Requirements
Initial tenant leases, including a signed and dated AHP lease addendum (if applicable) must be
on file and must specify a term of at least 6 months. Subsequent lease terms may be of shorter
duration. Leases must not contain any of the prohibited lease terms. Any non-renewal or
termination of leases must be in accordance with the lease and/or AHP lease addendum.
The owner/agent must comply with AHP requirements on evictions as well as state law
regarding eviction procedures. There must be a written notice that gives a tenant at least 30
days to vacate its unit, regardless of whether tenant has violated the law or lease terms.
Under the AHP, tenancy may be terminated only for:
• Serious or repeated violation of the terms and conditions of the lease.
• Violation of applicable federal, state, or local law.
• Other good cause.
Owners/agents must comply with the lease requirements found in Section 601 of the Violence
Against Women Reauthorization Act (VAWA) of 2013. HRA highly encourages owners/agents to
use the VAWA Lease Addendum, form HUD-91067 or its successor VAWA Lease Addendum
form. In general, owner/agent may not construe an incident of actual or threatened domestic
violence, dating violence, sexual assault, or stalking as a serious or repeated violation of a lease
term by the victim, or threatened victim, as good cause for terminating tenancy. However, in
accordance with VAWA 2013, owner/agent may bifurcate a lease to terminate the tenancy of
an individual who is a tenant or lawful occupant and engages in criminal activity directly
relating to domestic violence, dating violence, sexual assault, or stalking against another lawful
occupant living in the unit or other affiliated individual as defined in the VAWA 2013.
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Owner/Agent should include a copy of HUD form 91066 or its successor form with each tenancy
termination or eviction notice to allow an individual to certify that he or she is a victim of
domestic violence, dating violence, sexual assault or stalking. The form is to be completed and
submitted to owner/agent within 14 business days or an agreed upon extension date, for the
individual to receive protection under the VAWA.
3.05 House Rules
Developing a set of house rules is a good practice. The decision about whether to develop
house rules for a property rests solely with the owner/agent. If house rules are listed in the
lease as an attachment, then they must be attached to the lease. By identifying allowable and
prohibited activities in housing units and common areas, the owner/agent provides a structure
for treating tenants equitably and for making sure tenants treat each other with
consideration. House rules are also beneficial in keeping properties safe and clean and making
them more appealing and livable for the tenants. They are also extremely beneficial if it
becomes necessary to evict a tenant for inappropriate behavior. For more information on
House Rules, refer to Chapter 6-9 of the HUD 4350.3 REV 1, Change 4 Handbook.
3.06 Number of Persons Per Unit
There is no federal regulation governing the number of persons allowed to occupy a unit based
on size however ADU’s will have a minimum requirement of at least one person per bedroom.
It is important, though, to be consistent when accepting or rejecting applications. It is required
that the owner/agent determine the minimum and maximum number of people that will be
allowed to occupy each size unit and put that formula in writing as part of the Tenant Selection
Plan and submit to the HRA for approval. The owner/agent may refer to the HUD Handbook
4350.3 REV 1, Change 4, Chapter 3-23, regarding occupancy standards. By following the
standards described, owners/agents can ensure that applicants and tenants are housed in
appropriately sized units in a fair and consistent manner as prescribed by law.
3.07 Tenant Selection Plan
Owner/Agent must develop a formal written policy that clearly states the procedures and
criteria the owner/agent will consistently apply in drawing applicants from the waiting list,
screening for suitability for tenancy, and implementing income targeting requirements. The
Tenant Selection Plan must state if there is an elderly restriction (“seniors only” building).
In accordance with the VAWA of 2013, the selection criteria cannot deny admission on the basis
that the applicant has been a victim of domestic violence, dating violence, sexual assault or
stalking. Owner/Agent should provide to each applicant/tenant HUD form 91066 or its
successor form to allow the applicant/tenant to provide information regarding his or her status
as a victim of domestic violence, dating violence or stalking.
Owners/agents may refer to the HUD Handbook 4350.3 REV 1, Change 4, Chapter 4, when
developing a tenant selection plan. HRA will review the Tenant Selection Plan as part of its
monitoring process.
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3.08 Government Data Practices Act Disclosure Statement Form
In working with applicants and tenants, the owner/agent warrants compliance with applicable
data privacy laws and regulations including the Minnesota Government Data Practices Act,
which sets policies on the information that can be obtained, stored and/or released in
connection with public programs. To comply with this law, the Inclusionary Housing Program
Government Data Practices Act Statement form must be kept in each tenant's permanent file.
Note that this is not a release authorization for verification of income and assets and must not
be used as such. Each adult household member’s name must be printed clearly at the top in
the box provided. An unsigned and/or undated form is not valid and will be noted as
insufficient at time of file inspection.
1. The form is to be signed one time and is valid as long as the resident lives at the
property and participates in the program(s) identified in item #2 on page 1 of the form.
If a resident moves from one unit to another, the original signed and dated form should
be moved to the file for the new unit. A copy should be kept in the move out file for the
old unit.
2. A valid form must include all relevant attachments. Some properties or units within a
property may require 2 or more attachments for multiple programs.
3. Only one form is needed per unit as long as the head of household, spouse, co-head,
and all household members over the age of 18 have signed and dated the form.
4. If an adult is added to the household or a minor reaches age 18, they must be added to,
sign, and date the original form. It is not necessary to complete a new form.
5. A copy of the form should be made available to the applicant/tenant. It is acceptable to
give them an unsigned copy.
6. For new residents, the form should be completed at the time of initial application.
A Government Data Practices Act Disclosure form that can be used for all ADUs is available on
the HRA website.
3.09 Income Verification
At initial occupancy, owner/agent must determine whether prospective tenant(s) of ADUs
qualify as low income households. Income eligibility is based on anticipated income as defined
at 24 CFR 5.609 (Section 8). When collecting income verification documentation, owner/agent
must consider any likely changes in income. Owner/Agent must follow appropriate steps in
determining whether households are eligible prior to admittance.
Minnesota Housing provides sample verifications and other forms to assist owners/agents in
qualifying eligible tenants. The release of information (at top of form) must be completed and
signed by the person who is the subject of the verification prior to sending the form to an
employer or other income source. Completed and returned verifications are used to calculate
and document income.
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An Income and Asset Calculation Worksheet form is also available and can be used to assist in
showing the individual calculations of income and asset income. This is highly recommended
and will greatly assist an inspector during a file review. This form should be dated and signed
by the owner/agent.
3.10 Gross Annual Household Income
Gross annual income for households living in ADUs shall be determined in a manner consistent
with Section 8 of the U.S. Housing Act of 1937.
Note that the information below only provides a summary. The Technical Guide for
Determining Income and Allowances for the HOME Program is a good resource and can be
found on HUD’s website. The HUD Handbook 4350.3 is also an excellent resource.
The determination of annual income must include all types of income in the amount
anticipated to be received by the tenant in the 12 months following
certification/recertification. Owner/Agent should use current circumstances to project income,
unless verification forms or other verifiable documentation indicate that a change will occur
(increase/decrease in rate of pay and/or hours). However, if the owner/agent is unable to
determine annual income using current information because the family reports little to no
income, or because income fluctuates, the owner/agent may average past actual income
received or earned within the last 12 months before the certification date to calculate annual
income.
3.11 Factors that Affect Household Size
When determining family size for occupancy, the owner/agent must include the following
individuals who are not currently living in the unit:
• Children temporarily absent due to placement in a foster home;
• Children in joint custody arrangements who are present in the household 50% or more
of the time;
• Children who are away at school but who live with the family during school recesses;
• Unborn children of pregnant women. When a pregnant woman is an applicant, the
unborn child is included in the size of the household and is included for purposes of
determining the maximum allowable income. The rental application should ask the
following question: “Will there be any changes in household composition within the
next 12-month period?” If an applicant answers that a child is expected, the
owner/agent should explain to the tenant that to count the child as an additional
household member and use the corresponding income limit, a self-certification of
pregnancy must be provided.
• Children who are in the process of being adopted;
• Temporarily absent family members who are still considered family members. For
example, the owner/agent may consider a family member who is working in another
state on assignment to be temporarily absent. Persons on active military duty are
considered temporarily absent (except if the person is not the head, co-head or spouse
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or has no dependents living in the unit). If the person on active military duty is the
head, co-head, or spouse, or if the spouse or dependents of the person on active
military duty resides in the unit, that person’s income must be counted in full;
• Family members in the hospital or rehabilitation facility for periods of limited or fixed
duration. These persons are temporarily absent as defined above.
Persons permanently confined to a hospital or nursing home are not considered household
members.
When determining family size for establishing income eligibility, the owner/agent must include
all persons living in the unit except the following:
• Live-in aides
• Children of live-in aides
o A live-in aide/attendant is a person who resides with one or more elderly persons,
near-elderly persons, or persons with disabilities, and who:
Is determined to be essential to the care and well-being of the person(s);
Is not obligated for the support of the person(s); and
Would not be living in the unit except to provide the necessary
supportive services.
While a relative may be a live-in aide/attendant, they must meet the above requirements,
especially the last. The live-in aide qualifies for occupancy only if the individual needing
supportive services requires the aide’s services and remains a tenant, and may not qualify for
continued occupancy as a remaining family member. The owner/agent must obtain verification
from the person’s physician, psychiatrist or other medical practitioner or health care provider
that the live-in aide is needed to provide the necessary supportive services essential to the care
and well-being of the person and should not add the attendant to the lease. The owner/agent
may not require applicants or tenants to provide access to confidential medical records or to
submit to a physical examination.
Some households may include other persons who are considered family members for the
purposes of determining household size and income eligibility, including:
• Foster adults
• Foster children
Please see Appendix A for more detail on whose income is counted, what is counted as income
and what is not, and how to account for income generated by assets.
3.12 General Income Verification Requirements
All income and asset sources must be disclosed on the eligibility application and verified. A
properly completed application must be used as the basis for determining what verifications
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will be necessary. The application, along with all supporting documentation and the Tenant
Income Certification, will be reviewed by HRA staff or its agent during a tenant file review.
The following describes the types of third party verification in order of acceptability:
1. Third party verification from source (written):
a. An original or authentic document generated by a third-party source that is
dated within six months from the date of receipt by the owner/agent. Such
documentation may be in possession of the tenant (or applicant), and commonly
referred to as tenant provided documents. These documents are considered
third party verification because they originated from a third party source.
Examples of tenant provided documentation that may be used include, but are
not limited to: pay stubs, payroll summary report, employer notice/letter of
hire/termination, SSA benefit letter, bank statements, child support payment
stubs, welfare benefit letters and/or printouts, and unemployment monetary
benefit notices.
Owner/Agent must consider the following when using tenant provided
documentation:
i. Is the document current? Documentation of public assistance may be
inaccurate if it is not recent and does not show any changes in the
family’s benefits or work and training activities.
ii. Is the documentation complete? Owner/Agent may not accept pay stubs
to document employment income unless the applicant or tenant provides
the most recent two months of consecutive pay stubs to illustrate
variations in hours worked. Actual paychecks or copies of paychecks
should never be used to document income because deductions are not
shown on the paycheck.
iii. Is the document an unaltered original? The greatest shortcoming of
tenant provided documents as a verification source is their susceptibility
to undetectable change through the use of high quality copying
equipment. Documents with original signatures are the most reliable.
Photocopied documents generally cannot be assumed to be reliable.
2. Written documentation sent directly to the third party source by mail or electronically
by fax, email or internet.
Verification forms must contain a release authorization signed by the applicant/tenant.
Do not use a blanket release authorization as this entitles the owner/agent to obtain
information to which it is not entitled or needed for eligibility determination. The Data
Practices Act Disclosure Statement is not a verification release. Applicants should be
asked to sign two copies of each verification form. The second copy may be used if the
first request has not been returned in a timely manner.
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Income verification requests must be sent directly to and from the source. They are
never given to the tenant to obtain signatures. It is suggested that a self-addressed
stamped envelope be included with a mailed request for verification. If the returned
verifications do not contain complete information (typical examples include failure to
indicate interest rates, dates of anticipated raises, amounts of anticipated raises, etc.),
owner/agent must follow up with the source to obtain complete information. All
pertinent information must be documented in the file and must also include the name,
phone number and title of the contact, the name of the person accepting the
information, and the date.
3. Third party verification from source (verbal).
When clarifying information over the telephone, it is important to be certain that the
person on the telephone is the party he or she claims to be. Generally, it is best to
telephone the verification source rather than to accept verification from a source calling
the property management office. Verbal verification must be documented in the file.
When verifying information by phone, the owner/agent must record and include in the
tenant’s file the following information:
a. Third party’s name, position, and contact information;
b. Information reported by the third party;
c. Name of the person who conducted the telephone interview; and
d. Date and time of the telephone call.
4. Self Certification
An owner/agent may accept a tenant’s notarized statement or signed affidavit regarding
the veracity of information submitted only if the information cannot be verified by
another acceptable verification method. In these instances, the owner/agent must
document the file why third-party verification was not available. The owner/agent may
witness the tenant signature(s) in lieu of a notarized statement or affidavit.
The following describes use of electronic information when used as third party
verification.
Electronic Verification. The owner/agent may obtain accurate third party written
verification by facsimile, email, or Internet, if adequate effort is made to ensure that the
sender is a valid third party source.
a. Facsimile. Information sent by fax is most reliable if the owner/agent and the
verification source agree to use this method in advance during a telephone
conversation. The fax should include the company name and fax number of the
verification source.
b. Email. Similar to faxed information, information verified by email is more
reliable when preceded by a telephone conversation and/or when the email
address includes the name of an appropriate individual and firm.
c. Internet. Information verified on the Internet is considered third party
verification if the owner/agent is able to view web-based information from a
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reputable source on the computer screen. Use of a printout from the Internet
may also be adequate verification in many instances.
Steps used to obtain written verification as described in 1, 2 and 3 above must be documented
to show just cause for using other types of verification. The owner/agent must include the
following documents in the tenant file:
1. A written note explaining why third party verification is not possible.
2. A copy of the date stamped original request that was sent to the third party.
3. Written notes or documentation indicating follow up efforts to reach the third party
to obtain verification.
4. A written note indicating the request has been outstanding without a response from
the third party.
Note: If a tenant is employed by a business owned by the tenant's family or is employed by the
property owner/agent or the management company, a copy of a recent pay stub, verifying
year-to- date earnings, is also required.
Upon receipt of all verifications, owner/agent must determine if the resident is qualified for
participation in the AHP. All verifications should be reviewed and calculations made as
necessary.
3.13 Corrections to Documents
Sometimes it is necessary to make corrections or changes to documents. A document that has
been altered with correction fluid or "white out" will not be accepted by HRA. When a change
is needed on a document, the person making the correction must draw a line through the
incorrect information, write or type the correct wording or number, and have all parties initial
and date the change.
3.14 Effective Term of Verifications
Verifications of any kind are valid for 120 days prior to an ADU tenant’s move in date or
recertification date.
3.15 Over Income Households
When determining eligibility to occupy an ADU, the household's gross income must always be
considered. However, if a tenant goes over the income guidelines at recertification, the
owner/agent must raise the over income tenant’s rent as soon as the lease permits in
accordance with the terms of the lease (see Chapter 2). The AHP does not require interim rent
adjustments.
3.16 Annual Recertification
All households occupying an ADU must be recertified at least annually from the date of
occupancy. Annual recertifications must be effective on or before the occupancy anniversary
date of the previous certification. Owner/Agent may align recertification dates with other
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program certifications or so that all units in the property are recertified at one time during the
year. However, if a period of twelve (12) months passes without a recertification being
completed for any ADU, the unit is considered out of compliance. If the requirement to
recertify is included in an ADU lease or addendum, tenant refusal to comply can be considered
a violation of the lease and is grounds for termination.
Income must be third party verified in every 3rd year of the affordability period, not tenancy.
3.17 Tenant Files
Owner/Agent must maintain a tenant file for each ADU. All permanent documents must be
kept together so they are accessible at each compliance review (income certification and
supporting documentation, lease/AHP addendum, etc.). Annual recertification information,
including the tenant questionnaires, release forms, verifications, and annual inspection reports
must be grouped together by year, with the most recent year on top for review.
The tenant files must contain the following:
• HRA Government Data Practices Act Statement
• Household Questionnaire
• Acceptable verifications of income and assets
• Verification of student eligibility
• Tenant Income Certification (Initial Certification and Annual Recertifications)
• Signed lease agreement and AHP addendum (if needed)
• Move in inspection report
• Lead based paint acknowledgements (rental rehabilitation only; built pre-1978)
All move out files should also contain the following:
• Written 30-day (or greater) notice to vacate (if not available – document in file)
• Move out inspection report (both parties signed and dated)
• Security deposit refund (check number and date) or letter of intent to withhold security
deposit within 14 days of move out
• Itemized list of costs charged to tenant within 45 days
Tenant records, including income verifications, development rents, and unit inspections must
be retained for the most recent five year period, until five years after the affordability period
terminates.
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Chapter 4 – Reporting Requirements
The owner/agent must maintain a report of all tenants residing in each ADU at the time of
application through the end of the affordability period and submit annual reports to HRA in a
form and manner requested by HRA.
Annual compliance reports are due to HRA by March 1 or as otherwise specified by HRA, of
each year during the affordability period. If the due date falls on a weekend or a holiday,
reports are due the following business day. Reports and other required documents must be
submitted as directed by HRA on an annual basis.
4.01 Annual Owner/Agent Certifications
Complete the Owner/Agent Certification to certify compliance with AHP requirements for the
preceding calendar year. Owner/Agent Certifications must be printed, signed and dated by the
authorized Owner/Agent Representative, then scanned and submitted as directed by HRA on
an annual basis.
4.02 Compliance Reports
HRA will annually monitor AHP compliance by reviewing annual Owner/Agent Certifications and
analyzing compliance information submitted by the owner/agent. Failure to submit the
Owner/Agent Certification and/or update the report on all units and their related activity by
the due date will constitute noncompliance with the AHP and the related loan documents.
4.03 Utility Allowance Source Document
Owners/Agents must submit the utility allowance source documents applicable to the reporting
period. Multiple utility allowance source documents may apply to one reporting period.
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Chapter 5 – Compliance Inspections
Compliance inspections (file reviews) will be conducted every 3 years. This coincides with the
tax credit monitoring schedule, if applicable. When possible, efforts will be made to combine
AHP reviews with tax credit monitoring.
Inspections may be conducted more frequently if HRA determines it to be necessary based on
concerns raised during a previous review or other information.
The compliance inspection includes, but is not limited to, an inspection of at least 20%, but up
to 50%, of the ADU tenant files (with a minimum of four (4) units). Additionally, owners/agents
of these properties must annually certify that each building and all units are suitable for
occupancy and in compliance with State and local health, safety, and other applicable codes,
ordinances and requirements.
HRA will contact the owner/agent in advance to schedule the tenant file review. The property
inspection and tenant file review may be conducted at the same time or may be conducted
separately by different HRA staff.
5.01 Physical Inspections
The goal of the physical inspection is to ensure that the property and units are being well
maintained and in compliance with State and local health, safety, and other applicable codes,
ordinances and requirements.
Owners/Agents should conduct routine property inspections and perform any needed
maintenance to ensure that the property continually complies with all applicable requirements.
5.02 Review of Tenant Files and Property Records
During the tenant file review, HRA staff will review tenant income certifications, third party
verifications or other forms of income documentation, leases, lead based paint disclosure
forms, and other management information for selected units.
HRA staff will also review the following property information:
• Utility Allowances and supporting documentation
• Current written tenant selection plan, occupancy policy and/or house rules if changes
were made since the last review
• Current lease and lease addenda
• Affirmative Fair Housing Marketing Plan (if applicable)
• Advertising
• Equal Housing Opportunity posters, logos
• Correspondence
• Marketing plans
• Tenant ledgers for all units inspected
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Chapter 6 – Correction and Consequences of Non-Compliance
If HRA does not receive the required certifications and/or compliance reports when due, or
discovers by audit, inspection, or review, or in some other manner, that the property is not in
compliance with the requirements of the AHP, or with the property’s loan documents, including
the enforcement agreement, the HRA will notify the owner/agent as soon as possible.
6.01 Notice to Owner/Agent
HRA will provide prompt written notice to the owner/agent of an AHP assisted property if HRA
does not receive the annual Owner/Agent Certification and income and occupancy report by
the required due date. HRA will also notify the owner/agent if it does not receive or is not
permitted to inspect the tenant income certifications, supporting documentation, and rent
records, or discovers by inspection, review, or in some other manner, that the property is not in
compliance with the requirements of the AHP or with the property’s loan documents, including
the enforcement agreement.
6.02 Correction Period
The correction period will be established by the HRA and set forth in a Notice of Noncompliance
to the owner and its agent. HRA may extend the correction period if HRA determines there is
good cause for granting the extension. Requests for an extension must be in writing from the
owner/agent, must be received by HRA no later than the last day of the correction period
identified on the Notice of Noncompliance, and must include an explanation of the efforts to
correct the noncompliance and the reason the extension is needed.
6.03 Owner’s/Agent’s Response
HRA will review the owner’s/agent’s response and supporting documentation, if any, to
determine whether the noncompliance has been clarified, corrected or remains out of
compliance.
Clarified noncompliance is, for example, where income eligibility was not properly documented
and the inspector cannot make a reasonable determination that the unit is in compliance but
the owner/agent conducts a retroactive (re)certification which completely and clearly
documents the sources of income and assets that were in place at the time the certification
should have been effective, and applies income and rent limits that were in effect on that date.
If documentation is complete and it supports that the tenant was eligible as of the effective
date, the file is considered clarified.
Corrected noncompliance is when a violation is observed and there is a period of time during
which the unit is out of compliance, but the unit is brought back into compliance. For example,
a late certification or re-certification is out of compliance on the certification due date, and
back in compliance as of the date the last tenant signs the Tenant Income Certification.
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Uncorrected noncompliance is a violation that is not corrected or clarified by the end of the
correction period.
Failure to correct all noncompliance could result in extension of the end of the POA, loss of Tax
Increment Financing, or other legal remedies and may also affect the owner’s/agent’s eligibility
for financing from the HRA under any or all its programs.
HRA reserves the right to conduct a follow-up inspection if documentation is not sufficient to
confirm that all life threatening health and safety violations and any other hazardous
deficiencies have been corrected.
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Chapter 7 – Requests for Action
7.01 Sale or Transfer
Any property owner must provide prior written notice to the HRA before and sale or transfer of
the property. The notice will provide that the new owner/agent acknowledges that the terms
and conditions of the Inclusionary Housing Program as set forth in the governing documents
recorded against the property remain in place.
N-1 4840-2988-5825\1
EXHIBIT N
DECLARATION OF COVENANTS AND RESTRICTIONS
(Affordable Housing)
THIS DECLARATION is made as of the _____ day of ______________, 20___, by
ORION 4500 FRANCE, LLC, a Delaware limited liability company (“Declarant”).
RECITALS
A. Declarant, is the owner of certain real properties situated in the city of Edina,
County of Hennepin, State of Minnesota, legally described in Exhibit A attached hereto and
incorporated herein by reference (the “Property”).
B. The Housing and Redevelopment Authority of Edina, Minnesota, a public body corporate and politic organized and existing under the laws of the State of Minnesota (the
“Authority”); the City of Edina Minnesota, a Minnesota statutory city (the “City”); and
Declarant entered into that certain Redevelopment Agreement (as amended, the “Contract”)
dated December 18, 2018.
C. The Contract provides for the redevelopment of the Property by Declarant in coordination with the Authority and with the cooperation and assistance of City and provides
for the expenditure of certain public funds to assist in such redevelopment of the Property and
construction of certain improvements thereon, including an approximately 46-unit apartment
building (the “Project”).
D. The City, by Resolution No _________, dated __________________, 2018, approved Declarant’s development plan and rezoning for the Project (“Approval”).
E. Pursuant to the Contract and as a condition to the Approvals, Declarant has
agreed to impose restrictive covenants upon the Property to ensure that at least three of the
residential units within the Project will remain affordable to certain low-income persons and
households (“Affordable Units”).
F. Declarant, under this Declaration, intends, declares and covenants that the
restrictive covenants set forth herein governing the use, occupancy and transfer of the Project
shall be and are covenants running with the Property for the Term stated herein and binding
upon all subsequent owners of the Property for such Term, and are not merely personal
covenants of Declarant.
NOW, THEREFORE, said Declarant makes the following Declaration, hereby specifying
that said Declaration shall constitute covenants to run with the land and shall be binding on all
parties in interest and their respective successors and assigns:
ARTICLE I.
N-2 4840-2988-5825\1
OCCUPANCY, INCOME AND RENT RESTRICTIONS
Section 1.1. Declarant shall lease the Affordable Units only to individuals or
households (each a “Qualified Household”) whose gross annual income is fifty percent (50%) or
less of the area median income (including adjustments for family size) , as determined by the
U.S. Department of Housing and Urban Development’s (“HUD”) Area Median Income for the Minneapolis-Saint Paul-Bloomington Metropolitan Statistical Area (“AMI”).
Section 1.2. The Affordable Units shall bear annual rents not greater than the rental
rate limits for such Qualified Households (adjusted for bedroom count and including utilities) as
published by HUD, as such rental rate limits are updated annually by HUD (and if HUD ceases
to publish and update such rates, such annual rents for the Affordable Units shall not be not greater than thirty percent (30%) of fifty percent (50%) of AMI, as the case may be with respect
to the applicable Qualified Household, less the monthly allowance for utilities and services to be
paid by the tenant). No security deposit shall be required in excess of the amount of one month
of rent in connection with any Affordable Unit.
Section 1.3. Declarant covenants and agrees that no tenant household will be approved by Declarant for initial occupancy of an Affordable Unit unless and until Declarant shall have
determined (through verification of income, assets, expenses, and deductions) whether such
tenant household is a Qualified Household. Declarant must re-examine and verify the income of
each tenant household living in an Affordable Unit at least annually.
Section 1.4. Residential units of the Project shall qualify as Affordable Units despite temporary noncompliance with this Article I if the noncompliance is caused by increases in the
incomes of existing tenant household and if actions satisfactory to the Authority are being taken
to ensure that all vacancies are filled in accordance with this Article I until the noncompliance is
corrected.
ARTICLE II. ADDITIONAL REPRESENTATIONS, COVENANTS, AND WARRANTIES OF
DECLARANT
Section 2.1. Declarant shall maintain the Affordable Units and the Project in
compliance with all requirements of the Contract and Approvals, any requirements of any lender whose loan is secured by a mortgage to which Declarant is a party or by which it or the Project is
bound, and applicable ordinances, building and use restrictions, code-required building permits,
and any requirements with respect to licenses, permits, and agreements necessary for the lawful
use and operation of the Project.
Section 2.2. The execution and performance of this Declaration by Declarant (i) will not violate or, as applicable, have not violated any provision of law, rule or regulation, or any
order of any court or other agency or governmental body, and (ii) will not violate or, as
applicable, have not violated any provision of any indenture, agreement, mortgage, mortgage
note, or other instrument to which Declarant is a party or by which it or the Project is bound, and
(iii) will not result in the creation or imposition of any prohibited encumbrance of any nature.
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Section 2.3. Declarant shall not refuse to lease an Affordable Unit to the holder of a
voucher or certificate of eligibility under Section 8 of the United States Housing Act of I937
solely because of the status of the prospective tenant as such a holder.
Section 2.4. Declarant shall obtain the consent to this Declaration of any prior recorded
lien-holder for the Project and shall cause such liens to be subordinated to this Declaration.
Section 2.5. Declarant has not and will not execute any other agreement with
provisions contradictory to, or in opposition to, the provisions hereof and that, in any event, the
requirements of this Declaration are paramount and controlling as to the rights and obligations
set forth herein and supersede any other document's provisions in conflict herewith.
Section 2.6. Subject to the terms and conditions of the Contract and the Approvals, Declarant may sell, transfer or exchange the Project, the Property or any portion thereof, but
Declarant shall notify the Authority and City in writing at least thirty (30) days prior to such sale,
transfer or exchange, and use commercially reasonable efforts to obtain the acknowledgment of
any buyer or successor or other person acquiring the Project or any interest therein that such
acquisition is subject to the covenants and restrictions of this Declaration (and to the requirements of Contract incorporated herein). Failure by Declarant to obtain such
acknowledgment shall not be deemed to impair the covenants and restrictions of this Declaration.
Section 2.7. Declarant shall not demolish any part of the Project or substantially
subtract from any real or personal property of the Project or permit the use of any residential unit
for any purpose other than rental housing during the Term of this Declaration unless required by law.
Section 2.8. Promptly upon any casualty loss or damage to all or any part of the Project
(including subsurface structural support elements), Declarant shall proceed with diligence to
restore the Project to the condition prior to the casualty with the insurance proceeds obtained
with respect to the loss or damage to the extent the insurance proceeds recovered allow for such rebuilding; provided, however, Declarant shall not be obligated to rebuild the Project if any of
Declarant’s lenders or loan agreements (whether executed before or after the date hereof) do not
permit such rebuilding or require that insurance amounts recovered with respect to any loss or
damage to the Project be paid directly to the lender.
ARTICLE III. ENFORCEMENT OF COVENANTS AND RESTRICTIONS
Section 3.1. Declarant shall submit a rent roll, including the income and household size
of the tenants of the Affordable Units, and the proposed rent schedule to the City (or such
subdivision of the City administrating the City’s affordable housing program) annually for approval on the basis of compliance with this Declaration, with an initial deadline for submission
of three (3) months following the Commencement Date (defined below) and thereafter an annual
deadline for submission of September 1st for the Term of this Declaration.
Section 3.2. Declarant shall permit, during normal business hours and upon reasonable
notice, any duly authorized representative of the Authority or City, to inspect any books and
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records of Declarant regarding the Project with respect to the incomes of tenant households of
Affordable Units the rents charged for Affordable Units to ensure compliance with the
requirements of this Declaration. Declarant shall, upon annual invoicing, reimburse the City (or
such subdivision of the City administrating the City’s affordable housing program) for third-
party expenses related to monitoring of Declarant’s compliance with this Declaration, which such costs shall initially not exceed $500.00 per year (plus any additional costs necessitated by
re-inspections for noncompliance with this Declaration) and thereafter be subject to reasonable
adjustment from time to time.
Section 3.3. At the City’s or Authority’s request, Declarant will submit any other
information, documents or certifications that Declarant, in its reasonable discretion, deems necessary to substantiate Declarant’s compliance with the requirements of this Declaration.
Section 3.4. Pursuant to the terms of the Contract, the Affordable Units shall be subject
to the terms and condition of the Inclusionary Housing Policy Program Guide to be adopted by
the City.
ARTICLE IV. TERM
Section 4.1. This Declaration, and the covenants and restrictions contained herein,
shall continue in full force and effect for a period (the “Term”) commencing on the date a
Certificate of Completion (as defined in the Contract) is issued by the Authority for the Minimum Improvements (as defined in the Contract) (“Commencement Date”) and ending on
the fifteen (15) year anniversary of the Commencement Date.
Section 4.2. Declarant’s obligation to operate the Project subject to this Declaration for
the Term is independent of the existence and continuance of any tax increment financing and
other public assistance contemplated or given by the Authority or the City to Declarant under the Contract (“Public Assistance”). The provisions of this Declaration are intended to survive the
termination or extinguishment of any Public Assistance, any mortgage securing the same, and
any other security instruments placed of record in connection with the Public Assistance and to
survive the termination of any subsequent financing or security instruments placed of record by
other lenders. This Declaration automatically ceases to be of any force or effect on the date fifteen (15) year anniversary of the Commencement Date without the execution or recording of
any additional documents
ARTICLE V.
REPRESENTATIVES OF BENEFITED PARTIES
The Authority and the City are designated as the sole and exclusive representative(s) of
any and all other persons or entities also benefited by the covenants, conditions and restrictions
of this Declaration, insofar as the enforcement, the construction, the interpretation, the
amendment, the release and/or the termination of such covenants, conditions and restrictions are
concerned. This designation and appointment shall also run with the Property and the Project and
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is hereby made and agreed to by Declarant, its successors and assigns, and any subsequent
transferee of any interest in the Project, or any part thereof, from Declarant.
REMEDIES, ENFORCEABILITY
In the event of a violation or attempted violation of any of the covenants, conditions or restrictions herein contained, the Authority or the City may institute and prosecute any
proceeding at law or in equity to abate, prevent or enjoin any such violation or to specifically
enforce the covenants, conditions and restrictions therein set forth, or to recover monetary
damages caused by such violation or attempted violation. Unless terminated as provided herein,
the provisions hereof are imposed upon and made applicable to the Project, and shall be enforceable against Declarant, each purchaser, grantee, owner or lessee of the Project and the
respective heirs, legal representatives, successors and assigns of each. No delay in enforcing the
provisions of said covenants, conditions and restrictions as to any breach or violation shall
impair, damage or waive the right to enforce the same or to obtain relief against or recover for
the continuation or repetition of such breach or violation or any similar breach or violation thereof at any later time or times.
AMENDMENT, TERMINATION OF COVENANTS
Section 7.1. The provisions of this Declaration shall not be amended, terminated or
deleted during the Term hereof, except by an instrument in writing duly executed by the
Authority, the City, and Declarant, their respective successors and assigns, or in accordance with Section 7.2 of this Article VII.
Section 7.2. Unless sooner terminated, amended or deleted as provided in this Article
VII, the covenants, conditions and restrictions contained herein shall continue in full force and
effect through the Term hereof and shall thereupon terminate and be of no further force or effect.
ARTICLE VIII. COVENANTS RUNNING WITH THE LAND
Declarant intends, declares and covenants, on behalf of itself and all future owners and
operators of the Property and the Project during the Term, that this Declaration and the covenants
and restrictions set forth in this Declaration regulating and restricting the use, occupancy and transfer of the Property and the Project (i) shall be and are covenants running with the Property
and the Project, encumbering the Property and the Project for the Term, binding upon
Declarant’s successors in title and all subsequent owners and operators of the Property and the
Project; (ii) are not merely personal covenants of Declarant; and (iii) shall bind Declarant (and
the benefits shall inure to the Authority and the City) and its respective successors and assigns during the Term. Declarant hereby agrees that any and all requirements of the laws of the State
of Minnesota to be satisfied in order for the provisions of this Declaration to constitute deed
restrictions and covenants running with the land shall be deemed to be satisfied in full and that
any requirements of privileges of estate are intended to be satisfied, or in the alternate, that an
equitable servitude has been created to insure that these restrictions run with the land. For the Term, each and every contract, deed or other instrument hereafter executed conveying the
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Property and the Project or portion thereof shall expressly provide that such conveyance is
subject to this Declaration; provided, however, that the covenants contained herein shall survive
and be effective regardless of whether such contract, deed or other instrument hereafter executed
conveying the Property and the Project or portion thereof provides that such conveyance is
subject to this Declaration. MISCELLANEOUS
Section 9.1. Except as otherwise expressly provided in this Declaration, a notice,
demand or other communication under this Declaration by any party to any other shall be
sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, and in the case of Declarant, is addressed to or
delivered personally to Declarant at:
Declarant at: Orion 4500 France, LLC
Attn: Ted Carlson
4530 West 77th Street, Suite 365 Edina, MN 55435
The Authority at: Housing and Redevelopment Authority of Edina, Minnesota
Attention: Executive Director
4801 West 50th Street
Edina, MN 55424
with a copy to: Dorsey & Whitney LLP
Attention: Jay R. Lindgren
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
The City at: City of Edina Attention: City Manager
4801 W. 50th Street
Edina, MN 55424
with a copy to: Dorsey & Whitney LLP
Attention: Jay R. Lindgren 50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 9.2. This Declaration will be governed and construed in accordance with the laws of the State of Minnesota.
Section 9.3. If any provisions hereof shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining portions shall not in any way be affected or
impaired.
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[SIGNATURES APPEAR ON FOLLOWING PAGES]
N-8
[Signature Page to Declaration of Covenants and Restrictions] 4840-2988-5825\1
IN WITNESS WHEREOF, Declarant has caused this Declaration to be executed as of
the date first written above
ORION 4500 FRANCE, LLC,
a Delaware limited liability company
By: Orion Investments Edina II, LLC,
a Minnesota limited liability
company
Its: Manager
By:
Name:
Its:
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of _________, 20___, by
______________________, the _________________ of ORION INVESTMENTS EDINA II,
LLC, a Minnesota limited liability company, as the manager of ORION 4500 FRANCE, LLC, a
Delaware limited liability company, on behalf of the limited liability companies.
Notary Public
THIS DOCUMENT WAS DRAFTED BY: Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402-1498
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[Exhibit A to Declaration of Covenants and Restrictions] 4840-2988-5825\1
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
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CONSENT AND SUBORDINATION
The undersigned, ___________________, a ___________________, holder of that
certain [Mortgage] executed by Orion 4500 France, LLC, a Delaware limited liability company,
dated ________________, 20___, filed ________________, 20____, as Document No.
___________, in the office of the County Recorder in and for Hennepin County, Minnesota, and filed ________________, 20____, as Document No. ___________, in the office of the Registrar
of Titles in and for Hennepin County, Minnesota, in favor of ________________ (the
“Mortgage”), hereby consents to the foregoing Declaration of Covenants and Restrictions (the
“Declaration”), and hereby subordinates the Mortgage and all of its right, title and interest in the
Property to the Declaration.
___________________________________,
a ___________________
By:
Printed Name:
Title:
STATE OF ______________ )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of ____________,
201___, by ____________________, the _________________ of ___________________, a ___________________, on behalf of the ___________________.
(Signature of Person Taking Acknowledgment)
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EXHIBIT O
Form of Right of First Purchase Option Agreement
RIGHT OF FIRST PURCHASE OPTION AGREEMENT
between THE HOUSING AND REDEVELOPMENT AUTHORITY OF EDINA, MINNESOTA
and
ORION 4500 FRANCE, LLC
Dated as of ________________ ___, 20____
THIS DOCUMENT WAS DRAFTED BY:
Dorsey & Whitney LLP 50 South Sixth Street, Suite 1500
Minneapolis, MN 55402-1498
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RIGHT OF FIRST PURCHASE OPTION AGREEMENT (4500 France)
THIS RIGHT OF FIRST PURCHASE OPTION AGREEMENT (this “Agreement”) is
made and entered into this ___ day of ____________, 20___ (“Effective Date”), by and between
the HOUSING AND REDEVELOPMENT AUTHORITY OF EDINA, MINNESOTA, a public body corporate and politic organized and existing under the laws of the State of Minnesota (the
“Authority”), and ORION 4500 FRANCE, LLC, a Delaware limited liability company (“Owner”).
RECITALS:
A. The City of Edina, Minnesota, a Minnesota statutory city (the “City”), the
Authority, and Owner, as “Developer”, are parties to that certain Redevelopment Agreement dated December 18, 2018 (the “Contract”).
B. The Contract provides for the redevelopment by Owner of certain real property
legally described on the attached Exhibit A (referred to herein and in the Contract as the
“Redevelopment Area”) and located within the 44th & France 2 Tax Incremental Financing
District, established by the Authority pursuant to Resolution No. 2018-100, in coordination with the Authority and with the cooperation and assistance of the City.
C. The Contract provides for the expenditure of certain public funds to assist in the
redevelopment of the Redevelopment Area with certain “Minimum Improvements” consisting
generally of a new 4-story, mixed use project, including an approximately 46-unit apartment
building and approximately 6,500 square feet of ground-level restaurant and retail space.
D. The Contract requires that at least three of the residential units within the Minimum
Improvements (the “Affordable Units”) will be leased at rates that are considered affordable to
individuals or households earning less than 50% of the U.S. Department of Housing and Urban
Development’s Area Median Income (“AMI”) for the Minneapolis-Saint Paul-Bloomington
Metropolitan Statistical Area.
E. The Authority and Owner have agreed in the Contract that Owner shall grant the
Authority the first right to purchase one or more of the Affordable Units (the “Purchase Right”) in
the event the Affordable Units are converted from rental units to for-sale units, as more particularly
set forth herein.
F. All capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Contract.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the others as follows:
1. Right to Purchase. Upon and subject to the terms hereinafter set forth, Owner
hereby grants to the Authority, and the Authority hereby accepts, an option to purchase (“Purchase Option”) one or more of the Affordable Units, together with an undivided interest in all common
elements, all easements and rights benefiting or appurtenant to the Affordable Units (collectively,
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the “Property”) upon the occurrence of a For-Sale Conversion (as defined below). The Purchase
Option shall terminate only upon the occurrence of either of the following: (a) the Authority issues
a Rejection Notice or fails to timely issue an Election Notice, as set forth in Section 3 below; (b)
the execution of a written termination by the then-fee title owner of the Property and the Authority;
or (c) the 25th anniversary of the Effective Date (the “Term”).
2. For-Sale Conversion. In the event Owner elects to convert (a “For-Sale
Conversion”) all or part of the apartment component of the Minimum Improvements from rental
units into condominium units, cooperative units, or otherwise subdivide such units into separately
transferable and taxable housing units (“Separate Units”), Owner shall include the Affordable
Units in such For-Sale Conversion, such that each Affordable Unit into also converted into a Separate Unit. Owner shall give the Authority prompt notice of Owner’s election to proceed with
a For-Sale Conversion and the Owner shall give the Authority notice of date (the “Conversion
Date”) on which Owner causes the operative documents effectuating the For-Sale Conversion to
be recorded in the office of the County Recorder in and for Hennepin County, Minnesota and/or
the office of the Registrar of Titles in and for Hennepin County, Minnesota, as applicable (e.g., recording of the common interest community declaration and plat, registered land survey, etc.),
which such notice shall be delivered to the Authority no later than two business days after the
Conversion Date.
3. Election Period. The Authority shall have 120 days after the Conversion Date to
notify Owner of the Authority’s desire, in its sole discretion, and subject to approval by the Authority’s board of commissioners, to purchase one or more of the Affordable Units and related
Property subject to the terms and conditions of the Agreement (the “Election Period”). Prior to the
expiration of the Election Period, the Authority shall notify Owner that the Authority either (a)
elects to so purchase one or more of the Affordable Units (“Election Notice”) (which such Election
Notice will specify which Affordable Units the Authority elects to purchase) or (b) waives it right to purchase one or more of the Affordable Units (“Rejection Notice”). In the event the Authority
issues a Rejection Notice or fails to timely issue an Election Notice, then the Purchase Option shall
be deemed terminated and of no further force or effect, and Owner shall be free to sell the
Affordable Units on terms and conditions acceptable to Owner in its sole discretion.
4. Documents; Inspection. Within 10 days after the Conversion Date, Owner shall either make available to the Authority copies of all documents, reports, studies, tests, drawings,
surveys, agreements, contracts, and all other documentation relating to the Property in Owner’s
possession or control or to which Owner has knowledge or access (“Property Documents”). During
the Election Period (or until the Authority issues a Rejection Notice), the Authority may examine
the Property Documents and Owner shall allow the Authority, and the Authority’s employees, agents, and contractors, access to the Property upon reasonable notice from the Authority without
charge and for the purpose of the Authority’s reasonable inspection, investigation and testing of
the same.
5. Title Examination. Within 15 days after the Conversion Date, Owner shall deliver
to the Authority a current commitment (the “Commitment”) for an ALTA Form Owner’s Policy of Title Insurance insuring title to the Property in the amount of the Purchase Price issued by a
reputable title company (the “Title Company”), legible copies of all documents cited, raised as
exceptions or noted in the title commitment and Owner’s most recent survey of the Redevelopment
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Area (provided, the Authority may elect to obtain a new survey at its sole cost and expense)
(collectively [including the new survey if so obtained], the “Title Evidence”). During the Election
Period, the Authority may make written objections (“Objections”) to the Title Evidence. All matter
shown by the Title Evidence and not objected to by the Authority shall be a “Permitted
Encumbrance” hereunder. Owner shall not have any obligation to cure or attempt to cure any Objections which cannot be cured solely by the payment of money, however Owner shall use
commercially reasonable efforts to cure the Objections.
6. Purchase Terms. The following provisions are applicable to the Purchase Option:
(a) Purchase Price. The purchase price per each Affordable Unit (and related
Property) (the “Purchase Price”) purchased by the Authority pursuant to the Purchase Option shall be the lesser of:
(i) the amount considered affordable for a household of two at 120% of
AMI as of the Conversion Date (“Income Limit”), which such amount shall equal
the maximum mortgage financing available for such Affordable Unit where the
annual sum of the following “Mortgage Costs” equal 30% of the Income Limit, plus 3.01% of such maximum mortgage financing to adjust for the required equity:
(A) principal and interest payments of a first mortgage based on a 30-year, level
amortization mortgage loan with a fixed interest rate at the rate published by the
Minnesota Housing Finance Agency (“MHFA”) as of the Conversion Date for the
MHFA’s “Step-Up” mortgage program, assuming a 97% loan-to-value ratio, conventional financing under the HFA Preferred™ or HFA Advantage ™
programs, no upfront paid mortgage insurance, and the MHFA 1.5% Service
Release Premium rate option, or a comparable rate if the MHFA ceases to exists or
ceases to publish such rates; (B) the Affordable Unit’s property taxes as reasonably
estimated by the Authority based on the existing tax levy; (C) mortgage insurance (if any) payments which would be allowed by the MHFA in connection with the
interest rate program described in clause (A); and (D) market insurance rates for
similar units (but excluding homeowner association fees and dues) (the “Affordable
Price”); and
(ii) the “Fair Market Value” of such Affordable Unit(s), which shall mean the fair market value of the Affordable Unit(s) that an independent third party
would be willing to pay for the Affordable Unit(s) in an arm’s length transaction
without any compulsion to proceed, which shall be determined as follows: if the
parties are unable to agree on the purchase price within 30 days after the Conversion
Date, then the Authority and Owner shall each select a qualified MAI appraiser to determine the Fair Market Value for the Affordable Unit(s) within 10 days after
said 30-day period. If Owner fails to give notice identifying an appraiser within the
time provided, Owner has waived the right to identify an appraiser and the decision
of the Authority’s appraiser controls. If two appraisers are selected, they must
within 15 days after the selection of the second agree to a third appraiser. If the two appraisers fail to identify the third appraiser within such 15-day period, the either
the Authority or Owner may petition the district court (or its equivalent) having
jurisdiction over the Property for the appointment of the third appraiser. The three
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appraisers must each, within 30 days after the appointment of the third appraiser,
simultaneously deliver to the Authority and Owner their expert opinions of the Fair
Market Value in question. The Fair Market Value is the average of the three
appraisals unless one appraisal is more than ten percent (10%) greater or lesser than
the average of the other two appraisals, in which case that appraisal is disregarded, and the average of the remaining appraisals is the Fair Market Value. Each party
must pay the cost of the appraiser selected by it and one-half of the cost of the third
appraiser. All appraisers must be disinterested and must have the designation, MAI,
SRA or equivalent and must have not less than five years’ experience appraising
real estate in the business market wherein the Property is located. The appraisers may, but need not, present formal written appraisals supporting their opinion but
must, in any event, certify that the report was conducted in accordance with
professional standards. The decision of this appraisal process is binding upon the
parties and must not be subject to appeal to a court or other body except based upon
fraud.
Notwithstanding anything to contrary herein, if the Authority exercises its Purchase Option
hereunder during the first 15 years after the Effective Date, then the Authority may, but is not
required to, elect the Affordable Price as the Purchaser Price, without the parties making a
determination of the Fair Market Value. If the Authority exercises its Purchase Option hereunder
after such initial 15-year period, but before the expiration of the Term, Owner may require that the Purchase Price equal the Fair Market Value.
(b) Closing. The closing of the purchase and sale pursuant to the Purchase
Option (the “Closing”) shall occur no later than 30 days after the Authority issues its
Election Notice (the “Closing Date”). Owner agrees to deliver possession of the Property
to the Authority on the Closing Date.
(c) Owner’s Closing Deliveries. On the Closing Date, Owner shall execute and
deliver to the Authority the following, all in form and content reasonably satisfactory to
the Authority: (i) a limited warranty deed (the “Deed”) conveying the applicable Property
specified in the Election Notice to the Authority subject only to the Permitted
Encumbrances; (ii) a non-foreign affidavit, properly executed, containing such information as is required by Internal Revenue Code Section 1445(b)(2) and its regulations; and (iii)
such affidavits, certificates or other documents as may be reasonably required by Title
Company in order to record the Deed and issue an ALTA Form Owner’s Policy of Title
Insurance insuring title to the Property in the amount of the Purchase Price subject only to
the Permitted Encumbrances (the “Title Policy”).
(d) The Authority’s Closing Deliveries. On the Closing Date, the Authority will
execute and/or deliver to Owner the following: (i) Purchase Price; and (ii) such affidavits,
certificates or other documents as may be reasonably required by Title Company in order
to record the Deed and issue the Title Policy.
(e) Prorations. If the Authority issues its Election Notice, Owner and the Authority agree to the following prorations and allocation of costs regarding this
Agreement and Property purchased by the Authority:
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(i) Title Charges and Closing Fee. Owner will pay all costs for the
Commitment. The Authority will pay all title insurance premiums required for the
issuance of the Title Policy, including the cost of all additional endorsements
thereto. Owner and the Authority will each pay one-half of any closing fee or charge
imposed by Title Company.
(ii) Taxes. Owner shall pay all state deed tax or transfer tax or fee
payable in connection with this transaction. Special assessments, if any, shall be
paid in full by Owner on or before the Closing Date. Real estate taxes shall be
prorated as of the Closing Date. Accordingly, Owner shall pay all real estate taxes
due and payable up to the Closing Date and the Authority shall pay all real estate taxes due and payable on and after the Closing Date.
(iii) Other Income and Expenses. All income (including, without
limitation, rents) and other expenses shall be prorated and adjusted as of the Closing
Date.
(iv) Attorney’s Fees. Each of the parties will pay its own attorney’s fees.
(f) Warranties and Representations by Owner. Owner warrants and represents
to the Authority as follows:
(i) Owner has the requisite power and authority (including all necessary
approvals and authorizations) to enter into and perform this Agreement and those
closing documents to be signed by it; such documents have been duly authorized by all necessary action on the part of Owner and have been or will be duly executed
and delivered; such execution, delivery and performance by Owner of such
documents does not and will not conflict with or result in a violation of any
judgment, order, or decree of any court or arbiter to which Owner is a party, or any
law, statute, rule or regulation by which Owner is bound; such documents are and will be valid and binding obligations of Owner, and are and will be enforceable in
accordance with their terms.
(ii) As of the Closing Date, the Property is not subject to any leases or
possessory rights of any party other than Owner.
(g) As-Is. Except as herein expressly stated, the Authority is purchasing the Property (or the applicable part thereof) based upon its own investigation and inquiry and
is not relying on any warranty or representation of Owner or any other person and is
agreeing to accept and purchase the Property “as is, where is” subject to the conditions of
examination herein set forth and the express warranties and representations herein
contained.
(h) Condemnation; Casualty. If eminent domain proceedings are commenced
against all or a part of the Property, or if all or a substantial part of the property is damaged
by fire or other casualty, on or before the Closing Date, Owner shall immediately give
written notice to the Authority, and the Authority shall have the right to terminate any
exercised Purchase Option by giving written notice of such termination to Owner within
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30 days after Owner’s notice of such proceedings is given to the Authority. If the Authority
shall fail to give such notice, then the parties shall proceed to Closing, and Owner shall
assign to the Authority all rights to appear in and receive any award from such proceedings.
(i) Broker’s Commission. Owner and the Authority warrant and represent to
each other that they have dealt with no brokers, finders or the like in connection with this transaction, and agree to indemnify and hold each other harmless from all claims, damages,
costs or expenses of or for any fees or commissions owing to any brokers, finders or the
like resulting from their actions or agreements regarding the execution or performance of
this Agreement, and will pay all costs of defending any action or lawsuit brought to recover
any such fees or commissions incurred by the other party, including reasonable attorneys’ fees.
(j) Remedies. If the Authority defaults in performance of its obligations under
this Agreement, Owner shall have the right to terminate this Agreement in the manner
provided by Minn. Stat. Sec. 559.21 (inclusive of a minimum 30-day notice and right to
cure) as its sole and exclusive remedy. If Owner defaults in performance of its obligations under this Agreement, the Authority will provide written notice thereof to Owner. If Owner
fails to cure such default within 30 days after such notice, the Authority shall have the right,
in addition to all other rights under applicable law, including the right to seek and obtain
specific performance of this this Agreement.
7. Notices. Except as otherwise expressly provided in this Agreement, a notice, demand or other communication under this Agreement by any party to any other shall be
sufficiently given or delivered if it is (a) dispatched by registered or certified mail, postage prepaid,
return receipt requested, (b) sent by recognized overnight courier (such as Federal Express), or (c)
delivered personally, as follows:
In the case of Owner: Orion 4500 France, LLC Attn: Ted Carlson
4530 West 77th Street, Suite 365
Edina, MN 55435
In the case of the Authority: Housing and Redevelopment Authority of Edina,
Minnesota Attention: Executive Director
4801 West 50th Street
Edina, MN 55424
with a copy to: Dorsey & Whitney LLP
Attn: Jay Lindgren 50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
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8. Successors and Assigns. This Agreement and the purchase options set forth herein
shall inure to the benefit of the Authority and its successors and assigns and be binding upon Owner
and the heirs, personal representatives, successors and assigns of Owner, and upon any individual
or entity acquiring the Property or any portion thereof, or any interest therein, whether by operation
of law or otherwise.
9. Waiver. The waiver by any party hereto of any breach or default of any provisions
anywhere contained in this Agreement shall not be deemed to be a waiver of any subsequent breach
or default thereof. No provision of this Agreement shall be deemed to have been waived by any
party hereto unless such waiver is in writing and signed by the party charged with any such waiver.
10. Amendments. Except as otherwise herein provided, and not otherwise, no subsequent alteration, amendment, change, waiver, discharge, termination, deletion, or addition to
this Agreement shall be binding upon either party unless in writing and signed by both parties.
11. Joinder; Permitted Encumbrance. Except for the mortgagee consent attached
hereto, this Agreement does not require the joinder or approval of any other person and each of
the parties respectfully has the full, unrestricted and exclusive legal right and power to enter into this Agreement for the term and upon the provisions herein recited and for the use and purposes
hereinabove set forth. This Agreement shall constitute a permitted encumbrance under any loan
agreement heretofore or hereafter entered into between Owner and any construction lender or
permanent lender.
12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument.
13. Law Governing. This Agreement will be governed and construed in accordance
with the laws of the State of Minnesota.
[Remainder of page intentionally left blank; signature pages follow]
O-9
[Signature Page to Right of First Purchase Option Agreement (4500 France)] 4814-4505-2801\3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
AUTHORITY:
HOUSING AND REDEVELOPMENT
AUTHORITY OF EDINA, MINNESOTA
By
___________________, Chair
By
___________________, Secretary
STATE OF MINNESOTA ) ) ss.
COUNTY OF
The foregoing instrument was acknowledged before me this ____ day of ____________,
20__, by ___________________ and ___________________, the Chair and Secretary
respectively, of the Housing and Redevelopment Authority of Edina, Minnesota, on behalf of said Authority.
Notary Public
O-10
[Signature Page to Right of First Purchase Option Agreement (4500 France)] 4814-4505-2801\3
OWNER:
ORION 4500 FRANCE, LLC,
a Delaware limited liability company
By: Orion Investments Edina II, LLC, a Minnesota limited liability
company
Its: Manager
By:
Name:
Its:
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of _________, 20___, by ______________________, the _________________ of ORION INVESTMENTS EDINA II,
LLC, a Minnesota limited liability company, as the manager of ORION 4500 FRANCE, LLC, a
Delaware limited liability company, on behalf of the limited liability companies.
Notary Public
O-11
[Exhibit A to Right of First Purchase Option Agreement (4500 France)] 4814-4505-2801\3
EXHIBIT A
Legal Description of the Redevelopment Area
O-12 4814-4505-2801\3
CONSENT AND SUBORDINATION
The undersigned, ___________________, a ___________________, holder of that certain
[Mortgage] executed by Orion 4500 France, LLC, a Delaware limited liability company, dated
________________, 20____, filed ________________, 201__, as Document No. ___________,
in the office of the County Recorder in and for Hennepin County, Minnesota, and filed ________________, 20____, as Document No. ___________, in the office of the Registrar of
Titles in and for Hennepin County, Minnesota, in favor of ________________ (the “Mortgage”),
hereby consents to the foregoing Right of First Purchase Option Agreement (4500 France) (the
“Purchase Option Agreement”), and hereby subjects and subordinates the Mortgage and all of its
right, title and interest in and to the Purchase Option Agreement.
___________________________________,
a ___________________
By:
Name:
Title:
STATE OF ______________ )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of ____________,
20______, by ____________________, the _________________ of ___________________, a ___________________, on behalf of the ___________________.
Notary Public
1
4839-4506-5082\3
MEMORANDUM OF REDEVELOPMENT AGREEMENT
THIS MEMORANDUM OF REDEVELOPMENT AGREEMENT (this “Memorandum”)
is entered into as of December 18, 2018, by and among the CITY OF EDINA, MINNESOTA, a
Minnesota statutory city (“City”); the HOUSING AND REDEVELOPMENT AUTHORITY OF
EDINA, MINNESOTA, a public body corporate and politic organized and existing under the laws
of the State of Minnesota (“Authority”); and ORION 4500 FRANCE, LLC, a Delaware limited liability company (“Developer”).
RECITALS:
A. City, Authority, and Developer (collectively, the “Parties”) have entered into a
certain Redevelopment Agreement dated as of December 18, 2018 (the “Contract”), whereby the
Parties have agreed to various aspects of the redevelopment of certain real property more particularly described on the attached Exhibit A, together with all improvements, tenements,
easements, rights and appurtenances pertaining to such real property, lying and being in Hennepin
County, Minnesota (the “Property”).
B. The Parties wish to give notice of the existence of the Contract.
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. The above recitals are incorporated by reference as if fully set forth herein.
2. Capitalized terms, when not defined herein, shall have the meanings ascribed to
them in the Contract.
3. The Parties have entered into the Contract to set forth the terms and provisions
governing the redevelopment of the Property.
4. This Memorandum has been executed and delivered by the Parties for the purpose
of recording and giving notice that a contractual relationship for the redevelopment of the Property has been created between the Parties in accordance with the terms, covenants and conditions of the Contract.
5. The terms and conditions of the Contract are incorporated by reference into this
Memorandum as if fully set forth herein.
6. This Memorandum may be executed separately in counterparts which, when taken together, shall constitute one and the same instrument.
[Remainder of page left blank intentionally; signature pages follow]
[Signature Page to Memorandum of Redevelopment Agreement (4500 France)]
IN WITNESS WHEREOF, the Parties have executed this Memorandum as of the date first written above.
CITY OF EDINA, MINNESOTA
By James B. Hovland, Mayor
By
Scott H. Neal, City Manager
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of _____________,
2018, by James B. Hovland and Scott H. Neal, the Mayor and the City Manager, respectively, of the City of Edina, Minnesota, on behalf of the City.
Notary Public
[Signature Page to Memorandum of Redevelopment Agreement (4500 France)]
HOUSING AND REDEVELOPMENT AUTHORITY OF EDINA, MINNESOTA
By
James B. Hovland, Chair
By
Robert J. Stewart, Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF
The foregoing instrument was acknowledged before me this ____ day of ____________,
2018, by James B. Hovland and Robert J. Stewart, the Chair and Secretary respectively, of the Housing and Redevelopment Authority of Edina, Minnesota, on behalf of said Authority.
Notary Public
[Signature Page to Memorandum of Redevelopment Agreement (4500 France)]
ORION 4500 FRANCE, LLC, a Delaware limited liability company
By: Orion Investments Edina II, LLC,
a Minnesota limited liability
company
Its: Manager
By: _________________________________
Name: ______________________________
Its: _________________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of ______, 2018, by
________, the _________________ of Orion Investments Edina II, LLC, a Minnesota limited liability company, as the manager of ORION 4500 FRANCE, LLC, a Delaware limited liability
company, on behalf of the limited liability companies.
Notary Public
THIS DOCUMENT WAS DRAFTED BY:
Dorsey & Whitney LLP
50 South Sixth Street Suite 1500 Minneapolis, MN 55402-1498
Date: December 13, 2018 Agenda Item #: V.C.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Bill Neuendorf, Economic Dev. Manager and
Stephanie Hawkinson, Affordable Housing Dev.
Manager
Item Activity:
Subject:Proposed Strategy to use Tax Increment Financing
for Affordably-Priced Housing
Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Approve strategy to guide investment of incremental taxes to support affordably-priced housing.
INTRODUCTION:
This item pertains to the monies in the Southdale 2 Tax Increment Fund.
Staff recommends that special legislation be pursued in 2019 so that these monies can be invested to support the
creation and retention of affordably-priced housing in Edina. Staff further recommends that a policy be
established to guide the effective use of these monies.
Staff seeks direction on the recommended use of incremental property taxes to support the creation and retention
of affordably-priced housing.
ATTACHMENTS:
Description
Staff Report
TIF Strategy for Affordable Housing presentation
December 13, 2018
Chair and Members of the Edina Housing and Redevelopment Authority
Bill Neuendorf, Economic Development Manager and
Stephanie Hawkinson, Affordable Housing Development Manager
Proposed Strategy to use Tax Increment Financing for Affordably-Priced Housing
Information / Background:
Approximately $7 to $15 million in incremental property taxes are estimated to be collected in the
remaining years before the Southdale 2 Tax Increment Financing (TIF) District expires in 2021. These
monies are collected from the new market-rate construction projects surrounding the Southdale Center
Mall. It should be noted that these are “incremental” property taxes and that the “base” property taxes
continue to be distributed to the regular taxing agencies including the City, County and Edina and Richfield
School Districts.
The City has previously secured special legislation to use some of these incremental property taxes to
promote the creation or retention of affordably-priced housing.
Staff recommends that special legislation again be pursued in 2019 to maximize the availability of tax
increment funds that can be directed to affordably-priced housing in Edina.
Staff also recommends that a policy be established to guide the site selection and type of units delivered
using TIF monies. Based on a preliminary discussion in September 2017, staff recommends the following
approach:
• Invest in multiple affordable housing sites
• Focus on multi-family developments (potentially apartments, condominiums, townhouses, or duplexes)
• Consider a combination of new construction and retention of naturally occurring affordable housing
• Seek a variety of unit sizes from studios to 3-bedrooms
• Seek a variety of affordability levels
STAFF REPORT Page 2
• Seek both rental and ownership opportunities
• Pursue sites based on the availability of the property and willingness of the current owners
• Distribute the sites among both the Edina and Richfield School Districts, taking care not to
overburden any particular elementary school nor any particular neighborhood
• Consider a variety of acquisition and retention strategies to maximum the number of units and
length of affordability recognizing the limited funds available
This strategy is limited to the use of incremental property taxes related to the Southdale 2 TIF District. Staff
anticipates that additional strategies will be considered to further the goal of providing desirable housing
options at a variety of price points and in a variety of layouts.
Staff recommends the approval of this strategy to guide investment of TIF monies to support affordably-
priced housing.
The CITY of EDINA
Creation and Preservation of
Affordably-Priced Housing in Edina
using Tax Increment Financing
Proposed Implementation Strategy 2019-2021
Edina Housing and Redevelopment Authority
For discussion
December 13, 2018
The CITY of EDINA Background
The Edina HRA has discussed ideas for creating and preserving
affordably-priced housing on several occasions.
Approx $7-15 million of incremental taxes from the Southdale 2 TIF
District could be available to facilitate affordably-priced housing but
must be directed by December 2019.
•Staff recommends that Special Legislation be pursued in Spring 2019
to allow the full amount of these funds to be invested
•Other funding sources should be explored for additional programs
www.EdinaMN.gov 2
The CITY of EDINA Scale and Size – several options
www.EdinaMN.gov 3
Single Family
Co-operative
Multi-Family Townhouse
Duplex
Apartment
Condominium
Background - September 2017 Work Session
The CITY of EDINA Existing Buildings or New
•Existing Housing Stock
•Apartment buildings
•Townhouse complexes
•Condominiums
•Co-ops
•New Construction
•Affordable units intermixed with market-rate
•All affordable units included in one building
www.EdinaMN.gov 4
Background - September 2017 Work Session
The CITY of EDINA Strategies to Consider
www.EdinaMN.gov 5
Single Family / Duplex Town-house Apart-ment Condo-minium Co-operative
1) Purchase existing, remodel, and re-sell using land-trust model with long-term land lease
X X X X X
2) Purchase existing and re-sell with deed restriction or first-right-of refusal X X X X
3) Assemble land and construct new housing owned and operated by City X X X X X
4) Assemble land and partner with non-profit developer to build new housing that is owned and operated by the developer; (land could be leased or sold)
X X X X X
5) Partner with market-rate developer to include affordable units intermixed with market-rate units
X X X
Background - September 2017 Work Session
The CITY of EDINA Concerns Expressed
1)Don’t locate all Affordable Housing in the Richfield School District
2)Don’t over-concentrate in any particular neighborhood
3)Don’t over-concentrate in any particular elementary school
4)Don’t let multi-family housing overwhelm single-family neighborhoods
5)Several existing buildings at risk of being upgraded beyond affordable levels
6)Desire for both rental and ownership opportunities
7)New construction is expensive and requires complex funding partnerships
www.EdinaMN.gov 6
The CITY of EDINA Staff Recommendation
Staff recommends pursuing 3-6 affordable-housing sites in the next
three years. While one of the sites has been identified (7075
Amundson), the others are yet to be negotiated.
Sites must be identified and Housing TIF Districts must be created
by December 2019.
Staff seeks authority to identify potential sites and discuss
preliminary terms and conditions with the property owners and
potential developers. The sites would be selected based on the
following six criteria:
www.EdinaMN.gov 7
The CITY of EDINA Recommended Site Criteria
1)Distribute affordably-priced housing throughout the City
•- All four quadrants
•- Edina and Richfield School Districts
•- Multiple elementary school sub-districts
2)Combination of new construction and preservation of existing
3)Focus on multi-family for TIF-funds
1)- Other local programs to target single-family
4)Combination of rental and ownership opportunities
5)Combination of all affordable and mixed market/affordable units
6)Combination of unit sizes: studio to 3 bedrooms
www.EdinaMN.gov 8
The CITY of EDINA
•All four quadrants
•Multiple school districts
•Multiple elementary
school boundaries
•TIF-funding focused on
multi-family
developments in
commercial/mixed zoning
districts
Step 1) Pursue potential sites
www.EdinaMN.gov 9
?
?
?
?
?
Bloomington Eden Prairie St. Louis Park Richfield Minnetonka St. Louis Park Minneapolis Hopkins
?
?
?
?
?
The CITY of EDINA
Complete
A)3660 W. 66th St by
Beacon
In Progress
A)4100 W. 76th St by
AEON
Potential
A)7101 York Hennepin
County Library Site
B)Existing Apartment or
Condo Sites TBD
C)Others TBD
1a) Southeast Quadrant – Greater Southdale
www.EdinaMN.gov 10
S E A
A
B ?
B ?
A
The CITY of EDINA 1b) Southwest Quadrant – 70th & Cahill Area
www.EdinaMN.gov 11
S W
In Progress
A)7075 Amundson
Potential
A)7101 York
Hennepin Site
B)Existing
Apartment or
Condo Sites
C)Others TBD
A
A ?
B ?
The CITY of EDINA 1c) Northwest Quadrant – Grandview
www.EdinaMN.gov 12
N W
Potential
A)5146 Eden
Site
B)Existing
Apartment or
Condo Sites
C)Others TBD
A ?
The CITY of EDINA 1d) Northeast Quadrant – ValleyView & France
www.EdinaMN.gov 13
N E
Potential
A)Existing Apartment or
Condo Sites
B)Existing Duplex Sites
C)Others TBD
B ?
A ?
The CITY of EDINA
•Staff recommends that Edina seek State Legislative support to allow the
City to maximize local revenue to fund long-term affordably-priced
housing
•A) increase ‘pooling’ from Southdale 2 District but only for affordably-
priced housing
•B) extend deadline from Dec. 2019 to Dec. 2021
•City staff does not have the expertise to actively pursue legislation and
recommends that Messerli & Kramer be engaged to support this effort. Other
affordable-housing interest groups will also be engaged to help pursue this goal.
www.EdinaMN.gov 14
Step 2) Pursue special legislation
The CITY of EDINA
•After sites with willing owners and developer interest are
identified; negotiate preliminary terms and present to the HRA
Board for consideration.
•If terms and outcomes are desirable, a new Housing TIF District
should be created to allow the affordable-housing goal to be
implemented
•The City’s standard development review process would be applied
to each site.
www.EdinaMN.gov 15
Step 3) Negotiate terms and Implement
The CITY of EDINA
Questions and Discussion
www.EdinaMN.gov 16
Date: December 13, 2018 Agenda Item #: V.D.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Stephanie Hawkinson, Affordable Housing Dev.
Manager, and Tara Brown, Sustainability Coordinator Item Activity:
Subject:Approval of Multifamily Affordable Housing Property
Tax Relief and Energy Efficiency Grant Pilot
Program
Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Motion to approve Multifamily Affordable Housing Property Tax Relief and Energy Efficiency Grant Pilot
Program.
INTRODUCTION:
Healthy, stable, and affordable housing is important for the well-being, prosperity, and security of Edina residents.
Due to housing, economic, and demographic trends, the available affordable housing in Edina is insufficient to
meet the demand. In addition, already burdened low and moderate income tenants are increasingly paying more
than 30 percent of their income on rent and utilities. At the same time, many rental property owners are faced
with increased operating and maintenance costs as well as market opportunities to increase rents. The goal is to
preserve affordability, reduce energy use and create healthier homes to support tenants and strengthen the bottom
line for property owners.
ATTACHMENTS:
Description
Staff Report
December 13, 2018
Chair & Commissioners of Edina HRA
Stephanie Hawkinson, Affordable Housing Development Manager
Tara Brown, Sustainability Coordinator
Approval of Multifamily Affordable Housing Property Tax Relief and Energy Efficiency Grant
Pilot Program
Information / Background:
Healthy, stable, and affordable housing is important for the well-being, prosperity, and security of Edina
residents. Due to housing, economic, and demographic trends, the available of affordable housing in Edina
is insufficient to meet the demand. In addition, already burdened low and moderate income tenants are
increasingly paying more than 30 percent of their income on rent and utilities. At the same time, many
rental property owners are faced with increased operating and maintenance costs as well as market
opportunities to increase rents. The goal is to preserve affordability, reduce energy use and create
healthier homes to support tenants and strengthen the bottom line for property owners.
Purpose:
• Incentivize owners of Naturally Occurring Affordable Housing (NOAH) with buildings containing
four units or more to keep their rents affordable in exchange for property tax savings;
• Reduce property tax obligation on affordable housing units;
• Improve the energy efficiency of an aging rental stock to improve longevity and reduce operating
costs.
To qualify for the Low Income Rental Classification, also known as “4d property tax classification”, the
federal government, state of Minnesota or local unit of government must provide financing to the rental
housing property as evidenced by a document recorded against the property. This pilot program
provides City financing in exchange for a land Declaration for long term affordability.
Program Description:
There are two components to this pilot program:
1. Grant from the City to enroll in the State’s 4d program. This grant is $100 per unit and capped at
$5000 per building.
2. Grant to improve energy efficiency of the property with grants providing 90% of the costs, after
rebates, up to $30,000.
STAFF REPORT Page 2
In exchange for the grant, the property owners will sign a Declaration to keep the property affordable for
15 years.
Who is eligible?
Owners of market-rate multifamily properties that meet the following criteria:
• At least 20% of the rental units are occupied by, and are affordable to, households whose family
income is at or below 60% of the Area Median Income.
• Buildings must have at least 4 units total.
• Income qualification is determined upon initial occupancy. Thereafter, increased incomes of tenants
in affordable units will not violate the program requirements.
• Existing tenants in units that have program compliant rents do not need to be income qualified.
• Buildings can include units with owner occupants, but only rental units are eligible for 4d tax status.
Program Component #1(required):
Qualified building owners, with buildings having at least four units, that agree to keep a minimum of 20% of
units per building affordable to households making up to 60% of Area Median Income (AMI) will receive 40%
property tax reduction on qualifying units (Low Income Rental Classification, also known as “4d property
tax classification”).
Benefits:
• The City will pay the first year application fee to the State of Minnesota for certification of the 4d
property tax classification out of a grant to each 4d property, in the amount of $100 per affordable
unit, capped at $5,000 per property.
• The owners will receive a reduced property tax obligation.
• Existing and potential tenants will have preserved affordable units for 15 years.
Definition:
Non-4d apartments have a tax capacity of 1.25%
Units classified as 4d that are valued at $139,000* or less have a tax capacity rate of 0.75%
Units classified as 4d that are valued greater than $139,000* have a tax capacity rate of 0.25%
* This number is subject to change each year. This is the first tier for taxes paid in 2018
Example:
25 unit building constructed in 1968 valued at $3,250,000 or $130,000 per unit.
Non-4d property taxes paid in 2018:
$3,250,000 x .0125 = 40,625 tax capacity
Taxes = $52,630
Scenario 1: 6 units, 24%, classified as 4d and the remaining 19 units are market rate, or non-4d
6 x $130,000 = $780,000 X .0075 = 5,850 tax capacity
19 x $130,000 = $2,470,000 x .0125 = 30,875 tax capacity
36,725 tax capacity
Taxes = $47,836 ($4,794 savings)
Scenario 2: 100% of the units are affordable and classified as 4d
STAFF REPORT Page 3
$3,250,000 x .0075 = 24,375 tax capacity
Taxes = $32,658 ($19,972 savings)
Impact on City Tax Revenue: The City receives approximately 21% of the property taxes collected by
the County, so the impact to the City will be negligible.
Process and program requirements:
• Step 1 (required):
• Property Owner will submit a 2-page 4d program application and rent roll, and sign a Participation
Agreement with the City.
o Participation Agreement includes commitment to accept tenant based assistance and
affirmative fair marketing, and prohibits involuntary displacement of existing tenants.
• City will draft and record a declaration against the property that limits the rents and incomes on the
qualified units for 15 years. Property owner must limit rent increases to 6% or less annually, unless
the owner provides evidence that a larger rent increase is needed to address deferred maintenance
or unanticipated operating cost increases, and city staff approve an alternative schedule for rent
increases (a recorded document is required for 4d tax classification status).
• City will provide a grant to each 4d property, in the amount of $100 per affordable unit, capped at
$5,000 per property. This funding is intended to help property owners cover the cost of the 4d
administrative and reporting requirements associated with the program.
• Property Owners will select the percentage of their building to restrict, with a minimum of 20%. If
they select more than 20%, after 5 years and upon request and evidenced by financial burden, the
City will approve a reduction of the percentage of restricted units to the minimum level of 20% of
the units per building.
• Property owner will sign 4d application once declaration is filed.
• City will submit signed 4d application, application fee, and declaration to Minnesota Housing on
behalf of the property owner for their first year only. Owners are responsible for submitting annual
applications to Minnesota Housing to renew 4d tax status. See “Annual Owner Compliance” for
additional information.
Program Component #2 (optional):
Benefits:
• Free energy efficiency and healthy home assessments available to buildings with 4 or more units
• City grant up to $30,000 offered for the cost of energy efficiency and healthy homes improvement
identified in the free assessment.
• Increases tenant comfort.
• Lower maintenance and operating costs.
• Step 2 (encouraged):
• Sign up for the Multi-Family Building Efficiency Program through Xcel Energy and CenterPoint
Energy and complete a free energy assessment to receive an Energy Report of recommended
improvements.
o Benefit to owner: A free energy assessment, including free direct install of low-cost
improvements such as screw-in LED lights and faucet aerators, and qualifies owners to
receive 25%-80% cost rebates of energy efficiency project expenditures from the utility
companies if owners have at least 15% savings.
STAFF REPORT Page 4
• Step 3 (encouraged):
• Following a free energy assessment, meet with the City and Center for Energy and Environment
(CEE) to discuss energy efficiency upgrades. Property owner can choose from a menu of energy
efficiency/weatherization/healthy homes improvements and qualify for City grants that when paired
with utility rebates can cover 90% of costs up to $30,000.
o Benefit to owner: Receive public recognition for their partnership with the city and
receive help covering the cost of energy efficiency upgrades.
Who is CEE?
Center for Energy and Environment (CEE) is a 501(c)(3)-designated nonprofit organization. Since the 1980s,
CEE has pursued its mission through a variety of innovative programs and services in and outside of
Minnesota. CEE's mission is to promote energy efficiency to strengthen the economy while improving the
environment. Data-driven and community-engaged, CEE’s staff are passionate to discover and deploy the
most effective solutions for a healthy, low-carbon economy through several channels. CEE is currently
administers Home Energy Squad (HES) which completes energy assessment on single-family, townhomes,
and condos. Edina has been partnering with HES since 2013 to subsidize these visits for Edina
residents. CEE also provides support to the Minneapolis’ energy efficiency in 4d program.
Financial Impact:
Pilot Program: $160,000 budget
Source of Funds: Buy-In revenue
What does annual compliance involve?
• To continue to receive 4d status Property Owner is required to submit an annual 4d application to
Minnesota Housing as well as an annual report to the City in a form provided by the City.
• The owners need to complete these items on an annual basis to remain eligible for 4d tax status.
Notes on Area Median Income (AMI), and annual updates to rent and income restrictions:
The City of Edina will publish an annual rent and income schedule, based on the regional 60% AMI standard
that owners can reference to stay in compliance with the program over the 10 year commitment.
60% AMI Maximum Rent Limits, 2018 Program
Studio/Efficiency $991
1 Bedroom $1,062
2 Bedrooms $1,273
3 Bedrooms $1,471
4 Bedrooms $1,641
5 Bedrooms $1,811
Date: December 13, 2018 Agenda Item #: V.E.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Stephanie Hawkinson, Affordable Housing
Development Manager Item Activity:
Subject:7075 Amundson Status Report Information
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
No action needed.
INTRODUCTION:
Staff will give a verbal update on the 7075 Amundson development plans.
Date: December 13, 2018 Agenda Item #: VI.A.
To:Chair & Commissioners of the Edina HRA Item Type:
Other
From:Sharon Allison, City Clerk
Item Activity:
Subject:Correspondences Information
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
None.
INTRODUCTION:
There have been no correspondences since the last meeting.