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HomeMy WebLinkAbout1982-09-08 HRA Regular Meeting • MINUTES OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY SEPTEMBER 8, 1992 ROLLCALL Answering rollcall were Commissioners Kelly, Paulus, Rice and Richards. Commissioner Smith entered the meeting at 7:03 P.M. after adoption of the Consent Agenda. CONSENT AGENDA ITEMS ADOPTED Motion vas made by Commissioner Kelly and vas seconded by Commissioner Paulus to approve the HRA Consent Agenda items as presented. Motion carried on rollcall vote - four ayes. *MINUTES OF THE MEETING OF AUGUST 17, 1992, APPROVED Motion was made by Commissioner Kelly and was seconded by Commissioner Paulus to approve ERA Minutes of August 17, 1992. Motion carried on rollcall vote - four ayes. REDEVELOPMENT AGREEMENT AND CONTRACT FOR DEED AMENDED - CENTENNIAL LAKES Executive Director Hughes presented the following background information on the Centennial Lakes development project: Overview of Project The Redevelopment Agreement and the Contract for Deed for the Centennial Lakes development closed in October of 1988. The Redevelopment Agreement was executed by the HRA and South Edina Development Corporation (SED) . A Contract • for Deed was executed by the HRA and the estate of Fred W. Hedberg (Hedberg) . The Redevelopment Agreement dealt primarily with Phase 1 of the Centennial Lakes project which included a multi-screen movie theater, a medical building, a retail plaza, an assisted condominium development, and a 250,000 square foot multi-tenant office building. At this time, all Phase 1 private improvements have been completed (or are nearly complete) with the exception of the 250,000 square foot office building. All Phase 1 public improvements (acquisition and initial development of Central Park and North Park and abutting roadways) have been completed. In connection with Phase 1, the Redevelopment Agreement with SED required the payment of City dedication fees of $3 million of which $1.6 million has been paid. The remaining $1.4 million is due in one month. These payments were guaranteed by Northland Land Company, an affiliate of SED. The Redevelopment Agreement also provided for a payment of $1 million in 1995 and an additional payment of $1 million in 1998. The 1995 and 1998 payments were not guaranteed to the same extent as the initial $3 million payment. SED and the HRA also executed a shortfall agreement whereby SED guaranteed a minimum amount of taxes from the Phase 1 private improvements. The shortfall agreement provided that if taxes are not generated in the minimum amount, SED or its guarantor, Northland Land Company, would make up the difference. The Contract for Deed between the Hedbergs and the HRA required the annual payment of principal and interest commencing in 1988. The Redevelopment Agreement with SED required that SED make all payments required by the • Contract for Deed. A payment was made on the contract in 1989, however, H.R.A. Minutes - 9/8/92 Page 2 payments due in 1990 and in 1991 have not been made (the 1990 payment had been deferred by Hedberg in consideration of the 1989 payment) . Current Situation - The final installment of the initial City dedication is due in approximately one month. The amount of this installment is $1.4 million 0 000 in interest and payment of this installment plus approximately 20 p yA► P PP Y $ is guaranteed by Northland Land Company. The assets of Northland Land Company are primarily real estate holdings in Mendota Heights and Eagan. - SED, and therefore the HRA, are technically in default of the Contract for Deed due to the non-payment of the installment due in 1991. It is very doubtful that SED will pay the next installment due in approximately one month. No notice of default has been issued by Hedberg and, in staff's opinion, cancellation of the Contract for Deed by Hedberg is not imminent. - According to the approved development plan, the majority of Phase 2 Centennial Lakes developments are office uses. The office market continues to be depressed and the realization of a major office statement south of 76th Street is unlikely for the near term. Less intensive office developments are much more likely. - Based upon the market for high-density office development, the payment of the additional City dedication fees due in 1995 and 1998 are not feasible in SED's judgement. Therefore, in consideration of the payment • of the $1.4 million plus interest which is due in October 1992, SED has requested relief from the payments due in 1995 and 1998. Proposed Amendments Based upon the current situation, staff, SED and Hedberg have negotiated the following amendments: Amendment to Contract for Deed The proposed amendment to the Contract for Deed contains the following major elements: 1) The current interest rate on the unpaid principal balance is nine percent. The amendment eliminates the interest provision and in its place provides for a payment in lieu of interest whenever a principal payment is made. The payment in lieu of interest is based upon the increase in the Consumer Price Index. This change effectively reduces the interest rate from nine percent to approximately three percent under current conditions. 2) The amendment eliminates the requirement to purchase land intended for residential purposes along with land intended for office purposes. Given the current real estate environment, such a requirement is no longer necessary. 3) Land which is subject to the Contract for Deed is currently exempt from real estate taxes. The contract, however, provides that if such land • becomes taxable, the HRA is liable for the payment of such taxes. The HRA, in turn, has passed that obligation on to SED. The amended H.R.A. Minutes - 9/8/92 Page 3 • Contract for Deed provides that the HRA is not liable for the payment of taxes which could result from a third party decision (the Court or the County) that the property no longer qualifies for tax exempt status. of for the Phase 1 office building. 4 SED currently wns fee title to the 1 g• y The amended Contract for Deed permits the swapping of land on a square foot per square foot basis between the Phase 1 office lot and land subject to the Contract for Deed. 5) The amended contract provides for the grant of a storm sewer easement across the contract property which was inadvertently omitted from the original contract. Amendment to Redevelopment Agreement and Shortfall Agreement The proposed amendment to the Redevelopment Agreement and Shortfall Agreement contains the following major elements: 1) The amendment recognizes that the office development may utilize a less intensive development than originally planned. 2) The existing Redevelopment Agreement gives the HRA absolute authority over the transfer of the Phase 1 office parcel to any other developer. The amended contract provides that the HRA still retains authority over such transfers but must be reasonable in exercising its authority. 3) The $1 million payments due in 1995 and 1998 have been eliminated. • Instead, City dedication fees would be required in connection with developments on the following basis: A. For residential developments: the greater of $.30 per square foot of land area or $800 per dwelling unit. B. For commercial developments: the greater of $.65 per square foot of land area or $1.00 per square foot of net rentable floor area. Based upon this formula, the City would receive a minimum dedication of approximately $500,000. If the balance of Centennial Lakes were completed as envisioned by the Master Plan, the City would receive approximately the $2 million that was first envisioned. Such payments would be made only in connection with development that actually occurs. 4) The Shortfall Agreement has been amended to provide that any development, except assisted condominium units, undertaken by the developer anywhere on the Phase 2 Centennial Lakes site, constitutes a credit against the developer's shortfall liability. Under the present agreement, only development which occurs on the Phase 1 office site acts as a credit. Reasons for Approval of Amendments 1) The prospects for the development of Phase 2 of Centennial Lakes are significantly different than they were in October of 1988. The Contract • for Deed and the Development Agreement must more accurately reflect today's development environment. In this respect, the City contribution H.R.A. Minutes - 9/8/92 Page 4 requirements provide a method whereby the City will receive, at a • minimum, a traditional parkland dedication and at a maximum the fees that we bargained for in 1988. 2) The current developer is in the best position to accomplish the further development of this property. I 3) The prospects of collecting on the shortfall agreement (if required) is much greater if the obligor on such payments remains the current developer. 4) The HRA's position, with respect to the Contract for Deed and the future acquisition of Phase 2 Centennial Lakes properties is improved. 5) The City is assured of receiving the $1.4 million plus interest payment which is due in October. Based on these reasons, staff would recommend that the HRA approve the amendments to the Contract for Deed and the Redevelopment Agreement. Following discussion and questions on the proposed amendments, Commissioner Kelly moved adoption of the following resolutions: RESOLUTION AMENDING REDEVELOPMENT AGREEMENT AND SHORTFALL AGREEMENT - CENTENNIAL LAKES BE IT RESOLVED, that the Edina Housing and Redevelopment Authority (HRA) hereby approves the amendment, as presented, to the Redevelopment Agreement • and the amendment as presented to the Shortfall Agreement for Phase 1 Centennial Lakes, dated September 30, 1998, and executed by the BRA and South Edina Development Corporation (SED); BE IT FURTHER RESOLVED, that the Chairman and Secretary of the Edina Housing and Redevelopment Authority (HRA) be authorized and directed to execute the amendment to the Redevelopment Agreement and the amendment to the Shortfall Agreement. RESOLUTION AMENDING CONTRACT FOR DEED FOR CENTENNIAL LAKES BE IT RESOLVED, that the Edina Housing and Redevelopment Authority (BRA) hereby approves the amendment, as presented, to the Contract for Deed, dated October 3, 1988, and executed by the HRA and the estate of Fred W. Hedberg (Hedberg); BE IT FURTHER RESOLVED, that the Chairman and Secretary of the Edina Housing and Redevelopment Authority (HRA) be authorized and directed to execute the amendment to the Contract for Deed. Motion was seconded by Commissioner Paulus. Rollcall: Ayes: Kelly, Paulus, Rice, Smith, Richards Resolutions adopted. *CLAIMS PAID Motion was made by Commissioner Kelly and was seconded by Commissioner Paulus to approve payment of the following HRA claims as shown in detail on the Check Register dated September 3, 1992, and consisting of one page totalling $53,720.23. • Motion carried on rollcall vote - four ayes. H.R.A. Minutes - 9/8/92 Page 5 • There being no further business on the HRA Agenda, Chairman Richards declared the meeting adjourned. xec A t irector