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Memo - Amendment to SuperValu Redevel Agreement > . I ECONOMIC DEVELOPMENT I . MEMORANDUM TO: Honorable Mayor and City Council FROM: '-/~Jim Kerrigan, Director of Planning & Economic Development I DATE: November 21, 2002 SUBJECT: Amendment to SUPERV ALU Redevelopment Agreement Staff has been working with SUPERVALU over the last several months on this document. The amendment revises the 1998 redevelopment agreement that was executed with SUPERVALU to facilitate construction of the distribution facility on the Hennepin County property. Specifically, it addresses the section of the agreement that discusses the HRA's option for purchase of the North Annex property. The attached amendment has been revised somewhat from what was outlined at the October work session. If the HRA is comfortable with the amendment as drafted, it would be placed on the December 3 regular HRA meeting agenda for approval. Sid Inman and Bob Deike will . be present at the November 26 work session to answer questions. PROPOSED AMENDMENT EXISTING AGREEMENT 1. Allows for SUPERVALU to have an additional 2- to 1. The HRA option would 3~year period to market the North Annex property. commence March 27, Following this period, if they are unsuccessful in 2003. Option would securing a redevelopment project, the HRA would terminate in one and enter into the 18-month option period. The agree- one-half years. ment could be terminated after an 18-month period by SUPERV ALU if they feel no progress is being made finding a redeveloper for this site.lf it were not terminated at this time, it would continue for an ad- ditional 6 months.There would then be a 12-month automatic extension if SUPERV ALU meets the 2. The Original agreement requirement of actively marketing the property. At stated that the HRA such time as the amendment was terminated, com- would consider a project mencement of the HRA option would be undertaken. presented by SUPER- 2. States that the goal of the HRA for the North Annex VALU prior to July 2001 if it met the following is a project that meets the following conditions: conditions: . 450,000-600,000 sq. ft. of Class B office space 350,000 square feet-- . . . Traffic patterns must be oriented to the south 50% office, and no more than 40% of the It is understood that SUPERVALU has the ability to have remaining 50% of projects considered by the HRA that do not meet the space could be ware- above conditions. I house - PROPOSED AMENDMENT (Cont.) EXISTING AGREEMENT (Cont.) . 3. The HRA, as concerns Tax Increment District 2-11, 3. Not addressed. will undertake an effort to complete one of the following: . Secure special legislation to extend both the five-year rule and the term of the district by five years . Decertify the North Annex property from TI F District 2-11 and certify. it within a new tax increment district 4. SUPERVALU has the ability to demolish the North 4. Not addressed. Annex building during the term of this agreement. They would be reimbursed on a pay-as-you-go note for the actual cost of this work. 5. The purchase price for the HRA's option would be a 5, Purchase price would be fixed amount of $10,739,072.61, which is based on based on an appraisal the following: process completed by . $9,039,072.61--value of land and building SUPERVALU/HRA. . $1,700,OOO.OO--reimbursement of off-site public improvements completed in conjunction with the distribution facility project . 6. Prior to redevelopment, SUPERVALU would be 6. Not addressed. allowed to use the North Annex property for eligible uses, which do not adversely affect the surrounding neighborhood. SUPERVALU will agree to screen such uses as appropriate. 7. Within 60 days of the execution of the amendment, 7. Not addressed. SUPERV ALU will need to enter into a lease agreement for a three-acre property for snow storage. 8. SUPERVALU will proVide necessary right-of-way for 8. Not addressed. Excelsior Boulevard--north side at no cost; south side for $71,500. SUPERVALU will pay CityfHRA legal and consultant fees involved in preparing the amendment and facilitating redevelopment of the North Annex. SUPERVALU will be reimbursed if a development agreement is executed for the North Annex. . Attachment 11118/2002 . FIRST AMENDlVIENT TO REDEVELOPl\1ENT AGREEEMENT This First Amendment is made and entered into this day of , 2002, by the Housing and Redevelopment Authority In and For the City of Hopkins, Minnesota, a public body politic and corporate under tbe laws of the State of Minnesota (the "Authority") and SUPERV ALU INC., a Delaware corporation (the "Redeveloper") and amends that certain Redevelopment Agreement dated as of July 20, 1998 (tbe "Agreement"). WHEREAS, pursuant to the Agreement tbe Authority conveyed certain real property (the "Redevelopment Property") to the Redeveloper and the Redeveloper constructed thereon an office/warehouse development (the "Minimum Improvements"); and WHEREAS, the Agreement also contains provisions granting to the Authority certain rights to purchase other property owned by the Redeveloper (the "North Annex Property") if the Redeveloper does not redevelop such property on its own; and WHEREAS, the Authority and the Redeveloper desire to amend the Agreement to . modify the rights and responsibilities of the parties with respect to the North Annex Property. NOW, THEREFORE, the parties do hereby agree as follows: Section 1. Unless defined in this Amendment all capitalized words used herein shall have the meaning set forth in the Agreement. Section 2. As of the date of this Amendment the Authority and the Redeveloper have executed and recorded against the North Annex Property the Option in accordance with the tenns of the Agreement. Therefore, section 3.9 of the Agreement is hereby amended in tbe following respects: (a) The parties acknowledge that the Option has been executed and recorded against the North Annex Property. The Authority and Redeveloper agree that they will within (~ days after the date of this Amendment execute and record an amendment to the Option extending the COlmnencement Date as defined in paragraph 7 of the Option to a date two (2) years from the date of this Amendment. If the time within which the Redeveloper may market the NOlth Annex Property is extended pursuant to subsection (b) below the COlmnencement Date shall also be extended for a similar period. Such additional extensions of the COllliuencement Date shall be evidenced by written recordable amendments to the Option. . . (b) The purpose of extending the Commencement Date under the Option is to allow the Redeveloper additional time in which to market the North Annex Property for redevelopment. Therefore, until the date two (2) years after the date of this Amendment, the Redeveloper shall have the right to present to the Authority and the City for their consideration proposals for the redevelopment of the North Annex Property. The Redeveloper and the Authority understand that the City and the Authority currently desire a proposed development which would consist of approximately 450,000 to 600,000 square feet of Class B office space (potentially in phases) and which would orient traffic patterns to the south of the North Annex Property. The above are the desired goals of the Authority and the City for the redevelopment of the North Annex Property but are not prerequisites for the consideration of the proposals by the City and the Authority. The Authority agrees that it will not exercise its rights under the Option if the above requirements and any conditions set forth in section 3.9(b)(i) to (v) that are not inconsistent with the above requirements are met within two (2) years after the date of this Amendment. The Authority agrees that it will further extend the time within which the Redeveloper may market the North Annex Property for an additional one (1) year period if on the date two (2) years after the date of this Amendment the Redeveloper has an active real estate listing in place with a realtor marketing the Redevelopment Property. The Redeveloper agrees that it will give the Authority at least ninety (90) days written notice if it does not intend . to have an active real estate listing in place on the date two (2) years after the date of this Amendment. (c) During the period that the Redeveloper is allowed to market the North Annex Property for development, the Redeveloper shall provide to the I Authority quarterly written reports in such detail as the Authority may reasonably require describing the Redeveloper's efforts to market the North Annex Property and the progress made in that effort. (d) Within sixty (60) days from the date of this Amendment the City and the Redeveloper shall negotiate the terms of a lease under which the City shall be granted exclusive use of an approximately three (3) acre parcel of property, which parcel is legally described on Exhibit A to this Amendment, for snow storage until the North Annex Property is redeveloped; subject to the Redeveloper's ability to store its snow on the North Annex Property. If the Redeveloper or another party presents a proposal to the Authority for redevelopment ofthe North Annex Property that is approved by the Authority and the City, the agreement described in section 3.9(b)(v) of the Agreement shall contain provisions requiring the conveyance of the three (3) acre parcel to the City at a price to be determined by the parties. (e) The Redeveloper shall be entitled at its option to demolish the . improvements currently existing on the North Annex Property. Such demolition shall not occur until the Authority has exhausted reasonable effOlis to extend the 2 . tenn of Tax Increment District No. 2-11 and the time for making expenditures in Tax Increment Financing District No.2-II or to create a new tax increment district encompassing the North Annex Property, all as is desclibed in section 4(a) of this Amendment. The Redeveloper may demolish the improvements if the AuthOlity has been unable by the date ninety (90) days after the end of the Minnesota Legislature's 2003 legislative session to either: (i) extend the time for making expenditures in Tax Increment Financing District No.2-II and extend the term of District No.2-II for an additional five (5) years; or (ii) create a new tax increment district. Prior to demolishing such improvements, the Redeveloper shall submit to the Authority for its reasonable approval a plan to be implemented by the Redeveloper to reduce the dust that may be generated from the North Annex Property after demolition of the improvements. The Redeveloper shall obtain at least three (3) competitive bids, from contractors reasonably acceptable to the Authority, before letting contracts for the demolition and related environmental remediation work and shall award the contract for such work to the lowest responsible bidder, such determination to be made in the Redeveloper's reasonable discretion. (f) Until the North Aulnex Prope~ has been redeveloped, tbe Redeveloper agrees that it restrict the use of such property as provided in this paragraph. The Redeveloper agrees that it will not pennit the use of the North Annex Property in ways that will adversely affect the surrounding neighborhood . including, without limitation, uses that generate objectionable noise or odors, uses that generate substantial vehicular traffic to the north of the North Annex Property and uses for retail sales. The Redeveloper further agrees that it will install screening around such uses as appropliate considering the particular use. (g) The Redeveloper and Authority agree that the Option will be amended to specify that the purchase price to be paid by the Authority to acquire the North Annex Property is $10,739,072.61, consisting of $9,039,072.61 as the value of the land and building and $1,700,000.00 to reimburse the Redeveloper for certain public improvements fmanced by the Redeveloper in the course of developing the Minimum Improvements. The purchase price to be paid by the Authority will not be reduced on account of the Redeveloper's conveyance of a pOliion of the North Annex Property to the City pursuant to tbe new Section 4.6 of the Agreement to be added pursuant to section 3 below. The Option shall also be amended to provide that if the Redeveloper undeliakes the demolition of the improvements on the North Annex Property as permitted under this Agreement, the purchase price to be 'paid under the Option to acquire the North Annex Property will be increased by the reasonable documented costs of the demolition and enviromnental remediation specifically related to such demolition paid by the Redeveloper. The purchase price will also be increased by the amount of any costs paid by the Redeveloper under Section 4(c) of this Amendment. . 3 . Section 3. The redevelopment of the North Annex Propeliy will necessitate the construction of celiain improvements to the intersection at the southwest corner of the North Annex Propelty. Therefore, the Agreement is hereby amended in the following respects: In order to facilitate the redevelopment of the North Annex Property the City is in the process of constructing a new intersection at the southwest corner of the North Annex Property. In order to finance such intersection improvements the City will issue tax increment general obligation bonds payable from tax increment generated from Tax Increment District No.2-II. The Redeveloper will convey to the City at no cost to the City its land included in the North Annex Property necessary to construct the intersection improvements. The City will accept conveyance of such property subject to the interests in the N Olih Annex Property that the Authority accepted pursuant Section 3.3(g) of the Agreement. In addition, the City will purchase for the price of $71,500.00 Redeveloper's land located south of Excelsior Boulevard necessmy for the intersection improvements. The land south of Excelsior Boulevard shall be conveyed to the City free and clear of all defects and encumbrances other than those approved in writing by the City. To the extent that the City has to incur costs to clear any title matter on the land south of Excelsior Boulevard the purchase price will be reduced by the amount of such costs. The City will also pay the cost of making modifications to the Redeveloper's remaining land located south of Excelsior Boulevard which are made necessary as a result of tbe Redeveloper's conveyance of such land to the . City. The specific modifications that the City will pay for are described on the attached Exhibit C. The properties to be conveyed to the City are described on Exhibit A to this Amendment. On or before December 31, 2002, the City and the Redeveloper will enter into a purchase agreement detailing the terms of the Redeveloper's conveyance of such properties to the City. Section 4. Article V of the Agreement states that the AuthOlity and City will consider creating a new tax increment district and using tax increment generated from the district to reimburse the Redeveloper for certain costs incurred by it. Subsequent to the date of the Agreement, the Authority and City created Tax Increment Financing District No. 2-11 (the "Tax Increment District"), a redevelopment district. The Tax Increment District encompasses the Redevelopment Property, the North Annex Property and certain other parcels of property. The Authority and Redeveloper have reached celiain agreements concerning the use of tax increment from the Tax Increment District and desire to modify Article V of the Agreement in the following respects: (a) Under Minnesota Statutes, section 469.1763, tax increment from a tax increment district may generally be used to only pay for or reimburse costs incuned within five (5) years from the date of certification of the tax increment district. The AuthOlity agrees that it will in good faith attempt to secure special legislation from the Milmesota Legislature extending the five (5) year limitation on expenditures for the Tax Increment District and extending the tenn of the Tax . Increment District for an additional five (5) years. The Authority makes no representations or wananties that it will be successful in such effOli. If the 4 . Authority is unable to secure such special legislation it will take steps to create a new tax increment district encompassing only the NOlih Annex Property. The creation of such a tax increment district is, however, subject to the public healing and notice provisions of State law and therefore, the Authority cannot commit to create such a dishict unless and until the City holds a public hearing on the matter and considers all infonnation and COlmnents on the creation of the district. (b) For purposes of this Amendment, "Tax Increment" shall mean that portion of the real property taxes generated from the properties located in the Authority's Tax Increment District No.2-II or a new district that may be created by the AuthOlity pursuant to (a) above that is paid to the Authority after the date hereof as tax increment under the Minnesota tax increment financing laws, but excluding tax increment that was received by the Authority prior to the date of this Amendment and that was spent by the Authority. However, "Tax Increment" shall only include tax increment generated based on improvements that have been made in Tax Increment Distlict No.2-II, or a new dishict that may be created by the AuthOlity, as of the date of this Amendment and any improvements made pursuant to an agreement entered into pursuant to Section 3.9(b)(v) of the Agreement. Tax increment generated as a result of improvements made in Tax Increment District No. 2-11, or a new district that may be created by the Authority, that are not covered by an agreement entered into pursuant to Section 3.9(b)(v) of the Agreement shall not be considered "Tax Increment" under this . Amendment. Tax Increment will be used by the Authority, to the extent legally permissible, in accordance with the following: (i) First, ten percent (10%) of all Tax Increment will be retained by the Authority to pay its administrative costs. At the time that the Redeveloper presents to the Authority a redevelopment proposal for the North Annex Property that is approved by the Authority and the Authority and Redeveloper enter into an agreement pursuant to Section 3.9(b)(v) of the Agreement the Authority will consider reducing the amount of Tax Increment being withheld for administrative costs. If on the termination of the Tax Increment District the Authority has not spent all of the Tax Increment so withheld for administrative costs any amounts not spent will be applied to items (ii) through (v) in the order below. (ii) Second, Tax Increment will be used to pay current debt service on the City's bonds issued to finance the intersection improvements described in Section 4.6 and to pay the cost of any other off-site improvements made by the Authority or the City within the Tax Increment District or any new tax . increment district created under (a) above, 5 . (iii) Third, Tax Increment will be used to fund a debt service reserve fund in the amount of one year's average debt service due on the City's bonds described in (ii) above issued to finance the intersection improvements 4escribed in Section 4.6 to be used if 011 any debt service payment date for the bonds there is insufficient Tax Increment available to the City to make such debt service payment and to be applied to the last year's debt service payments on the bonds. (iv) Fourth, Tax Increment will be used to pay a tax increment revenue note issued by the Authority to the Redeveloper at the time of the execution of the agreement referenced in Section 3.9(b)(v) of the Agreement if the Redeveloper has demolished the improvements on the North Annex Property, The amount of the tax increment revenue note shall be the amount of Redeveloper's documented costs of demolition and environmental remediation. The note shall be issued at such time as the Redeveloper provides to the Authority documentation, III such fonn as the Authority may reasonably require, showing that the improvements on the North Annex Property have been demolished and removed and the cost thereof paid by the Redeveloper. The note shall . be in the fonn of the note attached to tbis Amendment as Exhibit B. (v) Fifth, Tax increment will be used to pay the qualified costs incurred by the Authority or third parties in redeveloping the North Annex Property. (c) All reasonable costs incurred by the Authority, whether incurred before or after the date of this Amendment, 10 connection with the implementation of the provisions of the Agreement, as amended by this Amendment, including, without limitation, the costs of securing special legislation or creating the new tax increment district described in section 4(a) above, the costs of reviewing and analyzing Redeveloper's development proposals, the cost of negotiating and preparing this Amendment, and the costs of negotiating and preparing any other agreement or agreements contemplated by the Agreement as amended by this Amendment, and all costs related to the foregoing shall be paid by the Redeveloper upon demand by the Authority. With the exception of the Authority's attorneys and financial advisors, prior to retaining consultants, conh"actors or otber parties for whose reasonable fees the Redeveloper will be responsible under this section, the AuthOlity will notify the Redeveloper of its intent to do so. lfthe Authority and the Redeveloper enter into an agreement pursuant to Section 3.9(b)(v) of the Agreement at that time the . principal amount of the note issued by the Authority under (b)(iv) above will be 6 . increased by the amount of the costs paid by the Redeveloper under tbis paragraph. Section 5. In consideration of the Authority's undeltakings and agreements in this Amendment, the Redeveloper agrees that during the tenn of the extension of the Commencement Date under the Option pursuant to Section 2(a) of tbis Amendment it will not pursue a request that the City approve a tax abatement for the Redeveloper's perishable warehouse facility located adjacent to the Tax Increment District. Section 6. The Redeveloper shall have the right to tenninate the extension of the Commencement Date under the Option on the date 18 months after the date of this Amendment by giving written notice of its intent to tenninate at least 120 days prior to such date. If the Redeveloper fails to give such notice of termination, Commencement Date shall continue to be extended as provided in Section 2 of this Amendment. Section 7. If requested by the Redeveloper, the Authority will discuss assisting the Redeveloper in its acquisition of the real property located immediately northeast of the North Annex Property if it is necessary for the Redevelopment of the . North Annex Property. Nothing in this Amendment is intended to obligate the Authority to take any action or incur any cost in connection with such an acquisition. Section 8. Except as they may be inconsistent with the tenns of this Amendment, all other provisions of the Agreement shall remain in full force and effect. . 7 . IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf and its seal to be hereunto duly affixed and the Redeveloper has caused this Agreement to be duly executed in its name and behalf on or as the date first above wlitten. HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF HOPKlNS, MINNESOTA By Its By Its SUPERVALU INe. By Its By Its STATE OF MINNESOTA) . )55. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 2002, by and , the and of the Housing and Redevelopment Authority In and For the City of Hopkins, Minnesota, a public body politic and corporate, on behalf oftbe Authority. Notary Public STATE OF MINNESOTA) )ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 2002, by and , the and of SUPER V ALU INC., a Delaware corporation, on behalf of the corporation. . Notary Public 8 . EXHIBIT A Legal Description of Property Three Acre Parcel: Property South of Excelsior to be deeded to City: Portion of North Annex Property to be deeded to City: . . . . EXHIBIT B Form of Tax Increment Revenue Note . . . . EXHIBIT C Modifications to Be Made to Redeveloper's Property South of Excelsior Reconfigure parking lot layout, rebuild and pave disturbed parking areas including the underground storage tank fill area, remove and replace parking lot fencing, abandon existing water service valve manhole and install new 8" water service pipe to pump house (install 10" water service pipe with Redeveloper paying the incremental cost increase) reimburse Redeveloper for pump house modifications per April 15, 2002 Olsen Fire Protection Incorporated description and price quotes, ADT alarm system work (June 18, 2002 letter) and Westside Equipment overfill protection work. . .