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Memo - Amendment to SuperValu Redevelopment . . I ECONOMIC DEVELOPMENT I MEMORANDUM TO: Honorable Mayor and City Council FROM:-+im Kerrigan, Director of Planning & Economic Development DATE: October 3 ,2002 SUBJECT: Amendment to SUPERV ALU Redevelopment Agreement Staff has been working with SUPERVALU over the last few 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 details of the amendment are as follows: . Allows for SUPERVALU to have an additional two to three-year period to market the North Annex property. Following this period, if they are unsuccessful in securing a redevelopment project, the HRA would enter into the 18-month option period. . The agreement could be terminated after an 18-month period by SUPERV ALU if they feel no progress is being made on finding a redeveloper for this site. If it were not terminated at this time, it would continue for an additional six months. There would then be a 1 2-month automatic extension if they meet the requirement of actively marketing the property. At such time as the amendment was terminated, the commencement of the HRA option would be undertaken. . States that SUPERVALU would solicit redevelopment proposals, which meet the following: 0 450,000 to 600,000 square feet of Class B office space constructed at a cost of at least $120 per square foot of building area. . 0 The proposed development must maximize green space. 0 Traffic patterns must be oriented to the south. . Memo to Mayor and City Council, October 3,2002 - Page 2 . SUPERVALU, in the discussions, has stated that they want the agreement to not have any specific parameters of a project identified. They have argued that the HRA has total control with the tax increment. . The HRA, as concerns Tax Increment District 2~11, will undertake an effort to complete one of the following: 0 Secure special legislation to extend both the five-year rule and the term of the district by five years. 0 Decertify the North Annex property from TIF District 2-11 and certify it within a new tax increment district. . SUPERVALU has the ability to demolish the North Annex building during the term of this agreement. They would be reimbursed for the actual cost of this work at the time of approval of a redevelopment project. . . The purchase price for the HRA's option would be a fixed amount of $10,739,072.61, which is based on the following: 0 $9,039,072.61 Value of land and building 0 $1,700,000.00 Reimbursement of off-site public improvements completed in conjunction with the distribution facility project . Prior to redevelopment, SUPERV ALU would be allowed to use the North Annex property for eligible uses within the business park zoning classification. The Council may want to identify specific uses in this section that they would consider unacceptable. Attachment . lO/9/2002 . FIRST AMENDMENT TO REDEVELOPMENT 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 the 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 (the "Agreement"). WHEREAS, pursuant to the Agreement the 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 ofthe 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 ofthis Amendment the Authority and the Redeveloper have executed and recorded against the North Annex Property the Option in accordance with the terms of the Agreement. Therefore, section 3.9 of the Agreement is hereby amended in the 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 U days after the date of this Amendment execute and record an amendment to the Option extending the Commencement 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 North Armex Property is extended pursuant to subsection (b) below the Commencement Date shall also be extended for a similar period. Such additional . extensions of the Commencement 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. To be considered, the proposals must include the following: (1) The proposed development must consist of the construction of between 450,000 and 600,000 square feet of Class B office space constructed at a cost of at least $120.00 per square feet of building area; (ii) The proposed development must maximize green space on the North Annex Property; and (iii) Traffic patterns must be orientated to the south of the North Annex Property. 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 win 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 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 other party presents a proposal to the Authority for redevelopment of the 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 efforts to extend the term of Tax Increment District No. 2-11 and the time for making expendihlres in Tax Increment Financing District No. 2-11 or to create a new tax increment district encompassing the North Annex Property, all as is described in section 4(a) of this Amendment. The Redeveloper may demolish the improvements if the Authority 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. 2-11 and extend the term of District No. 2-11 for an additional five (5) years; or (ii) to create a new tax increment district. Prior to demolishing such improvements, the Redeveloper shall submit to the Authority for its 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, 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 Annex Property has been redeveloped, the Redeveloper agrees that it will only use such property for uses allowed by the City's Business Park Zoning Ordinance. The Redeveloper's use of such property shall comply with all other local ordinance requirements. Without limiting the foregoing, the Redeveloper agrees that it will not use the North Annex Property for the following types of uses (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 financed 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 portion of the North Annex Property to the City pursuant to the new Section 4.6 ofthe Agreement to be added pursuant to section 3 below. The Option shall also be amended to provide that if the Redeveloper undertakes 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 . paid by the Redeveloper. . Section 3. The redevelopment of the North Annex Property will necessitate the construction of certain improvements to the intersection at the southwest comer of the North Annex Property. Therefore, the Agreement is hereby amended by adding a new Section 4.6 as follows: Section 4.6. Intersection Improvements. In order to facilitate the redevelopment of the North Annex Property the City is in the process of conshucting a new intersection at the southwest comer 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. 2-11. 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 North 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 necessary 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 the 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. Section 4. Article V of the Agreement states that the Authority 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 certain agreements concerning the use oftax 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 incurred within five (5) years from the date of certification of the tax increment district. The Authority agrees that it will in good faith attempt to secure special legislation from the Minnesota Legislature extending the five (5) year limitation . on expenditures for the Tax Increment District and extending the term of the Tax Increment District for an additional five (5) years. The Authority makes no representations or warranties that it will be successful in such effort. If the -~- ..--- ----- . Authority is unable to secure such special legislation it will take steps to create a new tax increment district encompassing only the North Annex Property. The creation of such a tax increment district is, however, subject to the public hearing and notice provisions of State law and therefore, the Authority cannot commit to create such a district unless and until the City holds a public hearing on the matter and considers all information"and COl1unents on the creation ofthe district. (b) For purposes of this Amendment, "Tax Increment" shall mean that portion ofthe real property taxes generated from the Redevelopment Property and Minimum Improvements and the North Annex Property that is paid to the Authority as tax increment under the Minnesota tax increment financing laws, excluding tax increment that was received by the Authority prior to the date of this Agreement and that was spent by the Authority. If the Authority and the Redeveloper do not enter into the agreement required by Section 3.9(b)(v) of the Agreement during the term of this Agreement, any tax increment generated from the Tax Increment District shall be the Authority's and the Authority shall be free to use it for any legal purpose. If such an agreement is executed, Tax Increment will be used by the Authority 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. 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. (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 described in Section 4.6 to be used if on any debt service payment date for the I 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 in the form of the note attached to this Amendment as Exhibit B. (v) Fifth, Tax increment will be used to reimburse the Authority for any amounts paid to the Redeveloper the time of the Authority's acquisition of the North Annex Property as described in section 2(g) above, together with interest at the rate of _ percent L%) per armum from the date such payment was made until the Authority has been reimbursed in full. The Authority may assign its right to receive such Tax Increment reimbursements to a developer of the North Annex Property who makes the payments at the time of acquisition of the North Annex Property in lieu of the Authority's payment of such amounts. (c) All costs incurred by the Authority, whether incurred before or after the date of this Amendment, in 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, contractors or other parties for whose fees the Redeveloper will be responsible Mder this section, the Authority will notify the Redeveloper of its intent to do so. Section 5. In consideration of the Authority's undertakings and agreements in this Arllendment, the Redeveloper agrees that during the term of this 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 terminate this Amendment and the extension of the term of the Option on the date 18 months after the date of this . Amendment by giving written notice of its intent to terminate at least 120 days prior to the effective date of the termination. If the Redeveloper fails to give such notice of ---- ---- --.- - - . termination, the term of this Amendment and the extended term of the option shall continue 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 terms of this Amendment, all other provisions of the Agreement shall remain in full force and effect. . I . -- . 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 written. HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF HOPK-INS, MINNESOTA By Its By Its SUPERV ALU INC. By Its By Its . STATE OF l\1INNESOTA) )ss. 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 of the 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 lNe., a Delaware corporation, on behalf of the corporation. . Notary Public . 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 and Westside Equipment overfill protection work. (Is this description adequate?) . .