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Memo - Block 64 Project I Economic Development] MEMORANDUM TO: Honorable Mayor and City Council COPIES: Bob Deike, Sid Inman I FROM:c,-,',~1 Jim Kerrigan, Director of Planning & Economic Development / DATE: March 31,2005 SUBJECT: Block 64 Project PURPOSE OF MEMO Staff has scheduled a City Council work session for April 5 to update the Council on GPS Financial Group's proposal for Block 64 in the downtown. Sid Inman and Bob Deike will be part of this discussion. OVERVIEW In February the HRA executed a preliminary redevelopment agreement with GPS Financial Group to undertake a mixed-use residential/retail project on the block in downtown Hopkins between Fifth and Sixth Avenues, north of Mainstreet (Block 64). This agreement identifies 15 tasks that need to be addressed by GPS at specific times over a 60-day period. All items need to be completed and submitted to staff by April 4, 2005. The following is the status of each of these tasks as of the date of this report: Sec. 3(a) Proiect Schedule - This document was submitted, but a number of the dates shown are incorrect. An e-mail dated March 8, 2005, (see attached) informed the developer that a corrected schedule needed to be provided. This has not yet been received. See, 3(b) Market Study - GPS received a draft market study report on March 18, but it was not provided to staff. The final report was provided to staff on March 31 (see attached). There has been no staff review of the document as of the date of this memo. Sec. 3(c) Relocation Plan - This report was provided to staff by the due date. In a letter dated March 23, 2005, (see attached) the developer was requested to provide timelines concerning the relocation. Memo to Mayor, et ai., March 31,2005 - Page 2 Sec. 3(d) Purchase Aqreements for Property - Purchase agreements have been secured and submitted to staff for all the properties except the Park Plaza property. The developer has been continuing to negotiate a purchase of this property, but has stated that the City will probably be asked to use its eminent domain authority. Sec. 3(e) Refined Site Plan - Staff spoke with the project architect on March 29, and they stated they will be preparing the required elevations and site plan. The developer has stated this information will be submitted to staff May4. Sec. 3(f) Summary of Required Public Improvements - Not yet received by staff. Requested in letter dated March 23, 2005, (see attached). Sec.3(q) Concept Review - This action was completed by the developer at the February 22 Zoning & Planning meeting. Sec. 3(h) Meet with HBCA & Neiqhbors - Both of these meetings were held by the developer. Sec. 3m Sources & Uses/Proiect Pro Forma - Preliminary information was provided to Ehlers & Associates. This information was based on early concepts of the project. With a revision in the pricing of the units, the construction phasing, and the number of units, new information was provided to Ehlers on March 30 for their review. Sec. 3m Development Proposal - A development proposal has been provided to Staff. No developer background or experience information was provided as required by the preliminary development agreement. A letter dated March 23, 2005, (see attached) was sent to the developer requesting this information. The developer has stated this information will be provided to staff May 4. Sec. 3(k) Preliminary Financial Commitment - This information has not yet been provided. The developer has stated he will be meeting with a financial institution to secure a letter of interest rather than a preliminary commitment. Sec. 3(1) Bimonthly Status Report - The developer has been submitting these reports as required. Sec.3(m) Phase I Environmental/Geo-technical Survey - The developer has completed environmental assessments of all of the subject property and provided a report to staff. Staff subsequently contracted with a consultant to review this information and identify additional actions that would need to be completed prior to closing on the property. This information has been provided to the developer. As concerns the geo-technical information, the developer has stated that they have undertaken testing, but no report has been provided to staff. Sec. 3(n) Land Survey - This survey was provided to staff. Memo to Mayor, et a!., March 31 , 2005 - Page 3 Sec. 3(0) Developer Financial Statements - The principal of GPS Financial Group has provided their financial statements to Sid Inman of Ehlers & Associates. PRIMARY ISSUES TO CONSIDER As staff has discussed previously, the Council needs to consider a number of issues in determining how to proceed with this project. . Whether the project still meets the goals and objectives of the Council- quality of the project, ability to fill a niche within the City . Comfort level with the development team's ability to complete the project . Project feasibility--the market study identifies the ability to sell the units; Ehlers will need to review the developer's financial capability, financial structure of the project and tax increment assistance request . Risk to the City-staff and Council need to be assured that the project is structured in such a manner that the taxpayers of the City are not unduly exposed CONCLUSION Once all the required information detailed in the preliminary development agreement has been submitted, Ehlers will complete a review on the overall feasibility of the project. Based on this review, if the Council wishes to proceed, a development agreement will be executed. The following is a tentative schedule that has been discussed: April 5 April 19 April 26 May3 May3 June 7 Special City Council work session - staff update and discussion Special City Council work session - staff/developer project discussion Regular City Council work session - Ehlers presents feasibility analysis findings HRA meeting - authorize preparation of development agreement Negotiate and prepare development agreement HRA meeting - approve development agreement ATTACHMENTS . E-mail dated March8,2005,re: project schedule . Letter from Jim Kerrigan to Steve Flanagan dated March 31,2005, . Market study by McComb Group, Ltd., dated March 2005 . Preliminary development agreement Shannon Smith .om: nt: To: Subject: Jim Kerrigan Wednesday, March 30, 20052:59 PM Shannon Smith FW: Construction and financing phases 3-3-05 -----Original Message----- From: Jim Kerrigan Sent: Tuesday, March 08, 2005 2:53 PM To: 'sf@4gfg.com' Subject: RE: Construction and financing phases 3-3-05 Steve I think some of these dates are wrong, ie loan closing on building F should be 06 not 05. Please review all dates and make changes as appropriate. Get me a revised copy. Jim Kerrigan -----Original Message----- From: Steve Flanagan [mailto:sf@4gfg.com] Sent: Friday, March 04, 2005 2:03 AM To: Jim Kerrigan Subject: Construction and financing phases 3-3-05 eim, until Here is the phasing document. The market study will not be complete 18 March. Thanks. Steve Flanagan sf@4gfg.com 808 561-8100 office 808 261-4996 fax 1 March 23, 2005 Steve Flanagan GPS Financial Group 15 Sixth Avenue North Hopkins, MN 55343 Re: Block 64 Redevelopment Project Dear Steve: Thank you for providing me the development proposal for this project. As we discussed, with this document I also need to receive the following (see Sec. U) of the preliminary development agreement): . Other redevelopment projects GPS has completed (you should include all projects since GPS was formed in 1985) . List of references that have been involved in the projects. This should include consultants, representatives of lending institutions that have provided financing, local government staff, and other appropriate individuals that have been involved in facilitating these projects. I need to receive this information as soon as possible so that staff can complete its review process for the City Council. Besides the above, the following information still needs to be submitted to comply with the timeline of the preliminary development agreement: . Market study (Section (b) of the preliminary development agreement) . Timelines for completing the relocation process (Section (c) of the preliminary development agreement) I) Engineer's report on the nature and location of required public improvements (Section (f) of the preliminary development agreement) You should also review the agreement for the items you need to have completed by April 4, 2005. This is the date when all the tasks described in this agreement need to be completed. I have scheduled a conference call for March 31 at 11 a.m. so that we can talk over project status. Please get back to me with the telephone number you would like me to use for this call. My direct number is 952-548-6340. Sincerely, Jim Kerrigan Planning & Economic Development Director 01125/05 ,,/= T/ ... ',;?;AJ2;.<'--e,vCe.f?( 0'::,CJ PRELIMINARY DEVELOPMENT AGREEMENT . THIS AGREEMENT is made and entered into this j'1 day of Pa/'VI I . 2005, by and between the Housing and Redevelopment Authority In and For the City 0 Hopkins~ Minnesota, a public body politic and corporate, (the "Authority") with its principal office at 1010 First Street South, Hopkins, Minnesota 55343, and GPS Financial Group, LLC, a Minnesota limited liability company (the "Developer") with its principal office at 15 Sixth Avenue North, Hopkins, MN 55343. WITNESSETH: WHEREAS, in further~ce of the objectives of the Minnesota Statutes, sections 469.001- .047 (the "Act"), the Authority has undertaken a program for the clearance and reconstruction or rehabilitation of blighted, deteriorated, deteriorating, vacant, unused, Under used or inappropdately used, areas of the City, and in this connection is engaged in caIrying out a redevelopment project known as Redevelopment l,'roject No.1 (hereinafter referred to as the "Project") in an area (hereinafter referred to as fue "Project Area") located in the City of Hopkins, Minnesota (the "City"); and WHEREAS, as of the date of this Agreement there has been prepared and approved by the Authority ~d the City Council of the City a redevelopment plan for the Project (which Plan. is hereinafter referred to as the "Redevelopment Plan"); and WHEREAS, the Developer has proposed to acquire certain real property in the Project Area (which real property is collectively referred to herein as the "Redevelopment Property"); and WHEREAS, the Developer has presented to the Authority a proposal for the redevelopment of the Redevelopment Property through the construction of a mixed use commercial/residential development (the "Development"), which proposal may involve the Authority's provision of fm~cial assist~ce to offset a portion of the costs associated with the Development; and . WHEREAS, the Authority's Board of Commissioners has reviewed the Developer's development proposal and desires to. enter into this Preliminary Development Agreement to allow fue Developer to further refine its proposal and to negotiate with fue Authority concerning the Authority's participation in and approval of the proposed Development; imd WHEREAS, fue Authority and the Developer intend to proceed wifu the Development if: (i) the Developer is able to acquire the Redevelopment Property; (ii) satisfactory' fin~cing for the Development c~ be secured; (in) agreement c~ be reached on the design of the Development and the types and mix of tenants that will occupy the retail portion of the Development; and (iv) the economic feasibility and soundness of the Development has been determined to the satisfaction of the parties. NOW, THEREFORE, in consideration of the covenants and obligations of the parties . hereto, the Authority and the Developer hereby agree as follows: Section 1. Preliminary Nature of Agreement. The Authority and the Developer agree that this Agreement is intended to be preliminary in nature. Before the Authority ~d the Developer can make a decision on whether to proceed with the implementation of fue Developer's development proposal, it Will be necessary to assemble and consider information relative to the design, economics and.other aspects of the Development. The purpose of this Agreement is to allow the Developer ~ opportunity to assemble such necessary information, to refine the above referenced development proposal, ~d to negotiate with fue Aufuority concerning the execution of a formal redevelopment contract. (the "Contract") which, if executed, will set forth the rights ~d responsibilities of the Aufuority and the Developer with respect to the Development. The Developer has propo~ed to construct a Development consisting of approximately 252 residential units ~d approximately 14,000 square feet of commercial space, as described in the letter from the Developer to the City dated J~uary 25,2005. Section 2. Present Intent of Parties. It is the intention of the parties that this Agreement document their present underst~ding and commitments and that if the following conditions can be fulfilled to the satisfaction of the Aufuority and the Developer that the parties will proceed in an attempt to formulate a mutually satisfactory Contract: (a) the Developer demonstrates the feasibility of fue Development at a design and density acceptable to the Authority and the City; . (b) the Developer provides such documentation regarding the economic feasibility of the Development as the Authority may reasonably wish to receive during the term of this Agreement; (c) the completion of all undertakings required by this Agreement in a satisfactory and timely manner; ~d (d) the satisfaction of such. other reasonable and customary conditions as are detennined to be appropriate by eifuer party. The Contract (together with ~y ofuer agreements entered into between the parties hereto contemporaneously therewith) when executed will supersede all underst~dings and obligations ofthe parties hereunder. Section 3. Developer Undertakings. During the term of this Agreement the Developer shall do the following: (a) Within 30 days after the date of this Agreement, the Developer.will submit to the Authority a proposed schedule for all phases of the Development, including wifuout limitation, the timing of the closing on financing and the various stages of construction. (b) Within 30 days after the date of this Agreement the Developer shall secure a market study for the Development which covers absorption, phasing of sales, and the impact of the Development on the market feasibility of a mixed use for-sale housing/commercial project proposed to be constructed on property located between (5th fu""ld 8th Avenues North of Main Street. The market study must be prepared by a consulting firm familiar with the Twin Cities housing and commercial market. The identity of the consulting :firm ~d the scope of the market study must be approved by the Authority. The Authority agrees that the McComb Group is an acceptable consulting :firm for this purpose. (c) Within 10 days after the date of this Agreement, the Developer shall enter into a contract with a relocation consultant acceptable to the Aufuority to assist in the preparation of a plan for the relocation .of all tenants ~d owners of the Redevelopment Property. The Authority agrees that Wilson Development Services is an acceptable relocation consultant. The relocation pl~ shall detail the timelines and process for complying with applicable relocation laws and shall identify what tenants and property owners are eligible for relocation assistance and estimate fue relocation benefits and displacement schedule for all persons and entities that will be displaced by the Development. (d) Within 10 days after the date of this Agreement the Developer shall secure and submit to the Authority purchase agreements or option agreements for all of the Redevelopment Property to be acquired for the Development together with summaries of the specifics of each of the agreements. Wifuin 15 days after the date of this Agreement the Developer shall secure and submit to the Authority written aufuorizations from all current owners of the Redevelopment PropertY allowing the Authority or its contractors to Gonduct interior inspections of all buildings on the Redevelopment Property for purpos-es of the building conditions analysis referenced in section 4(b) of this Agreement along with contact information for each property owner. (e) . Within 60 days after the date of this Agreement the Developer shall submit to the Authority and City a refined site plan for the Development showing the size, nature, ~d location of the proposed Development, including parking, access points off of roadways, access points to parking, locations of building, landscaping, other exterior improvements and such other matters as the Authority may require, and elevation and perspective drawings for the Development, showing the elevations of the buildings as. seen from all streets. The design of the Development shall be consistent with the City's ~d the Authority's architectural st~dards for the area, a copy of which stai:J.dards are attached to this Agreement as Exhibit B. (t) Within 30 days after the date of this Agreement the Developer shall submit to the Authority and City a report by the Developer's engineer describing the nature and 2 location of any public improvements that it will be necessary to construct as a result of the construction of the Development. (g) Within 30 days after the date of this Agreement the Developer shall complete a concept review of fue proposed Development by the City's Zoning and Planning Commission and City Council. (h) Within 45 days after the date of this Agreement the Developer shall hold a meeting with the Hopkins Business and Civic Association ~d all owners of property adjacent to the proposed Development to discuss the Development and to respond to such parties' concerns. The Authority will provide the Developer a mailing list of property owners to be notified of the meeting. (i) Within f5 days after the date of this Agreement the Developer shall submit to the Authority a statement of the sources and uses and profit of all funding, including any public .financial assistance requested by the Developer, for the construction of the Development and a revised pro forma detailing all costs of the Development and including the income that will be generated by the commercial portion of the Development. The pro forma shall be in such detail and form as would be acceptable to a lender being asked to provide mortgage financing. for the Development. The Developer shall provide to the Authority such additional information as the Authority and its financial consu1t~t may require to allow the AuthoritY"and its financial consultant to undertake a ''but for" analysis for purposes of the Minnesota tax increment financing laws. The Developer underst~ds that if the Authority considers providing tax. increment assistance for the Development such assistance will only be provided on a "pay as you go" basis by which tax increment would be made available as it is generated by the Development CD Within 45 days after the date of this Agreement the Developer shall submit to the Authority a fonnal development proposal including a narrative description of the proposed Development and specific information on the Developer's background and experience with similar redevelopment projects. Such proposal shall also include references including contact persons at other cities in which the Developer has completed projects. (Ie) Within 60 days after the date of this Agreement the Developer shall submit to the Authority a letter from a financial institution stating a preliminary commitment to provide financing for the Development. (1) Every two weeks during the term of this Agreement, the Developer will provide to the Authority written status reports on its activities under this Agreement and will attend, on a monthly basis, meetings of the City Council and the Authority's Board of Commissioners to discuss the ~evelopment. (m) Within 20 days after the date of this Agreement the Developer will submit to the Authority a Phase I Environmental Assessment for the Redevelopment Property 3 together with a summary of the assessment prepared by the Developer's environmental consultant describing the environmental conditions existing on fue Redevelopment Property and -containing recommendations as to any additional necessary assessments and any necessary remediation activities. Within the same time period the Developer shall submit to the Authority a geotechnical survey of the Redevelopment Property. (n) Within 30 days after the date of this Agreement the Develo'per shall submit to the Authority an ALTA land survey of the Redevelopment Property. (0) Within 20 days after the date of this Agreement the Developer shall submit to Ehlers & Associates, Inc., fin~cial statements for Developer and Developer's owners. All of the activities described above shall be performed at the sole expense of the Developer. Section 4. Aufuority Undertakings. During fue term of this Agreement, the Aufuority will undertake the following: (a) Utilizing the documentation and information submitted by the Developer pursuant Section 3, the Authority will cause its fiscal and development consultant, Ehlers & Associates, Inc., to prepare a report for fue Authority indicating: (i) Whefuer any public financial assist~ce requested by the Developer in connection with the Development is necessary and appropriate; (ii) Whether there will be sufficient cash flow and tax increment fi.om the Development to pay all of the costs associated with the Development; (iii) Whefuer there is a sufficient source of funding to bridge any financial gap relating to fue Development and whether the use of such funds by the Authority will unduly impair the Authority's ability to undertake other development activities; (iv) Whether, based on a review of the market study provided by the Developer pursuant to Section 3, the Development is supported by market conditions; and (v) Indicating any other actions to be performed by the Authority or Developer in order to proceed with the Development. (b) The Authority will, in cooperation with Ehlers & Associates, Inc., undertake an analysis of whether the Redevelopment Property qualifies to be included in a redevelopment tax increment district. Such ~alysis will include the preparation of a building conditions analysis to determine whether there exists the requisite number of subst~dard buildings to qualify under state law. The Authority will 4 solicit bids from consultants for the preparation of the building analysis ~d will submit such bids to the Developer for its review. At the time that fue Authority lets the contract for the building analysis the Developer will deposit wifu the Aufuority the entire contraCt amount to be used by the Authority to pay the consultant. (c) The Authority will ~alyze the information provided by the Developer pursu~t to Section 3 to determine the feasibility of the Development and whether proceeding with the Develqpment is in the public's best interest. Within thirty days after the Authority is provided information required to be .submitted by the Developer under Section 3, the Authority will notify the Developer if the Authority approves such information or if the Authority does not approve the information or finds the infonnation to be insufficient the Authority will inform the Developer in writing of the basis for its decision.. Following the Developer's receipt of the Authority's notification the Developer will have an additional thirty days to submit new or corrected information that satisfies the Authority's concerns. lfthe Aufuority finds that the Developer is diligently acting to supply additional or corrected information it agrees that it will grant reasonable extensions of the term of this Agreement to permit such information to be supplied. (d) Upon its receipt ~d approval of information to be provided under Section 3 the Authority will cause to be prepared drafts of the Contract and begin negotiating the execution of the Contract with the Developer. Section 5. Negotiation of Contract. If the Developer supplies altinformation required by this Agreement in a timely manner and such information is approved by fue Authority, the Authority and the Developer will work in good faith to negotiate the Contract. Although the decision to enter into the Contract rests in the discretion of the parties, the Aufuodty agrees that it will not base a decision to not enter into a Contract with the Developer upon ~y information that it had previously approved under this Agreement. Section 6. Effect of Approvals. No approval given by the Aufuority hereunder or in connection herewith shall be deemed to constitute ~ approval of the Development for any purpose ofuer th~ as stated herein and the process outlined in this Agreement shall not be deemed to supersede' any concept review, conditional use permit, vacation, subdivision, or ofuer zoning or pl~g approval process of the Authodty or the City relative to the development of real estate. Section 7. Authority Costs. In consideration of the Authority's covenants under this Agreement, fue Developer agrees that it will pay all out-of-pocket costs incurred by the Authority or City, including, without limitation, all fees owed to the Authority's or City's traffic, development, fiscal, environmental and other consultants, all costs incurred in connection with the creation of a tax increment district to encompass the Redevelopment Property and all attorneys' fees incurred by the Authority or City in connection with the negotiation ~d preparation this Agreement, the Contract and all related documents, or in enforcing the Developer's obligations to pay costs which it is obligated to pay under this Agreement. All of the Authodty's and City's attorneys and consultants shall be under contract with the Authority or 5 City, unless the Authority or City otherwise agree in writing. The Developer has deposited $5,000 with the Authority as of the date of this Agreement ~d the Authority has used such amount deposited to pay its costs associated with the Developer's development. The Authority shall have the right to draw upon amounts remaining on deposit with it to pay its costs. The Developer agrees to maintain a deposit with the City in the amount of $5,000. If the amount on deposit becomes depleted below $5,000, the Authority shall have the right to request that the Developer replenish such funds upon which the Developer shall, within 15 days of request by the Authority, remit to the Authority additional funds to be held on deposit so that the amount on deposit will equal $5,000. If on termination of this Agreement, the amounts held by fue Authority are insufficient to pay'the Authority's costs, the Developer shall be liable for ~y deficiency. If this Agreement is terminated in accordance with the terms hereof, any sums remaining on deposit with the Authority, after fue Authority pays or reimburses itself for costs incurred to the date of termination, shall be returned to the Developer. The Developer's obligations under this Section shall survive termination of this Agreement to the extent costs were incurred prior to the date of termination or to the extent that costs are incurred to enforce the Developer's obligations under this Section. . Section 8. Modifications. This Agreement may be modified and the term hereof may be extended only through written amendments hereto signed by all parties to this Agreement. Section 9. Term ofAgreement~ Exclusive Negotiations. This Agreement shall be effective for a period of one hundred and twenty days from fue date hereof. If for any reason a Contract has not been entered into by the parties within the term of this Agreement or any mutually approved extension thereof, this Agreement shall be null and void and, subject to Section 7, neither party shall have any liability or obligations to the other. ' During the term of this Agreement, the Authority agrees that it will negotiate exclusively with the Developer concerning the development of the Redevelopment Property. Section 10. Indemnification. The Developer agrees to indemnify, defend and hold hannless the Aufuority, the City and their officers, employees, agents and representatives from and against any c1aims,demands, suits, costs, expenses (including reasonable attorneys' fees) actions or other proceedings whatsoever by any person or entity whatsoever arising or purportedly arising from the actions or inactions of the Developer (or if other persons acting on its behalf or. under its direction or control) under this Agreement, or the transactions contemplated hereby or the acquisition, construction, installation, ownership, and operation of the Development; including, without limitation, any claim by a land owner or ten~t located on fue Redevelopment Property to be entitled to relocation costs and related expenses. Section 11. Severability. If any portion of this Agreement is held invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion of this Agreement. Section 12. Notices. Notice, demand, or ofuer communication from one party to the other shall be deemed effective if sent by certified mail, postage prepaid, return receipt requested or 6 delivered personally to . a party at its address in the first p?ragraph of this Agreement, or at such other address as such party may designate in writing to the other party. 7 IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf and the Developer has caused this Agreement to be duly executed in its name and behalf on or as of the date first above written. HOUSING AND REDEVELOP:MENT AUTHORITY IN AND FORTHE CITY OF HOPKINS GPS FINANCIAL GROUP, LLC By ~~ 4~ft;\A Its t>Q ~i h~ ~ 8 EXHIBIT A Redevelopment Property Block 64, West Minneapolis Second Addition and part of Auditor's Subdivision No. 242. The Redevelopment Property is located between Fifth and Sixth Avenues North and north of Main Street ~d south of First Street North. EXHIBIT B Architectural Standards