ITEM 4.5 Otsego Apartments LLC4 0
OtCI�eooF
MINNESOTA
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR:
MEETING DATE:
Administration
City Administrator/Finance Director Flaherty
July 23, 2018
PRESENTER(s)
REVIEWED BY:
ITEM #:
City Administrator/Finance
Director Flaherty
City Attorney MacArthur
4.5
STRATEGIC VISION
MEETS:
THE CITY OF OTSEGO:
development agreement.
Is a strong organization that is committed to leading the community through innovative
communication.
IS A PUBLIC HEARING REQUIRED?
Has proactively expanded infrastructure to responsibly provide core services.
Yes — Was Held February 12, 2018
Is committed to delivery of quality emergency service responsive to community needs and
expectations in a cost-effective manner.
X
Is a social community with diverse housing, service options, and employment opportunities.
redevelopment would include the decommissioning of the private waste water treatment facility currently
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council approve the attached resolution authorizing execution of a
development agreement.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
Yes
Yes — Was Held February 12, 2018
BACKGROUND/J USTI FICATION:
At a special meeting on December 11, 2017, the City Council concurred to move forward with the
consideration of tax increment financing on the Riverbend North redevelopment project. The proposed
redevelopment would include the decommissioning of the private waste water treatment facility currently
operating on the Riverbend North site to facilitate new development.
The project will include the construction of 84 units of market rate multi -family housing and a mini -storage
facility. Future phasing would include the construction of an additional 80 units of market rate multi -family
housing and approximately 15,000 square feet of future commercial development. The project will be
undertaken on approximately 13 acres located at the southeast intersection of Trunk Highway 101 and
CSAH 42.
At a meeting on February 12, 2018, the City Council held a public hearing in accordance with Minnesota
Statutes on the proposed redevelopment TIF District. No comments were received from the public leading
up to, or during that meeting.
At a meeting on February 26, 2018, the City Council approved a resolution adopting a modification to
Development District No. 1; establishing Tax Increment Financing District No. 4; and approving a Tax
Increment Financing Plan, which provides a summary of the District and provides a budget for the sources
and uses of the tax increment revenue.
At a meeting on May 14, 2018, the City Council held a Special City Council meeting for the purpose of
reviewing the developer's financial assistance request and to negotiate the terms of the development
agreement. At the conclusion of the meeting, both the developer and the City Council generally concurred
with the financial assistance request and general terms for a proposed development agreement, subject to
final review and approval by the City Council.
The development agreement outlines the issuance of two tax increment revenue notes in the maximum
principal amount of $3,359,685 to reimburse for certain demonstrated costs of the project. Note A is for a
maximum of $1,684,685 and will bear 0% interest. Note B is for an initial principal amount of $1,250,000
issued upon certificate of occupancy on phase 1 of the project with an additional $425,000 principal
amount upon certificate of occupancy on phase 2 of the project. Note B will bear simple, non -compounding
interest of 5%. Both Notes are payable solely from tax increment received from the development within
the new TIF district.
The current taxable market value of the property within the district is $342,200. The future taxable market
value projects to be $17,781,000 and will generate approximately $8,072,579 of revenue over the life of
the district, which exceeds the estimated use of increment for repayment of Notes A and B.
The following TIF agreements and resolutions have been a cooperative effort between City staff, Nick
Anhut (Ehler's) and Mary Ippel (Briggs & Morgan).
In order to continue, the City Council will need to approve the following item:
1] Resolution 2018-52
This resolution will authorize the execution of a development agreement by and between the City of
Otsego and Otsego Apartments, LLC. This agreement outlines certain understandings of the project
between the City and the developer as they relate to the Tax Increment Financing District.
The City and developer will also enter into two separate agreements that will include, but not limited to
the following: land use approvals; connection of Riverbend Mobile Home Park to municipal sanitary sewer;
decommissioning of the private waste water treatment facility currently operating on the Riverbend North
site; payment of utility availability and connection charges; and calculations of City fees, escrows and
securities; etc. These agreements will also be presented for approvals at this meeting.
SUPPORTING DOCUMENTS ATTACHED: I
• Development Agreement
• Resolution 2018-52: Authorizing Execution of a Development Agreement
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES:
Motion to approve Resolution 2018-51 authorizing the execution of a development agreement by and
between the City of Otsego and Otsego Apartments, LLC.
BUDGET INFORMATION
FUNDING BUDGETED:
N/A
DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE CITY OF OTSEGO, MINNESOTA
AND
OTSEGO APARTMENTS, LLC
(OTSEGO APARTMENTS PROJECT)
This document drafted by: BRIGGS AND MORGAN
Professional Association
2200 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402
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ARTICLE I. DEFINITIONS................................................................................................. 2
Section 1.1
Definitions............................................................................................ 2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES ................................................
5
Section 2.1
Representations and Warranties of the City .........................................
5
Section 2.2
Representations and Warranties of the Developer ...............................
5
ARTICLE III.
UNDERTAKINGS BY DEVELOPER AND CITY .......................................
7
Section3.1
Project..................................................................................................
7
Section3.2
TIF Note B...........................................................................................
8
Section 3.3
Action to Reduce Taxes.......................................................................
9
Section 3.4
Look Back and Reduction of TIF Assistance ......................................
9
Section3.5
Property Sale........................................................................................
9
ARTICLE IV.
EVENTS OF DEFAULT...............................................................................
11
Section 4.1
Events of Default Defined.................................................................
11
Section 4.2
Remedies on Default..........................................................................
12
Section 4.3
No Remedy Exclusive........................................................................
12
Section 4.4
No Implied Waiver............................................................................
12
Section 4.5
Agreement to Pay Attorney's Fees and Expenses ..............................
12
Section 4.6
Indemnification of City......................................................................
13
ARTICLE V.
ADDITIONAL PROVISIONS......................................................................
14
Section 5.1
Restrictions on Use............................................................................
14
Section 5.2
Conflicts of Interest............................................................................
14
Section 5.3
Titles of Articles and Sections...........................................................
14
Section 5.4
Notices and Demands........................................................................
14
Section 5.5
Counterparts.......................................................................................
15
Section 5.6
Law Governing..................................................................................
15
Section5.7
Expiration...........................................................................................
15
Section 5.8
Provisions Surviving Rescission or Expiration ..................................
15
Section 5.9
Assignability of Agreement and TIF Notes .......................................
15
EXHIBIT A Description of Development Property.................................................................. A-1
EXHIBIT B Form
of Tax Increment Note A............................................................................. B-1
EXHIBIT C Form
of Tax Increment Note B............................................................................. C-1
EXHIBIT D Site Improvements................................................................................................ D-1
EXHIBIT E Projected Acquisition Costs and Site Costs Eligible for Use of TIF Proceeds .....E-1
EXHIBIT F Sources and Uses Analysis.....................................................................................F-1
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DEVELOPMENT AGREEMENT
THIS AGREEMENT, made as of the 1 st day of July, 2018, by and between the City of
Otsego, Minnesota (the "City"), a municipal corporation organized and existing under the laws
of the State of Minnesota and Otsego Apartments, LLC (the "Developer"), a Minnesota limited
liability company under the laws of the United States of America.
WITNESSETH:
WHEREAS, pursuant to Minnesota Statutes, Section 469.124 through 469.134, the City
has previously established Development District No. 4 (the "Development District") and has
adopted a development program therefor, as modified (the 'Development Program"); and
WHEREAS, pursuant to the provisions of Minnesota Statutes, Section 469.174 through
469.1794, as amended (hereinafter, the "Tax Increment Act"), the City has created within the
Development District, Tax Increment Financing District No. 4 - Riverbend North (the "Tax
Increment District"), and has adopted a tax increment financing plan therefor (the "Tax
Increment Plan") which provides for the use of tax increment financing in connection with
certain development within the Development District; and
WHEREAS, in order to achieve the objectives of the Development Program and
particularly to make the land in the Development District available for development by private
enterprise in conformance with the Development Program, the City has determined to assist the
Developer with the financing of certain costs of a Project (as hereinafter defined) to be
constructed within the Tax Increment District as more particularly set forth in this Agreement;
and
WHEREAS, the City believes that the development and construction of the Project, and
fulfillment of this Agreement are vital and are in the best interests of the City, the health, safety,
morals and welfare of residents of the City, and in accordance with the public purpose and
provisions of the applicable state and local laws and requirements under which the Project has
been undertaken and is being assisted; and
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section
116J.993 through 116J.995, do not apply to this Agreement pursuant to an exemption for
housing; and
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 other as follows:
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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:
Agreement means this Agreement, as the same may be from time to time modified,
amended or supplemented;
Business Day means any day except a Saturday, Sunday or a legal holiday or a day on
which banking institutions in the City are authorized by law or executive order to close;
City means the City of Otsego, Minnesota;
Connection Agreement means the Agreement between the City of Otsego, the Developer,
Darkenwald's Riverbend Company LLC, and Darkenwald's Riverbend Wastewater Company
LLC for connection of Riverbend Mobile Home Park to principal sanitary sewer service dated
20191;
County means Wright County, Minnesota;
Developer means Otsego Apartments, LLC, a Minnesota limited liability company, its
successors and assigns;
Development District means the real property described in the Development Program for
Development District No. 4;
Development Program means the development program approved in connection with the
Development District;
Development Property means the real property described in Exhibit A attached hereto;
Event of Default means any of the events described in Section 4.1 hereof;
Land Use Agreement means the Development Agreement for Riverbend North dated as
of 2018 between the City and the Developer;
Note Payment Date means August 1, 2021, and each February 1 and August 1 of each
year thereafter to and including February 1, 2046; provided, that if any such Note Payment Date
should not be a Business Day, the Note Payment Date shall be the next succeeding Business
Day;
Person means any individual, corporation, partnership, joint venture, association, joint
stock company, trust, unincorporated organization, or government or any agency or political
subdivision thereof;
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Phase 1 Project means the construction of a 82 -unit multifamily rental apartment project
and the construction of an approximately 44,000 square foot commercial mini -storage facility on
the Development Property;
Phase 2 Project means the construction of a 82 -unit multifamily rental apartment project
on the Development Property;
Prime Rate means the rate of interest from time to time publicly announced by U.S. Bank
National Association in St. Paul, Minnesota, as its "prime rate" or "reference rate" or any
successor rate, which rate shall change as and when that rate or successor rate changes;
Project means together, the Phase 1 Project and the Phase 2 Project;
Site Improvements means the site improvements to be undertaken on the Development
Property as identified on Exhibit C attached hereto;
State means the State of Minnesota;
Tax Increment Act means Minnesota Statutes, Sections 469.174 through 469.1794, as
amended;
Tax Increment District means Tax Increment Financing District No. 4 - Riverbend North,
located within the Development District, which was qualified as a redevelopment district under
the Tax Increment Act;
Tax Increment Financing Plan means the tax increment financing plan approved for the
Tax Increment District by the City Council;
Tax Increment Note A or TIF Note A means the Tax Increment Revenue Note A (Otsego
Apartments Project) to be executed by the City and delivered to the Developer pursuant to
Article III hereof, the form of which is attached hereto as Exhibit B;
Tax Increment Note B or TIF Note B means the Tax Increment Revenue Note B (Otsego
Apartments Project) to be executed by the City and delivered to the Developer pursuant to
Article III hereof, the form of which is attached hereto as Exhibit C;
Tax Increment Notes or TIF Notes means together TIF Note A and TIF Note B;
Tax Increments means 95% of the tax increments derived from the Tax Increment
District which have been received and retained by the City in accordance with the provisions of
Minnesota Statutes, Section 469.177;
Termination Date means the earlier of (i) February 1, 2046, (ii) the date the Tax
Increment Notes are paid in full, (iii) the date on which the Tax Increment District expires or is
otherwise terminated, or (iv) the date this Agreement is terminated or rescinded in accordance
with its terms; and
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Unavoidable Delays means delays, outside the control of the party claiming its
occurrence, which are the direct result of strikes, other labor troubles, unusually severe or
prolonged bad weather, acts of God, fire or other casualty to the Project, delays in delivery of
materials for the construction of the Project, the soil conditions of the Development Property,
litigation commenced by third parties which, by injunction or other similar judicial action or by
the exercise of reasonable discretion, directly results in delays, or acts of any federal, state or
local governmental unit (other than the City) which directly result in delays.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a municipal corporation and has the power to enter into this
Agreement and carry out its obligations hereunder.
(2) The Tax Increment District is a "redevelopment district" within the meaning of
Minnesota Statutes, Section 469.174, Subdivision 10, and was created, adopted and approved in
accordance with the terms of the Tax Increment Act.
(3) The development contemplated by this Agreement is in conformance with the
development objectives set forth in the Development Program.
(4) To finance certain costs within the Tax Increment District, the City proposes,
subject to the further provisions of this Agreement, to apply Tax Increments to reimburse the
Developer for the costs of the Development Property and certain Site Improvements in
connection with the Project as further provided in this Agreement.
(5) The City makes no representation or warranty, either expressed or implied, as to
the Development Property or its condition or the soil conditions thereon, or that the Development
Property shall be suitable for the Developer's purposes or needs.
Section 2.2 Representations and Warranties of the Developer. The Developer makes
the following representations and warranties:
(1) The Developer is a Minnesota limited liability company and has power to enter
into this Agreement and to perform its obligations hereunder and is not in violation of its articles
or bylaws or the laws of the State.
(2) The Developer shall cause the Project to be constructed in accordance with the
terms of this Agreement, the Development Program, and all local, state and federal laws and
regulations (including, but not limited to, environmental, zoning, energy conservation, building
code and public health laws and regulations).
(3) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not be economically feasible within the reasonably
foreseeable future, without the assistance and benefit to the Developer provided for in this
Agreement.
(4) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provision of any contractual restriction, evidence of indebtedness,
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agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound, or constitutes a default under any of the foregoing.
(5) The Developer will cooperate fully with the City with respect to any litigation
commenced with respect to the Project.
(6) The Developer will cooperate fully with the City in resolution of any traffic,
parking, trash removal or public safety problems which may arise in connection with the
construction of the Project.
(7) The construction of the Phase 1 Project will commence on or before December
31, 2018 and barring Unavoidable Delays the Project will be substantially completed by April
30, 2020.
(8) The construction of the Phase 2 Project will commence on or before March 22,
2022 and barring Unavoidable Delays the Project will be substantially completed by June 30,
2023.
(9) The Developer acknowledges that Tax Increment projections contained in the Tax
Increment Plan are estimates only and the Developer acknowledges that it shall place no reliance
on the amount of projected Tax Increments and the sufficiency of such Tax Increments to
reimburse the Developer for the costs of the Development Property and Site Improvements as
provided in Article III.
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ARTICLE III.
UNDERTAKINGS BY DEVELOPER AND CITY
Section 3.1 Project.
(1) Development Property and Site Improvements. The costs of the Development
Property, the Site Improvements and the Phase 1 Project shall be paid by the Developer. The
City shall reimburse the Developer for the lesser of $1,684,685 or the costs of the Development
Property and the costs of the Site Improvements actually paid by the Developer (the " Phase 1
Reimbursement Amount") as further provided in Section 3.1 (2) hereof.
(2) Reimbursement: Tax Increment Revenue Note A. The City shall reimburse the
Developer for the costs identified in Section 3.1 (1) through the issuance of the City's Tax
Increment Revenue Note A in substantially the form attached to this Agreement as Exhibit B,
subject to the following conditions:
(a) TIF Note A shall be dated, issued and delivered when the City shall have
issued a Certificate of Occupancy for the Phase 1 Project and the Developer shall submit
a closing statement, purchase agreement for the Development Property and paid invoices
for the Site Improvements in an amount not less than the Reimbursement Amount.
(b) No interest will accrue on the unpaid principal amount of TIF Note A.
(c) The principal amount of TIF Note A shall be payable solely from 50% of
the Tax Increments.
(d) On each TIF Note A Payment Date and subject to the provisions of Note
A, the City shall pay, against the principal outstanding on TIF Note A, 50% of the Tax
Increments received by the City during the preceding 6 months. All such payments shall
be applied to the payment of the principal of Note A.
(e) TIF Note A shall be a special and limited obligation of the City and not a
general obligation of the City, and only 50% of the Tax Increments shall be used to pay
the principal amount of TIF Note A.
(f) The City's obligation to make payments on TIF Note A on any Note
Payment Date or any date thereafter shall be conditioned upon the requirement that (A)
there shall not at that time be an Event of Default that has occurred and is continuing
under this Agreement and (B) this Agreement shall not have been rescinded pursuant to
Section 4.2(b).
(g) TIF Note A shall be governed by and payable pursuant to the additional
terms thereof, as set forth in Exhibit B and Sections 3.4 and 3.5. In the event of any
conflict between the terms of TIF Note A and the terms of this Section 3.1, the terms of
TIF Note A shall govern. The issuance of TIF Note A pursuant and subject to the terms
of this Agreement, and the taking by the City of such additional actions as bond counsel
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for TIF Note A may require in connection therewith, are hereby authorized and approved
by the City.
Section 3.2 TIF Note B.
(1) Additional Costs of the Project. The City shall reimburse the Developer the sum
of $1,250,000 (the "TIF Note B Reimbursement Amount") for additional Phase 1 Development
Property costs and costs of the Site Improvements paid by the Developer and not reimbursed
under Section 3.1.
(2) Reimbursement: Tax Increment Revenue Note B. The City shall reimburse the
Developer for the costs identified in Section 3.2 (1) through the issuance of the City's Tax
Increment Revenue Note B in substantially the form attached to this Agreement as Exhibit C,
subject to the following conditions:
(a) TIF Note B shall be dated, issued and delivered when the City shall have
issued a Certificate of Occupancy for the Phase 1 Project and the Developer shall submit
a closing statement, purchase agreement for the Development Property and paid invoices
for the Site Improvements in an amount not less than the Reimbursement Amount.
(b) The unpaid principal amount of TIF Note B shall bear simple, non -
compounding interest from the date of issuance of TIF Note B at 5% per annum. Interest
shall be computed on the basis of a 360 day year consisting of twelve (12) 30 -day
months.
(c) The principal amount of TIF Note B and the interest thereon shall be
payable solely from 50% of the Tax Increments.
(d) On each Note Payment Date and subject to the provisions of TIF Note B,
the City shall pay, against the principal and interest outstanding on TIF Note B, 50% of
the Tax Increments received by the City during the preceding 6 months. All such
payments shall be applied first to accrued interest and then to reduce the principal of TIF
Note B.
(e) TIF Note B shall be a special and limited obligation of the City and not a
general obligation of the City, and only 50% of Tax Increments shall be used to pay the
principal and interest on TIF Note B. If, on any TIF Note B Note Payment Date, the 50%
of the Tax Increments for the payment of the accrued and unpaid interest on TIF Note B
are insufficient for such purposes, the difference shall be carried forward, without interest
accruing thereon, and shall be paid if and to the extent that on a future TIF Note B
Payment Date there are Tax Increments, not to exceed 50%, in excess of the amounts
needed to pay the accrued interest then due on TIF Note B.
(f) The City's obligation to make payments on TIF Note B on any Note
Payment Date or any date thereafter shall be conditioned upon the requirement that (A)
there shall not at that time be an Event of Default that has occurred and is continuing
under this Agreement and (B) this Agreement shall not have been rescinded pursuant to
Section 4.2(b).
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(g) TIF Note B shall be governed by and payable pursuant to the additional
terms thereof, as set forth in Exhibit C and Sections 3.4 and 3.5. In the event of any
conflict between the terms of TIF Note B and the terms of this Section 3.2, the terms of
TIF Note B shall govern. The issuance of TIF Note B pursuant and subject to the terms
of this Agreement, and the taking by the City of such additional actions as bond counsel
for TIF Note B may require in connection therewith, are hereby authorized and approved
by the City.
(3) Upon completion of the Phase 2 Project and the issuance of the City of a
Certificate of Occupancy for the Phase 2 Project, the City shall increase the outstanding principal
amount of TIF Note B in an amount not to exceed $425,000, provided the Developer submits
paid invoices for Site Improvements in the amount of $425,000.
Section 3.3 Action to Reduce Taxes. The Developer may seek through petition or
other means to have the market value for the Development Property reduced. Until the TIF
Notes are fully paid, such activity must be preceded by written notice from the Developer to the
City indicating its intention to do so. Upon receiving such notice, or otherwise learning of the
Developer's intentions, the City may suspend payments due under the TIF Notes until the actual
amount of the reduction is determined, whereupon the City will make the suspended payments
less any amount that the City is required to repay the County as a result any reduction in market
value of the Development Property. During the period that the payments are subject to
suspension, the City may make partial payments on the TIF Notes if it determines, in its sole and
absolute discretion that the amount retained will be sufficient to cover any repayment which the
County may require. The City's suspension of payments on the TIF Notes pursuant to this
Section shall not be considered a default under this Agreement.
Section 3.4 Look Back and Reduction of TIF Assistance. The financial assistance to
be provided to the Developer pursuant to this Agreement is based on certain assumptions
regarding the projected costs and expenses associated with constructing the Project (as provided
in the Pro Forma submitted to the City by the Developer and attached as Exhibit F). The City
and Developer agree that those assumptions will be reviewed at the time of completion of
construction of the Project and at the time of any sale of the Phase 1 Project. At the time of
completion of construction of the Project (both the Phase 1 Project and the Phase 2 Project), if
the aggregate amount of Site Improvement costs incurred is less than the aggregate amount of
Site Improvement costs projected in Exhibit E, the TIF assistance for Site Improvement costs
will be reduced on a dollar for dollar basis in the amount of such deficiency and the principal
amount of the TIF Note will be adjusted accordingly.
Section 3.5 Property Sale. If the Developer sells the Project to an unrelated third party
during the term of this Agreement, the Developer agrees to provide to the City's municipal
advisor (the "Consultant") certified cost and revenue information related to Project and income
and expenses for the period from the date of this Agreement through such sale (provided that the
Developer and the City agree that the calculation date will occur prior to the actual transfer).
The cost and revenue information will be prepared in accordance with generally accepted
accounting principles. If the Consultant properly determines, based on such review, that the
actual profit realized by the Developer has' exceeded a 20% Internal Rate of Return ("IRR")
during that period (to be calculated in a manner comparable to the sample attached as Exhibit G),
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then 100% of the excess amount of such profit over the 20% IRR will be applied to reduce the
amount payable under TIF Note B and the principal amount of TIF Note B will be reduced
accordingly. Such reduction will be effective upon delivery to Developer of a written notice
stating the amount of such excess profit as determined by the City in accordance with this
Section, accompanied by the Consultant's report.
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ARTICLE IV.
EVENTS OF DEFAULT
Section 4.1 Events of Default Defined. The following shall be 'Events of Default"
under this Agreement and the term 'Event of Default" shall mean whenever it is used in this
Agreement any one or more of the following events:
(a) Failure by the Developer to timely pay any ad valorem real property taxes
assessed, special assessments or other City charges with respect to the Development
Property.
(b) Failure by the Developer to cause the construction of the Project to be
completed pursuant to the terms, conditions and limitations of this Agreement.
(c) Failure of the Developer to observe or perform any other covenant,
condition, obligation or agreement on its part to be observed or performed under this
Agreement.
(d) An event of default by the Developer of its obligations under the
Connection Agreement occurs and remains uncured.
(e) An event of default occurs and remains uncured under the Land Use
Agreement.
(f) The holder of any mortgage on the Development Property or any
improvements thereon, or any portion thereof, commences foreclosure proceedings as a
result of any default under the applicable mortgage documents.
(g) If the Developer shall
(A) 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
(B) make an assignment for the benefit of its creditors; or
(C) admit in writing its inability to pay its debts generally as they
become due; or
(D) be adjudicated a bankrupt or insolvent; 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 sixty (60) days after the filing thereof; or a receiver, trustee or
liquidator of the Developer, or of the Project, or part thereof, shall be appointed in
any proceeding brought against the Developer, and shall not be discharged within
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sixty (60) days after such appointment, or if the Developer, shall consent to or
acquiesce in such appointment.
Section 4.2 Remedies on Default. Whenever any Event of Default referred to in
Section 4.1 occurs and is continuing, the City, as specified below, may take any one or more of
the following actions after the giving of thirty (30) days' written notice to the Developer citing
with specificity the item or items of default and notifying the Developer that it has thirty (30)
days within which to cure said Event of Default, or, if the Event of Default cannot be cured
within thirty (30) days through no fault of Developer, the Developer has commenced all actions
possible within the thirty (30) days, provided a reasonable plan to cure the Event of Default
within the thirty (30) day period, and Developer diligently pursues the plan to completion. If the
Event of Default has not been cured as provided in this Section:
(a) The City may suspend its performance under this Agreement until it
receives assurances from the Developer, deemed adequate by the City, that the Developer
will cure the Event of Default and continue its performance under this Agreement, and no
interest shall accrue on the TIF Notes while performance is suspended in accordance with
this Section 4.2.
(b) The City may cancel and rescind the Agreement.
(c) The City may take any action, including legal or administrative action, in
law or equity, which may appear necessary or desirable to enforce performance and
observance of any obligation, agreement, or covenant of the Developer under this
Agreement.
Section 4.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to
the City is intended to be exclusive of any other available remedy or remedies, 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.
Section 4.4 No Implied Waiver. In the event any agreement contained in this
Agreement should be breached by any party and thereafter waived by any other 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 4.5 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of
Default occurs and the City shall employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or observance of any
obligation or agreement on the part of the Developer herein contained, the Developer agrees that
it shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such other
expenses so incurred by the City.
12
10813417x5
Section 4.6 Indemnification of City.
(1) The Developer releases from and covenants and agrees that the City, its governing
body members, officers, agents, including the independent contractors, consultants and legal
counsel, servants and employees thereof (hereinafter, for purposes of this Section, collectively
the "Indemnified Parties") shall not be liable for and agrees to indemnify and hold harmless the
Indemnified 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 Project, provided that the
foregoing indemnification shall not be effective for any actions of the Indemnified Parties that
are not contemplated by this Agreement.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the Indemnified Parties, the Developer agrees to protect and defend the Indemnified Parties, now
and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit,
action or other proceeding 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 Project; provided, that
this indemnification shall not apply to the warranties made or obligations undertaken by the City
in this Agreement or to any actions undertaken by the City which are not contemplated by this
Agreement.
(3) All covenants, stipulations, promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
obligations of the City and not of any governing body member, officer, agent, servant or
employee of the City, as the case may be.
13
10813417v5
ARTICLE V.
ADDITIONAL PROVISIONS
Section 5.1 Restrictions on Use. The Developer agrees for itself, its successor and
assigns and every successor in interest to the Development Property, or any part thereof, that the
Developer and its successors and assigns shall operate, or cause to be operated, the Project as
multifamily rental housing facilities and shall devote the Development Property to, and in
accordance with, the uses specified in this Agreement.
Section 5.2 Conflicts of Interest. No member of the governing body or other official
of the City shall have any financial interest, direct or indirect, in this Agreement, the
Development Property or the Project, 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 shall be personally liable to the City in the event of any default
or breach by the Developer or successor or on any obligations under the terms of this Agreement.
Section 5.3 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.
Section 5.4 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 registered or certified mail,
postage prepaid, return receipt requested, or delivered personally, and
at:
(a) in the case of the Developer is addressed to or delivered personally to:
Otsego Apartments, LLC
7535 NE River Road
Otsego, MN 55330
Attn: Casey J. Darkenwald
(b) in the case of the City is addressed to or delivered personally to the City
City of Otsego, Minnesota
Otsego City Hall
13400 90 Street NE
Otsego, MN 55330
Attn: City Administrator
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.
14
10813417v5
Section 5.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.6 Law Governin . This Agreement will be governed and construed in
accordance with the laws of the State.
Section 5.7 Expiration. This Agreement shall expire on the Termination Date.
Section 5.8 Provisions Surviving Rescission or Expiration. Sections 4.5 and 4.6 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 5.9 Assi ng ability of Agreement and TIF Notes. This Agreement may be
assigned only with the consent of the City which consent shall not be unreasonably withheld.
The TIF Notes may only be assigned pursuant to the terms of the TIF Notes.
15
10813417v5
IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf and its seal to be hereunto duly affixed, and the Developer has caused this
Agreement to be duly executed on its behalf, on or as of the date first above written.
CITY OF OTSEGO, MINNESOTA
By
Its Mayor
By
Its Administrator
(SEAL)
This is a signature page to the Development Agreement by and between the City of Otsego and
Otsego Apartments, LLC.
10813417v5
Otsego Apartments, LLC
By _
Its
This is a signature page to the Development Agreement by and between the City of Otsego and
Otsego Apartments, LLC.
S-2
10813417v5
EXHIBIT A
Description of Development Property
Property located in the City of Otsego, Wright County, Minnesota with the following legal
description:
Lot 1, Block 1, Riverbend North Addition
Lot 2, Block 1, Riverbend North Addition
FEW
10813417v5
No. R-1
EXHIBIT B
Form of Tax Increment Note A
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF WRIGHT
CITY OF OTSEGO
TAX INCREMENT REVENUE NOTE A
(OTSEGO APARTMENTS PROJECT)
The City of Otsego, Minnesota (the "City"), hereby acknowledges itself to be indebted
and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment
Amounts") to Otsego Apartments, LLC (the 'Developer") or its registered assigns (the
"Registered Owner"), but only in the manner, at the times, from the sources of revenue, and to
the extent hereinafter provided.
The principal amount of this Note shall equal from time to time the principal amount
stated above, as reduced to the extent that such principal installments shall have been paid in
whole or in part pursuant to the terms hereof, provided that the sum of the principal amount
listed above shall in no event exceed $1,684,685 as provided in that certain Development
Agreement, dated as of , 2018, as the same may be amended from time to time
(the 'Development Agreement"), by and between the City and the Developer. No interest will
accrue on the unpaid principal amount of this TIF Note.
The amounts due under this Note shall be payable on August 1, 2021, and on each
February 1 and August 1 thereafter to and including February 1, 2046, or, if the first should not
be a Business Day, as defined in the Development Agreement, the next succeeding Business Day
(the "Payment Dates"). On each Payment Date the City shall pay by check or draft mailed to the
person that was the Registered Owner of this Note at the close of the last business day of the City
preceding such Payment Date an amount equal to 50% of the Tax Increments, as defined in the
Development Agreement, received by the City during the six month period preceding such
Payment Date. All payments made by the City under this Note shall applied to principal of this
Note.
The Payment Amounts due hereon shall be payable solely from 50% of the Tax
Increments, as defined in the Development Agreement, which are paid to the City and which the
City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174
through 469.1794, as the same may be amended or supplemented from time to time (the "Tax
Increment Act"). This Note shall terminate and be of no further force and effect following the
last Payment Date defined above, on any date upon which the City shall have terminated the
Development Agreement under Section 4.2(b) thereof, the date the Tax Increment District is
0613M
10813417v5
terminated, or on the date that all principal and interest payable hereunder shall have been paid in
full, whichever occurs earliest.
The City makes no representation or covenant, express or implied, that 50% of the Tax
Increments will be sufficient to pay, in whole or in part, the amounts which are or may become
due and payable hereunder.
The City's payment obligations hereunder shall be further conditioned on the fact that no
Event of Default under the Development Agreement shall have occurred and be continuing at the
time payment is otherwise due hereunder, but such unpaid amounts shall become payable if said
Event of Default shall thereafter have been cured; and, further, if pursuant to the occurrence of
an Event of Default under the Development Agreement the City elects to cancel and rescind the
Development Agreement, the City shall have no further debt or obligation under this Note
whatsoever. Reference is hereby made to all of the provisions of the Development Agreement,
including without limitation Section 3.2 thereof, for a fuller statement of the rights and
obligations of the City to pay the principal of this Note, and said provisions are hereby
incorporated into this Note as though set out in full herein.
This Note is a special, limited revenue obligation and not a general obligation of the City
and is payable by the City only from the sources and subject to the qualifications stated or
referenced herein. This Note is not a general obligation of the City and neither the full faith and
credit nor the taxing powers of the City are pledged to the payment of the principal of this Note
and no property or other asset of the City, save and except the above -referenced Tax Increments,
is or shall be a source of payment of the City's obligations hereunder.
This Note is issued by the City in aid of financing a project pursuant to and in full,
conformity with the Constitution and laws of the State of Minnesota, including the Tax
Increment Act.
This Note may be assigned only with the consent of the City which consent shall not be
unreasonably withheld. In order to assign the Note, the assignee shall surrender the same to the
City either in exchange for a new fully registered note or for transfer of this Note on the
registration records for the Note maintained by the City. Each permitted assignee shall take this
Note subject to the foregoing conditions and subject to all provisions stated or referenced herein.
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 City outstanding on the date
hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the
City to exceed any constitutional or statutory limitation thereon.
M.
10813417v5
IN WITNESS WHEREOF, City of Otsego, Minnesota, by its City Council, has caused
this Note to be executed by the manual signatures of its Mayor and Administrator and has caused
this Note to be dated as of
Administrator Mayor
10813417v5
CERTIFICATION OF REGISTRATION
It is hereby certified that the foregoing Note was registered in the name of Otsego
Apartments, LLC, and that, at the request of the Registered Owner of this Note, the undersigned
has this day registered the Note in the name of such Registered Owner, as indicated in the
registration blank below, on the books kept by the undersigned for such purposes.
NAME AND ADDRESS OF
REGISTERED OWNER
Otsego Apartments, LLC
7535 River Road NE
Otsego, MN 55330
10813417v5
DATE OF SIGNATURE OF
REGISTRATION CITY ADMINISTRATOR
IC
No. R-1
EXHIBIT C
Form of Tax Increment Note B
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF WRIGHT
CITY OF OTSEGO
TAX INCREMENT REVENUE NOTE B
(OTSEGO APARTMENTS PROJECT)
The City of Otsego, Minnesota (the "City"), hereby acknowledges itself to be indebted
and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment
Amounts") to Otsego Apartments, LLC (the "Developer") or its registered assigns (the
"Registered Owner"), but only in the manner, at the times, from the sources of revenue, and to
the extent hereinafter provided.
The principal amount of this Note shall equal from time to time the principal amount
stated above, as reduced to the extent that such principal installments shall have been paid in
whole or in part pursuant to the terms hereof, provided that the sum of the principal amount
listed above shall in no event exceed $1,250,000 when originally issued as provided in that
certain Development Agreement, dated as of July 1, 2018 as the same may be amended from
time to time (the 'Development Agreement"), by and between the City and the Developer. Upon
completion of the Phase 2 Project, as defined in the Development Agreement, and a Certificate
of Occupancy has been issued by the City for the Phase 2 Project, the outstanding principal
amount of this Note shall be increased in an amount not to exceed $425,000, as provided in
Section 3.3 of the Development Agreement. The unpaid principal amount hereof shall bear
interest at the simple non -compounded rate of five percent (5%) per annum. Interest shall be
computed on the basis of a 360 day year consisting of twelve (12) 30 -day months.
The amounts due under this Note shall be payable on August 1, 2021, and on each
February 1 and August 1 thereafter to and including February 1, 2046, or, if the first should not
be a Business Day (as defined in the Development Agreement), the next succeeding Business
Day (the "Payment Dates"). On each Payment Date the City shall pay by check or draft mailed
to the person that was the Registered Owner of this Note at the close of the last business day of
the City preceding such Payment Date an amount equal to 50% of the Tax Increments, as defined
in the Development Agreement, received by the City during the six month period preceding such
Payment Date. All payments made by the City under this Note shall first be applied to accrued
interest and then to principal.
The Payment Amounts due hereon shall be payable solely from 50% of the Tax
Increments, as defined in the Development Agreement, which are paid to the City and which the
City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174
C-1
10813417v5
through 469.1794, as the same may be amended or supplemented from time to time (the "Tax
Increment Act"). This Note shall terminate and be of no further force and effect following the
last Payment Date defined above, on any date upon which the City shall have terminated the
Development Agreement under Section 4.2(b) thereof, the date the Tax Increment District is
terminated, or on the date that all principal and interest payable hereunder shall have been paid in
full, whichever occurs earliest.
The City makes no representation or covenant, express or implied, that the Tax
Increments will be sufficient to pay, in whole or in part, the amounts which are or may become
due and payable hereunder.
The City's payment obligations hereunder shall be further conditioned on the fact that no
Event of Default under the Development Agreement shall have occurred and be continuing at the
time payment is otherwise due hereunder, but such unpaid amounts shall become payable if said
Event of Default shall thereafter have been cured; and, further, if pursuant to the occurrence of
an Event of Default under the Development Agreement the City elects to cancel and rescind the
Development Agreement, the City shall have no further debt or obligation under this Note
whatsoever. Reference is hereby made to all of the provisions of the Development Agreement,
including without limitation Section 3.2 thereof, for a fuller statement of the rights and
obligations of the City to pay the principal of this Note, and said provisions are hereby
incorporated into this Note as though set out in full herein.
This Note is a special, limited revenue obligation and not a general obligation of the City
and is payable by the City only from the sources and subject to the qualifications stated or
referenced herein. This Note is not a general obligation of the City and neither the full faith and
credit nor the taxing powers of the City are pledged to the payment of the principal of this Note
and no property or other asset of the City, save and except the above -referenced Tax Increments,
is or shall be a source of payment of the City's obligations hereunder.
This Note is issued by the City in aid of financing a project pursuant to and in full
conformity with the Constitution and laws of the State of Minnesota, including the Tax
Increment Act.
This Note may be assigned only with the consent of the City which consent shall not be
unreasonably withheld. In order to assign the Note, the assignee shall surrender the same to the
City either in exchange for a new fully registered note or for transfer of this Note on the
registration records for the Note maintained by the City. Each permitted assignee shall take this
Note subject to the foregoing conditions and subject to all provisions stated or referenced herein.
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 City outstanding on the date
hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the
City to exceed any constitutional or statutory limitation thereon.
C-2
10813417v5
IN WITNESS WHEREOF, City of Otsego, Minnesota, by its City Council, has caused
this Note to be executed by the manual signatures of its Mayor and Administrator and has caused
this Note to be dated as of
Administrator
C-3
10813417v5
Mayor
CERTIFICATION OF REGISTRATION
It is hereby certified that the foregoing Note was registered in the name of Otsego
Apartments, LLC, and that, at the request of the Registered Owner of this Note, the undersigned
has this day registered the Note in the name of such Registered Owner, as indicated in the
registration blank below, on the books kept by the undersigned for such purposes.
NAME AND ADDRESS OF
REGISTERED OWNER
Otsego Apartments, LLC
7535 River Road NE
Otsego, MN 55330
10813417v5
DATE OF SIGNATURE OF
REGISTRATION CITY ADMINISTRATOR
C-4
EXHIBIT D
Site Improvements
Earthwork/excavation
Soils test and environmental studies
Environmental remediation
Building demolition and clearance
Streets and roads
Curb and gutter
Street/parking lot lighting
Sidewalks and trails
Soils correction
Storm water retention systems
Utilities (sanitary sewer, storm sewer, and water),
including utility relocations
Surface parking lot paving
Parking structure, including related electrical and mechanical
costs specific to the construction of the parking structure
D-1
10813417v5
EXHIBIT E
Projected Acquisition Costs and Site Costs
Eligible for Use of TIF Proceeds
TIF ELIGIBLE COSTS
I. ACQUISITION COSTS
1. Land acquisition.
Subtotal
II. SITE IMPROVEMENT COSTS
1. Earthwork/excavation.
2. Soils test and environmental studies.
3. Environmental remediation.
4. Building demolition & clearance.
5. Streets and roads.
6. Curb and gutter.
7. Street/parking lot lighting.
8. Sidewalks & Trails.
9. Soils correction.
10. Storm water Retention Systems.
11. Utilities (sanitary sewer, storm sewer, and water),
including utility relocations.
12. Surface parking lot paving.
13. Parking structure, including related electrical and
mechanical costs specific to the construction of the
parking structure.
Subtotal
TOTAL
E-1
108134170
AMOUNT
$2,709,934
$2,709,934
$175,000
$150,000
$144,191
$31,220
$2,249,742
$250,000
$500,000
$3,500,153
$6,210,087
EXHIBIT F
Sources and Uses Analysis
Riverbend North Redevelopment
City of Otsego
Summary Sources and Uses
164 Apartment Units and Mini Storage
SOURCES
First Mortgage
13,031,838
41%
79,462
Phase 2
8,985,739
29%
54,791
Equity - Developer
9,436,104
30%
57,537
TOTAL SOURCES
31,463,681
100%
191,791
USES
Acquisition Costs
2,709,984
9%
16,524
Construction Costs
22,060,750
70%
134,517
Connection Fees
2,530,807
8%
15)432
Decommissioning & Public. Improvements
60,000
0%
366
Professional Services
1,533,090
5%
9,348
Financing Costs
1,539,824
5%
9,389
Developer Fee
824,276,
3%
5,026
Cash A(icounts/Es,crows/Reserves
195,000
1 %
I 189
,TOTAL USES
31,453,681
100%
191,791
F -I
10813417v5
Riverbend North Redevelopment
E H L E R S City of Otsego
LEADERS IN PUBLIC FINANCE 164Apartment Units and Mini Storage
10 Year Operating Proforma
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
10813417v5
-
a
Rental income
Gross Potential Rent rs%
2,769,600
2,811,144
2,853,311
2,896,111
2,939,552
2,983,646
3,028,400
3,073,826
3,119,934
3,166,733
Less: 5% Stabilized Vacancy
(138,480)
(140,557)
(142,666)
(144,806)
(146,978)
(149,182)
(151,420)
(153,691)
(155,997)
(158,337)
Less: Additional Pre -stabilization Vacancy
(1,315,560)
(1,335 293)
01
Total Rental Income
1,315,560
1,335,293
2,710,646
2,751,305
2,792,575
2,834,463
2,876,980
2,920,135
2,963,937
3,008,396
Other Residential Income InjOlor.�`.
Structured Parking to%
47,940
48,419
48,904
49,393
49,887
50,385
50,889
51,398
51,912
52,431
Detached Garage Stalls t':a%
37,440
37,814
38,193
38,574
38,960
39,350
39,743
40,141
40,542
40,948
Miscellaneous t'o%
24,000
24,240
24,482
24,727
24,974
25,224
25,476
25,731
25,989
26,248
Storage Garages ts%
216,000
219,240
222,529
225,867
229,255
232,693
236,184
239,727
243,322
246,972
Vacancy
(32,538)
(32,971)
(33,411)
(33,856)
(34,308)
(34,765)
(35,229)
(35,700)
(36,177)
(36,660)
Less: Additional Pre -stabilization Vacancy
(46,487)
(46,951)
0 1
Total Other Residential Income
246,356
249,791
300,696
304,705
308,768
312,888
317,064
321,297
325,589
329,940
Effective Gross 'income (EGI)
1,661,916
1,685,084
3,011,342
3,056,010
3,101,343r
3,147,351
3,194,044
3,241,432
3,289,526
3,338,336!
2021
2022
2023
2024
2025
2026 `
2027
2028
2029
2030
Rental Unit Expenses
Operating Expenses 3.00%
525,000
540,750
556,973
573,682
590,892
608,619
626,877
645,684
665,054
685,006
Management Fee SeJttie,'
62,477
63,403
120,454
122,240
124,054
125,894
127,762
129,657
131,581
133,533
Property Taxes 200% '
189,590
193,382
297,387
303,335
309,401
315,589
321,901
328,339
334,906
341,604
Reserves ri0H1aa0'
55,100
55,100
55,100
55,100
55,100
55,100
55,100
55,100
55,100
55,100
Total Rental Unit Expenses
832,167
852,635
1,029,913
1,054,357
1,079,447
1,105,202
1,131,640
1,158,780
1,186,641
1,215,243
Modified Expense During Stabilization
290,050
297,925
01
Total( Expenses;
642,117
554,710
1;029,913
1,054,357
1,079,447
1,105,202
1,131,640
1,158;780
1,186,641
1,215,243
72,338
73,785
116,918
119,256
121,641
124,074
126,555
129,086
131,668
134,302
2021
2022
2023
2024
2025
2026 '.
2027 '
2028E
2029
2030
Debt A: First Mortgage
914,194
914,194
914,194
914,194
914,194
914,194
914,194
914,194
914,194
914,194
Debt B: Phase 2
0
0
662,164
662164662
164
662,164
662,164
662,164
662,164
662,164
Tct b4htservice °'
,-914,194-`
=914,194 "1,576,353
1,576;358;576358':,1576,3681=r"1,570358`?`1,576;358�9,576,358.:�1;576;358j
cpm InemOd
Debt Coverage
rbtAq"say
119%
121%
133%
135%
136%
137%
139%
140%
142°%
143%
Debt Coverage wlo TIF
` oep(&'i a;,?
112%
113°%
126%
127%
128%
130°%
131%
132%
133%
135%
NETiCASH FLOW
177,943
189,965
521,989
544,552
567,179
589,865
612,601
635,381
658,195
681,036';
"NetCash to Developei
177,943
189,965
, .5
544,552`'
567, (1 9
. 589,865;
;612;601:
'835;381
' 668,195
' 681,036'
Net Gash to Devalo er w/a assistance `.
105,605 -
118,180
51
, 405,071
425,296
445,598
465 791
486,046:,.
506,284
526,527
546,735
Cash on Cash l
1.9%
2.0%
5.5%
I' 5.8%'i
6.0%'
6.3%
6.5%
6.7%D
7.0%
7.2%''
Cash on Cash - averse'
1.9%
1.9%D
3.1%
3.8%=
4.2%'
4.6%
4.9%
5.1%
5.3%D
5.5%D`:
' Cash:oq Cash (wlo, assis#ance) .
1,1 %'
1.2°%
4.3%
4.5%a
4.7°%'
' 4.9%,,
- 5,2°%
" 5,,4%
6.6%,
5.8%
Cash oncash-avers a w/o assistance -.
: 1.1%
1.2%
2.2%
2.81k.
3.2%
3.5-/.'3.7°10
. .3.9%
411/.
4.3%'
Cash on Cost
3.5%
3,5%
6.7%
6.7%
6,8%
6.9%
7.0%
7.0%
7.1%
7.2%1
10813417v5
EXHIBIT G
Sample MIRR Calculation
Net Operating Income End of Year
2,166,223
2,188,959
2,211,738
2,234,553
2,257,394
Divided By Cap Rate
6.25%
6.25%
6.25%
6.25%
6.25%
Gross Sale Price
34,659,561
35,023,343
35,387,813
35,752,845
36,118,302
Minus Debt A: First Mortgage
11,198,783
10,836,296
10,455,263
10,054,736
9,633,718
Minus Debt B: Phase 2
7,795,080
7,555,671
7,302,757
7,035,576
6,753,325
Net Sale Amount
15,665,698
16,631,377
17,629,794
18,662,532
19,731,260
Sales Ex ense 2.00%
693,191
700,467
707,756
715,057
722,366
2025
567,179
567,179
567,179
567,179
G-1
10813417v5
Initial Investment
(5,585,073)
(5,585,073)
(5,585,073)
(5,585,073)
(5,585,073)
2021
177,943
177,943
177,943
177,943
177,943
2022
(3,661,066)
(3,661,066)
(3,661,066)
(3,661,066)
(3,661,066)
2023
521,989
521,989
521,989
521,989
521,989
2024
544,552
544,552
544,552
544,552
544,552
2025
567,179
567,179
567,179
567,179
567,179
2026
14,972,507
15,562,372
589,865
589,865
589,865
589,865
2027
15,930,910
0
16,543,511
612,601
612,601
612,601
2028
16,922,037
0
0
17,557,418
635,381
635,381
2029
17,947,475
0
0
0
18,605,670
658,195
2030
19,008,894
0
0
0
0
19,689,930
2031
20,108,054
0
0
0
0
0
2032
21,246,814
0
0
0
0
0
2033
22,427,128
0
0
0
0
0'
2034
23,651,061
0
0
0
0
0
2035
24,920,786
0
0
0
0
0
Total
8,127,897
9,698,900
11,325,409
13,009,042
14,751,497
G-1
10813417v5
EXTRACT OF MINUTES OF MEETING
OF THE CITY COUNCIL OF THE
CITY OF OTSEGO, MINNESOTA
HELD: July 23, 2018
Pursuant to due call and notice thereof, a meeting of the City Council of the City of
Otsego, Wright County, Minnesota, was duly called and held at the Otsego Prairie Center, in said
City on the 23rd day of July, 2018, at 7:00 o'clock p.m.
The following members were present:
and the following were absent:
Member introduced the following resolution and moved its
adoption:
RESOLUTION NO. 2018-52
RESOLUTION AUTHORIZING EXECUTION
OF A DEVELOPMENT AGREEMENT
A. WHEREAS, Otsego Apartments, LLC, (the "Developer") has requested the City
of Otsego, Minnesota (the "City") to assist with the financing of certain costs incurred in
connection with the construction of a 82 -unit multifamily rental apartment project and the
construction of an approximately 44,000 square foot commercial mini -storage facility (the
"Phase 1 Project") and the construction of a 82 -unit multifamily rental apartment project (the
"Phase 2 Project" and with the Phase 1 Project, the "Project"), each to be constructed by the
Developer and located in the City; and
B. WHEREAS, the Developer and the City have determined to enter into a
Development Agreement providing for the City's tax increment financing assistance for the
Project (the "Development Agreement").
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego,
Minnesota, as follows:
1. The City Council hereby approves the Development Agreement in substantially
the form submitted, and the Mayor and the City Administrator/Finance Director are hereby
authorized and directed to execute the Development Agreement on behalf of the City.
2. The approval hereby given to the Development Agreement includes approval of
such additional details therein as may be necessary and appropriate and such modifications
thereof, deletions therefrom and additions thereto as may be necessary and appropriate and
approved by the City officials authorized by this resolution to execute the Development
109200090
Agreement. The execution of the Development Agreement by the appropriate officer or officers
of the City shall be conclusive evidence of the approval of the Development Agreement in
accordance with the terms hereof.
The motion for adoption of the foregoing resolution was duly seconded by member
and, after full discussion thereof, and upon a vote being taken thereof, the
following voted in favor thereof:
and the following voted against same:
Adopted this 23rd day of July, 2018.
Attest:
City Administrator/Finance Director
W
10920009v1
Mayor
STATE OF MINNESOTA
COUNTY OF WRIGHT
CITY OF OTSEGO
I, the undersigned, being the duly qualified and acting City Administrator/Finance
Director of the City of Otsego, Minnesota, DO HEREBY CERTIFY that I have carefully
compared the attached and foregoing extract of minutes with the original minutes of a meeting of
the City Council of the City held on the date therein indicated, which are on file and of record in
my office, and the same is a full, true and complete transcript therefrom insofar as the same
relates to a Resolution Authorizing Execution of a Development Agreement.
WITNESS my hand as such City Administrator/Finance Director of the City Council of
the City of Otsego, Minnesota this 23rd day of July, 2018.
3
10920009vi
City Administrator/Finance Director