ITEM 4.2 TIF Agreement40
OtSeOTY
F
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MINNESOTA
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR: MEETING DATE:
Legal
City Attorney January 28, 2019
PRESENTER(s)
REVIEWED BY: " ITEM #:
City Attorney
City Administrator/Finance Director Flaherty 4.2
Mary Ippel, Briggs & Morgan
STRATEGIC VISION
MEETS:
THE CITY OF.OTSEGO:
assigning the Tax Increment Notes between the City and Otsego Apartments LLC to Wings Financial Credit
Is a strong organization that is committed to leading the community through innovative
communication.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
Has proactively expanded infrastructure to responsibly provide core services.
Yes
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.
were approved by the City Council in July of 2018. In December the City Council extended the deadline for
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 Assignment of Tax Increment Notes,
assigning the Tax Increment Notes between the City and Otsego Apartments LLC to Wings Financial Credit
Union and the TIF Development Agreement as revised.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
Yes
I No
BACKGROLIN D/1USTI FICATION:
The Riverbend North Development Agreement, Connection Agreement and TIF Development Agreement
were approved by the City Council in July of 2018. In December the City Council extended the deadline for
commencement of the Project until April 1, 2019. The original City Agreements (Connection and
Development Agreement) have been revised to make administrative and non -material change of dates and
the inclusion of the entity which will own the mini -storage parcel as a signatory.
The TIF Development Agreement has been modified to include the additional entity which will own the
mini -storage parcel and resulting changes in the text. The City has held a pre -construction meeting with the
Developer and respective contractors. The Final Plat has been approved by Wright County and is ready for
City signature. The Developer intends to close during the week of January 28th, sign the Agreements and
deposit fees, escrow, and security with the City.
As part of that closing, the Developer intends to assign the TIF Notes to Wings Financial Credit Union.
Under the original approved TIF Development Agreement any such assignment requires Council approval.
This approval is normally given as matter of course as long as the Assignment is in proper form as approved
by the City Bond Counsel. The attached Assignment of Tax Increment Notes has been reviewed and
approved by Mary Ippel of Briggs and Morgan, the City bond counsel who joins with the City staff
recommendation to approve the Assignment as presented. In addition, the City Council should take action
to approve the TIF Development Agreement as revised.
SUPPORTING DOCUMENTS ATTACHED:
• Assignment of Tax Increment Notes
• TIF Development Agreement
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES
Motion to Approve Assignment of Tax Increment Notes Between the City of Otsego, Otsego Apartments,
LLC and Wings Financial Credit Union and to approve the TIF Development Agreement as revised.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A N/A
DEVELOPMENT AGREEMENT
BY AND BETWEEN
AMONG
OTSEGO APARTMENTS, LLC
AND
OTSEGO MINI STORAGE, 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
Section 3.5 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 28th day of January, 2019, 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 and Otsego Mini
Storage, LLC ("OMS"), 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
January 28, 2019;
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 January 28, 2019 between the City, OMS, and the Developer;
Mini Storage Property means the real property on which the approximately 44,000 square
foot mini storage facility will be constructed and legally described as "Lot 2, Block 1, Riverbend
North Addition."
Mini Storage Project means the approximately 44,000 square foot mini storage facility to
be constructed on the Mini Storage Property.
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
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should not be a Business Day, the Note Payment Date shall be the next succeeding Business
Day;
OMS means Otsego Mini Storage, LLC, a Minnesota limited liability company, its
successors and assigns;
Person means any individual, corporation, partnership, joint venture, association, joint
stock company, trust, unincorporated organization, or government or any agency or political
subdivision thereof;
Phase 1 Project means the construction of a 97 -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 67 -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
ankNational 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;
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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
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 I Project will commence on or before February 1,
2019 and barring Unavoidable Delays the Project will be substantially completed by May 31,
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 111.
Section 2.3 Representations and Warranties of OMS. OMS makes the following
representations and warranties:
(1) OMS 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) At the commencement of the Mini Storage Project, OMS will be the fee owner of
the Mini Storage Property.
(3) Developer is OMS's authorized agent with regards to the Mini Storage Project, is
the developer of record for the Mini Storage Project, and will oversee construction of the Mini
Storage Project on behalf of OMS.
(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,
agreement or instrument of whatever nature to which OMS is now a party or by which it is
bound, or constitutes a default under any of the foregoing.
(5) OMS will cooperate fully with the City with respect to any litigation commenced
with respect to the Mini Storage Project.
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(6) OMS agrees and acknowledges that the Mini Storage Project is included in the
TIF District, but that it has no interest in the TIF Notes.
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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 farm 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
10813417v7
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 or OMS 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 fiom the
Developer or OMS, as applicable, to the City indicating its intention to do so. Upon receiving
such notice, or otherwise learning of the Developer's or OMS'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, or any portion
thereof. 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. If the Developer sells the Project or OMS sells the Mini
Storage 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 or OMS has
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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), 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 or OMS 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 or OMS 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 or OMS 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 OMS shall 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.
(h) 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 banla-upt or insolvent; or if a petition or answer
proposing the adjudication of the Developer, as a bankrupt or its reorganization
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under any present or future federal banla-uptcy 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
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. OMS
expressly agrees that the Developer may cure any Event of Default by OMS. 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
13
10813417v7
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.
Section 4.6 Indemnification of Ci
(1) The Developer and OMS release 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.
14
10813417v7
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,
including without limitation OMS, that the Developer and its successors and assigns, including
without limitation OMS, shall operate, or cause to be operated, the Project as multifamily rental
housing facilities and approximately 44,000 square feet of mini storage 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
(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. Darlcenwald
(b) in the case of OMS is addressed to or delivered personally to:
Otsego Mini Storage, LLC
7535 NE River Road
Otsego, MN 55330
Attn: Casey J. Darkenwald
(c) in the case of the City is addressed to or delivered personally to the City
at:
City of Otsego, Minnesota
15
10813417v7
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.
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 Governing. 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.
16
10813417v7
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 Mini Storage, LLC and Otsego Apartments, LLC.
10813417v7
Otsego Apartments, LLC
LIM
Its
Otsego Mini Storage, LLC
Its
This is a signature page to the Development Agreement by and between the City of Otsego, and
Otsego Mini Storage, LLC and Otsego Apartments, LLC.
10813417v7
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
FMI
10813417v7
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 January 28, 2019, 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
ME
108134170
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.
10813417v7
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
108134170
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
10813417v7
DATE OF SIGNATURE OF
REGISTRATION CITY ADMINISTRATOR
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 January 28, 2019 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
108134170
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
108134170
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
10813417v7
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
10813417v7
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
10813417v7
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
I(GA Apartment Uvoits and Mini Stovage
SOURCES
IBM=
First Mortgage
13,031,838
41%
79,462
Phase 2
8,985,739
29%
54,791
Equity - Developer
9,436,104
30%
57,637
,TOTAL SOURCES
31,463,681
100%
191,791
USES
Acquisition Costs
2,709,934
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
6%
9,348
Financing Costs
1,539,824
5%
9,389
Developer Fee
824,276
3%
5,026
Cash Adcounts/EscrowsReserves
195,000
1 %
I ' 189
,TOTAL USES
31,453,681
100%
1191,7911
F-1
10813417v7
Riverbend North Redevelopment
E H L E RS City of Otsego
LEADERS IN PUBLIC FINANCE 164 Apartmont Units and Mini Storage
10 -Year Operating Proforma
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
F-2
10813417v7
Rental Income
Gross Potential Rent 1.5%
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)
0 (
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 Infww
Structured Parking tto%
47,940
48,419
48,904
49,393
49,887
50,385
50,889
51,398
51,912
52,431
Detached Garage Stalls r0%
E.
37,440
37,814
38,193
38,574
38,960
39,350
39,743
40,141
40,542
40,948
Miscellaneous 10%
24,000
24,240
24,482
24,727
24,974
25,224
25,476
25,731
25,989
26,248
Storage Garages
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)
01
Total Other Residential Income
246,356
249,791
300,696
304,705
306,768
312,888
317,064
321,297
325,589
329,940
Effective Gross Income EGI)
1,561,916
1,585,084
'3,011,342
3,056,010
3,101,343
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 I`
Rental Unit Expenses InnOr° I
Operating Expenses ao0%
525,000
540,750
556,973
573,682
590,892
608,619
626,877
645,684
665,054
685,006
Management Fee FxetlraEGi
62,477
63,403
120,454
122,240
124,054
125,894
127,762
129,657
131,581
133,533
Property Taxes zu0% '
189,590
193,382
297,387
303,335
309,401
315,589
321,901
328,339
334,906
341,604
Reserves NDhnatio0
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
0 1
Total Expenses:
542,117
554,710
1,029,913
1,054,357
1,079,447
1,105,202
1,131,640
1,158,780
1,986,641
1,215,243
2%
1
•1'
1
2021
2022
2023
2024
2025
2026
2027
2028'r
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
662,164
662,164
662,164
662,164
662,164
662,164
662164
�Tota1 Debt Service'
914,194`
914,194
'1,576,358
1,576,358
'1,576,368 ;.9,576,358;=;1,576,358
1,576,358
1,576,368 1,576,358
cam Wth d
Debt Coverage o nce'
119%
121%
133%
135%
136%
137%
139%
140%
142%
143°%
Debt Coverage w/o TIF 'oDMnSs'''
112%
113%
126%
127%
128%
130°%
131°%
132%
133°%
135%
NET CASH FLOW
177,943
189,965
521,989
1544,552
i 567,179:
589,865
612,601
635,381
658,195
681;036
Net06sh,toDeveloper
177,943
189,965
521,989
544,552''
567,179
-. 589,865
612,601
635,381
658,195
681,036
Net Cash to Develo er w/o assistance
105,605
116,980
1405,071
425,296,I
445,538.'
465,791
486,046,
506,294
526,527
54673511
Cash on Cash"
1.9%
2.0%
5.5%
5.8°%
6.0%
6.3%
6.5%
6.7%
7.0%
7.2°%
Cash on Cash - average
1.9%
1.9%
3.1%
< 3.8°%
4.2%
4.6%
4.9%
5.1%
5.3%
5.5%'
Cash on Cash (w/o assistance)
1.1°%
1.2°%
4,3°%
4.5°/D
., ' 4.7°%I
4.9%
5,2%D
5,4%
5,6°%
5.8%'
Cash on Cash -average w/o assistance
1A%
1.2%
2,2%
2.8°%
3.2%
3.5%
3.7°%
3.9°%
4.1%
. 4.3%
Cash on Cost '4
3.5%
3.5%
6.7%
6.7%
" 6.8%i
6.9%
7.0%
7.0°%
71°%
7.2W
Cash 4n°Do's"t"(wloassisfaTlce)
32%, „ ;'.-::3:9°!0'.::;"....6:3°%0;':.
64„°l0 64°a > .:,65%
, ,,.:,.8.6°%q
F-2
10813417v7
EXHIBIT G
Sample MIRR Calculation
Net Operating Income End of Year
2,166,223
2,188,959
2,211,738
Divided By Cap Rate
6.25%
6.25%
6.25%
Gross Sale Price
34,659,561
35,023,343
35,387,813
Minus Debt A: First Mortgage
11,198,783
10,836,296
10,455,263
Minus Debt B: Phase 2
7,795,080
7,555,671
7,302,757
Net Sale Amount
15,665,698
16,631,377
17,629,794
Sales Expense 2.00%
(693.191)
(700.467)
(707.756)
2,234,553 2,257,394
6.25% 6.25%
35,752,845 36,118,302
10,054,736 9,633,718
7,035,576 6,753,325
18,662,532 19,731,260
(715.057) (722.366
Initial Investment
(5,585,073)
(5,585,073)
(5,585,073)
(5,585,073)
2021
177,943
177,943
177,943
177,943
2022
(3,661,066)
(3,661,066)
(3,661,066)
(3,661,066)
2023
521,989
521,989
521,989
521,989
2024
544,552
544,552
544,552
544,552
2025
567,179
567,179
567,179
567,179
2026
14,972,507
15,562,372
589,865
589,865
589,865
2027
15,930,910
0
16,543,511
612,601
612,601
2028
16,922,037
0
0
17,557,418
635,381
2029
17,947,475
0
0
0
18,605,670
2030
19,008,894
0
0
0
0
2031
20,108,054
0
0
0
0
2032
21,246,814
0
0
0
0
2033
22,427,128
0
0
0
0
2034
23,651,061
0
0
0
0
2035
24,920,786
0
0
0
0
Total
8,127,897
9,698,900
11,325,409
13,009,042
G-1
10813417v7
ASSIGNMENT OF TAX INCREMENT NOTES
This Assignment, made and entered into as of January _, 2019, by and among
Otsego Apartments, LLC, a Minnesota limited liability company (the "Developer"), Wings
Financial Credit Union, a Minnesota credit union (the "Lender"), and the City of Otsego,
Minnesota, a municipal corporation and political subdivision of the State of Minnesota (the
"City").
WITNESSETH
WHEREAS, the City, Developer and Otsego Mini Storage LLC have entered into a
Development Agreement, dated January 28, 2019 (the "Development Agreement") providing for
the construction by the Developer of a 97 unit multifamily rental apartment project, and the
construction of an approximately 44,000 square foot commercial mini storage facility ("Phase I
Project"), and a 67 unit multifamily rental apartment ("Phase II Project"), to be located in the
City on the real property described therein. The Phase I Project and the Phase II Project are
collectively referred to as the "Project'; and
WHEREAS, in furtherance of the purposes of the Development Agreement and in order
to finance the construction of the improvements to be constructed thereunder, the City has
determined to assist the Developer with the financing of certain costs of the Project with tax
increment financing in the amounts up to $1,684,685.00, and ($1,250,000.0(, in accordance with comment 1511]: should this include the
the Development Agreement and a Tax Increment Financing Plan for Development District No. $425,000 addition for completion of Phase 27
4 (the "TIF Plan"); and
WHEREAS, the Lender has made a loan to the Developer for the purpose of financing a
portion of the Phase I Project; and
WHEREAS, the Developer desires to assign to the Lender the tax increment payments
(the "TIF Payments") payable under the Tax Increment Revenue Note A and the Tax Increment
Revenue Note B, issued pursuant to the Development Agreement (collectively the "TIF Notes");
NOW, THEREFORE, in consideration of the foregoing recitals, the parties hereto agree
with each other as follows:
1. Assi ng ment. The Developer does hereby assign and pledge to the Lender, for the
term of the Development Agreement, all of the Developer's right, title and interest in and to the
TIF Payments pursuant to the terms of the TIF Notes when the same shall be payable by the
City. This assignment constitutes a perfected, absolute and present assignment. Notwithstanding
the foregoing, all of the obligations of the Developer under the Development Agreement will
remain in effect and will be enforceable against the Developer.
2. Authorization. The City agrees that so long as the Lender holds a lien on the
property subject to the Development Agreement (i) the City will not, without the prior written
consent of the Lender, amend or modify the Development Agreement or any terms thereof; (ii)
the City will not terminate or cancel the Development Agreement except in accordance with the
terms thereof; (iii) the City will notify the Lender of an occurrence of an event of default under
5057833vl
the Development Agreement, and will allow the Lender to cure such default or to cause such
default to be cured within the time periods allowed to the Developer under the Development
Agreement; and (iv) payments under the TIF Notes shall be sent directly to the Lender at the
address provided below.
3. Continuing Authorization, Indemnification. The Developer hereby absolutely and
irrevocably authorizes the City to covenant as provided in paragraph 2 above. The Developer
hereby indemnifies and holds the City harmless from and against any claims or liabilities arising
or purporting to arise from the City's performance of its obligations under this Assignment.
4. Lender Acknowled eg ment. The Lender hereby acknowledges that the TIF Notes
are 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 therein.
Neither the full faith and credit nor the taxing powers of the City are pledged to the payment of
the principal of or interest on the TIF Notes and no property or other asset of the City, save and
except the Tax Increments (as defined in the Development Agreement), is or shall be a source of
payment of the City's obligations under the TIF Notes.
5. Notices. Any notice required or permitted hereunder shall be in writing and shall
be given when personally delivered to an officer of the Lender or of the City or when mailed,
certified mail, postage prepaid, to the applicable address:
If to the City: City of Otsego, Minnesota
Otsego City Hall
13400 90 Street NE
Otsego, MN 55330
Attn: City Administrator
If to the Lender: Wings Financial Credit Union
14985 Glazier Avenue
Apple Valley, MN 55124
Attn: Clint Hooppaw
If to the Developer: Otsego Apartments, LLC
7535 Riley Road NE
Otsego, MN 55330
Attn: Casey Darkenwald
Any party may by proper notice hereunder change its said address.
6. Binding. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
5057833vl
7. Counterparts: Minnesota Law. This Assignment shall be governed by the laws of
the State of Minnesota and may be executed in counterparts, each of which shall constitute an
original thereof.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the day and
year first above written.
OTSEGO APARTMENTS, LLC
a Minnesota limited liability company
By: _
Name:
Its:
[Signature page to Assignment of Tax Increment Financing Notes]
5057833vl
WINGS FINANCIAL CREDIT UNION
a Minnesota credit union
By: _
Name:
Title:
[Signature page to Assignment of Tax Increment Financing Notes]
5057833vl
CITY OF OTSEGO, MINNESOTA
By:
Its: Mayor
By:
Its: City Administrator
[Signature page to Assignment of Tax Increment Financing Notes]
5057833vl