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ITEM 5.1 Parkview Retail Development0 OtsF TY o MINNESOTA ✓ DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE: Administration City Attorney MacArthur August 12, 2019 PRESENTER(s) REVIEWED BY: ITEM #: City Attorney City Administrator/Finance Director Flaherty 5.1 STRATEGIC VISION MEETS: THE CITY OF OTSEGO: Companies, and approve or modify the Agreement based upon those discussions. Is a strong organization that is committed to leading the community through innovative communication. X Has proactively expanded infrastructure to responsibly provide core services. No 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. Agreement is to facilitate closing on the underlying property which is currently scheduled for the day after Is a distinctive, connected community known for its beauty and natural surroundings. AGENDA ITEM DETAILS RECOMMENDATION: That the Council discuss the attached Preliminary Agreement Between the City of Otsego and Rice Companies, and approve or modify the Agreement based upon those discussions. ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED? Yes No BACKGROUND/JUSTIFICATION : Rice Companies has requested that the City approve a Preliminary Agreement stating in general terms that the City will provide financial assistance under certain circumstances. The purpose of this Preliminary Agreement is to facilitate closing on the underlying property which is currently scheduled for the day after the City Council meeting. The Agreement is purposely vague on assurances since the City has not yet received certain information that it requested from the Developers. It is understood that the City Council will discuss this matter with the Developer at the City Council meeting. The Council has not yet determined whether or not they will provide any financial assistance and if so, how much. Basically, the Agreement provides that the City will undertake construction of the requested improvements provided that the Developer meets all of the conditions of the Preliminary Agreement. The amount of assistance, if any, to be provided has not yet been determined by the Council. SUPPORTING DOCUMENTS ATTACHED: • Preliminary Agreement • Ten Year Operating Pro -Formas POSSIBLE MOTION PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES: Motion to approve Preliminary Agreement Between the City of Otsego and Rice Companies Regarding Proposed Plat of Parkview Retail Development. BUDGET INFORMATION FUNDING: BUDGETED: N/A N/A PRELIMINARY AGREEMENT BETWEEN THE CITY OF OTSEGO AND RICE COMPANIES REGARDING PROPOSED PLAT OF PARKVIEW RETAIL DEVELOPMENT THIS AGREEMENT dated , August 2019 by and between the City of Otsego (CITY), a Minnesota Municipal Corporation and Rice Companies (DEVELOPER), a Minnesota Corporation. WHEREAS, DEVELOPER has preliminarily platted a development identified as PARKVIEW RETAIL DEVELOPMENT that was approved by CITY on July 22, 2019; and WHEREAS, DEVELOPER has approached both CITY and Wright County regarding financial assistance for construction of certain streets, utilities and related public improvements (IMPROVEMENTS) within the Plat; and WHEREAS, CITY has agreed to construct said IMPROVEMENTS subject to the contingencies and limitations of this Agreement; and WHEREAS, Wright County has not yet made any determination as to whether or not it will provide financial assistance for the IMPROVEMENTS and if it will, to what extent; and WHEREAS, the Otsego City Council has specifically requested that DEVELOPER provide additional financial pro -forma information prior to making any decision regarding assistance; and WHEREAS, DEVELOPER has requested that the CITY enter into this Preliminary Agreement in order to facilitate closing on the property. NOW THEREFORE, IT IS AGREED as follows: CITY hereby makes these limited commitments subject to DEVELOPER complying with any and all requirements and conditions as set forth in this Agreement. Any failure to comply with said terms and conditions or any misrepresentations inducing the CITY to enter this Agreement render any contingent obligations of the CITY as set forth herein null and void. 2. Upon DEVELOPER meeting its various obligations and deadlines and CITY, at its sole discretion, determining that adequate funds are available to commence the IMPROVEMENTS, CITY will construct the IMPROVEMENTS described as platted Parkview Avenue from its intersection with proposed 88th Street southerly to the Plat boundary and to construct said 88th Street from the western Plat boundary to CSAH 42, as well as right in right out access to Eastbound CSAH 39 and three quarter access from Southbound CSAH 42 including utilities and related public improvements, with said IMPROVEMENTS being constructed by August 1, 2020. This deadline is contingent upon DEVELOPER complying with all requirements of this Agreement, the availability of contractor's, adequate progress on the County CSAH 39 Project, adequate progress on site by the DEVELOPER and favorable weather conditions. 3. CITY may fund the IMPROVEMENTS, or a portion thereof, utilizing funds from CITY as well as any additional funds contributed by Wright County, which are at this time unknown. Total City funding contribution, if any, to the IMPROVEMENTS has not yet been determined. . 4. CITY will assess against the Plat property, at an interest rate and term to be determined by CITY, the Water Availability Charges, Sewer Availability Charges, Park Dedication Fees and Storm Water Impact Fees for the Plat. 5. The CITY commitments listed above are specifically fully contingent upon DEVELOPER performing all of its obligations in a timely manner. CITY may cancel this Agreement at any time for any failure by DEVELOPER to timely perform, or in the event that the other contingencies listed below are not satisfied. 6. CITY's obligations are specifically contingent upon Wright County cost participation in the IMPROVEMENTS. Said cost participation to be memorialized in a written Agreement between the CITY and Wright County and approved by the City Council and County Board. 7. CITY's obligations are also specifically contingent upon verification by the CITY and/or its financial consultants of the viability of tax abatement funds to cover an acceptable share (as determined by CITY) of the IMPROVEMENT costs. 8. CITY's obligations are specifically contingent upon City Council approval of tax abatement after the required public hearing process. 9. CITY's obligations are also contingent upon DEVELOPER providing to CITY any and all requested financial or other information related to the Plat. In the event that the CITY determines that additional information requested does not provide adequate basis for the funding assistance requested, this Agreement and all CITY obligations set forth above shall be null and void. 10. CITY's obligations are also contingent upon DEVELOPER completing all City approvals by December 31, 2019. 11. Prior to December 31, 2019 DEVELOPER shall have successfully completed the following: a. Submitted and have approved a Final Plat for Phase 1 of the Project including all required CITY and County right of way. b. Submitted and have approved Site Development Plans including a grocery store. c. Fully executed all necessary Development Agreements for Phase 1 of the development. d. Submitted to CITY all required escrow and Security (Letter of Credit) as set forth in the Development Agreements. e. Fully executed any and all Agreements (as approved by CITY) or documents required for tax abatement. f. Have closed on the Plat property (including all property needed for CITY construction of the IMPROVEMENTS) and have fee ownership of the same. g. Have razed any buildings or structures within platted Parkview Avenue and platted 88th Street. 12. Prior to August 1, 2020 DEVELOPER shall have successfully completed the following: a. Constructed the grocery store building. b. Installed all required utilities to service the grocery store. 13. This Agreement is a Preliminary Agreement based entirely upon information and preliminary costs produced by both CITY and DEVELOPER. If there are any substantial changes in these estimates or costs after the date of this Agreement or any change in conditions that the CITY, at its sole discretion, determines are unacceptable to the CITY, or for any other reason, the CITY may terminate this Agreement upon seven (7) days' written notice to DEVELOPER. 14.. Third parties may not rely on any of the terms and conditions of this Agreement, nor may any third parties have any recourse under this Agreement. Dated: DEVELOPER- RICE COMPANIES By: Its Dated: CITY OF OTSEGO Jessica Stockamp, Mayor Tami Loff, City Clerk Parkview Retail Development SCENARIO- NO ASSISTANCE ©RICE City of Otsego -' " Grocery Store WAC/SAC, Park Ded., Stormwater Impact $ 196,000.00 mmortizion period. 7 Interest rate Basis Points 2% Wall Street Journal Prime: 5.25% Annual Payments: $35,902.6 Land Costs (DEVELOPER) Land Acquistion: $ 3,435,715.00 Professional Costsfor Land Acquistion: $ 220,000.00 Construction Costs (DEVELOPER) Site Work: $ 1,892,000.00 Grocery Building Shell. $ 2,339,000.00 Grocery Building Interior: $ 3,528,000.00 Retail Building Shell: $ 1,875,000.00 Road, turn lane construction (DEVELOPER) Parkview, 88th Street Construction $ 791,170.00 3/4 turnione, CSAH 39& CSAH 42 Construction $ 80,000.00 Deferred Costs Water $ - SanitarySewer $ - Stormtvoter $ - Park Dedication $ - Grocery Interior Fixtures & Equipment (TENANT) Fixtures & Equipment., $ 4,189,000.00 Developer Costs (No Incentives) Grocery Store-Developer Cost $ 12,285,885.00 Percentage Financed: 80.00% Loan Amount: $ 9,828,708.00 Annual Debt Service: 850,671 Retail Store-Developer Cost $ 1,875,000.00 Percentage Financed: 80.00% Loan Amount: $ 1,500,000.00 Annual Debt Service: 129,824 ��►Parkview Retail Development SCENARIO - WITH ASSISTANCE © HICE City of Otsego —11— Grocery Store WAC/SAC, Park Ded., Stormwater Impact $ 196,000.00 Ammortbion period: 7 Interest rate Basis Points 2% Wo115treeUournal Prime: 5.25% Annual Payments: Lord Costs (DEVELOPER) Land Acquistian: $ 3,435,715.00 Professional Costsfor LandAcquistion: $ 220,000.00 Construction Costs (DEVELOPER) Site Work: $ 1,892,000.00 'Grocery Building Shell: $ 2,339,000.00 Grocery Building Interior: $ 3,528,000.00 Retail Building Shell. $ 1,875,000.00 Road, tum lone construction (CITY) Parkview, 88th Street Construction $ - 3/4 turnlone,, CSAH 39& CSAH 42 Construction $ Deferred Costs Water $ SanitarySewer $ - Storrawater $ - Park Dedication $ - Grocery Interior Fixtures & Equipment (TENANT) Fixtures & Equipment: $ 4,189,000.00 Developer Costs (No incentives) Grocery Store -Developer Cost $ 11,414,715.00 Percentage Financed: 80.00% Loan Amount: $ 9,131,772.00 Annual Debt Service: 727,398 Retail Store -Developer Cost $ 1,875,000.00 Percentage Financed: 80.00% Loan Amount: $ 1,500,000.00 Annual Debt Service: 119,484