08-12-08 WS21025 Commerce Blvd, Suite 1000 o Rogers, Minnesota 55374 e ph. 763.463.0220 ^ fax. 763.463.0290 e www. terragc.com
August 14, 2008
Mayor Jessica Stockamp & Council
City of Otsego
8899 Nashua Ave NE
Otsego, MN 55330 — 7314
Re: Appello Group
Great River Centre of Otsego
Mayor Stockamp:
The Appello Group, LLC (Appello) is the developer and owner of the remaining property with The Great
River Centre of Otsego and has a development contract with the City of Otsego. As part of that
development contract, Appello is required to raise their Letter of Credit (LOC) for the CSAH42
improvements to $1,000,000.00. Currently their Letter of Credit is $513,400.00.
Terra General Contractors, LLC has a contract with Appello to perform development and general
contracting services for this project. Bill Christian, Appello member, and I met with City Staff on
Thursday, August 7th. At that time we presented a request to revise the development agreement to not
require the additional $486,600.00 in the LOC and revise the LOC amount due to the following:
1.) Appello performed all the public improvements within the Great River Centre of Otsego.
This private investment was required to meet Target's original schedule; however, as we
all know Target delayed their project and this has delayed the project. The City of
Otsego did not perform the public improvements within the Great River Centre of Otsego
and in fact the City as been reimbursed for fees and services by your consultants for
their work so the city has not had the financial burden of these improvements.
2.) The public improvements within The Great River Centre of Otsego, although not 100%
complete, have been in place for over two (2) years.
3.) Appello has sold approximately 4.5 acres to CP Otsego Partners, LLC and they have
sold approximately one (1) acre to Klein Bank. At the time of the closing with Klein Bank
$39,223 was paid to the City of Otsego for the CSAH42 assessments.
4.) CP Otsego Partners has a purchase agreement with Otsego Autocare and anticipates a
closing within 30 days. This is for approximately one (1) acre.
5.) Appello and CP Otsego Partners anticipates additional sales this year; however, due to
the market and Target's delay it is anticipated that the project will begin to see more
activity in 2009 and 2010.
6.) Appello has a purchase agreement with MSP Commercial for two (2) acres with a
schedule closing in September/October
On behalf of Appello, we are requesting that the City of Otsego consider revising the development
contract between 4pello and the City of Otsego as follows:
Reduce LOC to the amount of one (1) year of assessments for the CSAH42
improvements and any warranty security for the public improvements. This would
reduce the LOC to approximately $200,000.00 to cover both the assessments and an
the warranty security. The improvements that are in place today have been in place for
two (2) years and the warranty period has or nearly has expired. As additional
improvements that are put in place (balance of lighting, wear course on balance of
Quaday & 85th) could have additional warranty amounts that could be acknowledged and
provided.
The City of Otsego shall require that Appello have one (1) year of assessments held in
place by the LOC. As sales occur and assessments are paid this amount can be
adjusted as necessary.
As lots are sold within the GRC of Otsego a assessment of $0.87/sf will be paid
immediately towards the CSAH42 assessments and directly to the City of Otsego.
Along with Appello, we believe that the Development Agreement for the Great River Centre of Otsego
was created at a time when it was anticipated the development would develop rather quickly. Today's
market is different, however, with the excitement that Targets opening will bring to the area we need to
provide the land owners an opportunity to manage their investment and protect the City of Otsego at
the same time.
I look forward to meeting with you on Thursday August 21, 2008 at 5:30pm to discuss our options.
Please call with any questions that you may have.
Sincerely,
Tom H. Brown (�
President
TH B/ss
C: Appello Members
File