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RES 2023-28 Consent to Collateral Assignment of Development Agreement and TIF NoteEXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF OTSEGO, MINNESOTA HELD: APRIL 24, 2023 Pursuant to due call and notice thereof, a meeting of the City Council (the "Council") of the City of Otsego, Wright County, Minnesota, was duly called and held at the Council Chambers at the Prairie Center in said City on April 24, 2023 at 7:00 p.m. The following members were present: Stocicamp, Dahl, Dunlap, Goede, and Moores and the following were absent: none Member Moores introduced the following resolution and moved its adoption: RESOLUTION NO. 2023-28 RESOLUTION APPROVING CONSENT TO COLLATERAL ASSIGNMENT OF DEVELOPMENT AGREEMENT AND TIF NOTE WHEREAS, on July 23, 2018, the City of Otsego (the "City") approved a Development Agreement, dated January 28, 2019, as amended by the First Amended and Restated Development Agreement, dated May 9, 2022 (the "Development Agreement") with Otsego Apartments, LLC, a Minnesota limited liability company (the "Developer"), Otsego Apartments II, LLC, a Minnesota limited liability company ("OA2"), and Otsego Mini Storage, LLC, a Minnesota limited liability compalry ("OMS"), in comlection with the construction of a 97-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 67-unit multifamily rental apartment project (the "Phase 2 Project", and together with the Phase 1 Project, the "Project") each to be constructed by the Developer and located in the City (the "Project"); and WHEREAS, pursuant to the Development Agreement, the City issued Tax Increment Revenue Note A (Otsego Apartments Project) (the "TIF Note A"), in the original principal amount of $1,684,685.00, and Tax Increment Revenue Note B (Otsego Apartments Project) (the "TIF Note B," and together with TIF Note A, the "TIF Notes") in the original principal amount of $1,250,000.00; WHEREAS, the Tax Increment Notes are currently held by Wings Financial Credit Union, a Minnesota credit union (the "Phase 1 Lender"); and WHEREAS, the Developer proposes to obtain financing for the Phase 2 Project from Crown Banlc, a Minnesota bai�lcing corporation (the "Phase 2 Lender"), and enter into a Collateral 90039879v1 Assignment of Interest in Tax Increment Revenue Note (the "Assignment") with the Phase 2 Lender, by which the Phase 1 Lender would release its interest in the TIF Note B, and Developer would assign its interest in TIF Note B to the Phase 2 Lender, for which a Consent to Collateral Assignment of Tax Increment Financing Note and Development Agreement (the Consent") of the City is required. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Otsego, Minnesota, as follows: l . The Council hereby approves the Assignment and the Consent in substantially the forms submitted, and the Mayor and City Administrator/Finance Director are hereby authorized to execute the Consent on behalf of the City. 2. The approval hereby given to the Assignment and Consent 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 a resolution of the City to execute the Consent. The execution of the Consent shall be conclusive evidence of the approval of the Consent in accordance with the terms hereof The motion for the adoption of the foregoing resolution was made by member _Moores_ and duly seconded by member Goede and, upon a vote being taken thereon after full discussion thereof, the following voted in favor thereof: Stockamp, Dahl, Dunlap, Goede, and Moores and the following voted against the same: none Whereupon said resolution was declared duly passed and adopted. 2 90039879v1 STATE OF MINNESOTA ) ) ss. COUNTY OF WRIGHT ) I, the undersigned, being the duly qualified and acting City Administrator/Finance Director of the City of Otsego, Mimlesota (the "City"), DO HEREBY CERTIFY that attached hereto is a compared, true and correct copy of a resolution approving the Collateral Assigmnent of Tax Increment Financing Note and Development Agreement by the City, duly adopted by the City Council of the City on April 24, 2023, at a regular meeting thereof duly called and held, as on file and of record in my office, which resolution has not been amended, modified or rescinded since the date thereof, and is in full force and effect as of the date hereof, and that the attached Extract of Minutes as to the adoption of such resolution is a true and accurate account of the proceedings taken in passage thereof. WITNESS My hand this day of April, 2023. Director 3 90039879v1 COLLATERAL ASSIGNMENT OF INTEREST IN TAX INCREMENT REVENUE NOTE THIS COLLATERAL ASSIGNMENT OF INTEREST IN TAX INCREMENT REVENUE NOTE (this "Assignment") is made as of April , 2023, by and between OTSEGO APARTMENTS, LLC, a Minnesota limited liability company (hereinafter referred to as "Assignor"), and CROWN BANK, a Miiuiesota bai�l�ing corporation (hereinafter referred to as "Lender"). RECITALS On even date herewith, pursuant to the terms and conditions contained in that certain Loan Agreement by and between Assignor, Otsego Apartments II, LLC, a Minnesota limited liability company ("Otsego Apartments II", together with Assignor, collectively, the "Borrower"), and Lender of even date herewith (the "Loan Agreement"), Lender has agreed to make a loan up to the principal amount of $ to Boi7ower (the "Loan"). The Loan is evidenced by a Promissory Note from Borrower to Lender of even date herewith in the principal amount of the Loan (the "Promissory Note"). Otsego Apartments II is using the proceeds of the Loan as and for a portion of the construction costs in connection with the construction of a sixty-seven (67) unit multifamily rental apartment project (the "Project"), located at 7535 River Road NE, in the City of Otsego, State of Mimnesota, County of Wright (the "Property"). The Promissory Note is secured by, inter cilia, this Assignment, and a Pledge of Deposit Account (the "Pledge Agreement"), all executed by Borrower in favor of Lender of even date herewith. The Loan Agreement, Promissory Note, and all other documents executed in connection with the Loan (along with any extensions, modifications or renewals thereof) are hereinafter sometimes collectively referred to as the "Loan Documents". Capitalized terms not defined herein shall have the meaning ascribed to them in the Loan Agreement. In the event of any conflict between the terms hereof and the Loan Agreement, the terms and conditions of the Loan Agreement shall control. As a condition to granting the Loan on the date hereof, Lender has requested Borrower to cause the execution and delivery of this Assignment. NOW, THEREFORE, in consideration of the Loan and intending to be legally bound, Assignor does hereby covenant, agree, warrant, represent, assign, set over and transfer, to the extent assignable and transferable, as set forth herein: l . The City of Otsego, Minnesota, a statutory city and political subdivision of the State of Mimzesota (the "City"), issued a Tax Increment Revenue Note B (Otsego Apartments Project), R-1, dated February 18, 2021 in the principal amount of $1,250,000.00, as may be subsequently increased by up to the amount of $425,000.00 (collectively, the "TIF Note") pursuant to that certain Amended and Restated Development Agreement, dated May 9, 2022, ultimately between the City, Otsego Apartments II, Otsego Mini Storage, LLC, a Minnesota limited liability company ("Otsego Mini Storage"), and Borrower, and all amendments thereto and assignments thereof (collectively, the "Development Agreement"). The TIF Note shall be the subject of this Assigmment. Borrower shall promptly deliver the original of the TIF Note to Lender, including any subsequent TIF Note due to amendment or increase of such TIF Note. If the TIF Note is not issued and delivered to Lender, as provided in this Section 1, by no later than , 202_, 2777649.v3 90040744v2 subject to extension in the event of delay by the City, which delay may only be approved by Lender in its sole discretion, then it shall be an Event of Default hereunder and Lender shall be entitled to all rights and remedies available to it pursuant to Section 6 herein. 2. Assignor hereby assigns, transfers and sets over unto Lender all of its current and future right, title and interest, in and to the TIF Note, and all rights and benefits therefrom, including, without limitation, rights to payments as set forth in Section 3 below, as security for the full, timely and faithful repayment by Borrower of the Loan, and performance by Borrower of its obligations under the Loan Documents. As fiu-ther security to Lender, Assignor hereby assigns, transfers and sets over unto Lender, a first security interest in all of its right, title and interest pursuant to Sections 3.2 and 3.3 of the Development Agreement and all other provisions and terms of the Development Agreement as they relate to the TIF Note, including the specimen TIF Note attached as Exhibit C to the Development Agreement, as security for the full, timely and faithful repayment by Borrower of the Loan, and performance by Borrower of its obligations under the Loan Documents. Borrower hereby agrees to execute such additional documentation as required by Lender in order to give full force and effect to such assigmnent to Lender of the TIF Note and relevant portions of the Development Agreement. 3. Commencing on the date hereof, and continuing until the earlier of the date the Promissory Note is paid in full, or the Maturity Date (as defined in the Note), or payment in full of the TIF Note, whichever shall first occur, all payments made by the City under the TIF Note, shall be deposited by Borrower into the Account (as defined in the Pledge Agreement, whereby Borrower pledged the Account to Lender) held by Borrower at Lender. Lender shall automatically be authorized to apply monies from the payments under the TIF Note deposited in the Account (as defined in the Pledge) against the Promissory Note as and when due pursuant to the terms of the Promissory Note. The affidavit or written statement of an officer, agent or attorney of Lender stating that Lender is exercising its right to payments under the TIF Note or this Assigmnent shall constitute conclusive evidence thereof, and the City or other persons are authorized and directed to rely thereon. 4. Assignor agrees to faithfully observe and perform all of the obligations and agreements imposed upon it under the TIF Note and Development Agreement, subject to Assignor's right to reasonably contest observance/performance. 5. Lender will not be deemed in any mariner to have assumed any of the obligations related to the TIF Note or the Development Agreement, nor shall Lender be liable to the City by reason of any default by any party under the TIF Note or the Development Agreement. Borrower agrees to indemnify and to hold Lender harmless of and from any and all liability, loss or damage which it may or might incur by reason of airy claims or demands against it based on its alleged assumption of Assignor's duty and obligation to perform and discharge the terms, covenants and agreements in the TIF Note or Development Agreement. 6. After the occurrence of an Event of Default (as defined in the Loan Agreement): a. Lender may elect to exercise any and all of Assignor's rights and remedies under the TIF Note or such rights assigned hereunder to Lender under the Development Agreement regarding the TIF Note, without any interference or objection from Assignor, 2 90040744v2 and Assignor shall cooperate in causing the City to comply with all the terms and conditions of the TIF Note or the Development Agreement. b. Lender may exercise Assignor's rights under the TIF Note or such rights assigned hereunder to Lender under the Development Agreement regarding the TIF Note, and perform all acts in the same manner and to the same extent as Assignor might do. In connection with any and all of the foregoing powers, and without limiting the same, Lender may amend the terms of and make concessi mons to the City. c. Lender may exercise any remedies provided to it in the Loan Agreement or Loan Documents. 7. All of the foregoing powers herein granted to Lender shall be liberally construed. Lender need not expend its own funds in the exercise of such power, but if it does, such amounts shall be considered as advances for and on behalf of Borrower secured by this Assignment and evidenced by the Promissory Note and secured by other Loan Documents. Any amounts so advanced shall bear interest at the then current rate prescribed in the Promissory Note. 8. Nothing herein contained shall be construed as constituting a waiver or suspension by Lender of its right to enforce payment of the debts under the terms of the Promissory Note, the Loan Agreement or other Loan Documents. Lender is not the agent, partner or joint venturer of Borrower, Assignor, any Guarantor or the City. 9. This Assigmmnent may be enforced from time to time by Lender at its discretion, with or without order of any court, as Lender shall determine. Lender may also, at any time, cease to enforce this Assignment. Any failure on the part of Lender promptly to exercise any option hereby given or reserved shall not prevent the exercise of any such option at any time thereafter. Lender may pursue and enforce any remedy or remedies accorded it herein independently of, in conjunction or concurrently with, or subsequent to its pursuit and enforcement of any remedy or remedies which it may have under the Promissory Note, the Loan Agreement and/or other Loan Documents, 10. Assignor warrants and represents to Lender that: a. It has the right to exercise and deliver this Assignment. The execution of this Assigmnent and performance and observance of its terms hereof have been duly authorized by necessary company action and do not contravene or violate any provision of Assignor's organizational documents, b, the outstanding principal balance on the TIF Note as of the date of issuance was $1,250,000.00 and current the outstanding principal balance is $1,250,000.00, together with interest at 5.00% per amlum from and after the date of issuance. c. It has made no prior assignments of the TIF Note, except to Wings Financial Credit Union ("Wings Financial"), which shall be released concui�ent herewith in connection with a portion of the proceeds of the Loan being used to pay Wings Financial in full for the TIF Note loan and Wings Financial shall release its security interest in the TIF Note. 3 90040744v2 d. To Assignor's lalowledge, the Development Agreement is in full force and effect on the date hereof, subject to no defenses, setoffs or counterclaims whatsoever. e. To Assignor's lalowledge, there exists no event, condition or occui7ence which constitutes, or which with notice and/or the passage of time would constitute, a breach of or default under any terms or conditions of any of the TIF Note or the Development Agreement. Assignor also hereby covenants and agrees not to do any act which would destroy or impair the security to Lender of this Assignment, £ Assignor has filed all tax returns required to be filed and either paid all taxes shown thereon to be due, including interest and penalties, which are not being contested in good faith and by appropriate proceedings, and Assignor has no knowledge of any objections or claims for additional taxes in respect to federal tax or excise profit tax returns for prior years. 11. When the context so requires, the singular shall include the plural and conversely, and use of any gender shall include all genders. 12. This Assigmnent shall be governed by and be const�ued in accordance with the laws of the State of Minnesota. Whenever possible, each provision of this Assigmnent shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Assignment shall be prohibited by or be invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Assignment, 13. Any notices required or contemplated hereunder shall be effective upon two (2) business days after placing thereof in the United States mail, certified mail and with return receipt requested, postage prepaid, and addressed as follows: If to Assignor at: If to Lender at: With a copy to: Otsego Apartments II, LLC 7535 NE River Road Otsego, Minnesota 55330 Attn: Casey Darkenwald Crown Ban1c 6600 France Avenue South, Suite 125 Edina, Minnesota 55435 Attno Brian Dougherty Michelle R. Jester, Esq. Messerli &Kramer P.A. 1400 Fifth Street Towers 100 South Fifth Street Mimzeapolis, Minnesota 55402 90040744v2 0 With a copy to; Mary Ippel Taft, Stettinius & Hollister LLP 2200 IDS Center 80 South 81h Street Miruieapolis, Minnesota 55402 or to such other address specified in writing by one party to the other upon ten (10) days advance written notice in accordance herewith. E 90040744v2 IN WITNESS WHEREOF, Assignor /Borrower has caused this Assignment to be executed as of the day and year first above written. ASSIGNOR /BORROWER; OTSEGO APARTMENTS, LLC, a Miimesota limited liability company By: Casey Darkenwald Its: Manager Signature page to Collateral Assignment of Interest in Tax Increment Revenue Note. 90040744v2 CONSENT TO ASSIGNMENT OF PAYMENTS UNDER TAX INCREMENT REVENUE NOTE The City of Otsego, Minnesota, a statutory city and political subdivision of the State of Mimmesota (the "City"), issued Tax Increment Revenue Note B (Otsego Apartments Project), R-1, dated February 18, 2021 in the principal amount of $1,250,000.00, including all amendments, modification or subsequent increases thereto (collectively, the "TIF Note") pursuant to that certain Amended and Restated Development Agreement, dated May 9, 2022, ultimately between the City, Otsego Apartments, LLC, a Minnesota limited liability company (hereinafter referred to as "Assignor" or "Borrower"), Otsego Mini Storage, LLC, a Mimlesota limited liability company and Otsego Apartments II, LLC, a Mimlesota limited liability company, and all amendments thereto and. assignments thereof (collectively, the "Development Agreement"). The City has received a Collateral Assigiunent of Interest in Tax Increment Revenue Note which assigns as collateral to Crown Bank, a Mimmesota banking corporation ("Crown Banlc"), all of Borrower's interests in the Payments (as defined in the Development Agreement) under the TIF Note and Bor7ower's rights pursuant to Sections 3.2 and 3.3 and Exhibit C of the Development Agreement and other sections related to the issuance of the TIF Note. The subsequent increase of the TIF Note by up to the amount of $425,000.00 is contingent on the City receiving evidence of eligible costs to be reimbursed by tax increments up to the amount of $425,000.00. The City consents to such assigmnent pursuant to the terms of the TIF Note and the City agrees that Crown Bank shall have the right but not the obligation to cure any default under the Development Agreement. Until further notified, the City shall make all payments under the TIF Note to the Borrower. CITY: CITY OF OTSEGO, MINNESOTA, A statutory city and political subdivision of the State of Mimlesota By; Print Name: Its: Signature page to Consent to Assignment of Payments Under Tax Increment Revenue Note 90040744v2