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111422 EDA Meeting Packet EDA MEETING City Hall, 4401 Xylon Avenue North Monday, November 14, 2022 President Kathi Hemken Commissioner John Elder Commissioner Andy Hoffe Commissioner Michael Isenberg Commissioner Jonathan London 1. Call to order – EDA Meeting of November 14, 2022 2. Roll call 3. Approval of Minutes: • September 12, 2022 4. Resolution approving Purchase Agreement for the acquisition of 3611 Louisiana Avenue North (improvement project no. 1065) 5. Adjournment EDA Meeting   Page 1 September 12, 2022  City of New Hope  4401 Xylon Avenue North  New Hope, Minnesota 55428    EDA Minutes September 12, 2022  Regular Meeting City Hall      CALL TO ORDER President Hemken called the meeting of the Economic Development Authority to  order at 8:11 p.m.    ROLL CALL Present:          Kathi Hemken, President  John Elder, Commissioner  Andy Hoffe, Commissioner  Michael Isenberg, Commissioner  Jonathan London, Commissioner     Staff Present:            Also Present:  Tim W. Hoyt, Acting City Manager  Jeff Alger, Community Development Specialist  Valerie Leone, City Clerk  Jeff Sargent, Director of Community Development  Stacy Woods, Assistant City Attorney    Erin Enstad, Abdo  Vicki Holthaus, Abdo    APPROVAL OF  MINUTES  Item 3    Motion was made by Commissioner Hoffe, seconded by Commissioner London,  to approve the minutes of May 9, 2022. All present voted in favor. Motion carried.    EDA 2023 LEVY  Item 4  President Hemken introduced for discussion EDA Item 4, Resolution authorizing  the proposed HRA levy pursuant to Minnesota Statutes, Section 469.033,  subdivision 6 and approval of a preliminary budget for fiscal year 2023.    Mr. Tim Hoyt, executive director, stated the EDA is asked to approve the HRA  levy of $437,850 levy for 2023 to help support redevelopment efforts.    RESOLUTION 2022‐06  Item 4  Commissioner Elder introduced the following resolution and moved its adoption  “RESOLUTION AUTHORIZING THE PROPOSED HRA LEVY PURSUANT  TO MINNESOTA STATUTES, SECTION 469.033, SUBDIVISION 6 AND  APPROVAL OF A PRELIMINARY BUDGET FOR FISCAL YEAR 2023.” The  motion for the adoption of the foregoing resolution was seconded by  Commissioner Hoffe, and upon vote being taken thereon, the following voted in  favor thereof: Hemken, Elder, Hoffe, Isenberg, London; and the following voted  against the same: None; Abstained: None; Absent: None; whereupon the  resolution was declared duly passed and adopted, signed by the president which  was attested to by the executive director.    4201 BOONE AVE N  (IMPROVEMENT  PROJECT NO. 1081)  President Hemken introduced for discussion EDA Item 5, Resolution approving  contract with Kevitt Excavating, LLC for hazardous material abatement,  demolition and disposal of site improvements, sewer lining, utility improvements,  EDA Meeting   Page 2 September 12, 2022  Item 5 well sealing, and site grading at 4201 Boone Avenue North (improvement project  no. 1081).    Mr. Jeff Alger, community development specialist, stated the EDA acquired the  TreeHouse property at 4201 Boone Avenue North in June of 2022. He indicated  the parcel will be split into two lots to accommodate construction of two homes.    Mr. Alger illustrated the options for placement of the homes and driveway  entrances. He stated three quotes were received for hazardous material abatement,  tree removal, house demolition, well sealing, site grading, sewer lining, water  service valve replacement, and the installation of new sewer and water services  for a future second lot at 4201 Boone Avenue North. The low bid was submitted  by Kevitt Excavating, LLC in the amount of $77,300 (base bid of $61,500 and  alternate of $15,800 for sewer and water line work). The company has done work  for the city in the past with good results.    Mr. Alger recommended awarding the contract to Kevitt Excavating, LLC for  $77,300.    Commissioner London inquired of the prices for the lots. Mr. Alger indicated a  decision has not yet been made but they will likely be the $75,000 to $80,000 range.  He noted a builder can always offer a higher amount to make their bid more  competitive.     Commissioner London stated he is pleased to learn the berm on 42nd Avenue and  many evergreen trees will remain to provide screening.    RESOLUTION 2022‐07  Item 5  Commissioner London introduced the following resolution and moved its  adoption “RESOLUTION APPROVING CONTRACT WITH KEVITT  EXCAVATING, LLC FOR HAZARDOUS MATERIAL ABATEMENT,  DEMOLITION AND DISPOSAL OF SITE IMPROVEMENTS, SEWER  LINING, UTILITY IMPROVEMENTS, WELL SEALING, AND SITE  GRADING AT 4201 BOONE AVENUE NORTH (IMPROVEMENT PROJECT  NO. 1081).” The motion for the adoption of the foregoing resolution was seconded  by Commissioner Elder, and upon vote being taken thereon, the following voted  in favor thereof: Hemken, Elder, Hoffe, Isenberg, London; and the following voted  against the same: None; Abstained: None; Absent: None; whereupon the  resolution was declared duly passed and adopted, signed by the president which  was attested to by the executive director.    ADJOURNMENT Motion was made by Commissioner Isenberg, seconded by Commissioner Elder,  to adjourn the meeting. All present voted in favor. Motion carried. The New Hope  EDA adjourned at 8:20 p.m.    Respectfully submitted,    Valerie Leone, City Clerk    I:\RFA\COMM DEV\2022\EDA\EDA4 Q ‐ 3611 Louisiana Ave N Acquisition 11‐14‐22.docx    Request for Action  November 14, 2022    Approved by: Tim Hoyt, Acting City Manager  Originating Department: Community Development  By: Jeff Alger, Community Development Specialist;   Jeff Sargent, Director of Community Development  Agenda Title  Resolution approving Purchase Agreement for the acquisition of 3611 Louisiana Avenue North (improvement  project no. 1065)  Requested Action  Staff requests that the Economic Development Authority authorize entering into a Purchase Agreement for the  acquisition of 3611 Louisiana Avenue North for a purchase price of $205,000 with traditional closing costs to  be paid by each party.  Policy/Past Practice  The Economic Development Authority has acquired vacant and distressed properties in the past as part of the  city’s scattered site housing program. Goals of the scattered site housing program include removing distressed  and/or blighted properties, providing step‐up housing options in the city, improving the city’s overall housing  stock, investing and instilling confidence into neighborhoods, and increasing home and land values.  Background  The Economic Development Authority (EDA) has directed community development staff to pursue the  acquisition of distressed and functionally obsolete single‐family homes as part of the city’s scattered site  housing program. The city has been interested in acquiring the property at 3611 Louisiana Avenue North for  redevelopment purposes since 2020. The 2022 assessed value of the property was $251,000, according to  Hennepin County. The existing home is believed to have been constructed in the 1940s. It has 1,553 square feet  of finished above ground space, two bedrooms on the main level, and an upstairs bedroom with limited  clearance due to the height of the ceiling. There is a single‐stall tuck under garage. The 0.29‐acre parcel is zoned  R‐1, Single‐family Residential. The lot is 94 feet wide in the front yard, decreasing to 30 feet wide in the rear  yard. The north side yard is 196 feet long and the south side yard is 215 feet long. The lot abuts multifamily  properties to the south and west and single‐family homes to the north and east. Staff believes the property at  3611 Louisiana Avenue North is a good candidate for a demolition and rebuild project.    City staff pursued the property last year and had an appraisal completed in January of 2021. The appraisal  estimated the value of the property at $170,000. The property owner agreed to sell the home for $170,000, with  closing costs to be paid by the city. The EDA approved the purchase in February of 2021. The property owner’s  son later discovered a third mortgage had been taken out against the property. The amount owed on the  property exceeded what the EDA had agreed to purchase the home for. As a result, the property owner elected  to let the home go into foreclosure instead of completing the sale. On March 1, 2021, Hennepin County held a  sheriff’s sale on the property. The city submitted a bid of $155,000 and was the highest bidder. As is the case  for many foreclosures, a six‐month redemption period went into effect, allowing the property owner time to  pay off the outstanding mortgage(s) and redeem on the foreclosed property. During that time, the property  owner reached an agreement with an investor to redeem on the property and purchase the home for $205,000.  The city was repaid its winning bid from the sheriff’s sale, plus interest and certain legal and related expenses  as dictated by state statute.  Agenda Section EDA Item Number  4    Request for Action, Page 2    Over the last year, the new property owner gutted the home and installed new windows. The home was  marketed through the MLS as an investment opportunity for much of the summer because it remained gutted,  with an asking price of $275,000. City staff remained in contact with the property owner throughout the  summer and fall. The property owner has agreed to sell the property to the city for $205,000, the same price it  was purchased for in August of 2021. While this is 20.6% more than what the property was appraised for in  January of 2021 ($170,000), home prices in New Hope have increased significantly over the last 21 months  (median home value increased by 7% in 2021 and 18% in 2022). Staff elected not to complete another appraisal  of the property as it would be difficult to determine an accurate value on a gutted house and the proposed  purchase price is $46,000 less than Hennepin County’s assessed value for 2022.    Cost & Tax Impact of Improvements   It is anticipated that expenses associated with the project would be approximately $244,819. Revenue from the  sale of the lot is estimated at $75,000, resulting in a net loss of $169,819. The new home would result in a  significant increase in the subject parcel’s taxable market value. If the property were to be valued at $450,000  in 2024, it is estimated that total taxes paid to the city in 2025 would increase by $1,194, or 79%, as compared to  those that will be allocated to the city in 2023.    Taxable Market Value 2022,  Payable 2023  Projected Taxable Value 2024,  Payable 2025  Change Percent Change  $251,000 $450,000 $199,000 79%            Estimated Taxes Allocated to  City 2022, Payable 2023  Projected Taxes Allocated to  City 2024, Payable 2025  Change Percent Change  $1,506 $2,700 $1,194 79%    The following table illustrates the Return On Investment (ROI) and tax benefit associated with the estimated  increase in taxable property value over the next several years:    # of Years  (Year Payable)  Additional Taxes   Collected By City  Total  Cost/Revenue  Return On  Investment  0 (present)  $0 $(169,819.00) ‐100.00%  1 (payable 2025)  $1,194.00  $(168,625.00) ‐99.30%  5 (payable 2029)  $6,339.11  $(163,479.89) ‐96.27%  10 (payable 2034)  $13,687.87  $(156,131.13) ‐91.94%  15 (payable 2039)  $22,207.10  $(147,611.90) ‐86.92%  20 (payable 2044)  $32,083.23  $(137,735.77) ‐81.11%  25 (payable 2049)  $43,532.36  $(126,286.64) ‐74.37%  30 (payable 2054)  $56,805.05  $(113,013.95) ‐66.55%    The estimated ROI for the project over 30 years is ‐66.55% and the estimated Internal Rate of Return (IRR) for  the project over 30 years is ‐5.44% (calculations attached). The calculations utilize an estimated 3% tax value  growth rate, which is applied to the original taxable market value for the old home and the increased taxable  market value for the new home, both over 30 years. A cost and tax impact comparison of this project and several  others that have been approved since implementation of an analysis template that utilizes tax growth rate  assumptions is attached.    Request for Action, Page 3    The primary focus of the scattered site program is to target distressed single‐family properties throughout the  city, with the goal of improving residential neighborhoods. It is understood that potential losses are incurred  on each project, as the cost to acquire and redevelop distressed properties often exceeds the value of the new  or rehabilitated home.  Funding  Funding for this project would come from the EDA budget. If the acquisition is approved, funds from the 2022  budget will be utilized. As a result of the implementation of a new HRA levy, the city has budgeted $500,000  for scattered site projects in 2022.    Project (2022 Budget) Estimated Net Cost  5306 Rhode Island Ave N $166,072.00  4201 Boone Ave N $193,975.00  3611 Louisiana Ave N $169,819.00  Total $529,866.00     Annual Budget (2022) $500,000.00  Under/Over Budget ($29,866.00)    The acquisition of 3611 Louisiana Avenue North would put the EDA 6% over budget for 2022, however, the  city did not spend the $159,301 it had committed to a scattered site project at 4215 Nevada Avenue North in  2021. That project did not come to fruition, allowing for those funds to be used on other projects, such as the  acquisition of 3611 Louisiana Avenue North. Additionally, the city received about $4,118 in interest (after  subtracting legal fees) when refunded its winning bid from the 3611 Louisiana Avenue North sheriff’s sale.  Recommendation  Staff recommends that the EDA approve a resolution approving a Purchase Agreement for the acquisition of  3611 Louisiana Avenue North for a purchase price of $205,000 with traditional closing costs to be paid by each  party.  Attachments   Resolution   Purchase Agreement   Sample Lot Layout   Photos   Budget   Estimated Tax Impact of Improvements   Estimated Return on Investment   Estimated Internal Rate of Return   Tax Calculator   Comparison of Costs & Tax Impact of Recent Projects    CITY OF NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY EDA RESOLUTION NO. 22-___ RESOLUTION APPROVING PURCHASE AGREEMENT FOR THE ACQUISITION OF 3611 LOUISIANA AVENUE NORTH (IMPROVEMENT PROJECT NO. 1065) BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope (“EDA”) as follows: WHEREAS, on September 22, 2014, the City Council adopted Resolution No.14-126 at the City Council meeting authorizing City community development staff to actively pursue the acquisition of distressed properties that can be redeveloped as single family residential lots for potential purchase by the EDA, as part of the City’s scattered site housing program; WHEREAS, the City Council has directed City staff to negotiate for the terms most favorable to the City and EDA, and the execution of purchase agreements so as to secure purchase rights for distressed real properties, contingent on the review and approval of the EDA to the terms of the purchase agreements; WHEREAS, City staff have identified the opportunity to purchase certain real property located at 3611 Louisiana Avenue North, New Hope, MN, 55427, P.I.D. 17-118-21-34-0060, and legally described as “Lot 14, Block 3, Wonderland 1st Addition, Hennepin County, Minnesota” (the “Property”) from Paramount Investment Group LLC, a Minnesota limited liability company (the “Seller”); WHEREAS, City staff believes that the best use of the Property is demolition in order to maximize the tax base by making the lot available for the development of a new residential housing unit; WHEREAS, the Property will be acquired with EDA funds; WHEREAS, the EDA has reviewed the proposed acquisition of Property and has determined that it has no effect or relationship with the New Hope Comprehensive Plan; WHEREAS, it is in the best interest of the EDA to purchase the Property from Seller, in order to redevelop the Property in accordance with the City’s scattered site housing program and policy; and WHEREAS, City staff is hereby seeking approval from the EDA of the Purchase Agreement, subject to the review and approval by the City Attorney of proper title evidence and other terms relating to the closing on the sale of the Property. NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope as follows: 1. That the above recitals are incorporated herein by reference. 2. It is in the best interest of the EDA to purchase the Property for demolition and redevelopment in accordance with the City’s scattered site housing program and policy. 3. That the purchase of the Property by EDA from Seller, for a sum of $205,000.00, with other terms and conditions as set forth in the Purchase Agreement attached hereto as Exhibit A, is approved subject to the review and approval by the City Attorney of proper title evidence and other terms relating to the closing on the purchase of the Property. 4. The proposed acquisition of Property is consistent with the New Hope Comprehensive Plan. 5. The City and EDA shall use due diligence for demolishing the structure located on the Property and conducting any necessary cleanup of the Property to pursue redevelopment and return the Property to the tax rolls for the benefit of all taxing jurisdictions. 6. The President and Acting Executive Director and the New Hope City staff are authorized and directed to sign all appropriate documents, and to take whatever additional actions are necessary or desirable, to complete the purchase of the Property in accordance with the Purchase Agreement. Dated the 14th day of November, 2022. ____________________________________ Kathi Hemken, President Attest: _____________________________ Tim Hoyt, Acting Executive Director P:\Attorney\SAS\1 Client Files\2 City of New Hope\99-11445 3611 Louisiana Ave N\Resolution approving purchase of 3611 Louisiana Ave N from Paramount.docx Exhibit A Purchase Agreement See attached. 1 PURCHASE AGREEMENT Date: November ____, 2022 BUYER: The Economic Development Authority in and for the City of New Hope, a public body corporate and politic created pursuant to the laws of the State of Minnesota SELLER: Paramount Investment Group LLC, a Minnesota limited liability company Seller agrees to sell and Buyer agrees to purchase the real property located at: Street Address: 3611 Louisiana Avenue North City of New Hope, County of Hennepin, State of Minnesota, 55427 legally described as “Lot 14, Block 3, Wonderland 1st Addition, Hennepin County, Minnesota” PID 17-118-21-34-0060. Torrens Property. Said purchase shall include all improvements, fixtures, and appurtenances on the property, if any, including but not limited to, the following (collectively the "Property"): garden bulbs, plants, shrubs, trees, and lawn watering system; shed; storm sash, storm doors, screens and awnings; window shades, blinds; traverse, curtain, and drapery rods, valances, drapes, curtains, window coverings and treatments; towel rods; attached lighting and bulbs; fan fixtures; plumbing fixtures; garbage disposals; water sof tener; water treatment system; water heating systems, heating systems; air exchange system; radon mitigation system; sump pump; TV antenna/cable TV jacks and wiring/TV wall mounts; wall/ceiling -mounted speakers and mounts; carpeting; mirrors; garage door openers and all controls; smoke detectors; fireplace screens, door and heatilators; BUILT-INS: dishwashers; refrigerators; wine/beverage refrigerators; trash compactors; ovens; cook-top stoves; warming drawers; microwave ovens; hood fans; shelving; work benches; intercoms; speakers; air conditioning equipment; electronic air filter; humidifier/dehumidifier; liquid fuel tanks (and controls); pool/spa equipment; propane tank (and controls); security system equipment; TV satellite dish; AND the following person al property shall be transferred with no additional monetary value, and free and clear of all liens and encumbrances: ______________________________________________ Notwithstanding the foregoing, the following item(s) are excluded from the purchase: _________________________________________________________________________ Seller has agreed to sell the Property to Buyer for the sum of Two Hundred Five Thousand and 00/100 Dollars ($205,000.00), which Buyer agrees to pay in the following manner: 1. CASH of 100 percent (100%) of the sale price. The date of closing shall be on or before December 31, 2022 and shall occur at the offices of the City Attorney for City of New Hope: Jensen, Sondrall, Persellin & Woods, P.A., 8525 Edinbrook Crossing, Suite 201, Brooklyn Park, MN 55443 or via escrow closing through Midland Title, 7760 France Avenue South #140. Bloomington, MN 55435. SALE OF BUYER'S PROPERTY CONTINGENCY: This Purchase Agreement IS NOT subject to an Addendum to Purchase Agreement: Sale of Buyer's Property Contingency. (If answer is IS, see attached Addendum.) (If answer is IS NOT, the closing of Buyer's property, if any, may still affect Buyer's ability to obtain financing, if financing is applicable.) This Purchase Agreement IS NOT subject to cancellation of a previously written purchase agreement dated _______________________, 20__. (If answer is IS, said cancellation shall be obtained no later than _____________, 20__. If said cancellation is not obtained by said date, this Purchase Agreement is canceled. Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement confirming said cancellation.) 2 Buyer has been made aware of the availability of Property inspections. Buyer does not elect to have a Property inspection performed at Buyer's expense. INSPECTION CONTINGENCY: This Purchase Agreement IS NOT subject to an Addendum to Purchase Agreement: Inspection Contingency. (If answer is IS, see attached Addendum.) DEED/MARKETABLE TITLE: Upon performance by Buyer, Seller shall deliver a (check one): Warranty Deed joined in by spouse, if any, conveying marketable title, subject to (a) building and zoning laws, ordinances, and state and federal regulations; (b) restrictions relating to use or improvement of the Property without effective forfeiture provisions; (c) reservation of any mineral rights by the State of Minnesota; and (d) utility and drainage easements which do not interfere with existing improvements; REAL ESTATE TAXES: Seller shall pay on the date of closing all real estate taxes due and payable in all prior years including all penalties and interest. Buyer shall pay PRORATED FROM DAY OF CLOSING real estate taxes due and payable in the year 2022. Seller shall pay PRORATED TO DAY OF CLOSING real estate taxes due and payable in the year 2022. If the closing date is changed, the real estate taxes paid shall, if prorated, be adjusted to the new closing date. If the Property tax status is a part- or non-homestead classification in the year of closing, Seller SHALL NOT pay the difference between the homestead and non-homestead. Buyer shall pay real estate taxes due and payable in the year following closing and thereafter, the paym ent of which is not otherwise herein provided. No representations are made concerning the amount of subsequent real estate taxes. DEFERRED TAXES/SPECIAL ASSESSMENTS: SELLER SHALL PAY on date of closing any deferred real estate taxes (e.g., Green Acres) or special assessments, payment of which is required as a result of the closing of this sale. SELLER SHALL PAY ON DATE OF CLOSING all installments of special assessments certified for payment, with the real estate taxes due and payable in the year of closing. SELLER SHALL PAY on date of closing all other special assessments levied as of the date of this Purchase Agreement. SELLER SHALL PROVIDE FOR PAYMENT OF special assessments pending as of the date of this Purchase Agreement for improvements that have been ordered by any assessing authorities. Buyer shall pay any unpaid special assessments payable in the year following closing and thereafter, the payment of which is not otherwise herein provided. As of the date of this Purchase Agreement, Seller represents that Seller HAS NOT received a notice regarding any new improvement project from any assessing authorities, the costs of which project may be assessed against the Property. Any such notice received by Seller after the date of this Purchase Agreement and before closing shall be provided to Buyer immediately. If such notice is issued after the date of this Purchase Agreement and on or before the date of closing, then the parties may agree in writing, on or before the date of closing, to pay, provide for the payment of or assume the special assessments. In the absence of such agreement, either party may declare this Purchase Agreement canceled by written notice to the other party, or licensee representing or assisting the other party, in which case this Purchase Agreement is canceled. If either party declares this Purchase Agreement canceled, Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement confirming said cancellation. 3 POSSESSION: Seller shall deliver possession of the Property no later than date of closing. Seller agrees to remove ALL DEBRIS AND ALL PERSONAL PROPERTY NOT INCLUDED HEREIN from the Property by possession date. LINKED DEVICES: Seller warrants that Seller shall permanently disconnect or discontinue Seller's access or service to any device or system on or serving the property that is connected or controlled wirelessly, via internet protocol ("IP") to a router or gateway or directly to the cloud no later than delivery of possession as specified in this Purchase Agreement. PRORATIONS: All interest; unit owners' association dues; rents; and charges for city water, city sewer, electricity and natural gas shall be prorated between the parties as of date of closing. Buyer shall pay Seller for remaining gallons of fuel oil or liquid petroleum gas on the day of closing, at the rate of the last fill by Seller. TITLE AND EXAMINATION: As quickly as reasonably possible after Final Acceptance Date of this Purchase Agreement: a. Seller shall deliver to Buyer a Commitment for an ALTA Form B owner's policy of title insurance (the “Commitment”) issued by Midland Title (“Title Company”) and covering title to the Property, in the amount of the Purchase Price. Seller agrees to pay the costs associated with the preparation and issuance of the Commitment; Buyer shall pay the premium for the owner’s policy, if any, and the lender’s policy, if any, along with the price for any endorsements requested by Buyer or Buyer’s lender. b. Buyer shall have fifteen (15) days after receipt of the Commitment to review and approve the title to the Property and to object to any exception to title that is disclosed in the Commitment or which is otherwise discovered by Buyer. In the event that Buyer does not within such fifteen (15) day period give notice to Seller objecting to any such exceptions, then all such exceptions shall be deemed approved and shall be considered a part of the Permitted Encumbrances. If Buyer timely objects to an exception to title, then on or before the tenth (10) day following Buyer’s notice of exception, Seller shall remove the exception or notify Buyer that Seller is unwilling or unable to remove the exception. Within five (5) days of any notice by Seller that Seller it is unable to remove an exception to title, Buyer may elect by notice to Seller to either: (i) terminate this Agreement, whereupon the parties shall be released from all further obligations hereunder except obligations under this Agreement which provide for continued exercise following the cancellation or other termination of this Agreement; or (ii) elect to have this Agreement remain in effect, in which event Buyer will be deemed to have approved the previously cited exception and the same shall be considered part of the Permitted Encumbrances. Seller shall use Seller's best efforts to provide marketable title by the date of closing. Seller agrees to pay all costs and fees necessary to convey marketable title including obtaining and recording all required documents, subject to the following: In the event Seller has not provided marketable title by the date of closing, Seller shall have an additional 30 days to make title marketable, or in the alternative, Buyer may waive title defects by written notice to Seller. In addition to the 30-day extension, Buyer and Seller may, by mutual agreement, further extend the closing date. Lacking such extension, either party may declare this Purchase Agreement canceled by written notice to the other party, or licensee representing or 4 assisting the other party, in which case this Purchase Agreement is canceled. If either party declares this Purchase Agreement canceled, Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement confirming said cancellation. SUBDIVISION OF LAND, BOUNDARIES, AND ACCESS: If this sale constitutes or requires a subdivision of land owned by Seller, Seller shall pay all subdivision expenses and obtain all necessary governmental approvals. Seller warrants that the legal description of the real property to be conveyed h as been or shall be approved for recording as of the date of closing. Seller warrants that the buildings are or shall be constructed entirely within the boundary lines of the Property. Seller warrants that there is a right of access to the Property from a public right-of-way. MECHANIC'S LIENS: Seller warrants that prior to the closing, payment in full will have been made for all labor, materials, machinery, fixtures or tools furnished within the 120 days immediately preceding the closing in connection with construction, alteration or repair of any structure on, or improvement to, the Property. NOTICES: Seller warrants that Seller has not received any notice from any governmental authority as to condemnation proceedings, or violation of any law, ordinance or regulation. If the Property is subject to restrictive covenants, Seller warrants that Seller has not received any notice from any person or authority as to a breach of the covenants. Any such notices received by Seller shall be provided to Buyer immediat ely. DIMENSIONS: Buyer acknowledges any dimensions, square footage or acreage of land or improvements provided by Seller, third party, or broker representing or assisting Seller are approximate. Buyer shall verify the accuracy of information to Buyer's satisfaction, if material, at Buyer's sole cost and expense. ACCESS AGREEMENT: Seller agrees to allow reasonable access to the Property for performance of any surveys or inspections agreed to herein. RISK OF LOSS: If there is any loss or damage to the Prop erty between the date hereof and the date of closing for any reason, including fire, vandalism, flood, earthquake or act of God, the risk of loss shall be on Seller. If the Property is destroyed or substantially damaged before the closing date, this Purcha se Agreement is canceled, at Buyer's option, by written notice to Seller or licensee representing or assisting Seller. If Buyer cancels this Purchase Agreement, Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement confirming said cancellation. TIME OF ESSENCE: Time is of the essence in this Purchase Agreement. CALCULATION OF DAYS: Any calculation of days begins on the first day (calendar or Business Days as specified) following the occurrence of the event specified and includes subsequent days (calendar or Business Days as specified) ending at 11:59 P.M. on the last day. BUSINESS DAYS: "Business Days" are days which are not Saturdays, Sundays or state or federal holidays unless stated elsewhere by the parties in writing. DEFAULT: If Buyer defaults in any of the agreements herein, Seller may cancel this Purchase Agreement, and Buyer and Seller shall affirm the same by a written cancellation agreement. If Buyer defaults in any of the agreements hereunder, Seller may terminate this Purchase Agreement under the provisions of either MN Statute 559.21 or MN Statute 559.217, whichever is applicable. If either Buyer or Seller defaults in any of the agreements hereunder or there exists an unfulfilled condition after the date specified for fulfillment, either party may cancel this Purchase Agreement under MN Statute 559.217, Subd. 3. Whenever it is provided herein that this Purchase Agreement is canceled, said language shall be deemed a provision authorizing a Declaratory Cancellation under MN Statute 559.217, Subd. 4. If this Purchase Agreement is not canceled or terminated as provided hereunder, Buyer or Seller may seek actual damages for breach of this Purchase Agreement or specific performance of this Purchase 5 Agreement; and, as to specific performance, such action must be commenced within six (6) months after such right of action arises. BUYER HAS NOT RECEIVED A DISCLOSURE STATEMENT RE: SELLER'S PROPERTY. DESCRIPTION OF PROPERTY CONDITION: See Disclosure Statement: Seller's Property or Disclosure Statement: Seller's Disclosure Alternatives for description of disclosure responsibilities and limitations, if any. BUYER IS NOT RELYING ON ANY ORAL REPRESENTATIONS REGARDING THE CONDITION OF THE PROPERTY AND ITS CONTENTS. SELLER WARRANTS THAT THE PROPERTY IS EITHER DIRECTLY OR INDIRECTLY CONNECTED TO: CITY SEWER-YES / CITY WATER-YES SUBSURFACE SEWAGE TREATMENT SYSTEM SELLER DOES NOT KNOW OF A SUBSURFACE SEWAGE TREATMENT SYSTEM ON OR SERVING THE PROPERTY. (If answer is DOES, and the system does not require a state permit, see Disclosure. Statement: Subsurface Sewage Treatment System.) PRIVATE WELL SELLER DOES KNOW OF A WELL ON OR SERVING THE PROPERTY. (If answer is DOES and well is located on the Property, see Disclosure Statement: Well.) THIS PURCHASE AGREEMENT IS NOT SUBJECT TO AN ADDENDUM TO PURCHASE AGREEMENT: SUBSURFACE SEWAGE TREATMENT SYSTEM AND WELL INSPECTION CONTINGENCY. (If answer is IS, see attached Addendum.) IF A WELL OR SUBSURFACE SEWAGE TREATMENT SYSTEM EXISTS ON THE PROPERTY, BUYER HAS RECEIVED A DISCLOSURE STATEMENT: WELL AND/OR A DISCLOSURE STATEMENT: SUBSURFACE SEWAGE TREATMENT SYSTEM. NOTICE REGARDING PREDATORY OFFENDER INFORMATION: Information regarding the predatory offender registry and persons registered with the predatory offender registry under MN Statute 243.166 may be obtained by contacting the local law enforcement offices in the community where the Prop erty is located or the Minnesota Department of Corrections at (651) 361 -7200, or from the Department of Corrections web site at www.corr.state.mn.us. No Home Protection/Warranty Plan is negotiated as part of this Purchase Agreement. 6 NOTICE Seller is not represented by a listing Agent in this transaction. (Licensee) (Real Estate Company Name) Buyer is not represented by an Agent in this transaction. (Licensee) (Real Estate Company Name) DUAL AGENCY REPRESENTATION Dual Agency representation DOES NOT apply in this transaction. CLOSING COSTS: Buyer and Seller agree to respectively pay traditional closing costs. FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT ("FIRPTA"): Section 1445 of the Internal Revenue Code provides that a transferee ("Buyer") of a United States real property interest must be notified in writing and must withhold tax if the transferor ("Seller") is a foreign person and no exceptions from FIRPTA withholding apply. Buyer and Seller agree to comply with FIRPTA requirements under Section 1445 of the Internal Revenue Code. Seller shall represent and warrant, under the penalties of perjury, whether Sel ler is a "foreign person" (as the same is defined within FIRPTA), prior to closing. Any representations made by Seller with respect to this issue shall survive the closing and delivery of the deed. Buyer and Seller shall complete, execute, and deliver, on or before closing, any instrument, affidavit, or statement reasonably necessary to comply with the FIRPTA requirements, including delivery of their respective federal taxpayer identification numbers or Social Security numbers. Due to the complexity and potential risks of failing to comply with FIRPTA, including the Buyer's responsibility for withholding the applicable tax, Buyer and Seller should seek appropriate legal and tax advice regarding FIRPTA compliance, as the respective licensee's representing o r assisting either party will be unable to assure either party whether the transaction is exempt from FIRPTA withholding requirements. ENTIRE AGREEMENT: This Purchase Agreement and any addenda or amendments signed by the parties shall constitute the entire agreement between Buyer and Seller. Any other written or oral communication between Buyer and Seller, including, but not limited to, e-mails, text messages, or other electronic communications are not part of this Purchase Agreement. This Purchase Agreement can be modified or canceled only in writing signed by Seller and Buyer or by operation of law. All monetary sums are deemed to be United States currency for purposes of this Purchase Agreement. ELECTRONIC SIGNATURES: The parties agree the electronic signature of any party on any document related to this transaction constitute valid, binding signatures. FINAL ACCEPTANCE: To be binding, this Purchase Agreement must be fully executed by both parties and a copy must be delivered. 7 SURVIVAL: All warranties specified in this Purchase Agreement shall survive the delivery of the deed or contract for deed. OTHER: Buyer’s obligation to purchase the Property under this Purchase Agreement is contingent on the following: (1) Review and approval of the terms of the Purchase Agreement by the Economic Development Authority in and for the City of New Hope to the terms of the Purchase Agreement If the above contingency is not met, Buyer may declare this Purchase Agreement canceled by written notice to Seller, or licensee representing or assisting Seller, in which case this Purchase Agreement is canceled. If Buyer declares this Purchase Agreement canceled due to the failur e of one of the above contingencies, Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement confirming said cancellation and all earnest money paid shall be immediately returned to Buyer. Seller will not be required to complete the City of New Hope Point of Sale inspection. Seller warrants that there are no tenants on the property with a lawful leasehold interest. In the event any tenant comes forward and claims an interest in the property at the time of or following the purchase, Seller agrees to fully indemnify Buyer for any and all costs associated with terminating such tenancy and for any and all relocation assistance and benefits that may be due to such tenant together with attorney’s fees that Buyer would have to incur in connection with legal action required to resolve any relocation assistance or benefits dispute with such tenant. Seller acknowledges that he is not being displaced from the property as a result of the Purchase Agreement and that he is not eligible for relocation assistance and benefits, that the purchase price includes compensation for any and all relocation assistance and benefits for which Seller may be eligible. The provisions of this paragraph shall survive the closing of the transaction contemplated by this Purchase Agreement. For purposes of this Purchase Agreement, “relocation assistance and benefits” shall have the meanings ascribed to them by the Minnesota Uniform Relocation Act, Minn. Stat.§117.50 to 117.56, the Uniform Relocation Assistance and Real Property Acquisition Policies Act, 42 U.S.C. §§4601-4655 (the federal URA) and the regulations implementing the federal URA, 49 C.D.R. Part 24. Enter total number of pages of this Purchase Agreement: 8 pages. 8 NOTE: Disclosures and optional Arbitration Agreement are not part of this Purchase Agreement and should not be part of the page numbering. I, the owner of the Property, accept this Purchase Agreement and authorize the listing broker to withdraw said Property from the market, unless instructed otherwise in writing. I have reviewed all pages of this Purchase Agreement. If checked, this Agreement is subject to attached Addendum to Purchase Agreement: Counteroffer. FIRPTA: Seller represents and warrants, under penalty of perjury, that Seller IS NOT a foreign person (i.e., a non-resident alien individual, foreign corporation, foreign partnership, foreign trust, or foreign estate for purposes of income taxation. This representation and warranty shall survive the closing of the transaction and the delivery of the deed. I agree to purchase the Property for the price and on the terms and conditions set forth above. I have reviewed all pages of this Purchase Agreement Seller Buyer Paramount Investment Group LLC, Economic Development Authority in and for the a Minnesota limited liability company City of New Hope, a public body corporate and politic created pursuant to the laws of the State of Minnesota Date: November ____, 2022 By: Tim Hoyt Its: Acting Executive Director Date: November ____, 2022 THIS IS A LEGALLY BINDING CONTRACT BETWEEN BUYER(S) AND SELLER(S). IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL. P:\Attorney\SAS\1 Client Files\2 City of New Hope\99-11445 3611 Louisiana Ave N\Purchase Agreement.docx 3611 Louisiana Ave N R-1, Single-family residential 195.94’30’Buildable Area 94’Poten t ial Home & Garage Poten t ial Driveway 214.76’ 3611 Louisiana Avenue North 3611 Louisiana Avenue North Budget for 3611 Louisiana Ave N EXPENSES AMOUNT Acquisition (205,000.00)$ Closing costs for purchase (estimated)(3,000.00)$ Legal costs for purchase (estimated)(2,000.00)$ Appraisal (completed in 2021)(350.00)$ Demolition survey (650.00)$ Demolition and site prep (estimated)(28,000.00)$ Real estate taxes (estimated at 6 months)(1,619.00)$ Lawn services (estimated)(400.00)$ Utility billing (estimated)(200.00)$ Public hearing notice (estimated)(100.00)$ Closing costs for sale (estimated)(1,500.00)$ Legal costs for sale (estimated)(2,000.00)$ TOTAL (244,819.00)$ REVENUE AMOUNT EDA (estimated lot sale proceeds)75,000.00$ TOTAL 75,000.00$ TOTAL COST/REVENUE (169,819.00)$ Taxable Market Value 2022, Payable 2023 Projected Taxable Value 2024, Payable 2025 Change Percent Change 251,000.00$ 450,000.00$ 199,000.00$ 79.28% Estimated Taxes Allocated to City 2022, Payable 2023 Projected Taxes Allocated to City 2024, Payable 2025 Change Percent Change 1,506.00$ 2,700.00$ 1,194.00$ 79.28% Projected Project Expenses (244,819.00)$ Lot Sale Revenue 75,000.00$ Total Cost/Revenue (169,819.00)$ # of Years (Year) Additional Taxes Collected By City Total Cost/ Revenue Return On Investment 0 (present)-$ (169,819.00)$ -100.00% 1 (payable 2025)1,194.00$ (168,625.00)$ -99.30% 2 (payable 2026)2,423.82$ (167,395.18)$ -98.57% 3 (payable 2027)3,690.53$ (166,128.47)$ -97.83% 4 (payable 2028)4,995.25$ (164,823.75)$ -97.06% 5 (payable 2029)6,339.11$ (163,479.89)$ -96.27% 10 (payable 2034)13,687.87$ (156,131.13)$ -91.94% 15 (payable 2039)22,207.10$ (147,611.90)$ -86.92% 20 (payable 2044)32,083.23$ (137,735.77)$ -81.11% 25 (payable 2049)43,532.36$ (126,286.64)$ -74.37% 30 (payable 2054)56,805.05$ (113,013.95)$ -66.55% *Based on new home valued at $450,000 Estimated Tax Impact of Improvements at 3611 Louisiana Ave N Estimated Return on Investment for 3611 Louisiana Ave N Description Taxable Market Value Change Cash Flow Investment -$ (169,819.00)$ Return, Year 1 199,000.00$ 1,194.00$ Return, Year 2 204,970.00$ 1,229.82$ Return, Year 3 211,119.10$ 1,266.71$ Return, Year 4 217,452.67$ 1,304.72$ Return, Year 5 223,976.25$ 1,343.86$ Return, Year 6 230,695.54$ 1,384.17$ Return, Year 7 237,616.41$ 1,425.70$ Return, Year 8 244,744.90$ 1,468.47$ Return, Year 9 252,087.25$ 1,512.52$ Return, Year 10 259,649.86$ 1,557.90$ Return, Year 11 267,439.36$ 1,604.64$ Return, Year 12 275,462.54$ 1,652.78$ Return, Year 13 283,726.42$ 1,702.36$ Return, Year 14 292,238.21$ 1,753.43$ Return, Year 15 301,005.36$ 1,806.03$ Return, Year 16 310,035.52$ 1,860.21$ Return, Year 17 319,336.58$ 1,916.02$ Return, Year 18 328,916.68$ 1,973.50$ Return, Year 19 338,784.18$ 2,032.71$ Return, Year 20 348,947.70$ 2,093.69$ Return, Year 21 359,416.14$ 2,156.50$ Return, Year 22 370,198.62$ 2,221.19$ Return, Year 23 381,304.58$ 2,287.83$ Return, Year 24 392,743.72$ 2,356.46$ Return, Year 25 404,526.03$ 2,427.16$ Return, Year 26 416,661.81$ 2,499.97$ Return, Year 27 429,161.66$ 2,574.97$ Return, Year 28 442,036.51$ 2,652.22$ Return, Year 29 455,297.61$ 2,731.79$ Return, Year 30 468,956.54$ 2,813.74$ Total Returns 56,805.05$ Investment Cost 244,819.00$ Selling Price 75,000.00$ Return on Investment -66.55% Description Amount Investment (169,819.00)$ Return, Year 1 1,194.00$ Return, Year 2 1,229.82$ Return, Year 3 1,266.71$ Return, Year 4 1,304.72$ Return, Year 5 1,343.86$ Return, Year 6 1,384.17$ Return, Year 7 1,425.70$ Return, Year 8 1,468.47$ Return, Year 9 1,512.52$ Return, Year 10 1,557.90$ Return, Year 11 1,604.64$ Return, Year 12 1,652.78$ Return, Year 13 1,702.36$ Return, Year 14 1,753.43$ Return, Year 15 1,806.03$ Return, Year 16 1,860.21$ Return, Year 17 1,916.02$ Return, Year 18 1,973.50$ Return, Year 19 2,032.71$ Return, Year 20 2,093.69$ Return, Year 21 2,156.50$ Return, Year 22 2,221.19$ Return, Year 23 2,287.83$ Return, Year 24 2,356.46$ Return, Year 25 2,427.16$ Return, Year 26 2,499.97$ Return, Year 27 2,574.97$ Return, Year 28 2,652.22$ Return, Year 29 2,731.79$ Return, Year 30 2,813.74$ Total Returns 56,805.05$ Internal Rate of Return -5.44% Estimated Internal Rate of Return for 3611 Louisiana Ave N Year Original Taxable Market Value (assumes growth in value over time) Improved Taxable Market Value (assumes growth in value over time) New Taxable Value Projected City Taxes on New Taxable Market Value 1 251,000.00$ 450,000.00$ 199,000.00$ 1,194.00$ 2 258,530.00$ 463,500.00$ 204,970.00$ 1,229.82$ 3 266,285.90$ 477,405.00$ 211,119.10$ 1,266.71$ 4 274,274.48$ 491,727.15$ 217,452.67$ 1,304.72$ 5 282,502.71$ 506,478.96$ 223,976.25$ 1,343.86$ 6 290,977.79$ 521,673.33$ 230,695.54$ 1,384.17$ 7 299,707.13$ 537,323.53$ 237,616.41$ 1,425.70$ 8 308,698.34$ 553,443.24$ 244,744.90$ 1,468.47$ 9 317,959.29$ 570,046.54$ 252,087.25$ 1,512.52$ 10 327,498.07$ 587,147.93$ 259,649.86$ 1,557.90$ 11 337,323.01$ 604,762.37$ 267,439.36$ 1,604.64$ 12 347,442.70$ 622,905.24$ 275,462.54$ 1,652.78$ 13 357,865.98$ 641,592.40$ 283,726.42$ 1,702.36$ 14 368,601.96$ 660,840.17$ 292,238.21$ 1,753.43$ 15 379,660.02$ 680,665.38$ 301,005.36$ 1,806.03$ 16 391,049.82$ 701,085.34$ 310,035.52$ 1,860.21$ 17 402,781.32$ 722,117.90$ 319,336.58$ 1,916.02$ 18 414,864.76$ 743,781.43$ 328,916.68$ 1,973.50$ 19 427,310.70$ 766,094.88$ 338,784.18$ 2,032.71$ 20 440,130.02$ 789,077.72$ 348,947.70$ 2,093.69$ 21 453,333.92$ 812,750.06$ 359,416.14$ 2,156.50$ 22 466,933.94$ 837,132.56$ 370,198.62$ 2,221.19$ 23 480,941.96$ 862,246.53$ 381,304.58$ 2,287.83$ 24 495,370.21$ 888,113.93$ 392,743.72$ 2,356.46$ 25 510,231.32$ 914,757.35$ 404,526.03$ 2,427.16$ 26 525,538.26$ 942,200.07$ 416,661.81$ 2,499.97$ 27 541,304.41$ 970,466.07$ 429,161.66$ 2,574.97$ 28 557,543.54$ 999,580.05$ 442,036.51$ 2,652.22$ 29 574,269.85$ 1,029,567.45$ 455,297.61$ 2,731.79$ 30 591,497.94$ 1,060,454.48$ 468,956.54$ 2,813.74$ Tax Value Growth Rate 3% City Rate 60% The equation for calculating property taxes, in its most simplistic form, is Taxable Market Value X Property Tax Class Rate X City Tax Rate. The Taxable Market Value in this calculation is assumed based on the city's projections for growth in property value due to the improvements. The Property Tax Class Rates are set by the State of MN and stay fairly consistent from year to year (there have been changes in commercial industrial, however; residential is mostly constant). The city’s Tax Rate changes every year based on the levy certified and the overall tax value of the city. So, the Tax Rate used in this illustration is an assumption. The city’s rate has varied between 58-63% in recent years. Property taxes are calculated on taxable market value, not estimated market value. It is of important note, that this calculation does not take into consideration the market value exclusion which is applied to residential properties under $413,800 in value. Tax Calculator for 3611 Louisiana Ave N Comparison of Costs & Tax Impact for Recent Projects Since implementation of analysis template that utilizes tax growth rate assumptions (September of 2020) 3611 Louisiana Avenue North 4201 Boone Avenue North 5306 Rhode Island Avenue North 5213 Pennsylvania Avenue North 4637 Aquila Avenue North 4215 Louisiana Avenue North Number of Units 1 2 1 1 1 1 Project Description Demolition & rebuild Demolition, lot split & rebuild Demolition & rebuild Demolition & rebuild Demolition & rebuild Demolition & rebuild Year Acquired TBD 2022 2022 2021 2021 2020 Projected or Actual Projected (at time of offer) Projected (at time of offer) Projected (at time of lot sale) Projected (at time of lot sale) Projected (at time of lot sale) Projected (at time of lot sale) Expenses ($244,819.00) ($343,975.00) ($253,072.00) ($205,172.18) ($127,292.01) ($170,441.53) Revenue $75,000.00 $150,000.00 $87,000.00 $72,000.00 $81,000.00 $69,000.00 Total Cost/Revenue ($169,819.00) ($193,975.00) ($166,072.00) ($133,172.18) ($46,292.01) ($101,441.53) Estimated Taxable Value of New Home(s) $450,000 $425,000 per home $850,000 total $575,000 $485,000 $445,000 $380,000 *Additional Taxes Collected by City - 1 year $1,194.00 $5,100.00 $2,100.00 $1,902.00 $1,254.00 $786.00 *Additional Taxes Collected by City - 30 years $56,805.05 $242,634.62 $99,908.37 $90,488.44 $59,659.57 $37,394.28 *Return On Investment - 30 years -66.55% 25.09% -39.84% -32.05% 28.88% -63.14% *Internal Rate of Return - 30 years -5.44% 1.31% -2.69% -2.08% 1.49% -5.01% *Assumed 3% tax value growth rate