032017 Special EDA Meeting Packet
SPECIAL EDA MEETING
New Hope City Hall – Council Chambers
4401 Xylon Avenue North
Monday, March 20, 2017
6:00 p.m.
President Kathi Hemken
Commissioner John Elder
Commissioner Andy Hoffe
Commissioner Eric Lammle
Commissioner Jonathan London
1. Call to order – EDA Meeting of March 20, 2017
2. Roll call
3. Resolution authorizing the execution of a purchase and development agreement
with Alatus New Hope, LLC
4. Adjournment
I:\RFA\COMM DEV\Development\EDA ‐ Approve VRF Loan Structure for Alatus 3‐20‐17.docx
Request for Action
March 20, 2017
Approved by: Kirk McDonald, City Manager
Originating Department: Community Development
By: Jeff Sargent, Director
Agenda Title
Resolution authorizing the execution of a purchase and development agreement with Alatus New Hope, LLC
Requested Action
At the February 27 Economic Development Authority (EDA) meeting, Alatus stated that they would be
agreeable to the city funding a portion of the cost for the Variable Refrigerant Flow (VRF) HVAC system
through a loan instead of an increase in TIF funding. The majority of the EDA approved the concept of a loan,
subject to the terms and conditions being presented at a later date. Subsequent to that meeting, staff and Ehlers
have negotiated terms of the loan with Alatus, and staff requests to present the terms of the loan to the EDA
for consideration. The action taken by the EDA would be to authorize the execution of the purchase and
development agreement, which will be amended to reflect the terms and conditions of the proposed loan.
Policy/Past Practice
It is a practice of staff to present loan terms to the EDA for consideration.
Background
Bob Lux, Principal of Alatus, LLC, approached the city with an idea to incorporate a state‐of‐the‐art heating
and cooling system for the project in New Hope. Instead of incorporating individual “MagicPak” systems in
each apartment unit, Alatus is looking to utilize a Variable Refrigerant Flow (VRF) system for the building.
VRF systems achieve extremely high efficiencies by modulating the flow of the refrigerant according to the
exact demands of specific areas throughout the building. By coupling the boiler/chiller VRF system with solar
power, the new apartment building in New Hope would be able to achieve close to zero emissions, meaning
that the building would generate no carbon footprint. This would allow the building to achieve LEED
certification, making it a model project for the future of heating and cooling needs of similar buildings in the
metro area. Support of this project would also align with the city’s goals of striving for a “green” environment,
as it does with the GreenStep Program.
The benefits of the VRF HVAC system include the nearly 100% efficiency rating, the fact that there will be no
carbon footprint for the building, as well as better control of heating and cooling needs throughout the
development. The VRF system uses roughly 50% of the energy that the MagicPak systems use, saving an
equivalent in emissions of 615,000 gallons of gasoline over a 20‐year period. Each apartment unit would have
its own meter to monitor heating and cooling usage, but would no longer need to have individual MagicPak
systems in each unit, adding to the aesthetics of the building as well. Having a LEED‐certified building within
city limits is also beneficial to the city.
The challenge facing Alatus to incorporate the VRF system is the cost. Alatus received a quote of $688,000 for
the installation of the VRF HVAC system. Mr. Lux is excited to install the VRF system because of the positive
impacts it would have on the building and the city, however he stated that the cost would be prohibitive for
Alatus to pursue on its own. He has asked if the City Council would be amenable to cover half of the cost of
the system (up to $350,000) to help with the project. Ehlers conducted a TIF analysis of this proposal and has
Agenda Section
EDA
Item Number
3
Request for Action, Page 2
indicated that if the Council would like to pursue this project, TIF generated from the project could be used to
help pay for the VRF system. The effect on the TIF note would be an increase to the agreed upon terms from 23
years of assistance to 23.5 years.
The City Council reviewed the proposal at the February 21 work session meeting and inquired whether Alatus
would be amenable to a loan rather than using TIF money to support the project. Staff had conversations with
Alatus, and they were in favor of exploring a loan option to help finance the VRF system. At the February 27
EDA meeting, the majority of the commissioners approved the concept of the loan, subject to its terms and
conditions. Subsequently, staff and Ehlers negotiated the terms with Alatus and now would like to present the
terms of the loan to the EDA for approval.
A special EDA meeting was requested in order for Alatus to meet their closing schedule in a timely manner.
Once the loan is approved, Alatus’ legal counsel will work with the city’s redevelopment attorney to add the
terms of the loan into the purchase and development agreement. Once complete, Alatus will then sign the
purchase and development agreement and close on the property.
Loan Terms
The loan amount to Alatus from the New Hope EDA would be for $350,000. The payback of this loan would
be over 5 years, with 4% interest. The payback is structured in a way that Alatus would pay the city interest‐
only payments during years 1‐4, with a balloon payment in year 5 for the remainder. Staff and representatives
from Ehlers feel that these are very good terms, and recommend approval of the loan. A more detailed analysis
of the loan structure is included in the attached memo from Ehlers & Associates.
Attachments
EDA Resolution
Ehlers Memo
Draft Purchase and Development Agreement
VRF System Benefits Memo provided by Alatus, LLC
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO. 17-
RESOLUTION AUTHORIZING THE EXECUTION OF A PURCHASE AND DEVELOPMENT
AGREEMENT WITH ALATUS NEW HOPE, LLC
BE IT RESOLVED BY THE BOARD OF COMMISSIONERS OF THE NEW HOPE
ECONOMIC DEVELOPMENT AUTHORITY (the "Authority") AS FOLLOWS:
WHEREAS, the Authority and the City of New Hope, Minnesota (the "City") have created Tax
Increment Financing District No. 11-1 (the “District”) pursuant to the Minnesota Tax Increment Financing
Law, Minnesota Statutes, sections 469.174-469.1794 (the “Tax Increment Act”); and
WHEREAS, the Authority has received a proposal from Alatus New Hope, LLC (the “Developer”)
pursuant to which the Developer would construct a rental housing development (the “Improvements”) on
certain real property in the District to be conveyed by the Authority to the Developer (the “Property”);
and
WHEREAS, the Developer has also proposed that the Authority provide certain financial assistance
to the Developer using tax increment revenues from the District; and
WHEREAS, the Authority’s Board of Commissioners previously reviewed and approved a
development agreement between the Authority and the Developer, but subsequent to that approval
Authority staff and the Developer negotiated changes to certain provisions of that agreement; and
WHEREAS, there has been presented to the Authority’s Board of Commissioners a revised
proposed Purchase and Development Agreement (the “Contract”) between the Authority and the
Developer setting forth the terms of the Authority’s conveyance of the Property to the Developer and its
provision of financial assistance to the Developer in connection with the construction of the
Improvements.
NOW, THEREFORE, be it hereby resolved by the Board of Commissioner of the Authority as
follows:
1.02. Execution and Performance of Contract and Issuance of the Note. The appropriate officers of
the Authority are hereby authorized to execute the Contract in substantially the form presented to the
Board of Commissioners, subject to such non-substantive changes as may be approved by the Executive
Director and the Authority’s legal counsel, to cause the Authority’s obligations under the Contract to be
performed, including its obligation to convey the Property to the Developer, to execute the Note at the
time stated in the Contract and to issue and deliver the Note described therein at the time provided in the
Contract.
Section 2. Form of Note. The Note shall be substantially in the form contained in the Contract, with
the blanks properly filled in.
Section 3. Terms, Execution and Delivery.
3.01. Dates; Interest Payment Dates. The Note shall be dated as of the date it is issued. Principal of
and interest on the Note shall be payable to the owner of record thereof as of the close of business on the
fifteenth day of the month preceding each Scheduled Payment Date, whether or not such day is a business
day.
3.02. Registration. The Authority appoints the Executive Director as Note Registrar. The effect of
registration and the rights and duties of the Authority and the Registrar with respect thereto shall be as
follows:
(a) Register. The Registrar shall keep at his/her principal office a Note register in which the
Registrar shall provide for the registration of ownership of the Note and the registration of transfers or
exchanges of the Note.
(b) Transfer of Note. Upon surrender for transfer of the Note duly endorsed by the registered
owner thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar,
duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner
in writing, the Registrar shall authenticate and deliver, in the name of the designated transferee or
transferees, a new Note of a like aggregate principal amount and maturity, as requested by the transferor.
The Registrar may close the books for registration of any transfer after the fifteenth day of the month
preceding each interest payment date and until such interest payment date. The Note shall not be
transferred to any person other than an affiliate or other related entity of the Developer, unless the a has
been provided with an opinion of counsel, acceptable to the Authority, that such transfer is exempt from
registration and prospectus delivery requirements of federal and applicable state securities laws.
(c) Cancellation. The Note surrendered upon any transfer shall be promptly canceled by the
Registrar and thereafter disposed of as directed by the Authority.
(d) Improper or Unauthorized Transfer. When the Note is presented to the Registrar for transfer,
the Registrar may refuse to transfer the same until it is satisfied that the endorsement on the Note or
separate instrument of transfer is valid and genuine and the requested transfer is legally authorized. The
Registrar shall incur no liability for its refusal, in good faith, to make transfers which it, in its judgment,
deems improper or unauthorized.
(e) Persons Deemed Owners. The Authority and the Registrar may treat the person in whose
name the Note is at any time registered in the Note register as the absolute owner of the Note, whether the
Note shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of
or interest on the Note and for all other purposes, and all such payments so made to any such registered
owner or upon the owner's order shall be valid and effectual to satisfy and discharge the liability of the
Authority upon the Note to the extent of the sum or sums so paid.
(f) Taxes, Fees and Charges. For every transfer or exchange of the Note, the Registrar may
impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee, or other
governmental charge required to be paid with respect to such transfer or exchange and reasonable legal
fees and other costs incurred in connection therewith.
(g) Mutilated, Lost, Stolen or Destroyed Note. In case the Note shall become mutilated or be
lost, stolen, or destroyed, the Registrar shall deliver a new Note of like amount, maturity dates and tenor
in exchange and substitution for and upon cancellation of such mutilated Note or in lieu of and in
substitution for such Note lost, stolen, or destroyed, upon the payment of the reasonable expenses and
charges of the Registrar in connection therewith; and, in the case of a Note lost, stolen, or destroyed, upon
filing with the Registrar of evidence satisfactory to it that such Note was lost, stolen or destroyed, and of
the ownership thereof, and upon furnishing to the Registrar of an appropriate indemnity in form, substance,
and amount satisfactory to it, in which both the Authority and the Registrar shall be named as obligees.
Any Note so surrendered to the Registrar shall be canceled by it and evidence of such cancellation shall
be given to the Authority. If the mutilated, lost, stolen, or destroyed Note has already matured or been
called for redemption in accordance with its terms, it shall not be necessary to issue a new Note prior to
payment.
3.03. Preparation and Delivery. The Note shall be prepared under the direction of the Executive
Director of the Authority and shall be executed on behalf of the Authority by the manual signatures of its
Executive Director and President. In case any officer whose signature, or a facsimile of whose signature,
shall appear on the Note shall cease to be such officer before the delivery of the Note, such signature or
facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such officer had
remained in office until delivery. Notwithstanding such execution, the Note shall not be valid or
obligatory for any purpose or entitled to any security or benefit under this Resolution unless and until a
certificate of authentication on such Note has been duly executed by the manual signature of an authorized
representative of the Registrar. The executed certificate of authentication on the Note shall be conclusive
evidence it has been authenticated and delivered under this resolution. When the Note have been so
executed and authenticated, it shall be delivered by the Executive Director to the Developer.
Section 4. Pledge of Available Tax Increment. The Authority hereby pledges to the payment of the
principal of and interest on the Note Available Tax Increment, as defined in the Contract.
Section 5. Certification of Proceedings.
5.01 Certification of Proceedings. The officers of the Authority are hereby authorized and directed
to prepare and furnish to the Developer certified copies of all proceedings and records of the Authority,
and such other affidavits, certificates, and information as may be required to show the facts relating to the
legality and marketability of the Note as the same appear from the books and records under their custody
and control or as otherwise known to them, and all such certified copies, certificates and affidavits,
including any heretofore furnished, shall be deemed representations of the Authority as to the facts recited
therein.
Adopted this 20th day of March, 2017.
_____________________________________
Kathi Hemken, President
Attest:
_______________________________
Kirk McDonald, Executive Director
Memo
To: Kirk McDonald – Executive Director
From: Stacie Kvilvang - Ehlers
Date: March 20, 2017
Subject: Updated Development Agreement Terms With Alatus New Hope LLC
On February 21, 2017, the City Council met with staff and the Developer in a work session
to discuss their request that the EDA provide a grant or loan to the project for $344,000.
The request was to assist in paying for half (1/2) the increased costs of installing a VRF
mechanical system instead of utilizing a traditional magic pack system. The City Council
was split on the idea and discussed that a loan seemed more appealing due to the large
investment the EDA was already making with TIF. On March 27, 2017, the EDA met to
discuss the request again and a majority of the members agreed a loan would be
acceptable and directed staff and the Developer to come back with terms for their review
and consideration.
Based upon this, staff and the developer have formulated the following terms for
consideration (Section 3.11 of the Agreement):
1. EDA Loan
a. EDA will loan the Developer up to $344,000 for increased costs of the
project’s mechanical system (VRF)
i. Loan term is 5 years
ii. Funds are drawn only when 100% of developer’s equity and loan
proceeds have been expended
iii. Interest rate is 4% (maximum statutory interfund loan rate)
1. Interest is payable upon draw of funds
2. Paid annually on the anniversary of the first disbursement
iv. Principal amount is to be paid in full on or before the fifth (5th)
anniversary date of the draw of funds
In addition, updated improvements to the storm water pond located on the City’s Golf
Course and utilized by both the City and the development will require improvements (rip rap
along the ponds edge) on the City’s portion as well. Alatus will undertake these
improvements as part of their project, but the City will be required to reimburse them for
Kirk McDonald
Updated Development Agreement Terms With Alatus New Hope LLC.
March 20, 2016
Page 2
their share of the costs (estimated at approximately $70,000). Based upon this, we have
included this information within Section 4.3 (h) of the Development Agreement:
(h) In connection with the development of the Improvements the Owner will
construct certain storm water pond upgrades on the City’s golf course, including but
not limited to installation of rip rap along the pond edge on the City’s portion of the
pond. The City has agreed to pay the costs of such improvements. The City has
reviewed plans for such upgrades, and the Owner agrees that it will not make
changes to such plans without the City’s prior written approval.
Finally, the agreement was also updated since the trash enclosure on the Golf Course
property no longer needed to be relocated, but the joint entrance did as well as some minor
modifications to the current Golf Course parking lot. Therefore, Section 4.3 (d) of the
Agreement has been updated as follows:
(d) As a part of its construction of the Improvements the Owner will
construct a new joint entrance into the Property and the City’s golf course and
construct required changes to the golf course parking lot due to the relocation of the
entrance. The location and nature of the entrance and golf course parking lot
improvements will be as shown on the Owner’s approved Construction Plans. The
City and the Owner will enter into an access agreement, which access agreement will
be in the form attached to this Agreement as Schedule F.
If these terms are acceptable to the EDA, the attached resolution would approve the
updated Development Agreement and issuance of the TIF Note. The Developer is ready to
proceed with closing on the land transaction with the City upon approval of the updated
Agreement.
Please contact me at 651-697-8506 with any questions.
Draft
1-193-16-17 (v2)
PURCHASE AND DEVELOPMENT AGREEMENT
By and Between
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
and
ALATUS NEW HOPE, LLC
Dated as of: ____________, 2017
This document was drafted by:
BRADLEY & DEIKE, P. A.
4018 West 65th Street, Suite 100
Edina, MN 55435
Telephone: (952) 926-5337
TABLE OF CONTENTS
Page
PREAMBLE 1
ARTICLE I
Definitions
Section 1.1. Definitions 3
ARTICLE II
Representations
Section 2.1. Representations by the Authority 6
Section 2.2. Representations by the Owner 6
ARTICLE III
Authority Assistance; Issuance of TIF Note
Section 3.1. Basis for Assistance 8
Section 3.2. Issuance of Note 8
Section 3.3. Conditions Precedent to Issuance of TIF Note 8
Section 3.4. Payment of Administrative Costs 9
Section 3.5. Potential Reduction of Assistance 9
Section 3.6. Soils and Environmental Conditions 10
Section 3.7. Title 10
Section 3.8. Closing; Purchase Price 12
Section 3.9. Conditions Precedent to Conveyance of Authority Property 12
Section 3.10. Tax Increment Inter-fund Loan 13
Section 3.11. Authority Loan 13
(i)
ARTICLE IV
Construction of Improvements
Section 4.1. Construction of Improvements 1415
Section 4.2. Construction Plans 1415
Section 4.3. Commencement and Completion of Construction 1516
Section 4.4. Certificate of Completion 1617
ARTICLE V
Insurance and Condemnation
Section 5.1. Insurance 1718
Section 5.2. Condemnation 1819
ARTICLE VI
Taxes; Tax Increment
Section 6.1. Real Property Taxes 2021
Section 6.2. Tax Increment 2122
Section 6.3. Owner’s Representations Concerning TIF Note 2122
Section 6.4. Assessment Agreement 2223
ARTICLE VII
Mortgage Financing
Section 7.1. Mortgage Financing 2324
ARTICLE VIII
Prohibitions Against Assignment and Transfer; Indemnification
Section 8.1. Prohibition Against Transfer of Property and
Assignment of Agreement 2425
(ii)
Section 8.2. Release and Indemnification 2526
Section 8.3. Environmental Conditions 2526
ARTICLE IX
Events of Default
Section 9.1. Events of Default Defined 2627
Section 9.2. Authority's Remedies on Default 2627
Section 9.3. No Remedy Exclusive 2627
Section 9.4. No Additional Waiver Implied by One Waiver 2728
Section 9.5. Costs of Enforcement 2728
ARTICLE X
Additional Provisions
Section 10.1. Representatives Not Individually Liable 2829
Section 10.2. Restrictions on Use 2829
Section 10.3. Titles of Articles and Sections 2829
Section 10.4. Notices and Demands 2829
Section 10.5. Disclaimer of Relationships 2829
Section 10.6. Modifications 2930
Section 10.7. Counterparts 2930
Section 10.8. Judicial Interpretation 2930
Section 10.9. Business Subsidy Act 2930
Section 10.10. Miscellaneous 2930
Section 10.11. Termination 3031
Section 10.12 Estoppel Certificates 3031
SCHEDULE A Description of Property
SCHEDULE B TIF Note
SCHEDULE C Deed
SCHEDULE D Assessment Agreement
SCHEDULE E Access Easement
SCHEDULE F Access Agreement
SCHEDULE G Pro Forma
(iii)
1
PURCHASE AND DEVELOPMENT AGREEMENT
THIS AGREEMENT, made on or as of the ___ day of _____________, 2017, by and
between the New Hope Economic Development Authority, a public body politic and corporate
under the laws of the State of Minnesota (hereinafter referred to as the "Authority"), and having
its principal office at City Hall, 4401 Xylon Avenue North, New Hope, Minnesota 55428, and
Alatus New Hope, LLC, a Minnesota limited liability company (hereinafter referred to as the
"Owner"), having its principal office at U.S. Bancorp Center, 800 Nicollet Mall, Suite 2850,
Minneapolis, Minnesota 55402.
WITNESSETH:
WHEREAS, The Authority is a municipal economic development authority organized and
existing pursuant to the Constitution and laws of the State of Minnesota and is governed by its
Board of Commissioners (the "Board"); and
WHEREAS, the Authority and the City of New Hope, Minnesota (the “City”) have
established within the City Redevelopment Project No. 1 pursuant to Minnesota Statutes, Sections
469.001 - 469.047, providing for the development and redevelopment of certain areas located
within the City (which redevelopment project is hereinafter referred to as the "Project"); and
WHEREAS, the Authority and the City have further established Tax Increment Financing
District No. 11-1 within the Project pursuant to Minnesota Statutes, Sections 469.174-469.179
(which tax increment financing district is hereinafter referred to as the "Tax Increment District");
and
WHEREAS, the Tax Increment District is a redevelopment tax increment financing district
intended to facilitate the redevelopment of real property located in the City containing blighted
conditions and substandard buildings and improvements; and
WHEREAS, pursuant to Minnesota Statutes, Section 469.176, subdivision 4, tax increment
derived from the Tax Increment District may be used in accordance with the tax increment
financing plan created in connection with the establishment of the Tax Increment District to pay
the public redevelopment costs of the Project; and
WHEREAS, the Owner has presented to the Authority a proposal pursuant to which the
Owner will acquire from the Authority certain real property owned by the Authority within the
Project (which property is hereinafter referred to as the "Property" and is more particularly
described in Schedule A annexed hereto and made a part hereof) and construct thereon a 182-unit
market rate apartment building with underground parking; and
WHEREAS, the Owner has as a part of its proposal requested that the Authority provide
certain financial assistance to aid in its development, without which such development would not
be possible; and
2
WHEREAS, Authority believes that the development activities proposed by the Owner are
in the best interest of the City and its residents and in accord with the public purposes and
provisions of applicable federal, state and local laws under which the Project is being undertaken
and assisted;
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:
3
ARTICLE I
Definitions
Section 1.1. Definitions. In this Agreement, unless a different meaning clearly appears
from the context:
"Act" means Minnesota Statutes, Sections 469.001-469.047, as amended.
"Agreement" means this Agreement, as the same may be from time to time modified,
amended, or supplemented.
“Assessment Agreement” means the agreement in the form attached to this Agreement as
Schedule D.
“Authority” means the New Hope Economic Development Authority, a public body politic
and corporate, its successors and assigns.
“Available Tax Increment” means, with respect to a Scheduled Payment Date, as defined
in the TIF Note, ninety five percent (95%) of the Tax Increment received by the Authority in the
six (6) month period preceding such Scheduled Payment Date.
“Board” means the Authority’s Board of Commissioners.
"City" means the City of New Hope, Minnesota.
"Construction Plans" means the site plan, utility plan, grading and drainage plan, landscape
plan, elevations drawings and related documents on the construction work to be performed by the
Owner on the Property which have been or will be submitted for approval by the Board, together
with the resolution of the Board approving such plans and the plans, specifications, drawings and
related documents on the construction work to be performed by the Owner on the Property which
are to be submitted to the building inspector of the City.
"County" means Hennepin County, Minnesota.
“Deed” means the deed in the form of Schedule C attached hereto.
"Event of Default" means an action by the Owner listed in Article IX of this Agreement.
"Improvements" means the improvements to be constructed by the Owner on the Property,
consisting of, as of the date of this Agreement (but subject to modifications required by or
approved by the Authority), a four story market rate apartment community containing 182 units,
together with related improvements.
4
"Local Time" means Standard or daylight savings time in effect on the date in question in
the time zone in which the Property is located.
“Minimum Market Value” means the market value for tax purposes of the Property and
Improvements established by the Assessment Agreement.
"Net Proceeds" means any proceeds paid by an insurer to the Owner or the Authority under
a policy or policies of insurance required to be provided and maintained by the Owner pursuant to
Article V of this Agreement and remaining after deducting all expenses (including fees and
disbursements of counsel) incurred in the collection of such proceeds.
"Owner" means Alatus New Hope LLC, a Minnesota limited liability company, its
successors and assigns.
“Permitted Encumbrances” means the provisions of the Deed and this Agreement:
reservations of minerals or mineral rights to the State of Minnesota; public utility, roadway and
other easements which will not adversely affect the development and use of the Property pursuant
to the Owner’s Construction Plans; building laws, regulations and ordinances consistent with the
Improvements; restrictions, covenants and easements of record that do not materially adversely
affect the development and use of the Improvements and are reasonably acceptable to the Owner;
and exceptions to title to the Property which are not objected to by Owner upon examination of
the title evidence delivered to the Owner pursuant to the terms of this Agreement.
"Project" means the Authority's Redevelopment Project No. 1.
"Project Area" means the real property located within the boundaries of the Project.
"Project Plan" means the redevelopment plan adopted in connection with creation of the
Project.
“Property” means the real property described as such on the attached Schedule A.
"Reimbursable Costs" means the costs to be reimbursed by the Authority to the Owner as
described in Article III of this Agreement, which costs consist of a portion of the cost of acquiring
the Property and constructing the Improvements, and specifically includes site acquisition,
earthwork and excavation, soil testing, environmental studies and remediation, streets and roads,
curb and gutter, street and parking lot lighting, sidewalks and trails, storm water retention systems,
pilings and caissons, utilities and utility relocation (electrical lines, sanitary sewer, storm sewer,
water and gas), surface parking and parking structures, and any other costs that may be reimbursed
under the Tax Increment Act.
"State" means the State of Minnesota.
"Tax Increment" means that portion of the real property taxes paid with respect to the
Property and Improvements that is remitted to the Authority as tax increment pursuant to the Tax
Increment Act, minus deductions required by law.
5
"Tax Increment Act" means the Tax Increment Financing Act, Minnesota Statutes,
Sections 469.174-469.1794, as amended and as it may be further amended from time to time.
"Tax Increment District" means Tax Increment Financing District No. 11-1 created by the
Authority and City within the Project Area.
“Tax Increment Plan” means the tax increment financing plan adopted by the Authority in
connection with its creation of the Tax Increment District, which plan together with the
information and findings contained therein is hereby incorporated herein and made a part hereof
by reference.
"Termination Date" means the earlier of the following dates: (i) the date that the TIF Note
is paid in full or terminated; (ii) the date the Tax Increment District terminates; provided, that in
the event that at the time that the TIF Note is paid in full or terminated the Interfund Loan described
in Section 3.10 has not been paid in full, then the Termination Date shall be the date that the Tax
Increment District terminates or the date that the Interfund Loan is paid in full, whichever occurs
first.
"TIF Note" means the Taxable Limited Revenue Tax Increment Note to be issued by the
Authority pursuant to Section 3.2 of this Agreement, which TIF Note shall be in the form of the
TIF Note attached to this Agreement as Schedule B, with all blanks filled in and approved by the
Authority and the Owner.
"Unavoidable Delays" means delays which are the direct result of acts of God, acts of
nature, acts of terrorism, inability to obtain necessary materials, unforeseen adverse weather
conditions, strikes, other labor troubles, fire or other casualty to the Improvements, litigation
commenced by third parties which, by injunction or other similar judicial action, directly results
in delays, acts of any federal, state or local governmental unit, and which directly results in delays,
or any other matter beyond the reasonable control of the party claiming the delay.
6
ARTICLE II
Representations
Section 2.1. Representations by the Authority. The Authority makes the following
representations as the basis for the undertaking on its part herein contained:
(a) The Authority is a municipal economic development authority organized and
existing under the laws of the State. Under the laws of the State, the Authority has the power to
enter into this Agreement and to perform its obligations hereunder.
(b) The Authority owns the Property, acquired the same in accordance with all
applicable laws and there has either been no legal challenge to the Authority's acquisition of the
Property or the time for such legal challenge has expired.
(c) The Authority will cooperate with the Owner with respect to any litigation
commenced with respect to the Project Plan, Project, or Improvements and in the Owner's
acquisition of any permits or other approvals required in connection with the construction of the
Improvements.
(d) The Authority has received no notice or communication from any local, state or
federal official that the activities of the Owner or the Authority in the Project Area may be or will
be in violation of any environmental law or regulation. The Authority is aware of no facts the
existence of which would cause it or any portion of the Authority Property to be in violation of
any local, state or federal environmental law, regulation or review procedure.
(e) 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 provisions of any restriction or any evidences of indebtedness, agreement
or instrument of whatever nature to which the Authority is now a party or by which it is bound, or
constitutes a default under any of the foregoing
(f) To the best of the Authority's knowledge, there is no litigation, pending or
threatened, regarding the Authority Property or challenging the validity of this Agreement.
(g) The Authority will not issue any further obligations that are payable from or secured
by the Available Tax Increment prior to the date that the TIF Note has been paid in full, or
terminated in accordance with its terms, without the prior written consent of the Owner, which
may be given or withheld in the sole discretion of the Owner.
(h) To the best of the Authority’s knowledge, 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 Act. The Authority
will take no action to impair the collection of the Tax Increment from the Tax Increment District.
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Section 2.2. Representations by the Owner. The Owner represents that:
(a) The Owner is a limited liability company duly organized and authorized to transact
business in the State, is not in violation of any provisions of its articles of organization, member
control agreement or the laws of the State, has power to enter into this Agreement and has duly
authorized the execution, delivery and performance of this Agreement by proper action of its
members.
(b) The Owner will construct the Improvements in accordance with the terms of this
Agreement and all local, state and federal laws and regulations (including, but not limited to,
environmental, zoning, building code and public health laws and regulations), except for variances
necessary to construct the improvements contemplated in the Construction Plans approved by the
Authority.
(c) The Owner has received no notice or communication from any local, state or federal
official that the activities of the Owner or the Authority in the Project Area may be or will be in
violation of any environmental law or regulation. The Owner is aware of no facts the existence of
which would cause it to be in violation of any local, state or federal environmental law, regulation
or review procedure. In the event that it is necessary to take any action to obtain any necessary
permits or approvals with respect to the Property under any local, state or federal environmental
law or regulation, the Owner will be responsible for taking such action.
(d) Subject to issuance thereof by the City, the County, the State or the United States,
as applicable, the Owner will obtain, in a timely manner, all required permits, licenses and
approvals, and will meet, in a timely manner, all requirements of all applicable local, state and
federal laws and regulations which must be obtained or met before the Improvements may be
lawfully constructed.
(e) 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 provisions of any restriction or any evidences of indebtedness, agreement
or instrument of whatever nature to which the Owner is now a party or by which it is bound, or
constitutes a default under any of the foregoing.
(f) The Owner will cooperate with the Authority with respect to any litigation
commenced with respect to the Project Plan, Project, or Improvements.
(g) The Owner could not and would not proceed with the construction of the
Improvements absent the financial assistance being provided by the Authority pursuant to this
Agreement.
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ARTICLE III
Issuance of Note; Conveyance of Property
Section 3.1. Basis for Assistance. The Authority has acquired the Property for the purpose
of facilitating its redevelopment through private development. The Property contained certain
blighted conditions and substandard buildings and Improvements. The Authority has caused the
buildings and improvements to be demolished and removed from the Property. The Authority is
willing to convey the Property to the Owner in order to allow the Owner to construct the
Improvements on the Property. In addition, the Authority has determined that construction of the
Improvements would not be financially feasible absent the provision of certain public financial
assistance. Therefore, in consideration for the Owner’s agreement to undertake the development
of the Improvements and its agreement to construct as a part of the Improvements certain amenities
that the Authority deems necessary and desirable, the Authority is willing to defray a portion of
the Owner’s costs of construction of the Improvements through the issuance and the payment of
the TIF Note.
Section 3.2. Issuance of TIF Note. The Authority agrees to defray a portion of the Owner’s
cost of constructing the Improvements through the issuance of the TIF Note. The costs to be
reimbursed by the Authority through the issuance of the TIF Note are referred to herein as the
“Reimbursable Costs”. The issuance of the Note shall occur when the conditions set forth in
Section 3.3 have been satisfied. The principal amount of the Note will be equal to the Owner’s
actual Reimbursable Costs incurred and paid by the Owner, but in no event to exceed $6,574,000.
If the Owner’s documented Reimbursable Costs for such items are less than $6,574,000 then the
principal amount of the TIF Note shall be such lesser amount. If the total of the eligible
Reimbursable Costs exceed $6,574,000, the Authority shall have the right to designate which of
such costs equaling $6,574,00 will constitute the Reimbursable Costs. The TIF Note shall be in
the form of the TIF Note attached to this Agreement as Schedule B, with all blanks properly
completed. Interest at the rate of four and one half percent (4.50%) shall accrue on the principal
amount of the TIF Note from the date of its issuance up to February 1, 2019, and such accrued
interest shall be added to the principal amount of the TIF Note on the first day of each February
and August after its issuance up to and including February 1, 2019. From and after February 1,
2019, until the TIF Note is terminated or paid in full, simple non-compounding interest at the rate
of four and one half percent (4.50%) per annum shall accrue with respect to the principal amount
of the TIF Note.
Section 3.3. Conditions Precedent to Issuance of TIF Note. Notwithstanding anything to
the contrary contained herein, the Authority's obligation to issue the TIF Note shall be subject to
satisfaction, or waiver in writing by the Authority, of all of the following conditions precedent:
(a) no Event of Default by Owner shall have occurred under this Agreement and be
continuing;
(b) the Owner shall have closed on financing sufficient to pay all costs to be incurred in
connection with the construction of the Improvements;
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(c) the Owner shall have paid the Reimbursable Costs as described in Section 3.2 of this
Agreement and shall have provided to the Authority such documentation of such
costs as the Authority shall reasonably request; and
(d) the Owner shall have completed construction of the Improvements.
Section 3.4. Payment of Administrative Costs. The Owner will reimburse the Authority
for all out-of-pocket costs incurred by the Authority in connection with review and analysis of the
development proposed under this Agreement, development of the Tax Increment Plan for the Tax
Increment District; and the negotiation of this Agreement and any related agreements and
documents (collectively, the “Administrative Costs”). The Administrative Costs include fees paid
to attorneys, the Authority’s financial advisor, and any planning and engineering consultants
retained by the Authority or City in connection with the construction of the Improvements. As
security for the Administrative Costs, the Owner deposited with the Authority the amount of
$20,000, and the Authority shall pay the Administrative Costs from such funds. If the total
Administrative Costs exceed $20,000, the Owner remains responsible for such excess costs, and
must pay such costs to the Authority within 10 days after receipt of a written invoice from the
Authority describing the amount and nature of the costs to be reimbursed. After the Note has been
issued and the certificate of completion referenced in Section 4.4 has been executed and delivered,
and all the Administrative Costs related to such actions have been paid, the Authority will refund
to the Owner any portion of the balance from the $20,000 deposit (if any) that is not needed to
cover the Administrative Costs through such reimbursement date. Notwithstanding anything to
the contrary herein, the Owner remains obligated to pay the Administrative Costs after issuance of
such certificate of completion, including the costs of any amendments to this Agreement or to the
TIF Note.
Section 3.5. Potential Reduction of Assistance. (a) On the Calculation Date, as defined
below, the amount of the tax increment finance assistance provided pursuant to this Agreement
will be subject to adjustment based on a target Cash on Cash Return, as defined below, of 10%. By
the Calculation Date, the Owner must deliver to the Authority’s municipal advisor evidence of its
Cash on Cash Return, which evidence shall include such audited and other financial information
as the Authority’s municipal advisor shall reasonably require. The Cash on Cash Return shall be
calculated by the Authority’s municipal advisor based on audited financials and a current cash
flow pro forma model projecting future returns and submitted to the Authority’s municipal advisor,
a summary of which pro forma and its assumptions is attached to this Agreement as Schedule I
(the “Pro Forma”).
If the Cash on Cash Return exceeds 10%, then the principal amount of the TIF Note issued
to the Owner will be reduced to an amount that results in a stabilized Cash on Cash Return equal
to 10% over the term of the TIF Note, in which case the Owner shall deliver the TIF Note to the
Authority in exchange for a new TIF Note in the adjusted principal amount upon the Authority’s
written request.
(b) For the purposes of this Section, the following terms have the following meanings:
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“Calculation Date” means 60 days after the earliest of (i) the date of Stabilization, as defined
below, of the Improvements; (ii) the date of any transfer of the Improvements (provided that the
Owner and the Authority may agree that the Calculation Date will occur prior to the actual
transfer); or (iii) two years after the date of completion of the Improvements, as evidenced by the
City’s issuance of a final certificate of occupancy.
“Cash Flow” means Net Operating Income less debt service with respect to the permanent
first mortgage loan. In the event that on the Calculation Date the Owner has not secured permanent
financing for the Improvements, then debt service cost will be reasonably projected by the
Authority based on a hypothetical amortizing permanent loan with a term, an interest rate and debt
coverage ratio generally available for facilities similar to the Improvements, taking into account
then current lending conditions.
“Cash on Cash Return” means Cash Flow divided by the sum of Owner’s actual equity,
which excludes any grants or City, Authority, Federal or State funds received by the Owner, and
the principal amount of the TIF Note.
“Net Operating Income” means total rent and other project-derived revenue, including
payments under the TIF Note, less Operating Expenses in accordance with the Pro Forma.
“Operating Expenses” means reasonable and customary expenses incurred in operating the
Property in accordance with the Pro Forma, including deposits to capital replacement reserves and
payment of real estate taxes.
“Stabilization” is defined as the first date upon which both of the following have occurred:
(1) the apartments within the Improvements have achieved 90% occupancy for three consecutive
months; and (2) real estate taxes have been fully assessed on the completed Improvements.
Section 3.6. Soils and Environmental Conditions. The Owner acknowledges that the
Authority makes no representations or warranties as to the environmental conditions existing on
the Property or as to the condition of the soils on the Property or its fitness for construction of the
Improvements. The Owner shall have the right to enter upon the Property to undertake such
environmental and soil tests as the Owner deems necessary to determine the condition of the
Property. The Authority shall furnish the Owner with all test results and environmental
assessments that it has in its possession relating to the Property. The Owner has completed its
testing and analysis of the Property and has determined that the environmental and soil conditions
existing on the Property are acceptable. If the Owner closes on the conveyance of the Property to
the Owner, the Owner shall be deemed to accept the Property in its "as is" condition and the
Authority shall have no further responsibility to the Owner for any defects in the condition of the
Property.
Section 3.7. Title. (a) Within ten (10) days after the date of this Agreement (the
"Commitment Delivery Date"), the Authority shall obtain and furnish to the Owner a commitment
for the issuance of an owner's policy of title insurance for the Property issued by Commercial
Partners Title, LLC ("Title Company"), naming the Owner as the proposed insured party in the
amount of $1,443,000 (the "Commitment"), together with any survey of the Property in the
possession of the Authority. The Commitment shall include legible copies of all documents
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referenced therein, instruments and matters shown as exceptions or referenced therein. Within
forty five (45) days after the date of this Agreement, the Owner shall obtain and deliver to the
Authority a current land title survey of the Property prepared and certified by a registered land
surveyor licensed in the State of Minnesota and satisfactory to the Owner's lender and the Title
Company (the "Survey"; the Commitment and the Survey, as amended and revised from time to
time may be referred to herein as the "Title Evidence"). The Authority and the Owner contemplate
that construction of the Improvements will require a re-plat of the Property. The parties will
cooperate to agree upon and finalize a re-plat of the Property by March 31, 2017.
(b) The Owner shall have until and through thirty (30) days following the
Commitment Delivery Date to notify the Authority of specific objections that the
Owner has to the Title Evidence (the "Title Review Period"). Upon expiration of said
Title Review Period, if the Owner has not notified the Authority of any unacceptable
items in Commitment (including the underlying documents) and the Survey, the Owner
shall be deemed to have accepted all exceptions to title referenced in the Commitment
and all matters shown on the Survey, and such accepted exceptions shall be included
in the term "Permitted Exceptions" as used herein. Any objection and the Authority's
response thereto shall be made pursuant to this Section 3.7(b). In the event the Owner
does object to any matters shown in the Commitment (including any exception
documents) or the Survey within the Title Review Period, the Authority shall have a
period of ten (10) days, commencing on the thirty-first (31st) day after the Commitment
Delivery Date and ending at 5:00 p.m. Local Time on the tenth (10th) day thereafter
(the "Election Period"), to notify the Owner of the steps, if any, the Authority intends
to take to cure the objections to title and survey made by the Owner. A title objection
shall be deemed to be cured if the title insurer agrees to issue an endorsement to the
owner's title insurance and lender's title insurance policies and the Owner and its lender
agree that such endorsement constitutes a cure. The parties understand and agree that,
without any objection thereto being made by the Owner, the Authority shall have the
obligation to remove or cause to be removed, at Closing, all liens that can be satisfied
by the payment of money, whether consensual or otherwise, affecting the Property; but
provided further that the Authority shall not be obligated to remove any liens created
by the Owner in the course of the Owner's due diligence investigations. In the event
that the Authority is unable to cure the Owner's objections prior to the expiration of the
Election Period, the Authority shall notify the Owner in writing of such fact prior to
the expiration of the Election Period. In such event, or if the Authority shall fail to
provide any such notice to the Owner, the Owner shall have until ten (10) days prior to
the Closing Date (as defined in Section 3.8(a) below within which to either waive the
Owner's objections in writing and accept title to the Property subject to the matters
which the Authority has been unable to cure, or terminate this Agreement in writing,
in which case any deposits made by the Owner to the Authority shall be returned to the
Owner and neither the Authority nor the Owner shall have any further obligation
hereunder, except as to those obligations provided for herein which are stated to survive
termination of this Agreement. If the Owner does not so waive such objections in
writing or so terminate this Agreement in writing the Owner shall be deemed to have
waived the Owner's objections and accepted the Property subject to the matters which
the Authority has been unable or unwilling to eliminate and such accepted exceptions
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shall be included in the term "Permitted Exceptions". Notwithstanding the foregoing,
nothing herein shall prohibit the Owner from objecting to new title matters or new
survey matters first appearing on title or the Survey after the initial issuance of each of
the same. In such case, the parties shall proceed as though the period beginning on the
day after the date after the Owner receives (a) any revised Commitment showing a new
title matter; or; or (b) a revised survey showing a new survey matter and ending five
(5) days thereafter is the Title Review Period as to any such matter(s). The Election
Cure Period shall be three (3) days, and, after the expiration of the Title Review Period,
and the Owner shall then have three (3) days after the expiration of the Election Cure
Period to either (x) terminate this Agreement and receive a refund of all deposits to the
Authority; or (y) proceed to Closing without diminution of the Purchase Price. The
Authority shall have no obligation to exercise its powers of eminent domain to clear
defects in the title to the Property. The cost of obtaining the title insurance commitment
and the cost of title insurance policies in favor the Owner and its lender shall be borne
by the Owner. In the event of any termination of this Agreement pursuant to this
Section 3.7(b), the parties agree that they shall execute an agreement in recordable form
evidencing the cancellation of this Agreement.
(c) The Authority shall voluntarily take no actions to encumber title to the
Property between the date hereof and the date on which the Deed is delivered to the
Owner.
Section 3.8. Closing; Purchase Price. (a) Subject to the conditions precedent set forth in
Section 3.9 of this Agreement, the Authority agrees to sell the Property to the Owner as provided
in this Section 3.8. Closing on the conveyance of the Property to the Owner (the “Closing”) shall
occur within thirty (30) days after the date that the conditions precedent contained in Section 3.9
have been satisfied or waived, but in no event later than February 28March 31, 2017.
(b) At Closing. the Authority shall deliver to the Owner: (i) a Deed duly executed and
acknowledged conveying to the Owner marketable title to the Property subject only to Permitted
Encumbrances; and (ii) such other customary documents as are required by the title company
issuing the title commitment and title policy to be executed and delivered to effectuate the closing
on the conveyance of the Property.
(c) All closing costs associated with the Closing will be paid by the Owner.
(d) The purchase price to be paid by the Owner shall be $1,443,000 and shall payable
in full at the Closing.
Section 3.9. Conditions Precedent to Conveyance of the Property. The Authority’s
obligation to sell and the Owner’s obligation to purchase the Property shall be subject to
satisfaction of the following conditions precedent:
(a) The Owner having secured financing or provided to the Authority evidence
reasonably satisfactory to the Authority of its ability to secure financing sufficient for the
acquisition of the Property and the construction of the Improvements.
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(b) The Owner having reviewed and approved, or waived any objections to, title to the
Property pursuant to Section 3.7 of this Agreement.
(c) The City having issued a building permit for the Improvements to the Owner.
If all of the conditions precedent to the conveyance of the Property have not been satisfied
by February 28March 31, 2017, the Authority shall have the right to terminate this Agreement by
giving written notice of termination to the Owner, upon which this Agreement shall terminate and
the Authority and Owner shall execute an instrument in recordable form evidencing such
termination.
Section 3.10. Tax Increment Interfund Loan. (a) The Authority has acquired the Property
and the City and the Authority have incurred certain costs to prepare such property for
redevelopment, including environmental remediation, demolition of buildings and site clearance.
After Owner’s payment of the purchase price for the Property there will remain unreimbursed costs
incurred by the City and the Authority in the approximate amount of $920,100 (the “Authority
Costs”). Subject to all the terms and conditions of this Agreement, upon the conveyance of the
Property to the Owner, the City and the Authority will forego receipt of the Authority Costs and
the Authority Costs will remain outstanding. The City and the Authority shall reserve the right to
collect such Authority Costs through the Interfund Loan, as described in Section 3.10(b) below.
(b) The Authority will treat the amount of the Authority Costs as an interfund loan (the
“Interfund Loan”) within the meaning of Section 469.178, Subdivision 7 of the Tax Increment
Act. The terms of the Interfund Loan are described in a resolution adopted in August, 2015, (the
“Loan Resolution”). Until the TIF Note has been paid in full, or terminated in accordance with its
terms, the Interfund Loan will be payable only from Tax Increment received by the Authority that
is in excess of Available Tax Increment, and under no circumstances shall the Owner or any
successor or assign of the Owner, have any responsibility for payment of the Interfund Loan or
any portion thereof.
Section 3.11. Authority Loan. In order to facilitate the development of the Improvements
the Authority agrees to make a loan (the “Authority Loan”) to the Owner to finance in part the cost
of the variable refrigerant flow system (the “VRF System”) to be installed in the Improvements.
The maximum amount of the Authority Loan is $344,000, and the outstanding balance of the
Authority Loan will accrue simple non-compounding annual interest at the rate of four percent
(4.0%) from the date that the Authority Loan is advanced until the Authority Loan and all accrued
interest on the Authority Loan has been paid in full. The Owner shall pay to the Authority on each
of the first four anniversary dates of the disbursement of the Authority Loan interest accrued during
the prior year. On the fifth anniversary date of the disbursement of the Authority Loan the entire
principal amount of the Authority Loan and all accrued and unpaid interest shall be due and
payable in its entirety. Prior to and as a condition to the making of the Authority Loan, the
Authority and the Owner will enter into a separate loan agreement documenting and evidencing
the Authority Loan and containing such terms and provisions as are consistent with this Section
3.11 and are reasonably acceptable to the Authority and the Owner.
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The Authority Loan will be disbursed in one installment to finance the cost of the VFR
System sat the time that the Owner provides to the Authority documentation, satisfactory to the
Authority, demonstrating: (a) that all other funds available to the Owner to pay the costs of
developing the Improvements, including, without limitation, equity and loan proceeds and any
contingency funds, have been expended to pay the costs of developing of the Improvements; (b)
that the costs of the VRF System for which the Owner is seeking financing with the Authority
Loan have either been paid by the Owner or are due and payable; and (c) that the amount of the
Authority Loan is sufficient to finance all of the costs remaining to be paid in connection with the
development of the Improvements, or if the Authority Loan is not sufficient to finance such costs,
that the Owner has either secured additional financing or committed additional funds which when
added to the Authority Loan will be sufficient to pay such costs. The amount of the Authority
Loan will be the amount necessary to pay the remaining costs of developing the Improvements,
but not to exceed $344,000
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ARTICLE IV
Construction of Improvements
Section 4.1. Construction of Improvements. The Owner agrees that it will construct the
Improvements on the Property in accordance with the approved Construction Plans and at all times
prior to the Termination Date will operate and maintain, preserve and keep the Improvements or
cause the Improvements to be maintained, preserved and kept with the appurtenances and every
part and parcel thereof, in good repair and condition.
Section 4.2. Construction Plans. (a) The Owner has submitted and the City and the
Authority have approved a site plan for the construction of the Improvements (the "Site Plan"). All
Construction Plans for the Improvements shall be consistent with the approved Site Plan. The
Construction Plans shall provide for the construction of the Improvements and shall be in
conformity with this Agreement, the Site Plan approved by the Authority, and all applicable state
and local laws and regulations. The Authority shall approve the Construction Plans in writing if,
in the reasonable discretion of the Authority: (i) the Construction Plans conform to the terms and
conditions of this Agreement; (ii) the Construction Plans are consistent with the Site Plans
previously submitted to the Authority; (iii) the Construction Plans conform to all applicable
federal, State and local law, ordinances, rules and regulations; (iv) the Construction Plans are
adequate to provide for the construction of the Improvements; (v) the Construction Plans do not
provide for expenditures in excess of the funds which will be available to the Owner for the
construction of the Improvements, including, without limitation, construction loan proceeds; and
(vi) no Event of Default by the Owner has occurred. No approval by the Authority under this
Section 4.2 shall relieve the Owner of the obligation to comply with the terms of this Agreement
or applicable federal, state and local laws, ordinances, rules and regulations, or to construct the
Improvements. No approval by the Authority shall constitute a waiver of an Event of Default.
Such Construction Plans shall, in any event, be deemed approved unless rejected in writing by the
Authority, in whole or in part. Such rejection shall set forth in detail the reasons therefor, and shall
be made within thirty (30) days after the date of their receipt by the Authority. The provisions of
this Section relating to approval, rejection and resubmission of corrected Construction Plans shall
continue to apply until the Construction Plans have been approved by the Authority or until this
Agreement is terminated. The Authority's approval shall not be unreasonably withheld.
Notwithstanding any other provisions of this Agreement, the issuance by the City of a building
permit for the construction of the Improvements shall constitute the approval of the Construction
Plans by the City and the Authority as provided herein.
(b) If the Owner desires to make any material change in any Construction Plans after
their approval by the Authority, the Owner shall submit the proposed change to the Authority for
its approval. For purposes of this Agreement, a “material change” means a change that changes
the size, nature or exterior appearance of the Improvements or that substantially reduces the value
of the Improvements. If the Construction Plans, as modified by the proposed change, conform to
the requirements of this Section 4.2 of this Agreement with respect to such previously approved
Construction Plans, the Authority shall approve the proposed change and notify the Owner in
writing of its approval. Any requested change in the Construction Plans shall, in any event, be
deemed approved by the Authority unless rejected, in whole or in part, by written notice by the
16
Authority to the Owner, setting forth in detail the reasons therefor. Such rejection shall be made
within ten (10) days after receipt of the notice of such change.
(c) City approval of the Improvements will occur as a part of a planned unit
development process. The Owner acknowledges that it will be required to enter into a planned
unit development agreement containing the terms and conditions of the planned unit development
approval subject to the Owner’s reasonable approval.
Section 4.3. Commencement and Completion of Construction. (a) Subject to Unavoidable
Delays, the Owner shall commence construction of the Improvements by April 1, 2017, or on such
other date as the parties shall mutually agree. Subject to Unavoidable Delays, the Owner shall
complete the construction of the Improvements by August 31, 2018. All work with respect to the
Improvements to be constructed or provided by the Owner on the Property shall be in conformity
with the Construction Plans as submitted by the Owner and approved by the Authority, and as may
be modified as provided in Section 4.2 above.
(b) Until construction of the Improvements has been completed, the Owner shall make
construction progress reports, at such times as may reasonably be requested by the Authority, but
not more than once a month, as to the actual progress of the Owner with respect to such
construction.
(c) The construction of the Improvements will result in a shared access over the
Property to the Improvements and to the City’s golf course. Therefore, at the time that the
Authority conveys the Property to the Owner the Owner will execute a perpetual non-exclusive
easement over the Property providing such access to the golf course. Such easement will be in the
form attached hereto as Schedule E.
(d) As a part of its construction of the Improvements the Owner will construct a new
joint entrance into the Property and trash enclosure on the City’s golf course and construct required
changes to the golf course parking lot due to the relocation of the entrance. Such trash enclosure
will serve both the golf course and the Improvements. The location and nature of the entrance and
golf course parking lot improvements such enclosure will be as shown on the Owner’s approved
Construction Plans. The City and the Owner will enter into an access agreement allowing the
Owner to access and use the trash enclosure, which access agreement will be in the form attached
to this Agreement as Schedule F.
(e) The Owner will pay to the City a park dedication fee in the amount of $17,700 in
connection with the development of the Improvements.
(f) As part of construction of the Improvements the Owner will, at its sole cost and
expense, install a municipal utility lift station. The design and location of the lift station will be
agreed upon by the City and the Owner during the process of developing plans for the construction
of the Improvements.
17
(g) The Owner will bury the existing power lines located between Yukon Avenue and
Winnetka Avenue. The Authority agrees to reimburse the Owner for up to $125,000 of the cost
of such work.
(h) In connection with the development of the Improvements the Owner will construct
certain storm water pond upgrades on the City’s golf course, including but not limited to
installation of rip rap along the pond edge on the City’s portion of the pond. The City has agreed
to pay the costs of such improvements. The City has reviewed plans for such upgrades, and the
Owner agrees that it will not make changes to such plans without the City’s prior written approval.
Section 4.4. Certificate of Completion. (a) Promptly after completion of the Improvements
in accordance with those provisions of this Agreement relating solely to the obligations of the
Owner to construct the Improvements, and upon request by the Owner, the Authority will furnish
the Owner with a Certificate of Completion for the Improvements in a form acceptable for
recording in the County Recorder’s Office or the Office of the Registrar of Titles. The Certificate
of Completion shall be furnished to the Owner within ten (10) business day after request by the
Owner, and shall conclusively satisfy and terminate the agreements and covenants in this
Agreement of the Owner, and its successors and assigns, to construct the Improvements. Such
certification and such determination shall not constitute evidence of compliance with or
satisfaction of any obligation of the Owner to any Holder of a Mortgage, or any insurer of a
Mortgage, securing money loaned for construction of the Minimum Improvements, or any part
thereof.
(b) If the Authority shall refuse or fail to provide a Certificate of Completion in
accordance with the provisions of this Section 4.4 of this Agreement, the Authority shall, within
ten (10) business day after written request by the Owner for the Certificate of Completion, provide
the Owner with a written statement, indicating in adequate detail in what respects the Owner has
failed to complete the Improvements in accordance with the provisions of this Agreement and what
measures or acts will be necessary, in the opinion of the Authority, for the Owner to take or perform
in order to obtain the Certificate of Completion.
(c) The construction of the Improvements shall be deemed to be completed when the
City has issued a final certificate of occupancy for the Improvements (or when the Owner would
be entitled to a certificate of occupancy if it requested one), and when all conditions imposed in
connection with the City’s approval of the Owner’s development, including the establishment of
any completion escrow, if necessary, have been satisfied.
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ARTICLE V
Insurance and Condemnation
Section 5.1. Insurance.
(a) The Owner will provide and maintain at all times during the process of constructing
the Improvements and, from time to time at the request of the Authority, furnish the Authority
with proof of payment of premiums on:
(i) Builder's risk insurance, written on the so-called "Builder's Risk -- Completed
Value Basis," in an amount equal to one hundred percent (100%) of the insurable value of
the Improvements at the date of completion, and with coverage available in nonreporting
form on the so called "all risk" form of policy;
(ii) Commercial general liability insurance (including operations, contingent
liability, operations of subcontractors, completed operations, including contractual liability
insurance), naming the Authority as an additional insured, with limits against bodily injury
and property damage of not less than $2,000,000 for each occurrence (to accomplish the
above-required limits, an umbrella excess liability policy may be used); and
(iii) Worker's compensation insurance, with statutory coverage and employer's
liability protection.
The policies of insurance required pursuant to clauses (i) and (ii) above shall be in form and content
reasonably satisfactory to the Authority and shall be placed with financially sound and reputable
insurers licensed to transact business in the State, the liability insurer to be rated A or better in
Best's Insurance Guide. The policy of insurance delivered pursuant to clause (i) above shall contain
an endorsement by the insurer to in favor of the Authority to give not less than thirty (30) days'
advance written notice to the Authority in the event of cancellation of such policy or change
affecting the coverage thereunder.
(b) Upon completion of construction of the Improvements and prior to the Termination
Date, the Owner shall maintain, or cause to be maintained, at its cost and expense, and from time
to time at the request of the Authority shall furnish proof of the payment of premiums on, insurance
as follows:
(i) Insurance against loss and/or damage to the Improvements under a policy or
policies covering such risks as are ordinarily insured against by similar businesses, including
(without limiting the generality of the foregoing) fire, extended coverage, all risk vandalism
and malicious mischief, boiler explosion, water damage, demolition cost, debris removal,
and collapse in an amount not less than the full insurable replacement value of the
Improvements, but any such policy may have a deductible amount of not more than $10,000.
No policy of insurance shall be so written that the proceeds thereof will produce less than
the minimum coverage required by the preceding sentence, by reason of co-insurance
provisions or otherwise, without the prior consent thereto in writing by the Authority. The
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term "full insurable replacement value" shall mean the actual replacement cost of the
Improvements (excluding foundation and excavation costs and costs of underground flues,
pipes, drains and other uninsurable items) and equipment, and shall be determined from time
to time at the request of the Authority, but not more frequently than once every three years,
by an insurance consultant or insurer, selected and paid for by the Owner and approved by
the Authority.
(ii) Commercial general liability insurance, including personal injury liability
(with employee exclusion deleted), and automobile insurance, including owned, non-owned
and hired automobiles, against liability for injuries to persons and/or property, in the
minimum amount for each occurrence and for each year of $2,000,000.00.
(iii) Such other insurance, including worker's compensation insurance respecting
all employees of the Owner, if any, in such amount as is customarily carried by like
organizations engaged in like activities of comparable size and liability exposure; provided
that the Owner may be self-insured with respect to all or any part of its liability for worker's
compensation.
(c) All insurance required in Article V of this Agreement shall be taken out and
maintained in responsible insurance companies selected by the Owner which are authorized under
the laws of the State to assume the risks covered thereby.
(d) The Owner agrees to notify the Authority immediately in the case of damage as to
which the cost to repair exceeds $100,000, or destruction of, the Improvements or any portion
thereof, as to which the cost to repair exceeds $100,000, resulting from fire or other casualty. In
the event of any such damage, the Owner will forthwith repair, reconstruct and restore the
Improvements to substantially the same or an improved condition or value as existed prior to the
event causing such damage and, to the extent necessary to accomplish such repair, reconstruction
and restoration, but subject to the rights of Owner’s lenders, the Owner will apply the proceeds of
any insurance relating to such damage received by the Owner to the payment or reimbursement of
the costs thereof.
If the Owner fails to fulfill its obligations to repair, reconstruct and restore the Improvements
within a reasonable time after the occurrence of the damage, the Authority shall be entitled
terminate the TIF Note and shall be entitled to Net Proceeds of insurance to the extent of the unpaid
balance of the Interfund Loan under Section 3.10.
Section 5.2. Condemnation. In the event that title to and possession of the Improvements or
any material part thereof shall be taken in condemnation or by the exercise of the power of eminent
domain by any governmental body (other than the City or the Authority) or other person prior to
the Termination Date, the Owner shall, with reasonable promptness after such taking, notify the
Authority as to the nature and extent of such taking. Upon receipt of any condemnation award,
but subject to the rights of Owner’s lenders, the Owner shall elect to either: (a) use the entire
condemnation award to reconstruct the Improvements (or, in the event only a part of Improvements
have been taken, then to reconstruct such part) within the Project Area; or (b) retain the
condemnation award, less the unpaid balance of the Interfund Loan under Section 3.10 which shall
20
be paid to the Authority, whereupon in the event that a substantial portion of the Property and
Improvements have been taken, the Authority's obligations under the TIF Note shall terminate as
of the date of the taking.
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ARTICLE VI
Taxes; Tax Increment; Assessment Agreement
Section 6.1. Real Property Taxes. The Owner shall pay or cause to be paid when due and
prior to the imposition of penalty all real property taxes and installments of special assessments
payable with respect to the Property after the Owner acquires the Property. In addition, the Owner
agrees that prior to the Termination Date: (1) it will not seek administrative or judicial review of
the applicability of any tax statute determined by any Tax Official to be applicable to the
Improvements or the Property or raise the inapplicability of any such tax statute as a defense in
any proceedings, including delinquent tax proceedings; (2) it will not seek administrative or
judicial review of the constitutionality of any tax statute determined by any tax official to be
applicable to the Improvements or the Property or raise the unconstitutionality of any such tax
statute as a defense in any proceedings, including delinquent tax proceedings; and (3) it will not
cause a reduction in the Minimum Market Value of the Improvements through:
(a) willful destruction of the Improvements or any part thereof;
(b) willful refusal to reconstruct damaged or destroyed property pursuant to
Section 5.1(d) of this Agreement;
(c) a request to the County assessor to reduce the assessed value of the Property below
the Minimum Market Value of all or any portion of the Property or Improvements;
(d) a petition to the board of equalization of the County to reduce the assessed value of
the Property below the Minimum Market Value;
(e) a petition to the board of equalization of the State or the commissioner of revenue
of the State to reduce the assessed value of the Property below the Minimum Market Value;
(f) an action in a district court of the State or the tax court of the State seeking a
reduction in the assessed value of the Property below the Minimum Market Value;
(g) an application to the commissioner of revenue of the State or to any local taxing
jurisdiction requesting an abatement of real property taxes regarding the Property or
Improvements;
(h) any other proceedings, whether administrative, legal or equitable, with any
administrative body within the County or the State or with any court of the State or the federal
government regarding a reduction in the assessed value of the Property below the Minimum
Market Value; or
(i) a transfer of the Property or Improvements, or any part thereof, to an entity exempt
from the payment of real property taxes under State law.
22
Notwithstanding anything contained in this Section 6.1 or elsewhere in this Agreement to the
contrary, the Owner may contest real property taxes assessed in excess of the Minimum Market
Value of the Improvements. The Owner shall notify the City and Authority of any administrative
or judicial review affecting the Improvements or the Property. In such event, the Authority will
continue to make payments under the TIF Note to the Owner based upon the value stated in the
Assessment Agreement, with any additional Tax Increment available for payment being withheld
from Owner until such time that the administrative or judicial review affecting the Improvements
or the Property is finally determined. The Owner shall not, prior to the Termination Date, apply
to any taxing jurisdiction for a deferral or abatement of property tax on the Property or
Improvements.
Section 6.2. Tax Increment. Subject to the limitations contained in the TIF Note, the
Authority hereby pledges to the payment of the TIF Note the Available Tax Increment. Tax
Increment received by the Authority in excess of Available Tax Increment shall be the Authority’s
property and, the Authority shall be free to use such excess Tax Increment for any purpose for
which such Tax Increment may be used under the Tax Increment Act.
Section 6.3. Owner’s Representations Concerning TIF Note. The Owner makes the
following representations to the Authority with respect to the issuance of the TIF Note:
(a) The Owner has not relied on any representations of the Authority, or any of its
officers, agents, or employees, and has not relied on any opinion of any attorney of the Authority,
as to the federal or State income tax consequences relating to the ownership of the TIF Note by
the Owner.
(b) The Owner is sufficiently knowledgeable and experienced in financial and business
matters, including the purchase and ownership of obligations of a nature similar to the TIF Note,
to be able to evaluate the risks and merits of the purchase and ownership of the TIF Note. The
Owner has been made aware of the security for the TIF Note and the proposed uses of the proceeds
of the TIF Note, and has received the cooperation of the Authority in undertaking any due diligence
that the Owner has deemed necessary or appropriate.
(c) The Owner understands that the portion of the Tax Increment pledged to the
payment of the TIF Note pursuant to this Agreement is the sole source of money that is pledged
and will be available for the payments due under the TIF Note; that the Authority is not under any
obligation to repurchase the TIF Note from the Owner under any circumstances; that the TIF Note
is not a general obligation of the Authority; and that, if the Tax Increment pledged to the payment
of the TIF Note pursuant to this Agreement is not sufficient to make the payments due under the
TIF Note in full, no right will exist to have taxes levied by the Authority or the City for the payment
of the unpaid amounts due under the TIF Note.
(d) The Owner understands that the Tax Increment necessary to pay the TIF Note has
been estimated assuming that the Improvements will have certain market values on certain dates.
All estimates of Tax Increment that have been prepared by or on behalf of the Authority have been
done for the Authority’s use only and neither the Authority nor its consultants shall have liability
to the Owner if the actual Tax Increment is less than the amounts estimated. In the event, among
23
other things, the Owner fails to complete the Improvements in a timely manner or the market value
of the Improvements does not reach certain levels, the Tax Increment pledged to the payment of
the TIF Note may be inadequate to pay the total principal of and interest on the TIF Note.
(e) The Owner understands that the TIF Note is not registered or otherwise qualified
for sale or transfer under the securities laws and regulations of the State or under federal securities
laws or regulations, the TIF Note is not listed on any stock or other securities exchange, and the
TIF Note will carry no rating from any rating service.
Except as provided in this Agreement, including, without limitation Section 8.1 below, the
TIF Note may not be transferred to any third party without the prior written approval of the
Authority.
Section 6.4. Assessment Agreement.
(a) At the time of the Closing on the conveyance of the Property to the Owner, the Owner
shall, with the Authority, execute an Assessment Agreement pursuant to Minnesota Statutes, Section
469.177, subd. 8, specifying an assessor’s Minimum Market Value for the Improvements. The
amount of the minimum Market Value of the Improvements shall be $27,300,000 as of January 2,
2019, and each January 2 thereafter, notwithstanding the status of construction by such dates.
(b) The Assessment Agreement shall be in the form attached as Schedule D with all
blanks properly completed. Nothing in the Assessment Agreements shall limit the discretion of the
assessor to assign a market value to the property in excess of such Minimum Market Value. The
Assessment Agreement shall remain in force for the period specified in the Assessment Agreement.
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ARTICLE VII
Mortgage Financing
Section 7.1. Mortgage Financing. On or before January 31, 2017, the Owner shall provide
to the Authority evidence of a term sheet or other evidence reasonably satisfactory to the Authority
for mortgage financing sufficient for construction of the Improvements. If the Authority finds that
the mortgage financing is adequate in amount to provide for the construction of the Improvements,
and subject only to such conditions as the Authority approves, such approval not to be
unreasonably withheld, delayed or conditioned, then the Authority shall notify the Owner in
writing of its approval. Such approval shall not be unreasonably withheld and either approval or
rejection shall be given within fourteen (14) days from the date when the Authority is provided the
evidence of mortgage financing. The issuance of a building permit for the Improvements by the
City shall be deemed to evidence the Authority's approval under this Section. If the Authority
rejects the evidence of mortgage financing as inadequate, it shall do so in writing specifying in
reasonable detail the basis for the rejection. In any event, the Owner shall submit adequate
evidence of mortgage financing within thirty (30) days after such rejection.
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ARTICLE VIII
Prohibitions Against Assignment and Transfer, Indemnification
Section 8.1. Prohibition Against Transfer of Property and Assignment of Agreement. The
Owner represents and agrees that the Owner has not made or created and, prior to the completion
of the Improvements, will not make or create, or suffer to be made or created, any total or partial
sale, assignment, conveyance, or lease, or any trust or power, or transfer in any other mode or form
of or with respect to this Agreement or the Property or any part thereof or any interest herein or
therein, or any contract or agreement to do any of the same, other than to residential tenants in the
ordinary course of business, without the prior written approval of the Authority, which approval
shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, the Owner may
transfer the Property, the Improvements, the TIF Note and/or assign its interest in this Agreement
to an entity affiliated with the Owner or one of the Owner’s owners, and, after completion of the
Improvements, to any entity that purchases the Property and the Improvements, provided that, in
each instance, such new entity executes an instrument in a form acceptable to the Authority by
which it assumes and agrees to perform the Owner’s obligations under this Agreement. Any such
assignment or transfer shall relieve the Owner of any liability under this Agreement, the basis for
which arises after the date of assignment or transfer. In addition, the TIF Note may be assigned to
a lender as collateral for any loan made to the Owner.
Section 8.2. Release and Indemnification Covenants.
(a) The Owner releases from and covenants and agrees that the Authority, the City and
the governing body members, officers, agents, servants and employees thereof shall not be liable
for and agrees to indemnify and hold harmless the Authority, the City, and the governing body
members, officers, agents, servants and employees thereof 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
Improvements.
(b) Except for any willful misrepresentation, any willful or wanton misconduct or gross
negligence of the following named parties, the Owner agrees to protect and defend the Authority,
the City, and the governing body members, officers, agents, servants and employees thereof, now
or 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 this Agreement, or the transactions contemplated hereby or the acquisition, construction,
installation, ownership, and operation of the Improvements.
(c) The Authority, the City, and the governing body members, officers, agents, servants
and employees thereof shall not be liable for any damage or injury to the persons or property of
the company or its officers, agents, servants or employees or any other person who may be about
the Property or Improvements due to any act of negligence of any person.
(d) All covenants, stipulations, promises, agreements and obligations of the Authority
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
26
obligations of the Authority and not of any governing body member, officer, agent, servant or
employee of the Authority in the individual capacity thereof.
(e) Nothing in this Section or Section 8.3 will be construed to limit or affect any
limitations on liability of the City or Authority under State or federal law, including without
limitation, Minnesota Statutes Sections 466.04 and 604.02.
(f) The liability of the Owner under this Agreement shall be limited to the Owner and
its assets. No member, officer or employee of the Owner shall be personally liable to the Authority
or to the City, or any successor in interest, in the event of any default or breach by the Owner or
for any amount which may become due to the Authority or the City or any successor in interest or
on any obligations under the terms of this Agreement.
Section 8.3. Environmental Conditions. The Owner acknowledges that the Authority
makes no representations or warranties as to the condition of the soils of the Property or the fitness
of the Property for construction of the Minimum Improvements or any other purpose for which
the Owner may make use of such property, and that the assistance provided to the Owner under
this Agreement neither implies any responsibility by the Authority for any contamination of the
Property nor imposes any obligation on the Authority to participate in any cleanup of the Property.
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ARTICLE IX
Events of Default
Section 9.1. Events of Default Defined. The term "Event of Default" shall mean, whenever
it is used in this Agreement (unless the context otherwise provides):
(a) any failure by Owner to observe or perform any covenant, condition, obligation or
agreement on its part to be observed or performed hereunder; or
(b) if, before issuance of the certificate of completion for the Improvements, the Owner
shall
(i) file any petition in bankruptcy or for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under the United
States Bankruptcy Act or under any similar federal or State law, which action is not
dismissed within sixty (60) days after filing; or
(ii) make an assignment for benefit of its creditors; or
(iii) admit in writing its inability to pay its debts generally as they become due;
or
(iv) be adjudicated a bankrupt or insolvent.
Section 9.2. Authority's Remedies on Default. Whenever any Event of Default by Owner
referred to in Section 9.1 of this Agreement occurs, the Authority may immediately suspend its
performance under this Agreement and/or the TIF Note until it receives assurances from the
Owner, deemed adequate by the Authority, that the Owner will cure its default and continue its
performance under this Agreement and may take any one or more of the following actions after
providing sixty (60) days written notice to the Owner of the Event of Default, but only if the Event
of Default has not been cured within said sixty (60) days, or such longer period of time as the
Authority may reasonably determine if the Event of Default is of a nature that it cannot be cured
in thirty (30) days:
(a) Terminate this Agreement and/or the TIF Note.
(b) Take whatever action, including legal, equitable or administrative action, which may
appear necessary or desirable to the Authority to collect any payments due under this Agreement,
or to enforce performance and observance of any obligation, agreement, or covenant of the Owner
under this Agreement.
Section 9.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the
Authority or Owner 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
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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. In order to entitle the
Authority or the Owner to exercise any remedy reserved to it, it shall not be necessary to give
notice, other than such notice as may be required in this Article IX.
Section 9.4. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in this Agreement should be breached by either party and thereafter waived by the 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 9.5. Costs of Enforcement. Whenever any Event of Default occurs and the
Authority shall employ attorneys or incur other expenses for the collection of payments due or to
become due or for the enforcement of performance or observance of any obligation or agreement
on the part of the Owner under this Agreement, the Owner agrees that it shall be liable for the
reasonable fees of such attorneys and such other expenses so reasonably incurred by the Authority.
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ARTICLE X
Additional Provisions
Section 10.1. Representatives Not Individually Liable. No member, official, or employee of
the Authority shall be personally liable to the Owner, or any successor in interest, in the event of
any default or breach or for any amount which may become due to Owner or successor or on any
obligations under the terms of the Agreement.
Section 10.2. Restrictions on Use. The Owner agrees for itself, and its successors and
assigns that the Owner, and such successors and assigns, shall until the Termination Date devote
the Property to, and only to and in accordance with, the uses specified in this Agreement.
Section 10.3. 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 10.4. Notices and Demands. All notices or communications, required or desired to
be given hereunder shall be in writing, sent to the addresses specified below and shall be deemed
effective and received (a) upon personal delivery; (b) five (5) days after deposit in the United
States mail, certified mail, return receipt requested, postage prepaid; or (c) one (1) business day
after deposit with a national overnight air courier, fees prepaid, to the Authority or the Owner, as
the case may be. Either party may designate an additional or another address upon giving written
notice to the other party at the address for notices below, or as previously changed. Attorneys for
either party may give or receive notices for such party. For the purposes of this Agreement,
"business day" shall mean a day which is not a Saturday, a Sunday or a legal holiday of the State
of Minnesota.
(a) if to the Owner, at U.S. Bancorp Center, 800 Nicollet Mall, Suite 2850,
Minneapolis, Minnesota 55402,
(b) if to the Authority, at City Hall, 4401 Xylon Avenue North, New Hope, Minnesota
55428.
Or at such other address with respect to either such party as that party may, from time to time,
designate in writing and forward to the other as provided in this Section.
Section 10.5. Disclaimer of Relationships. Nothing contained in this Agreement nor any act
by the Authority or the Owner shall be deemed or construed by any person to create any
relationship of third-party beneficiary, principal and agent, limited or general partner, or joint
venture among the Authority, the Owner, and/or any third party.
Section 10.6. Modifications. This Agreement may be modified solely through written
amendments hereto executed by the Owner and the Authority.
30
Section 10.7. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall constitute one and the same instrument.
Section 10.8. Judicial Interpretation. Should any provision of this Agreement require
judicial interpretation, the court interpreting or construing the same shall not apply a presumption
that the terms hereof shall be more strictly construed against one party by reason of the rule of
construction that a document is to be construed more strictly against the party who itself or through
its agent or attorney prepared the same, it being agreed that the agents and attorneys of both parties
have participated in the preparation hereof.
Section 10.9. Business Subsidy Act. Because the Authority’s assistance to the Owner’s
development is being made available for the purpose of developing housing, the assistance does
not constitute a business subsidy within the meaning of Minnesota Statutes, sections 116J.993 to
116J.995.
Section 10.10 Miscellaneous.
(a) Gender; etc. Words of any gender used in this Agreement shall be held and
construed to include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires.
(b) Binding Effect. The terms, provisions and covenants and conditions
contained in this Agreement shall apply to, inure to the benefit of, and be binding upon,
the parties hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided.
(c) Captions. The captions inserted in this Agreement are for convenience only
and in no way define, limit or otherwise describe the scope or intent of this Agreement,
or any provision hereof, or in any way affect the interpretation of this Agreement.
(d) Estoppel. Each party agrees that, at any time and from time to time, within
ten (10) days after the request of the other party, to sign and deliver to the other party,
or such other party's designee, an estoppel certificate in a form reasonably satisfactory
to the sending party and the receiving party.
(e) Time. Any period of time described in this Agreement by reference to a
number of days includes Saturdays, Sundays, and any holiday of the State of
Minnesota. Any period of time described in this Agreement by reference to a number
of business days does not include Saturdays, Sundays, or any holiday of the State of
Minnesota. If the date or last date to perform any act or to give any notice is a Saturday,
Sunday, or holiday of the State of Minnesota, that act or notice may be timely
performed or given on the next succeeding business day.
(f) Severability. If any clause or provision of this Agreement is illegal, invalid
or unenforceable under present or future laws effective during the Agreement Term,
then and in that event, it is the intention of the parties hereto that the remainder of this
Agreement shall not be affected thereby, and it is also the intention of the parties to this
31
Agreement that in lieu of each clause or provision of this Agreement that is illegal,
invalid or unenforceable, there be added as a part of this Agreement a clause or
provision as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
(g) Waiver of Jury Trial; Jurisdiction. EACH OF THE AUTHORITY AND
THE OWNER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION RELATING TO THIS AGREEMENT. This Agreement shall be enforced in
any United States District Court for the District of Minnesota or state court of the State
of Minnesota sitting in Hennepin County, and the parties consent to the jurisdiction and
venue of any such court and waives any argument that venue in such forums is not
proper or convenient.
(h) Complete Agreement. This Agreement and the exhibits and schedules
attached hereto contains all of the agreements and understandings relating to the subject
matter herein and therein. This Agreement and the exhibits and schedules attached
hereto supersede any and all prior agreements and understandings between the
Authority and the Owner and alone expresses the agreement of the parties.
(i) Governing Law. This Agreement, the rights of the parties hereunder and
the interpretation hereof shall be governed by, and construed in accordance with, the
internal laws of the State of Minnesota, without giving effect to conflict of laws
principles thereof.
(j) Time of Essence. Time shall be of the essence as to this Agreement and
each and every provision hereof.
Section 10.11 Termination. This Agreement shall be null and void on the Termination
Date, provided, that Sections 8.2 and 8.3 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 10.12. Estoppel Certificates. The Authority agrees it will, from time to time upon
reasonable prior written request by the Owner, execute and deliver to the Owner and such other parties
as the Owner may reasonably designate, within ten (10) business days following the request therefor,
written certification, if true, that (a) this Agreement is unmodified and in full force and effect (or if
there have been modifications, that the same are in full force and effect as modified), (b) that to the
knowledge of the Authority there are not defaults under this Agreement (or specifying any claimed
defaults), (c) certifying as to the status of completion of the Improvements, and (d) the outstanding
principal amount of the TIF Note.
32
IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed
in its name and behalf and the Owner has caused this Agreement to be duly executed in its name
and behalf on or as of the date first above written.
NEW HOPE ECONOMIC
DEVELOPMENT AUTHORITY
By: _______________________
Name: _________________
Title: _________________
By: _______________________
Name: _________________
Title: _________________
STATE OF MINNESOTA )
) SS.
COUNTY OF ___________)
The foregoing instrument was acknowledged before me this _______day of ________,
2017, by ___________________ and ____________________, the President and Executive
Director of the New Hope Economic Development Authority, a public body politic and corporate,
on behalf of the Authority.
_____________________________________
N o t a r y P u b l i c
33
ALATUS NEW HOPE LLC
By: Alatus Yukon LLC
Its Managing Member
By: ________________________
Robert C. Lux
I t s P r e s i d e n t
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _________ day
of_____________, 2017, by Robert C. Lux, the President of Alatus Yukon LLC, a Minnesota
limited liability company, the managing member of Alatus New Hope LLC, a Minnesota limited
liability company, on behalf of the limited liability companies.
_____________________________________
N o t a r y P u b l i c
SCHEDULE A
Description of Property
The Property is legally described as Lots 1, 2, 3, 4, and 5, Block 1, GERVAIS AND HUNTER
REPLAT, according to the recorded plat thereof, Hennepin County, Minnesota, to be replatted as
Lot 1, Block 1, Hemken Addition, Hennepin County, Minnesota.
The Property has the following tax property identification numbers:
0611821420008
0611821420009
0611821420010
0611821420011
0611821420012.
SCHEDULE B
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF HENNEPIN
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
TAXABLE LIMITED REVENUE TAX INCREMENT NOTE
(ALATUS NEW HOPE, LLC PROJECT)
The New Hope Economic Development Authority (the "Authority"), hereby acknowledges
itself to be indebted and, for value received, promises to pay to the order of Alatus New Hope,
LLC, a Minnesota limited liability company, or its permitted assigns (the "Owner"), solely from
the source, to the extent and in the manner hereinafter provided, the principal amount of this Note,
being ____________________________ Dollars ($______________) (the "Principal Amount"),
commencing on August 1, 2019, and continuing on each February 1 and August 1 thereafter up to
and including February 1, 2042 (the "Scheduled Payment Dates"). Interest at the rate of four and
one half percent (4.50%) per annum shall accrue from the date of this Note on the Principal
Amount and shall be added to the Principal Amount on each February 1 and August 1 up to and
including February 1, 2019. From and after February 1, 2019, simple non-compounding interest
at the rate of four and one half percent (4.50%) shall accrue on the outstanding Principal Amount
until this Note has been paid in full or terminated in accordance with its terms. Interest shall be
computed on the basis of a 360 day year consisting of twelve (12) thirty (30) day months. This
Note is the Note defined in that certain Purchase and Development Agreement dated as of
___________, 2016, between the Authority and the Owner (the “Contract”).
The Principal Amount of this Note is subject to potential reduction in accordance with
Section 3.1005 of the Contract.
Each payment on this Note is payable in any coin or currency of the United States of America
which on the date of such payment is legal tender for public and private debts and shall be made
by check or draft made payable to the Owner and mailed to the Owner at its postal address within
the United States which shall be designated from time to time by the Owner.
The Note is a special and limited obligation and not a general obligation of the Authority,
which has been issued by the Authority pursuant to and in full conformity with the Constitution
and laws of the State of Minnesota, including Minnesota Statutes, Section 469.178, subdivision 4,
to aid in financing a "project", as therein defined, of the Authority consisting generally of defraying
certain public redevelopment costs incurred and to be incurred by the Owner within and for the
benefit of the Authority’s Redevelopment Project No. 1 (the "Project").
THIS NOTE IS A SPECIAL AND LIMITED AND NOT A GENERAL
OBLIGATION OF THE AUTHORITY PAYABLE SOLELY OUT OF AVAILABLE TAX
INCREMENT, AS DEFINED BELOW, AND NEITHER THE STATE, THE CITY OF
NEW HOPE, NOR ANY POLITICAL SUBDIVISION OF THE STATE, SHALL BE
LIABLE ON THIS NOTE, NOR SHALL THIS NOTE BE PAYABLE OUT OF ANY
FUNDS OR PROPERTIES OTHER THAN AVAILABLE TAX INCREMENT.
The scheduled payment of this Note due on any Scheduled Payment Date is payable solely
from and only to the extent that the Authority shall have received in the six (6) month period
preceding such Scheduled Payment Date "Available Tax Increment". For purposes of this Note,
Available Tax Increment with respect to any Scheduled Payment Date shall mean ninety five
percent (95%) of the Tax Increment, as defined in the Contract, that has been received by the
Authority in the six (6) month period preceding a Scheduled Payment Date. Available Tax
Increment constitutes a portion of the real property taxes paid with respect to that certain real
property described on the attached Exhibit A (hereinafter referred to as the “Property”).
The Authority shall pay on each Scheduled Payment Date to the Owner the lesser of: (i)
the Available Tax Increment; or (ii) the amount remaining to be paid under this Note. On the
earlier of: (i) the date that this Note has been paid in full; or (ii) February 1, 2042, which is the last
Scheduled Payment Date, after making the payment due on such date, the Authority’s payment
obligations under this Note shall terminate and this Note shall no longer be an obligation of the
Authority. All payments made by the Authority shall be applied first to accrued interest and then
to the Principal Amount of this Note. The Authority may, at its option, prepay this Note in whole
or in part at any time at a price of the outstanding Principal Amount plus accrued and unpaid
interest.
The Authority’s obligations herein are subject to the terms and conditions of the Contract.
Upon the occurrence of an Event of Default as provided in Section 9.1 of the Contract, which
Contract is incorporated herein and made a part hereof by reference, the Authority’s payment
obligations hereunder shall be suspended and, upon expiration of all applicable cure periods
provided for in Section 9.2 of the Contract, this Note may be terminated by the Authority. Upon
such termination, the Authority’s obligations to make further payments hereunder shall be
discharged. Such termination may be accomplished by the Authority’s giving of written notice to
the then registered owner of this Note, as shown on the books of the Authority.
This Note shall not be payable from or constitute a charge upon any funds of the Authority,
and the Authority shall not be subject to any liability hereon or be deemed to have obligated itself
to pay hereon from any funds except Available Tax Increment, and then only to the extent and in
the manner herein specified.
The Owner shall never have or be deemed to have the right to compel any exercise of any
taxing power of the Authority or of any other public body, and neither the Authority nor any
director, commissioner, council member, board member, officer, employee or agent of the
Authority, nor any person executing or registering this Note shall be liable personally hereon by
reason of the issuance or registration hereof or otherwise.
This Note shall not be transferable or assignable, in whole or in part, by the Owner without
the prior written consent of the Authority, which consent shall not be unreasonably withheld,
except that the Owner shall have the right to (a) assign this Note to an affiliate or to buyer in
accordance with Section 8.1 thereof; and (b) assign this Note to a lender as collateral for any loan
made to the Owner. This Note is issued pursuant to Resolution _____ of the Authority and is
entitled to the benefits thereof, which resolution is incorporated herein by reference.
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 Authority outstanding on the date hereof and on
the date of its actual issuance and delivery, does not cause the indebtedness of the Authority to
exceed any constitutional or statutory limitation thereon.
IN WITNESS WHEREOF, the New Hope Economic Development Authority, by its
Board of Commissioners, has caused this Note to be executed by the manual signatures of the
_____________ and the _____________ of the Authority and has caused this Note to be dated
_____________, 20___.
________________________________ _______________________________
EXHIBIT A TO NOTE
Description of Property
The Property consists of the parcels of property located in Hennepin County, Minnesota with the
following tax property identification numbers:
0611821420008
0611821420009
0611821420010
0611821420011
0611821420012
SCHEDULE C
QUIT CLAIM DEED
THIS INDENTURE, between the New Hope Economic Development Authority,
Minnesota, a public body politic and corporate under the laws of the state of Minnesota (the
"Grantor"), and Alatus New Hope, LLC, a Minnesota limited liability company (the "Grantee").
WITNESSETH, that Grantor, in consideration of the sum of One Dollar ($1.00) and other
good and valuable consideration the receipt whereof is hereby acknowledged, does hereby grant,
bargain, quitclaim and convey to the Grantee, its successors and assigns forever, all the tract or
parcel of land lying and being in the County of Hennepin and State of Minnesota described as
follows, to-wit (such tract or parcel of land is hereinafter referred to as the "Property"):
See Exhibit A Attached Hereto
To have and to hold the same, together with all the hereditaments and appurtenances
thereunto belonging in any wise appertaining, to the said Grantee, its successors and assigns,
forever,
The Grantor certifies that the Grantor does not know of any wells on the subject property.
IN WITNESS WHEREOF, the Grantor has caused this Deed to be duly executed in its
behalf by its President and Executive Director this ______ day of ______________, 2017.
NEW HOPE ECONOMIC
DEVELOPMENT AUTHORITY
By: _________________________________
Its: President
By: _________________________________
Its: Executive Director
STATE OF MINNESOTA)
)ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledge before me this ____ day of _________, 2016,
by __________________________ and ___________________, the President and Executive
Director of the New Hope Economic Development Authority, a public body politic and corporate
organized and existing under the laws of the state of Minnesota, on behalf of the Authority.
____________________________________
Notary Public
This instrument was drafted by:
BRADLEY & DEIKE, P.A.
4018 West 65th Street, Suite 100
Edina, Minnesota 55435.
Exhibit A to Quit Claim Deed
Description of Property
SCHEDULE D
Assessment Agreement
______________________________________________________________________________
ASSESSMENT AGREEMENT
and
ASSESSOR'S CERTIFICATION
By and among
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY,
ALATUS NEW HOPE, LLC,
and
COUNTY ASSESSOR OF THE COUNTY OF HENNEPIN
______________________________________________________________________________
This document was drafted by:
BRADLEY & DEIKE, P.A.
4018 West 65th Street, Suite 100
Edina, Minnesota 55435
THIS AGREEMENT, dated as of this ____ day of _______, 2017, by and between the
New Hope Economic Development Authority, a body politic and corporate (the "Authority") and
Alatus New Hope, LLC, a Minnesota limited liability company (the "Owner").
WITNESSETH: that:
WHEREAS, on or before the date hereof the Authority and the Owner entered into that
certain Purchase and Development Agreement (the "Development Agreement") regarding certain
real property located in the City of New Hope, hereinafter referred to as the Property and legally
described in Exhibit A hereto; and
WHEREAS, it is contemplated that pursuant to said Development Agreement the Owner
will construct a market rate apartment building on the Property; and
WHEREAS, the Authority and Owner desire to establish a minimum market value for said
land and the improvements to be constructed thereon, pursuant to Minnesota Statutes, Section
469.177, Subdivision 8; and
WHEREAS, the Authority and the County Assessor for the County of Hennepin have
reviewed the preliminary plans and specifications for the improvements which it is contemplated
will be erected.
NOW, THEREFORE, the parties to this Agreement, in consideration of the promises,
covenants and agreements made by each to the other, do hereby agree as follows:
1. Commencing on January 2, 2019, and continuing on each assessment date
thereafter until the termination date stated in paragraph 2 below, the minimum market value which
shall be assessed for the land described in Exhibit A and the above described improvements shall
be not less than Twenty Seven Million Three Hundred Dollars ($27,300,000), notwithstanding
incomplete construction of the above described improvements.
2. This Agreement shall terminate in its entirety on the Termination Date, as defined
in the Development Agreement.
3. This Agreement shall be promptly recorded at the expense of the Owner.
4. Neither the preambles nor provisions of this Agreement are intended to, nor shall
they be construed as, modifying the terms of the Development Agreement between the Authority
and the Owner.
5. This Agreement shall inure to the benefit of and be binding upon the successors
and assigns of the parties.
NEW HOPE ECONOMIC
DEVELOPMENT AUTHORITY
By: ________________________________
Its President
By: ________________________________
Its Executive Director
STATE OF MINNESOTA )
) S S .
COUNTY OF ___________)
The foregoing instrument was acknowledged before me this _______day of ________,
2017, by ___________________ and ____________________, the President and Executive
Director of the New Hope Economic Development Authority, a public body politic and corporate,
on behalf of the authority.
_____________________________________
Notary Public
A L A T U S N E W H O P E L L C
By: Alatus Yukon LLC
Its Managing Member
By: _________________________
Robert C. Lux
I t s P r e s i d e n t
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _________ day
of_____________, 2017, by Robert C. Lux, the President of Alatus Yukon LLC, a Minnesota
limited liability company, the managing member of Alatus New Hope LLC, a Minnesota limited
liability company, on behalf of the companies.
CERTIFICATION BY COUNTY ASSESSOR
The undersigned, having reviewed the plans and specifications for the improvements to be
constructed and the market value assigned to the land upon which the improvements are to be
constructed, and being of the opinion that the minimum market value contained in the foregoing
Agreement appears reasonable, hereby certifies as follows: The undersigned assessor, being
legally responsible for the assessment of the above described property, certifies that the market
values assigned to such land and improvements are reasonable.
____________________________________
County Assessor for the County
of Hennepin
STATE OF MINNESOTA)
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ______ day of ___________,
2017, by the County Assessor for the County of Hennepin.
____________________________________
Notary Public
EXHIBIT A
Legal Description of Land
SCHEDULE E
Access Easement
SCHEDULE F
Access Agreement
SCHEDULE G
Pro Forma
VRF System Benefits
8400 Bass Lake Road, New Hope MN
- 2 -
Memo
To: Jeff Sargent, Director of Community Development
City of New Hope
From: Robert Lux
Ashley Bisner
Alatus LLC
Date: February 15, 2017
Re: VRF System Benefits
Alatus’ goal for 8400 Bass Lake Road Apartments (“8400 Bass Lake”) is to create an exceptional
experience not only for the building’s residents, but also for the citizens of New Hope and the citizens of
the surrounding area; every aspect of the building has been designed with this goal in mind. Alatus
strives to set the new standard when developing buildings – specifically, to incorporate designs and
features that others are compelled to emulate. One way Alatus seeks to achieve this goal at 8400 Bass
Lake is with the building’s mechanical system.
There are currently three mechanical systems utilized in apartment buildings: (1) MagicPak, (2) Water
sourced heat pumps, and (3) Variable Refrigerant Flow (VRF). A vast majority of apartment buildings use
separate gas-fired MagicPaks in each individual unit for heating and cooling because the system has the
lowest up-front investment cost and the technology is familiar (it has been around for over 40 years).
Fortunately, there is a better option.
A VRF system presents an opportunity to utilize and benefit from the newest and highest efficiency
technology. The VRF system requires a larger up-front investment cost compared to the other options,
but significantly reduces environmental impact and improves the resident experience. The system also
allows the building to achieve LEED certification and positions it to reach close to a net zero emissions,
making it a model project for future developments in the Twin Cities metro area.
Key Benefits:
1) VRF currently leads the industry as the most energy efficient heating and cooling system
available.
2) A VRF system will vastly improve tenant comfort, system controllability, and building aesthetic
compared to traditional MagicPak systems.
3) VRF technology is built to last.
8400 BASS LAKE ROAD APARTMENTS
- 3 -
1) Energy Efficiency and Lifetime Cost of Energy
The most recent energy survey by the U.S. government (conducted in 2012) shows a use of 6,963 trillion
BTUs of energy each year to operate commercial buildings.1 Almost seven quadrillion BTUs is an
enormous amount of energy and clearly indicates that developers and City officials need to work to
ensure future buildings are built to be more efficient. The easiest and most significant way to improve
energy usage is to invest in high efficiency heating and cooling systems because these systems account
for almost 40% of the energy used by commercial buildings. VRF technology is a full building heating
and cooling system solution that currently leads the industry in energy efficiency and would significantly
reduce the lifetime energy use at 8400 Bass Lake.
VRF systems include the most recent advancements in controls, energy recovery, and heating and
cooling technology. Through these advancements, the VRF system proposed for 8400 Bass Lake will use
50% less energy than the baseline MagicPak system. To put this into perspective, the proposed VRF
system will save the equivalent of 615,000 gallons of gasoline over a 20 -year period; that is enough
gasoline for a car to drive around the entire globe 617 times.
MagicPak Units VRF Potential Savings
by Using VRF
Lifetime Equivalent CO2
Emissions (metric tons) 14,054 8,588 5,466 (39%)
Lifetime Equivalent gasoline
consumed (Gallons) 1,581,418 966,356 615,063 (39%)
Based on a full-scale energy model completed by LG Electronics USA to compare a VRF heat recovery
system to a baseline gas fired MagicPak system, the VRF system will cost $66,000 less per year to
operate than a MagicPak system at 8400 Bass Lake (using current rates). This equates to a heating and
cooling savings of roughly $400 per unit per year. Additionally, VRF systems only use electricity for both
heating and cooling, thus completely replacing unsustainable energy sources with renewable energy.
2) Improved Tenant Comfort, System Controllability, and Building Aesthetic
VRF systems utilize variable speed technology, which is a significant reason the system leads the
industry in energy efficiency. While MagicPak units have two speeds, 100% on or 100% off, the VRF
system has the ability to vacillate between 10% and 100% in order to exactly ma tch the heating or
cooling load a space requires at any given moment. The variable speed technology allows the VRF
system to more accurately maintain space temperature compared to a MagicPak unit. With a VRF
system, each resident can maintain the exact temperature setting they desire using the precise amount
of energy necessary to do so. Comparatively, MagicPak systems have to constantly cycle on and off in
attempts to maintain a desired temperature. The VRF system’s variable speed blower fan that circulates
air in each apartment also provides an additional level of comfort for residents and produces
significantly less noise compared to a MagicPak fan.
1 https://www.eia.gov/consumption/commercial/reports/2012/energyusage/
- 4 -
Figure 1 - Flux Apartments in Uptown, Minneapolis. Picture from: http://bkvgroup.com/wp-
content/uploads/2015/01/flux_img3.jpg
VRF systems use a centralized plant of equipment located in a mechanical room that feeds the terminal
units in each apartment. When compared to a decentralized MagicPak system, the three major benefits
include (1) ease of maintenance, (2) system controllability, and (3) building aesthetic. By centralizing all
of the major equipment in a maintenance room, any service or routine maintenance can be completed
without requiring access to tenants’ apartments. A centralized VRF system includes a central controller
that monitors the entire building and allows the building service personnel to proactively maintain the
system. Lastly, the VRF central plant eliminates the need for the wall penetration a MagicPak unit
requires on the exterior wall of each apartment (see example in Figure 1 below). The large opening
required to install a MagicPak unit detracts from the overall aesthetic of a building and has a tendency
to both rust and allow moisture into the building envelope.
3) Cost implications of utilizing VRF Technology
As outlined above, there are many benefits of utilizing a VRF system. As stated, Alatus’ goal for 8400
Bass Lake is to position the development to be the most advanced suburban apartment product in the
marketplace. As is the case with most leading-edge technology, the up-front costs associated with the
system’s implementation is often times a deterrent to making the better long-term choice. The
additional initial cost of the VRF system as programmed in the building compared to a MagicPak system
is $688,000. Alatus would like to join with the City of New Hope in bringing this technology to 8400 Bass
Lake and would like to propose sharing this additional expense 50% / 50% with the City by reducing the
purchase price on the land by $344,000. We view this as a joint partnership between Alatus and the City
of New Hope to achieve a truly best in class product that demonstrates our values and will serve
residents and citizens into the future.