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HRA 02/12/1987 - 29331CITY OF FRIDLEY • HOUSING & REDEVELO'KiIENT AUTHORITY MEETING, FEBRUARY 12, 1987 CALL TO ORDER: Vice- Chairperson Sch'nabel called the February 12, 1987, Housing &.Redevelopment Authority meeting to order at 7:15 p.m. ROLL CALL: Members Present: Virginia Schnabel, Duane Prairie, Walter Rasmussen, John Meyer Members Absent: Larry Commers Others Present: Jock Robertson, HRA Executive Director Nasim Qureshi, City Manager Samantha Orduno, Management Assistant Dave Newman, HRA Attorney Rick Pribyl, Finance Director Julie Burt, Asst. Finance Officer John Flora, Public Works Director Nancy Jorgenson, Cou.ncilperson -at -large Dennis Schneider, Councilperson Bob Levy, 100 S. 5th St. Douglas Peterson, 6401 University Ave. N.E. Tom Ryan Louis & June Lundgren, 1140 Minnesota Bldg., St. Paul APPROVAL OF JANUARY 8, 1987, HOUSING. &:.REDEVELOPMENT AUT14ORITY MINUTES: MOTION BY MR. RASMUSSEN, SECONDED BY MR. PRAIRIE, TO APPROVE THE JAN. 8, 1987, MINUTES WITH THE FOLLOWING CORRECTION: ON PAGE 4, ITEM #3, THE DOLLAR AMOUNT, "$30,000" SHOULD BE CHANGED TO $100,00.0,BOTH IN THE HEADING AND IN THE MOTION. UPON A VOICE VOTE, ALL VOTING AYE, VICE- CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 1 CONSIDERATION OF ACQUISITION OF RICE PLAZA OR ENTERITNG, -INTO A MASTER LEASE: Mr. Robertson stated the HRA has had previous discussions about the acquisition of the Levy property, but at the December meeting, the HRA made a motion not to acquire the property. As a counter proposal, at the Dec. meeting, Mr. Levy and Mr. Diamond suggested the concept of a master lease. Staff was directed by the HRA to do an analysis of some of the numbers that would be involved in that concept. Mr. Robertson stated Staff had done an outline of the cash flow figures based on 'information about the leases that Mr. Levy had given them. They ,had out- lined the worst case alternative. Basically, there were two alternatives under a master lease arrangement. One was the purchase option for five years HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 2 in which the HRA would make a decision whether or not to: buy the property within the five year time period, but under the option arrangement, the landlord would retain his perogative -of renewing leases when existing leases are up. The HRA would enter into a master lease whereby the HRA might make up 50% of the difference for the period that the landlord was unable to lease the property. Mr. Robertson illustrated the alternative in which there would be an actual purchase agreement whereby once.the present leases were up, the property would not be re- leased and the HRA would then make up the difference in lost revenue using 1986 as a base year. Mr. Rasmussen stated he was not against being in the this particular condition, but it seemed to him they worlds. They were neither landlord nor the HRA. It Weren't they ultimately buying a two - thirds vacant pi go downhill at a $1/4 million shot because they were now? landlord business under had the worst of both seemed like a mess. ^operty that was going to not deciding what to do Mr. Prairie stated they could have the same situation anyway, even if they purchased the property. Mr. Newman stated Mr. Levy has been coming before the HRA since last April on the question of the HRA acquiring the property. At the December meeting, the HRA took final action not to acquire the property; however, thoy did discuss the possibility of some kind of master lease arrangement - -the thought being that there were some unique characteristics of the situation and the HRA could provide some compensation to Mr. Levy, if, in fact, he is losing: tenants because the property was in the redevelopment district and was a site that has been aisubjett of discussion for redevelopment. The HRA could possibly receive some benefits from a master lease arrangement. One benefit would be that instead of the HRA acquiring and operating the property, Mr. Levy would con - tinue to manage and own and have some economic incentives to try to keep the property involved and maintain it. What Mr. Robertson had presented was the worst case scenario, assuming the bottom fell out of the market and the center was half vacant. Mr. Rasmussen stated he felt entering into a master lease arrangement would be setting a precedent. Mr. Newman stated that could be a risk; however, there were actually two things they should consider: (1) To a lesser extent the HRA took a similar approach on the corner where Target is located, They did enter into a master lease .arrangement with Art Christenson. Obv.ously, that situation was a little different, but i -t has been done before, (2) There was certainly some dispute as to how many development contracts and develvpers,the City has met with for this site', but he did -not think there was any dispute that the HRA has had an interest in developing this site for a period of time and it has been one of the WA's prioNit ies for several years. That might be a unique situation that cannot be said about other properties in the City Mr. Qureshi stated it has been Staff's recommendation all along.not to acquire the property, and the HRA made the decision not to acquire the property at the • HOUSING & REDEVELOPMENT AUTHORITY MEETING,, FEBRUARY 1'2, 1,987 PAGE 3 December meeting. This master lease arrangement concept was a way to respond to the concerns of the landlord. Within the master lease arrangement, the HRA would have the flexibility of when to acquire the property. The price would be $1 million, and that price would remain the same. The property owner says his property has been devalued and affected by the HRH's actions, so he was guaranteed a fixed value if the HRA acquired the property. If there are vacancies and the HRA wants the property owner to re -lease the property, the HRA would only bear 50% of the cost. If the HRA feels the development is imminent and doesn't want the property. :owner to: re- lease, the. HRA pays 100% of the cost. After five years, if the HRA has not purchased the property, the HRA will pay the property owner 75% of the cost for one year of whatever is not leased. Mr. Qureshi stated that by doing this, the HRA was achieving 'the following things: (1) a fixed cost; (2) As the property became vacant and the HRA made the choice to keep it vacant, they have no relocation costs and no lease hold improvement costs. Mr. Bob Levy stated much of what Mr. Robertson and Mr. Qureshi had described, he agreed with; however, there were some elements they did not agree with. He stated he felt that the overall principle they are dealing with makes sense. He recognizes the HRA has a problem with acquiring the property when they do not have a ready project. and they understand the difficulties with that. The other side of that was the owners have a problem in trying to keep the property leased up, maintained, and dealt with, not knowing what is going Lo happen. They ;we been in tttat state of flux for some years now. Mr. Bob Levy stated that after the HRA's decision not to acquire the property, they were trying to focus on whether there was some way of dealing with both the HRA's problems and needs as well as the property owner's problems and needs to avoid an adversarial situation between the two. The thought was because they understood that the HRA did not want to be in the landlord business, maybe they could continue to Ue in the landlord business and avoid that burden for the HRA. Maybe another benefit for the HRA would be to give the HRA some element of control with respect to lease - renewals for entering into new leases to dimim'sh the HRA's potential exposure `to tenant relocation expenses. Mr. Levy stated the thing they would be looking for in the process would be: (1) some certainty as to what would happen at the end of whatever the term of agreement would be, either there would be an acquisition or the property would be removed from the redevelopment district. (2) Where should the economic burden relative to vacancies caused by this cloud of condemnation lie; and in the option scenario, it would be a shared burden. In the acquisition scenario, it would be the HRA's burden, the idea being that, since, in effect, the property was being warehoused pending development, some of that economic burden of the warehousing situation would fall back on the HRA. Mr. Levy stated they were open to either option. What they were looking at 40 was some kind of compromise that worked well for the HRA as well as the property owner. The one option basically was an option situation with the HRA. • HOUSING & REDEVELOPMENT AUTHORITY MEETING; FEBRUARY'12, 1987 PAGE 4 The way they approached this with staff was to say, whoever got to make decisions about the property ( landlord -type decisions), that was ultimately where the property should end up. If the HRA wanted the authority to decide whether or not there would be renewal or vacancy because the HRA wants to avoid relocation costs to the tenants, the property owner, did not have a problem with that, but then at the end-of the term of agreement,.they want to know that the HRA was going to buy the property. They do not want the property coming back to them--as "Ghost Town U.S.A. ". Mr. Levy stated that on the other hand, if they retain the right to make the decisions regarding entering into`'new leases, or renewing old leases then they did not need a commitment from the HRA -to buy the property. What they needed was a commitment from the HRA that at the end of the term of agreement, the HRA was going to buy the property or take the property out 'of the district. Then, they can figure out what they want to do without the cloud of condemnation. Mr. Levy stated what they told Mr. Qureshi and, Mr., Robertson was they are flexible between these options -- whatever t.he. Staff or• tre_HRA feltwas'more workable. They will go the option route or the purchase agreement route with delayed acquisition, the point being that whoever gets-to make the decisions about signing leases was ultimately where the property should end up. Mr. Levy stated at this time there were two specific items of difference between the Staff and the landlord: (1) the acquisition price. Mr. Qureshi had described a fixed price today that would continue through the term of the agreement, and that was not acceptable to the property owner. (2) the term of the agreement. It was much easier to deal with a longer term agreement if they knew for certain the property was going.to be acquired at the end of the term. If they do not know what is going to happen, it made it more difficult tca_deal with major decisions because there was always that uncertainty. When they initially made the proposal to the HRA -, they had talked about a three year term rather than a five year term. If they were deal-irrq with a purchase structure rather than an option structure, they would probabbly have a little more flexibility in trying to manage the terms of the agreement. If it was the option structure, obviously they would like to see a shorter term. Mr. Levy stated that in general principle or concept, they threw this sort of proposal out as a way to possibly compromise their differences. And, in principle or concpet, it made sense to them. Where they have specific disagree- ments with staff at this point was to expect the property owner to agree to a fixed price today and run the risk of five years of inflation or changing market conditions. The second element was they do.not_.want to :go out to five years. They have been dealing with this issue since 1- 979,: and with another five years down the road, they would have.13 years into the program. Mr. Levy stated that in discussions at previous meetings, they 'had asked for a floor price based on the valuation today. He was sure #'question the HRA would then ask was if they were going to have a fixed floor price then, • why shouldn't there be a 'fixed price going the other direct-Pon? The answer was that it was their feeling that because of the cloud of condemnation and the inability to keep the property let at market rates and under market term leases, that has the effect of devaluing the property. . HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 5 Mr. Newman stated one of the. things he had proposed was-that in lieu of a floor, since there has to be a mechanism to'determine the value anyway, they could stipulate that in determining the mechanism, any information regarding the condemnation would be excluded. He had a problem with a floor plus the possibility there would be an escalation in price. Mr. Qureshi stated he would recommend that the HRA not consider a master lease arrangement finless there was a fixed price of $1 million at today's price. The only reason they were taking the extra burden was because they feel they are sharing in the property owner's burden, and the property owner was not taking the total risk. If the property depreciates, the HRA was sharing in that burden. They also guarantee that after five years, the property owner can make the decision of having the property purchased or out of the district. If the property was out of the district, the HRA was guaranteeing they would give him one full year of rent at 75%. So, he would have a whole year to re -rent his shopping center if the HRA did not acquire the property. Ms. Schnab -,el asked -tom`' ad-the ultimate authority on the rental decisions. Mr. Qureshi stated it was separate whether they were talking option or purchase. What he was suggesting was they put in the option agreement-that the HRA decides whether they want the property leased or not. If the HRA decides not to lease the property, they would bear 100% of the cost. If they have Mr. Levy do the leasing and he cannot lease it for 2 -3 months, the HRA would bear 50% of the cost. Ms. Schnabel asked what happened if Mr. Levy found a tenant that wanted to lease for a length of term beyond what the HRA was interested in. Did the HRA h6,ve 'arry, authority over that? Mr. Qureshi stated, no, they can only make a commitment for'five years. Then, either the HRA will buy the property or let the property out of the redevelop - ment district. Mr. Rasmussen stated he felt they were premature in discussing this at this meeting, because (1) they do not have an agreement from the owner on the base price and (2) they do not have a mutual agreement on who controls the lease provisions. Mr. Qureshi stated they were just bringing this item to the HRA because the HRA has asked Staff to pursue other avenues of agreement with Mr. Levy. He realized details would have to be put together and formalized. But, it was his recommendation that there be an absolute fixed purchase price, so Mr. Levy would know the HRA would never depreciate his property. Mr. Qureshi stated. another item he would like-to suggest was that if there was any acquisition of right -of -way, for example, for example, $100,000 paid for the right -of -way and that money was paid to the landlord, that'amo`unt would be • deducted from the price agreed upon for the property. HOUSING &.REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 6 Mr. Meyer and Mr. Rasmussen agreed they had no problem with Staff exploring this further. Mr. Prairie stated he thought some form of this was a compromise and it assisted the owner in some of his rental problems. Mr. Levy stated that if he understood what Mr. Qureshi was saying, from the property owner's standpoint,.if the HRA wanted the right to make the decisions on whether or not-to lease and decided to exercise that right in a manner not to lease, the property owner would want that coupled with the decision to go ahead and acquire the property on or before the expiration of the agreement. Their position was that whoever gets to'decide what to do with the property was where the ownership should be. That was not an ultimate decision that had to be made now, but they had told staff they could build into the agree- ment that when the HRA does decide they do not want the property owner to lease the property that was when they had to make the decision to purchase. If the HRA never said that, then they did not need the commitment to purchase. He did not want the property owner to be in the situation where somebody has said they cannot use their property for a period of five years, and then at the end of the five years, the property comes back totally vacant, and they have to start from scratch. Mr. Prairie stated he felt the property owner and the HRA were close enough in agreement that it wo ul'°d be beneficial for staff to continue negotiations with Mr. Levy. - Ms. Schnabel stated she felt there should be further negotiations with Mr. Levy to see if some agreements can be reached. MOTION BY MR. RASMUSSEN, SECONDED. BY MR.. PRAIRIE, TO TABLE DISCUSSION ON THE CONSIDERATION OF A.MASTER LEASE ARRANGEMENT UNTIL THE NEXT MEETING AND TO INSTRUCT STAFF TO CONTINUE NEGOTIATIONS WITH MR. LEVY ON ENTERING INTO A MASTER LEASE ARRANGEMENT. UPON A VOICE VOTE, ALL VOTING AYE, VICE - CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 2. CONSIDERATION OF DRAWING ON LOU LUND.GREW S LETTER OF CREDIT: Mr. Robertson stated Mr. Lundgren did come this evening with,a written report and Mr. Lundgren was prepared to give a verbal report covering the material he had delivered at the meeting. Mr. Lundgren stated he apologized for not getting this report ready for the HRA's agenda, but he did not have all the information at that time. In general, he was trying to report on the progress since the last HRA meeting on the financing for the Fridley Plaza project apartment building. He read the letter to the HRA. 0 HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12,. 1987 PAGE 7 Mr. Lundgren stated he had received from Meritor Mortgage 'a list of people who might be interested in joint venture.financing or participation financing. He had contacted all the people. on that list. The two he had received strong expressions from and who have requested preliminary financing packages were Murray's Savings and Loan in Dallas, Texas, and Home Federal Savings and Loan in San Diego, California. In addition, they have received 'a strong expression of interest from Golden Real Estate. These people, if they said yes, would not be providing the financing, they were mortgage brokers. Mr. Lundgren stated Mr. Golden's letter was attached to his letter. Mr. Golden had stated in his letter that he had two firms interested in the construction and permanent financing and had told Mr. Lundgren he was very interested and would get back to Mr. Lundgren within a week to ten days Mr. Doug Mayo of the,-Rothchild Financial Co. was preparing a package to be_sent,to a company in Maryland. Mr. Mayo has helped him with financing in th& past, and they had good experiences between them. Mr. Lundgren stated they expect the preliminary responses to their packages before the end of February. Mr. Lundgren stated he had received from-Mr. Lee Maxfi °eld the person he felt was the most competent in the field, a price and timeline for a feasibility study. He had had several feasibility studies done before, but he did not actually have them in hand. He stated he had decided not to commit $5,000 for the study if, in just two days, the HRA decided to draw-on °'his letter of credit. He had told Mr. Maxfield he would call him the morning after the HRA meeting and would authorize the study if the [IRA did not call on the letter of credit at this meeting. Mr. Lundgren stated he wanted to. explain that joint venture financing meant he would have a partner and the partner would be a financial institution that was involved. They lend great financial credibility to the project, put up all the money, and then get _perhaps 50% ownership ih the project: Mr. Lundgren stated participation financing meant the company would give all the money that was required for the project so they did not have to seek additional equity by syndication, saving lots of legal and other fees. With all five-of-the intwested parties, they were talking about either partici- pation financing or joint venture financing. Mr. Lundgren stated he felt he was now at the point where he was going to be getting some preliminary and some pretty strong indications yet this month. In his letter, he had suggested that when he received any responses from these people, he would report to staff on the indication whether it was yes or no. He wanted to assure the HRA that they were still talking about the same building, the same quality, etc., that has been discussed from the beginning. • Mr. R smussen asked if the HRA had any obligation to W. Lundgren. HOUSING_ REDEVELOPMENT AUTHORITY TIM M, FEBRUARY 12, 1987 PAGE 8 Mr. Newman stated that at previous meetings Mr. Lundgren has made it very clear that even though the HRA has so far declined to call on his letter of credit that it: should not be construed or implied that there was any commitment on the part of the HRA. It was not to be construed or implied at this meeting that if the HRA elects not to call on Mr. Lundgren's letter of credit that the letter of credit would be reduced by the amount of $5,000 for the feasi- bility study or that the action of the HRA would create any obligation to Mr. Lundgren. Mr. Lundgren stated he fully understood that. He stated this feasibility study was necessary for him, the HRA, the community, and the project. Mr. Meyer stated it seemed to him they had the best of all worlds here. They have Mr. Lundgren working to develop the property in the way the HRA would like to see it developed, and it was not really costing them any money to wait. It seemed to him it was to the HRA's advantage to not exercise their right to call on Mr. Lundgren's letter of credit and leave the status as it was. Mr. Newman stated it has been Staff's recommendation since December to draw on the letter of credit. He wanted to emphasize that at the last 2 -3 meetings, Mr. Lundgren has repeatedly indicated he would have information for the next meeting. At each meeting, there has been a reason for not having that information, and it was a little frustrating at the.staff level to not see 0 any progress. Ms'. Schnabel stated the HRA had another greeting in four weeks, and she did not see where Mr. Lundgren was going to have an answer within four weeks unless the answer was "no ". If the answer was "yes" or "maybe" or "we would like to take another look ", it was netgoing to happen in four weeks because of the feasibility study that has to bei; done. Mr. Robertson stated it should be noted again for the record that there was not an indefinite time the HRA has the option to draw on the letter of credit. The HRA must make a final decision at the May meeting, if it is not done before. Mr. Lundgren stated he understood that also, He understood that if the HRA granted his request not to draw on the letter of credit that they were only doing it for this particular meeting. At the March meeting, if it comes up again, they might vote negatively at that time. Mr. Newman stated that procedurally the matter was tabled at a previous meeting so if there was no intention by the HRA to call on the letter of credit, no action was needed at this time. Ms. Schnabel stated it seemed to again be the concensus of the HRA members to not call on Mr. Lundgren's letter of credit and that the item remain on the table. Mr. Lundgren stated that when the feasibility study was available, the HRA would receive it no matter what happens. HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 9 3. LETTER CONCERNING TOM RYAN PROPERTY AND RECOMMENDATION FROM VIRGIL HERRICK: Mr. Newman stated the HRA members had - received at the meeting a copy of a memo from Jim Robinson regarding relocation expenses, and a letter from Virgil Herrick dated Jan. 12, 1987. He stated both Tom Ryan and his legal counsel, Douglas Peterson, were at the meeting. He would ask Mr. Peterson to give some background on why this request was being made and then proceed from there. Mr. Douglas Peterson stated he was an attorney representing Tom Ryan, who owned Dr. Ryan's Automotive Clinic across the street. Back in 1983, as part of the redevelopment of the Center City area, Mr. Ryan's property on which he was doing business was condemned and, as part of the - condemnation, he entered into an agreement with the HRA and the City-to move his business from that property to the vacant Standard Station across the street. As part of that agreement, Mr. Ryan was allowed to remain at that location. He believed the original lease was for two years and then on a month. -to: -month basis after that. The rent was currently $650 /month. Mr. Peterson stated at this time Mr. Ryan was intending to sell his business. They have a purchase agreement with Mr. George Frey, a mechanic, who intends to take over Mr. Ryan's business at this location. But the purchase agreement was contingent upon a two year lease he would be entering into with the HRA. That was the reason they were before the HRA at this meeting to talk to the HRA about attempting to get an accommodation with Mr. Frey to get the lease. MK Frey understood that the HRA was interested in developing the property and the property around the parcel. Mr. Frey was concerned about going into the business unless he had some sort of guarantee that he was not going to be removed from the property immediately. That was the reason for the two year lease. They-would . like a lease with a term of two years with a 90 -day termination provision starting at the end of the two years at the same rental of $650 /month, with a prevision in the lease that the new lessee would not be entitled to any relocation expenses in the event the HRA wanted to develop the property at the end of the two years. Mr. Frey understood there was no way he would get a lease unless he waived the right to relocation. Mr. Newman stated Staff',s. recommendation was against a two year lease as described by Mr. Peterson. That was the basis of the discussion Mr. Herrick had with Mr. Ryan. One thing pointed out in Mr. Herrick's letter was that at any point during the two year period', the lease could be terminated on a 90 -day notice if the HRA required the property for the purpose of "development. That was substantially different from what Mr. Peterson was proposing. He thought that from a legal standpoint with the type of provisions outlined in Mr. Herrick's letter and based on the memo received from Mr. Robinson indi- cating there would not, in fact, be any claim for relocation, they feel more comfortable with what Mr. Herrick has proposed. They certainly need to have the flexibility. Mr.Lundgren has indicated some possibility of obtaining funding for his project so within a two year period, a number of things could • happen. HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 10 Mr. Qureshi stated he was sure the HRA realized they had already paid Mr. Ryan acquisition and relocation costs and the renting of the Standard Station building was a mutually agreeable arrangement which now stands on a month - to -month basis. If either party wants Mr. Ryan to move out, all they have to do is give a 30 -day notice and they have no further obligation to each other. He would have no problem with the HRA providing a two year lease with a 90- day notice as long as there was a provision that when the HRA entered into an agreement with a development that required the removal of this building, the HRA could give the 90 -day notice at that time. On the north side of Mississippi, they removed a gas station, not because they wanted to develop anything on the site, but because it provided a better exposure to Holly Shopping Center. That could also happen on this side of Mississippi St. where they might want to remove the structure just for exposure to a develop- ment behind it. In that situation, also, the HRA should have the right to do that. Mr. Newman stated he had indicated to Mr. Peterson that the only way he could recommend approval of the terms of the lease was if the removal of the building for development purposes was defined in a broad enough sense so it would cover the situation Mr. Qureshi had described. Mr. Peterson stated it was true that when Mr. Ryan's property was condemned that Mr. Ryan was paid everything required by the City and the HRA. Mr. Ryan idid have a business and still has a business that to him was worth money. He has been in business in the City of Fridley for over 26 years. At the time he moved across the street, possibly at that time he should have made the decision to go out of the redevelopment district, but he was concerned that it would mean losing business. At this time, they - really might not have any- thing to sell unless they can get assurances that the person who woUld like to purchase the business has some time to set up his business and keep the business going so the customers get to know him and then,hopefully, will follow him when he does have to move. Mr. Peterson stated as far as the time period, it was great to ?gave -the flexi- bility, but he did not think.khat anything was going to be happen- ing on that property within the two year period or at least within a one year period. With the tax law change at the end of December,-very few developers really know what they-are doing -with regard to construction, financing, etc. This property has been in the process of being attempted to be developed for a numt>&'of years. It did not sound like Mr. Lundgren had anything extremely nailed down, so it did not look like anything would really get going yet this year. If, by the end of the year, a developer comes in, they were still looking at another 7 -9 months before they can really get into the ground and be in a_ position to have anything anyone could look at which would mean tearing down this building. Ms- Schnabel stated that at this time, the HRA has the ability to give Mr. Ryan a 30 -day notice to vacate. It was her feeling to go along with the suggestion • made by Mr. Herrick with a two year maximum lease with a 90 -day notice to vacate and the waiver of relocation costs. HOUS ING & REDEVELOPMENT ;, QKI 3 MEETING, FEBRUARY 12, 19-87 PAGE 11 Mr. Prairie stated he would agree with that. He thought that was about as generous as they could be. Mr. Rasmussen stated he was reluctant to go into a two year lease. The HRA already owns the property, and why should they even get involved in another lease, regardless of the terms? Ms. Schnabel stated the HRA has already paid Mr. Ryan for relocation costs once, and they tried to help him along in getting his business established across the street. She thought the HRA had treated-him quite fairly in that situation,but she did not know how strong their obligation was. She did not want to hurt him from the standpoint of his business, but what were the HRA's obligations? Mr. Qureshi stated the HRA had no.legal obligations. Their only concern was they want to give some consideration to Mr. Ryan's request. He felt the HRA should have the absolute right to acquire the vacation of the property for the tearing down of the building for any devel- opment needs. Mr. Qureshi asked Mr. Peterson what kind of flexibility ,he could give to the HRA and still preserve the purchase agreement. Mr. Peterson stated the purchaser was looking for some assurances that he can go into the business and stay longer than 90 days. He thought the furthest they could go in the lease was to have a 2 year lease with a one year guarantee and possibly after that a vacation for any purpose. He did not think the HRA was going to require a vacation unless they had a specific use for the property. Mr. Prairie stated he felt the HRA could agree to a two year lease with a 90- day vacation notice as proposed by Mr. Herrick. Mr. Ryan stated when you sell a business, you sell the land, the building, the equipment, and the name. That was not what happened in his case. He got paid for the land and the building and relocation, but he was now sitting with $40,000 worth of equipment and a name. He has been looking for a buyer for two years and has finally found one. He will not have that buyer unless he has some kind of lease. Otherwise, he will be sitting in'limbo with $40,000 worth of equipment and a name that was no good after 26 years of business unless he has a buyer. Ms. Schnabel stated she sensed from the discussion that the HRA was reluctant to tie that property up any more than was reasonable, at least beyond what they have been doing for Mr. Ryan, and especially in view of the fact they do have a developer who appears to be hopeful in getting the development going. As proposed by Mr. Herrick, the two years was fine, but they had to remain flexible on the property so that they have an option -tom give notice to' vacate if there is need for the property. • Mr. Meyer stated he thought the two year lease was alright with a 90 -day notice situation. But, he also agreed with what Mr. Rasmussen was saying about why should they even put themselves in a hole they don't have to be in? HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 12 Mr. Rasmussen stated that even though it sounded rather cruel, he did not think the HRA should be involved in the sale of Mr. Ryan's business at all. Mr. Newman stated he believed Mr. Ryan wanted to close on the sale of his business at the end of February, and they certainly want to accommodate Mr. Ryan. They would have the new owner enter directly into a new lease with the HRA and in that lease, they would clearly spell out the limitations- - that he was waiving the right to relocation, and that it would be a two year lease with a 90 -day notice at the discretion of the HRA for any development reason. Mr. Meyer stated he would suggest 180 days notice instead of 90 days, because he could not foresee that even though they got a buyer or some developer immediately, it would still be six months before they would need that property. Mr. Newman stated he would speak against that because of their experience with Mr. Lundgren. When they draft development contracts, it was the City's desire for the development to move as quickly as possible. In the case of Mr. Lundgren, the way the contract was drafted, the HRA had approximately, 120 days -from the' time fir. Lundgren provided evidence of financing to fully acquire the property. The HRA was really not in a position where they were going to want to go ahead and have someone vacate that property until they know the development was ready to go in. They could be in the situation where they have been presented with the evidence of financing, the commitment for financing was there, and the developer was ready to go, but they then had to wait six months to building. He stated that could really impede development. Mr. Meyer stated he could understand what fir. Newman was saying. Mr. Peterson stated he would like to bring back to the buyer something that said there was a guarantee. Would the HRA consider a six month hiatus from notice at the front end of the lease? It was something he could bring back to the buyer as kind of a guarantee. Mr.Qureshi stated he would have no problem with that. He had no problem even giving six months up front and then 90 days notice after that. Mr. Qureshi stated he wanted to make sure the buyer was aware that the City was taking part of the right -of -way, about 20 ft., for the potential expansion of Mississippi St. He did not think it would affect the business at all. Mr. Newman stated he felt very confident that even if a developer would come in the next day with a specific proposal, the fact that the HRA would not be able to deliver the property until September 1 would not be an impediment to the new development. Ms. Schnabel stated that if Mr. Ryan did not sell the business for some reason to this particular buyer at the end of this month, was this kind of agreement going to be effective for a period of time so that it could be for another buyer? HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 13 Mr. Newman stated this agreement would be specifically limited to this offer of purchase. If this purchase fell through, it would revert back to the original 30 day notice on a month -to -month basis with Mr. Ryan. Ms. Schnabel stated she wanted Mr. Ryan to understand that this agreement was only for this buyer; and if this purchase did not go through and he had another buyer at another time, the developmental stages for this property at that time might be totally different. Mr. Qureshi stated he hoped this offer was only limited to the end of the month. Mr. Rasmussen stated because the HRA had an unfortunate experience in a previous lease, he would hope the HRA could examine the financial ability of the new buyer to make the rental payments on the property. Mr.Newman stated they could request that Mr. Peterson get a financial statement of the buyer. MOTION BY MR. PRAIRIE, SECONDED BY MR. RASMUSSEN, TO DIRECT THE EXECUTIVE DIRECTOR TO EXECUTE THE LEASE WITH THE NEW BUYER OF THE DR. RYAN AUTOMOTIVE CLINIC SUBJECT TO LEGAL STAFF REVIEW AND APPROVAL AND SUBJECT TO THE FOLLOWING STIPULATIONS: 1. THE LEASE TO BE A TWO -YEAR LEASE WITH A 90 -DAY NOTICE AT THE • DISCRETION OF THE HRA FOR ANY DEVELOPMENT PURPOSE. 2. THERE WOULD BE NO RELOCATION EXPENSES TO THE BUYER. 3. THE 90 -DAY NOTICE WOULD NOT BECOME EFFECTIVE PRIOR TO THE EXPIRATION OF THE FIRST SIX MONTHS OF THE LEASE. 4. THIS NEW LEASE TO BE EXECUTED ON OR BEFORE. MARCH 1, 1987. 5. THE PROSPECTIVE TENANT TO PROVIDE A FINANCIAL STATEMENT OF HIS CURRENT FINANCIAL CONDITION AND GRANT AUTHORIZATION FOR A CREDIT CHECK. UPON A VOICE VOTE, ALL VOTING AYE, VICE- CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 4. UPDATE ON LAKE POINTE CORPORATE CENTER DEVELOPMENT PROJECT: Mr. Qureshi stated that last August, the HRA approved amendments to the Agree - ment for the Lake Pointe Corporate Center development. TievHRA awarded the contracts which committed the HRA and the City Council to roughly a cost of $2.2 million -for work on the site. Also, it was required that the plat be approved and filed. The plat was approved by the City Council in August, but it has never been filed. Mr. Newman had come before the HRA indicating to the HRA the problems and difficulties in getting that plat filed. Mr. Weir had hired Sunde Engineering to do the plat. The plat was prepared. He had also tried to file the Metes and Bounds description for Parcel C, and if he had been successful, the HRA would have gotten $1 million. Mr.Weir did try to file-the plat, but could not because of some legal description problems. HOUSING & REDEVELOPMENT AUTHORI_TY MEETING, FEBRUARY 12, 1987 PAGE 14 Mr. Qureshi stated in about October, there were some further meetings with Mr. Weir and his staff, and Mr. Weir indicated he wanted the right -of -way along Highway 65 vacated. The City did go ahead and start the process and now have legally vacated the property which was essentially where the road exits, except the portion needed for the Highway 65 intersection improvements. Mr. Qureshi stated when the plat was approved in August, there was a statement made by Eric Nesset that the alignment of this road might have to be adjusted. After that when the intersection plans for Highway 65 and West Moore Lake Drive were finalized, it was indicated the new alignment would be better for traffic purposes. The alignment that would meet Mr. Weir's desires required the acquisition of a second house. It was Mr. Weir's desire also that the HRA pay for :the..acquisition of that house. Even though -the HRA had agreed they had gone farther than they should have with Mr. Weir and should not give any more assistance, they reluctantly agreed with the City Council that if paying for the acquisition of this house would solve the problems with Mr. Weir, they should do it. Mr. Newman put that information in a letter and sent it to Mr.Weir. Mr. Qureshi stated he had told Mr. Weir they should sit down and try to work out the problem areas. Mr. Weir had said that because of the market changes, he could not live with some of the restrictions imposed by the HRA. Mr. Qureshi stated -he had told Mr. Weir he should approach the HRA and the . City Council and request an adjustment to the Agreement. On January 22., Mr.-Weir sent him a letter giving a notice of default on the part of the HRA. Mr. Newman has responded saying the City and the HRA deny the alleged items of default. Mr. Qureshi stated there were - basically three scenarios the HRA could pursue. Of course, each of these three choices had disadvantages and advantages. 1. There was an Agreement, and the developer should live by that Agreement. If the problems cannot be resolved, they will have to go the legal route, i.e., litigation. 2. The HRA could attempt to renegotiate and adjust the Agreement. 3. If no agreement could be made between the two parties, the HRA could pay back the developer's costs of the land and seek another developer. Mr. Rasmussen expressed concern about how these things had been documented. Mr. Newman stated most of the negotiations since last August have been documented in writing. Mr. Robertson and he have taken notes of the various discussions. The objections by the developer prior to August 1986 were negated by the new Agreement. Since that Agreement was entered into, Mr. Qureshi has only had one meeting with Mr. Weir that he was aware of, • and he, Mr. Newman, was present,at that meeting. He did not believe Mr. Robertson had had any meetings with Mr. Weir since that time. HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 15 Mr. Newman stated he has had very few discussions with Mr. Weir's attorneys. Most of the conversations back and forth have been in writing, so they do have extensive communication. He has -made a further request to, Staff to go back in time and see -what other documents there are. Staff will be meeting the next day to review these ddcuments. If there was no problem with the HRA reviewing these documents, he would forward them on to the HRA. Mr. Qureshi stated the City Council has been briefed also on the background of this situation, and it was the Council's feeling that the HRA has been performing in good faith with the Lake Pointe development. The HRA has basi- cally purchased the property, they promised and purchased the George Johnson property, they had proceeded with the contracts and the r,ork was being done, the City Council had approved the plat, there was a question on alignment and the adjustment was made. Financially, the HRA was still in a good position, because they cbntrol the property, and they still have $5.6 million' o'f Mr. Weir's money for which they gave a Revenue Note, Mr. Newman stated that in talking to the developer's attorneys, it was obvious they were looking for more than just minor modifications in the development contract. They were looking for renegotiating the basic principles of the Agreement. He was fairly confident a lawsuit would be filed before the end of Feb. Unless the HRA and City Staff directed him to commence major renegotiations of the Agreement, their only alternative at this time was to defend the lawsuit. He has talked to Staff, Larry Commers, Jim Casserly and the City Council about the fact that they are going to need legal assistance in repres tng the HRA. At this time, his recommendation would be to retain the Popham- Haik lav firm. There were a number of reasons why they were recommending this law firm. It was a large firm of about 70 -80 attorneys so it had the size and -the resources to handle this size of litigation: Herrick & Newman has associated with Popham -Haik in the past. Mr. Newman stated he and Mr. Herrick will be meeting with Ray Haik and Tom Berg of the Popham Haik law firm; and if they feel comfortable with proceeding with this firm, they will immediately give Mr. Haik and Mr. Berg the information so they can make an assessment of what action should be taken.- If needed, they will request a special HRA meeting. Mr. Qureshi stated again that the HRA' has committed to the project $2.2 million for improvements. Contracts have been signed by the City and contractors and it was Staff's recommendation to continue to proceed to improve the property so it will look attractive, whether for this development or another future development. There was another $1.6 million of commitment for the Highway 65 and West Moore Lake Dr. intersection improvement which the HRA and City Council have not actually entered into an construction contract yet. Ms. Schnabel. stated if -the HRA members are served with a suit from anyone representing the developer, perhaps the HRA should have some type of meetireg before the March meeting so they can be apprised of the situation and be brought up to dato:by staff and legal counsel. Mr. Newman stated they would be glad to do that. HOUSING & REDEVELOPMENT AUTHORITY MEETING., FEBRUARY 12, 1987 PAGE 16 Mr. Rasmussen ask- .d i f the HRA shou.l d be doing any kind of PR regarding this impending lawsuit to protect their interests. Mr. Newman stated the subject was raised at the last City Council meeting about whether the City and the HRA should go on the offense and issue their own press release. (Mr. Prairie left the meeting at 10:15 p.m.) Ms. Schnabel stated if people are-co.ncerned about what is going on with that property and rumours are.flying around, maybe there was -a need for some type of press release and maybe Staff should start preparing for an article. Mr. Newman stated he would caution the HRA members that if they do get served with any legal papers that they note the date and the time and forward the papers to him immediately —,. If any of the HRA members feel the need for any further discussion, he /she should let Mr. Robertson know and they will schedule a meeting. .Ms. Schnabel stated she woulhd like to know whenever any of the HRA members was served with Wers, because-.she -felt that was something the other members should be aware of right away. • 5. CONSIDERATION OF A RESOLUTION, 1 RE UESTING THAT THE FRIDLEY CITY COUNCIL AUTRORIZE7CO'NSTRUCTION I _ S ,I R H aH 65 AND WEST MOORE LAKE DRIV` AND:WAI E THE-PUBLIC .HEARING RELATED THERETO AND 2 APPROVING AID AUTHORIZING THE REIMBURSEMENT TO nE CITY OF FRIDLEY, ON A MONTHLY BASIS,- FOR THE COST OFT ESE INTERSECTION IMPROVEMENTS: Mr. Robertson stated this project was originally started to improve the easterly entrance to the Lake Pointe project. As the HRA remembered, it was the project that was requi.red to, not only improve the entrance visually and functionally, but was also required by the Indirect Source Air Quality Permit to expedite the traffic flow to reduce the air pollution. Mr. Robertson stated the basic cost was not to exceed $1,661,784.40; however, there were some additional costs the HRA might wish to consider in the future on decorative lighting. He would also call the HRA's attention to the memo given to the HRA members regarding an informational meeting that was held the pre- vious evening at City Hall with the people who own homes along 0ld Central Ave. beyond the intersection. Mr. Robertson stated Mr. Flora was at the meeting to give some technical background. Mr. Flora stated that since the public hearing with the residents along Old Central, there was some question about whether this was actually an acceptable solution to the intersection at this time. So, they are working on some • alternative solutions to satisfy some of the concerns of the neighborhood, but they were,still looking at somewhere around $1.7 million for this intersection improvement which was designed to hand a the Lake Pointe Development, Highway 65, and the future traffic upstream and downstream from the intersection. HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 17 Nr. Flora stated that if the project goes, Staff has some suggestions. As the HRA knew, they were doing a University Ave. Corridor study & in that study, they were looking at the "Fridley look ", certain light fixtures, plantings, motif, etc. If this was to be the Fridley look, the question was should the Fridley look be continued to this location also. If they do that, they should look at incorporating those types of lights, plantings, etc., into the project. So, depending on the options, they were looking at a range of $4,000 to $155,000 for the Fridley street lighting look. Mr. Flora stated another item, with the Indirect Source Permit, was the Rice Creek Road diversion. Part of that plan was that too many cars were coring down Old Central to the Highway 65/Old Central intersection, so the plan was to divert the traffic from Old Central to Highway 65 through Rice Creek Road by the Shorewood Shopping Center. That was another project that was authorized by the HRA for preliminary plans to be prepared. At the informational meeting with the neighborhood, the neighbors felt this was probably the first priority because by moving the traffic off Old Central at the Old Central/ Rice Creek Road intersection, some of the concerns could be resolved more satis- factorily. So, Staff might be coming to the HRA to do this. Right now in round numbers, that improvement would be $400,000. Staff was also looking at whether they should also continue the Fridley look in this location if they do it at the Highway 65 /Old Central location. These were things- -the HRA would have to decide. Mr. Flora stated the item before the HRA at this meeting was the intersection. Per the agreement with Mr. Weir -'and the HRA and the City was supposed to work to get this intersection done this construction season. The City was moving forward, but they needed some approval from the HRA. Councilperson Schneider stated he did not know if the City Council would hold a public hearing or not, but he would be more comfortable if this resolution came to the City Council without the HRA specifically requesting the City Council not to hold a public hearing. Mr. Qureshi stated there was no legal requirement to hold a public hearing, but certainly the HRA or the City Council could hold a public hearing if they wished. The HRA could delete that wording from the resolution. Mr. Flora stated he would also like some kind of concensus from the #+RA so they can tell the consultant he can put the lighting into the plan so they can be identified and the costs provided rather than doing tt later. This was certainly going to be another- one.of the foca =l points of the City. Ms. Schnabel stated her problem was that as far as she knew the HRA had not made any decision yet on the lighting along University Ave. Mr. Robertson stated the HRA did approve the lighting at the intersections, . but not along the Corridor. After Staff received the recommendations from the Barton- Aschmann firm, staff -did recommend a style of lighting standards. It was HOUSING & REDEVELOPl9ENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 18 his understanding that when the HRA approved the Staff report in December, they approved that style of Iightinq standards for the intersection. The - RRA.;then hired Mr. Ellers, a former NSP lighting engi -neer, to specify the lighting details, not only for the intersections, but for the entire corridor to make sure all the lighting fit so they wouldn't have to redo the intersections to match the corridor at some later time. They now have a design and layout for the entire University Ave. corridor for the approved lighting style plus preliminary recommendations for the commercial frontage road lighting. They have not yet brought this to the HRA. Mr. Robertson stated.they were now beginning preliminary engineering designs for Old Central''and Highway 65 /Lake Pointe Drive entrance. Did the HRA wish to make a commitment at this time to adopt those styles of lighting standards for this intersection also? MOTION BY MR. RASMUSSEN, SECONDED BY MR. MEYER, TO ADOPT RESOLUTION NO. HRA ? -19871 DELETING THE LANGUAGE, "AND WAIVE. THE PUBLIC HEARING RELATING THERETO". UPON A VOICE VOTE, ALL VOTING AYE, VICE- CHAIRPERSON .SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. The HRA members agreed Staff could proceed to incorporate the lighting design into the plan all the way to Rice Creek Road, but that the HRA would like to see all the plans before it is approved. 6. CLAIMS (1565- 1581): MOTION BY MR. RASMUSSEN, SECONDED BY MR. MEYER, TO APPROVE THE CHECK REGISTER AS PRESENTED. UPON A VOICE VOTE, ALL VOTING AYE, VICE- CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 7. OTHER BUSINESS: a. Update on Mississippi St. Intersection Mr. Qureshi stated the intersection plans have been prepared. The County originally had plans to do the East River Road/Rice Creek Bridge, but they ran into some technical difficulties. Since the Mississippi Street plans are ready, the County wishes to proceed on it this year if possible. This plan was presented to the City Council and the members of the City Council had some concerns'. They recognized the improvements would help move the traffic through the intersection, but their concern was to make sure the neighborhood, behind Holly Center still had access to this road and be able to use it safely. The City Council requested the Caunty to look at the possibilities of providing some control of the intersection in this location. The City received a-letter from the County stating that when this development comes and they can identify a cross intersection either at 2nd Street or.at the westerly entrance to the -Holly Shopping Center, they will assist in providing a signal at that 1lodation.' With that commitment, he felt the City Council would be amiable to the County proceeding with the project. HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 19 Mr. Qureshi stated this was for the HRA's information. It still needed City Council approval, but the HRA was committed for a portion of the cost the City will have to pay. ADJOURNMENT: MOTION BY MR. RASMUSSEN, SECONDED BY MR. MEYER, TO ADJOURN THE MEETING. UPON A VOICE VOTE, ALL VOTING AYE, VICE- CHAIRPERSON SCHNABEL DECLARED THE FEB. 12, 1987, HOUSING & REDEVELOPMENT AUTHORITY MEETING ADJOURNED AT 11:10 P.M. Respectfully su mitted, �tJ LyrMe Saba Recording Secretary 0 U �nc,e • ))4-6