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HRA 12-03-2020 December 3, 2020 HRA Meeting Regular Meeting Agenda Call to order Roll call. Action Items 1.Approval of Expenditures 2. Approval of November 5, 2020 Meeting Minutes 3. Approval of Amendment to De Associates (Northstar Transit Village) 4. Approval of 2021 HRA Budget Informational Items 1. Housing Loan Program Update Adjournment HRA ACTION ITEM Date: 11/25/2020 To: Wally Wysopal, Executive Director From: Paul Bolin, Assistant Executive Director RE: After a four year quest to obtain the Low Income Housing Tax Credits (LIHTC) needed to construct their affordable building, Sherman Associates were met with the highest materials and labor costs the Country has experienced. This perfect storm has increased the project costs and created an additional funding gap of approximately $2.4M. To assist in making up this shortfall, Sherman Associates have asked that the Authority increase the size of its PAYGO TIF revenue note by approximately $600,000. This change simply allows Sherman to take a larger share of the new taxes that their project will generate, to fill the funding gap. Attached is a memorandum from Attorney Casserly explaining the change to the development agreement. Staff recommends the Authority adopt the resolution amending the development agreement, increasing the size of the TIF Note to assist in moving this affordable housing project forward. James R. Casserly jcasserly@mmblawfirm.com Direct 952.885.1296 TO: Fridley HRA Attn: Paul Bolin, Assistant HRA Executive Director FROM: James R. Casserly, Esq. Vickie Loher-Johnson, Esq. SUBJECT: Seventh Amendment to the Restated Contract Between The Housing and Redevelopment Authority of the City of Fridley and Sherman Associates Development LLC FILE NO.: 9571-85 DATE: November 25, 2020 Attached you will find the following: 1. A letter from Sherman requesting the changes to the Seventh Amendment. 2. A Tax Increment Analysis for the Mixed Income Rental Project; and 3. A Seventh Amendment to the Restated Contract between the HRA and Sherman 4. A Resolution authorizing execution of the Seventh Amendment; The Sherman letter explains the shortfall with which the Redeveloper has been struggling. It amounts to approximately $2.4M and to help reduce the shortfall, the Redeveloper has asked the HRA to increase the size of its to be issued for $623,350. If approved, the new Note would be in the amount or $1,222,750. We have reviewed the pro forma and we agree that there is a substantial shortfall. The Tax Increment Analysis is our standard analysis and shows that the increment on this Mixed Income Rental Building should be received in 2023 and would continue until 2042. Columns (i) and (j) on page two of the Analysis show the semi-annual present value and the cumulative present value of the available tax increment. Using a present value rate of 5%, the available tax increment is $1,242,498 (approximately $20,000 more than the revised Note). The Seventh Amendment has three sections. Section 1 of the Seventh Amendment amends the Note for the Mixed Income Rental Project which is described in the Redevelopment Contract as Phase 2. The original Contract multiplied the number of units in the development by $8,850. This Amendment multiplies the number of units by $16,750. The 73 units multiplied by $16,750 provides that the Note totals $1,222,750. Section 2 of Seventh Amendment extends the maturity date of the Note from 17 years to 20 years and 3 months or 243 months. This provides a maturity date three months after the maturity date of a senior lender to us and is a requirement of that November 25, 2020 Page 2 lender. Section 3 of the Seventh Amendment recites that a default by one of the projects will not result in a default in the other projects. If the HRA wishes to approve the Seventh Amendment, then it needs to adopt the Resolution above. This has been a very difficult project to finance and we have been working with Sherman for several years to try to have a successful financing package. We think the adoption of the Seventh Amendment will allow the project to close, and we approval. Attachments 4835-7272-1107, v. 1 Commercial / Retail Rental-Low/Mod Income 4d Rental 0 ---- SEMI - ANNUAL ---- ANNUAL HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY COUNTY OF ANOKA STATE OF MINNESOTA RESOLUTION NO. HRA 2020 - 14 A RESOLUTION AUTHORIZING EXECUTION AND DELIVERY OF A SEVENTH AMENDMENT TO THE RESTATED CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY MINNESOTA AND SHERMAN ASSOCIATES DEVELOPMENT LLC BE IT RESOLVED by the Redevelopment Authority in and for the City of Fridley Min follows: Section 1. Recitals. 1.01. It has been proposed that the Authority enter into a Seventh Amendment to the Restated Contract for Private Redevelopment (the Sherman Associates Development LLC, a Minnesota limited liability company (the Section 2. Findings. 2.01. The Board hereby finds that the Seventh Amendment promotes the objectives as outlined in its Development Program established pursuant to Minnesota Statutes, Section 469.001 et seq. 2.02. The Board hereby finds that it has approved and executed a Restated Contract for Private Redevelopment between the Authority and the Redeveloper dated as of April 4, 2019, a First Amendment dated as of July 11, 2019, a Second Amendment dated as of September 5, 2019, a Third Amendment dated as of October 3, 2019, a Fourth Amendment dated as of December 5, 2019, a Fifth Amendment dated as of January 2, 2020, and a Sixth Amendment dated as of August 6, 2020. Section 3. Authorizations. 3.01. The President and the Executive authorized to execute and deliver the Seventh Amendment to the Contract when the following conditions are met: 1. Substantial conformance of a Seventh Amendment to the Seventh Amendment presented to the Authority as of this date with such additions and modifications as the Officers may deem desirable or necessary as evidenced by the execution thereof. Adopted by the Board of the Authority this _______ day of ___________________, 2020. __________________________________ WILLIAM B. HOLM - CHAIRPERSON ATTEST: _________________________________________ 2 Execution: December 3, 2020 ________________________________________________________________________ SEVENTH AMENDMENT TO THE RESTATED CONTRACT FOR PRIVATE REDEVELOPMENT By and Between the HOUSING AND REDEVELOPMENT AUTHORITY In and For THE CITY OF FRIDLEY, MINNESOTA And SHERMAN ASSOCIATES DEVELOPMENT LLC ________________________________________________________________________ This document was drafted by: James Casserly, Esq. Monroe Moxness Berg PA 7760 France Ave South, Suite 700 Minneapolis, Minnesota 55435 952-885-1296 SEVENTH AMENDMENT TO THE RESTATED CONTRACT FOR PRIVATE REDEVELOPMENT THIS SEVENTH AMENDMENT is made on or as of this 3rd day of December, 2020, by and between the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "Authority") and Sherman Associates Development LLC, a Minnesota limited liability company (the "Redeveloper"). WITNESSETH: WHEREAS, the Authority and the Redeveloper entered into a Restated Contract for Private Redevelopment dated as of April 4, 2019 a First Amendment dated as of July 11, ond Amendment dated as of S endment dated as of Oc Fourth Amendment dated as of December 5, 2019, a Fifth Amendment dated as of January 2, 2020, and a Sixth Amendment dated as (collectively, the "Contract") (Capitalized terms not defined in this Agreement are defined in the Contract); and WHEREAS, the Redeveloper is performing all of its obligations required by the Contract; and WHEREAS, the Authority is performing its obligations in accordance with the Contract; and WHEREAS, the Authority and Redeveloper desire to amend the Contract to further the purposes set forth therein; NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, the parties hereby agree as follows: Section 1. Note for Phase 2. Section 3.4(b) of the Contract is hereby amended to read as follows: For Phase 2, the Note principal shall be the sum of $16,750/unit multiplied by the number of units included in the final Certificate of Occupancy. Section 2. Maturity of Authority Loan. Section 3.2(l) is hereby amended to read as follows: (I) For the Phase 2 closing and on the Phase 2 Closing Date, the Authority shall loan the Redeveloper the sum of $600,000, the principal of the Authority Loan. The Authority Loan shall be evidenced by a Promissory Note (the "Promissory Note" attached as Schedule I) and the Loan Agreement (the "Loan Agreement" attached as Schedule J) and secured by a mortgage subordinate to any financing necessary for construction of the Phase 2 Minimum Improvements. The mortgage securing the Authority Loan shall be senior to the mortgage described in Section 3.2(j) and shall be recorded at Redeveloper's expense on the Phase 2 Date of Closing. The Authority Loan shall incur 2.0% simple interest from the date of the Promissory Note with annual payments from net cash flow and a maturity date 243 months from the date of the Promissory Note as further described in the Promissory Note and the Loan Agreement. Section 3. Minimum Improvements Not to be Cross-Defaulted. The Contract is hereby amended to add the following Section 7.9 after Section 7.8: Section 7.9 No Cross-Default. Notwithstanding any provision herein to the contrary, an Event of Default incurred by one an Event of Default with respect to the other Phases that would not otherwise be in default but for the Event of Default by the Defaulting Phase. Any remedies to be exercised by the Authority for an Event of Default may only be exercised against the Defaulting Phase and the owner thereof. Section 4. Agreement Supersedes Contract. The terms and conditions contained in this Seventh Amendment shall supersede any conflicting provisions contained in the Contract. 2 IN WITNESS WHEREOF, the Authority has caused this Seventh Amendment to the Restated Contract for Private Redevelopment to be duly executed in its name and behalf and the Redeveloper has executed this Seventh Amendment to Contract for Private Redevelopment on or as of the date first above written. \[Signature Pages Follow\] 3 Dated: ____________________ HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY, MINNESOTA By _____________________________________ Its _______________________________ By _____________________________________ Its _______________________________ STATE OF MINNESOTA ) )ss COUNTY OF __________ ) On this _____ day of ________________________, 2020 before me, a notary public, personally appeared William B. Holm and Walter T. Wysopal to me personally known who by me duly sworn, did say that they are the _______________________ and _________________________ respectively, of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota, and acknowledged the foregoing instrument on behalf of said Authority. ___________________________________ Notary Public Authority Signature Page Seventh Amendment to Restated Contract for Private Redevelopment 4 Dated: ____________________ Sherman Associates Development LLC By Its STATE OF MINNESOTA ) ) ss. COUNTY OF ) On this _____ day of _____________________________, 2020 before me, a notary public, personally appeared ___________________________________________ of Sherman Associates Development LLC, a Minnesota limited liability company, and acknowledged the foregoing instrument on behalf of said company. __________________________________ Notary Public Redeveloper Signature Page Seventh Amendment to Restated Contract for Private Redevelopment MMB: 4849-6689-4546, v. 1 5 HRA AGENDA ITEM Date: 11/25/2020 To: Wally Wysopal, Executive Director From: Paul Bolin, Assistant Executive Director Daniel Tienter, Finance Director/City Treasurer/City Clerk RE: HRA 2021 Budget On Thursday night, staff will present the Proposed 2021 Budget for the Authority to review and approve. Paul Bolin and Dan Tienter will be available to answer any questions that the Commissioners may have on the proposed budget. Last month, the Authority reviewed their cash fund balances in a work session. The cash flow projections and discussion that ensued serve as the basis for the Proposed 2021 Budget attached to this memorandum. It includes the General Fund, Housing Loan Program Fund and the various TIF Funds. The General Fund covers the bulk of the administrative and overhead costs of the Authority. It is also used to provide internal loans for development projects. The Housing Loan Program Fund covers the housing related programs and services (e.g., CEE programs). Since the October work session, staff revised the Proposed 2021 Budget to include strd addition budget authority for the extension of Locke Park Pointe from 71 Avenue to 73 Avenue. As a public improvement around the new municipal campus, the Authority may include this project as an expense related to sale proceeds to support the cost. Staff recommends approval of the Proposed 2021 Budget as presented.