6. HRSR 05-02-2011 - Laserfiche WebLink

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Kennedy Offices in 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis Minneapolis MN 55402 Saint Paul (612) 337-9300 telephone Gray en (612) 337-9310 fax St. Cloud ~'~'µ'•kennedy-graven.com CHARTERED Affirmative Action Equal Opportunity Employer MEMORANDUM TO: Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Elk River, Minnesota FROM: Jenny Boulton DATE: Apri122, 2011 RE: Development Agreement with Metroplains Development, LLC The City Council of the City of Elk River and the Board of Commissioners of the Elk River HRA have requested additional information regarding the use of the Bluff Block Development under the Development Agreement with Metroplains Development, LLC ("Metroplains"). 1. Back rg_ ound. On December 6, 2004 the City and Metroplains entered into a Development Agreement to provide tax increment assistance for a development including the construction of approximately 67 units of owner-occupied housing and approximately 11,513 square feet of retail space, together with related parking facilities (the "Bluff Block Development"). At Metroplains' request the City amended the terms of the original agreement, pursuant to an Amended and Restated Development Agreement with Metroplains, dated as of February 28, 2006, (the "Development Agreement") to provide, among other things, for (i) the Bluff Block Development to be designed and constructed by Bluff Block, LLC or CSS Builders, Inc., or its principal, Charles Schulz and (ii) to provide a mechanism for Metroplains to secure a construction loan (rather than permanent financing after construction and lease-up) by assigning the payments under the tax increment revenue note to a bank. Shortly after signing the Development Agreement, Metroplains obtained a construction loan for the construction of approximately 32 units of rental housing and approximately 10,806 square feet of retail space, together with related parking facilities, (the "Jackson Block Development") secured by the payments under the tax increment revenue note. Also, the Bluff Block property was conveyed to Bluff Block, LLC, which obtained construction financing from MinnWest Bank ("MinnWest") secured by a mortgage on the Bluff Block property, and construction of the Bluff Block Development proceeded to the point of a complete building shell and approximately 15 completed housing units. Bluff Block, LLC subsequently defaulted on its construction loan and MinnWest foreclosed its mortgage and is now the owner of most of the Bluff Block property. Three of the housing units are independently owned and one of those is occupied by its owner. MinnWest is leasing the remaining 12 housing units to residential tenants. 2. Rental of Bluff Block Housing Units. The Bluff Block housing development is defined in the Development Agreement as "approximately 67 units of owner-occupied housing". Accordingly, the Bluff Block Development has been set up for separate ownership of housing 384281v2 JSB EL185-7