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072913SpecialCompleteAgenda CITY OF RICHFIELD, MINNESOTA MONDAY, JULY 29, 2013 RICHFIELD MUNICIPAL CENTER 6700 PORTLAND AVENUE SPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS 6:00 P.M. AGENDA Call to order Roll caii 1. Consideration of a resolution modifying the HRA mortgage relating to the Lyndale Gardens redevelopment Staff Report No. 39 Notes: Adjournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the City Clerk at 612-861-9738. AGENDA ITEM# 1 REPORT# 3 g STAFF REPORT � HOUSING AND REDEVELOPMENT AUTHORITY MEETING JuLy 29, 2013 REPORT PREPARED BY: ��N BARTON, COMMUNITY DEVELOPMENT ASSISTANT DIRECTOR NAME,TlTLE REPORT PRESENTER: ��N BARTON, COMMUNITY DEVELOPMENT ASSISTANT DIRECTOR NAME,T/TLE DEPARTMENT DIRECTOR REVIEW: � NA REVIEWED BY EXECUTNE DIRECTOR: � ITEM FOR HRA CONSIDERATION: Consideration of a mortgage modification relating to the Lyndale Gardens redevelopment. I. RECOMMENDED ACTION: By Motion: Adopt the resolution modifying the Housing and Redevelopment Authority's mortgage relating to the Lyndale Gardens redevelo ment. II. EXECUTIVE SUMMARY In November 2011, the Richfield Housing and Redevelopment Authority (HRA) awarded a Business Subsidy in the amount of$650,000 to Lyndale Gardens LLC (Developer) to aid in the redevelopment of the Lyndale Gardens property (Property). The business subsidy was awarded in the form of a $335,000 grant and a $315,000 deferred, forgivable loan. To facilitate redevelopment of the Property, the Developer intends to plat the Property and proposes to sell a portion of the Property to a third party for the development of a cooperative grocery store. The HRA currently has a first priority mortgage on a portion of the Property, currently designated as 6330 Lyndale Avenue to secure repayment of the forgivable 07292013 Lyndale Gardens Mortgage Modification loan, if necessary. However, upon platting, the mortgaged property will be located in portions of two platted lots. The Developer has requested that the HRA release its existing mortgage on the mortgaged Property and except a first priority mortgage on another lot within the platted development Property. III. BASIS OF RECOMMENDATION A. BACKGROUND • The Lyndale Gardens site is currently comprised of 2 individual parcels: 1) The Garden Center Building, located at 6400 and 6430 Lyndale Avenue. Including a "gap strip" which was purchased by Lyndale Gardens LLC and merged with this property. 2) 6330 Lyndale Avenue. • In order to redevelop the site, the property is being re-platted as approved by the City. The new plat needs to be filed in order to transfer ownership of Lot 3 (per the new plat) to Lakewinds Natural Foods for the construction of their store. This plat also creates new lots for the Cornerstone Group retail, residential, gardens, public amenity, and lakefront trail area. • The City of Richfield ("City") approved the Lyndale Gardens Planned Unit Development (PUD) in March of this year. • The City approved the Lyndale Gardens Plat on June 11, 2013. • The HRA's mortgage is currently in first-position on the 6330 parcel, which represents a portion of Lots 1 and 2 when replatted. • Three other lenders also have mortgages secured by the Lyndale Gardens property. • The Developer's primary lender, LISC has a mortgage secured by the Lyndale Gardens property, including the portion that will be sold to Lakewinds Natural Foods (Lot 3). LISC is requiring a mortgage modification to secure first-position on the remainder of the property. • LISC will not permit the sale of Lot 3 to Lakewinds Natural Foods without the mortgage modification. • LISC has agreed to allow the HRA to be in first-position on Lot 4 of the development, with LISC taking a second position on the parcel. • Lot 4 is a vacant parcel, located to the south of the future Lakewinds Natural Foods. • The HRA could potentially retain its security interests on the Lots 1 and 2; however would likely be in a third or fourth position behind LISC, Hennepin County and Metropolitan Council. • Lyndale Gardens LLC will be quit-claiming Outlot A to the City, which will include new trail improvements (at no cost to the City or HRA). • The estimated value of Lot 4 is $229,404, based on the square-foot sale price of Lot 3 to Lakewinds Natural Foods. • The 2013 estimated market value of the 6330 parcel is $314,000, per Hennepin County. B. PoLICY • To the extent possible, secure public investment. • 2008 City of Richfield Comprehensive Plan: o Goa/: Develop the Lakes at Lyndale Area as a City Center o Goal: Provide an economic climate within Richfield that will encourage the availability of quality goods, services and employment opportunities for residents. C. CRITICAL TIMING ISSUES • Lakewinds Natural Foods is scheduled to close on Lot 3 on August 7, 2013. • Any delay in closing will have significant impacts on Lakewinds development timeline. • Lyndale Gardens LLC is required to file the Plat by August 11, 2013. D. FINANCIAL • The $315,000 loan that is secured by the mortgage will be forgiven upon substantial completion of the project and adherence to the terms of the Funding Agreement. • The loan is required to be repaid if the development project is not completed and/or terms of the Funding Agreement are not met by September 1, 2015. • The estimated value of Lot 4 is $229,404, based on the square-foot sale price of Lot 3 to Lakewinds Natural Foods. • The 2013 estimated market value of the 6330 Lyndale Avenue parcel is $314,000, per Hennepin County. • Lyndale Gardens LLC will be quit-claiming Outlot A to the City, which will include new trail improvements, at no cost to the City. E. LEGAL • The mortgage modification has been reviewed by the HRA's attorney. IV. ALTERNATIVE RECOMMENDATION�S� • Do not adopt the Resolution authorizing the mortgage modification. V. ATTACHMENTS • Resolution • Mortgage Modification Amendment • Lyndale Gardens Plat Map VI. PRINCII'AL PARTIES EXPECTED AT MEETING • Beth Pfeiffer, The Cornerstone Group/Lyndale Gardens LLC • Julie Eddington, HRA Attorney /-% HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA RESOLUTION NO. RESOLUTION APPROVING THE FIRST MORTGAGE MODIFICATION FOR THE BENEFIT OF LYNDALE GARDENS LLC AND AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH FIRST MORTGAGE MODIFICATION WHEREAS, on May 2, 2012, Lyndale Gardens LLC, a Minnesota limited liability company (the "Developer"), as mortgagor, executed and delivered a Mortgage (the "Mortgage") to the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (the "Authority"), as mortgagee, securing certain real property located at 6330 Lyndale Avenue South (the "Mortgaged Property"); and WHEREAS, the Mortgage secures the Developer's obligation under the Funding Agreement, dated November 7, 2011, as amended by the First Amendment to Funding Agreement, dated April 13, 2013, to repay a forgivable loan provided by the Authority to the Developer in the amount of $315,000 to help finance the costs of redeveloping the Lyndale Garden Center site, located at 6430 - 6400 Lyndale Avenue South (the "Development Property") in the City if Richfield; and WHEREAS, to facilitate redevelopment of the Development Property, the Developer intends to plat the Development Property and proposes to sell a portion of the Property to a third party for the development of a cooperative grocery store; and WHEREAS, the Authority currently has a first priority mortgage on the Mortgaged Property, however, upon platting, the Mortgaged Property will be located in portions of two platted lots; and WHEREAS, the Developer has requested that the Authority release its existing mortgage on the Mortgaged Property and accept a first priority mortgage on another lot within platted Development Property; and WHEREAS, the Authority previously consented to the Developer placing a second mortgage for the benefit of Local Initiatives Support Corporation ("LISC") on the Mortgaged Property pursuant to an Intercreditor and Consent Agreement, dated July 16, 2012 (the "2012 Intercreditor and Consent Agreement") and the Developer would like the Authority's consent to place a second mortgage for the benefit of LISC on the newly described Mortgaged Property; and WHEREAS, the Developer has presented to the Board of the Authority a First Mortgage Modification (the "First Mortgage Modification") which modifies the Mortgaged Property description; and 428626v2 JAE RC125-316 /-� WHEREAS, the Authority has reviewed the First Mortgage Modification and finds that the execution thereof by the Authority and performance of the Authority's obligations thereunder are necessary to ensure the redevelopment of the Lyndale Garden Center site; and NOW, THEREFORE, BE IT RESOLVED, by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. The First Mortgage Modification presented to the Authority and on file with the Community Development Director is hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the Chairperson and Executive Director; provided that execution of such documents by such officials shall be conclusive evidence of approval. 2. The Chairperson and Executive Director are hereby authorized to execute the First Mortgage Modification on behalf of the Authority and to carry out on behalf of the Authority the Authority's obligations thereunder. 3. The Authority hereby consents to a second mortgage for the benefit of LISC being filed against the Mortgaged Property. If required by LISC, the Chairperson and Executive Director are hereby authorized to execute an Intercreditor and Consent Agreement, in the form and substance of the 2012 Intercreditor and Consent Agreement. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 29t" day of July, 2013. Suzanne M. Sandahl, Chair ATTEST: Doris Rubenstein, Secretary 2 428626v2 JAE RC125-316 i �.� This document was prepared by, and after recording, return to: . Winthrop & Weinstine, P.A. Suite 3500 225 South Sixth Street Minneapolis, Minnesota 55402-4629 Attention: Tammera R. Diehm This space reserved for Recor�de�s use only. THIS IS A MORTGAGE MODIFICATION, AS DEFINED IN SECTION 287.01, SUBD. 2 OF THE MINNESOTA STATUTES, AND DOES NOT SECURE NEW DEBT OR AN INCREASED AMOUNT OF DEBT. FIRST MORTGAGE MODIFICATION This FIRST MORTGAGE MODIFICATION, dated as of this day of , 2013 ("Modification"), is executed by and between LYNDALE GARDENS LLC, a Minnesota limited liability company ("Borrower") and THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, a public body corporate and politic under the laws of the State of Minnesota("Lender"). RECITALS: A. The Lender has made a loan to the Borrower in the principal amount of Three Hundred Fifteen Thousand and No/00 Dollars ($315,000.00) ("Loan"). The Loan is evidenced by that certain Funding Agreement dated as of November 21, 2011 (as amended, restated or replaced from time to time, the "Fundin�Agreement"), executed by the Borrower and made payable to the order of the Lender in the original principal amount of the Loan, and the Loan is secured by that certain Mortgage dated as of May 22, 2012 ("Mort�a�e"). B. The Mortgage was filed of record in the Office of the Registrar of Titles for Herulepin County on June 18, 2012 as Document No. T4965139. C. Borrower and Lender have agreed to modify the Mortgage pursuant to this Modification to account for the platting of the property and the sale of a portion of the property to a third party. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and Lender agree as follows: � -� AGREEMENTS: 1. Le�al Description. The legal description of the property secured by the Mortgage shall be amended by deleting the legal description listed on Exhibit A and replacing the same with the legal description on Exhibit B (the "Mort�a�ed Property"). 2. Release of Propertv. In amending the definition of the Mortgaged Property, the Lender hereby releases any and all interest that the Lender may have in the following property (collectively, the "Released Propertv"): Lot 1, Block 1, LYNDALE GARDENS Lot 2, Block 1, LYNDALE GARDENS Lot 3, Block 1, LYNDALE GARDENS Outlot A, LYNDALE GARDENS Outlot B, LI'NDALE GARDENS Outlot C, LYNDALE GARDENS 3. No Further Amendment. Except as provided herein, the terms and provisions of the Loan Documents shall remain unchanged and shall remain in full force and effect. 4. Priori . Borrower represents that, with respect to the Mortgaged Property, Borrower will not grant any senior mortgage lien rights to other third-party lenders. Borrower and Lender agree to execute any and all other documents which may be necessary or desirable to establish the priority of the Mortgage. 5. Governin� Law. It is agreed that this instrument is made pursuant to and shall be construed and governed by the laws of the State of Minnesota without regard to the principles of conflicts of law. 6. Bindin� Effect. This Modification and each and every part hereof shall be binding upon the parties hereto and their successors or assigns. 7. AdditionaI Documents. Borrower, upon request from Lender, agrees to execute such other and further documents as may be reasonably necessary or proper to carry ou� more effectively the purposes of this Modification. 8. Counterparts. This Modification may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Modification by signing any such counterpart. IN WITNESS WHEREOF, the Borrower and Lender have executed and delivered this Modification on the day and year first above written. 2 1 �� � BORROWER: LYNDALE GARDENS LLC, a Minnesota limited liability company By: Colleen Carey Chief Manager STATE OF MINNESOTA ) ) SS. COUNTY OF ) The undersigned, a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Colleen Carey, the Chief Manager of Lyndale Gardens LLC, a Minnesota limited liability company, has signed and delivered the said instrument on behalf of said limited liability company. Notary Public My Commission Expires: 3 I �� HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA By Its Chairperson By Its Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of August 2013, by Suzanne M. Sandahl, the Chair of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, on behalf of the Authority. Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of August, 2013, b.y Steve Devich, the Executive Director of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, on behalf of the Authority. Notary Public 4 � ,1 EXHIBIT A Original Legal Description �Parcell That part of Government Lot 3,Section 28,Township 28,Range 24,described as follows: Beginning at a point on the East line of said Govemment Lot 3 distant 1131.3 feet South from the Northeast corner of said Government Lot 3;thence on an assumed bearing of North along said East line a distance of 70.36 feet;thence West at a right angle a distance of 176.5 feet;thence South at a right angle a distance of 95.17 feet, more or less, to an intersection with a line bearing South 82 degrees West from the point of beginning;thence North 82 degees East 178.23 feet,more or less,to the pourt of beginning. Parcel 2 That part of Government Lot 3,Section 28,Township 28,Range 24,Beginning at a point on the East line of said lot distant South 1176.3 feet from the Northeast comer thereof;thence North on said East line 45 feet;thence South 82 degrees West to a line drawn parallel with and distant 1�6.5 feet West of the East line of said Government Lat 3 thence South along said pa�allel line to a line drawn South 82 degrees West from the point of beginning thence North 82 degrees East to said point of beginniug. That part of the premises located between the ordinary high water line and the ordinary low water line is registererl subject to the rights of the State of Minnesota as the owner in its sovereign capacity to the bed of Grass Lake(As to Pazce12). \ 5 � �� t EXHIBIT B Revised Legal Description Lot 4, Block 1, LYNDALE GARDENS, Hennepin County, State of Minnesota. 7990093v4 6 j �i LYNDALE GARDENS Se<cZBer1G28 Ro:24 -' I�;�, _ ____ I ' R.T. DOC. N0. 5o��h��.,•o����4.��a�¢7-. 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