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04-29-96 agendaCITY OF RICHFIELD, MINNESOTA MONDAY, APRIL 29, 1996 SPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING 7:30 P.M. COUNCIL CHAMBERS. AGENDA CALL TO ORDER 1. CONSIDERATION OF POTENTIAL PURCHASE OF 6205 MORGAN AVENUE HRA LETTER NO. 22 ADJOURNMENT Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the Administrative Services Director at 861-9702. • • HOUSING AND REDEVELOPMENT AUTHORITY HRA Letter No. 22 Agenda April 29, 1996 Issue Statement: Consideration of the potential purchase of 6205 Morgan Avenue. Backaround: Afire occurred at this single family residence at 6205 Morgan Avenue in November 1993. The property has been vacant, boarded, and not properly maintained on the exterior. The poor appearance has become a concern of the neighborhood. Staff working with the owner, has improved the exterior appearance and provided for routine lawn maintenance. However, more serious issues must also be resolved. A complicated combination of mortgage foreclosure, bankruptcy, commercial credit claims, and IRS tax liens provide a challenge to the owner before he would be able to consider returning the property to a standard consistent with the neighborhood. In recent weeks, HRA legal counsel has been investigating what is required to assign the $83,700 interest of State Farm Fire and Casualty to the HRA. The HRA may purchase those interests for $20,000 to $25,000. Legal counsel is also evaluating the condition of other title interests. It is believed there is an opportunity prior to a May 2, 1996 bankruptcy hearing for the HRA to secure an ownership interest that can lead to • ownership and the inclusion of the property in the Richfield Rediscovered program. (At this time a final decision whether to renovate or build a new home has not been made.) The assignment agreement and terms are provided on the attached form. If the title work analysis and ongoing discussions with the bankruptcy court concludes this week that condemnation and eminenf domain proceedings are also required, the necessary resolutions will be prepared and provided at the HRA meeting. The purchase price within the specified range will also be clarified at the meeting. Recommended Motion: 1. Discuss the status of the property. 2. Authorize an assignment agreement with State Farm Fire and Casualty for an amount within the range of $20,000 to $25,000. 3. Authorize the Executive Director and Chair to execute documents providing for the acquisition of 6205 Morgan Avenue. Basis of Recommendation: 1. The HRA would be purchasing the ability to control the future direction of the property for $20,000 to $25,000. This represents all the financial consideration that may be necessary to secure ownership. 2. The title evaluation has identified the limitation: of all other claims to further solidify the HRA's position and minimize additional acquisition costs. 3. The pending foreclosure, bankruptcy and IRS liens could delay improvements to the property for one to two years if the owner is left to resolve them. 4. .Staff has closely evaluated the property during February and March. BCL Appraisals places the "as is" value at $35,000. It is estimated that approximately $70,000 in repairs are required to return the home to a pre-fire condition. 5. The HRA may have a greater ability to secure title if it acts on an assignment with State Farm prior to a May 2, 1996 bankruptcy hearing involving the owner. 6. Sufficient funds are available for acquisition. Alternative Recommendation: 1. Choose not to acquire the property. The time frame for property improvement by the owner is unknown and would likely to be one to two years minimum. The source of financial resources available to the owner is unclear given the financial claims presently against the property. • 2. Modify the proposal Discussion/Decision Mode:. The assignment agreement would be completed prior to May 2, 1996. Respectfully submitted, Jam .Prosser Execu ive Director JDP:cak AGREEMENT C7 THIS AGREEMENT, made and entered into as of this day of , 1996 by and between THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, a Minnesota public body corporate and politic ("HRA") and STATE FARM FIRE AND CASUALTY COMPANY, a under the law of the State of ("State Farm") . I. BACKGROUND 1. The HRA is a public body operating within the corporate limits of the City of Richfield . Among its programs is the acquisition of substandard properties and redevelopment of those properties to provide decent, safe and affordable housing. In pursuit of that program, the HRA is desirous of acquiring the property located at 6205 Morgan Avenue South and legally described as Lot 2, Block 1, Melbar ("Property") and thereafter redeveloping it in accordance with the HRA's housing goals and policies . 2. The Property is owned by David C. Annis and Janice M. Annis ("Owners"). The Property sustained fire damage on or about November 14, 1993; the Property is currently vacant and uninhabited . 3. The Property is subject to certain encumbrances which include the following: a} Mortgage, dated August 1, 1978, in favor of Richfield Bank & Trust Company in the original amount of $37,000.00. b) Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement, dated July 17, 1992, in favor of Security Pacific Financial Services of Minnesota, Inc . , in the amount of $60, 986.00 . c) Notice of Federal Tax lien, dated September 22, 1994, in the amount of $18,603..31. d) Real estate taxes and installments on special assessments plus penalties and interest for 1994 and subsequent years. 4. Pursuant to the provisions of Minnesota Statutes, Chapter 65A, State Farm has obtain certain rights in the Property which rights include, without JBD103470 RC145-297 limitation, the right to request and receive an assignment of the mortgages described in 3(a) and (b) above. The instruments by which such rights were obtained are attached hereto as Exhibits A and B . 5. The Property currently has a fair market value which is substantially less than the value of the mortgages described in 3(a) and (b) above. 6. The HRA desires to acquire and redevelop the Property consistent with its goals and policies; and State Farm is supportive of activities such as are being proposed by the HRA; and is willing to assign its interests to the HRA in furtherance of those activities . II. RECITALS In light of the foregoing, and subject to the conditions contained hereafter, State Farm agrees to assign and the HRA agrees to accept the assignment of State Farm's interest in the Property as contained and described in Exhibits A and B . 1. Closin Closing shall .take place not later than 60 days following the date of this Agreement unless extended by the mutual written agreement of the parties . 2. Purchase Price. As consideration, the HRA shall deliver to State Farm, at closing, the amount of $. in cash or certified funds payable to State Farm . 3 . Assignment . As consideration for the. purchase price, State Farm will deliver to the HRA at closing the following: a) an assignment in substantially the form of the attached Exhibit C. b) a quit -claim deed conveying State Farm's interest in the Property to the HRA. 4 . Representations and Warranties . a) The HRA represents and warrants to State Farm that the execution and delivery of this agreement and the acts contemplated thereby have been authorized by proper action of the HRA's board of commissioners; and that the HRA has the full legal authority to carry out its obligations hereunder . b) State Farm represents and warrants to the HRA as follows: JBD103470 RC145-297 2 i) The instruments contained herein as Exhibits A and B are in full force and effect, that there has been no default or event of default thereunder by State Farm, that the instruments are fully assignable to the HRA by State Farm, and that the HRA, as assignee will have all the rights and remedies which are available to State Farm thereunder. ii) State Farm and Owners are party to an action in Hennepin County District Court (Case No. CT 95-017744) . That litigation in no way effects the validity or amount of State Farm's interests created pursuant to Exhibits A and B; nor would any judgment against State Farm as a result of such litigation in any way affect the HRA's interest in the Property or result in any new liens or encumbrances being placed against the Property . 5. Preconditions to Closing. Closing shall not occur until all of the following precondition to closing have either occurred or been waived by the party in whose favor they run. a) The HRA is satisfied with the condition of title based upon its review of title information obtained at its sole expense. b) The HRA has obtained any necessary authority, approvals. or waivers from the bankruptcy court relating to the acquisition of the .Property or the entering into this Agreement. c) The HRA is reasonably satisfied that the federal tax lien described in I.3. (c) above is inferior to the interests which the HRA would obtain through the assignment; and that such federal. interest is payable of extinguishment through exercise of the HRA's power of eminent domain. d} The HRA has authorized the acquisition of the property through either direct acquisition or exercise of its power of eminent domain. e) All of the representations and warranties which are made herein remain materially true . 6. Condition of Property. The HRA acknowledges that State Farm has made no representations concerning the condition of the Property, its suitability for any purpose, the presence or absence of pollution or contamination or any similar matter which may affect the value or the utility of the Property upon acquisition. 7. Indemnity. In the event that the closing contemplated by this Agreement does take place, State Farm hereby indemnifies, holds harmless and agrees to defend the HRA, its officers agents or employees for any claim or cause of action with respect to which State Farm has made its representation and warranty JBD103470 RCid5-297 3 pursuant to Section II4(b) of this Agreement; provided, however, that in no event shall State Farm be obligated under this Section 7 in an amount in excess of the purchase price contained in Section II2; and provided further that any claim made under this Seetion 7 must be made in writing not later than December 31, 1996. 8. No Merger. The provisions of this Agreement which are, by their terms, intended to survive the closing shall be deemed to survive, and shall not be deemed to merge with the Assignment. IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of the day and year first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By Its BY Its STATE FARM FIRE AND CASUALTY COMPANY BY Its By Its • J8D103470 RC145-297 Ll