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06-16-86 agenda~, HOUSING AND REDEVELOPMENT AUTHORITY Office of Executive Director N-/ HRA Letter No. 17 Agenda June 16, 1986 Housing and Redevelopment Authority Commissioners City of Richfield Subject: Trestman/Shaller Project Status Report Commissioners: Since the HRA meeting of May 19, 1986 at which time the commercial concept proposal presented by Trestman/Shaller was selected for further consideration, the following actions have transpired: -Discussions have been held by Trestman/Shaller with three different builders. Though a final selection of a builder has not taken place, this will happen after bids have been received. -There are two potential tenants interested in occupying the new in-fill space proposed. -Some members of the Housing and Redevelopment Authority have talked to the Acting Executive Director and have concerns about whether or not the one-story in-fill is an adequate project for the site or if additional building should be pursued by the city in a developer's agreement. -The architect for Trestman/Shaller has indicated concern about moving with the project and that unless construction is to begin in August, the .project will not be completed by year's end. The critical consideration in the project completion is paving of the parking lot before snow falls. -A representative from Krause/Anderson Construction telephoned Dick Shaller approximately two weeks ago to discuss the needs of the VFW. Krause/Anderson has indicated that they may make a proposal to Trestman/Shaller for the use of some land for parking. The city staff is ready to proceed immediately to begin negotiations for such a developer's agreement. It is staff's opinion that the completion of those negotiations and implementation of a developer's agreement would not be a lengthy process and could be accomplished within the next several weeks. y,~ z However, another consideration to be addressed is the three parcels of land owned by the HRA which must be rezoned from single family residential to general commercial and that the street must also be vacated. The City Council could be requested to initiate the rezoning and street vacation on June 23 by referring it to the Planning Commission. The Planning Commission could then act on those matters in July and the City Council could undertake the first and second readings for the rezoning and right-of-way vacations during the August City Council meetings. Unless there are some concerns by the HRA at this time, staff is ready to proceed immediately with negotiations for the developer's agreement based on the proposal presented to the HRA on May 19, 1986. Res tfully bm' ted, _----- ~t , ev n L. evich Acting Executive Director SLD/eja cc: Director Community Development HRD Manager 3-/ HOUSING AND REDEVELOPMENT AUTHORITY Office of Executive Director HRA Letter No. 16 Agenda June 16, 1986 Housing and Redevelopment Authority Commissioners City of Richfield Subject: Amendment To Subordination Agreement Twin City Federal Savings & Loan Commissioners: In February, 1985, the HRA and City entered into a Subordination Agreement in favor of Twin City Federal Savings & Loan Association (TCF) which provided the financing for the Woodlake Point Condominium. This letter requests the HRA to amend that agreement. The HRA and City entered into a developer's agreement for the Woodlake Point/Market Plaza projects in May, 1984, prior to the time the developers obtained project financing. The developer's agreement gave the HRA and City the first right to take over the project if the developers were unable to complete it. When financing was obtained by Derrick & Arkell for Woodlake Point, TCF required that as the mortgage lender they (TCF) would have a position superior to the HRA and City. Thus, the HRA and City approved a Subordination Agreement. The Subordination Agreement was part of the Second Amendment to the Developer's Agreement. The Second Amendment provided a process for the mortgage holder and the HRA/City to select an alternative developer if Arkell & Derrick were unable to complete it. The assessment agreement was also protected by the Second Amendment. The sale of Woodlake Point units is behind schedule. Currently 70 units have been closed, an additional 24 units have a nonbinding purchase agreement and eleven units are reserved yet to be converted to purchase agreements. Originally, the developer had projected that 150 units would be closed or subject to a purchase agreement by June 1. By August, 1986, all units were to be closed or subject to a purchase agreement. Because of the sales lag, the developers must obtain a second mortgage from TCF in the amount of $440,000. This second mortgage must be made subject to the Subordination Agreement. However, the amendment releases those condominium units which have been completed and sold from the mortgage lien. At the same time, the buyer accepts responsibility for the assessment agreement for his/her unit. Those units would be listed on Exhibit C. 3-L Attached to this letter is the original and amended Subordination Agreements. It is recommended that the HRA adopt a motion approving the Amendment to Subordination Agreement and also request the City Council to approve it. n Res e tfully ubmit ed, ~i C~. n evich Acting Executive Director Exhibit B to Second Amendrent 33 SUBORDINATION AGREEMENT TfiIS AGREEMENT, made as of this day of February, 1985, b}• the Housing and Redevelopment Authority of the City of Richfield, Minnesota, a Minnesota public body corporate and politic ("HRA"), and the City of Richfield, Minnesota, a Minnesota municipal corporation ("City"), in favor of Twin City Federal Savings and Loan Association, a United States of America corporation ("TCF") W I T N E S S E T H: WHEREAS, the City and the HRA have heretofore entered into a Contract for the Sale of Land for Private Development dated May 14, 1984 (the "Agreement"), as amended by First Amend- ment to Developer's Agreement dated December 27, 1984 (the "First Amend:-~ent"), as further amended. by Second Amendment to Developer's Argument dated February 1985 (the "Second Amendment"; the Amendment, First Amendment, and Second Amendment are hereinafter collectively referred to as the "HRA Agreement"), with Market Plaza Corp., a Minnesota corporation; The Arkell Development Corporation, a Minnesota corporation; and E.J. Plesko and Associates, Inc., a Florida carporation, with respect to the development of the Project Area as therein defined pursuant to plans and specifications prepared by and dated (the "Plans and Specifications"); and 3-~ h'HEREAS, Richfield Lake Limited Partnership, a Minnesota limited partnership ("Mortgagor")-has executed and. delivered to TCF a certain mortgage (the "Mortgage") in the original principal amount of $9,000,.0.00, dated the day of February, 1985, and recorded on the day of , 1985, ir. the Office of the County Recorder in and for Hennepin County, Minnesota, as Document No. , conveying and mortgaging the property situated in the County of Hennepin and State of Minnesota and described on Exhibit A attached hereto (the "Property"); and WHEREAS, the HRA Agreement affects the rights of the parties thereto in and to the Property; and WHEREAS, it is the mutual desire and intention of the City, the HRA, and TCF and the purpose of this Agreement to make the Mortgage in all respects prior and .superior to tie HRA Agree- ment except as expressly hereinafter provided; and WHEREAS, TCF requires, as a condition precedent to advancing funds on the Mortgage, that the City and HRA make certain representations with respect to the HRA Agreement;' NOW, THEREFORE, in consideration of One Dollar ($1) and other good and valuable consideration, and in order to induce TCF to advance funds upon the Mortgage, the HRA and the City do hereby represent to TCF and agree as follows: 1. The City and the HRA have reviewed and approved. the Plans and Specifications pursuant to Section 4.6 of the HRA Agreement. -2- s 3S 2. The HRA Agreement is currently. in full force and effect, and there exists no default or Event of Default thereunder. 3 The City and the HRA consent to the encumbrance of the Property by the Mortgage, and acknowledge that the Mortgage is given for the purpose of obtaining funds to the extent necessary for making the Improvements,~within the meaning of Section 8.1 of the HRA Agreement. 4. The City and the HRA acknowledge. that TCF is a Holder within the meaning of Section 8.2 of the HRA Agreement, with an address of 801 Marquette Avenue South, Minneapolis, Minnesota 55402. 5. Any provision contained in the HRA Agreement to the contrary .notwithstanding, the City and the HRA do hereby agree with TCF that the Mortgage shall, except as provided in the Second Amendment, be in all respects prior and superior to the HRA Agreement, notwithstanding the fact that the HRA Agreement was executed prior to the execution and recordation of the Mortgage, and that all right, title, and interest acquired by TCF either by foreclosure proceedings, deed in lieu of foreclosure, or otherwise, shall be prior and superior to any and all right, title, and interest heretofore or hereafter acquired by the HR.A or the City pursuant to the HRA Agreement or otherwise, and the City and the HRA further agree that TCF and its successors and assigns shall not, except as provided in the Second Amendment, be bound by any provision of the HR.A Agreement if TCF shall acquire -3- 3-,6 title to the Property, or any portion thereof, by foreclosure, deed in lieu of foreclosure, or otherwise. 6. This Subordination Agreement will inure to the benefit of and bind the parties hereto, their heirs, personal representa- tives, successors, and assigns. IN TESTIMONY WHEREOF, the undersigned have executed this instrument as of the day and year first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF RICHFIELD, MINNESOTA, a Minnesota public body corporate and politic By Its By Its CITY OF RICHFIELD, MINNESOTA, a Minnesota municipal corporation .. By Its By Its -4- 4 3-~ STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN j .The foregoing instrument was acknowledged before me this day of , 1985, by and , the and of The Housing and Redevelopment Authority of the City of Richfield, Minnesota, a Minnesota public body, corporate and politic, on behalf of the Housing and Redevelopment Authority of the City of Richfield, Minnesota. Notary Public STATE OF MINNESOTA ) ss. COUNTY GF HENNEPIN ) The foregoing instrument was acknowledged before me this day of 1985, by and , the ~. and of the City of Richfield, Minnesota, a Minnesota municipal corporation, on behalf of the City of Richfield, Minnesota. Notary Public -5- 3-8 EXHIBIT A (legal description) That part of Government Lot 2, Section 28, Township 28, Range 24, Hennepin County, Minnesota, lying easterly of the center line of Graham Avenue as described in'Book 2052 of Deeds, page 639, southerly of the southerly line of West 65th Street as described_in Book 2053 of Deeds, page 131, Hennepin County records, northerly of the center line of West 66th Street and westerly and southwesterly of the following described line. Beginning at the southwest corner of Govern- ment Lot 1, Section 27, Township 28, Range 24, Hennepin County, Minnesota; thence north along the west line of said Government Lot 1 a distance of 33.00 feet; thence north- westerly deflecting to the left 14 degrees 15 minutes 38 seconds a distance of 224.64 feet to the south line of said West 65th Street and said line there terminating. ,.. i;; c~0 r AMENDMENT TO • SUBORDINATION AGREEMENT ~ • THIS AGREEMENT, made. as of this day of 1986, by the Housing and Redevelopiil:;nt Authority of the City of Richfield, Minnesota, a Minnesota public body corporate and politic ("HRA"), and the City of Richfield, Minnesota, a Minnesota municipal corporation ("City"), in favor of Twin City Federal Savings and Loan Association, a United States of America corporation ("TCF"); W I T N E S SET H: WHEREAS, the City and the HRA have heretofore entered into a Contract for .the Sale of Land for Private Development dated May 14, 1984 (the "Agreement"), as amended by First r Amendment to Developer's Agreement dated December 27, 1984 (the "First Amendment"), as further amended by Second Amendment to Developer's Agreement dated February 5, 1985 (the "Second Amendment"; the Agreement, First Amendment, and Second Amendment are hereinafter collectively referred to as the "HRA Agreement"), with Market P1az.a Corp., a Minnesota corporation; The Arkell Development Corporation, a Minnesota corporation; and E.J. Plesko and Associates, Inc., a Florida corporation, with respect to the development of the Project Area as therein defined pursuant to plans and specifications prepared by Tushie Montgomery Associates, Inc., and dated November 16, 1984 (the "Plans and Specifications"); WHEREAS, Richfield Lake Linliced Partnership, a Minnesota limited partnership ("Mortgagor") has executed and -1- ~~ ~~ ~ ~~ delivered to TCF a certain mortgage (the "Mortgage") in the ' original principal amount of $9,000,000, dated the 5th day of February, .1985, and recorded on the day of , 1985, in the Office of the County Recorder in and for Hennepin County, Minnesota, as Document No. , conveying and mortgaging the property .situated in the County of Hennepin and State of Minnesota and described on Exhibit A attached hereto, (the "Property"); and WHEREAS, a condominium has been formed on the Property, which is described as shown in Exhibit H hereto, and certain units of said condominium have been released frorn the lien of the Mortgage, which units are shown on Exhibit C hereto; and WHEREAS, the HRA Agreement affects the rights of the - - parties thereto in and to the Property; and WHEREAS, the HRA and the City entered into a certain Subordination Agreement in favor of TCF, made as of February 5, 1986, a copy of which is attached as Exhibit D (the "Subordination Agreement"); and WHEREAS, Mortgagor has requested that TCF execute and deliver to it an Agreement Amending Note, Mortgage and Construction Loan Agreement dated as of 1986 (the "Amendment").pursuant to which the Mortgage and certain other documents will be amended in certain respects; WHEREAS, Mortgagor has requested that TCF advance to it additional funds in the amount of $440,000, which additional funds are to be securad by a second mortgage on the Property (the "Second Mortgage"); and -2- .~ 3 -~/ WHEREAS, TCF has required, as a condition precedent to executing the Amendment or advancing funds on the Second Mortgage, that the City and the HRA agree that the provisions of the Subordination Agreement be made applicable to the Mortgage, as amended by the Amendment, and to the Second Mortgage; and WHEREAS, it is the mutual desire and intention of the City, the HRA, and TCF and the purpose of this Agreement to make the Mortgage, as amended by the Amendment, and the Second Mortgage in all respects prior and superior to the HRA Agreement, except as expressly provided in the Subordination Agreement; and NOW, ,THEREFORE, in consideration of One Dollar ($1) and other good and valuable consideration, and in order to induce TCF to execute the Amendment and to advanced funds upon the Second - - Mortgage, the HRA and the City do hereby and agree as follows: 1. Wherever reference is made in the Subordination Agreement to the Mortgage, each such reference shall be deemed to refer, collectively, to the (i) Mortgage as amended by the Agreement, and (ii) the. Second Mortgage. 2. This Amendment to Subordination Agreement will inure to the benefit of and bind the parties hereto, their heirs, personal representatives, successors, and assigns. -3- ~~ ~ 3 ~y IN TESTIMONY WHEREOF, the undersigned have executed :, this instrument as of tha day and year first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF RICHFIELD, MINNESOTA, a Minnesota public bodx corporate and politic By Its And Hy Its CITY OF RICHFIELD, MINNESOTA, a Minnesota municipal corporation By Its And By Its -4- STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) 3-~3 The foregoing instrument was acknowledged before me this day of , 198_, by and the and of The Housing and Redevelopment Authority of the City of Richfield, Minnesota, a Minnesota public body, corporate and politic, on behalf of The Housing and Redevelopment Authority of the City of Richfield, Minnesota. STATE OF MINNESOTA ) SS. COUNTY OF HENNEPIN ) Notary Public The foregoing instrument was acknowledged before me this day of 198_, by and the and of the City of Richfield, Minnesota, a Minnesota municipal corporation, on behalf of the City of Richfield, Minnesota. Notary Public -5- EXHIBIT A (legal description) That part of Government Lot 2, Section 28, Township 28, Range 24, Hennepin County, Minnesota, lying easterly of the center line of Graham Avenue as described in Book 2052 of Deeds, page 639, southerly of the southerly .line of West 65th Street as described in Book 20.53 of Deeds, page 131, Hennepin County records, northerly of the center line of West 66th Street and westerly and southwesterly of the following described line: Beginning at the southwest corner of Government Lot 1, Section 27, Township 28, Range 24, Hennepin County, Minnesota; thence noYf:h along tho west line o£ said Government Lot 1 a distance of 33.00 feet; thence northwesterly deflecting to the-left 14 degrees 15 minutes 38 seconds a distance of 224.64 feet to the south line of said West 65th Street and said line there terminating. 3-~Y -6- .;, EXHIBIT B 3-is Condominium No. 533, Woodlake Point, a Condomimium. 3 -~~ EXHIBIT C [Schedule of released units] 3-/~ LAW OFFICES H$ssl~x, M~Ras~•&. SoD$xBBRa HAROLD J. SODERBERG P$OFBSSIONAL ASSOCIATION ROLLIN F. WEST 4700 IDS CENTER ROLAND D. GRAHAM ALBERT F.KOSEK MINNEAPOLIS,MINNESOTA 46402 THOMAS E. HARMS GERALD E. RUTMAN 16121 330-3000 JAMES A. STEIN TELECOPfERl16121 330-3060 MARK R. MILLER WILLIAM 5. BORCM ERS JEROME M.SODERBERG June 3 1986 DAVID G.RONALD , KEITH O. SIM MONS SALLY R. V. OLS EN RCi'~i~~~ ~ ~ a~ `~ ~ ~9~6 COUNSELI JOSEPH E. OLSON MAURICE A. HESSIAN. SR.118BB-19881 MAURICE A. NESSIAN,JR. 119 2 0-19 711 SAINT PAUL OFFICE 730 AM HOIST TOWER SAINT PAU L,MINNESOTA b8102 (812) 224-4911 WASHINGTON, D. C. OFFICE SUITE 900, 1275 K STREET N. W. WASHINGTON, D. C. 20005 (202) 842-3000 3'~(L ~nn~ WRITER'S DIRECT LINE John B. Dean, Esq. LeFevere, Lefler, Kennedy, 0°Brien & Drawz 2000 First Bank Place West Minneapolis, Minnesota 55402 RE; Market Plaza Dear John: I have. briefly reviewed the materials you .sent me by your cover letter of June 2,1986. The Subordination Agreement appears relatively straight forward and I have no problems with it. I assume, however, .that you have reviewed the original subordination agreement and the proposed new mortgage to assure yourself that we are not substantially weakening our position. It would appear to me that the only significant benefit we need to maintain, given the fact that the building is already built, is the binding nature of the valuation agreements contained in the developers agreements and assumed by the individual buyers of the condominiums. I understand that the documents .you sent me do not impair that contractual right. With that one caveat I see no problems with submitting this matter in Jure. Ve tr ly yours, omas E. Harms TEH:Cg cc: Steve Devich g ~- P, r b. HOUSING AND REDEVELOPMENT AUTHORITY Office. of Executive Director a-i HRA Letter No. 15 Agenda June 16, 1986 Housing and Redevelopment Authority Commissioners City of Richfield Subject: Public Hearing, Sale of Property At 7245 Humboldt Avenue South Commissioners: A notice of public hearing has been published for the June 16, 1986 HRA meeting to review and authorize the sale of the rehabilitated single-family home at 7245 Humboldt Avenue South. This rehabilitation project, now being completed by the South Hennepin Vocational Technical Schools (Vo-Tech), was authorized by the HRA on May 20, 1985. The house should be ready for sale by the end of July. The Vo-Tech contract of $54,102.14 would be paid from the proceeds of the sale. The Planning Commission has found the disposition of this property for single family purposes to be in conformance with the city's comprehensive plan. The Richfield HRA has secured mortgage financing for this home through the Minnesota Housing Finance Agency (MHFA). This financing provides a 9.95 percent, 30-year mortgage, to first- time homebuyers meeting certain program and income requirements. If a more favorable mortgage rate becomes available through MHFA it will be utilized. The identified purchaser for the home at 7245 Humboldt Avenue South meets the following program and income requirements: -have a 3-6 member family to best utilize the 3 bedroom home; -are first time homebuyers; -have an income between $24,000 and $30,950, depending upon family size (this income is 80% of the Metropolitan area median income-a Section 8 program income level); -have the ability to pay an initial sales price of $60,000 with $5,000 required as down payment; and -indicate a willingness to be subject to a second lien by the HRA for the difference between the initial sales price and actual value (this lien will be discussed in detail later in this letter). Advertisements to identify eligible families were published in the Minneapolis Star & Tribune. Five applications were received and evaluated. Three applicants were ineligible for various reasons; too high an income, too-large of a family and not enough assets to provide for down payment. Two -~ applicants were found to be eligible, and a drawing was held to identify the first ranked purchaser.. A four-member family, currently renting in Richfield, was selected. This family will be evaluated by the lender and MHFA for final eligibility and a mortgage commitment within the next few weeks. In order to receive the firm commitment for financing, a purchase agreement must be executed and the sale authorized by the HRA before the family can be determined eligible by the lender and MHFA. The purchase agreement is void and earnest money released in the event the HRA does not authorize the sale or the family is found ineligible by the lender. Preliminary analysis suggests that the family will be eligible for the financing. Data privacy requirements prevent release of any information that might further clarify the identity and background of the family. The purchase agreement discusses the HRA second lien placed on the property. In addition to the $55,000 first mortgage lien to the lender and the $5,000 down payment, the purchasers will be responsible for paying the difference between the $60,000 initial sales price and the appraised value of the property or $85,000, whichever is less. The appraised value of the property has not yet been determined because of the uncertainty related to the mortgage financing commitment. When the appraisal is made, the second mortgage amount can be determined. If the appraised value of the property falls below $85,000, the second mortgage amount would be the difference between the $60,000 and appraised value. As MHFA mortgage financing requirements limit the sale price of new construction single-family homes to $85,000, the value of the HRA's second mortgage would not exceed $25,000 (i.e.,$85,000 final sales price less $60,000 initial sales price). MHFA could enforce a maximum sale price of $75,000 if they consider the structure to be an existing dwelling. Staff is continuing negotiations with MHFA regarding this consideration. The HRA will be informed of the final sales price and second mortgage amount determination when it occurs. The second mortgage amount would accrue no interest and would not have to be paid by the purchasers until they sell at some future date. This second lien concept, used several times by the HRA, helps keep the initial purchase price more affordable to moderate income families. Funds recovered when a second lien is repaid are returned to the New Home Program for financing housing activities of the HRA. At closing, the HRA will pay up to 3 1/2 points for mortgage discounting (approximately $2,000) and the costs of title insurance. These costs have been anticipated in the 1986 authorized budget. It is not known at this time if the applicant is definitely the qualified purchaser. The lender and MHFA will make that determination once a loan package and purchase ~-3 agreement are received. However, it is likely that they will be found acceptable. Prior to sale, the HRA will have an opportunity to inspect the work during an "open house". It is recommended that the HRA adopt the attached resolution authorizing the disposition of property at 7245 Humboldt Avenue South and permitting the Acting Executive Director to effectuate the sale of the property. Res tfully ubm'tted, n v Acting Executive Director HRA RESOLUTION N0. ~'' RESOLUTION AUTHORIZING SALE OF PROPERTY AT 7245 HUMBOLDT AVENUE SOUTH WHEREAS, the Housing and Redevelopment Authority of Richfield, Minnesota (hereinafter referred to as the HRA) owns certain real property located at 7245 Humboldt Avenue South, said property legally described as follows: Lot 10 & 11, Block 5 Irwin Shores, Except That Part Taken for U.S. Interstate Highway No. 35W, Hennepin County, WHEREAS, the property was acquired by the HRA so that the South Hennepin Vocational Technical Center (Vo-Tech) could relocate and rehabilitate a house on the site and the HRA could subsequently sell the home to a moderate income family; and WHEREAS, the rehabilitation work is nearing completion and disposition of the property would allow for the timely payment of the Vo-Tech contract; and WHEREAS, as the result of advertising, and in cooperation with the lender, a qualified purchaser for 7245 Humboldt Avenue South has been selected and it is likely that they will be found eligible by MHFA; and WHEREAS, a purchase agreement must be authorized by the HRA; and WHEREAS, the conditions of sale include an initial sales price of $60,000, a $5,000 down payment, a mortgage amount of not more than $55,000, and provisions for a second mortgage not to exceed $25,000; and WHEREAS, the purchaser will also be subject to any requirements imposed by MHFA; and WHEREAS, the HRA has completed a public hearing on the proposed disposition of 7245 Humboldt Avenue South. NOW, THEREFORE, BE IT RESOLVED BY THE HOUSING AND REDEVELOPMENT AUTHORITY OF RICHFIELD, MINNESOTA: 1) that the property located at 7245 Humboldt Avenue South can be sold in accordance with the conditions of sale; and 2) that the Acting Executive Director and staff are authorized to take such steps necessary to effectuate this resolution and any sales agreement. Passed by the Housing and Redevelopment Authority of O7 "`~ Richfield this 16th day of June, 1986. Thomas E. Harms, Chairman Joan Helmberger, Secretary