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11-13-79 agendaHOUSII`dG AND REDEV~ELOPME~IT AUTHORITY Office of Executive Director HRA Letter No. 4?_ Agenda November 13, 1979 rIOUS i:Zg and Redevelopment Authority Commissioners City of Richf field Dear Commissioners: Subject: Sale of Property by Financial Properties Developers, Ir~c. ' There is an item on the November 13, 1979 I-iRA agenda providing for HRA review and approval of the sale of the K-Mart property by Financial Properties Developers, IncY. to i~Ir. Lawrence Kadish. This sale, actually a sale-leaseback transaction, is in accordance with the developer`s agreement betvaeeiz the HRA and Financial Properties Developer's Inc. Attached is a copy of the letter from Financial Properties Developer's Inc., requesting HRA approval of the prop- erty sale. This letter further explains the provisions of the sale arrangements between`Financial Developer's Inc., and Lawrence Kadish. It is recommended that the HRA adopt the attached resolution, approving the proposed land sale by Financial Properties Developers, Irlc., to Lawrence Kadish Respectfully submitted, Karl Nollenberger Executive Director KN/ej a cc: City Attorney Acting Redevelopment Director Finance Coordinator • t' ALE xANDER W, SMITH 186:-1925' H EODC RE A HAM MOND !1861-1932. VICTOR LAMAR SMITH '186]'19<] ALEXANDER W~ SMITH IIB86 •1964 WILLIAM G.GRANT ;1099-19]41 LEW13 CENKER 11916 -IH]6I I.T. GOH EN 'RBERT A. RING EL XANDER W.SMITH KOHLE R,JR. ..,.THUR B. L. MARTIN DE JONGH FRANKLIN ROBERT w. SPEARS ROBERT I. PALLER DAVID J. HARRIS WILLISTON C.WHITE WILLIAM W. GRIFFIN RONALD W. HARTLEY HOMER A. HO UCHINS. JR. ROBERT W. BEYNART JOEL B. PIASSICK WARREN C. FORTSON ROBERT O. PANNELL HILLY ER MAD. YOV NG TERRY L- NEVEL JOHN A. BLACK MON HENRY S. ROGERS JOHN A-HOWARD PRENTi05 O.YA NC EY.JR. FRED W. AJAX.J R. THEODORE H. MILBY C.B ROOHS TH URM OND III RAWSON C.GORDON MARION SMITH 17 THOMAS D. PERRIE MARRY L. HICKS ON SMITH, COHEt~i, RINGEL, KOHLER & MARTII~1 ATTORNEYS AT LAVA 2400 FIRST NATIONAL BANK TOWER ATLANTA. GEORGIA 30303 ' (404) 656-1800 TELEX 54-2589 October 30, 1979 EDWARD 5. KELLY HAROLD JOSE T. MICHAEL HVRLEY. JR. ARTHUR JAY SCH WARTZ ROBERT L. KISER ANDREW C.SHOVERS DANIEL M. MCRAE ARGARET H.MURPHY DAVID K. WHAT LEY BRUCE H. BEERMAN JAMES W. HARRIS WILLIAM D. BARWICX GUY G.GEBHARDT ANDREW J. HINTON RALPH 5. FORCE WILLIAM L.MEYER CAR LILE M.CHAMBERS KENNETH L. MILLWOOD HARVEY S.GRAY BRUCE t.CRA BTREE lIl CLYDE HURT FEIL L.SRANCH S.CONN ELLY R.CLAY RATTERREE DANIEL LEE OLIVER STEPHEN L.GOLDNER CHARLES L.ALLEN Il DAVID W.SA NTI SUSAN ELIZABETH SIEBERT Housing and Redevelopment Authority of Richfield, Minnesota 6700 Portland Avenue, South Richfield, Minnesota 55423 Attention: Executive Director City of Richfield 6700 Portland Avenue 3 Richfield, Minnesota 55423 Attention: City Manager Mr. John B. Dean LeFevere, Lefler, Pearson, O'Brien & Drawz 1100 First National Bank Building Minneapolis, Minnesota 55402. The Fulton National Bank of Atlanta P. O. Box 49165 Atlanta, Georgia 30359 Attention: Mr. Martin Blanchard RE: "Proposed Sale by Financial Properties Developers, Inc. to Lawrence Kadish, K mart Project, Rich- field, Minnesota Gentlemen: This letter is written on behalf of Financial Properties Developers, Inc. ("Financial") to request your review and approval of Financial's proposed sale of the K mart development in Richfield to Mr. Lawrence Kadish ("Kadish") of New York City. Mr. Robert L. Foreman, Jr. Jones, Bird & Howell Haas-Howell Building 75 Poplar Street Atlanta, Georgia 30303 The Farmers and Mechanics Savings Bank of Minneapolis Marquette at Sixth P. 0. Box 1257 Minneapolis, Minnesota 55480 Attention: Mr. Duncan G . Barr Page Two October 30, 1979 Financial has an agreement with Kadish for a sale- leaseback transaction using a technique which has been used suc- cessfully several times in the past. -This technique would allow Kadish to take title to the property during development, and thereby allow him certain benefits incident with ownership during development. The purchase price includes the outstanding prin- cipal balance of the permanent financing ($2,550,000.00) plus $560,000.00 representing the purchase of the equity in the pro- ject. The $560,000.00 would be paid in increments of $156,400.00 cash adjusted in accordance with our Development Agreement upon funding of the permanent financing, and Promissory~Notes for the balance of $403,600.00 due and payable in two equal, annual installments on the anniversary dates of the funding of the per- manent financing. The closing technique is outlined as follows: Financial would convey title to the property to Kadish immediately subject to all outstanding encumbrances of record. Kadish would execute and deliver a lease of the property back to Financial. Kadish`s obligation to make payment on his agreement with Financial would be conditioned upon Financial.'s completion of the project and funding of the permanent loan. During the construction period by agreement with Kadish, Financial would retain the obligation of completing the project in accordance with the plans and specifi- cations and requirements of the construction and permanent lenders. Upon completion of the project and funding of the permanent loan, Kadish would be obligated to make payment to Financial under its Development Agreement, and thereafter would be the fee simple owner subject to the permanent loan, the K mart lease, and the leaseback to Financial with the obligation to make all payments incident on the fee owner. ,During the period of construction and prior to the payment to Financial, Financials position. would be protected by an escrow agreement whereby reconveyance documentation is delivered in escrow, evidence of which would be represented by an option to be recorded reciting that a default in the terms of the Escrow Agreement would enable Financial to record the reconveyance documentation. This docur.~entation clearly establishes that the obligations to the. City of Richfield and The Fulton National Bank of Atlanta, under the terms of the Construction Loan Agreement and the Construction Loan indebtedness, would remain with Financial. We would point out at this point that in regard to the Housing and Redevelopment Authority of Richfield, Minnesota, that this conveyance technique complies Page Three October 30, 1979 with Exception (2) of Section 11.02 of the Agreement between Finan- cial and HRA dated June 16, 1977, as amended. We are, however, still requesting that HRA acknowledge this conveyance and consent thereto. In order to assure all parties of the continued tax exempt status of this loan, Financial, Kadish and K mart will pro- vide certificates assuring that the "capital investment" at the time of the conveyance to Kadish and within the "covered period" does not adversely affect the limitation imposed on such loans. Enclosed herewith for your review is a booklet contain- ing the proposed closing documentation, with the exception of the Note and Mortgage representing the $403,600.00 delayed payment. The delayed payment will be represented by non-negotiable promis- sory note secured by a mortgage, subject to all outstanding encum- brances of record due and payable in two annual installments. These documents will be on basic standard forms and will be sub- ject to and inferior-to the interest of the City, Farmers and. Mechanics Savings Bank of Minneapolis, K mart,-and all other encum- brances of record. 3 If you require any further explanation prior to an appro- val of the conveyance of the property in accordance with the above outlined technique and documentation supplied herewith, please feel free to contact me. Yours very tr-uly, SMITH, CO N, RI/N) L, KOHLER & MARTIN - / ~v HSR:dpl BY: HENRY (. ROGE S Enclosure cc: Mr. James T. Murphy {w/o) Financial Properties Developers, Inc. 5825 Glenridge Drive, N. E. Atlanta, Georgia 30328 Mr. Joseph Kavanau (w/o) -~~~ Blue Chip Ventures 100 Park Avenue New York, N. Y. 10017 Mr. Herman Brickner (w/o) 100 Park Avenue New York, N. Y. 10017 RESOLUTION RESOLUTION APPROVIi1G TRANSFER OF PROPERTY SUEJECT TO DEVELOPER'S AGREEMENT WF-=EREAS, The Dousing and Redevelopment Authority did on June 16, 1977, execute and enter into a Contract For Sale of Land For Private Development between itself and Financial Properties Developers, Inc., and WHEREAS, Financial Properties Developers, Inc. has now notified the Authority of its desire to convey its interest in the property on which the development is located, which property is legally described aso Lot one (1) , Blpck one (l) HEYN;A1V' ADDITION to Lawrence Kadish WHEREAS, such transfer would be subject to the rights and remedies of the Authority as contained in the Developer's Agreement dated June 16, 1977; and WHEREAS, such transfer would not create any direct contractual relationship between the Authority and any third party NOG•T THEREFORE, be it resolved by the Housing and Redevelop- ment Authority of the City of Richfield, Minnesota as follows: 1. The proposed sale of the property above described is a transfer within the meaning of Section 11.02 (2) of the Developer`s Agreement. 2. As such, and subject to th.e rights of the authority contained within such agreement, the proposed sale and transfer is ' approved. I _ , P .. ..