06-15-2020 EDA Complete AgendaE C O N O MIC D E V E L O P ME N T AU T H O R IT Y ME E T IN G
V IR T U AL ME E TIN G H E L D V IA W E B E X
J U N E 15, 2020
7:15 PM (I MME D I AT ELY FO L L OWI NG THE HRA ME ETI NG)
C all to Order
A ttendance
Open F orum
Approval of the Minutes
A pproval of the minutes of the Regular E conomic D evelopment A uthority meeting of A pril 20, 2020.
AG E N D A APPR O VAL
1.A pproval of the A genda
O T H E R B U S IN E S S
2.C onsideration of a Master A mendment to the A partment Remodeling P rogram mortgage, promissory note, and
loan agreement with A eon S easons P ark and a subordination of the mortgage.
S taff Report No. 13
E D A D ISC U SSIO N IT E MS
3.E D A D iscussion Items
E X E C U T IV E D IR E C TO R R E P O R T
4.E xecutive D irector's Report
C O V ID -19 S mall B usiness L oan update
C LAIMS
5.C laims
6.A djournment
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.
ECONOMIC DEVELOPMENT
AUTHORITY MEETING MINUTES
Richfield, Minnesota
Regular Meeting
Virtual Meeting held via Webex
April 20, 2020
CALL TO ORDER
The meeting was called to order by President Supple at 7:32 p.m. via Webex.
HRA Members Mary Supple, Chair; Maria Regan Gonzalez; Sue Sandahl; Erin Vrieze
Present: Daniels; and Pat Elliott.
EDA Members None
Absent:
Staff Present: John Stark, Executive Director; Julie Urban, Housing Manager; and LaTonia
DuBois, Administrative Assistant.
OPEN FORUM
No speakers
APPROVAL OF MINUTES
M/Regan Gonzalez, S/Sandahl to approve the minutes of the regular Economic
Development Authority meeting of March 16, 2020.
Motion carried 5-0
Item #1
APPROVAL OF THE AGENDA
M/Sandahl, S/Regan Gonzalez, to approve the agenda.
Motion carried 5-0
Item #2
CONSIDERATION OF A MOTION TO SUSPEND THE ECONOMIC DEVELOPMENT
AUTHORITY SMALL BUSINESS REVOLVING LOAN FUND AND A RESOLUTION
ESTABISHING A COVID-19 SMALL BUSINESS ASSISTANCE FORGIVABLE
LOAN. (S.R. NO 12)
EDA Meeting Minutes -2- April 20, 2020
Executive Director Stark presented Staff Report No.12, went over the guidelines for the
loan and offered explanation of the qualifications criteria.
Commissioner Vrieze Daniels inquired about who would administer the loan.
Executive Director expressed the Economic Development Authority staff would administer
the loan.
RESOLUTION NO. 22
RESOLUTION IMPLEMENTING A COVID-19 SMALL BUSINESS ASSISTANCE FORGIVABLE
LOAN PROGRAM
M/Sandahl, S/Elliott to approve a motion to suspend the Economic Development Authority
Small Business Revolving Loan Fund and a resolution establishing a Covid-19 Small Business
Assistance Forgivable Loan and to authorize staff to independently administer the loan with
guidelines substantially similar to what was presented.
Motion carried 5-0
Commissioners spoke of their appreciation for staff and the ability to administer this loan to
provide assistance for small businesses.
Executive Director Stark encouraged commissioners to help get the word out about the
loan.
Item #3
EDA DISCUSSION ITEMS
None.
Item #4
EXECUTIVE DIRECTOR’S REPORT
Executive Director Stark informed commissioners that the Energy Efficiency Business Grant
program is still going and marketing materials are coming soon.
Item #5
CLAIMS
M/Elliott, S/Sandahl that the following claims be approved:
U.S. BANK 4/20/2020
EDA Checks: 20360-20376 $34,252.50
TOTAL $34,252.50
Motion carried 5-0
Item #8
ADJOURNMENT
EDA Meeting Minutes -3- April 20, 2020
The meeting was adjourned by unanimous consent at 7:56 p.m.
Date Approved: June 15, 2020
Mary B. Supple
President
LaTonia DuBois John Stark
Administrative Assistant Executive Director
AGENDA SECTION:OTHER BUSINESS
AGENDA ITEM #2.
S TAFF REPORT NO. 13
E CONOMIC DE V E LOP ME NT AUT HORIT Y
MEET ING
6/15/2020
RE P O RT P RE PA RE D B Y: J ulie Urban, Housing and Redevelopment Manager
O THE R D E PA RTM E NT RE V IE W:
E X E C UTIV E D IRE C TO R RE V IE W: J ohn S tark, E xecutive D irector
6/10/2020
I T E M F O R C O UNC IL C O NS ID E RAT I O N:
Consideration of a Master Amendment to the Apartment Remodeling Program mortgage, promissory
note, and loan agreement with Aeon Seasons Park and a subordination of the mortgage.
E X E C UT IV E S UM M ARY:
I n 2019, the Economic Development Authority (E D A) provided an Apartment Remodeling Program loan
(Loan) in the amount of $98,512 to Aeon Seasons Park to help provide security improvements to several
buildings located in the center court. Aeon is in the process of refinancing their principal mortgage with
Minnesota Housing. The E D A's Loan was issued to enable Aeon to begin some of the critical security
improvements while waiting for the refinance that will free up additional resources for rehabilitating the
property.
A condition that Minnesota Housing is placing on the refinance is that all mortgages on the property have the
same term as the principal mortgage, which is 35 years. The term of the Loan is 15 years. Approval of the
Master Amendment will cover the mortgage, promissory note and loan agreement and extend the
term from 2034 to 2055. In addition, the H R A is being asked to subordinate its mortgage to the
principal mortgage.
The Master Amendment is being reviewed by Minnesota Housing, and the Subordination Agreement is in the
process of being revised. T he E D A Attorney would approve any technical revisions to the documents
that may be required.
RE C O M M E ND E D AC T I O N:
By Motion: Approve a resolution authorizing the execution of a Master Amendment to the Apartment
Remodeling Program mortgage, promissory note, and loan agreement with Aeon Seasons Park and
approve a subordination of the mortgage to the Minnesota Housing principal mortgage.
B AS IS O F RE C O M M E ND AT I O N:
A.H IS TOR IC AL C ON T E X T
I n September 2017, the Housing and Redevelopment Authority (HRA) authorized payment of
$150,000 to Aeon to assist in purchasing the Seasons Park apartment complex. I n exchange,
100% of the units are maintained as affordable to households earning no more than 60% of the
Area Median I ncome (A MI ).
After purchasing the property, Aeon determined that the complex needed significantly more
improvements than originally anticipated. They were unable to identify sufficient resources to pay
for the needed repairs and improvements until last year, when Minnesota Housing agreed to
refinance the existing mortgage and allow Aeon to cash out the funds needed for rehabilitating the
property.
B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc):
Preserving naturally occurring affordable housing and supporting improvements to the City's apartment
buildings is a priority of the E D A.
C.C R IT IC AL T IMIN G IS S U E S:
The refinance of the principal mortgage is scheduled for J uly 22, and an Amendment to the
mortgage and approval of a subordination is needed before closing can occur. Documents are
needed by the closing team well in advance of that date.
Extending the loan term will ensure affordability for the 422 units of affordable rental housing until
2055.
W ork on the security improvements proposed under the Loan has begun but is waiting to be
completed until the refinance process is complete.
D.F IN AN C IAL IMPAC T:
W ith the refinance, six million dollars will be available to make improvements to the property. The
following improvements will be made: roof replacement, security upgrades, critical drainage
improvements, repair of driveway and parking lot areas, and unit renovations, including flooring,
appliances, and bath fixture replacements.
Apartment Remodeling Loans are forgivable after 15 years. Once the original maturity date of
2034 is reached, Aeon may request that the E D A forgive the loan.
E.L E GAL C ON S ID E R AT ION:
The Loan is currently secured with a corporate guaranty with the understanding that a mortgage
will be recorded once the refinance process is complete.
The E D A Attorney prepared the Master Amendment and will review the Subordination Agreement.
The Master Amendment is being reviewed by Minnesota Housing. Any technical changes
requested will be approved by the E D A Attorney.
ALTE R N AT IV E R E C O MME N D ATIO N(S):
Decide not to approve the Master Amendment and subordination.
P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G:
Representative from Aeon.
AT TAC H ME N T S:
D escription Type
Resolution Resolution L etter
D escription of S easons P ark Improvements B ackup Material
Master A mendment C ontract/A greement
RICHFIELD ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO. ______
RESOLUTION APPROVING A MASTER AMENDMENT AGREEMENT WITH AEON SEASONS
PARK LLC RELATED TO AN AFFORDABLE HOUSING PROJECT IN THE CITY OF
RICHFIELD AND TAKING OTHER ACTIONS IN CONNECTION THEREWITH
WHEREAS, the Richfield Economic Development Authority (the “Authority”) provided a loan to
Aeon Seasons Park LLC, a Minnesota limited liability company (the “Borrower”), in the amount of $98,512
(the “Loan”) pursuant to a Loan Agreement, dated October 30, 2019 (the “Loan Agreement”), between the
Authority and the Borrower, to assist the Borrower in financing the remodeling of the Borrower’s property
located at 701-729 77th Street East and 620-638 78th Street East in the City of Richfield, Minnesota,
which contains eight buildings with seventeen units per building (the “Project”); and
WHEREAS, to secure the Borrower’s repayment obligations under the Loan Agreement, the
Borrower executed and delivered to the Authority a Promissory Note, dated October 30, 2019 (the “Note”),
in the original aggregate principal amount of $98,512, and the Borrower caused Aeon, a Minnesota nonprofit
corporation and the sole member of Seasons Park I LLC, the manager of Seasons Park Preservation JV LLC,
and the sole member of the Borrower, to execute and deliver to the Authority a Guaranty Agreement, dated
October 30, 2019 (the “Guaranty”); and
WHEREAS, the Loan Agreement provides that once a mortgage (the “Mortgage”) was recorded
against the Project, the Guaranty would be released; and
WHEREAS, the Borrower intends to refinance a loan provide to acquire the Project and obtain
additional loan funds to remodel the Project, with the proceeds of loans in the principal amount of
$42,500,000 (the “MHFA Loan”) from the Minnesota Housing Finance Agency (“MHFA”); and
WHEREAS, the Authority and the Borrower have determined the need to amend certain provisions
of the Loan Agreement and the Note to incorporate certain requirements of MHFA, including but not limited
to the extension of the maturity date of the Note, and MHFA requires that the Authority subordinate its
interest in the Mortgage and the Note and the Borrower’s repayment obligations thereunder to MHFA; and
WHEREAS, in connection with the MHFA Loan, MHFA has requested that the Authority and the
Borrower enter into a subordination agreement (the “MHFA Subordination Agreement”) with MHFA; and
WHEREAS, there has been presented before the Board of Commissioners of the Authority forms of
the MHFA Subordination Agreement and the Master Amendment Agreement (the “Master Amendment
Agreement”) between the Authority and the Borrower, which sets forth the amendments to the Note and the
Loan Agreement, including but not limited to the extension of the maturity date of the Note, and a Release of
Guaranty Agreement (the “Guaranty Release”); and
NOW, THEREFORE, BE IT RESOLVED, by the Board of Commissioners of the Richfield
Economic Development Authority as follows:
1. The MHFA Subordination Agreement, the Master Amendment Agreement, and the
Guaranty Release are hereby in all respects authorized, approved, and confirmed, and the President and the
Executive Director are hereby authorized and directed to execute the MHFA Subordination Agreement, the
Master Amendment Agreement, and the Guaranty Release for and on behalf of the Authority in substantially
2
the forms now on file with the Executive Director but with such modifications as shall be deemed necessary,
desirable, or appropriate, the execution thereof to constitute conclusive evidence of their approval of any and
all modifications therein.
2. The President and the Executive Director are hereby authorized to execute and deliver any
and all documents deemed necessary to carry out the intentions of this resolution.
Adopted by the Richfield Economic Development Authority this 15th day of June, 2020.
Mary Supple, President
ATTEST:
John Stark, Executive Director
MEMORANDUM
TO: Julie Urban
FROM: Bill Mague
DATE: 8-Jun-20
RE: Seasons Park Refinance and Renovation
Seasons Park is a 422-unit family apartment community in Richfield, acquired by Aeon in late
2017. The property is a Naturally Occurring Affordable Housing (NOAH) project, in that its
rental rates are currently affordable to folks at 60% AMI and below, consistent with federal
and state guidelines. Older Class B & C properties like Seasons Park are at significant risk of
being acquired by national investment funds for “value add” conversion to market-rate
housing. The result of this sort of conversion, as was seen in case of the Crossroads at Penn,
is substantial dislocation of at-risk, low-income families, loss of employment, financial impact
on schools, and, notably, significant impacts on family stability.
Aeon acquired the 422-unit complex in stiff competition with such national “value add” buyers
in late 2017 in order specifically to maintain its affordability at 60% AMI and below. 100% of
the units will serve that income-population and the project is subject to a development
agreement and we are now undertaking a refinancing with MHFA necessary to provide
over $6.0 million in renovation funds, complimenting the almost $250,000 provided by the
City of Richfield in its two property improvement loans.
Renovations will include:
Roof replacement, security upgrades, critical drainage and civil improvements to eliminate
below-grade water infiltration/mold/mildew, unit-renovations, including flooring, appliance,
and bath fixture replacements, and repair of driveway and parking lot areas.
Major systems repair will be completed in the next 12 months, weather permitting, and the
unit renovations will be completed in a roughly 2-year period as units turnover. There will be
some relocation of residents within the property as the renovations are completed, in order
to maximize efficiency of renovation dollars and spaces.
Our refinancing with MHFA will pay off an existing $21.5MM existing FNMA loan, provide
approximately $7.6MM of bridge financing, and provide $8.0MM for renovation, reserves, and
901 No 3rd Street, #150, Minneapolis, MN 55401 612-341-3148 Main 612-341-4208 Fax www.aeonmn.org
Page 2 of 2
901 No 3rd Street, #150, Minneapolis, MN 55401 612-341-3148 Main 612-341-4208 Fax
www.aeon.org
transaction costs. It is necessary to request an extension of the terms of the Richfield loans
to be coterminous with the Senior financing, confirm their subordination thereto, record the
mortgage associated with the December 2019 apartment improvement loan, and release the
guaranty from Aeon for that latter loan.
We have an anticipated closing date of July 22, or shortly thereafter. We have introduced the
City and its legal counsel to the closing attorneys for MHFA and will work to coordinate the
parties vis a vis document sharing and resolution of any outstanding issues, if any.
If you have any questions concerning this transaction, property operations, or project details,
please contact Stephanie Karp at skarp@aeon.org or Bill Mague at bmague@aeon.org.
111 = 1 ""490915v1 JAE MN140-185
First Draft
June 9, 2020
MASTER AMENDMENT AGREEMENT
between
RICHFIELD ECONOMIC DEVELOPMENT AUTHORITY,
as Lender
and
AEON SEASONS PARK LLC,
as Borrower
Dated July ___, 2020
This instrument drafted by:
Kennedy & Graven, Chartered (JAE)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, MN 55402
1
MASTER AMENDMENT AGREEMENT
THIS MASTER AMENDMENT AGREEMENT is entered into on July ___, 2020 (the “Master
Amendment Agreement”), between the RICHFIELD ECONOMIC DEVELOPMENT AUTHORITY, a
public body corporate and politic (the “Lender”), and AEON SEASONS PARK LLC, a Minnesota
limited liability company (the “Borrower”).
RECITALS
WHEREAS, the Lender provided a loan to the Borrower in the amount of $98,512 (the “Loan”)
pursuant to a Loan Agreement, dated October 30, 2019 (the “Loan Agreement”), between the Lender and
the Borrower, to assist the Borrower in financing improvements to the Borrower’s property (the
“Property”) located at 701-729 77th Street East and 620-638 78th Street East in the City of Richfield,
Minnesota (the “City”), which contains eight buildings with seventeen units per building (the “Project”);
and
WHEREAS, to secure the Borrower’s repayment obligations under the Loan Agreement, the
Borrower executed and delivered to the Lender a Promissory Note, dated October 30, 2019 (the “Note”),
in the original aggregate principal amount of $98,512, and the Borrower caused Aeon, a Minnesota
nonprofit corporation and the sole member of Seasons Park I LLC, the manager of Seasons Park
Preservation JV LLC, and the sole member of the Borrower, to execute and deliver to the Lender a
Guaranty Agreement, dated October 30, 2019 (the “Guaranty”); and
WHEREAS, the Borrower is obtaining a loan in the principal amount of $42,500,000 (the
“MHFA Loan”) from the Minnesota Housing Finance Agency (“MHFA”) in order to provide additional
financing for the Project; and
WHEREAS, in connection with the MHFA Loan, the Borrower will execute and deliver to the
Lender a Mortgage of even date herewith (the “Mortgage”) against the Property to secure the Borrower’s
repayment obligations with respect to the Note, and the Lender will execute and deliver a release of the
Guaranty; and
WHEREAS, the Lender and the Borrower have determined the need to amend certain provisions
of the Loan Agreement and the Note to incorporate certain requirements of MHFA, and MHFA requires
that the Lender subordinate its interest in the Mortgage and the Note and the Borrower’s repayment
obligations thereunder to MHFA; and
WHEREAS, the Lender and the Borrower will enter into a separate subordination agreement with
MHFA; and
NOW THEREFORE, the Lender and the Borrower, each in consideration of the representations,
covenants and agreements of the other as set forth herein, mutually represent, covenant and agree as
follows:
ARTICLE I
AMENDMENTS
Section 1.1. Amendments to the Note.
(a) Section 2 of the Note is hereby deleted in its entirety and replaced with the following:
2
2. If the Loan is not forgiven by the Holder, the entire unpaid balance of principal shall
be due and payable upon the earliest of the following: (i) 30 days after written notification by Holder
to Maker of the occurrence of any default or non-compliance with any provision or requirement of
the Loan Agreement of even date herewith (the “Agreement”) between the Maker and the Holder,
which includes the Program Guidelines if the default is not cured within 30 days; or (ii) 30 days after
the Maker makes or allows to be made any total or partial transfer, sale, assignment, conveyance or
transfer in any other mode, of the Property, if such transfer occurs within 15 years following the date
of this Note; or (iii) July ___, 2055.
(b) All references to the Note and the Loan Agreement in the Note are hereby deemed to
include the amendments set forth in this Master Amendment Agreement.
Section 1.2. Amendments to the Loan Agreement.
(a) Section 3 of the Loan Agreement is hereby deleted in its entirety and replaced with the
following:
3. The Loan is evidenced by a Promissory Note of even date herewith (the “Note”),
from the Borrower to the EDA. The Note shall have a maturity date of no later than
July ___, 2055. The Loan shall not accrue interest. If the Borrower retains ownership of and
continues to rent out the residential apartment property during the fifteen years that follows
October 30, 2019 (the original date of the Loan), then the Loan shall be forgiven on October 30,
2034.
(b) All references to the Guaranty in the Loan Agreement are hereby deleted.
(c) All references to the Note and the Loan Agreement in the Loan Agreement are hereby
deemed to include the amendments set forth in this Master Amendment Agreement.
ARTICLE II
MISCELLANEOUS
Section 2.1. Effective Date. The amendments made to the Note and the Loan Agreement, as
set forth in this Master Amendment Agreement, shall be effective on July ___, 2020.
Section 2.2. Certain Defined Terms. Terms used in this Master Amendment Agreement and
not defined herein shall have the meanings given in the Loan Agreement.
Section 2.3. Confirmation of Agreements. Except as specifically amended by this Master
Amendment Agreement, the Note and the Loan Agreement are hereby ratified and confirmed and remain
in full force and effect.
(The remainder of this page is intentionally left blank.)
S-1
IN WITNESS WHEREOF, the Lender and the Borrower have caused this Master Amendment
Agreement to be executed in their respective names all as of the date and year first written above.
RICHFIELD ECONOMIC DEVELOPMENT
AUTHORITY
By
Its President
By
Its Executive Director
S-2
Execution page of the Borrower to the Master Amendment Agreement, dated as of the date and year first
written above.
AEON SEASONS PARK LLC
By
Its