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070924 Special HRA AgendaCall to Order SPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING RICHFIELD MUNICIPAL CENTER, COUNCIL CHAMBERS JULY 9, 2024 5:30 PM AGENDA APPROVAL 1. Approval of the Agenda RESOLUTIONS 2. Consideration of an amended Preliminary Development Agreement with JO Companies, LLC for the development of 40 units of affordable housing at 6501-25 Penn Avenue South. Staff Report No. 14 3. 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 612-861-9739. AGENDA SECTION:RESOLUTIONS AGENDA ITEM #2. STAFF REPORT NO. 14 HOUSING AND REDEVELOPMENT AUTHORITY MEETING 7/9/2024 Julie Urban, Asst. Community Development DirectorREPORT PREPARED BY: EXECUTIVE DIRE CTOR RE VIEW: Melissa Poehlman, Executive Director 7/2/2024 ITEM FOR COUNCIL CONSIDERATION: Consideration of an amended Preliminary Development Agreement with JO Companies, LLC for the development of 40 units of affordable housing at 6501-25 Penn Avenue South. EXECUTIVE SUMMARY: On June 17, 2024, the Housing and Redevelopment Authority (HRA) approved a Preliminary Development Agreement (Agreement) with JO Companies, LLC (Developer) for the development of 40 units of work force housing at HRA-owned property located at 6501-25 Penn Avenue South. Under the terms of the Agreement, the HRA agreed to provide financial assistance in the amount of up to $985,000 in the form of a grant or loan from the Affordable Housing Trust Fund (Trust Fund) and/or a reduced price for the land. The amount of this assistance was based on a review of the project's preliminary financial information using an estimated value of one million dollars for the land; however, the Broker Price Opinion of the property's value was completed after the HRA meeting and estimates a significantly higher land value of $1.5 million. Based on this value, the amount of the project's gap increases by $500,000, and the request of assistance from the HRA would total $1.485 million. The proposed amendment to the Agreement reflects this larger amount. While the Agreement indicates a larger amount of assistance, this additional assistance would not actually cost the HRA anything. The HRA is considering selling the property for $500,000 and this does not change in the Amended Agreement. The change is simply to the amount of the "discount" the HRA would be offering. The Developer is planning to submit an application to the Minnesota Housing Finance Agency for federal Low Income Housing Tax Credits (LIHTC) on July 11, 2024, in order to finance the development. Points are awarded to developments based, in part, on the amount of local assistance provided to a project. The higher value of the HRA's assistance to the project will warrant a higher score for the project and make it more competitive for funding. RECOMMENDED ACTION: By Motion: Adopt a resolution approving the execution and delivery of an amended Preliminary Development Agreement with JO Companies, LLC for the development of 40 units of affordable housing on Housing and Redevelopment Authority-owned property located at 6501-25 Penn Avenue South. 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 The HRA purchased the property at 6501 P enn Avenue S outh in 2019. The adjacent property at 6525 P enn Avenue S outh has been tax forfeited. The HRA submitted a check to Hennepin C ounty to purchase the property in May and anticipates receiving a deed to the property in July. A development was proposed for 6501 P enn Avenue S outh and 6504 Oliver Avenue S outh in 2020 but did not receive financing. The D eveloper is proposing to develop 40 units of affordable housing on HRA -owned property located at 6501-25 P enn Avenue S outh. The development would include a five-story building with 34 underground and 14 surface parking spaces. The affordability mix would include 15 units affordable to households earning up to 30% of the A M I, 18 units affordable at 50% of the A M I, and seven units affordable at 60% of the A M I. Two units will be accessible with roll-in showers. The D eveloper presented the project concept at a C ity C ouncil, HRA and P lanning C ommission work session on A pril 15, 2024. On J une 17, 2024, the HRA approved the A greement with the D eveloper. B .E QU ITAB L E OR S T R AT E GIC C ON S ID E R AT ION S OR IMPAC T S The proposed affordable housing development provides an opportunity for the development of accessible housing units and housing units affordable to households earning 30% of the A M I. The proposed affordable housing development would help to meet the S trategic P lan goal to maintain Richfield as an affordable place to live. The D eveloper is in the process of seeking input from the community on the design of the project and is specifically reaching out to people with disabilities; B lack, Indigenous and P eople of C olor (B IP OC ); people who are or have been unsheltered, and large families with children. C .P OL IC IE S (resolutions, ordinances, regulations, statutes, exc): The property is guided for Mixed Use and zoned Mixed-Use C ommunity. The C ity's Inclusionary Housing P olicy requires at least 20% of the units receiving financial assistance from the C ity be affordable at 60% of the A M I. The proposed development would provide a greater number of affordable units at greater levels of affordability. D .C R IT IC AL T IMIN G IS S U E S: The B roker P rice Opinion was not completed at the time of the HRA meeting, so the consideration at that time was based on an estimated land value of one million dollars. The D eveloper is applying for L IHTC to finance the development. The deadline for that application is July 11, and the D eveloper is seeking support for the project in order to submit a competitive application. F unding decisions would likely occur in D ecember. The expiration of the amended A greement remains F ebruary 28, 2025. E .F IN AN C IAL IMPAC T: The B roker P rice Opinion provides a land value of $1.5 million, which is significantly higher than the original estimate and increases the amount of the project's financial gap. The development has demonstrated a need for financial assistance from the HRA , and as the project is further refined, staff and the HRA 's financial consultant will work with the D eveloper to confirm the amount of assistance needed and determine if the assistance takes the form of a land write-down and/or an award from the Trust F und. A dditional funds may need to be transferred to the Trust F und from the S pending P lan or from the Housing & Redevelopment F und. There are sufficient funds in both accounts to meet the development's funding need. F.L E GAL C ON S ID E R AT ION: The HRA A ttorney approved the amendment to the A greement. The A greement is contingent on the D eveloper applying for and receiving a tax credit award, and the HRA receiving the deed for 6525 P enn Avenue S outh. S everal additional approvals will be needed before the project can move forward, including: HRA approval of a C ontract for P rivate Redevelopment, HRA approval of the sale of land following a public hearing, and C ity C ouncil approval of zoning and subdivision entitlements. ALTE R N AT IV E R E C O MME N D ATIO N(S): Decide not to approve an amended Preliminary Development Agreement with J O Companies, L L C. P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G: J ohnny Opara, J O Companies, L L C AT TAC H ME N T S: D escription Type Resolution Resolution L etter A mended P reliminary Redevelopment A greement C ontract/A greement RE D L INE D P reliminary Redevelopment A greement B ackup Material HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA RESOLUTION NO. 1485 RESOLUTION APPROVING THE EXECUTION AND DELIVERY OF AN AMENDED PRELIMINARY REDEVELOPMENT AGREEMENT WITH JO COMPANIES, LLC WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (the “Authority”) owns the real property located at 6501 Penn Avenue South in the City of Richfield, Minnesota (the “City”); and WHEREAS, the Authority intends to purchase the real property located at 6525 Penn Avenue South in the City, which is currently forfeited property, and is working with the State of Minnesota to obtain a deed to such property; and WHEREAS, JO Companies, LLC, a Minnesota limited liability company, or one of its wholly owned affiliates (collectively, the “Redeveloper”), proposes to purchase the real property located at 6501 Penn Avenue South from the Authority and the real property located at 6525 Penn Avenue South once the Authority obtains such property (collectively, the “Redevelopment Property”) and construct thereon a multifamily housing project consisting of approximately 40 affordable housing units and approximately 34 underground and 14 surface parking spaces (the “Project”); and WHEREAS, the Redeveloper proposes that all of the units within the Project will be affordable, with a portion of the units occupied by residents whose incomes do not exceed thirty percent (30%) of the area median gross income, a portion occupied by residents whose incomes do not exceed fifty percent (50%) of the area median gross income, and the remainder of the units occupied by residents whose incomes do not exceed sixty percent (60%) of the area median gross income; and WHEREAS, the Redeveloper and the Authority have been engaged in informal discussions regarding the Project, including consideration of the Authority selling the Redevelopment Property to the Redeveloper at a reduced cost, no more than $500,000, and/or providing financial assistance for the Project using pooled tax increment from the Affordable Housing Trust Fund in a total amount of up to $485,000, or a combination thereof; and WHEREAS, on June 17, 2024, the Board of Commissioners of the Authority (the “Board”) approved a Preliminary Development Agreement (the “Preliminary Redevelopment Agreement”) between the Authority and the Redeveloper, which sets forth the Redeveloper’s intentions and the conditions under which the Redeveloper will undertake the Project; and WHEREAS, on July 9th, 2024, the Board approved an Amendment to the Preliminary Development Agreement (the “Amended Agreement”) between the Authority and the Redeveloper, which provides an updated valuation of the Redevelopment Property of $1,500,000 and sets a total amount of financial assistance at no more than $1,485,000; and WHEREAS, the Board has reviewed the Amended Agreement and finds that the execution thereof by the Authority and performance of the Authority’s obligations thereunder are in the best interest of the City and its residents; and 2 NOW, THEREFORE, BE IT RESOLVED, by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1.The Amended Preliminary Redevelopment Agreement presented to the Board and on file with the staff of the Authority is hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the Chair and Executive Director; provided that execution of such document by such officials shall be conclusive evidence of approval. 2.The Chair and Executive Director are hereby authorized to execute the Amended Preliminary Redevelopment Agreement on behalf of the Authority and to carry out the Authority’s obligations thereunder. 3.The approvals set forth in this resolution are contingent upon the Authority’s acquisition of the portion of the Redevelopment Property located at 6525 Penn Avenue South. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 9th day of July, 2024. Gordon Hanson, Acting Chair Sean Hayford Oleary, Secretary RC125-399 (JAE) 955888v4 AMENDED PRELIMINARY REDEVELOPMENT AGREEMENT THIS AMENDED PRELIMINARY REDEVELOPMENT AGREEMENT, made as of the _____ day of July, 2024 (the “Agreement”), is between the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a Minnesota public body corporate and politic (the “Authority”), and JO Companies, LLC, a Minnesota limited liability company, or one of its wholly owned affiliates (collectively, the “Redeveloper”). The Authority and the Redeveloper are referred to herein as the “Parties” or a “Party.” RECITALS First: The Redeveloper and the Authority have been engaged in informal discussions regarding the redevelopment of certain real property located at 6501 and 6525 Penn Avenue South in the City of Richfield, Minnesota (the “City”), which is legally described in EXHIBIT A attached hereto (the “Redevelopment Property”); Second: The portion of the Redevelopment Property located at 6525 Penn Avenue South is forfeited property that the Authority has submitted payment to the County to purchase and is waiting for the State of Minnesota to provide a deed for the property; Third: The Redeveloper proposes to purchase the Redevelopment Property from the Authority and construct on the Redevelopment Property a multifamily housing project consisting of approximately 40 affordable housing units and approximately 34 underground and 14 surface parking spaces (the “Project”); Fourth: All of the units within the Project will be affordable, with a portion of the units occupied by residents whose incomes do not exceed thirty percent (30%) of the area median gross income, a portion occupied by residents whose incomes do not exceed fifty percent (50%) of the area median gross income, and the remainder of the units occupied by residents whose incomes do not exceed sixty percent (60%) of the area median gross income; Fifth: In order to assist the Redeveloper with the Project, the Authority is considering financial assistance for the Project in an amount of up to $1,485,000 by selling the Redevelopment Property to the Redeveloper at a reduced cost of $500,000 (the Authority requested a Broker Opinion regarding the value of the Property and the value was determined to be $1.5 million) and providing financial assistance for the Project using pooled tax increment from the Affordable Housing Trust Fund in an amount up to $485,000; Sixth: Based on initial reviews of the proposal, it appears that the Project is potentially feasible; however, further review is needed; Seventh: The Parties wish to cooperate in further analyzing the potential and the feasibility of the Project and are willing to proceed with such analysis as described in this Agreement; Eighth: The Parties acknowledge that the Redeveloper will expend substantial time and effort, and incur substantial expense in pursuing the Project; Ninth: The Redeveloper is willing to undertake the activities described in this Agreement only with the reasonable assurance from the Authority that it will support and cooperate with the Redeveloper in its efforts; 2 Tenth: The Authority and the Redeveloper have executed this Agreement to document their understanding with respect to the proposed Project. Eleventh: This Agreement is effective from the date hereof through February 28, 2025 (the “Term”), but may be extended by the mutual agreement of both Parties. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual obligations of the Parties contained herein, each of them does hereby represent, covenant and agree with the other as follows: 1.Statement of Intent. It is the intention of the Parties that during the Term of this Agreement the following activities will take place; provided, however, that the Authority obtains the deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South: (a)Plan Review and Refinement. The Redeveloper will complete and provide a general redevelopment plan, including parking layout and design, to the Authority for review and comment. This submission shall be made on or before February 25, 2025, as an application for sketch plan review. This review involves a staff review of the general redevelopment plan by Authority staff. Following the sketch plan review, the Redeveloper will undertake any additional studies or refinements to the general redevelopment plan for the Project that are necessary to determine that the plan (i)complies with the City’s land use requirements; and (ii) provides sufficient detail to permit the reviews described in Section 1(d) below. (b)Financial Feasibility. The Redeveloper has provided the Authority with a financial feasibility analysis of the Project, including a detailed sources and uses of all funding and all expenditures expected for the construction of the Project and a Project pro forma. (c)Authority Analysis of Project. The Authority’s fiscal consultant will conduct a financial analysis of the Redeveloper and the Project. The purpose of the Authority’s analysis is to determine the Redeveloper’s ability to finance the proposed Project. The analysis will consider such factors as the Redeveloper’s capability to arrange for financing, the anticipated level of assistance available to the Project from the Authority or other sources, and the Redeveloper’s ability to provide equity to the Project. (d)Acquisition of Redevelopment Property by Redeveloper. The Authority currently owns the portion of the Redevelopment Property located at 6501 Penn Avenue South and anticipates obtaining a deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South by the end of July 2024. The Authority understands that in order for the Project to proceed, the Redeveloper must purchase the Redevelopment Property from the Authority. The Authority Board must hold a duly noticed public hearing before conveying the Redevelopment Property to the Redeveloper. During the Term of this Agreement, the Authority will not negotiate with other parties with respect to the purchase of the Redevelopment Property. (e)Contract Negotiation. Under the condition that the Redeveloper is awarded tax credits for the Project, the Parties will attempt in good faith to negotiate the terms of a contract 3 for private development (the “Contract”) which will provide the terms of sale and the purchase price of the Redevelopment Property, the nature and timing of the Project and any private improvements to be constructed, and the form, amount and conditions of any economic assistance to be provided by the Authority for the Project. The Contract will contain such additional terms as either Party believes are necessary for the transaction. (f)Right of Entry. During the Term of this Agreement (as may be extended by the mutual agreement of both Parties), the Authority will grant the Redeveloper a right to enter the Redevelopment Property as necessary for surveying the Redevelopment Property, geotechnical and environmental tests, and other studies of the Redevelopment Property. The Authority will also allow the Redeveloper to post a development and/or marketing sign on the Redevelopment Property. (g)Cooperation with Grant and Entitlement Applications. The Redeveloper plans to prepare applications for various grants and entitlements for the Project. The Authority agrees to cooperate with the Redeveloper to obtain the various grants, including supplying information for the grant applications and requesting approval from the Authority Board if necessary. (h)Tax Credit Application. The Redeveloper will apply for 9% tax credits for the Project on or before July 11, 2024. The Authority agrees to cooperate with the Redeveloper in its application for low income housing tax credits, including requesting approval from the Authority Board if necessary. 2.Undertaking by Redeveloper. During the Term of this Agreement, the Redeveloper will undertake all of the activities necessary, in the Redeveloper’s discretion, to accomplish the activities described in Section 1 of this Agreement required to be performed by the Redeveloper. 3.Undertaking and Agreement by Authority. The Authority agrees to cooperate with the Redeveloper in the Redeveloper’s undertakings and agrees to utilize its best efforts, subject to the Redeveloper’s performance, to accomplish the activities described in Section 1 of this Agreement, which includes an analysis of the financial feasibility of the Project and the nature, area, and financial implications of any tax increment financing district which might be established. 4.Term. This Agreement is effective from the date hereof through February 28, 2025, unless extended with approval of the Authority Board, provided, in the event either Party, after consultation with the other Party, determines in good faith that the other Party is not diligently pursuing the Project or its obligations hereunder; or the Redeveloper determines, in good faith, that the Project is not feasible, such determining Party may terminate this Agreement upon thirty (30) days’ written notice to the other. The Authority may also terminate this Agreement for failure of the Redeveloper to provide additional funds pursuant to Section 5 below. The Parties each waive any claim or cause of action that they may have against the other Party based upon the termination of this Agreement by such other Party. The Parties may, by mutual written agreement, extend the Term of this Agreement for such further periods as determined to be appropriate from time to time. 4 5.Administrative Costs of Authority. The Redeveloper agrees and understands that it is responsible for and will pay to the Authority $2,000 in Authority staff costs, along with all out-of-pocket costs incurred by the Authority (including without limitation reasonable attorney and fiscal consultant fees) in the negotiation and preparation of this Agreement and other documents and agreements in connection with the activities and the Project contemplated hereunder (collectively, the “Administrative Costs”). The Authority and Redeveloper agree that the Administrative Costs shall not exceed $15,000 unless agreed to by both Parties. The Administrative Costs shall be evidenced by invoices, statements or other reasonable written evidence of the costs incurred by the Authority. The Redeveloper provided a deposit to the Authority in the amount of $5,000 (the “Deposit”) to pay Administrative Costs. If at any time the Deposit drops below $1,000, the Redeveloper shall replenish the deposit to the full $5,000 within thirty (30) days after receipt of written notice thereof from the Authority. The Authority shall provide invoices to the Redeveloper for all payments deducted from the Deposit. If at any time the Deposit is insufficient to pay invoices related to the Project, the Authority will ask for additional Deposits from the Redeveloper. If the additional Deposit is not made within thirty (30) days following the date of such request, the Authority may elect to either suspend its performance under this Agreement or terminate this Agreement. Such suspension or termination will be effective on the date it is given in writing, or on such later date specified in the notification. Any unexpended or unencumbered portion of the Deposit shall be returned to the Redeveloper upon the expiration or termination of this Agreement. 6.Termination of Agreement. This Agreement may be terminated upon five (5) days’ written notice by a Party to the other Party if: (a)the Authority is unable to obtain the deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South; (b)in the respective good faith judgment of any Party, an impasse has been reached in the negotiation or implementation of any material term or the completion or execution of any material condition of this Agreement or the Contract; or (c)a Party fails to perform any of its obligations under this Agreement. 7.Miscellaneous. (a)This Agreement constitutes the entire agreement between the Parties relative to the proposed Project. Unless specifically described herein, no obligation shall be inferred or construed. (b)The redevelopment of the Redevelopment Property will be in accordance with the Contract or other agreements which the Parties shall, in good faith, attempt to negotiate during the Term of this Agreement. (c)The Redeveloper understands that further and separate action, for which no obligation is created hereunder, will be required before the Authority or the Redeveloper is obligated 5 to take various actions with respect to the Project. Those actions may include, without limitation: 1)Zoning and subdivision approvals to the extent any are required; 2)Construction of public improvements to serve the Project; and 3)Negotiation of and approval of the Contract by the Authority Board. (d)The Redeveloper further understands that many of the actions which the Authority or the City may be called upon to take require the reasonable discretion and, in some instances, the legislative judgment of the Authority or the City, and such actions may be made only following established procedures; and the Authority may not, by agreement, agree in advance to any specific decision in such matters. (e)Notice or demand or other communication between or among the Parties shall be sufficiently given if sent by certified or registered mail, postage prepaid, return receipt requested or delivered personally: JO Companies, LLC 510 Brunson Street, Suite 100 Saint Paul, MN 55130 Attn: Johnny Opara Housing and Redevelopment Authority in and for the City of Richfield, Minnesota 6700 Portland Avenue South Richfield, MN 55423 Attn: Melissa Poehlman, Executive Director (f)This Agreement is contingent upon the Authority obtaining the deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South. In the event that the Authority is unable to obtain the deed to this property, this Agreement shall terminate. (The remainder of this page is intentionally left blank.) S-1 IN WITNESS WHEREOF, the Parties have executed this Preliminary Redevelopment Agreement effective the date and year first above written. HOUSING AND REDEVELOPMENT JO COMPANIES, LLC, a Minnesota limited AUTHORITY IN AND FOR THE CITY OF liability company RICHFIELD, MINNESOTA By: By: Its: ____________________________ Gordon Hanson ActingChair Its: By: _____________________________ Melissa Poehlman Its: Executive Director A-1 EXHIBIT A LEGAL DESCRIPTION OF THE REDEVELOPMENT PROPERTY 6501 Penn Avenue South: Par. 1: The West ½ of the South 109.6 feet of the North 767.2 feet of the North ¾ of the West ¼ of the Southwest Quarter of the Northwest Quarter except the North 30 feet thereof; Par. 2: The West ½ of the South 109.6 feet of the North 876.8 feet of the North ¾ of the West ¼ of the Southwest Quarter of the Northwest Quarter; All in Section 28, Township 28, Range 24, in the Village of Richfield, Hennepin County, Minnesota. Par. 3: The South 109.6 feet of the North 767.2 feet of the North 3/4 of the West Quarter of the Southwest Quarter of the Northwest Quarter of Section 28, Township 28, Range 24, except the South 50 feet of the East 1/2 thereof and except that part of the West 1/2 lying South of the North 30 feet thereof, in the City of Richfield, Hennepin County, Minnesota. 6525 Penn Avenue South: RC125-399 (JAE) 955866v1 AMENDED PRELIMINARY REDEVELOPMENT AGREEMENT THIS AMENDED PRELIMINARY REDEVELOPMENT AGREEMENT, made as of the _____ day of JuneJuly, 2024 (the “Agreement”), is between the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a Minnesota public body corporate and politic (the “Authority”), and JO Companies, LLC, a Minnesota limited liability company, or one of its wholly owned affiliates (collectively, the “Redeveloper”). The Authority and the Redeveloper are referred to herein as the “Parties” or a “Party.” RECITALS First: The Redeveloper and the Authority have been engaged in informal discussions regarding the redevelopment of certain real property located at 6501 and 6525 Penn Avenue South in the City of Richfield, Minnesota (the “City”), which is legally described in EXHIBIT A attached hereto (the “Redevelopment Property”); Second: The portion of the Redevelopment Property located at 6525 Penn Avenue South is forfeited property that the Authority has submitted payment to the County to purchase and is waiting for the State of Minnesota to provide a deed for the property; Third: The Redeveloper proposes to purchase the Redevelopment Property from the Authority and construct on the Redevelopment Property a multifamily housing project consisting of approximately 40 affordable housing units and approximately 34 underground and 14 surface parking spaces (the “Project”); Fourth: All of the units within the Project will be affordable, with a portion of the units occupied by residents whose incomes do not exceed thirty percent (30%) of the area median gross income, a portion occupied by residents whose incomes do not exceed fifty percent (50%) of the area median gross income, and the remainder of the units occupied by residents whose incomes do not exceed sixty percent (60%) of the area median gross income; Fifth: In order to assist the Redeveloper with the Project, the Authority is considering financial assistance for the Project in an amount of up to $9851,485,000 by selling the Redevelopment Property to the Redeveloper at a reduced cost of $500,000 (the Authority requested a Broker Opinion regarding the value of the Property and the value was determined to be $___________) $1.5 million) and providing financial assistance for the Project using pooled tax increment from the Affordable Housing Trust Fund in an amount up to $485,000; Sixth: Based on initial reviews of the proposal, it appears that the Project is potentially feasible; however, further review is needed; Seventh: The Parties wish to cooperate in further analyzing the potential and the feasibility of the Project and are willing to proceed with such analysis as described in this Agreement; Eighth: The Parties acknowledge that the Redeveloper will expend substantial time and effort, and incur substantial expense in pursuing the Project; Ninth: The Redeveloper is willing to undertake the activities described in this Agreement only with the reasonable assurance from the Authority that it will support and cooperate with the Redeveloper in its efforts; 2 Tenth: The Authority and the Redeveloper have executed this Agreement to document their understanding with respect to the proposed Project. Eleventh: This Agreement is effective from the date hereof through February 28, 2025 (the “Term”), but may be extended by the mutual agreement of both Parties. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual obligations of the Parties contained herein, each of them does hereby represent, covenant and agree with the other as follows: 1.Statement of Intent. It is the intention of the Parties that during the Term of this Agreement the following activities will take place; provided, however, that the Authority obtains the deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South: (a)Plan Review and Refinement. The Redeveloper will complete and provide a general redevelopment plan, including parking layout and design, to the Authority for review and comment. This submission shall be made on or before February 25, 2025, as an application for sketch plan review. This review involves a staff review of the general redevelopment plan by Authority staff. Following the sketch plan review, the Redeveloper will undertake any additional studies or refinements to the general redevelopment plan for the Project that are necessary to determine that the plan (i)complies with the City’s land use requirements; and (ii) provides sufficient detail to permit the reviews described in Section 1(d) below. (b)Financial Feasibility. The Redeveloper has provided the Authority with a financial feasibility analysis of the Project, including a detailed sources and uses of all funding and all expenditures expected for the construction of the Project and a Project pro forma. (c)Authority Analysis of Project. The Authority’s fiscal consultant will conduct a financial analysis of the Redeveloper and the Project. The purpose of the Authority’s analysis is to determine the Redeveloper’s ability to finance the proposed Project. The analysis will consider such factors as the Redeveloper’s capability to arrange for financing, the anticipated level of assistance available to the Project from the Authority or other sources, and the Redeveloper’s ability to provide equity to the Project. (d)Acquisition of Redevelopment Property by Redeveloper. The Authority currently owns the portion of the Redevelopment Property located at 6501 Penn Avenue South and anticipates obtaining a deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South by the end of June July 2024. The Authority understands that in order for the Project to proceed, the Redeveloper must purchase the Redevelopment Property from the Authority. The Authority Board must hold a duly noticed public hearing before conveying the Redevelopment Property to the Redeveloper. During the Term of this Agreement, the Authority will not negotiate with other parties with respect to the purchase of the Redevelopment Property. (e)Contract Negotiation. Under the condition that the Redeveloper is awarded tax credits for the Project, the Parties will attempt in good faith to negotiate the terms of a contract 3 for private development (the “Contract”) which will provide the terms of sale and the purchase price of the Redevelopment Property, the nature and timing of the Project and any private improvements to be constructed, and the form, amount and conditions of any economic assistance to be provided by the Authority for the Project. The Contract will contain such additional terms as either Party believes are necessary for the transaction. (f)Right of Entry. During the Term of this Agreement (as may be extended by the mutual agreement of both Parties), the Authority will grant the Redeveloper a right to enter the Redevelopment Property as necessary for surveying the Redevelopment Property, geotechnical and environmental tests, and other studies of the Redevelopment Property. The Authority will also allow the Redeveloper to post a development and/or marketing sign on the Redevelopment Property. (g)Cooperation with Grant and Entitlement Applications. The Redeveloper plans to prepare applications for various grants and entitlements for the Project. The Authority agrees to cooperate with the Redeveloper to obtain the various grants, including supplying information for the grant applications and requesting approval from the Authority Board if necessary. (h)Tax Credit Application. The Redeveloper will apply for 9% tax credits for the Project on or before July 11, 2024. The Authority agrees to cooperate with the Redeveloper in its application for low income housing tax credits, including requesting approval from the Authority Board if necessary. 2.Undertaking by Redeveloper. During the Term of this Agreement, the Redeveloper will undertake all of the activities necessary, in the Redeveloper’s discretion, to accomplish the activities described in Section 1 of this Agreement required to be performed by the Redeveloper. 3.Undertaking and Agreement by Authority. The Authority agrees to cooperate with the Redeveloper in the Redeveloper’s undertakings and agrees to utilize its best efforts, subject to the Redeveloper’s performance, to accomplish the activities described in Section 1 of this Agreement, which includes an analysis of the financial feasibility of the Project and the nature, area, and financial implications of any tax increment financing district which might be established. 4.Term. This Agreement is effective from the date hereof through February 28, 2025, unless extended with approval of the Authority Board, provided, in the event either Party, after consultation with the other Party, determines in good faith that the other Party is not diligently pursuing the Project or its obligations hereunder; or the Redeveloper determines, in good faith, that the Project is not feasible, such determining Party may terminate this Agreement upon thirty (30) days’ written notice to the other. The Authority may also terminate this Agreement for failure of the Redeveloper to provide additional funds pursuant to Section 5 below. The Parties each waive any claim or cause of action that they may have against the other Party based upon the termination of this Agreement by such other Party. The Parties may, by mutual written agreement, extend the Term of this Agreement for such further periods as determined to be appropriate from time to time. 4 5.Administrative Costs of Authority. The Redeveloper agrees and understands that it is responsible for and will pay to the Authority $2,000 in Authority staff costs, along with all out-of-pocket costs incurred by the Authority (including without limitation reasonable attorney and fiscal consultant fees) in the negotiation and preparation of this Agreement and other documents and agreements in connection with the activities and the Project contemplated hereunder (collectively, the “Administrative Costs”). The Authority and Redeveloper agree that the Administrative Costs shall not exceed $15,000 unless agreed to by both Parties. The Administrative Costs shall be evidenced by invoices, statements or other reasonable written evidence of the costs incurred by the Authority. The Redeveloper provided a deposit to the Authority in the amount of $5,000 (the “Deposit”) to pay Administrative Costs. If at any time the Deposit drops below $1,000, the Redeveloper shall replenish the deposit to the full $5,000 within thirty (30) days after receipt of written notice thereof from the Authority. The Authority shall provide invoices to the Redeveloper for all payments deducted from the Deposit. If at any time the Deposit is insufficient to pay invoices related to the Project, the Authority will ask for additional Deposits from the Redeveloper. If the additional Deposit is not made within thirty (30) days following the date of such request, the Authority may elect to either suspend its performance under this Agreement or terminate this Agreement. Such suspension or termination will be effective on the date it is given in writing, or on such later date specified in the notification. Any unexpended or unencumbered portion of the Deposit shall be returned to the Redeveloper upon the expiration or termination of this Agreement. 6.Termination of Agreement. This Agreement may be terminated upon five (5) days’ written notice by a Party to the other Party if: (a)the Authority is unable to obtain the deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South; (b)in the respective good faith judgment of any Party, an impasse has been reached in the negotiation or implementation of any material term or the completion or execution of any material condition of this Agreement or the Contract; or (c)a Party fails to perform any of its obligations under this Agreement. 7.Miscellaneous. (a)This Agreement constitutes the entire agreement between the Parties relative to the proposed Project. Unless specifically described herein, no obligation shall be inferred or construed. (b)The redevelopment of the Redevelopment Property will be in accordance with the Contract or other agreements which the Parties shall, in good faith, attempt to negotiate during the Term of this Agreement. (c)The Redeveloper understands that further and separate action, for which no obligation is created hereunder, will be required before the Authority or the Redeveloper is obligated 5 to take various actions with respect to the Project. Those actions may include, without limitation: 1)Zoning and subdivision approvals to the extent any are required; 2)Construction of public improvements to serve the Project; and 3)Negotiation of and approval of the Contract by the Authority Board. (d)The Redeveloper further understands that many of the actions which the Authority or the City may be called upon to take require the reasonable discretion and, in some instances, the legislative judgment of the Authority or the City, and such actions may be made only following established procedures; and the Authority may not, by agreement, agree in advance to any specific decision in such matters. (e)Notice or demand or other communication between or among the Parties shall be sufficiently given if sent by certified or registered mail, postage prepaid, return receipt requested or delivered personally: JO Companies, LLC 510 Brunson Street, Suite 100 Saint Paul, MN 55130 Attn: Johnny Opara Housing and Redevelopment Authority in and for the City of Richfield, Minnesota 6700 Portland Avenue South Richfield, MN 55423 Attn: Melissa Poehlman, Executive Director (f)This Agreement is contingent upon the Authority obtaining the deed to the portion of the Redevelopment Property located at 6525 Penn Avenue South. In the event that the Authority is unable to obtain the deed to this property, this Agreement shall terminate. (The remainder of this page is intentionally left blank.) S-1 IN WITNESS WHEREOF, the Parties have executed this Preliminary Redevelopment Agreement effective the date and year first above written. HOUSING AND REDEVELOPMENT JO COMPANIES, LLC, a Minnesota limited AUTHORITY IN AND FOR THE CITY OF liability company RICHFIELD, MINNESOTA By: By: Its: ____________________________ Gordon Hanson Acting Chair Its: By: _____________________________ Melissa Poehlman Its: Executive Director A-1 EXHIBIT A LEGAL DESCRIPTION OF THE REDEVELOPMENT PROPERTY 6501 Penn Avenue South: Par. 1: The West ½ of the South 109.6 feet of the North 767.2 feet of the North ¾ of the West ¼ of the Southwest Quarter of the Northwest Quarter except the North 30 feet thereof; Par. 2: The West ½ of the South 109.6 feet of the North 876.8 feet of the North ¾ of the West ¼ of the Southwest Quarter of the Northwest Quarter; All in Section 28, Township 28, Range 24, in the Village of Richfield, Hennepin County, Minnesota. Par. 3: The South 109.6 feet of the North 767.2 feet of the North 3/4 of the West Quarter of the Southwest Quarter of the Northwest Quarter of Section 28, Township 28, Range 24, except the South 50 feet of the East 1/2 thereof and except that part of the West 1/2 lying South of the North 30 feet thereof, in the City of Richfield, Hennepin County, Minnesota. 6525 Penn Avenue South: RC125-399 (JAE) 955866v1