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HomeMy WebLinkAbout2010 07-12 EDAP EDA MEETING City of Brooklyn Center July 12, 2010 AGENDA 1. Call to Order —The EDA requests that attendees turn off cell phones and pagers during the meeting. A copy of the full City Council packet, including EDA (Economic Development Authority), is available to the public. The packet ring binder is located at the front of the Council Chambers by the Secretary. 2. Roll Call 3. Approval of Agenda and Consent Agenda —The following items are considered to be routine by the Economic Development Authority (EDA) and will be enacted by one motion. There will be no separate discussion of these items unless a Commissioner so requests, in which event the item will be removed from the consent agenda and considered at the end of Commission Consideration Items. a. Approval of Minutes 1. June 28, 2010 — Regular Session 4. Commission Consideration Items a. Status of Fourth Amendment to a Development Agreement (Embassy Suites — Brooklyn Hotel Partners, LLC) Requested Commission Action: None. 5. Adjournment • EDA Agenda Item No. 3a MINUTES OF THE PROCEEDINGS OF THE ECONOMIC DEVELOPMENT AUTHORITY • OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA REGULAR SESSION JUNE 28, 2010 CITY HALL — COUNCIL CHAMBERS 1. CALL TO ORDER The Brooklyn Center Economic Development Authority (EDA) met in Regular Session called to order by President Tim Willson at 8:36 p.m. 2. ROLL CALL President Tim Willson and Commissioners Dan Ryan and Mark Yelich. Absent and excused at roll call were Commissioners Kay Lasman and Tim Roche. Also present were Executive Director Curt Boganey, Director of Business and Development Gary Eitel, Assistant City Manager/Director of Building and Community Standards Vickie Schleuning, City Attorney Charlie LeFevere, and Carla Wirth, TimeSaver Off Site Secretarial, Inc. . Others present were City's Legal Counsel David Greene, Briggs & Morgan. 3. APPROVAL OF AGENDA AND CONSENT AGENDA Commissioner Ryan moved and Commissioner Yelich seconded approval of the Agenda and d the following item was Consent Agenda, an g approved: 3a. APPROVAL OF MINUTES 1. June 14, 2010 — Regular Session Motion passed unanimously. 4. COMMISSION CONSIDERATION ITEMS 4a. RESOLUTION NO. 2010 -14 APPROVING A FOURTH AMENDMENT TO A DEVELOPMENT AGREEMENT AND CERTAIN RELATED AGREEMENTS ATTACHED THERETO AS EXHIBITS (LICENSE, DEED, AMENDED EASEMENT, LEASE AMENDMENT, AND SUBORDINATION AGREEMENTS) Executive Director Curt Boganey introduced the item, discussed the history, and stated the purpose of the proposed resolution. He explained the Council considered the amendment due to the involvement of tax abatements, the EDA considered it since the amendment was to the 06/28/10 -1- DRAFT original agreement between the EDA and developer, and the HRA will consider it since the link involves the Earle Brown Heritage Center. Commissioner Yelich moved and Commissioner Ryan seconded adoption of RESOLUTION NO. 2010-14 Approving a Fourth Amendment to a Development Agreement and Certain Related Agreements Attached Thereto as Exhibits (License, Deed, Amended Easement, Lease Amendment and Subordination Agreements). Motion passed unanimously. 5. ADJOURNMENT Commissioner Yelich moved and Commissioner Ryan seconded adjournment of the Economic Y J Development Authority meeting at 8:39 p.m. Motion passed unanimously. i 06/28/10 -2- DRAFT EDA Agenda Item No. 4a EDA ITEM MEMORANDUM DATE: July 7, 2010 TO: Curt Boganey, City Manager FROM: Gary Eitel, Director of Business & Development�- SUBJECT: Status of the Fourth Amendment to the Development Agreement (Embassy Suites - Brooklyn Hotel Partners, LLQ Recommendation: The status report on the Fourth Amendment is being presented as information only at this time. In the event the Fourth Amendment does not close before the July 12th EDA Meeting, further consideration of EDA actions relating to the defaults of the Development Agreement and D -Barn Lease will be necessary. Background: On June 28, 2010, the EDA adopted Resolution No. 2010 - 14, A Resolution Approving a • Fourth Amendment to the Development Agreement and Certain Related Ajreements Attached Thereto as Exhibits (License Deed Amended Easement Lease Amendment and Subordination Agreements), which collectively provided a global resolution to both the default of the Development Agreement and the D -Barn Lease Agreement. The agreement and all of its Exhibits, with the exception of the Subordination / Approval of Amendment of Development Agreement by The Prudential Insurance Company of America, were executed prior to June 30, 2010 This last document provides for the approval of the amendment to the development agreement by the lender/Prudential and includes their acknowledgement, consent, and subordination to the offset rights granted to the City/EDA and HRA with respect to tax abatement payments as set forth in the Development Agreement, the First Amendment to Lease, and the License Agreement. The Developer's Attorney has indicated that Prudential has verbally consented to the amendment. Note The Third Amendment to the Development Agreement, executed in December, 2007, included Prudential subordinating its security interest in these Tax Abatement Payments to the Hurlbit -Zeppa Charitable Trust. Attached for your reference is a copy of the Approval of Amendment of Development Agreement that has been executed by all parties except Prudential. i :Mission: Ensuring an attractive, clean, safe community that enhances the duality of life ruin preserves the public trust EDA ITEM MEMORANDUM Fourth Amendment to the Development Agreement, Exhibit D, First Amendment to Lease. . Section 8 of the First Amendment to Lease provides that the tenant will pay the landlord $72,181 which represents lost revenue arising from the adjustment to the Commencement of the Term of the Lease. This amount was based on a monthly revenue loss of $3,799 for 19 months (November, 2008 thru May, 2010) and provided an incentive that the month of June would not be added, providing the developer executed the documents before June 16 and that the closing occurred on or before June 30 Budget Issues: This status /update on the Fourth Amendment does not affect the current budget. However, as previously identified there are a number of financial issues associated with the global resolution he Development Agreement and D -Barn Lease to the default oft p gr Agreement: 1. The EDA retains ownershi p ( of the Phase II site. 2010 assessed valuation $560,000) 2. The tax abatement and business subsidy agreement for Phase II is terminated. (A potential savings of $350,000+ over the ten year term under the current development agreement providing for a complementary hotel.) 3. The lease agreement for the D -Barn as a salon and spa exceeds the previous office lease by approximately $25,000 a year or approximately $250,000 during the ten year lease. 4. The license agreement provides for a 50 -50 cost participation of the pedestrian link . costs which provides a projected annual savings to the Heritage Center of approximately $20,000+ annually. 5. Projections on the cost of constructing the link have been estimated at $960,000 by the architect, which included a 15 percent factor pending finalizing the scope of work ($804,525 which includes the standard 10 percent contingency line item). Council Goals: Strategic: 1. We will aggressively proceed with implementation of City's redevelopment plans. Ongoing: 1. We will move toward maintaining or lowering the level of City property taxes • ?Mission: Ensuring an attractive, clean, safe commun4 that enhances the quality of life anal preserves the public trust APPROVAL OF AMENDMENT OF DEVELOPMENT AGREEMENT This Agreement made effective as of the 29th day of June, 2010, by and between The Prudential Insurance Company of America ( "Lender "), Brooklyn Hotel Partners, LLC ('Borrower "), Economic Development Authority of Brooklyn Center ( "Authority ") and City of Brooklyn Center, Minnesota ( "City ") who are parties to that certain Assignment and Subordination of Development Agreement dated January 17, 2008 ( "the Assignment "), and The Housing and Redevelopment Authority in and for the City of Brooklyn Center ( "HRA "). All capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Assignment. WHEREAS, the Assignment provides that there will be no amendment of the Development Agreement without prior written consent of Lender; and WHEREAS, the Authority, City and Borrower have negotiated a Fourth Amendment to Development Agreement and documents ancillary thereto in the form attached hereto as Exhibit A ( "the Amendment "); NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. The Amendment is approved by Lender. 2. Borrower, City and Authority shall provide Lender with a fully signed copy of the Amendment within three (3) business days of execution. 3. Lender acknowledges and consents to the grant of certain offset rights (collectively, "the Offset ") granted to the Authority and the HRA with respect to "Tax Abatements" payments ( "the Payments ") that hereafter become due under Article V of the Development Agreement. The Offset is set forth and described in (a) Section 7 of the First Amendment to Lease incorporated into the Amendment ( "Amendment to Lease "), and (b) Section 14 of the License Agreement 2573887v2 incorporated into the Amendment ( "License "). Pursuant to the Amendment and in reliance upon the is Lender's approval, consent and subordination herein contained, on the date hereof both the Amendment to Lease (by and between the Authority and the Borrower) and the License (by and between the HRA and Borrower) have been executed and delivered effective as of the date hereof. 4. Lender has, by Subordination and Intercreditor Agreement dated January 17, 2008 between it and the Tax Abatement Lender, previously subordinated its security interest in the Payments to the interests therein of the Tax Abatement Lender. Contemporaneously with the Amendment, the Tax Abatement Lender has in turn subordinated its interest in the Payments to (a) the Offset, and (b) certain security interests in the Payments granted by Borrower in favor of the Authority and the HRA. Lender hereby consents to the grant of a security interest in the Payments by Borrower in favor of the Authority and the HRA as described in Section 7 of the Lease Amendment and Section 14 of the License. Lender hereby acknowledges and agrees that its security interest in the Payments remains subordinate to the interest of the Tax Abatement Lender therein and that, regardless of any priority otherwise available to Lender by law or agreement, any security interest which Lender now or may have at any time hereafter in the Payments together with all products and proceeds thereof, is and shall be subject and subordinate to (i) the Offset set forth in the Amendment to Lease and in the License, and (ii) the security interests of the Authority and the HRA in the Payments, as such security interests are described in Section 7 of the Amendment to Lease and Section 14 of the License. 5. All provisions of [the Agreement ?] not hereby expressly amended are hereby expressly reaffirmed. 6. This Agreement maybe executed in counte.Yarts. [End of Page] • 2 2573887v2 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: Its BROOKLYN HOTEL PARTNERS, LLC By: Its ECONOMIC DEVELOPMENT AUTHORITY OF BROOKLYN CENTER By: Its President And By: Its Executive Director CITY OF BROOKLYN CENTER, MINNESOTA By: Its Mayor And By: Its City Manager 3 2573887v2 THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF BROOKLYN CENTER By: Its Chairman And By: Its Executive Director • 4 2573887v2