HomeMy WebLinkAbout4.b. Discussion of Johnson Correspondence re: Shamrock Square Project t i
CITY OF ROSEMOIINT
EXECUTIVE SUbII�lARY FOR ACTION
PORT AUTHORITY MEETING DATE: DECEMBER 21, 1993
AGENDA ITEM: JOHNSON CORRESPONDENCE RE: AGENDA SECTION:
SHAMR.00K SQUARE WORK SESSION
PREPARED BY: JOHN MILLER, AGENDA NO.
ECONOMIC DEVELOPMENT COOR.DINATOR 4 .B.
ATTACHI�SENTS: CORR. FROM RON JOHNSON RE: AP OVED BY:
SH�N�20CK SQUARE/12-13-93 , DRAFT COMM. AGREEMT. ����
In reviewing the attached correspondence from Ron J'ohnson you will note
that the Johnsons are making efforts to reduce overall buil,ding casts for
the proposed redevelopment of the Repairs, Inc. site. This will allow them
to attract tenants by offering reduced rents and help them secure bank
financing.
The Johnsons are alsa asking the port authority for up-front, as opposed to
pay-as-you-go, financing; this will help them meet the bank' s requirement
of equity.
Additional information about the property includes.
1. The Johnsons have not yet signed the Commitment Agreement drafted
by legal counsel, Mike Miles and the port authority has not
received the $4, 000 guarantee.
2 . Another user of the site has been identified if the Shamrock
Square project fails, this is White Funeral Home.
3 . Another possible use of the site is parkland. The situation of
the land on T.H. 3 would allaw development of a suitable entrance
to the park and amphitheater. The port authority will have to
pay gark dedication for the business park, dedication of this
<land could save hard cash.
The commissioners may want to discuss with the Johnsons the extent of their
financial participation in the project. If it appears that the Johnsons
are putting good equity into Shamrock Square, then the commissioners ma�
want to explare methods of assisting the project up-front. By way of a
benchmark, the port authority is asking at least 25 percent equity from a
motel developer. If the commissioners do not see the Johnsons putting
sufficient equity in the building, then the executive director should be
asked to explore and report on other options.
RECOD�+lENDED ACTION: None. Discussion item.
PORT AUTHORITY ACTION:
� e
Rosemount Port Authority
2875 - 145 ST. West
Rosemount, Mn, 55088
December 13, 1993 �
Dear Members,
In recent months we have had serious concerns about Shamrock Square
building. Our concern has not been related to concept, design, or
desire on our part to proceed with the project, rather it has to do
with the financial aspect. Issues such as costs, risks, margin,
financing, and (the bottom line) will it pay for itself.
We have made a considerable effort and expended thousands of
dollars trying to lease the space prior to construction which is
what the bank would like us to do. We have had a great deal of
interest from both local and out of town businesses who would like
to lease from us but our prices are to high even though they are
not high enough to generate a pasitive cash flow.
We spent the last two weeks networking and visiting with expert
resource people who had no vested interest in the praject. They
included accountants, developers, investors, bankers, and
contractars. I met with John Milier today and shared with him our
findings. The good news, as I told John, was that the project
survived as a good concept which is do-able if the costs are
slashed, and the bad news is that we need some help up front with
financing.
The project we are told is overpriced and needs to be Ieaned out
considerably in terms of overhead, soft costs, and construction
bids. We were given a multitude of strategies on how to do this,
one of which was to use local contractors, workers, and expertise
to the greatest extent possible. As such we now feel more
comfortable in terms of having a solid project from a financial
standpoint and will be able to offer prospective tenants a better
package which of course translates into making leasing easier.
Meanwhile, unbeknown to us, the bank was ready to remove itse].f
from the project because of high costs and a lack of up front
equity to cover those costs. When I talked to them today they �
developed a renewed interest when they found out that we were in
the process of leaning out the project. They came down quite hard
however on our lack of equity up front and suggested that would
somehow need to change. They suggested we approach the city for any
help we could get in terms of cuttinq costs and providing more
front end equity.
page 2
Two of the strategies the banker suggested the RPA might consider
which he had appearently experienced in other communities and that
John Miller and I discussed were as follows:
1. Keep the TIF, sell bonds, and provide low cost financing for
the project.
2. Provide the developer the TIF up front as a loan to use as
equity and then keep the taxes as received each year as loan
-- payments with minimal if any interest.
The second option may be most desirable as it is simpler and does
not involve all the costs associated with option one. I see these
options as being consistent with our original proposal as we are
asking the RPA for the same commitment, "the TIF" , packaged
somewhat differently however to enable the success of the project.
I'm sure others may have ideas as to how to make this project work
and we would be most happy discuss those ideas also.
Sincerely
/� .�
Ronald . J nson, Partner
cc Dr. Kerry Johnson
John Miller
COMMITMENT AGREEMENT
THIS AGREEMENT, is entered into this day of
, 1993, by and between the City of Rosemount,
Minnesota, Port Authority (hereinafter "RPA" ) and Kerry L. Johnson
and Ronald L. Johnson (hereinafter collectively referred to as
"Develaper" ) .
RECITALS
• The RPA has acquired title to certain real property in
Rosemount, Minnesota, which property is described as
follows :
AUDITOR'S SUBDIVISION NUMBER 1 .
Part of Lot 4 commencing 348 feet
North of Center Section 29, Township
115, Range 119 , East 196 feet North
110 feet, West 196 feet, South 110
feet to beginning. (hereinafter,
the "Property" ) .
• The RPA solicited proposals from potential developers of
the Property.
• On January 19 , 1993, Developer presented a proposed
_ project to the RPA (which is attached as Exhibit A to
this Agreement and hereinafter referred to the
"Project" ) .
• At its regular meeting on April 6 , 1993, adopted a motion
authorizing RPA staff to enter into a Commitment
Agreement with Developer, following the negotiation of
suitable terms and conditions .
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NOW, THEREFORE, the RPA and Developer agree as follows :
1 . DEVELOPER'S DUTIES .
A. EARNEST MONEY. Upon execution of this Agreement,
Developer shall provide Four Thousand Dollars
( $4 , 000) to the RPA as earnest money for the
purchase of the Property.
B. PRELIMINARY DEVELOPMENT. Developer shall, at its
expense, proceed with completion of a grade plan,
survey, replatting and other necessary preliminary
development activities in order to prepare the
Property for undertaking of the Project .
C. FINANCING. By not later than the end of the
business day on February 21, 1994 , Developer sha11
obtain and present to the RPA, evidence that it has
obtained necessary financing to fully undertake the
Project. At a minimum, satisfactory evidence of
financing shall include an unconditional Letter of
Commitment from an accredited_ conventianal lending
institution and submission of either an irrevacable
Letter of Credit or a bond to the RPA, in an amount
of Twenty-Five Thousand Dollars ($25, 000 ) providing
the RPA may liquidate the security if Developer
fails to immediately proceed with the Project. For
purposes of this paragraph, "immediately proceed"
shall mean that the Developer shall commence
construction of this Project ( 1 ) when necessary
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permits for the start of construetion (which must
be promptly sought) are received and ( 2 ) when
weather permits commencement of construction
without extraordinary expense but, in any event, no
later than May 1, 1994 . �
D. DEVELOPMENT AGREEMENT. At such time, but in any
event not later than February 21 , 1994 , as
Developer provides satisfactory evidence that it
has necessary financing for the Project, Developer
shall proceed with negotiation of a Development
Agreement with the City of Rosemount, Minnesota, in
a form agreeable to the City of Rosemount and the
RPA. Among other things, the Development Agreement
shall specify that the Project shall be undertaken
in accord with the Proposal and such other terms
and conditions as the City may require and that the
Project shall be completed by not later than
October 1 , 1994 .
E. DEM�LITION COSTS . Developer shall, upon receipt of
title to the Praperty from the RPA, pay an amount
to the RPA equal to the total cost of demolition of
structures on the Property undertaken pursuant to
Paragraph 2A, belaw.
2 . RPA'S DUTIES . Subject to obtaining any and all necessary
approvals from the Rosemount City Council, the RPA shall
undertake the following duties and responsibilities :
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A. DEMOLITZON. The RPA, upon the receipt of
competitive bids, shall proceed with the demolition
of all structures on the Property.
B. ENVIRONMENTAL WORK. The RPA shall, at no expense
to Developer, undertake any necessary environmental
cleanups , reclamations, etc. , in order to put the
Property in a condition legally suitable for the
undertaking of Developer' s Project.
C. SOIL TESTS . The RPA shall commission the taking of
soil tests to determine if the Property is suitable
for the Project without extraordinary building
methods or costs and, if necessary, prepare the
soil condition of the Property so that it is
useable for the Project.
D. CONVEYANCE. Within 30 calendar days of Developer's
presentation of satisfactory evidence of financing
to the RPA and upon receipt of reimbursement for
all demolition costs incurred by the RPA, the RPA
shall quitclaim its interest in the Property to
Developer fGr the sum of One Dollar ( $1 . 00 ) .
E. Tax Increment Financinq. Following completion of
the Project and as tax revenues generated by the
Project are received by the City of Rosemount, the
RPA shall remit to Develaper, all tax increment
funds received as a result of the Project for the�
period of time during which the tax increment
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finance district in which the Property is located
exists .
3 . FORFEITURE AND TERMINATION. In the event that Developer
�ails to provide satisfactory evidence of financing as
required in Paragraph 1 (C) by the close of the business
day on February 21 , 1994 , the following events shall
occur:
A. FORFEITURE OF EARNEST MONEY. Developer shall
forfeit ta the RPA, the earnest money submitted to
the RPA under the provisions of Paragraph 1(A) .
B. - TERMINATION. This Agreement shall terminate and,
except as otherwise provided in this Paragraph,
neither the RPA nor the Developer shall bear any
responsibilities or obligations to the other.
4 . TERM. This Agreement shall be effective on the date
first above written and, unless terminated pursuant to
Paragraph 3, shall continue in effect until all the terms
herein have been fulfilled.
5 . ADMINISTR�TIVE PROVISIONS .
A. ENTIRE AGRrEMENT/AMENDMENTS . This Agreernent
constitutes the full and complete understanding of
the RPA and the Developer regarding the subject
matter thereof . Any amendments to this Agreement
must be in writing and must be executed by the
parties to this Agreement or their successors in
interest.
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B. SURVIVAL OF COVENANTS . The promises made in this
Agreement shall remain in effect until all such
promises have been fulfilled.
C . DEFAULT/REMEDIES . The failure of a party to
fu�fill all of the terms and conditions of this
Agreement shall constitute an event of default by
that party and, upon such occurrence, shall entitle
the other party to seek specific performance of the
provisions of this Agreement and recover any costs
incurred in obtaining that remedy, including
reasonable attorney's fees .
D. GOVERNING LAW. This Agreement shall be governed by
the laws of the State of Minnesota.
IN WITNESS WHEREOF, the RPA and the Developer have executed
this Agreement intending to be bound thereby.
ROSEMOUNT PORT AUTHORITY DEVELOPER
By: By:
Ed Dunn Kerry L. Johnson
Its : Chair
By:
" Ronald L. Johnson
By:
Ron Wasmund
Its: Executive Director
Roaemount\PA-Johnson.Agreement
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