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HomeMy WebLinkAbout9C EDA Purchase Agreement ReportPhone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: JANUARY 6, 2020 AGENDA #: 9C PREPARED BY: CASEY MCCABE, COMMUNITY DEVELOPMENT DIRECTOR PRESENTED BY: CASEY MCCABE AGENDA ITEM: ADOPT RESOLUTION NO. 20-009 – AUTHORIZING THE EDA TO ENTER INTO A REAL ESTATE PURCHASE AGREEMENT WITH THE BEARD GROUP, INC. GOAL AREA AND OBJECTIVE: Desirable & Sustainable Development 3. Explore ways to encourage downtown as a vibrant destination. DISCUSSION: Introduction The purpose of this agenda item is to consider approval of a resolution authorizing the EDA to enter into a Real Estate Purchase Agreement with The Beard Group, Inc. (“Beard”). Current Circumstances The EDA has been working with Beard, a real estate development company specializing in redevelopment and mixed -use projects, for the past several months on a potential downtown redevelopment project on the VFW block of Main Avenue SE. Beard has entered into a purchase agreement with a property owner to acquire a single-family residential property at 4656 Pleasant Street SE (“Property”) to facilitate this redevelopment project. Beard has requested the EDA enter into a Real Estate Purchase Agreement whereby the EDA would purchase the Property from Beard if the proposed redevelopment project does not move forward. The Purchase Agreement includes language which automatically terminates the Agreement and its obligations of the EDA if Beard enters into an agreement with the EDA or City of Prior Lake addressing redevelopment of the Property, such as a Development or TIF Agreement. ISSUES: The EDA and Beard have entered into a Purchase Agreement with similar terms for another property Beard is purchasing downtown. Because funding has already been obligated by the EDA to facilitate the initial property purchase, the EDA does not have enough funds to guarantee the purchase of this second Property. Council approval is required to guarantee funds will be available for the EDA to acquire the Property, if necessary. If redevelopment of this block does not occur, the EDA would be required to purchase the Property on or before January 6, 2022 at a purchase price of $350,000, plus costs Beard incurs to purchase the property up to $25,000 and future closing costs. If the EDA is required to acquire the Property, the EDA would be purchasing the property as-is. This means that regardless of what might be wrong either with title to the property or physically, the EDA must purchase the property. FINANCIAL IMPACT: No financial impact is anticipated in 2020 or 2021 related to this Purchase Agreement. There is a potential financial impact in 2022, including acquisition costs of $350,000 plus closing costs. ALTERNATIVES: 1. Motion and second to approve a resolution authorizing the EDA to enter into a real estate purchase agreement with The Beard Group, Inc. 2. Motion and second to deny a resolution authorizing the EDA to enter into a real estate purchase agreement with The Beard Group, Inc. 3. Provide direction to staff and continue discussion at a future meeting. RECOMMENDED MOTION: ATTACHMENT: Alternative #1 1. Real Estate Purchase Agreement 4646 Dakota Street SE Prior Lake, MN 55372 RESOLUTION 20-009 RESOLUTION AUTHORIZING THE EDA TO ENTER INTO A REAL ESTATE PURCHASE AGREEMENT WITH THE BEARD GROUP, INC. Motion By: Second By: WHEREAS, WHEREAS, The City of Prior Lake Economic Development Authority (“EDA”) has been working with The Beard Group, Inc. (“Beard”) on a potential downtown redevelopment project along Main Avenue SE; and Beard has entered into a purchase agreement to acquire a single-family residential property at 4656 Pleasant Street SE; PID 250020120 (“Property”) to facilitate a downtown Prior Lake redevelopment project; and WHEREAS, Beard has requested the EDA enter into a Real Estate Purchase Agreement whereby the EDA would purchase the Property from Beard if the proposed redevelopment project does not move forward; and WHEREAS, WHEREAS, WHEREAS, If the redevelopment of this block does occur and Beard enters into an agreement with the EDA or City of Prior Lake addressing redevelopment of the Property, such as a Development or TIF Agreement, the Real Estate Purchase Agreement includes language which automatically terminates the Agreement and its obligations of the EDA; and If redevelopment of this block does not occur, the EDA would be required to purchase the Property on or before January 6, 2022 at a purchase price of $350,000, plus costs Beard incurs to purchase the property up to $25,000 and future closing costs; and The EDA does not have enough funding available to guarantee the property purchase, so the Council action is necessary to commit city funds as a guarantee. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. If additional EDA funds are needed to acquire the Property at 4656 Pleasant Street SE in 2022, the City Council will allocate the necessary funds to the EDA. At that time, the financing options would be reviewed and determined by the Finance Director (use of reserves, tax levy, debt issuance, etc.) 3. The EDA is authorized to enter into a Real Estate purchase Agreement with The Beard Group, Inc. for property located at 4656 Pleasant Street. SE. Passed and adopted by the Prior Lake City Council this 6th day of January 2020. VOTE Briggs Thompson Burkart Braid Erickson Aye ☐ ☐ ☐ ☐ ☐ Nay ☐ ☐ ☐ ☐ ☐ Abstain ☐ ☐ ☐ ☐ ☐ Absent ☐ ☐ ☐ ☐ ☐ ______________________________ Lori Olson, Assistant City Manager DMNORTH #7085937 v1 REAL ESTATE PURCHASE AGREEMENT THIS REAL ESTATE PURCHASE AGREEMENT (the “Agreement”) is made effective as of _______________, 20____ (the “Effective Date”), between The Beard Group, Inc., a Minnesota corporation (“Seller”), and the Economic Development Authority for the City of Prior Lake, Minnesota, a Minnesota municipal corporation (“Buyer”). In consideration of this Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows: 1. Sale of Property. Seller shall sell to Buyer, and Buyer shall buy from Seller, the following property pursuant to the terms and conditions herein set forth (collectively, the “Property”): (a) Real Property. The improved real property located at 4656 Pleasant Street SE, Prior Lake, Minnesota, legally described on attached Exhibit A, together with all privileges, rights, easements, hereditaments and appurtenances thereto belonging and all right, title and interest of Seller in and to any streets, alleys, passages and other rights of way included therein or adjacent thereto (before or after the vacation thereof) and together with all improvements located thereon (collectively, the “Real Property”). (b) Records. All records in Seller’s possession related to the Property. 2. Purchase Price and Manner of Payment. The total purchase price for the Property is $350,000.00, plus all acquisition costs actually incurred and paid by Seller in purchasing the Property (e.g. closing costs, title commitment cost and title policy premium, real estate taxes, and interest paid by Seller on the foregoing amounts, but excluding any development costs incurred by Seller (e.g. architect and engineering fees, environmental review costs, and survey costs)), less any amounts actually received by Seller for payments of such costs under any currently existing leases of the Property; provided, however, the total acquisition costs, as adjusted by payments of costs under the lease, shall not to exceed $25,000.00 (the “Purchase Price”). On the Closing Date (as hereinafter defined), the Purchase Price, subject to increase or decrease due to prorations and adjustments required pursuant to this Agreement, shall be paid by Buyer in immediately available funds to Guaranty Commercial Title, LLC (the “Title Company”) to be disbursed pursuant to the Settlement Statement (as hereinafter defined). 3. Automatic Termination. Seller shall be obligated to sell the Property and Buyer shall be obligated to buy the Property as provided for in this Agreement; except that, this Agreement shall automatically terminate if Seller enters into an agreement with Buyer or with the City of Prior Lake with mutually agreeable terms addressing the redevelopment of the Property. Such mutually agreeable terms shall include, among other terms, language addressing whether existing tenants will qualify for relocation benefits and the unavailability of relocation benefits for subsequent tenants. 4. Closing. The closing of the purchase and sale contemplated by this Agreement (the “Closing”) shall occur on January 6, 2022, or such earlier or later date agreed to in writing by Buyer and Seller (the “Closing Date”). The Closing shall take place at 10:00 a.m. local time at the Title 2 DMNORTH #7085937 v1 Company’s office unless another location is mutually agreed upon by the parties. Seller shall deliver possession of the Property to Buyer on the Closing Date. 5. Closing Documents. (a) On the Closing Date, Seller shall execute and/or deliver to Buyer the following (collectively, the “Seller’s Closing Documents”), provided by Buyer for Seller’s execution: (1) Special Warranty Deed. A Special Warranty Deed conveying Seller’s interest in the Real Property to Buyer. (2) Seller’s Affidavit. An Affidavit of Seller indicating that on the Closing Date there are no outstanding, unsatisfied judgments, tax liens or bankruptcies against or involving Seller or the Property; that there has been no skill, labor or material furnished to the Property at Seller’s request for which payment has not been made or for which mechanics’ liens could be filed and that to Seller’s knowledge there are no other unrecorded interests in the Property. (3) FIRPTA Affidavit. A non-foreign affidavit, properly executed and in recordable form, containing such information as is required by IRC Section 1445(b)(2) and its regulations. (4) Executive Order Affidavit. An affidavit properly executed satisfying Buyer and Title Company that the Seller is not a blocked person under Executive Order 13224. (5) Other Documents. All other documents reasonably determined to be necessary to transfer the fee interest in the Property to Buyer in the manner specified herein. (6) Settlement Statement. A closing or settlement statement reflecting the financial provisions of the Closing, consistent with the provisions of this Agreement (the “Settlement Statement”). (b) Buyer’s Closing Documents. On the Closing Date, Buyer shall execute and/or deliver to Seller the following: (1) Purchase Price Payment. Payment of the Purchase Price in immediately available funds to the Title Company for disbursement pursuant to the Settlement Statement. (2) Title Documents. Such Affidavits of Buyer, Certificates of Real Estate Value or other documents as may be reasonably required by Title Company in order to record the Seller’s Closing Documents. (3) Settlement Statement. The Settlement Statement. 3 DMNORTH #7085937 v1 6. Prorations. Seller and Buyer agree to the following prorations and allocation of costs regarding this Agreement: (a) Closing Fees. Buyer shall pay the Title Company’s closing fee or charge. (b) Real Estate Taxes and Special Assessments. General real estate taxes and installments of special assessments payable therewith (“Taxes”) due and payable in the year prior to the year in which the Closing Date occurs and all prior years shall be paid by Seller. Unless otherwise paid pursuant to any leases of the Property, Taxes and special assessments due and payable in the year in which the Closing Date occurs shall be prorated between Seller and Buyer as of the Closing Date. Buyer shall assume the obligation to pay the Taxes and installments of special assessments due and payable in the year subsequent to the year in which the Closing Date occurs and thereafter. (c) Recording Costs. Buyer will pay the state deed tax. Seller will pay the cost of recording all documents necessary to place record title in the condition warranted and represented by Seller in this Agreement. Buyer shall pay the cost to record the Special Warranty Deed. (d) Other Costs. All other utilities, fees, costs, expenses, operating costs of the Property and any other expenses shall be prorated between Seller and Buyer as of the Closing Date. (e) Attorneys’ Fees. Each of the parties will pay its own attorneys’ fees, except that a party defaulting under this Agreement or any closing document will pay the reasonable attorneys’ fees and court costs incurred by the non-defaulting party to enforce its rights regarding such default. 7. AS IS; No Representations or Warranties by Seller. Except as expressly stated in this Agreement or in the closing documents provided by Seller pursuant hereto, Seller makes no representation or warranty to Buyer. Buyer acknowledges that in purchasing the Property the Buyer is not relying upon any representations of Seller as to the fitness for any particular use, or the condition or safety of the Property, including, but not limited to, environmental conditions. Buyer acknowledges and agrees that Seller has not made, does not make and specifically negates and disclaims any representations, warranties, promises, covenants, agreements of any kind whether expressed or implied, oral or written, past, present or future relating to or arising from the Property, including but not limited to (a) the value, nature, quality or condition of the Property including, without limitation, the environmental condition of the Property; (b) the income to be derived from the Property; (c) the suitability of the Property for any and all activities and uses to which the Buyer may want to conduct on the Property; and (d) the compliance of or by the Property with any laws, rules, ordinances or regulations of any applicable governmental authority. Buyer on behalf of Buyer, and its successors and assigns, unconditionally and absolutely waives, releases and forever discharges the Seller, and its directors, officers, employees, contractors, agents or other representatives, and its successors and assigns, from any and all claims, demands, rights, and causes of action of whatsoever kind and nature, arising from, and by reason of any and all express and/or implied agreements involving the Property, and any other matters known or unknown which may 4 DMNORTH #7085937 v1 presently exist. To the maximum extent permitted by law, the sale of the Property is provided for herein is made on a “as-is”, “where-is” condition and basis with all faults. 8. Operation Prior to Closing. During the period from the Effective Date to the Closing Date (the “Executory Period”), Seller shall operate and maintain the Property in the ordinary course of business in accordance with prudent, reasonable business standards, including the maintenance of adequate liability insurance, including vandalism and malicious mischief in reasonable amounts. However, Seller shall execute no contracts, leases or other agreements regarding the Property during the Executory Period without the prior written consent of Buyer. 9. Broker’s Commission. Seller and Buyer represent to each other that they have dealt with no brokers, finders or the like in connection with this transaction, and agree to indemnify each other and to hold each other harmless against all other claims, damages, costs or expenses of or for any fees or commissions resulting from their separate actions or agreements regarding the execution or performance of this Agreement, and will pay all costs of defending any action or lawsuit brought to recover any such fees or commissions incurred by the other party, including reasonable attorneys’ fees. 10. Assignment. Neither party may assign its rights under this Agreement without the prior written consent of the other party. 11. Remedies. If Seller defaults under this Agreement, Buyer’s sole remedy shall be to terminate this Agreement by giving written notice to Seller. If Buyer defaults under this Agreement and such default is not remedied by Buyer within thirty (30) days after written notice of default is given by Seller to Buyer, Seller shall be entitled only to the right to require specific performance by the Buyer, and Buyer hereby agrees to waive any and all defenses to such an action. 12. Notices. Any notices required or permitted to be given hereunder shall be in writing and shall be effective: (i) when delivered personally, (ii) when received by overnight courier service or electronic (e-mail) communications (provided that a copy of such notice is deposited in the United States mail within one (1) business day of the email transmission), or (iii) three (3) days after being deposited in the United States Mail (sent certified or registered, return receipt requested), in each case addressed as follows (or to such other address as the parties hereto may designate in the manner set forth herein): If to Buyer: Economic Development Authority for the City of Prior Lake, Minnesota 4646 Dakota St. SE Prior Lake, MN 55372 Attn: Casey McCabe Email: cmccabe@CityofPRIORLAKE.com 5 DMNORTH #7085937 v1 with a copy to: Hoff Barry, P.A. 100 Prairie Center Drive, Suite 200 Eden Prairie, MN 55344 Attn: Sarah Schwarzhoff Email: sschwarzhoff@hoffbarry.com If to Seller: The Beard Group, Inc. 750 2nd Street NE, Suite 100 Hopkins, MN 55343 Attn: William H. Beard Email: billb@beardgroupinc.com with a copy to: Ballard Spahr LLP 2000 IDS Center 80 South Eighth Street Minneapolis, MN 55402 Attn: Laura L. Krenz Email: krenzl@ballardspahr.com 13. Entire Agreement; Modification. This written Agreement constitutes the complete agreement between the parties and supersedes any prior oral or written agreements between the parties regarding the Property. There are no verbal agreements that change this Agreement and no waiver of any of its terms will be effective unless in a writing executed by the parties. 14. Binding Effect. This Agreement binds and benefits the parties and their successors and assigns. 15. Controlling Law. This Agreement has been made under the laws of the State of Minnesota, and such laws will control its interpretation. 16. Counterparts. This Agreement may be executed separately and independently in any number of counterparts and each and all of which together shall be deemed to have been executed simultaneously and regarded as one agreement dated the Effective Date. [Signature Page Follows] 6 DMNORTH #7085937 v1 IN AGREEMENT, Seller and Buyer have executed this Agreement as of the date first written above. SELLER: The Beard Group, Inc. By: William H. Beard Its: President BUYER: Economic Development Authority for the City of Prior Lake, Minnesota By: David Chromy Its: President And By: Jason Wedel Its: Executive Director DMNORTH #7085937 v1 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY [to be added] Scott County PIN 250020120