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HomeMy WebLinkAbout05(H) - Resolution Approving the Collateral Assignment of the Development Agreement and Tax Increment Financing Note for TIF District 1-6 (Cora Apartments) Report ITEM: 5H CITY COUNCIL AGENDA REPORT MEETING DATE: December 09, 2025 PREPARED BY: Casey McCabe, Community Development Director PRESENTED BY: Casey McCabe AGENDA ITEM: Resolution Approving the Collateral Assignment of the Development Agreement and Tax Increment Financing (TIF) Note for TIF District 1-6 (Cora Apartments) RECOMMENDED ACTION: Approval of a resolution approving the Collateral Assignment of the Development Agreement and Tax Increment Financing (TIF) Note for TIF District 1-6 (Cora Apartments). BACKGROUND: On November 12, 2025 the City Council approved a development agreement with Prior Lake B Squared Ventures, LLC relating to the construction and equipping of a five-story mixed-use building including 105 market rate residential rental units, a street front restaurant of approximately 2,600 square feet, a rooftop bar of approximately 1,435 square feet for restaurant customers, a rooftop deck for tenants, as well as approximately 28 surface parking stalls and two levels of underground parking with approximately 135 parking stalls. The development agreement was related to TIF district 1-6 for the Cora Apartments. Pursuant to the TIF development agreement, the City is to execute a Tax Increment Revenue Note in the maximum principal amount of up to $3,383,000. The developer is proposing to obtain financing for the project from Bridgewater Bank and as a condition for providing the loan, Bridgewater Bank has required that the developer assign its interest in the development agreement and TIF Note to the bank pursuant to a Collateral Assignment of Tax Increment Note and Development Agreement by and between the City, the lender, and the developer. The City’s attorney from Taft, who prepared the TIF development agreement, reviewed and amended the proposed collateral assignment agreement. The City’s revisions to the agreement were accepted by the developer and bank and are incorporated into the attachment. FINANCIAL IMPACT: No financial impact is anticipated as a result of this action. ALTERNATIVES: 1. Motion and second, as part of the consent agenda, approving a resolution approving the Collateral Assignment of the Development Agreement and Tax Increment Financing (TIF) Note for TIF District 1-6 (Cora Apartments). 2. Remove this item from the consent agenda for additional discussion. ATTACHMENTS: 1. Collateral Assignment of Tax Increment Note and Development Agreement City of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372 4646 Dakota Street SE Prior Lake, MN 55372 RESOLUTION 25-___ A RESOLUTION APPROVING THE COLLATERAL ASSIGNMENT OF THE DEVELOPMENT AGREEMENT AND TAX INCREMENT FINANCING NOTE FOR TIF DISTRICT 1-6 (CORA APARTMENTS) Motion By: Second By: WHEREAS, on November 12, 2025 the City Council for the City of Prior Lake, Minnesota (the “City”) approved a Development Agreement (the "Development Agreement") with Prior Lake B Squared Ventures, LLC, a Minnesota limited liability company (the "Developer") relating to the construction and equipping of a five-story mixed-use building including 105 market rate residential rental units, a street front restaurant of approximately 2,600 square feet, a rooftop bar of approximately 1,435 square feet for restaurant customers, a rooftop deck for tenants, as well as approximately 28 surface parking stalls and two levels of underground parking with approximately 135 parking stalls (the "Project"); and WHEREAS, pursuant to the Development Agreement, the City is to execute that certain Tax Increment Revenue Note (Prior Lake B Squared Ventures, LLC Project) in the maximum principal amount of up to $3,383,000 (the "TIF Note") upon the terms and conditions set forth in the Development Agreement; and WHEREAS, the Developer proposes to obtain financing (the “Loan”) for the Project from Bridgewater Bank, a Minnesota state banking corporation (the "Lender") and as a condition for providing the Loan, the Lender has required that the Developer assign its interest in the Development Agreement and TIF Note to the Lender pursuant to a Collateral Assignment of Tax Increment Note and Development Agreement (the "Assignment") by and between the City, the Lender, and the Developer; and WHEREAS, a draft of the Assignment has been submitted to the City Council for approval. 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. The City Council hereby approves the Assignment in substantially the form submitted, and the Mayor and City Manager are hereby authorized to execute the Assignment on behalf of the City. 3. The approval hereby given to the Assignment includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by the City officials authorized by a resolution of the City to execute the Assignment. The execution of the Assignment shall be conclusive evidence of the approval of the Assignment in accordance with the terms hereof. th Passed and Adopted this 9 day of December 2025. VOTE Briggs Braid Churchill Lake Hellier Aye ☐ ☐ ☐ ☐ ☐ Nay ☐ ☐ ☐ ☐ ☐ Abstain ☐ ☐ ☐ ☐ ☐ Absent ☐ ☐ ☐ ☐ ☐ ______________________________ Jason Wedel, City Manager Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement COLLATERAL ASSIGNMENT OF TAX INCREMENT NOTE AND DEVELOPMENT AGREEMENT THIS COLLATERAL ASSIGNMENT OF TAX INCREMENT NOTE AND DEVELOPMENT AGREEMENT (this “Agreement”), is made and entered into as of the __ day of November, 2025, by and among the CITY OF PRIOR LAKE, MINNESOTA, a municipal corporation organized and existing under the laws of the State of Minnesota (the “City”), PRIOR LAKE B SQUARED VENTURES, LLC, a Minnesota limited liability company (the “Developer”), and BRIDGEWATER BANK, a Minnesota state banking corporation (the “Lender”). W I T N E S S E T H: WHEREAS, the City and the Developer have entered into that certain Development Agreement dated as of _________ 1, 2025 (the “Development Agreement”), pertaining to the development of the Project (as defined in the Development Agreement) and legally described on Exhibit A attached hereto and hereby made a part hereof; and WHEREAS, pursuant to the Development Agreement and provided the Developer is in compliance with the requirements contained in the Development Agreement, the City shall execute and deliver to the Developer that certain Tax Increment Revenue Note (Prior Lake B Squared Ventures, LLC Project), in a maximum principal amount of $3,383,000 (the “TIF Note”); and WHEREAS, the Lender is financing the construction of the Project and is providing funds to the Borrower in the principal amount of up to $22,050,000 (the “Loan”), pursuant to the terms of that certain Construction Loan Agreement of even date herewith (as the same may be amended or restated from time to time, the “Loan Agreement”), by and between the Developer and the Lender; and WHEREAS, the Loan is evidenced by that certain Real Estate Note of even date herewith in the original principal amount of $22,050,000 executed by the Developer and payable to the order of the Lender (as the same may be amended or restated from time to time, the “Note”); and WHEREAS, the Note is secured by, among other things, that certain Construction Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement encumbering the Project of even date herewith (as the same may be amended or restated from time to time, the “Mortgage”), executed by the Developer in favor of the Lender and filed of record in the office of the Scott County Recorder on _____________, 2025, as Document No. _____________; and WHEREAS, the Lender has required, as an express condition to making the Loan, (a) that the Developer assign all of its rights under the Development Agreement and the TIF Note to the Lender to secure the obligations of the Developer to the Lender under the Loan Agreement, the Note, the Mortgage and the documents related thereto (collectively, the “Loan Documents”), and (b) that the City agree to certain other matters, all as more fully contained herein. NOW THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The Developer hereby assigns to the Lender, and the Lender hereby accepts (subject to the terms of this Assignment), all of the Developer’s right, title and interest under and pursuant to the Development Agreement and the TIF Note to secure all of the Developer’s obligations to the Lender under the Loan Documents. 2. To perfect the Lender’s security interest in the TIF Note, the Developer has, contemporaneously with the execution of this Agreement, endorsed and delivered the original TIF Note to the Lender to be held pursuant to the terms of this Agreement. 3. The City hereby acknowledges and agrees that, upon issuance of the TIF Note, the City will duly note the assignment of the TIF Note by the Borrower to the Lender on the registration records for the TIF Note. Upon written notification by the Lender of an Event of Default (as that term is defined in the Loan Documents), the City hereby agrees to make all payments under the TIF Note directly to the Lender and the Borrower hereby consents to the making of such payments directly to the Lender without any further authorization or approval. 4. The Developer hereby represents and warrants that there have been no prior assignments of the Development Agreement or the TIF Note, that the Development Agreement and the TIF Note are valid and enforceable agreements in accordance with their terms and that neither the City nor the Developer is in default thereunder, and that all covenants, conditions and agreements have been performed as required herein, except those not to be performed until after the date hereof. The Developer agrees not to sell, assign, pledge, mortgage or otherwise transfer or encumber its interest in the Development Agreement or the TIF Note as long as this Agreement is in effect. The Developer hereby irrevocably constitutes and appoints the Lender as its attorney-in-fact to demand, receive and enforce the Developer’s rights with respect to the Development Agreement and/or - 2 - Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement the TIF Note upon the occurrence and during the continuance of an Event of Default for and on behalf of and in the name of the Developer or, at the option of the Lender, in the name of the Lender, with the same force and effect as the Developer could do if this Agreement had not been made. 5. This Agreement shall constitute a perfected, absolute and present assignment, provided that the Lender shall have no right under this Agreement to enforce the provisions of the Development Agreement or the TIF Note, or to collect any funds payable to the Developer pursuant to the TIF Note, or exercise any rights or remedies under this Agreement until an Event of Default shall occur and be continuing. 6. Upon the occurrence and during the continuance of an Event of Default, the Lender may, without affecting any of its rights or remedies against the Developer under any other instrument, document or agreement, exercise its rights under this Agreement as the Developer’s attorney-in-fact in any manner permitted by law and in addition the Lender shall have the right to exercise and enforce any and all rights and remedies available after a default to a secured party under the Uniform Commercial Code as adopted in the State of Minnesota. If notice to the Developer of any intended disposition of collateral or of any intended action is required by law in any particular instance, such notice shall be deemed commercially reasonable if given in writing at least ten (10) days prior to the intended disposition or other action. 7. The City consents and agrees to the terms and conditions of this Agreement. The City further represents and warrants to the Lender that the Development Agreement and the TIF Note are valid agreements enforceable in accordance with their terms and that the City has not declared an event of default thereunder, and that, to the City’s knowledge, with no independent investigation, all covenants, conditions and agreements have been performed as required therein, except those not to be performed until after the date hereof. 8. The City hereby agrees that any agreement of the Borrower to indemnify the City pursuant to Section 4.6 of the Development Agreement is not the obligation of, nor shall such section or any other provisions impose any obligation upon, the Lender, its successors and/or assigns until such time as the Lender, in its discretion, exercises its rights hereunder and assumes the obligations of Developer under the Development Agreement. 9. The City hereby approves the financing for the Project as contemplated by the Loan Documents to the extent such approval is required under the Development Agreement. 10. The City agrees that, contemporaneously with any notice of default given under the Development Agreement to the Developer, the City shall also provide the Lender with a copy of such notice of default, and the Lender shall have the right, - 3 - Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement but not the obligation, to cure any such default on behalf of the Developer within any applicable cure period provided for in the Development Agreement. 11. The parties hereto agree that no change or amendment shall be made to the terms of the Development Agreement or the TIF Note without the prior written consent of the Lender. 12. This Agreement can be waived, modified, amended, terminated or discharged only explicitly in a writing signed by all parties hereto. A waiver by the Lender shall be effective only in a specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any of the Lender’s rights or remedies hereunder. All rights and remedies of the Lender shall be cumulative and shall be exercised singularly or concurrently, at the Lender’s option, and any exercise or enforcement of any one such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. 13. No provision of this Agreement shall be deemed or construed to alter, amend or modify, in any way, the rights and obligations of the City with respect to the Borrower and the Borrower with respect to the City as contained in the Development Agreement. Nothing herein shall be construed to limit the City’s remedies under Section 4.2 of the Development Agreement upon the occurrence and during the continuance of a default under the Development Agreement. 14. Any notice, request, demand or other communication hereunder shall be deemed duly given if delivered or postage prepaid, certified or registered, addressed to the party as set forth in the Development Agreement. The Lender’s notice address is as follows: If to the Lender: Bridgewater Bank 4450 Excelsior Road, #100 St. Louis Park, Minnesota 55416 Attention: Adam Benjamin 15. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. This Agreement may be executed in several counterparts, each of which when executed is an original, but all of which together shall constitute one instrument. Separate signature pages may be signed by various parties and each complete set of pages hereto, with signature pages signed by each party, shall constitute one original of this Agreement. \[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK\] - 4 - Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement IN WITNESS WHEREOF, the parties hereto have made and entered into this Collateral Assignment of Tax Increment Note and Development Agreement as of the day and year first above written. CITY: CITY OF PRIOR LAKE, MINNESOTA By: Its Mayor By: Its Manager STATE OF MINNESOTA ) ) ss COUNTY OF ) The foregoing instrument was acknowledged before me this ____ day of ________, 2025, by ______________________________ and _____________________, the Mayor and the Manager of the City of Prior Lake, Minnesota. a municipal corporation duly organized and existing under the laws of the State of Minnesota, for and on behalf of the municipal corporation. Notary Public S-1 Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement DEVELOPER: PRIOR LAKE B SQUARED VENTURES, LLC By: ______________ Its ______________ STATE OF MINNESOTA ) ) ss COUNTY OF ) The foregoing instrument was acknowledged before me this ____ day of ________, 2025, by __________________, the _______________ of Prior Lake B Squared Ventures, LLC, a Minnesota limited liability company, for and on behalf of said company. Notary Public S-2 Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement LENDER: BRIDGEWATER BANK By: Adam Benjamin Its Senior Vice President STATE OF MINNESOTA ) ) ss COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this ____ day of ________, 2025, by Adam Benjamin, a Senior Vice President of Bridgewater Bank, a Minnesota state banking corporation, for and on behalf of the banking corporation. Notary Public THIS INSTRUMENT WAS DRAFTED BY: Winthrop & Weinstine, P.A. (JWJA) Suite 3500 225 South Sixth Street Minneapolis, Minnesota 55402-4629 12636-110 41173852v2 S-3 Bridgewater Bank/Prior Lake B Squared Loan No. 116530 Collateral Assignment of TIF Note and Development Agreement EXHIBIT A (Legal Description) The Land described is located in Scott County, Minnesota, and is legally described as follows: All that part of Lot 2 lying East of the Westerly 5 feet as measured at a right angle, and Lot 3, all in Block 1, City Hall Plaza, according to the recorded plat thereof, Scott County, Minnesota. A-1