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HomeMy WebLinkAboutIV.C - Authorize Signature - Extension No. 3 to Real Estate Option Agreement - Rungoli-Panache HEDRA Memorandum To: HEDRA Commissioners From: Rusty Fifield, Economic Development Coordinator John Hinzman, Community Development Director Date: January 2, 2020 Subject: Panache Action Requested Approve Extension #3 to the Real Estate Option Agreement with Panache. Background At the October meeting, the Real Estate Option Agreement with Panache was extended to January 31, 2020. As part of the extension, Panache was required to provide the following information by December 30, 2019: 1) Preliminary site plan (including building, parking, utilities, and stormwater discharge) illustrating limitations of Mississippi River setbacks and powerline easement, architectural renderings, floor plan for the building (including square footage of proposed uses), and preliminary construction budget prepared by a qualified engineer and architect. 2) A table containing the sources and uses of funds for the Project in the form contained in Exhibit C. The table must: a) Utilize the preliminary construction budget. b) Cover all activities required to begin business operations on the Property. c) Itemize all sources of funds including Developer and investor equity contributions. d) Include the land purchase price requested by the Developer. 3) A proforma including projected operating revenues and expenditures for all activities conducted on the property for the years 2020 through 2029. The proforma must include: a) Projected revenues by source, such as taproom, event space, apartments, and merchandise. b) Projected operating expenses including cost of cider, food, merchandise and other goods sold; wages and benefits, business expense including office, marketing, maintenance, utilities, taxes, insurance, and professional services. c) Calculation of cash-on-cash return on investment. d) Explanation and supporting documentation for assumptions used in proforma. Panache Update January 2, 2020 Page 2 Panache has made substantial and tangible progress towards providing the required information, but has not yet complied with the terms of the Agreement. The preliminary site information submitted is attached to this memo. We’ve had discussions with the developer about the financial information outlined in items 2 and 3. The Developer is making good faith efforts to provide this information, but was not able to complete the work prior to leaving the country for the month of January. The progress made on site layout, building design and construction estimates have been very helpful. Concerns remain about the financial feasibility of the project. These concerns cannot be addressed until we receive financial information from the Developer. Given the progress made and the Developers inability to respond in January, we believe that a third extension to the Agreement is warranted. The proposed extension would include the same informational requirements and run through April 30, 2020. The final informational submittal deadline would be February 28, 2020. This timetable provides adequate time for the completion of work by the Developer and consideration by HEDRA. With that, this should be the final extension. Attachments A. Preliminary site and building information from Panache B. Draft of extension agreement B-1 Attachment A Preliminary Site and Building Information From Panache B-2 B-3 B-4 B-1 Attachment B EXTENSION TO REAL ESTATE OPTION AGREEMENT THIS AGREEMENT, is made on or as of the __________ day of _____________, 2019, by and between the Hastings Economic Development and Redevelopment Authority in and for the City of Hastings, a public body corporate and politic under the laws of the State of Minnesota, (hereinafter referred to as "HEDRA"), having its principal office at 101 4th Street East, Hastings, Minnesota 55033-1955, and Rungoli LLC, a Minnesota limited liability company (hereinafter referred to as the "Developer"), having its principal office at 1865 Fairmont Avenue, St. Paul, Minnesota 55105. RECITALS WHEREAS, HEDRA and Developer entered into that certain real estate option agreement on December 17, 2018 (“Option Agreement”). WHEREAS, HEDRA and Developer have agreed to two extensions of the Option Agreement on May 31, 2019 (“Extension No. 1”) and on October 31, 2019 (“Extension No. 2”). WHEREAS, HEDRA and Developer have determined that an additional extension of the Option Agreement is necessary and appropriate. WHEREAS, the real property subject to the option granted under the Option Agreement as extended herein is legally described in the Option Agreement and is referred to hereafter as the (“Property”) upon which the Developer proposes to build a multi-story building for a cidery, event space, and apartments (“Project”). WHEREAS, the option price for the property was not established in the Option Agreement and instead, the Option Agreement provided that if the Developer elects to exercise the option B-2 within the option term, the purchase price for the Property shall be determined upon agreement between HEDRA and Developer based on application of HEDRA’S policies for promoting development and redevelopment and taking into consideration the funding Developer is able to obtain to apply toward the purchase price and which price shall be memorialized in a development agreement establishing any obligations of the Developer, in addition to the payment of the purchase price, to satisfy certain employment, wage and construction requirements within specified times complying with HEDRA’S objectives for encouraging economic development and job growth within the City of Hastings. The parties desire to reduce to writing their agreement regarding the purchase price under the Option Agreement. NOW, THEREFORE, in consideration of mutual covenants and obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: 1. OPTION TERM. The term of the option to purchase the Property granted under the Option Agreement is hereby extended from January 31, 2020 to April 30, 2020. 2. OPTION PRICE. If the Developer elects to exercise the option within the option term, as set forth in Paragraph 1 herein, the purchase price for the Property shall be $470,700.00 ($7.23 per s.f.). HEDRA may consider a reduction of the purchase price upon demonstration from the Developer that a specified lower price is needed to make the project financially feasible. 3. ADDITIONAL INFORMATION – DEVELOPER. On or before February 28, 2020, the Developer shall provide the following information to HEDRA: a) Preliminary site plan (including building, parking, utilities, and stormwater discharge) illustrating limitations of Mississippi River setbacks and powerline easement, architectural renderings, floor plan for the building (including square footage of proposed uses), and preliminary construction budget prepared by a qualified engineer and architect. b) A table containing the sources and uses of funds for the Project in the form contained in Exhibit A. The table must: 1) Utilize the preliminary construction budget. 2) Cover all activities required to begin business operations on the Property. 3) Itemize all sources of funds including Developer and investor equity contributions. 4) Include the land purchase price requested by the Developer. c) A proforma including projected operating revenues and expenditures for all activities conducted on the property for the years 2020 through 2029. The proforma must include: B-3 1) Projected revenues by source, such as taproom, event space, apartments, and merchandise. 2) Projected operating expenses including cost of cider, food, merchandise and other goods sold; wages and benefits, business expense including office, marketing, maintenance, utilities, taxes, insurance, and professional services. 3) Calculation of cash-on-cash return on investment. 4) Explanation and supporting documentation for assumptions used in proforma. IN WITNSS WHEREOF, the parties have executed this Agreement effective the day of , 2020. RUNGOLI LLC A Minnesota limited liability company By: Ameeta Jaiswal-Dale Its: CEO and Owner B-4 ACKNOWLEDGEMENT STATE OF MINNESOTA ) ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this _____day of , 2020, by Ameeta Jaiswal-Dale, the of Rungoli LLC, a Minnesota limited liability company. _________________________________ Notary Public B-5 HASTINGS ECONOMIC DEVELOPMENT AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF HASTINGS, A PUBLIC BODY CORPORATE AND POLITIC UNDER THE LAWS OF THE STATE OF MINNESOTA By: Scott Sinclair, President (SEAL) ACKNOWLEDGEMENT STATE OF MINNESOTA ) ) ss. COUNTY OF DAKOTA ) The foregoing instrument was acknowledged before me this _____day of , 2020, by Scott Sinclair, the President of Hastings Economic Development and Redevelopment Authority in and for the City of Hastings, a public body corporate and politic under the laws of the State of Minnesota. _________________________________ Notary Public EXHIBIT A Form of Sources and Uses Table Sources of Funds Uses of Funds Bank loan $___________ Land $___________ SBA Loan $___________ Building construction $___________ Other loans Describe $___________ Site improvements $___________ Describe $___________ Cidery Equipment $___________ Grants Furnishings $___________ Describe $___________ Describe $___________ Architect services $___________ Legal services $___________ Equity Accounting and other services $___________ Owner $___________ Other investors $___________ Licenses and permits City $___________ Other sources Other $___________ Describe $___________ Describe $___________ Loan fees $___________ Describe $___________ Bank $___________ SBA $___________ Other project costs $___________ Contingency $____________ Working capital $___________ TOTAL Sources $___________ TOTAL Uses $___________ Notes 1. Information in this table covers the complete Project. 2. Provide anticipated terms of Bank loan here: 3. Provide any other information needed to explain this table.