HomeMy WebLinkAboutIV.A - Confluence Agreement City Council and HEDRA Memorandum
To: Mayor Fasbender, City Councilmembers, and HEDRA Commissioners
From: John Hinzman, Community Development Director
Date: July 6, 2021
Item: Authorize Signature: 4th Amendment to Purchase and Development Agreement –
Confluence Development
Action Requested:
Authorize Signature of the attached 4th Amendment to the Purchase and Development
Agreement for the redevelopment of the former Hudson Manufacturing Building subject to minor modifications as approved by the City Attorney. The project is located at 200 West 2nd Street. Approval requires a simple majority of City Council and HEDRA Commissioners.
Background:
In 2016 the City, HEDRA, and Confluence Development executed a Purchase and Development Agreement (PDA) for Great River Landing (now The Confluence) a historic rehabilitation of the former Hudson Manufacturing Building located at 200 2nd Street W. The PDA set parameters and obligations for the transfer of the building to Confluence for development of a hotel, apartments, banquet facility, and commercial space.
All parties have subsequently executed amendments to the original PDA to reflect changes and delays with the project. The property was transferred to Confluence in March, 2018. In August 2019 a third amendment to the agreement was executed to address environmental remediation, remaining grant payments, and completion dates.
City\HEDRA Obligations: Since 2019 all grant related work has been completed and the City’s environmental obligations are substantially complete. All piping and mechanical equipment for the vapor intrusion mitigation system (VIMS) has been installed; VIMS contractors are awaiting further completion
of the building to provide the electrical connection and testing. Wood sealing and encapsulation of hazardous substances within the building has taken place; the City has been made aware of areas of encapsulant that are flaking and is working with our contractors to address the concerns. Delays in the project have led to a loss of anticipated TIF revenue. This has led to higher than
anticipated bond expenses from the original acquisition of the building. Key Items of Amendment:
• Commencement and Completion items have been updated to reflect current construction
status.
o City has until August 31, 2021 to complete wood sealing and encapsulation work. o Confluence shall substantially complete construction by October 31, 2022.
• Remedies of Default have been updated
o If substantial completion does not meet the October 31, 2022 deadline, the developer agrees to execute a minimum assessment agreement obligating payment of taxes based on the estimated market value of the completed
development. Payment based on the developed value would substantially reduce
the City’s TIF bond payment obligations for acquisition of the facility. Attachments:
• 4th Amendment to Purchase and Development Agreement
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FOURTH AMENDMENT TO PURCHASE AND DEVELOPMENT AGREEMENT
THIS FOURTH AMENDMENT TO PURCHASE AND DEVELOPMENT
AGREEMENT (“Fourth Amendment”) is made this day of , 2021
(“Effective Date”), by and between the Hastings Economic Development and Redevelopment
Authority, a public body corporate and politic (“Authority”), 101 Fourth Street East, Hastings,
Minnesota 55033; the City of Hastings, a home rule charter city under the laws of the State of
Minnesota (“City”), 101 Fourth Street East, Hastings, Minnesota 55033; Confluence Development
LLC, a Minnesota limited liability company (“Redeveloper”), 101 East 10th Street, Suite 300,
Hastings, Minnesota 55033; and Confluence Park LLC, a Minnesota limited liability company
(“Park LLC”), 101 East 10th Street, Suite 300, Hastings, Minnesota 55033 (Redeveloper and Park
LLC are collectively known as “Redeveloper”).
RECITALS
WHEREAS, the Authority, the City and Redeveloper entered into that certain Purchase
and Development Agreement dated January 18, 2016 (the “Original Agreement”) as amended by
the First Amendment to Purchase and Development Agreement dated January 2, 2018 (the “First
Amendment”), further amended by the Second Amendment to Purchase and Development
Agreement dated July 23, 2018 and further amended by the Third Amendment to Purchase and
Development Agreement dated August 19, 2019, which added Park LLC as a party thereto (the
“Third Amendment”) (collectively, the Original Agreement, First Amendment, Second
Amendment, Third Amendment and Fourth Amendment shall be called the “Agreement”), in
which the Authority agreed to sell certain real property to the Redeveloper (“Redevelopment
Property”) for the purpose of rehabilitating the building located on a portion of the Redevelopment
Property (the “Building”) and performing certain other improvements to the Redevelopment
Property as required in the Agreement; and
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WHEREAS, the Authority conveyed the Redevelopment Property to the Redeveloper on
or about March 5, 2018; and
WHEREAS, on or about March of 2020, the COVID-19 pandemic shut down all activities
related to fulfilling the obligations under the Agreement and caused major stoppages and
disruptions in the production, supply chains and workers such that it made compliance with
completion dates in the Agreement impossible; and
WHEREAS, certain obligations related to the VIMS Work and the Wood Sealing
Preparation Work have yet to be completed, therefore requiring an extension of the Completion
Date of the Minimum Improvements; and
WHEREAS, the Minimum Improvements description has been refined by the
Redeveloper to reduce the number of apartments, add a hotel and add a restaurant to the
commercial space.
NOW THEREFORE, the Parties hereby agree as follows:
Section 1. Section 1.1 definition of “Minimum Improvements” of the Agreement is hereby
deleted in its entirety and replaced as follows:
“Minimum Improvements” means the construction by the Redeveloper on the
Redevelopment Property consisting of the rehabilitation and conversion of the Building into a
hotel, market-rate apartments, a restaurant and retail or commercial uses in accordance with the
Construction Plans.
In addition, the following definitions are added to Section 1.1 of the Agreement, for clarification
purposes only,
“Development Work” as defined in the First Amendment Section 2, means the design and
construction of the Minimum Improvements, the Private Park Improvements, and the Parking
Ramp.
“Main Project” as defined in the Third Amendment Section 2 means work other than the
Preliminary Improvements.
“Preliminary Improvements” as defined in the 17th Recital of the Third Amendment (p. 6),
means the Riverfront Trail, the Private Park Improvements, and the VIMS and Sealing Preparation
Work.
“Revised Project Scope” as defined in the 3rd Recital of the General Background of the
First Amendment, shall mean the Minimum Improvements.
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Section 2. Section 4.3 (a) of the Agreement is hereby deleted in its entirety and replaced
as follows:
(a) Commencement and Completion of Construction.
i. Redeveloper has completed the Riverfront Trail, Parking Ramp and Private Park
Improvements.
ii. Redeveloper has not completed the Minimum Improvements.
iii. Testing on the VIMS Work will be conducted after the mechanical systems in the
Building have been installed by the Redeveloper, are fully operational and the
mechanical systems have passed inspections by the Building Official. This process
will complete the VIMS Work by the Authority and the City. The City shall
transfer or assign all contracts regarding the VIMS Work and all warranties, express
or implied, to Redeveloper upon receipt of successful testing results of the VIMS
Work. Upon receipt of the successful testing results and transfer or assignment of
all contracts and warranties, City shall no longer be responsible for the VIMS Work.
iv. The Authority and City shall complete the repairs to the Wood Sealing Work by
August 31, 2021. In addition, following completion of such initial repairs to the
Wood Sealing Work, the Authority and the City shall be responsible for completing
final repairs to the Wood Sealing Work after the Redeveloper has completed
construction of the Minimum Improvements, including patching and touch-up of
paint in areas where the Redeveloper has attached plumbing or mechanical piping
and areas where the Redeveloper has cut or installed penetrations through the
flooring as part of its Construction Plans, as articulated in the contract between the
City and Mavo Systems, Inc. It is understood by the parties that following the
repairs, additional testing is required to confirm the integrity of the repairs of the
Wood Sealing Work, which may occur after the completion date. The City shall
transfer or assign all contracts regarding the Wood Sealing Work and all warranties,
express or implied, to Redeveloper upon receipt of successful testing results of the
Wood Sealing Work. Upon receipt of the successful testing results and transfer or
assignment of all contracts and warranties, City shall no longer be responsible for
the Wood Sealing Work.
v. Redeveloper shall substantially complete construction of the Preliminary
Improvements, the Main Project, the Development Work and the Minimum
Improvements by October 31, 2022. “Substantially complete construction” shall
mean that the Redeveloper has completed all of the Developer’s construction
obligations pursuant to this Agreement so that a Certificate of Occupancy can be
issued for final occupancy of the entire Building.
Section 3. Section 9.2 of the Agreement is hereby deleted in its entirety and
replaced as follows:
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Section 9.2 Remedies on Default. Whenever any Event of Default occurs, the non-
defaulting party to this Agreement may immediately suspend its performance under this
Agreement and may take any one or more of the following actions after providing seven
(7) days written notice to the other party of the Event of Default, but only if the Event of
Default has not been cured within said seven (7) days or, if the Event of Default is by its
nature incurable within said seven (7) days, the defaulting party has not provided
reasonable assurances to the non-defaulting party that the Event of Default will be cured
and that it will be cured as soon as reasonably possible:
(a) Terminate this Agreement.
(b) Take whatever action, including legal, equitable or administrative action, which
may appear necessary or desirable to collect any payments due under this
Agreement, or to enforce performance and observance of any obligation,
agreement or covenant under this Agreement.
(c) In the event that Redeveloper does not substantially complete construction
pursuant to the date in Section 4.3(a)(v), the Redeveloper agrees to execute a
Minimum Assessment Agreement for the estimated market value of
$5,733,294, which shall be the minimum assessed value for the Redevelopment
Property effective January 1, 2023, regardless of the status of the completion of
the Minimum Improvements.
Section 4. All other terms of the Agreement shall remain unchanged.
[remainder of page intentionally blank]
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IN AGREEMENT, the parties hereto have hereunto set their hands as of the Effective Date.
HEDRA:
HASTINGS ECONOMIC DEVELOPMENT
AND REDEVELOPMENT AUTHORITY
By ________________________________
Dennis Peine
Its President
By ________________________________
Eric Maass
Its Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF DAKOTA )
The foregoing instrument was acknowledged before me this ____ day of ____________, 2021 by
Dennis Peine and Eric Maass, the President and Secretary respectively, of the Hastings Economic
Development and Redevelopment Authority, a public body corporate and politic organized and existing
under the Constitution and laws of Minnesota, on behalf of HEDRA.
Notary Public
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CITY:
CITY OF HASTINGS
By:
Mary Fasbender
Its Mayor
By:
Kelly Murtaugh
Its City Clerk
STATE OF MINNESOTA )
) ss.
COUNTY OF DAKOTA )
On this ___ day of ______________________, 2021, before me a Notary Public within
and for said County, personally appeared Mary Fasbender and Kelly Murtaugh, to me personally
known, who being each by me duly sworn, each did say that they are respectively the Mayor and
City Clerk of the City of Hastings, the municipality named in the foregoing instrument, and that
the seal affixed to said instrument was signed and sealed on behalf of said municipality by authority
of its City Council and said Mayor and City Clerk acknowledged said instrument to be the free act
and deed of said municipality.
Notary Public
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CONFLUENCE DEVELOPMENT LLC
By:
Patrick O. Regan
Its Vice President
STATE OF MINNESOTA )
) ss.
COUNTY OF DAKOTA )
The foregoing instrument was acknowledged before me this day of , 2021,
by Patrick O. Regan, the Vice-President of Confluence Development LLC, a Minnesota limited
liability company, on behalf of said limited liability company.
Notary Public
CONFLUENCE PARK LLC
By:
Patrick O. Regan
Its Vice President
STATE OF MINNESOTA )
) ss.
COUNTY OF DAKOTA )
The foregoing instrument was acknowledged before me this day of , 2021,
by Patrick O. Regan, the Vice-President of Confluence Park LLC, a Minnesota limited liability
company, on behalf of said limited liability company.
Notary Public
This document drafted by:
Korine Land, #262432
LeVander, Gillen, & Miller, P.A.
633 South Concord Street, Suite 400
South St. Paul, MN 55075
(651) 451-1831