2001 02 15FILE COPY
Agenda
Economic Development Authority
Thursday, February 15, 2001, 6:30p. m.
City Council Chambers, 690 City Center Drive
Mortgage Foreclosure on Chanhassen Bowl Property, Chanhassen
Ventures, LLC.
o
Update on Request for TIF Assistance, Villages on the Ponds Senior
Residential Campus, Presbyterian Homes.
Adjournment
CITYOF
CHANHASSEN
690 Ci0, Ce, ret D~qve
?0 Box I47
Cha,hasse,. Min,esota 55317
Pholle
952.937.1900
General Fax
952.937.5739
E, gineering Department Fax
952.937.9152
Buildi,g Department Fax
952.934.2524
Web Site
WlUW. C/. c/;alihayse,. ~)lll. I15
TO:
FROM:
DATE:
SUB J:
MEMORANDUM
Economic Development Authority
Todd Gerhardt, Assistant City Manager ...~, '
February 9, 2001
Bowling Alley Property (Chanhassen Ventures, LLC),
Mortgage Foreclosure
In September 1997, Chanhassen Ventures, LLC purchased the bowling alley
property and renegotiated the original loan from the EDA. As security for this
loan, the EDA secured a second mortgage on the Chanhassen Bowl property.
Heritage National Bank held the first mortgage.
In August 2000, the EDA directed the City Attorney to commence foreclosure
by advertisement on the current loan balance of approximately $140,000. On
September 21, 2000, the Carver County Sheriff held the sale in regards to the
EDA's mortgage and the City Attorney submitted a bid in the amount of the
loan balance. Then on September 26, 2000, the Carver County Sheriff held
another sale relating to the Heritage Mortgage and their bid was approximately
$380,000 (their outstanding loan amount). The redemption period for both
parties is six months. In the last five months, no one has seriously requested
redemption of our position.
The options available to the EDA are as follows:
The EDA could become the owner of the property subject to the Heritage
Mortgage amount and the current and delinquent real estate taxes. They
are as follows:
Taxes (As of December 31, 2000)
Heritage Loan
Total
$385,331.17
$380,000.00
$765,331.17
Amount the City/EDA would get back
after paying taxes/special assessments
($154,339.87)
Total Out of Pocket Money Needed
$610,991.30
The estimated value of the property is approximately $800,000 to
$900,000 (based on the vacant land only (103,672 sq. ft. x $8 or $9
per square foot).
The Gtl, of Cha,hasse, A q 'owi,¢ comm,,itv with flea,/akec ana/itv ~rho,k. , d ,~v~i,~ #,,,,t,,..,. tl, ri,i,a hmi,e,ec ,,d henutifl,I ~,rhc A ar~nt ~/,ce to/i,e, mm'h. , ~d ~bv
Economic Development Authority
February 9, 2001
Page 2
The EDA could do nothing, which would result in forgiving the
$140,000 loan.
The EDA could do nothing regarding its redemption rights under the
Heritage Mortgage and negotiate with Heritage Bank after they become
the owner of the property. I believe that we 'would be competing with
several other private business owners if we chose this option.
Summmy of Events
September 21, 2000 EDA foreclosed on the Bowling Alley mortgage
($140,000). Six-month redemption period begins.
September 26, 2000 Heritage Mortgage foreclosed on their $380,000
mortgage. Six-month redemption period begins
March 25, 2001 Last day for the EDA to consider purchasing the
bowling property.
March 26, 2001 Heritage Bank could become the fee title owner of the
property after paying only the real estate taxes.
Jolm F. Kelly fi'om the City Attorney's office will be present at the EDA's
meeting on Thm'sday night to review each of the options and answer any
questions you may have regarding this project.
g:\admin\tg\chan bowl foreclosurel .doc
National Lodging ~(~-~
25-11900_~0_~ ~i
, Na!,?n.a!~?~g.ing~!I ~ ~1
25-1190010 ";'
Chanhassen Suite~ LLC ~,~
25-1950021
CITYOF
690 City Center Drive
PO Box 147
Ganhassen, M immota 55317
952.937.1900
General Fax
952.937.5739
Engiueering Department Fax
952.937.9152
Building Department Fax
952.934.2524
IlSb Site
tt,u.,u~ci, chaJthasse~J, mn. tis
MEMORANDUM
TO: Economic Development Authority
FROM: Todd Gerhardt, Assistant City Manage ·
DATE: February 9, 2001
SUB& Update on Presbyterian Homes, Request for TIF Assistance for
the Villages on the Ponds Senior Residential Campus
This memo is to give you a heads-up that Presbyterian Homes will be requesting
TIF assistance for the Villages on the Ponds Senior Residential Campus,
probably within the next month. Staff is conducting an analysis of their
preli~ninary financial Performa.
Staff has also had contact with the Metropolitan Council and Minnesota
Housing Finance Agency to see if they would contribute financially to the
project.
The following is a summary of the proposed project. They are proposing two
buildings:
Building 1:
- 97 total units
- All units will be independent living for those age 55 and older
- 34 of the units would be affordable if the EDA provides assistance
- Rems for the affordable units will be in the range of $650-$675/month
- Market rate rents for the remaining 63 units will be in the range of $938-
$2,000/month
Building 2:
- 70 total units
- 50 assisted housing units with rents ranging from $2,200-$3,100/month
- 20 units for Dementia patients with rents ranging from $2,500-$2800/month
Definitions:
Independent Living Units are similar to any apartment, condominium,
or single-family development, except that they provide special services.
Most are fully secured with staff that may meet and screen visitors
around the clock. Many independent living options provide a full range
of activities that promote social contact among residents.
T/~e (Titv nf ('l~m~h,mm~. A a,'m,,/,a tatum,m/tv ,,itl, flea, bhec anaOtv ¢d~h. ~ rhamd,a dray,totem, thrit.,i~w hmi~e.c¢rc and heautif~d ~(trks. .4 ~,reat t~lace to/ive, work. a~td
Economic Development A uth ority
February 9, 2001
Page 2
Assisted Living facilities provide an independent living situation for
those who need help in their day-to-day living. Often, the added services
m'e provided on an individual basis depending on specific needs. The
services include, but are not limited to, congregate dining, medication,
housekeeping, laundry, limited physical therapy, assisted bathing, as well
as the other services offered by congregate living facilities.
Demetttia Living Facility: This facility provides different levels of care
and activities for residents that have memory-related disorders, such as
Alzheimer's disease.
Again, this is an informational/discussion item. No decisions need to be made
on this item at the meeting.
ATTACHMENTS
1. Maps of the Villages on the Ponds and Proposed Development.
2. TIF ApplicatiolUBusiness Subsidy Criteria.
g:\admin\tg\presbytcrian homes.doc
Americlnn
Bokoo Bikes
Independent
'~ .Living,(97
Foss Swim
School
St. Hubert's Church
CI T Y 0 F CHA NHA SSEN
BUSINESS S UBSID Y CRITERIA
Approved October 11, 1999
CITY OF CHANHASSEN
BUSINESS SUBSIDY CRITERIA
Policy and Criteria for Business Subsidy
GENERAL POLICY
The City Council of the City of Chanhassen has the power, should it deem necessary, to grant business
subsidies. The fundamental purpose of Business Subsidy Criteria in Cbanhassen is to encourage desirable
and affordable housing, senior housing, and assisted living that would not otherwise occur "but for" the
assistance provided by the City of Chanhassen Business Subsidy Criteria. This Business Subsidy Criteria
shall be used as a guide in processing and reviewing applications requesting business subsidy.
PROJECT SELECTION CRITERIA
Business Subsidies can benefit the community by providing a broad range of housing opportunities such as
affordable housiug, senior housing and assisted living. The Council reserves the right to approve or reject
business subsidies on an individual basis.
Highest Priority Shall Be Given to Proiects Which Include:
1. Compatibility of the proposed project with the City's overall development plans and objectives.
2. Broad range of housing opportunities such as affordable housing, seuior housing and assisted living.
3. Minimal impact on City service needs.
4. High quality of the facility to be built.
5. Increase in Tax Base: While an increase in the tax base cannot be the sole grounds for granting a
subsidy, the EDA believes it is a necessary condition for any subsidy.
6. Jobs and Wages: It is the EDA's iutent that the grantee create the maximum number of livable wage
jobs at the site. This may include jobs to be retained but only if job retention is imminent and
demonstrable.
7. Economic Development: Projects should promote one or more of the following:
a. Encourage economic and commercial diversity within the community;
b. Contribute to the establishment of a critical mass of commercial development within an area;
c. Provide basic goods and services, increase the range of goods and services available,
or encourage fast-growing businesses;
d. Promote redevelopment objectives and removal of blight, including potintion cleanup;
e. Promote the retention or adaptive reuse of buildings of historical or architectural significance;
f. Promote additional or spin-off development within the community;
g. Encourage full utilization of existing or planned infrastructure improvements.
PROJECT REQUIREMENTS
1. Applicant at all times should retain and be assisted by qualified financial consultants and/or
underwriters, and legal counsel.
2. Construction of the project shall not be commenced until the City has given preliminary approval to the
application for financing.
3. The City reserves the right to deny any application for financing at any stage of the proceedings prior to
adoption of the final approval authorizing issuance of the bonds.
4. The City reserves the right to select a third party administrator to assist in the management of the
process.
5. The City will only consider a "pay as you go" plan for high quality industrial developments in existing
TIF districts (National Weather, 2-2; Hennepin County, 3-1; Gateway, 6-1; and Entertainment
District, 4).
6. Development must be of the highest quality with high quality building materials and landscaping as
agreed bem, een the City and the Developer.
7. Developer must pay all costs of establishing the district unless the City agrees to allow costs to come
out of the district.
8. Local requirements may be more stringent than State statute as applies to TIF.
9. Project meets "but for" analysis and statutory qualifications (Exhibit A).
10. All projects must be consistent with Chanhassen's Comprehensive Plan and any other similar plan or
guide for development of the community.
ACTIVITIES TO BE CONSIDERED FOR FINANCING
I. Any subsidy granted by the city will be subject to the requirement of a public hearing, if necessary, and
must be approved by the Chanhassen City Council.
2. It will be necessary for both the grantee and the EDA (City of Chanhassen) to comply with the reporting
and monitoring requirements of the Act.
3. Land write down
4. Costs of streets and utilities
5. Demolition and relocation costs
6. City costs such as trunk utility costs, street costs, and MSA reimbursement
7. Extraordinary landscaping and lighting
8. Soil corrections
APPLICATION PROCESS
1. The application process must be completed in accordance with TIF application procedures (Exhibit B).
2. Applicant shall make an application for TIF usage on forms available from the City.
3. The application will include (if appropriate):
A. Statement of Public Purposes
B. Description of Project
C. Plans and Drawings of Project
D. Description of Company
E. Legal Opinions
F. Investment Bank Letter of Feasibility
G. Market Analysis
H. Pro Forma Analysis
I. Financial Statements
J. Zoning and Planning Analysis
K. Application Fee
L. Demonstration of past successful general development capability as well as specific capability in the
type and size of development proposed.
M. Other Documentation Requested by the City
The City's Business Subsidy program will be administered by the City of Chanhassen's Economic
Development Authority (EDA). The applicant shall submit a completed application and a $2,000 non-
refundable application fee. The application fee shall be paid to the City of Chanhassen at the time a final
Business Subsidy application is submitted.
At the time a final Business Subsidy application is submitted, the applicant shall also deliver to the City
a deposit in the amount of $10,000. The purpose of this deposit is to reimburse the City for costs and
expenses incurred in connection with preparation of the development agreement and the carrying out of
all actions necessary in the fulfillment or the City's obligations. Any part of the deposit not
needed for those purposes shall be promptly returned to the Redeveloper not later than the date of
issuance of the Certificate of Completion, or within 15 days following the termination of the
Development Agreement for failure to close. It is understood the deposit is not a limitation on the
Redeveloper's obligation to reimburse the City for such costs; and the Redeveloper shall pay the City
for any such costs in excess of the deposit within 30 days following a written request to do so.
4. City staff will review the data and make preliminary recommendations to the City Council as to
compliance of the application and proposed project with City objectives and criteria/Strategic Plan.
5. Formal evaluation of the application will include, in addition to items subject to preliminary review,
review of applicable credit analysis, credit enhancement and legal compliance. Formal recommendation
will then be made to the City Council.
6. After evaluation of the formal recommendation, the City Council will consider final approval of the
establishment of the Business Subsidy and hold the appropriate hearings.
7. All applications and supporting materials and documents shall become the property of the City.
CITY OF CHANHASSEN
APPLICATION FOR BUSINESS SUBSIDY
Business Name:
Address:
Location of Proposed Development:
Type(Partnership, etc.):
Telephone:
Nature of Business:
HISTORY OF APPLICANT
Have you ever filed bankruptcy? Yes No
If yes, provide details on separate sheet.
Have you ever defaulted on any loan commitment? Yes__
If yes, provide details on separate sheet.
No
Have you ever applied for conventional financing for the project? Yes
If yes, provide details on separate sheet. If no, why not?
Project Cost Breakdown:
$
$
$
$
Total: $
Date:
No
List financial references: Name/Address/Contact
a.
Co
5. Other information pertinent to your application:
6. Name of Counsel:
INFORMATION CONCERNING APPLICANT'S PROPOSED PROJECT FOR EXISTING
INDUSTRIAL DEVELOPMENT LOCATED IN TIF DISTRICTS(National Weather, 2-2; Hennepin
County, 3-1; Gateway, 6-1; Entertainment District, 4)~ AND Eden Trace, 4-1.
1. Is the proposed project a new facility or rehabilitation and/or expansion of existing facility?
2. Industrial/Commercial:
3. What is the present employment of your firm?
4. What will the employment be at completion of project?
5. Estimated Project Cost?
6. What is the principal business or product oftl~e company?
7. Potential other use of proposed development?
8. Will this development attract other related industries? Yes___
How?
No
9. What are the proposed financing arrangements?
INFORMATION CONCERNING APPLICANT'S PROPOSED HOUSING PROJECT
1. Is the proposed housing project a new facility or rehabilitation and/or expansion of existing facility?
2 Housing Type(single family, multi-family, apartments, condominiums, etc.):
3. Number of units:
4. Number of bedrooms in each unit:
5. Saleprice oftheunits:
or
6. Rentalprice oftheunits:
7. Estimated total project cost and breakdown of overall development costs?
8. Who are you principally marketing your product to?
9. How long do you think it will take to sell or rent your product?
11. Do you have linkages/contacts with Chanhassen businesses? Please explain(Reason: To see if you are
meeting the local business needs.)
12. What are the proposed financing arrangements?
13. How are you proposing to meet alternate transportation needs?
EXHIBIT A
SAMPLE "BUT-FOR" ANALYSIS
WITH NO BUSINESS SUBSIDY WITH BUSINESS SUBSIDY
Sources and Uses Sources and Uses
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,000
Tax Increment 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land
Sitework
Soil Correction
Demolition
Relocation
1,500,000
300,000
d68,000
100,000
65,000
1,500,000
300,000
468,000
100,000
65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction
Finish Manufacturing
Subtotal Construction Costs
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
Soft Costs
Taxes
Finance Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
TOTAL USES
12,ooo,o00I
12,000,000I
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Income Statement Income Statement
Sq. Ft. PerSq. Ft.
100,000 $8.00 800,000
25,000 $8.00 212,000
25,000 $9.00 225,000
0 $0.00 0
1,237,500
Sq. Ft. Per Sq. Ft
100,000 $8.00 800,000
25,000 $8.00 212,000
25,000 $9.00 225,000
0 $0.00 0
1,237,500
IMortgage
20 Term
0
9.00 ¼ Interest
9,600,000
1,051,646
20 Term
9.00%
8,667,000
949,439
Net Income
288,061t
12.00%
Total Return on Equity
185,85.4
7.74%
"BUT-FOR" ANALYSIS WORKSHEET
Mortgage
Equity
Tax Increment
WITH NO BUSINESS SUBSIDY
Sources and Uses
SOURCES
WITH BUSINESS SUBSIDY
Sources and Uses
SOURCES
TOTAL SOURCES
Land
Sitework
Soil Correction
Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufacturin~
Subtotal Construction Costs
Soft Costs
Taxes
Finance Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
USES
USES
TOTAL USES I I
Income Statement Income Statement
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Mortgage I
Sq. Ft. Per Sq. Ft.
Sq. Ft. Per Sq. Ft
Net Income
Total Return on Equity
I hereby certify the above financial information is true and accurate.
Signature
Title
Date
EXHIBIT B
CITY OF CHANHASSEN
APPLICATION PROCEDURES FOR BUSINESS SUBSIDY
1. Applicant shall meet with City staffto discuss the scope of the project, public assistance being
requested, time schedule and other information as may be necessary.
2. Following an initial meeting, applicant shall complete a Business Subsidy application. The completed
application shall be submitted to the Executive Director of the Economic Development Authority.
3. The application shall be reviewed by City staff on a preliminary basis as to the feasibility of the project.
City staff shall prepare a report on the project.
4. The application shall be placed on an EDA agenda for concept review. The applicant may make a
presentation of the project at that time. City staffwill present its preliminary findings.
5. The following items must accompany the application:
a. $2,000 application fee
b. Completed"but-for" worksheet
c. $10,000 application deposit
d. Statement of Public Purpose
e. Description of Project
f. Plans and Drawing of Project
g. Company Background Material
h. Letter of Feasibility
i. Market Analysis
j. Pro Forma Analysis
k. Financial Statements
1. Zoning and Comprehensive Plan Analysis
m. Other Pertinent Information
o
Following tile necessary analysis of the application by City staff', a report shall be prepared and
presented to the EDA for £ormal action. If the application is approved, City staff will be directed to
undertake tile following steps:
a. Prepare a redevelopment agreement between tile City of Chanhassen and the Developer;
b. Prepare or modify the redevelopment plan and TIF plan ifreqaired.
7. If zoning amendments or Planning Commission action is required as part of the project, the appropriate
actions shall be taken prior to final consideration of the redevelopment agreement.
8. Applicant must follow all city development review processes (e.g. site plan, platting, rezoning, PUD,
etc.) before final Business Subsidy application may be approved.
If you have any questions concerning the Business Subsidy application process, please contact:
City of Chanhassen
EDA Executive Director
690 City Center Drive
PO Box 147
Chanhassen, MN 55317
(612)937-1900 ext. 119
10