2020-07-27 Special City Council MeetingCITY OF MENDOTA HEIGHTS
SPECIAL MEETING—
CITY COUNCIL
AGENDA
Monday, July 27, 2020
1:30 pm
Mendota Heights City Hall
1) Call to Order
2) Roll Call
3) Action Items—Village Lots
a) Approval of Development Agreement with MH Development, LLC
b) Approval of 3rd Amendment to Development Agreement with MH
Development, LLC
c) Approval of Trail and Utility Easement and Maintenance Agreement
4) Other Business
a) Discussion of City issuance of conduit debt
5) Adjourn
DATE: July 27, 2020
TO: Mayor and City Council
FROM: Tim Benetti, Community Development Director
Mark McNeill, City Administrator
SUBJECT: Approve Action Items for Village Lots Development
Comment:
Introduction:
At a special meeting of the City Council to be held on July 27th, the Council will be asked to act on three
documents which are needed for MH Development LLC, to close on four City-owned lots at The Village
of Mendota Heights.
Background:
Last year, the City advertised the availability of a 2.7 acre parcel of land in The Village development.
Five proposals were received; after a selection process, the City Council chose to accept the proposal of
Grand Real Estate Advisors.
GREA began the due diligence process for what will be a 48 unit apartment building for people aged 55
years and older, and to include an attached sit down café/restaurant. The original plan was to have all
necessary approvals in time for a March 30th closing. However, due to complications caused by the
COVID -19 pandemic, financing and other needed considerations were delayed. A first amendment, and
then a second amendment to the Purchase Agreement were approved by the Council in order to allow for
financing and other development considerations to be secured.
The second amendment was approved by the City Council on April 7, 2020. It called for the Contingency
date to expire on June 30th, with the closing to take place within 30 days of that date. The closing is now
scheduled for July 29th.
The legal name of the developer is now MH Development LLC, which was created by GREA for this
development.
Development Agreement: In order for the closing to take place as scheduled, the City Council should
approve the Development Agreement which has been negotiated. A copy is attached for the Council’s
consideration. It provides for:
• The construction of a three story, 87,912 square foot building with underground and surface
parking.
• Related development improvements and permissions necessary for building construction.
• The inclusion of Final Plans for the development, which are to be separately approved by the
City.
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• Acknowledgement of the adjacent condominium HOA, and an intent to enter into a separate
agreement with the HOA to financially participate in the maintenance of certain common area
costs.
As specified by the Council, the Development Agreement requires the construction of a noise wall to
shield neighboring residential properties to the west, across Dodd, from patio noise in the restaurant.
Once the sale is closed, the developer will be able to proceed with applying for the preliminary and final
plats of the property. However, that action should not hold up the start of construction activity; MH
Development LLC is anxious to commence. Draft plats have already been submitted.
One question which has been asked of staff is what leverage the City has to ensure that the restaurant
portion of the project will take place, once the closing has taken place and the City has relinquished
control of the property. According to the City Attorney, if the developer can’t build the restaurant, it
would be in default under this Development Agreement and the PUD, which could potentially lead to a
revocation of any land-use rights they would have on the property.
However, the developer has indicated that it has secured the financing for the restaurant, and are very
serious about proceeding. The restaurant developer will be in attendance at the Special Council Meeting
to answer questions.
Trail and Utility Easement and Maintenance Agreement: A separate document to provide for the Dodd
Road pedestrian trail (which is within the MNDOT ROW) and utilities on the property (including storm
drainage easements on what is now the Outlot which is south of the Condominiums) is also included.
These easements are necessary because the City vacated previous easements it held on the old plat. Since
the property is being replatted, the City will need new trail and utilities easements. This document should
be separately considered, and approved.
Third Amendment to Real Estate Purchase Agreement and Escrow Agreement: As stated earlier in this
memo, the property will not be replatted until after ownership has changed hands. Therefore, it is
proposed the City transfer the three development lots and the outlot to the Developer. The Developer will
then replat the entire property (keep in mind that the outlot to the south of the condominiums will shrink
compared to what is there now, due to the building construction) and execute a quit claim deed to the
City, transferring the new outlot (Outlot A) back to the City. The purpose of this Third Amendment is to
memorialize this process; the title company will hold the quit claim deed in escrow and will record it
simultaneously with the new plat. The Developer’s lender has also agreed to release its mortgage on the
property so the City can receive Outlot A free and clear. This document should be separately considered
and approved.
Budget Impact:
The proceeds of the sale of this property will add $1,110,000 to the City’s General Fund. This is
sufficient to offset the excess cost of the Fire Station, and has allowed the funding of the City’s portion of
the purchase of the Snyder property, so that that can be included in the Historic Pilot Knob preserve area.
The park dedication fee will add $192,000 to the City’s Special Parks Fund.
Recommendation:
In order for the development of the Village lots to proceed, we recommend that the City Council approve
the three attached documents.
Action Required:
If the City Council concurs, it should, by motion, approve the following documents:
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1. A Development Agreement by and between the City of Mendota Heights and MH Development
LLC, for four City-Owned Lots totaling approximately 2.7 Acres, in the Village at Mendota
Heights Development;
2. A Trail and Utility Easement and Maintenance Agreement, for said Development; and
3. A Third Amendment to Real Estate Purchase Agreement and Escrow Agreement, for said
Development.
Tim Benetti Mark McNeill
Community Development Director City Administrator
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DEVELOPER’S AGREEMENT
THIS DEVELOPER’S AGREEMENT (the “Agreement”) is made this _____ day of
__________, 2020 (“Effective Date”), by and between the City of Mendota Heights, a Minnesota
municipal corporation and political subdivision, having its principal office at 1101 Victoria Curve,
Mendota Heights, Minnesota 55150-0688 (the “City”) and MH Development LLC, a Minnesota
limited liability company, as assignee of Grand Real Estate Advisors, LLC, having its principal
office at 90 Dale Street South, Saint Paul, MN 55102, its successors and assigns as permitted
herein (the “Developer”).
WITNESSETH:
WHEREAS, the City and Mendota Heights Town Center, LLC, a Minnesota limited
liability company, entered into certain agreements related to the acquisition and development of
land known as The Village of Mendota Heights, consisting of approximately 19.25 acres generally
located at the northeast corner of Dodd Road and Highway 62 in the City (the “Village”); and
WHEREAS, after a majority of the Village was developed for mixed uses, the City acquired
four lots within said property, consisting of approximately 2.7 acres, legally described on the
attached Exhibit A (the “Property”);
WHEREAS, the Developer intends to acquire the Property from the City and develop the
same; and
WHEREAS, on March 4, 2020, the City Council of the City adopted Resolution No. 2020-
14 (attached as Exhibit B), consisting of a Conditional Use Permit to amend a previously approved
Planned Unit Development - Final Master Development Plan for the development originally titled
The Mendota Heights Town Center, and which is now known as The Village at Mendota Heights,
as proposed under Planning Case No. 2020-01; and
WHEREAS, the Developer seeks to revise the “West Neighborhood” of the original
Mendota Heights Town Center Planned Unit Development plans, which original plan called for
fourteen residential townhomes and five home-office style townhomes, to be replaced with a new
mixed-use site and development plan, consisting of a three-story, 48-unit senior apartment building
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with an attached sit-down style café/restaurant, with underground and surface parking facilities,
preliminarily titled the “Mendota Heights Senior Apartments” (the “Project”);
WHEREAS, the final plans for construction of the Project, as approved by the City, are
attached as Exhibit C (the “Final Plans”); and
WHEREAS, the Developer seeks to re-plat the Property as soon as possible, which platting
shall be completed prior to the final issuance of any certificate of occupancy for the Project; and
WHEREAS, the purpose of this Agreement is to set forth the priorities, responsibilities
and timelines of the City and the Developer related to the acquisition, development and equipping
of the Property through the Project.
NOW, THEREFORE, in consideration of the premises and of the mutual promises and
conditions hereinafter contained, it is hereby agreed as follows:
ARTICLE 1 - REPRESENTATIONS AND WARRANTIES
Section 1.1. Representations by the City. The City represents, warrants, and covenants
to the following:
a) The City is a municipal corporation and political subdivision duly organized and
existing under the laws of the State of Minnesota. The City is authorized and has
the requisite power to enter into this Agreement and perform its obligations
hereunder.
b) The City shall use reasonable efforts to cooperate and work with the Developer in
connection with:
i. further applications, agreements, amendments and approvals relating to, among
other things, site plans, planned unit developments, subdivisions, utility and
other development matters to permit the development of the Property in
accordance with this Agreement and the Final Plans for the Project;
ii. any requirements of local, state or federal governments or agencies thereof
relating to the development of the Project; and
iii. coordinating the sequencing, commencement and completion of all site grading
on the Property, placement of utility infrastructure to serve the Project, and all
ancillary activities related to completion of the Project, as shown on the Final
Plans and as further described in Section 2.1 hereof.
Section 1.2. Representations, Covenants and Warranties by the Developer. The
Developer represents, warrants, and covenants to the following:
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a) The Developer is a duly and legally formed Minnesota limited liability company,
and is not in violation of any laws of local, state or federal governments, and has
all necessary power and authority to enter into this Agreement and to carry out its
obligations hereunder.
b) Upon acquisition of the Property, all Private Improvements (as defined in Section
2.1) to be installed by the Developer will be constructed, operated and maintained,
to the extent retained by it, in accordance with the terms of this Agreement, the
Final Plans for the Project, and all local, state and federal laws and regulations,
including, but not limited to, environmental, zoning, building code, energy
conservation, and public health laws and regulations.
c) The Developer has received no notice or communication from any local, state or
federal official that the activities of the Developer on the Property may be in
violation of any known state or federal environmental laws. The Developer has no
knowledge of any facts, the existence of which would cause it or any of its projects
to be in violation of any environmental laws, or which would give any person a
valid claim under any such environmental laws.
d) The Developer shall use its reasonable efforts to pursue and obtain, in a diligent
and timely manner, all required permits, licenses and approvals, and will seek to
meet, in a timely manner, all requirements of all applicable local, state and federal
laws and regulations which must be obtained or met before the Private
Improvements may be lawfully constructed.
e) Neither the execution nor the delivery of this Agreement by the Developer, nor the
consummation of the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement is prevented,
materially limited by, or materially conflicts with or results in a material breach of
the terms, conditions or provisions of any restriction or any evidence of
indebtedness, agreement or instrument of whatever nature to which the Developer
is now a party or by which it is bound, or constitutes a default under any of the
foregoing.
f) The Developer shall cooperate and use its reasonable efforts with the City, in a
reasonable, timely and diligent manner, in connection with (a) applications,
agreements, amendments and approvals relating to, among other things, site plans,
planned unit developments, subdivisions, utility installations, submittals for
approval of Final Plans and other development matters to permit the development
of the Property in accordance with this Agreement and the Final Plans, (b) any
requirements of local, state or federal governments or agencies thereof relating to
the development of the Project, and (c) coordinating the sequencing,
commencement and completion of the Private Improvements.
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ARTICLE 2 – PRIVATE IMPROVEMENTS AND
DEVELOPMENT OF THE PROPERTY
Section 2.1. Final Plans; Private Improvements. The Final Plans are as set forth
on Exhibit C attached hereto. All improvements to be completed pursuant to the Final Plans are
referred to herein as the “Private Improvements.” The Private Improvements shall include the
following items, but in the event of any inconsistency between the Final Plans and this
Agreement, the Private Improvements shall consist of those Private Improvements set forth in
the Final Plans. Notwithstanding the previous sentence, the Final Plans shall provide for, at a
minimum, a three-story, 48-unit senior apartment building with an attached sit-down style
café/restaurant, with a full liquor license, as well as underground and surface parking facilities.
(a) Construction and installation of the new 87,912 square foot, three-story residential
and restaurant facility on the Property, along with all surface parking areas,
parking curbs and gutters, sidewalks, fire hydrants, and related fire safety
items meeting the requirements of the City’s fire marshal, as set forth herein
and as shown on a specific (overall) Site Plan for the Project (Plan Sheet C-101).
(b) All new buildings shall be constructed only in conformance to building and site
plans certified by a registered architect and engineers (as applicable); and in
accordance with all architectural and building standards found under City Code
Title 12-1E-8, Subpart F “Architectural Controls” and Subpart G – “Structural,
Electrical and Mechanical Requirements.”
(c) Removal of any trees or plantings and materials necessary to prepare for
development of the Property must be shown as set forth herein and as shown on a
specific Removal Plan for the Project (Plan Sheet C-004).
(d) All erosion control measures necessary for the Project as set forth herein and
as shown on a specific Post Construction Stabilization Plan for the Project (Plan
Sheet C-201).
(e) Grading and compacting of the Property as necessary for the preparation of
development and installation of the Private Improvements as set forth herein and
as shown on a specific Grading Plan for the Project (Plan Sheet C-301).
(f) Installation of necessary utilities within the Property and Project site areas,
including without limitation: 1) electric, 2) telephone, 3) natural gas, 4) water,
5) sanitary sewer, 6) cable, and 7) storm sewer and inlets, as set forth herein
and as shown on a specific Utility Plan for the Project (Plan Sheet C-401).
(g) Any necessary grading and installation of required storm water management
improvements as set forth herein and as shown on a specific Storm Sewer Plan
for the Project (Plan Sheet C-501).
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(h) All new landscaping, tree plantings and ground cover materials necessary for
the Project, as set forth herein and as shown on a specific Landscape Plan for the
Project (Plan Sheet C-101).
(i) Installation of water mains and service lines, including for potable and fire
service lines, shall be installed and constructed in in accordance with the Final
Plans for the Project, and shall conform with the St. Paul Regional Water
Services (“SPRWS”) specifications, designs and approvals.
(j) All ground-level mechanicals and utility appurtenances must be screened with
vegetation or one or more of the materials used in the construction of the principal
structure, but shall not obstruct fire department connections or hydrants, to be
reviewed by the City Planning and Fire Departments and verified as part of the
building permit review process.
(k) Any new sign(s) for the building and Property must meet the requirements and
standards set forth under City Code Title 12-1D-15 “Signs” and the 2002 Master
Development Plan and Design Standards for Mendota Heights Town Center.
Section 2.2. Developer Requirements. The Developer shall be financially
responsible for the completion of the Project and the Private Improvements in compliance
with the Final Plans for the Project. Additionally, the Developer shall be solely responsible
for completion of the following:
(a) Erosion Control. Prior to initiating any Private Improvements or site grading,
the erosion control measures depicted on the Post Construction Stabilization
Plan, along with the Storm Water Pollution Prevention Plan (the “SWPPP”)
shall be implemented by the Developer and inspected and approved by the
City. All areas disturbed by grading shall be reseeded in a timely fashion to
meet the erosion control requirements as described in the Final Plans. All
seeded areas shall be mulched and disc anchored as necessary for seed
retention. If the Developer does not comply with the Erosion Control Plan or
the SWPPP, the City may take such reasonable action as is necessary to control
erosion. The City will notify the Developer in advance of any proposed action.
The Developer shall be solely responsible for any costs properly incurred by
the City for erosion control measures. If the Developer does not reimburse the
City for any cost the City properly incurred for such work within thirty (30)
days, the City shall be allowed to recover its cost by execution on the
Irrevocable Letter of Credit as described in Section 3.1. No Project
development, improvements or paving construction will be allowed unless the
Project is in compliance with the erosion control requirements as set forth
herein.
(b) Subdivision and Easement Dedications. The Developer shall be responsible for
preparing and submitting to the City for review and approval, a new Preliminary
and Final Plat of the Property, pursuant to the requirements and standards under
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City Code Title 11 - Subdivision Regulations. It is the intent of the City to
structure the Final Plat to include a 20-foot setback from the building envelope on
the north side of the Property; the final setback amount shall be included on the
Final Plat and subject to approval of the City. A ll required utility, drainage,
public and access easements as needed or as prescribed by the City shall be
illustrated on the proposed Preliminary Plat map and dedicated on the Final Plat,
for the benefit of the City, its agents, utility companies and other public agencies.
Upon approval by the City, the Final Plat shall be promptly recorded by the
Developer with Dakota County for official filing.
(c) Access During Development. During the period from commencement of
construction of the Project, the Developer (and its contractor) shall install and
maintain a construction access road serving the Project site with an all-weather
gravel base, with gravel or pavement surface that accommodates City
inspection vehicles and emergency vehicles.
(d) Traffic and Pedestrian Ways and Signs. The Developer shall construct or
renovate the existing curb cuts into Maple Street consistent with the Final Plans,
and shall provide a clearly marked crosswalk on Maple Street over to the separated
parking lot, with final location and design as called for by the Final Plans. The
Developer shall install any traffic and pedestrian safety signs within the Property
and Project site, as called for by the Final Plans.
(e) Storm Sewer Maintenance. The Developer shall be responsible for
maintenance of the underground storm water chambers located within and
upon the Property, as shown on the Final Plans (Utility Plan and Storm Sewer
Plan) during and after the construction of the Project. The Developer shall
provide the City with an inspection report and as-built report if necessary,
verifying the chambers and all storm water pipes and appurtenances are
constructed and operating in accordance with the Final Plans. Subsequent
maintenance, as well as inspection, clean-out, and maintenance reports for the
storm water improvements, as required by any federal, state or local
governmental entity, shall be provided to the City at no cost to the City on a
yearly basis by the Developer, or its qualified successors and assigns.
Notwithstanding the previous sentence, the stormwater outlet control structure
located within the Property and subject to a drainage and utility easement in
favor of the City, shall continue to be maintained by the City.
(f) Landscaping Maintenance. The Developer shall be responsible for the
maintenance of all landscaping on the Property in a condition presenting a healthy,
neat and orderly appearance and free from refuse and debris. Plants and ground
cover which are required by an approved site or landscape plan and which have
died within 12 months following the issuance of the first certificate of completion
for the Private Improvements to be constructed on the Property shall be replaced
as soon as seasonal or weather conditions allow. All landscape areas must be
irrigated.
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(g) Noise Wall. As may be further described in the Final Plans, the Developer must
construct and locate a wall to shield noise from the restaurant outside patio as best
as practicable, to protect surrounding residential areas from undue noise and
disturbance. The construction materials and dimensions of the noise wall shall be
set forth in the Final Plans.
(h) Water Service Systems. The proposed water system serving the Property shall be
designed and constructed to SPRWS standards.
(i) Engineering Services and Utility Locations. The Developer shall furnish all
engineering services for the Private Improvements consistent with the Final Plans.
The Developer shall be responsible for utility locations, including other
information or utility work necessary, as determined by the Minnesota Office of
Pipeline Safety, necessary for the City to conform to the requirements of Minn.
Rule 7560. The Developer shall also deliver an “As-Built” survey to the City of
all utilities within the Project site and any dedicated utility easements, based on
the Dakota County coordinate system, within 180 days following issuance of the
last certificate of occupancy for the Private Improvements.
(j) Staking and Inspection. The Developer shall provide any staking or surveying
services as required by the City Public Works Director. The Developer agrees to
reimburse the City, within thirty (30) days of a written request, for the cost of the
City to provide a City inspector for any required or requested inspection of any
Private Improvements in order to assure that the completed Private Improvements
conform to the Final Plans. The City and SPRWS will provide for general and
final inspection and shall be notified of all tests to be performed. The Developer
shall use reasonable efforts to coordinate its inspector with the City’s and
SPRWS’s inspectors and the times and dates for said inspections of the Private
Improvements to ensure the condition of water stop boxes and other utility
extensions.
(k) Grading and Construction Activities. All grading and construction activities as
part of the proposed development shall be in compliance with applicable federal,
state, and local regulations and codes and the Final Plans, as well as in compliance
with the City’s Land Disturbance Guidance Document.
(l) Building and Related Construction Permits. Building, demolition and grading
permits shall be obtained from the City prior to commencement of any
construction activity on the Property. All applicable fire and building codes, as
adopted and amended by the City, shall apply and the buildings shall be fully
protected by an automatic fire sprinkler system. As part of the building permit
application process, the City shall promptly review plans prepared by the Developer
or its contractors, and shall use good faith efforts to review the plans and approve or
disapprove within five (5) business days. The City’s approval of the plans shall not
be unreasonably withheld and the Developer will promptly reply to requests for
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additional information or clarification on items requested by the City in order to
ensure an efficient review process. If the Final Plans vary from the written terms of
this Agreement, the written terms of the Final Plans approved by the City shall
control.
(m) Certificate(s) of Occupancy. No Certificate of Occupancy for the new building
on the Property shall be issued by the City unless and until all Private
Improvements serving the Property and Project have been installed, inspected and
accepted by the City and SPRWS, and are available for use to the reasonable
satisfaction of the City, and so long as no uncured Event of Default exists under
this Agreement. The foregoing notwithstanding, the City acknowledges that the
residential component and the commercial component may be completed in
phases, and upon successful completion of any component that may be segregated
for life-safety purposes, the City shall issue a Certificate of Occupancy for such
segregated component, so long as (i) all activities to be undertaken under the Final
Plans for such component are completed, (ii) all utilities are completed, and (iii)
no uncured Event of Default exists under this Agreement. The City acknowledges
that in the event all Private Improvements are successfully completed other than
landscaping, the Certificate(s) of Occupancy for the Project shall be issued in
accordance with this Agreement and the City Code, and the Developer shall
complete all landscaping requirements within a reasonable time following the
expiration of winter conditions.
(n) Park Dedication. Pursuant to City Code Section 11-5-1, the Developer must
dedicate at least ten percent (10%) of the gross area of the Final Plat to the public
for use as parks, playgrounds, public open space, trail systems, or water ponding,
or in lieu thereof, shall contribute an amount of cash as determined by the City.
As a part of the Resolution, and as satisfaction of all payments owed by the
Developer with respect to City Code Section 11-5-1, the City Council set a park
dedication fee of $192,000 (48 residential units @ $4,000/unit), which shall be
paid by the Developer prior to the issuance of a building permit for the Project.
(o) Pre-Construction Meeting. The Developer agrees to hold one or more pre-
construction meetings prior to the initiation of any construction activities on the
Property, which meetings shall include the Developer, its engineers and
contractors, the City Public Works Director and other City staff, Dakota County,
MnDOT (if necessary), SPRWS representatives, and representatives from all other
private utility providers serving the Property or Project.
(p) Quality of Work. The Developer agrees that all the Private Improvements,
including all labor, materials and supplies, shall be done and performed in a good
and workmanlike manner and in conformance with the Final Plans as approved by
the City, and on file with the City.
(q) Hours of Operation. The Developer will not permit any grading, construction,
mobilization, equipment maintenance, fueling or other physical work to be
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conducted on the Property outside of the specified working hours of 7:00 a.m. to
7:00 p.m. Monday through Friday, and 9:00 a.m. to 5:00 p.m. on Saturday.
Permission from the Mendota Heights City Council is required for work on
Sundays or Holidays.
(r) Homeowners’ Association. The Developer understands and acknowledges the
presence of a condominium homeowners’ association (Common-Interest-
Community No. 464), located at Lots 1 and 2, Block 4, and Lots 1, 2 and 3, Block
5, Mendota Heights Town Center, Dakota County, Minnesota (the “HOA”). The
Developer intends to enter into a separate agreement with the Board of Directors
of the HOA to provide financial assistance for various common area maintenance
costs related to the maintenance of common areas throughout the Village. The
City will not be a party to any financial agreement between the Developer and the
HOA, and any default under such separate agreement by the Developer will not
be considered an Event of Default under this Agreement.
ARTICLE 3 – FINANCIAL COMMITMENTS AND WARRANTIES
Section 3.1. Landscape Financial Security. Prior to issuance of a building permit for the
Project, the Developer shall provide the City with a landscape letter of credit, bond, cash escrow, or
other financial security covering a minimum of one full growing season, in a form reasonably
acceptable to the City in an amount of up to the lesser of $10,000 or 150% of the value of the
landscape planting materials list (as determined by the Developer’s landscape architect and agreed
to by the City Community Development Director) of the full cost of all landscaping, plantings,
irrigation, and related improvements for the Property. After one complete growing season, the
Developer may request a release (partial or whole) of the aforementioned financial security;
provided, however, that the amount to be released (if any) shall be determined by the City in the
exercise of its reasonable judgment. If, in the reasonable judgment of the City, the landscaping has
survived one complete growing season, he City shall return the financial security to the Developer
on the first September 15 following the date that is the one-year anniversary of installation of all
landscaping required by the Final Plans, or, if the landscaping was installed after September 15 of
any given year, the date that is one year after the installation of all landscaping in accordance with
the Final Plans.
Section 3.2. No Warranty; Changes to Private Improvements. Approval of the Final
Plans, any portion thereof or any changes thereto by the City is not intended, nor shall it be
construed to be, a warranty or representation by the City as to: (i) the compliance of the Project
with any federal, state, or local statutes, regulations, or ordinances; (ii) the structural soundness of
the proposed Project; (iii) quality of materials; (iv) workmanship; or (v) the fitness of the Private
Improvements for their proposed uses.
(a) The Developer shall timely submit to the City Public Works Director for approval
any changes in the Final Plans. The City shall approve changes in the Final Plans
in writing if, in the reasonable judgment of the City the changed Final Plans: (i)
conform to the terms and conditions of this Agreement; (ii) conform to the
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specifications established by the City and the City Public Works Director; (iii)
conform to all applicable local laws, ordinances, rules and regulations; and (iv) the
construction sequencing is such that the City will be able to comply with its
obligations set forth herein. No approval by the City of changes to the Final Plans
shall relieve the Developer of the obligation to comply with all of the terms of this
Agreement. Any rejection by the City of any change requested shall set forth the
reasons therefor.
(b) For any changes requested for the Private Improvements, said improvements shall
not be constructed until the City has issued a written approval of any such
requested change to the Final Plans.
(c) The City may choose to waive this procedure in the future as to any change,
however, no such waiver shall be construed as a waiver of the City’s rights
pursuant to this Agreement or this section with respect to further changes
subsequent to any such waiver.
ARTICLE 4 - INDEMNIFICATION, RELEASE AND INSURANCE
Section 4.1. Indemnity. The Developer, the Developer’s contractors or subcontractors,
materialmen, and laborers, release and waive any claims of liability or responsibility in any way
against the City, the City Council, and its agents, consultants or employees, arising out of the
performance and completion of the Project provided for herein, except for any (i) breach by the
City of its obligations hereunder and (ii) negligence or intentional misconduct of the City or its
agents. Additionally, the Developer will unconditionally indemnify and hold the City harmless
from all such claims, demands, damages, actions or causes of actions or the cost of disbursement,
and expenses of defending the same, specifically including, without intending to limit the
categories of said costs, costs and expenses for City administrative time and labor, costs of
consulting engineering services and costs of legal services rendered in connection with defending
such claims as may be brought against the City, to the extent related to (a) breach by the Developer
of its obligations hereunder, or (b) negligence or misconduct of the Developer or its agents.
Section 4.2. Release and Waiver. The Developer agrees to rely entirely upon its own
property insurance for coverage with respect to any damage, loss or injury to the property interests
of the Developer in the Project or interests which may be exposed to damage, loss or injury in
connection therewith, except to the extent related to (a) breach by the City of its obligations
hereunder, or (b) negligence or misconduct of the City or its agents. Except as set forth in the
foregoing sentence, the Developer hereby releases the City, its officers, employees, agents, and
others acting on its behalf from all liability or responsibility to the Developer, and to anyone
claiming through or under the Developer, by way of subrogation or otherwise, for any loss of or
damage to the Developer’s business or property caused by fire or other peril or event to the extent
that such fire or other peril or event was covered by any type of real or personal property insurance,
including any indirect property insurance (such as business interruption coverage) in effect on the
date of the loss, even if such fire or other peril or event was caused in whole or in part by the
negligence or other act or omission of the City or other party who is to be released by the terms
hereof; or by anyone for whom such party may be responsible.
page 14
Section 4.3. Insurance. Except as is specifically provided to the contrary in the following
provisions of this Article, the Developer agrees to provide and maintain at all times the insurance
coverage set forth in this Section, and to otherwise comply with the provisions that follow.
a) Builders’ Risk. Builders’ Risk Insurance, written on a Completed Value coverage
form (non-reporting), in an amount equal to one hundred percent (100%) of the
insurable value of the Private Improvements at the date of completion. Such
coverage shall become effective concurrent with the beginning of the process of
construction, and shall continue until replaced by the permanent all risk Property
Insurance described below. Coverage shall be provided on an “all risk” basis.
b) General Liability. Occurrence-Based Commercial General Liability insurance,
providing coverage on an “occurrence”, rather than on a “claims made” basis,
which policy shall include coverage for the Completed Operations Hazard, and
which shall also include a Broad Form General Liability Endorsement GL 0404
(Insurance Services Office form designation), or an equivalent form (or forms), so
long as such equivalent form (or forms) affords coverage which is in all material
respects at least as broad.
The Developer agrees to maintain total liability policy limits of at least $1,500,000,
applying to liability for Bodily Injury, Personal Injury, and Property Damage,
which total limits may be satisfied by the limits afforded under its Occurrence-
Based Commercial General Liability Policy (which Policy is to include the Broad
Form Endorsement coverage specified above), or by such Policy in combination
with the limits afforded by an Umbrella Liability Policy (or policies); provided,
however, that the coverage afforded under any such Umbrella Liability Policy shall
be at least as broad as that afforded by the underlying Occurrence-Based
Commercial General Liability Policy (including Broad Form coverage).
Such Occurrence-Based Commercial General Liability Policy and Umbrella
Liability Policy (or policies) may provide aggregate limits for some or all of the
coverages afforded thereunder, so long as such aggregate limits have not, as of the
date of the Developer’s possession of the Property, been reduced to less than the
total required limits stated above, and further, that the Umbrella Liability Policy
provides coverage from the point that such aggregate limits in the underlying
Occurrence-Based Commercial General Liability Policy become reduced or
exhausted. An Umbrella Policy which “drops down” to respond immediately over
reduced underlying limits, or in place of exhausted underlying limits, but subject to
a deductible amount, shall be acceptable in this regard so long as such deductible
amount does not cause the Developer’s total deductible for each occurrence to
exceed the amount shown in the provision immediately below.
The Builders’ Risk and General Liability policies described in this Section shall
also name the City as an additional insured and permit waiver of claims in favor of
the City. Copies of all policy certificates must be provided to the City.
page 15
c) Property Insurance. All risk property insurance in an amount not less than the full
insurable replacement value of the Project. The term “full insurable replacement
value” shall mean the actual replacement cost of the Project (excluding foundation
and excavation costs and costs of underground flues, pipes, drains, and other items
customarily omitted from replacement cost valuation for insurance purposes),
without deduction for depreciation.
d) Insurers. All policies of insurance required under this Agreement shall be
maintained with financially sound and reputable insurers licensed to do business in
the State of Minnesota and as reasonably acceptable to the City. All policies of
insurance required under this Agreement shall be in form and content, and in all
other respects reasonably satisfactory to the City.
e) Non-Imputation. All covenants, stipulations, promises, agreements and obligations
of the City contained herein shall be deemed to be the covenants, stipulations,
promises, agreements and obligations of the City and not of any governing body
member, officer, agent, consultant or employee of the City, in their individual
capacity.
ARTICLE 5 - EVENTS OF DEFAULT
Section 5.1. Defined. The term “Event of Default” shall mean any failure by the
Developer or the City to observe or perform any covenant, condition, obligation or agreement on
its part to be observed or performed under this Agreement.
Section 5.2. Remedies. Whenever any party becomes aware of the occurrence of an Event
of Default, the non-defaulting party may, after providing twenty (20) days’ written notice to the
defaulting party of the Event of Default, but only if the Event of Default has not been cured within
said twenty (20) days or, if the Event of Default is by its nature incurable within twenty (20) days
and the defaulting party does not provide assurances reasonably satisfactory to the non-defaulting
party that the Event of Default will be cured as soon as reasonably possible, take whatever other
action permitted by law, including the termination of this Agreement and any other legal, equitable
or administrative action, which may appear necessary or desirable to cure any such Event of
Default or to enforce performance and observance of any obligation, agreement, or covenant under
this Agreement.
Section 5.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to
either party is intended to be exclusive of any other available remedy or remedies. Each and every
such remedy shall be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any remedy or power accruing upon any Event of Default shall impair any such remedy
or power or shall be construed to be a waiver thereof. Any such remedy and power may be
exercised from time to time and as often as may be deemed expedient. In order to entitle either
party to exercise any remedy reserved to it, it shall not be necessary to give notice, other than such
page 16
notice as may be required in this Section.
Section 5.4. No Additional Waiver Implied by One Waiver. In the event any Event of
Default is waived by the non-defaulting party, such waiver shall be limited to the particular Event
of Default so waived and shall not be deemed to waive any other concurrent, previous or
subsequent Event of Default hereunder.
ARTICLE 6 - ADDITIONAL PROVISIONS
Section 6.1. Conflicts of Interest; City Representatives Not Individually Liable.
No member, official or employee of the City shall have any personal interest, direct or
indirect, in this Agreement, nor shall any such member, official, or employee participate in
any decision relating to this Agreement which affects his/her personal interests or the
interests of any corporation, partnership, or association in which he/she is, directly or
indirectly, interested. No member, official, or employee of the City shall be personally liable
to the Developer, or any successor in interest, in the event of any default or breach by the
City or for any amount that may become due to the Developer or successor or on any
obligations under the terms of the Agreement.
Section 6.2. Provisions Not Merged with Deed. None of the provisions of this
Agreement are intended to or shall be merged because of any deed transferring any interest
in the Property. All such provisions shall survive any deed transferred in such a closing and
any such deed shall not be deemed to affect or impair the provisions and covenants of this
Agreement.
Section 6.3. City Approvals. The City’s roles in connection with zoning, building
code, and other governmental processes are independent of this Agreement, without
limitation of the consequences thereof, the approvals given by the City pursuant to such
governmental processes shall not be limited by any qualifications in this Agreement unless
otherwise provided for in this Agreement.
Section 6.4. Titles of Articles and Sections. Any titles of the several parts, Articles,
and Sections of the Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 6.5. Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand, or other communication under this Agreement by either party
to the other shall be sufficiently given or delivered upon receipt if personally delivered
(including electronic mail) or three (3) days after dispatched by U.S. registered or certified
mail, postage prepaid, return receipt requested; and
page 17
To Seller: City of Mendota Heights, Minnesota
1101 Victoria Curve
Mendota Heights, Minnesota 55118
Attn: Mark McNeill, City Administrator
[t] 651.452.1850
[e] markm@mendota-heights.com
To Buyer: MH Development LLC
c/o Grand Real Estate Advisors, LLC
90 Dale Street South
Saint Paul, Minnesota 55102
Attn: Judd Fenlon
[t] 651.492.1741
[e] jfenlon@grandrea.com
Section 6.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 6.7. Law Governing. This Agreement will be governed and construed in
accordance with the laws of Minnesota.
Section 6.8. Severability. If any provision of this Agreement is declared invalid, illegal
or otherwise unenforceable, that provision shall be deemed to have been severed from this
Agreement and the remainder of this Agreement shall otherwise remain in full force and effect.
Section 6.9. Complete Agreement. This Agreement is the complete agreement between
the parties hereto with respect to the matters addressed herein and shall, as of the Effective Date
supersede all prior agreements related thereto, both oral and written. Any amendments hereto
shall be effective upon written consent of both the Developer, its successors and assigns, and the
City.
Section 6.10. Successors. This Agreement shall be binding upon the successors, heirs,
and assigns of the Developer and the City. The City’s written consent shall be required for any
proposed assignment of this Agreement by the Developer.
Section 6.11. Authority. Each of the undersigned parties warrants that it has full
authority to execute this Agreement, and each individual signing this Agreement on behalf of a
company hereby warrants that he or she has full authority to sign on behalf of the company that
he or she represents and to bind such company thereby.
Section 6.12. Recording. This Agreement shall be promptly recorded by the Developer
against the Property, at no cost to the City.
Section 6.13. Partial Termination of Agreement. Upon completion of the Project and
issuance of all City-required building permits, the Developer may request the City to partially
terminate this Agreement as it relates to the foregoing. Any partial termination of this Agreement
by the City shall not terminate the continuing obligations of the parties to this Agreement. Upon
completion of the Project, as evidenced by a final certificate of occupancy for both the residential
and commercial components of the Project, this Agreement shall terminate automatically and
without further action by either party, provided, however, that: (a) the provisions of Section
2.2(f) and Section 3.1, regarding landscaping, shall continue during the warranty period as
provided therein, and (b) the provisions of Sections 4.1 and 4.2 regarding indemnification and
page 18
liability shall survive any termination of this Agreement; and (c) any provisions regarding
financial obligations, including return of financial security, shall survive any termination of this
Agreement. Upon request, the City and the Developer shall enter into a written, recordable
agreement evidencing such termination, which may be recorded by and at the expense of the
requesting party.
[REMAINDER OF PAGE LEFT BLANK]
page 19
IN WITNESS WHEREOF, the City and the Developer have caused this DEVELOPER’S
AGREEMENT to be duly executed on the date and year first above written.
MH DEVELOPMENT LLC
Date:
By: Judd Fenlon, Manager, President and CEO
STATE OF MINNESOTA )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of __________________, 2020, by
Judd Fenlon, the Manager, President and CEO of MH Development LLC, a Minnesota limited liability
company, on behalf of such company.
Notary Public
page 20
Signature page of the City.
CITY OF MENDOTA HEIGHTS, MINNESOTA
Neil Garlock, Mayor
Date:
Lorri Smith, City Clerk
STATE OF MINNESOTA )
) ss.
COUNTY OF DAKOTA )
The foregoing instrument was acknowledged before me this ____ day of __________________, 2020, by
Neil Garlock and Lorri Smith, the Mayor and the City Clerk, respectively, of the City of Mendota Heights,
a Minnesota municipal corporation and political subdivision, on behalf of such city.
Notary Public
page 21
EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY
Lot 1, Block 2, Mendota Heights Town Center, Dakota County, Minnesota.
Lot 1, Block 3, Mendota Heights Town Center, Dakota County, Minnesota.
Lot 2, Block 3, Mendota Heights Town Center, Dakota County, Minnesota.
Outlot D, Mendota Heights Town Center, Dakota County, Minnesota.
page 22
EXHIBIT B
CITY COUNCIL RESOLUTION NO. 2020-14
page 23
EXHIBIT C
FINAL PLANS
page 24
THIRD AMENDMENT TO REAL ESTATE PURCHASE AGREEMENT
AND ESCROW AGREEMENT
This Third Amendment to Real Estate Purchase Agreement and Escrow Agreement (the
“Amendment”) is entered into by and between the CITY OF MENDOTA HEIGHTS,
MINNESOTA, a municipal corporation and political subdivision under the laws of the State of
Minnesota (the “Seller”) and MH DEVELOPMENT LLC, a Minnesota limited liability company
(the “Buyer”), and LAND TITLE, INC., a Minnesota corporation, effective as of the ___ day of
July, 2020.
A. The parties hereto have previously entered into a Real Estate Purchase
Agreement, dated as of August 20, 2019 (as thereafter and hereby amended, the “Agreement”),
in which the Seller has agreed to sell and the Buyer has agreed to buy real property located in
“the Village at Mendota Heights” development consisting of 2.70 acres, legally described as Lot
1, Block 2, Lot 1, Block 3, Lot 2, Block 3, and Outlot D, all in the Mendota Heights Town Center
plat, Dakota County, Minnesota.
B. The parties have determined that a portion of Outlot D, which is depicted as
“Outlot A” on the plat of Mendota Heights Senior Living attached hereto as Exhibit A (“Outlot A”),
shall be retained by the City for open space, utility and trail uses, and such other public uses as
the City shall deem appropriate.
C. The plat of Mendota Heights Senior Living (the “Senior Plat”) has not yet been
recorded, but the parties wish to close on the acquisition by Buyer as contemplated by the
Agreement, and accommodate conveyance of Outlot A to the City following recording of the
Senior Plat, as more fully set forth herein.
D. All capitalized but undefined terms in this Amendment shall have the same
defined terms as provided in the Agreement.
In consideration of the foregoing and of the following terms and conditions, the parties
agree as follows:
1. Property. At Closing, Seller shall convey the Property to Buyer, as set forth in
the Agreement. At Closing, Buyer shall place into escrow with Land Title, Inc.: (a) a quit claim
deed, conveying Outlot A to the City, and (b) a partial release of mortgage, releasing Outlot A
from the lien of the mortgage granted on the Property by Buyer. Buyer shall use reasonable
efforts to obtain approval of and record the Senior Plat in a timely manner following Closing, and
upon such recording of the Senior Plat, Land Title, Inc. shall record said deed and partial
release. Seller shall use its best efforts to cooperate with Buyer’s efforts to obtain timely
approval of and to record the Senior Plat.
2. No Other Amendments. Other than as described in this Amendment, the
Agreement remains in full force and effect. Any future amendments to the Agreement must be
agreed to in writing by the parties hereto. This Amendment may be executed in counterparts,
with each counterpart consisting of an original document.
[signatures on following page]
page 25
THIRD AMENDMENT TO REAL ESTATE PURCHASE AGREEMENT
AND ESCROW AGREEMENT
Buyer and Seller have executed this Third Amendment to Real Estate Purchase
Agreement and Escrow Agreement.
BUYER:
MH Development LLC
By:_____________________________
Name: Judd Fenlon_______________
Its: ____Chief Manger__________________
SELLER:
CITY OF MENDOTA HEIGHTS, MINNESOTA
By:_____________________________
Name: Neil Garlock________________
Its: Mayor_______________________
By:_____________________________
Name: Lorri Smith________________
Its: City Clerk_______________________
ESCROW AGENT:
LAND TITLE, INC.
By:_____________________________
Name: _________________________
Its: ____________________________
page 26
TRAIL AND UTILITY
EASEMENT AND MAINTENANCE AGREEMENT
This Trail and Utility Easement and Maintenance Agreement (“Agreement”) is entered
into this ___ day of _____________, 2020, by and between MH Development LLC, a Minnesota
limited liability company (“Owner”) and The City of Mendota Heights, a Minnesota municipal
corporation and political subdivision (“City”).
WHEREAS, Owner is the fee owner of certain real property (the “Property”) legally described
as:
Lot 1, Block 2, Mendota Heights Senior Living, according to the recorded plat
thereof, Dakota County, Minnesota;
WHEREAS, the Property is being developed by Owner as a part of a senior housing and
commercial development to be known as “Mendota Heights Senior Living,” which development
shall consist of senior rental apartments and a sit-down café/restaurant; and
WHEREAS, as a condition of the City's approval for development of the Property, the Owner
agreed to grant a non-exclusive permanent easement (the “Trail Easement”) for trail, walkway
and access purposes over, under and across a portion of the Property, as shown on Exhibit A
attached hereto (the “Trail Easement Area”); and
WHEREAS, as a condition of the City's approval for development of the Property, the Owner
agreed to grant a non-exclusive permanent easement (the “Utility Easement,” and together with
the Trail Easement, the “Easement”) for utility purposes over, under and across a portion of the
Property, as shown on Exhibit B attached hereto (the “Utility Easement Area,” and together with
the Trail Easement Area, the “Easement Area”); and
WHEREAS, the City shall be responsible for certain maintenance obligations with respect to the
Easement Area and the trail and utility improvements existing therein, which were previously
constructed by the City (the “Improvements”).
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the City and Owner, it is agreed as follows:
1. Trail Easement. Owner hereby grants and conveys unto City, for the benefit of
the public, a permanent, non-exclusive easement for trail, walkway and access purposes over,
under and across the Trail Easement Area. Owner shall not perform, permit, allow or cause the
construction of any improvement on the Trail Easement Area that obstructs the use or enjoyment
by the City of the Trail Easement. Owner agrees to provide the City reasonable access to the
page 27
Trail Easement Area over any private driveway, road, or parking lot that may be located on the
Property from time to time. A portion of the Trail Easement Area is subject to that certain Trail
Easement, recorded as Document No. 3183737 with the County Recorder of Dakota County,
Minnesota (the “Existing Easement”). This Agreement supplements and amends the Existing
Easement. All terms and conditions of this Agreement shall be deemed to apply to the Existing
Easement, including but not limited to all provisions related to use, maintenance, repair,
replacement, insurance, and liability.
2. Utility Easement. Owner hereby grants and conveys unto City, for the benefit of
the public, a permanent, non-exclusive easement for storm sewer utility purposes over, under and
across the Utility Easement Area. Owner shall not perform, permit, allow or cause the
construction of any improvement on the Utility Easement Area that obstructs the use or
enjoyment by the City of the Utility Easement. Owner agrees to provide the City reasonable
access to the Utility Easement Area over any private driveway, road, or parking lot that may be
located on the Property from time to time.
3. Maintenance. The City shall be solely responsible for maintenance, repair and
replacement of the Easement Area, including all Improvements. Without limiting the generality
of the foregoing, such maintenance, repair and replacement shall include: pavement preservation
and replacement, including periodic inspections and preventative maintenance consistent with
industry standards and the product or manufacturer's specifications and recommendations;
regular cleaning, including thorough cleaning of the trail every spring and fall and as needed
throughout the year, and including removing items such as sand, debris, litter and leaf collection
by way of sweeping, vacuuming, or other means necessary to clean the trail; snow removal and
ice control consistent with the snow and ice control being conducted for the Mendota Heights
Senior Living development; and landscaping, including maintenance and replacement of any
vegetation, landscaping, or trees within the Easement Area. Owner shall have no responsibility
or liability for any damages, claims, losses or causes of action related to maintenance, repair,
replacement or use of the Easement Area by the City or any member of the public, except to the
extent caused by the gross negligence or willful misconduct of Owner or its agents.
4. Failure to Perform. The failure by either party to observe and perform any
covenant, condition or obligation on its part to be observed or performed under this Agreement,
which continues for ten business days following written notice from the non-defaulting party,
shall be an “Event of Default” under this Agreement. Upon an Event of Default, the non-
defaulting party shall be entitled to all remedies available at law or in equity. Without limiting
the foregoing, with respect to an Event of Default relating to maintenance, repair or replacement
of the Easement Area, Owner may perform any or all of such work and the City shall promptly
reimburse Owner for any reasonable cost incurred with respect to such work, upon receipt of a
written invoice from the Owner.
5. Insurance. Each party shall defend and hold the other party and its respective
officers, agents, and employees harmless from any claims made by itself and/or third parties,
including but not limited to tenants, contractors, subcontractors, and materialmen, for damages
sustained, costs incurred, or injuries on or relating to the Easement Area or this Agreement, to
the extent arising from the negligence, misconduct or violation of this Agreement or applicable
laws. The obligations set forth in this Section shall survive any termination of this Agreement.
Each party shall maintain commercial general liability insurance in an amount of not less than
page 28
$1,500,000 per occurrence and $2,000,000 aggregate, covering such losses within or related to
the Property and Easement Area.
6. Duration. The easement rights and obligations set forth herein shall be perpetual
unless terminated by the mutual written consent of the parties hereto, or their successors in
interest.
7. Miscellaneous.
a. Amendment and Waiver. This Agreement may not be modified, waived or
terminated except pursuant to an instrument in writing signed by the parties
hereto, or their successors or assigns in interest. The action or inaction of any
party shall not constitute a waiver or amendment to the provisions of this
Agreement or a waiver of any rights granted hereunder. Any party's failure to
promptly take legal action to enforce this Agreement shall not be a waiver,
revocation or release hereunder.
b. Covenants Run With Land. The terms and provisions of this Agreement shall run
with the Property, and shall be binding upon and inure to the benefit of the City
and the Owner, and their respective successors and assigns.
c. Not a Public Dedication. Nothing herein contained shall be deemed to be a gift or
dedication of all or any portion of the Easement Area to the general public, except
to the extent the Easement Area shall be open and available for the purposes set
forth herein.
d. Severability. If any term of this Agreement or any application thereof is invalid or
unenforceable, the remainder of the Agreement and any other application of such
term shall not be affected thereby.
e. Exhibits. All exhibits referred to herein and attached hereto shall be deemed part
of the Agreement.
f. Counterparts. This document may be executed and acknowledged in counterparts,
all of which executed and acknowledged counterparts shall together constitute a
single document. Signature and acknowledgment pages may be detached from the
counterparts and attached to a single copy of this document to physically form
one document, which may be recorded.
SIGNATURES APPEAR ON FOLLOWING PAGE
page 29
SIGNATURE PAGE TO
TRAIL AND UTILITY
EASEMENT AND MAINTENANCE AGREEMENT
STATE DEED TAX DUE HEREON: NONE
MH DEVELOPMENT LLC
By: _____________________________________
Judd Fenlon, Manager, President and CEO
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this ________ day of ______________, 2020 by
Judd Fenlon, Manager, President and CEO of MH Development LLC, a Minnesota limited liability company,
on behalf of the company.
NOTARY STAMP OR SEAL
______________________________
Notary Public
CITY OF MENDOTA HEIGHTS:
Neil Garlock, Mayor
Lorri Smith, City Clerk
STATE OF MINNESOTA )
) ss.
COUNTY OF DAKOTA )
The foregoing instrument was acknowledged before me this ____ day of _______________, 2020,
by Neil Garlock and Lorri Smith, the Mayor and the City Clerk, respectively, of the City of Mendota
Heights, a Minnesota municipal corporation and political subdivision, on behalf of such city.
Notary Public
THIS INSTRUMENT DRAFTED BY:
Hoagland Law, PLLC
P.O. Box 692514
Orlando, FL 32869
page 30
DATE: July 27, 2020
TO: Mayor and City Council
FROM: Kristen Schabacker, Finance Director
Mark McNeill, City Administrator
SUBJECT: Conduit Debt Issuance
Comment:
Introduction:
The Council is asked to indicate whether it is interested in issuing conduit debt on behalf of a non-profit
entity with no direct ties to Mendota Heights.
Background:
Conduit debt is when cities issue tax exempt financing on behalf of 501 c.3 non-profits—schools, health
care providers, and certain types of housing agencies. In order to retain its tax-exempt status, the IRS
limits a city to the issuance of no more than $10 million in debt annually for itself, and in combination
with others.
Bond counsels occasionally approach cities which are not anticipated to fully utilize their issuance
allotment, to see if they will issue such debt on behalf of their clients. When this arrangement is made,
the non-profit will see significant savings in interest rates on borrowed monies as a result.
A firm acting on behalf of a non-profit health care agency (Augustana Regent LLC, of Burnsville) has
recently inquired as to whether Mendota Heights would be interested. Augustana has asked to have the
City issue approximately $1 million on their behalf.
In 2016, the City of Mendota Heights revised its policy on the issuance of conduit debt. It adjusted its
required fees to make certain that the city’s costs would be covered. In addition to an application fee of
$2500, the City would require the reimbursement of any out of pocket fees, such as legal or financial
costs.
However, the City would also receive the greater of $10,000, or one half of 1% of the par value of the
bonds. This fee is meant to cover any ancillary costs of the City, such as if the issuer is audited at some
point in the future. In general, however, that amount is more than sufficient to cover city expenses. This
issuance also does not affect the City’s credit rating.
Question for the Council:
The City has issued conduit debt on behalf of local private schools previously. In exchange for the
financial fees, is this Council agreeable to issuing conduit debt on behalf of this non-profit?
page 31
If so, the City Council would be asked to call for a Public Hearing for probably the second meeting of
August. Calling for the Public Hearing would take place as a consent agenda item at the August 4th
meeting.
Recommendation:
There is little downside, and at least a modest financial benefit to the City to do issue the conduit debt,
As such, we recommend approval.
Action Required:
If the Council concurs, it should direct staff to work with the attorney for Augustana Regent LLC to call
for a Public Hearing for the issuance of conduit debt bonds.
Kristen Schabacker Mark McNeill
Finance Director City Administrator
page 32
July 23, 2020
BY E-MAIL
Mark McNeill
City of Mendota Heights
1101 Victoria Curve
Mendota Heights, MN 55118-4106
Re: Issuance of Conduit Revenue Notes by the City of Mendota Heights for
Augustana Regent
Dear Mr. McNeill:
This letter is in follow-up to a conversation that I had with Kristen Schabacker related to
a request that the City of Mendota Heights has received from Augustana Regent at Burnsville,
LLC, a Minnesota limited liability company (the “Borrower”), the sole member of which is
Augustana Care, a Minnesota nonprofit corporation and 501(c)(3) organization, the sole member
of which is Cassia, a Minnesota nonprofit corporation and 501(c)(3) organization, regarding
consideration by the City to act as an issuer of 501(c)(3) revenue obligations (the “Notes”) in an
amount of approximately $1,000,000. The proceeds of the Notes would be loaned to the
Borrower to be used to refinance, in part, the acquisition of The Regent, an approximately 148-
unit senior housing facility, including independent living units, assisted living units, and
memory care units, located in the City of Burnsville (the "Project"). The Cities of Hampton and
Landfall Village will act as the other issuers of the remaining amount (approximately
$10,000,000 each) needed to refinance the Project in full. Mendota Heights, Hampton, and
Landfall Village are referred to collectively in this letter as the “Issuers.” Taft Stettinius &
Hollister LLP, formerly known as Briggs and Morgan, Professional Association, will act as bond
counsel on the issuance of such Notes. The Notes are expected to be purchased directly by
Bremer Bank, National Association (the “Lender”).
State and federal laws allow local government units to enter into arrangements to issue
tax-exempt obligations and loan the proceeds to nonprofit corporations to finance capital
expenditures. This assistance reduces borrowing costs for nonprofit corporations and enables
them to provide their services more cost effectively. It is a fairly common means of obtaining
necessary financing for all nonprofit entities, including senior housing and health care providers
like the Borrower.
page 33
To accomplish this purpose, the Issuers will enter into Loan Agreements with the
Borrower under which the Borrower will agree to pay all principal and interest on the Notes.
The Issuers will assign all of their rights to payments under the Loan Agreements the Lender,
who will purchase the Notes and loan the purchase price of the Notes directly to the Borrower.
The Issuers are merely a conduit and the money and obligations flow only between the Lender
and the Borrower.
The Notes and the resolutions adopted by the Issuers will recite that the Notes, if and
when issued, will not to be payable from or charged upon any of the Issuers’ funds, other than
the revenues received under the Loan Agreements and pledged to the payment of the Notes, and
the Issuers are not subject to any liability on the Notes. No holder of the Notes will ever have
the right to compel any exercise by the Issuers of their taxing powers to pay any of the principal
of the Notes or the interest or premium thereon, or to enforce payment of the Notes against any
property of the Issuers except the interests of the Issuers in payments to be made by the
Borrower under the Loan Agreements. The Notes will not constitute a charge, lien, or
encumbrance, legal or equitable, upon any property of the Issuers, except the interests of the
Issuers in payments to be made by the Borrower under the Loan Agreements. The Notes are not
moral obligations on the part of the State or its political subdivisions, including the Issuers, and
the Notes will not constitute a debt of the Issuers within the meaning of any constitutional or
statutory limitation.
The issuance of the Notes will not affect the Issuers’ credit rating on bonds they issue for
municipal purposes.
Each city may issue up to $10,000,000 of its own and 501(c)(3) bonds each calendar year
as “bank-qualified” bonds, which is the type of obligation that the Lender wishes to acquire.
Because the total cost of the financing is approximately $21,000,000 and Burnsville has its own
bond issuance of $18,000,000 planned for 2020, Burnsville cannot issue bank-qualified debt for
the benefit of the Borrower. Therefore, other cities are being sought to act as the issuers for the
Notes. Under the federal tax law, alternative issuers are permitted, but a “nexus” between the
jurisdictional city and the issuer is preferred. In this case, Mendota Heights has geographical
proximity to Burnsville and is within the market area for the Project. Mendota Heights’ residents
could be potential beneficiaries of the Project, either as employees or future residents of the
Project.
The Notes will affect the bank-qualified status of any of the City's tax-exempt obligations
issued for its own governmental purposes in 2020. It is our understanding that the City does
currently expect to issue bonds for its own purposes in 2020, but that it would be able to issue the
necessary amount to fill the difference between the $20,000,000 that will be issued by Hampton
and Landfall Village and the total amount of the debt, which is currently expected to be
approximately $21,000,000. It should be noted that the proposed amendments to the 2010 notes
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for St. Thomas Academy have no bearing on the City’s bank-qualification capacity. The Notes
will not affect the bank-qualified status of tax-exempt obligations in future years.
The Notes will be issued in accordance with Minnesota Statutes, Chapter 462C. A city
may not issue bonds for a project located outside of its jurisdiction, as is requested in this case.
However, the city in which a project is located may give permission for the issuance of bonds by
another city. This is commonly referred to as “ host approval.” Under Minnesota Statutes,
Section 471.656, subdivision 2(2), host approval may be given for a project located in the host
city, by resolution of the host city. Burnsville, as the host city, will give permission to Mendota
Heights (and the other Issuers) to issue its Notes. In addition, the Issuers and Burnsville will
enter into a joint powers agreement for the purpose of issuing the Notes.
Similarly, under the federal tax code, before a city can issue bonds for a project located
outside of its jurisdiction, the host city must give its approval. Such approval can only be given
following the holding of a public hearing.
As noted above, under federal and State law, in order for the Notes to be a tax exempt
obligation, they must be issued by a political subdivision. This requires that the City hold a
public hearing and approve issuance of the Notes and approve the execution of related
documents. If the City is willing to act as a conduit issuer for the Borrower, we propose that the
City adopt a resolution at its August 4th meeting (which we will prepare) that calls for that public
hearing. We will also prepare and take care of submitting the public hearing notice to the City’s
official newspaper.
Following the public hearing, the City Council would then consider for adoption a
resolution approving the issuance of the Notes.
We understand that the City has a $2,500 application fee and an issuer’s fee that is the
greater of $10,000 or ½ of 1% of the principal amount of the Notes issued by the City. In
addition, you should be aware that the Borrower is responsible for paying all costs of the
transaction. There will be no costs paid by the City.
I understand that the City Council is having a special meeting on July 27th, at which time
you will present this request to the Council to discuss whether it is willing for the City to act as
an issuer for the Borrower.
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Thank you for considering this request on behalf of Augustana. Please feel free to
contact me if you have any questions or comments.
Very truly yours,
Catherine J. Courtney
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