HomeMy WebLinkAbout10.F.1. Shutterfly Subordination Agreement CITY OF SHAKOPEE
Memorandum
TO: Mayor and City Council
FROM: Mark McNeill, City Administrator
SUBJECT: Shutterfly Subordination Agreement
DATE: September 17, 2013
Comment:
ACTION SOUGHT:
For the Council to approve a resolution entering into a Subordination Agreement with Ryan Companies,
relating to the Shutterfly project.
BACKGROUND:
As part of the Master Development Agreement for Dean Lakes, the City agreed to subordinate (in other
words,take a second position)to any bank that provided financing for a particular development.
Without this Subordination Agreement, it would be difficult, if not impossible, for private developers to
obtain financing. Ryan/Dean Lakes, or subsequent secondary developers, continue to pay all special
assessments related to the Dean Lakes properties. The Subordination Agreement does not relate to the
City's ability to collect special assessments levied against the property upon which the Shutterfly project
will be built.
Ryan Companies, the company which will build and own the building in which Shutterfly will be
housed, has asked the City to agree to execute the Subordination Agreement, so that financing may be
obtained.
The applicable section of the Master Redevelopment Agreement states the following:
Section 7.2 Modification; Subordination. In order to facilitate the Developer or any individual
Developer obtaining financing for the development of any Individual Improvements, the City
agrees to subordinate its rights under this Agreement to the Holder of a Mortgage securing
construction or permanent financing, under terms and conditions reasonably acceptable to the
Authority,provided that if any Individual Development Agreement requires execution of an
assessment agreement pursuant to Minnesota Statutes, Section 469.177, Subd. 8, in no event with
the City's rights under that assessment agreement be subordinated to any Mortgage.
City Attorney Julie Eddington states that the actual subordination will not be a problem for the City, as
Shutterfly will not be receiving any of the "Individual Developer" subsidies provided in the Master
Development Contract and the City has previously agreed to Shutterfly's development. In addition,
special assessments are already assessed against the Shutterfly property, and Ryan will continue to pay
these. In her opinion, the City has obligated itself to provide a subordination and providing the
subordination will not have a significant impact on the City with respect to this property. The
subordination would be only for the Shutterfly property.
RECOMMENDATION:
In order for the City to facilitate Shutterfly financing, the City should agree to the Subordination
Agreement.
BUDGET IMPACT:
There is no direct additional cost to the City.
RELATIONSHIP TO VISIONING:
This supports Goal B, "Positively manage the challenges and opportunities present by growth,
development and change."
ACTION REOUIRED:
If the Council concurs, it should, by motion, adopt the following resolution number 7364:
RESOLUTION APPROVING SUBORDINATION AGREEMENT AND AUTHORIZING THE
EXECUTION AND DELIVERY OF THE SUBORDINATION AGREEMENT AND A
CERTIFICATION LETTER TO DEAN LAKES I,LLC
U V& AX-(lU,c^o
Mark McNeill
MM:en City Administrator
CITY OF SHAKOPEE,MINNESOTA
RESOLUTION NO.7364
RESOLUTION APPROVING SUBORDINATION AGREEMENT AND AUTHORIZING THE
EXECUTION AND DELIVERY OF THE SUBORDINATION AGREEMENT AND A
CERTIFICATION LETTER TO DEAN LAKES I,LLC
WHEREAS, the City of Shakopee, Minnesota (the "City") and Ryan Companies US, Inc., a
Minnesota corporation ("Ryan"), are parties to (i)that certain Planned Unit Development Agreement for
Dean Lakes Project, dated December 26, 2003 (the "PUD Agreement"); (ii)that certain Dean Lakes First
Addition Master Development Agreement, dated December 9, 2003 (the "Master Development
Agreement"); (iii) that certain Developer's Agreement, dated May 11, 2004 (the "First Developer's
Agreement"); (iv) that certain Developer's Agreement, dated September 1, 2004 (the "Second
Developer's Agreement"); (v) that certain Developer's Agreement, dated January 6, 2006 (the "Third
Developer's Agreement"); and (vi) that certain Developer's Agreement, dated December 27, 2006 (the
"Fourth Developer's Agreement," and collectively with the PUD Agreement, the Master Development
Agreement, the First Developer's Agreement,the Second Developer's Agreement,the Third Developer's
Agreement,the"Development Agreement"),covering certain real property owned by Dean Lakes I,LLC,
a Minnesota limited liability company(the`Borrower"), located in the City(the"Property"); and
WHEREAS, pursuant to a Construction Loan Agreement, dated September 6, 2013 (the "Loan
Agreement"),between the Borrower,as successor in interest to Ryan's fee title ownership of the Property,the
Lender agreed to make a construction loan to the Borrower in the maximum principal amount of$21,344,420
(the"Loan"),to facilitate development of the Property;and
WHEREAS, as a condition to making the Loan to the Borrower, the Lender requires that the City
subordinate its interest in the Development Agreement to the Lender;and
WHEREAS, there has been presented before the City Council a form of Subordination Agreement
proposed to be delivered by the City to the Lender (the "Subordination Agreement") and a form of
certification letter proposed to be delivered by the City to the Borrower certifying, among other things, that
the Development Agreement and other documents named therein are in full force and effect, that the City is
not aware of any defaults existing except those set forth therein, and that Ryan and the Property are in
compliance with the Development Agreement(the"Certification Letter").
NOW,THEREFORE, BE IT RESOLVED by the City Council of the City of Shakopee, Minnesota
as follows:
1. The Subordination Agreement and the Certification Letter are hereby in all respects
authorized, approved, and confirmed and the Mayor and City Administrator are hereby authorized and
directed to execute and deliver the Subordination Agreement and the Certification Letter for and on behalf of
the City in substantially the form now on file with the City but with such modifications as shall be deemed
necessary, desirable or appropriate, their execution thereof to constitute such conclusive evidence of their
approval of any and all modifications therein.
2. This resolution is effective upon the date of its adoption.
Approved by the City Council of the City of Shakopee, Minnesota this 17`" day of September,
2013.
Mayor
ATTEST:
Finance Director/City Clerk
431992v1 JAE SH155-316 2
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is made as of this _ day of
, 2013, by the CITY OF SHAKOPEE, a Minnesota municipal corporation
("City"), in favor of U.S. BANK NATIONAL ASSOCIATION, a national banking association
("Lender").
RECITALS
A. The City and Ryan Companies US, Inc., a Minnesota corporation ("Ryan") are
parties to the following agreements: (i) that certain Planned Unit Development Agreement for
Dean Lakes Project dated December 26, 2003, filed January 22, 2004, as Document No.
T153920 (the "PUD Agreement"); (ii) that certain Dean Lakes First Addition Master
Development Agreement dated December 9, 2003, filed June 3, 2004, as Document No.
T157652 (the "Master Development Agreement"); (iii)that certain Developer's Agreement dated
May 11, 2004, filed June 3, 2004, as Document No. T157653 (the "First Developer's
Agreement"); (iv) that certain Developer's Agreement dated September 1, 2004, filed September
13, 2004, as Document No. T160613 (the "Second Developer's Agreement"); (v) that certain
Developer's Agreement dated January 6, 2006 filed July 13, 2006, as Document No. T178018
(the "Third Developer's Agreement"); and (vi) that certain Developer's Agreement dated
December 27, 2006, filed November 15, 2007, as Document No. T187463 (the "Fourth
Developer's Agreement"; the PUD Agreement, the Master Development Agreement, the First
Developer's Agreement, the Second Developer's Agreement, the Third Developer's Agreement
and the Fourth Developer's Agreement are collectively, the "Development Agreement").
B. The Development Agreement covers, among other real property, certain real
property owned by Dean Lakes 1, LLC, a Minnesota limited liability company (`Borrower"),
located in Scott County, Minnesota, and legally described on Exhibit A attached hereto (the
"Property").
C. Pursuant to a certain Construction Loan Agreement between Borrower (the
successor in interest to Ryan's fee title ownership of the Property), and Lender dated September
6, 2013 (the "Loan Agreement"), Lender has agreed to make a construction loan to Borrower in
the original principal amount of up to $21,344,420 (the "Loan") to finance a portion of the costs
-1-
of acquiring the Property and certain improvements to be made by Borrower on a portion of the
Property. The Loan is evidenced by the Promissory Note dated September 6, 2013, executed and
delivered by Borrower to the order of Lender in the amount of$21,344,420 (the "Note").
D. The Note is secured by, among other things, that certain Mortgage, Security
Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated September
6, 2013, recorded September , 2013 as Document No. , which encumbers the
Property (as such mortgage may be amended, the "Mortgage"; the Loan Agreement, the Note,
the Mortgage and any other document evidencing and/or securing the Loan are hereafter the
"Loan Documents").
E. As a condition to making the Loan available to Borrower, Lender requires that
City enter into this Agreement.
F. City understands that Borrower requires the proceeds of the Loan in order to
finance the development of the Property and to perform certain of its other obligations under the
Development Agreement.
NOW THEREFORE, in order to induce Lender to make the Loan to Borrower, Lender
and City hereby agree as follows:
1. Defined Terms. Unless the context otherwise provides, each capitalized term not
defined herein shall have the meaning therefor specified in the Development Agreement.
2. Subordination. City agrees that City's interest in the Property, including but not
limited to City's interest in or pursuant to the Development Agreement, the obligations of Ryan
and Borrower to City contained therein and the rights and liens of City contained therein, are
subordinate to the lien of the Mortgage and the other Loan Documents and any amendments,
modifications and replacements thereof, notwithstanding the order of recording or any other
priority requirements which may otherwise exist. Lender agrees, however, that without the prior
written consent of the City, Lender will not increase the indebtedness secured by the Loan
Documents (other than optional advances as provided under the Loan Documents to protect
Lender's interest therein including, without limitation, advances for payment of taxes and
assessments, insurance premiums, discharge of liens and repair and maintenance expenses). No
other amendment or modification of any Loan Document nor any waiver by Lender of any
obligations of Borrower contained therein shall require the consent of the City.
City further agrees that, unless Lender or its successors or assigns expressly agree in
writing to assume and perform Ryan's or Borrower's obligations under the Development
Agreement, neither the Development Agreement nor any provision thereof, shall be a personal
obligation of Lender or its successors or assigns. In the event Lender or its successors or assigns
assume in writing any of the obligations of Ryan or Borrower under the Development
Agreement, Lender shall nonetheless not be liable for any then existing defaults of Ryan or
Borrower, any misrepresentations of Ryan or Borrower or any breaches of any covenant,
agreement or indemnification of Ryan or Borrower which occurred prior to the date on which
Lender or such successor or assign acquires title to the Property.
-2-
3. Improvements. Neither Lender nor its successors or assigns shall be obligated to
construct or complete (i) any Individual Improvements (as defined in the Master Development
Agreement) on the Property pursuant to the Master Development Agreement; (ii) any Essential
Improvements (as defined in the PUD Agreement) on the Property pursuant to the PUD
Agreement; (ii) any Plan A Improvements and/or Plan B Improvements (as defined in the First
Developer's Agreement, Second Developer's Agreement, Third Developer's Agreement and
Fourth Developer's Agreement). In the event, however, that Lender or its successors or assigns
acquires any portion of the Property by foreclosure or deed in lieu of foreclosure, the City
acknowledges and agrees that, upon substantial completion of the related portion of any
Individual Improvements, any Essential Improvements and/or any Plan A Improvements or Plan
B Improvements, Lender shall be entitled to seek from the City a Certificate of Completion for
such completed portion of the Individual Improvements, Essential Improvements, Plan A
Improvements and/or Plan B Improvements under the terms set forth in Section 4.6(c) of the
Master Development Agreement and Section 18.11 of the PUD Agreement.
4. Insurance and Condemnation Proceeds. City acknowledges that the rights of the
City with respect to the receipt and application of any insurance proceeds or condemnation
awards affecting the Property shall, in all respects, be subject to the rights of the Lender under
the Mortgage.
5. Notice to City. Lender agrees to use commercially reasonable efforts to send City
a copy of any written notice of default sent by Lender to Borrower relating to the Loan
Documents.
6. Miscellaneous.
6.1 City acknowledges that Lender is not a party to the Development
Agreement and that this Agreement constitutes the entire agreement between City and the
Lender with respect to the Development Agreement, and that this Agreement may be
amended only in a writing executed by City and Lender.
6.2 This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties hereto and
their respective successors and assigns, including any subsequent holder of the Mortgage.
6.3 Any notices and other communications permitted or required by the
provisions of this Agreement (except for telephonic notices expressly permitted) shall be
in writing and shall be deemed to have been properly given or served by (i) personal
delivery, (ii) depositing the same with the United States Postal Service, or any official
successor thereto, designated as Certified Mail, Return Receipt Requested, bearing
adequate postage, or (iii) depositing the same with a reputable private courier or
overnight delivery service, in each case addressed as hereinafter provided. Each such
notice shall be effective upon (a) immediately upon personal delivery, (b) three (3) days
after being deposited in the U.S. Mail, or (c) one (1) Business Day after being deposited
with such courier service. The time period within which a response to any such notice
must be given, however shall commence to run from the date of receipt of the notice by
the addressee thereof. Rejection or other refusal to accept or the inability to deliver
-3-
because of changed address of which no notice was given shall be deemed to be receipt
of the notice sent. By giving to the other party hereto at least ten (10) days' notice
thereof, either party hereto shall have the right from time to time to change its address
and shall have the right to specify as its address any other address within the United
States of America:
To City: City of Shakopee
129 Holmes Street South
Shakopee, MN 55379-1328
Attention: Mark McNeill, City Manager
With a copy of any notice to City to:
Kennedy & Graven, Chartered
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, MN 55402-1458
Attention: Julie Eddington, Esq.
To Lender: U.S. Bank National Association
U.S. Bancorp Center
800 Nicollet Mall, 3rd Floor
BC-MN-H03A
Minneapolis, Minnesota 55402-7020
Attention: Real Estate Banking Division
With a copy of any notice to Lender to:
Fabyanske, Westra, Hart& Thomson, P.A.
800 LaSalle Avenue
Suite 1900
Minneapolis, Minnesota 55402
Attention: Rory O. Duggan, Esq.
6.4 This Agreement may be executed in counterparts, all of which, when
taken together, shall constitute one and the same original.
6.5 In the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not invalidate or
render unenforceable any other provision thereof.
6.6 THIS AGREEMENT WAS NEGOTIATED, EXECUTED AND
DELIVERED IN THE STATE OF MINNESOTA, IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND
THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
-4-
MINNESOTA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND
ANY LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO
NATIONAL BANKS. TO THE FULLEST EXTENT PERMITTED BY LAW, CITY
HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY RIGHT TO
ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MINNESOTA AND ANY LAWS OF THE UNITED STATES OF AMERICA
APPLICABLE TO NATIONAL BANKS.
CITY HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION RELATING TO THIS AGREEMENT. THIS AGREEMENT MAY BE
ENFORCED IN THE STATE COURT SITTING IN THE COUNTY IN WHICH THE
PROPERTY IS LOCATED; CITY CONSENTS TO THE JURISDICTION AND
VENUE OF SUCH COURT AND WAIVES ANY ARGUMENT THAT
JURISDICTION IN SUCH FORUM IS NOT PROPER OR THAT VENUE IN SUCH
FORUM IS NOT CONVENIENT. IN THE EVENT AN ACTION IS COMMENCED
IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, LENDER AT ITS OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO THE JURISDICTION AND
VENUE ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
[Remainder of Page Intentionally Left Blank]
-5-
IN WITNESS WHEREOF, the City has executed this Agreement as of the day and year
first written above.
CITY OF SHAKOPEE
By:
Name: Brad Tabke
Its: Mayor
By:
Name: Mark McNeill
Its: City Administrator
STATE OF MINNESOTA )
ss.
COUNTY OF )
The foregoing was acknowledged before me this day of , 2013,
by Brad Tabke and Mark McNeill, the Mayor and City Administrator, respectively, of the City of
Shakopee, a Minnesota municipal corporation, on behalf of the municipal corporation.
Notary Public
THIS INSTRUMENT DRAFTED BY:
Fabyanske, Westra, Hart& Thomson, P.A.
800 LaSalle Avenue
Suite 1900
Minneapolis, Minnesota 55402
-6-
Exhibit A
to
Subordination Agreement
Legal Description
Parcel 1:
Lot 1, Block 2, Dean Lakes Fifth Addition, according to the recorded plat thereof, and situate in
Scott County, Minnesota, together with the appurtenant easements contained in that certain
Declaration of Easements and Covenants dated January 13, 2006, filed July 13, 2006, as
Document No. T 178019.
Torrens Property
Parcel 2:
Lot 2, Block 2, Dean Lakes Fifth Addition, according to the recorded plat thereof, and situate in
Scott County, Minnesota, together with the appurtenant easements contained in that certain
Declaration of Easements and Covenants dated January 13, 2006, filed July 13, 2006, as
Document No. T 178019.
Torrens Property
Parcel 3:
Lot 3, Block 2, Dean Lakes Fifth Addition, according to the recorded plat thereof, and situate in
Scott County, Minnesota, together with the appurtenant easements contained in that certain
Declaration of Easements and Covenants dated January 13, 2006, filed July 13, 2006, as
Document No. T 178019.
Torrens Property
Parcel 4:
Tract C, Registered Land Survey No. 199, Scott County, Minnesota, together with the
appurtenant easements contained in that certain Declaration of Easements and Covenants dated
January 13, 2006, filed July 13, 2006, as Document No. T 178019.
Torrens Property
[CITY LETTERHEAD]
Dean Lakes 1, LLC
c/o Ryan Companies US, Inc.
50 South Tenth Street, Suite 300
Minneapolis, Minnesota 55403
Attention: Audra Williams
Attention: Judy Hermanson
U.S. Bank National Association
U.S. Bancorp Center
800 Nicollet Mall, 3rd Floor
BC-MN-H03A
Minneapolis MN 55402-7020
Attention: Real Estate Banking Division
Re: Lots 1-3, Block 2, Dean Lakes Fifth Addition and Tract C, Registered Land
Survey No. 199, Scott County, Minnesota (the "Property")
The undersigned certifies to Dean Lakes I, LLC, a Minnesota limited liability company
("Dean Lakes"), and U.S. Bank National Association, a national banking association ("USB")
together with any of their respective affiliates and/or any of its or their respective successors
and/or assigns:
1. The undersigned is a party to the following documents and resolutions
(collectively,the "Development Documents"):
(a) Planned Unit Development Agreement for Dean Lakes Project dated
December 26, 2003, filed January 22, 2004, as Document No. T153920 by
and between the City of Shakopee and Ryan Companies US, Inc., a
Minnesota Corporation.
(b) Dean Lakes First Addition Master Development Agreement by and
between the City of Shakopee, Minnesota and Ryan Companies US, Inc.,
a Minnesota Corporation, dated December 9, 2003, filed June 3, 2004, as
Document No. T157652 (the "Master Development Agreement").
(c) Developer's Agreement by and between the City of Shakopee and Ryan
Companies US, Inc., a Minnesota Corporation, dated May 11, 2004, filed
June 3, 2004, as Document No. T 157653.
(d) Developer's Agreement by and between the City of Shakopee and Ryan
Companies US, Inc., a Minnesota Corporation, dated September 1, 2004,
filed September 13, 2004, as Document No. T 160613.
(e) Developer's Agreement by and between the City of Shakopee and Ryan
Companies US, Inc., a Minnesota Corporation, dated January 6, 2006,
filed July 13, 2006, as Document No. T 178018.
(f) Developer's Agreement by and between the City of Shakopee and Ryan
Companies US, Inc., a Minnesota Corporation, dated December 27, 2006,
filed November 15, 2007, as Document No. T 187463.
(g) City of Shakopee Petition for Public Improvement and Waiver of
Assessment Rights Recitals dated January 14, 2004, filed January 22,
2004, as Document No. T 153921.
(h) Petition for Public Improvements and Waiver of Assessment Rights
Recital dated March 15, 2001, filed March 29, 2001, as Document No. T
117776.
(i) Resolution No. 5986 being a resolution of the City of Shakopee,
Minnesota, approving Planned Unit Development (PUD) Overlay District
No. 24, Dean Lakes, filed January 20, 2004, as Document No. T 153787.
(j) Resolution No. 5988 being a resolution of the City of Shakopee,
Minnesota, approving the request for a Conditional Use Permit (CUP) to
allow business park and residential uses, as well as trails in the Shoreland
Overlay Zone filed January 20, 2004, as Document No. T 153788.
(k) Resolution No. 6078 being a Resolution of the City of Shakopee,
Minnesota, approving the preliminary and final plat of Dean Lakes Second
Addition filed July 28, 2004 as Document No. T 159164.
(1) Resolution No. 6242 being a Resolution of the City of Shakopee,
Minnesota, approving the preliminary and final plat of Dean Lakes Fourth
Addition and an amendment to the Dean Lakes Planned Unit Development
(PUD) filed May 31, 2005 as Document No. T167388.
(m) Resolution No. 6345 being a Resolution of the City of Shakopee,
Minnesota, approving the preliminary and final plat of Dean Lakes Fifth
Addition and an amendment to the Dean Lakes Planned Unit Development
(PUD) filed January 23, 2006 as Document No. T173896.
(n) Consent and Agreement regarding the encroachment of parking
improvements with the City of Shakopee dated June 7, 2006, filed July 13,
2006, as Document No. T 178020.
2. To the best knowledge of the City without investigation, the Development
Documents have not been modified, amended or terminated in any respect except as set forth
herein. To the best knowledge of the City without investigation, the Development Documents
are valid and in full force and effect on the date hereof.
-2-
3. On the date hereof, the City has executed a subordination agreement pursuant to
Section 7.2 of the Developer's Agreement The City's subordination of its interests under the
Master Development Agreement does not subordinate the City's right to collect special
assessments levied against the Property.
4. As of the date hereof, the City is not aware of any defaults existing, or any
amounts due and owing, under any of the Development Documents, except as set forth herein:
5. To the best knowledge of the City without investigation, as of the date hereof,
Ryan Companies US, Inc. and the Property are in compliance with each of the Development
Documents.
6. The person signing this letter on behalf of the undersigned is a duly authorized
agent of the undersigned. The undersigned is providing you with this letter and agrees that you
may rely upon it as conclusive evidence of the matters stated herein.
-3-
Dated this day of September, 2013.
CITY OF SHAKOPEE
a Minnesota municipal corporation
By:
Name:
Title:
-4-