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87-1147 WHITE - C�TV CIERK PINK - FINANCE COUIICII � CANARV - DEPARTMENT G I TY OF SA I NT PA U L File NO. � ` /�� BLUE - MAVOR y Co n il Resolution Presented By , � Re o Committee: Date Out of Committee By Date WHEREAS: 1 . On July 21, 1987, the Port Authority of the City of Sa1nt Paul adopted Resolutlon No. 2842 giving preliminary approval to the issuance of taxable revenue bonds in the initiai principai amount of $4,050,000 to finance the acquisition of the business and technology center at 245 East Stxth Street and the Annex Building at 261 East Fifth Street in Downtown Saint Paul for GMf Corporation. Miller 8, Schroeder Municipals has agreed to underwrite the taxable revenue bond issue for a term of 30 years. 2. Laws of Minnesota 1976, Chapter 234, provides that any issue of revenue bonds authorized by the Port Authority of the City of Saint Paul, shali be issued only with the consent of the City Council ot the City of Saint Paul, by resolution adopted in accordance with law; 3. The Port Authority of the City of Saint Paul has requested that the City Council give its requisite consent pursuant to said law to facilitate the issuance of said revenue bonds by the Port Authority of the City of Saint Paul, subJect to final approvai of the details of said issue by the Port Authority of the City of Saint Paul . RESOLVED, by the City Council of the City of Saint Paul, that in accordance with Laws of Minnesota 1976, Chapter 234, the City Council hereby consents to the issuance of the aforesaid revenue bonds for the purposes described in the aforesaid Port Authority Resolution No. 2842 the exact details of which, including, but not limited to, provisions relating to maturities, interest rates, dtscount, redemption, and for the issuance of additional bonds are to be determined by the Port Authority, pursuant to resolution adopted by the Port Authority, and the City Council hereby authorizes the lssuance of any additionai bonds (including refunding bonds) by the Port Authority, found by the Port Authority to be necessary for carrying out the purposes for which the aforesaid bonds are issued. COUNCILMEN Requested by Department of: Yeas p�eW Nays � �� �1°"'a"' [n Favor Rettman Scheibel � �� __ Against Tad.s� W ilson Adopted by Council: Date AUC7 � 1987 Form Approved by City Attorney �--, Certified Pass d y u cil Sec r BY � � . .� gy, Approved Mavor. Date �C'�� Appro d by Mayor for Submis n to ��uncil By — ptjBl.IStt�D hu G 1 5 1987 �� ����1'� 060'71 St. Paul Port Authority DEPARTMENT `" ' _ . ._ J.A. Campobasso, E.A. Kraut CONTACT 224-5686 PHONE Julv 21,, 1987 DATE Q/�� �, Qr � ASSIGN NUNBER FOR .RQUTIN_G ORDER (.Clip All Locations for �ignature);; 1 Departrr�n� Director 3 Director af Management/Mayor Finance and Management Services Director � 4 City Clerk Budget; pi rector �.:�1�,.c�o�T�o�,_ 2 City Attorney $4,050,000 TAXABLE REVEN[JE BOND. ISSUE WHAT WILL BE ACH�IEVED BY TAKING ACTION ON THE ATTACHED MATERIALS? (Purpose/ _ Rationale) : The purpose of the taxa�le revenue bond issue is to finance the acquisition of the :business and technology center at 245 East Sixth Street and the Annex Building at 261 East Fifth Street in Downtown Saint Paul for GMT Corporati�on. RECEIt/Ep �UL 2 31987 . COST/BENEFIT, BUOGETARY AND PERSONNEL IMPACTS ANTICIPATED: � ��� The amount of the taxable bond issue is $4,050,000 and,will be for a term��� years. �'here..�iil b� a�pr�oxitrtate�y 60 new 3obs for St. Paul as a result of this pro�ect. � . FINANCING SOURCE AND BUDGET ACTIVITY NUhI6ER CHARGE OR CREDITED: (Mayor's signa- ture nox re- Tota1 Amount of "Transaction: quired if under � $10,00Q) . Funding. Source; _ Activity Number: ATTACHMENTS (List and Number All Attachments) : 1. Staff Memorandum • 2. Draft City Council � 3. Part Authority Resolution No. 2842 cc. J. Shoholm � DEPARTMENT REVIEW CIT�f, ATTORNEY REVIEW xYesy No Council Resolution Required? ' Resolution Required? x Yes No Yes'.; x No Insurance Req�ired? Insurance Suffirient? X Yes No ' Yes x No Insurance Attached: (SEE •REVERSE SIDE FOR INS RUCTIONS) � Reyised 12/84 - � � 7 � ii�7 � PORT ' AUTHORITY • OF THE CITY OF ST. PAUL Memoroedum TO: BOARD OF COMMISSIONERS DATE July 14, 1987 (July 21, 1987 Regular Meeting) FROM: J.A. Campobasso , SUBJECT: GMT CORPORATION PUBLIC HEARING - PRELIMINARY AND UNDERWRITING AGREEMENT $4,050,000 TAXABLE REVENUE BOND ISSUE OFF-SITE RESOLUTION N0. 2842 PUBLIC HEARING - SALE OF LAND RESOLUTION N0. 2843 1. THE COMPANY • GMT Corporation is a Minnesota corporation owned by Mr. Henry Zaidan and his immediate family. The company has been structured to own and operate the Control Data Business Development and Technology Center. GMT will operate the BTC under a five-year license agreement with Control Data sup- plying all of the present support services for the small businesses oc- cupying the facility. Mr. Zaidan has extensive experience in real estate developing nearly 3,000 units of office and residential projects in Houston; Toronto; London, Ontario; Ottawa and Montreal. He is also a mem- ber of the Zaidan Group which is an organization consisting of five family members with assets of over $79 million and a net worth of over $6.7 million. 2. THE PROJECT GMT Corporation proposes to acquire the Control Data BTC properties for $5,250,000. Aa appraisal by Muske Company indicates a value of $6,405,000 for the property. The purchase price reflects a $12.51 per square foot price based on gross rentable area or $16.38 per square foot of net usable space. The property to be acquired includes the BTC located at 245 East Sixth Street and the Annex building at 261 East Fifth Street in Downtown F St. Paul. The BTC complex is located on 59,928 square feet of land and contains three buildings. The eight-story building on Sixth Street contains 202,500 square feet and was constructed in 1905 and remodeled in 1979. The fire barn at 416 Wacouta contains 12,594 square feet and the parking ramp with 245 spaces � plus two floors of office/industrial space totaling 60,006 feet at the top of the ramp. Total gross space is 275,100 and net usable is 209,999 for the complex. , . ��-,��7 BOARD OF COMMISSIONERS • July 14, 1987 Page -2- The seven-story Annex building on Fifth Street is located on 21,000 square feet of land and was constructed in 1909. The Annex is a loft type office/warehouse building containing 144,660 gross square feet with net usable space of approximately 110,570 square feet. At the present time, the BTC is leased to 38 tenants while the Annex has 26 tenants. With the exception of Buckbee Mears (136,021 square feet) and Multi-Arc (49,899 square feet) , no tenant occupies more than 7,000 square feet of usable area. The majority of the tenants actually take less than 1,000 square feet. With the exception of two of the Buckbee Mears leases, all leases expire within three years. The two Buckbee Mears leases mature on November 30, 1992. Total annual contract rent based on the June 18, 1987, rental roll amounts to $1,091,826. The rental rates for average of- fice space range from $11 to 12.50 per usable square foot on a gross basis. The range for the Annex building is $2.95 to $4 per square foot. GMT Corporation will continue to operate the facility in a similar manner to Control Data in assisting start-up companies and developing new employ- ment opportunities in the City. Since the opening of the facility, 173 new businesses were started of which only 20 have f ailed or closed. The success rate of 88X is outstanding in comparison to the the national • average of 20%. The new jobs created by these companies has reached 2,110. Mr. Zaidan also expects to relocate the headquarters of Energx, a company he owns from Eden Prairie, to the BTC. Energx employs 60 at its head- quarters and an additional 200 at its manufacturing facility in LeCenter, Minnesota. Mr. Zaidan acquired the generator manufacturing business about a year ago from Earth Energy Systems, Inc. which was 74X owned by Control Data. Mr. Zaidan indicated he is in the process of acquiring at least one other business and expects to relocate their headquarters into the facility as well. If this acquisition is completed and a relocation package can be put together, it would bring in another 90 jobs. Mr. Zaidan anticipates cQnverting and upgrading space in the Annex on a pre- lease basis and expects to improve the cash flow of the facility in doing so. Presently both facilities have approximately a 20X vacancy rate. 3. FINANCING The proposed finaacing would be done as a taxable industrial development revenue bond for a 30-year term. Proceeds from the bond issue would be as follows: Purchase $3,937,500 Bond Issuance Expense 31,500 Bond Discount 81.000 TOTAL $4,050,000 � � • � ���f/�7 � • BOARD OF COMMISSIONERS July 14, 1987 Page -2- The Port Authority would receive earnings on the sinking fund as well as its customary 1X fiscal and administrative fee. Control Data will be financing $1,365,000 of the acquisition price on a subordinated mortgage at a floating rate of 1/2 percent in excess of the prime rate with the First National Bank of St. Paul adjusted annually but not to exceed lOX. That financiag will be amortized over 30 years and will become due and payable five years from the date of closing. Mr. Zaidan will also per- sonally guarantee $250,000 of the second mortgage. Control Data would also have the ability to step back into the property in the event of a ' default. 4. TERMS OF THE LEASE The term of the lease would be for thirty years with options to purchase in years ten, twenty and thirty for the outstanding principal balance as well as 10% of the original bond issue. 5. UNDERWRITING Miller & Schroeder Financial has agreed to underwrite the 30-year bond issue at a rate of interest to be set at the time the bonds are sold. We • anticipate bonds will be sold at our regular August Board meeting. 6. RECOMMENDATIONS Staff has interviewed the officers of the corporation, reviewed Mr. Zaidan's financial statements and has reviewed the lease rolls on the properties and recommends approval of Resolution Nos. 2842 and 2843. JAC:ca • ' � �7-/�`F� � . Resolution No. ���/-,,� RESOLUTION OF THE PORT AUTHORTTY OF THE CITY OF SAINT PAUL WHEREAS, the purpose oF Minnesota Statutes, Chapter 474 , known as the Minnesota Municipal Industrial Development Act ( hereinafter called "Act" ) as Eound and determined by the legislature is to promote the welfare of the state by the active attraction and encouragement and development of economically sound industry and commerce to prevent so far as possible the emergence oF blighted and marginal lands and areas of chronic unemployment and to ai.d in the deveLopment of existing areas of blight , marginal land and persistent ' unemployment; and WHEREAS, Factors necessitating the active promotion and development of economically sound industry and commerce are the increasing concentration of population in the metropolitan areas and the rapidly rising increase in the amount and cost of governmental services required to meet the needs of the increased population and the need for development of land use which will provide an adequate tax base to finance these increased costs and access to employment opportunities for such population; and WHEREAS , the Port Authority of the Cit�� of Saint Paul ( the "Authority" ) has received From the GMT Corporation (hereinafter referred to as "Company" ) a request that the Authority issue its full faith and credit taxable revenue bonds to finance the acquisition of the Control Data Business Development and Technology Center properties loc:ated at 245 East Sixth Street, 416 Wacouta Avenue, and 261 East Fifth Street, which facilities are for the support and development of small businesses in Saint Paul in the City of St. Paul (hereinafter collectively called the "Project" ) , all as is more fully described in the staff report on file; and WHEREAS, the Authority desires to facilitate the selective development of the community, to retain and improve its tax base and to help it provi.de the range of services and C���-���7� employment opportunities required by its population , and said Project will assist the City in achieving that objecti.ve. Said Project will help to increase the assessed valuation of the City and help maintain a positive relationship between assessed valuation and debt and enhance the image and reputation of the City; and WHEREAS, the Project to be financed by revenue bonds will result in substantial employment opportunities in the Project; - WHEREAS, Miller & Schroeder Financial , Inc. ( the "Underwriter" ) has made a proposal in an agreement ( the • "Underwriting Agreement" ) relating to the purchase of the • revenue bonds to be issued to finance the Project; NOW, THEREFORE, BE IT RESOLVED by the Commissioners of the Port Authority of the City of Saint Paul , Minnesota as follows: l . On the basis of information available to the Authority it appears, and the Authority hereby finds , that � said Project constitutes properties , used or useful in connection with one or more revenue producing enterprises engaged in any business within the meaning of Subdivision 1 (a ) of Section 474 . 02 of the Act; that the Project furthers the purposes stated in Section 474 . 01 of the Act and, and that the effect of the Project, if undertaken, will be to encourage the development of economically sound industry and commerce and assist in the prevention of the emergence of blighted and marginal land, and will help to prevent chronic unemployment, and will help the City to retain and improve its tax base and provide the range of services and employment opportunities required by its population, and will help to pr. event the movement of talented and educated persons out of the state and to areas within the state where their services may not be as effectively used and will result in more intensive development and use of land within the City and will eventually result in an increase in the City' s tax base; and that it is in the best interests of the port district and the peop.le of the Cii:y oL- Saint Paul and in furtherance of the general plan of development to assist the Company in financing the Project. 2 . Subject to the mutual agreement of the Authority, the Company and the purchaser of the revenue bonds as to the details of the lease or other revenue agreement as defined in the Act, and other documents necessary to evidence and effect the financing of the Project and the issuance of 2 . � . ��>-���r� the revenue bonds, the Project is hereby approved and authorized and the issuance oF Laxable revenue bonds of the Authority in an amount not to exceed approximately $4 , 050 , 000 (other than such additional revenue bonds as are needed to complete the Project) is authorized to finance the costs oF the Project and the recommendations of the Authority' s staff , as set forth in the staff inemorandum to the Commissioners which was presented to the Commissioners , are incorporated herein by reference and approved. 3 . There has heretofore been filed with the , Authority a form of Preliminary Agreement between the Authority and Company, relating to the proposed acquisition of the Project and a form of the Underwriting Agreement. The forms of the aqreements have been examined by the Commissioners . Said Agreements are hereby approved, and the President and Secretary of the Authority are hereby authorized and directed to execute said Agreements . 4 . � Upon execution of the Preliminary Agreement by, the Company, the staff of the Authority is authorized and directed to continue negotiations with the Company so as to resolve the remaining issues necessary to the preparati.on of the lease and other documents necessary to the adoption by the . Authority of its final bond resolution and the issuance and delivery of the revenue bonds; provided that the President (or vice-President if the President is absent) and the Secretary (or Assistant Secretary if the Secretary is absent) of the Authority, or if either of such officers (and his alternative? are absent, the Treasurer of the Authority in lieu of such absent officers, are hereby authorized in accordance with khe provisions of Minnesota Statutes , Section 475 . 06 , Subdi.vision l , to accept a final offer of the Underwriter made by the Underwriter to purchase said bonds and to execute an Underwriting Agreement setting forth such offer on behalf of the Authority. Such acceptance shall bind the Underwriter to said offer but shall be subject to approval and ratification by the Port Authority in a formal supplemental bond resolu- tion to be adopte�] prior to the delivery of said revenue bonds. 5 . The revenue bonds ( including any interim note or notes) and interest thereon shall constitute an indebtedness of the Authority but shall not constitute an indebtedness the City of Saint Paul ( the "City" ) within the meaning of any constitutional or statutory limitation and shall not constitute or give rise to a pecuniary liability of the City or a charge against its genera.l credit or taxing 3 ���_,,�� � powers and neither the full faith and credit nor the taxing powers of the City is pledged for the payment of the bonds (and interim note or notes) or interest thereon. 7. In order to facili.tate completion of the revenue bond financing herein contemplated, the City Council is hereby requested to consent, pursuant to Laws of Minnesota , 1976 , Chapter 234 , to the issuance of the revenue bonds ( including any interim note or notes) herein contemplated and any additional bonds which the Authority may prior to issuance or from time to time thereafter deem necessary to complete the Project or to refund such revenue bonds; and for such purpose the Executive Vice President of the Authority is hereby authorized and directed to forward to the City Council copies of this resolution and said Preliminary Agreement and any additional available information the City Council may request . ..� , / Adopted : July 21 , 1987� �/ !� � � %'` _ �� `�� • Attest: � `? i t The Po t Authority of the City / of S� nt Paul � ����1;,����� �"�� S�c etary 4 , ,�.�-.-�.. �� - //� '7 �.:..v� .,,4:., ;��: �� ��-' .� � � PORT AUTHORIN OF THE CIN OF SAINT PAUL TOLL FREE(800) 328-8417 1900 AMHOIST TOWER • 345 ST. PETER STREET • ST. PAUL, MN. 55102 • PHONE(612)224-5686 July 21, 1987 Mr. James Bellus, Director Planning and Economic Development Department City of St. Paul 14th Floor - City Hall Annex St. Paul, Mi nnesota 55102 n ,�,�� ��� � o SUBJ ECT: GMT CORPORAT I ON �1"� � $4,050,000 TAXABLE REVENUE BOND ISSUE Dear Jims We submit herewith for your review and referral to the office of the Mayor, City Council and City Attorney's office details pertaining to the issuance of $4,050,000 in taxable revenue bonds to finance the acquisition of the business and technology center at 245 East Sixth Street and the Annex Building at 261 East Fifth Street in Downtown Satnt Paul for GMT Corporation. The Port Authority staff has conducted a thorough evaluation of the firms and/or individuals that are tnvolved in this proJect or in which the prin- cipals have an interest. This investfgation has included Dun and Bradstreet reports, direct communication with representatives of financial institutions with whom the participants have done business and database checks to determine if any principal (s) have been in any way involved in legal proceedings as a resuit of securities fraud, extortion, embezzlement or financial misrepresentation. In addition to the staff inemorandum, we are attaching a draft copy of the proposed City Council resolution and a copy of Port Authority Resolution No. 2842 which authorized the sale of taxable revenue bonds in the amount of amount. Your expeditious handling of this matter will be appreciated. Yours truly, ugene A. Kraut EAK:ca Executive Vice President cc. Mayor Lat i mer EUGENE A KRAUT,C.I.D. DONALD G.DUNSHEE,C.I.D. CHARLES M.TOWLE CLIFFORD E.RAMSTED,P.E. PERRV K.FEDERS C.PA EXECUTIVE VICE PRESIDENT ASST.EXEC.VICE PRESIDENT DIRECTOR OF INDUSTR�AL DEVELOPMENT CHIEF ENGINEER DIRECTOR OF FINANCE ASST.TREASURER RICHARO A GIERDAL WILLIAM E.McGNERN PROPERN MANAGER. DIRECTOR OF PUBUC RELATIONS COMMISSIONERS GEORGE W.WINTER WILLIAM WILSON ARTHUR N.GOODMAN VICTOR P.REIM RAYMOND E.LANGEVIN CHRIS NICOSIA JEAN M.WEST PRESIDENT VICE PRESIDENT SECREfARV TREASURER COMMISSIONER COMMISSIONER COMMISSIONER C.I.D. Certified Industrial Developer