84-1673 WHI7E - CITV CLERK
PINK - FINANCE G I TY OF SA I NT PA U L Council r�_/� 73
BLUERV - MAVORTMENT r
�
File N 0. ��
� � C �.cil Resolution
Presented By h--
Referred To Committee: Date
Out of Committee By Date
WHEREAS:
1. On December 4, 1984, the Port Authority of the City of Saint Paul adopted
Resolution No. 2392 giving preliminary approval to the issuance of a taxable revenue bond
issue in the initial principal amount of $11,000,000 to finance the rehabilitation into
office space the interior of the south half of the 435,000 square foot International
Harvester building at 2572 University Avenue in St. Paul for Estes II Limited Partnership
whose general partner is the Estes Company.
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, shall be issued only with the
consent of the City Council of 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 approval 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. 2392 the exact details of which, including, but not limited to, provisions
relating to maturities, interest rates, discount, 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 issuance of any
additional 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.
COUNC[LMEN Requested b Department of:
Yeas ������ �
Drew IR Fevo[ —�
Masanz
Nicosia
Scheibel __ Against BY
Tedesco
Wilson
D�C 1 8 198�► Form Approved by City Attorney
Adopted by Council: Date
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Certified Pa s uncil Se ar B� j �
By, l�-�� ° $ S'
Appro Mavor. Date DEC 2 0 198� App� ed by Mayor for Sub sio kQ Council
By PUBLISHED D E� Z � 19$�- B
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St. Pau1 Port Authority DEPARTIiENT
��,M T�n_,_wl P� F_A__ I[ra,�t rONTACT
��4-5686 PHONE re��, ee �
December 4, 1984 DATE
(Routing and Explanation Sheet)
Assign Nur�er for Routing Order (Clip All Locations for Ma�yoral Signature):
� Department Director ��
�_ C�ty Attorney ���
�_ Girector of Management/Mayor � �
�_ Finance and Management Services Director
� City Clerk
Budget Di rector
ESTES II LIMITED PARTNERSHP
$11 ,000,000 TAXABLE REVENUE BOND ISSUE
What Will be Achieved by iaking Action on the Attached Materials? (Purpose/Rationale):
The purpose of the bond issue is to rehabilitate in,to office space the interior of the south
half of the 435,000 square foot International Harvester building at 2572 University Avenue
for Estes II Limited Partnership whose general partner is the Estes Company.
Financial , �udgetary and Personnel Irr�acts Anticipated:
The amount of the taxable bond issue is $11 ,OOD.,000 whic�r will. be prirrately placed.
This is a non-876 bond issue; therefore, the credit of the Port Authority is not involved.
The Estes II project wil] house approximately 600 jobs.
Funding Source and Fund Activity Number Charged or Credited:
Attachments (List and N w�er all Attachments) :
1 . Staff inemorandum
2. Draft City Council Resolution
3. Port Authority Resolut.ion No.
cc. D. Thorpe
DEPARTMENT REYIEW CITY ATTORNEY REVIEW �
X Yes No Council Resolution Required? Resolution Required? X Yes No
Yes X No Insurance Required? Insurance Sufficient? X Yes No
Yes X No Insurance Attached?
Revision of October, 1982
(�ee Reverse Side for Instructions)
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RECEIVED
QtC 10 1g84
PORT AUTHORITY OF TNE CITY OF SAINT PAUL
CITY ATTORNEY
25 WEST FOURTH STREET • SUITE 1305 • ST. PAUL, MINN. 55102 • PHONE (612) 224-5686
December 14, 1984
Mr. .James Bellus RECEIVED
Director
Planning and Economic Development Department ��C 1
City of St. Paui 1 1984
14th Floor, City Hall Annex MAYOR'S
St. Paul, Minnesota 55102 QFFICE
SUBJECT: ESTES II LIMITED PARTNERSHIP
$11,000,000 TAXABLE REVENUE BOND ISSUE
Dear Jim:
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 $11,000,000 in taxable revenue bonds to finance the rehabilitation into
office space of the interior of the south half of the 435,000 square foot
International Harvester building at 2572 University Avenue for Estes II
Limited Partnership whose general partner is the Estes Company.�
The Port Authority staff has conducted a thorough evaluation of the firms
and/or individuals that are involved in this project or in which the
principals have an interest. This investigation has included detailed
credit analysis, Dun and Bradstreet reports, direct communication with
representatives of financial institutions with whom the participants have
done business and data base checks to determine if any principal(s) have
been in any way involved in legal proceedings as a result 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. 2392 which authorized the sale of the taxable revenue bonds in the
amount of $11,000,000.
Your expeditious handling of this matter will be appreciated.
Yours truly,
'�_:t
,
''----i�-:_-�_._..a�
�3ugene A. Kraut
Executive Vice President
�;AK:ca
OBERT F. SPRAf�(A CC� ����+�•C:t.D. DONALD G. DUNSHEE. CJ.D. CUFFORD E. RAMSTED PERRY K fEDERS
�CIANE VICE PR�JT G9VERALMIJrM'�ERAND DIRECTOR.INDUSTRIAL DEVELOW�AENT CFNEF ENCINEER DIRECTOR OFflNANCI
ASST.EXEC.VECE PRESIOEi�f
OMNIISSIONERS GEORGE W.WINTER WILLIAM WILSON ARTHUR N. GOODMAN VICTOR P. REIM JEAN M. WEST CHRIS NICOSIA WIWAM J. SEIffRI
PRESiDENT �10E PRESIpEM �C2ETARV �A�1RER
C.I.D. Certified Industrial Developer
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�0` °. � � CITY OF SAINT PAUL
` ����j������ b DEPARTMENT OF PLANNING AND ECONOMIC DEVELOPMENT
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A
�s6• JAMES J. BELLUS, DIRECTOR
25 West Fourth Street,Saint Paul,Minnesota 55102
GEORGE LATIMER 612-292-1577
MAYOR
December 6, 1984
Ma�yor George Latimer
Council President Victor Tedesco
Members of the St. Paul City Council
City Hall
St. Paul , MN 55102
Dear Mayor and Councilpersons:
Attached for your consideration are two proposals by the St. Paul Port Authority
to fund the International Harvester Building at 2572 University Avenue. I consider
this project to be a good one which reinforces our overall economic development
activities in the City.
As you know, the procedure has been set up whereby all Port Authority revenue bond
projects are forwarded to my office by Gene Kraut, Executive Vice President of the
St. Paul Port Authority. I, in turn, sign a resolution and forward them on to you
for your consideration. Given the recent concerns on the part of the City Council
about revenue bond projects, I want to make it clear to all of you what my office
does and does not do in looking at these projects before they are sent to you.
In short, our review is a proforma review. If there are glaring conflicts with
City policy or City plans, we would certainly make you aware of them. However,
we do not review any of the financial information, nor do we attempt to second
guess the Port Authority with regard to the financial aspects of the project.
The Port Authority goes through a very complicated and sophisticated review of
each project and we do not want to try to duplicate that.
This process that I outlined in the preceding paragraph has worked well and I am
not advocating changing it. I just wanted to make sure no one was expecting us
to do more than we really did. I will continue to forward Port Authority projects
to you in an expeditious manner.
Sincerely,
me J. 11 s
i re or
JJB/lle
cc: Gene Kraut
i� O� R T . . ��_ � ��7 3
- ' AUTHORiTY
OF THE CITY OF ST. PAUL
Memorondum
TO: BOARD OF COMMISSIONERS pA�, Nov. 29, 1984
(Dec. 4, 1984 Special Meeting)
FROM: C.M. Towl� �
SUBJECT:ESTES I LIMITED PARTNERSHIP, A MINNESOTA LIMITED PARTNERSHIP
PUBLIC HEARING — PRELIMINARY AND UNDERWRITING AGREEMENTS
$9,600,000 — 876 INDUSTRIAL REVENUE BOND ISSUE
ST. Pt�UL -- OFF—SITE
RE,SULUTION N0. 2390
ESTES II LIMITED PARTNERSHIP, A MINNESOTA LIMITED PARTNERSHIP
PUBLIC HEARING — PRELIMINARY AGREEMENT
$11,000,000 TAXABLE REVENUE BOND ISSUE — PRIVATE PLACEMENT
ST. PAUL -- UFF—SITE
RESOLUTION N0. 2392
PUBLIC HEARING — SALE OF LAND
RESOLUTION N0. 2391
1. THE PROJECT
The Estes Company plans to acquire and rehabilitate for office use the
435,000 square foot International Harvester manufacturing plant west of
Highway 280 and south of University Avenue. The company is proposing
to create two partnerships to accomplish this in a phased
condominiumized type development. It is currently proposed to have The
Estes Company acquire the project and allocate ownership to Estes I who
will own the north half of the building and the entire exterior shell
with the second partnership, Estes II, to be responsible for
rehabilitating the interior of the south half of the building.
Both halves of tha condominiumized office structure will contain an
atrium through the entire four levels of the project with a glass roof
to permit the entry of natural light. The ceiling heights within the
structure will permit the addition of inezzanine type office space and
allow for a range of between 280,000 and 370,000 square feet of
rentable space. The basement will be converted to a parking garage
with additional parking provided by a bi—level deck east of the
building.
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BOARD OF COMMISSIONERS
November 29, 1984
Page —2—
2. THE DEVELOPER
The Estes Company is one of the largest home builders in Arizona and
has developed a variety of business parks in the State and commercial
projects throughout the United States. We have been advised by their
financial references that the Estes Company is one of the finest
developers in Arizona and are very sound financially.
Estes I Limited Partnership will have as its general partner the Estes
Company, an Arizona general partnership consisting of WE7, Inc.;.
Shedco, Inc. ; and Guardian Development, Inc. and initial limited
partners, Othello Limited Partnership and Redevelopment Resources Inc.
Estes II Limited Partnership would have the Estes Company as its
general partner and as initial limited partner, Plaza Limited
Partnership.
3. FINANCING
Financing for Estes I would be a $9,600,000 876 industrial revenue bond
issue for a 30—year term.
The Estes Company will provide an equity package consisting of the
following:
(a) A Master Lease or comparable document will cover projected
operating shortfalls and remain in effect to cover 105� of the
annual debt service of the bond issue. The guarantee will remain
in effect until one year after each tenant takes occupancy with the
obligation correspondingly reduced.
(b) The partnership will raise $500,000 in cash as equity in the
project.
(c) The debt service reserve will be funded with an irrevocable Letter
of Assurance (comparable to a bank letter of credit and is the
instrument utilized by Savings & Loan institutions) furnished by
First Federal Savings and Loan Association of Arizona.
Initially the Estes I bond financing will be privately placed and the
rate allowed to float at 65X of prime until a Target Rate has been
achieved at which time the borrower will have the opportunity to either
go out long—term or call the issue. The objective in this structure is
to lock in the bond issue this year, permit structuraZ details to be
worked out and permit the developer to secure lease commitments.
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BOARD OF COMMISSIONERS
Nov. 29, 1984
Page —3—
The proceeds from the bond issue will be as follows:
Construction $8,196,000
Capitalized Interest 1,056,000
(Letter of Assurance) (1,112,550)
Expenses 60,000
Discount 288,000
TOTAL $9,600,000
The Port Authority will receive its usual and customary fiscal and
administrative fees as well as full earnings on the sinking fund.
The Estes II Limited Partnership $11,000,000 taxable bond issue will be.
privately placed and, if Resolution 876 is involved, will carry credit
� enhancement to achieve a AA or AAA rating.
The property has been appraised in an "as is" condition by the Muske
Company for $2,650,000, and James B. McComb and Associates has
conducted a preliminary feasibility study and has concluded that at
pro�ected rental rates of about $9 to $10.75 per square foot net, they
could achieve a 90X occupancy of the first phase by the end of the
second year.
The Estes Company has $90,000 on deposit with the State of Minnesota to
reserve their bond allocation for issuance in 1985.
4. UNDERWRITING
Miller & Schroeder Municipals has agreed to underwrite the 30—year bond
issue, and the initial private placement will be at 65% of prime with
the long—term interest rate set the date the bonds are sold long term
which we anticipate to take place at our regular December 18 Commission
meeting.
5. RECOMMENDATIONS
The developer and staff have reviewed this project with District 12,
and the full committee endorsed the project unanimously. Staff has
interviewed the officers of this company, reviewed their financial
statements, considered the preliminary feasibility and pro forma data
and given the guarantee provided and recommends approval of Resolution
Nos. 2390 . 2391 , and 2392.
CMT:ca
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Resolution No. a��2-
RESOLUTION OF
THE PORT AUTHORZTY OF TF�: CITY OF SAINT PAUL
WHEREAS, the purpose of Chapter 474, Minnesota
Statutes, known as the Minnesota Municipal Industrial Develop-
ment Act (hereinafter called "Act") as found and determined by
the legislature is to promote the welfare of the state by the
active attraction and encouragement and development of economi-
cally sound industry and co�nmerce to prevent so far as possible
the emergence of blighted and marginal lands and areas of
chronic �ine�mployment and to a�.d in the de�elopment of existing
areas of blight, marginal land and persistent unemployment; and
WHEREAS, factors necessitating the active promotion
and develo�xnent of econo�nically� 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 City of Saint Paul
(the "Authority") has received from Estes II Limited
Partnership, a Minnesota Limited Partnership (hereinafter
referred to as "Co¢npany") a request that the Authority issue
its taxable revenue bonds (which may be in the forrn of a single
note) to finance the acquisition of the south one-half of the
interior of the former International Harvester building at
Highway 280 and University Avenue and the reaovation thereof
for use as an office buil3ing and related parking facilities
(hereinafter collectively called the "Project") all in the City
of St. Paul, all as is more fully described in the staff report
on file; and
WHEREAS, the Authority desires to facilitate the
selective develo�nent of the community, to retain and improve
its tax base and to help i� provide the range of services and
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employment opportunities require� by its population, and said
Project will aasist the� Cfty^ in achievinq that objective. Said
Project will help to increaae the assessed valuation of thg
City anc� heip maintain a positive relationahip between assessed
valuation and debt and enhaneg the imaqe and reputation of the
City,- and
WFiEREAS, the Pro J ect. ta be financed by revenue bond s
will result in substantial employment opportunities in the
Proj ect;
WHEREAS, the Authoritlr has� been advised by repre-
sentatives of the Company that conventional,. commercial
financing to pay the capital cost of the� Project is available
only on � limited �asis and at such higtr costs of borrowing
that the- economic feasibility of operating the Project would be
significantly reduced, but the Company has also advised this.
Authority that but for revenue bond financing, and its
resulting low borrowing cost, the Project would not be
undertaken;
WHEREAS, Miller & Schroeder Municipals, Inc. ( the
"Unde=writer") has made a proposal in an agreement (the
"Underwriting Agreement") relating to the purchase of the
revenue� bonds to b� issued to finance the Project;
WHEREAS, the Authority, pursuant to Minnesota
Statutes, Sectioa 474.01, Subdivision 7b did publish a notice, .
a copy of which with proof of publication is on file in the
office of the Authority, of a public hearing on the proposal of
the Company that the• Authority finance the Project hereinbefore
3escribed by the issuanc� of its industrial revenue bonds; and
°�JHEREAS, the� Authority did conduct a �ublic hearing
pursuant to said notice, at which hearinq th� reco�nmendations
contained in the Authority' g staff inemorandunr. to the�
Cemmissioners were reviewec��, and all persons who appeared at
the heari.nq. were� given an opportunity ta express their views
with respect to the proposal.
NO�t, TI�REFORE, BE IT RESOLVED by the Commissioners
of the Port Authority of th� City of Saint Paul, Minnesota as
foTlowsr
1. On the basis� of information available to the
Authority it appears, and the° Authority hereby finds, that said
Project constitutes properties, usecY or usefui in connection
with one� or more� revenue- producing enterprises engaged in any
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business within the meaninq of Subdivision la of Section 474.02
of the Act; that the Project furthers th� purpoaes statec� in
3ectioc� 474.01 of the Act and, but for the willingnesa of the
Authority to furnisYr such financing, the Company would not
undertake the: Projectp and that the effect of the Project, if
undertaken,. �i1L be to encourage the development of
economic�lly sound industry and canmerce and assist in the
preveation of the esaergencg of .blighted and marginal land, and
will help to preveat chronic unezaployment, and will help the
City to. retain and improve� its tax base and provide the range
of servicea and employment opportunities required by its
population,. and will help to prevent 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 resul.t in more intensive� develoFxnent and use of land
within ther 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 people of the� City of Saint Paul and
in furtherance� of the general plan of develop�ment 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 document� necessary to evidence
anc� effect the financing of the• Proj ect and the issuance of the
revenue bonds-, the� Project is hereby approved and authorized
and the issuance of tax�ble. revenue bonds of the Authority
(which may be� in the form of a single note) in an amount not to
exceed approximately $11,000,000 (oth�r than such additional
revenue bonds- as� are needed to complete the Project) is
authorized to finance the costs of the Project and the
recocnmendations of the Authority' s staff, as set forth in the
staff m�aorandum to the Commissioners which was. presented to
the Co�nmissioners, are incorporated. herein by reference and
approved�
3. In accordance with Subdivision 7a of Section
474.01., Minnesot� Statutes, the Executive Vice-President of the
AUTHORITY is• hereby authorized and directed to submit the
proposaZ for the abov� described Project to th� Commissioner of
Energy and Econontic Develop�nent, requesting his approval, and
other officers., employees and agents of the AUTHORITY are
hereby authorized to provide the Commissioner with such
preliminary information as he may require.
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4. There has her�tofore beer� filed with the
Authority a� form of Frelimtnary �Agreement between the Authority
and Company, relating to th� proposed construction and
financing of the Project and a form of the Underwriting
Agreement. The fornt of said Agreements have been examined by
th� Can�issioners. It i� the purpoae of said Agrepsaents to
evidence� the� c�itraent of th� parties and their intentions
witYr respect ta the proposed Pro7ect in order that the Canpany
may proceed without delay with the catuaencement. of the
acquisition, installation and' construction of thg Project with
the assurance° that there has. been sufficient "official action"
under Section 103(b) of the- Internal Revenue Code of 1954, as
amended, to allow for the issuance of induatrial revenue bonds
( including, if de�ned appropriate, any interim note or notes to
provide temporary financing thereof) to finance the entire cost
of th� Pro�ect upon agreement be�nq reached a� to the ultimate
det�ils of the Project and its financing. Said Agreements are
hereby approved, and the President and Secretary of the
Authority are hereby authorized and directed to execute said
__ Agree�nents.
5. Upon executioa of the� Preliminary Agreement by
the Coanpany, the staff of the Authority are authorized and
d irected to continue negotiations with the- Company so as to
resolve the reiaaining issues necessary to the preparation of
the I.ease and other documents necessary to th� 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 the
provisions of Minnesota Statutes, Section 475 .06, Subdivision
1, to accept a final offer of the Underwriters made by the
Underwriters to purchase said bonds and to execute an
underwriting agre�nent setting forth such offer on behal£ of
the� Authority. Such acceptance shall bind the Underwriters to
said offer but shall be subject to appro�ral and ratification by
the� Port Authority in a formal supplemental bond resolution to
be adopted prior to the delivery of said revenue bonds.
6. The� revenue bonds ( including any interim note or
notes) and interest thereon shall not constitute an
indebtedness of the Authority or the City of Saint Paul wi.thin
the me�aning of any constitutional or statutory limitation and
shall not constitute� or give� rise to a pecuniary Liability of
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the Authority or the C:ity or a charqe aga�inst their general.
crec�it or ta�cing powers and neither the full faith and credit
nor the taxing powers of the Authority or the City ig pledged
for the payment of the bonds (and interim. note az notes) or
interest thereo�.
T. Zn order to facilit�te compl.etion of the revenue .
bocu� �inancing herein contemplated, the City Counail is hereby
requested to cvnsent, pursuant to Laws of Minnesota, 1976,
Chapter 234, to the issuance� of the revenue bonds ( including
any interiat note or note�) herein contemplated and any
additional bonds which the Authority may prior to issuance or
fronr time to• time thereafter deem necessary to complete the
Pzoject or to refund such revenue bonds; and for such purpose
th� Executive. Vic� Pre�ideat o£ 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.
8. The actions of the Executive Vice-President of
the� Authority in causing public notice of the public hearing
and in describinq the general nature of the° Project and
estimatinq the principal amount of bonds to be� issued to
finance the Project and in preparing a draft of the proposed
application to the Commissioner of Energy and Economic
Development, State of Minnesota, for approval of the Project.,
which has been available for inspection by th� public at the
office of the� Authority from and after the- nublication of
notice of the 'nearing, are in all respects ratified and
confirmed.�
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Adopted �ecember 4, 1984 � -
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Attest ` � �
P r ' �n
The Po uthority of the City
of Sai Paul
�!l'�� Secr ary
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