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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 ' �"�,. 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 , � � ��y-��� 73 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) , . � ���i��� 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 . C���- �� �3 �14r o�. �0` °. � � CITY OF SAINT PAUL ` ����j������ b DEPARTMENT OF PLANNING AND ECONOMIC DEVELOPMENT � h� 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. -:. � � � . �_ �-��7� .. . 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. - ' - � �F �-�I-l�73 i � 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 � . . ' . �--�- /�73 , 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 � � � - ���-1�7� . , 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 2 . ., , � � �y���� 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. 3 � . ' t � � . . @j-��/�7� r • 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 4 " � . ; . �y��73 , 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.� ^ �, Adopted �ecember 4, 1984 � - / _.�� Attest ` � � P r ' �n The Po uthority of the City of Sai Paul �!l'�� Secr ary 5