Adopt Resolution #19-299 Approving Purchase Agreement Third Amendment for AEON Ramsey 2, LLC (portions may be closed to the public)
 

Generally speaking, the purpose of this case is to consider a short term extension to allow reasonable time for full negotiation. A clause in the Agreement prevents AEON from moving to closing despite their desire to close (see details below). A short term extension will simply allow Staff, EDA and Council time for a typical negotiation cycle (EDA is not able to review due to timing of request). Due to timing of meetings, Staff is feeling rushed to a recommendation for the December 10, 2019 Council meeting, and doesn't feel Staff can provide a well-rounded recommendation either in support or not in support of ongoing discussions without further negotiations and review by the EDA. The City and Developer have invested multiple years of work towards this project, and additional time for discussion would honor past commitment. This short term extension will allow the process to go in front of the EDA in early 2020 before Council needs to take final action. The extension requires additional negotiations. The City Council will retain its discretion to either extend to a point to allow for construction or let the Purchase Agreement expire. 

Staff is aware of the Council's desire to evaluate future planned multifamily projects in the context of our future land use plan (Comprehensive Plan). This project was considered in the 'pipeline' and was under a real estate contract. Staff wants to make sure that the Council has all pertinent facts before making a decision on the Purchase Agreement Extension. 

Purpose:
Review request by AEON Ramsey 2, LLC dated December 3, 2019 to extend January 13, 2020 to April 30, 2020. AEON Ramsey 2, LLC did not receive funding from Minnesota Housing for the 2019 application cycle.  The inability to get this funding has resulted in the request for the Purchase Agreement Third Amendment by the Buyer to allow for more time to renegotiate or to perform.  AEON will be in default of the Purchase Agreement Second Amendment if they do not close by January 13, 2020. 

Background:
AEON (Greenway Terrace) constructed a 54 unit affordable housing project that has now opened in the COR.  The Developer has entered into a purchase agreement to buy and develop the land adjacent to Phase 1 and complete Phase 2 of the project.  A representative of Buyer has indicated that Phase 1 is fully leased and there is a waiting list of 300 for Phase 2.

On June 14, 2017, the City of Ramsey entered into a Purchase Agreement to sell Outlot A, Greenway Terrace, to AEON Ramsey 2 LLC for $123,368.  The City received $10,000 in earnest money which is now non-refundable. The term of the agreement was until October 13, 2018.  An option to extend closing for up to two 90 day periods was included in paragraph 17.1 and required deposit of an an additional $10,000 in non refundable earnest money. 

On May 22, 2018, AEON Ramsey 2 LLC and the City of Ramsey executed the Purchase Agreement First Amendment. The City of Ramsey received an additional $10,000 in non-refundable earnest money. The terms of this agreement stated that Closing on the property must occur on or before October 13, 2019.  There is no reference to extending the Closing date in the First Amendment.

On April 18, 2019, AEON sent an email requesting that the City of Ramsey consider another extension/amendment to the Purchase Agreement First Amendment to move the Closing date out to to accommodate for the Minnesota Housing Application process.  AEON submitted a grant application to the Minnesota Housing Finance Agency.  The Minnesota Housing application required that the purchase agreement extend past the award date which is November 21, 2019.  AEON  requested the extension/amendment to move the Closing date to on or before January 13, 2020 to include an additional $10,000 in non-refundable earnest money. The City granted that extension of Closing Date to January 13, 2020 including the deposit of the additional $10,000 in Non-refundable Earnest Money in the Purchase Agreement Second Amendment.  AEON Ramsey 2, LLC did  not receive an award from Minnesota Housing for the 2019 application cycle which is prompting the request for the extension for more time to work out a solution.

To date, the City has received $30,000 in non-refundable earnest money from AEON Ramsey 2 LLC from the original purchase agreement, first amendment and second amendment.  The City Council is being asked to review the general terms of the proposed Third Amendment.

Notification is not required. 

Due to timing of this request the EDA has not had time to review this item at a formal board meeting.  In order to fully evaluate the request and to potentially amend the Purchase Agreement Staff believes that extending the Closing Date to February 28, 2020 would be prudent.  The only change being requested is an extension fof the Closing Date from January 13, 2020 to February 28, 2020 to give the City and AEON time to renegotiate the terms of the Purchase Agreement.  AEON would not be able to fully perform the requirement to obtain government approvals (site plan and plat) within this timeframe, so additional negotiations would be required.

Items that should be considered if the PA is renegotiated include, but are not limited to:

• Purchase Price
• Project Definition (Concept)
• Project Timing
• Additional Earnest Money

Alternatives:

1. Adopt resolution approving Purchase Agreement Third Amendment (extend to require additional negotiation in January/February 2020)
2. Adopt resolution approving Purchase Agreement Third Amendment with changes (based on discussion)
3. No Action - Purchase Agreement would expire and project would not move forward

This item would be covered under normal staff duties.

Staff recommends extending the Closing Date to February 28, 2020 to allow time to renegotiate the Purchase Agreement.

Motion to adopt/deny Resolution #19-299 Approving Purchase Agreement Third Amendment for AEON Ramsey 2, LLC requiring additional negotiations in January/February 2020.