Adopt Resolution #20-013 Approving Notice of Default (Expiring Purchase Agreement) for AEON Ramsey 2, LLC
Please Note - this case has been moved from the Consent Agenda to the Regular Agenda as item 7.0.
 

Purpose:
Seek authorization to send Notice of Default Letter to AEON Ramsey 2, LLC relating to non-performance of Purchase Agreement, First Amendment to Purchase Agreement and Second Amendment to Purchase Agreement.

Background:
Staff presented an option to extend the purchase agreement to allow for the ability to negotiate an extension or amend the terms of the existing Purchase Agreement and Amendments at the December 14, 2019 City Council Meeting.  The City Council took no action at that meeting leaving the Second Amendment to Purchase Agreement as the active purchase agreement which requires the Closing to occur on or before January 13, 2020.  At the time this memo was drafted a closing was not scheduled and did not occur.  Per the terms of the active active purchase agreement failure to close, to obtain financing and government approvals put the AEON Ramsey 2, LLC in default.  

The active purchase agreement requires the City provide a Notice of Default if the Buyer is not in compliance with the terms and conditions of the agreement.  The Buyer has 10 days to cure the Default. If the default is not cured the City may exercise remedies including, but not limited to the retainage of Non-Refundable Earnest Money. 

Additional 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 prompted the request for the extension for more time to work out a solution.

The City Council reviewed a request to extend the closing date at the December 14, 2019. The City Council voted to deny Resolution #19-299 which would have extended the closing date.

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.  

Notification is not required. 

Alternatives:

1. Adopt Resolution #20-013 Approving Notice of Default for AEON Ramsey 2, LLC and retain $30,000 in Non-Refundable Earnest Money.
2. Consider deviation from existing agreement and to negotiate a new settlement.
3. Sell the property to AEON Ramsey 2, LLC without the Buyer obtaining Governmental Approvals and provision of proof of project Financing.
4. Something else.

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

This item would be covered under normal staff duties.

Staff has no recommendation.

Motion to adopt Resolution #20-013 Approving Notice of Default for AEON Ramsey 2, LLC.