04-24-2017 Council Work Session Packet

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CITY OF ORONO MEMORANDUM DATE: April 24, 2017 TO: Orono City Council FROM: Jeremy Barnhart, Community Development Director RE: HRA Ground Lease 1. Purpose. The purpose of this work session item is gain an understanding of the Council's appetite to consider a proposal from a potential buyer that would involve the sale of the Orono Woods property. The proposal has not yet been developed. 2. Background. The City of Orono's HRA owns and leases the land under Orono Woods Senior Apartments to the owner of the building, Orono Senior Housing, LLC. Orono Woods Senior Apartments are at the northwest corner of Brown Road and Wayzata Boulevard. When built in 2001, the Council wanted to ensure that Orono Woods would remain a senior housing apartment building, and retained ownership of the land for that purpose. In 2006, the minimum age was lowered from 62 and above to 59 and above via an amendment to the lease. The lease is 99 years, expiring December 2100, and rent is $1.00 per year. The tenant may purchase the property at the conclusion of the lease for $1.00. The tenant may not assign its' interest in the lease without consent of the City. This project was financed in part via Tax Increment Financing (TIF) funds. The TIF district expires February, 2024. The development agreement stipulates that if the building remained as housing for residents 62 and over the park dedication and utility connection fees of $202,038 would be forgiven. Orono Senior Housing is considering selling the building; the financing for prospective buyers relies on owning the land. The proposed buyer is a for-profit metro wide operator of senior housing communities, recently purchasing a building from the City of Blaine. The buyer plans to operate the building as a senior housing apartment building, in effect remain generally consistent with the parameters of the already established agreements, though own the land. 3. Issue. The Buyer seeks support on two questions. 1. Assuming no changes to the lease, would the Council object to the Tenant assigning the land lease to the buyer? 2. Assuming an agreement can be written to the satisfaction of the City, would the Council consider reviewing a proposal from the buyer that allows for the sale of the land? The agreement would include discussion of the following city goals: a. Mechanism to ensure the building will remain senior housing b. Amendment to allow for a for-profit operator c. Tax Increment Financing impacts, if any.