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HomeMy WebLinkAbout13581 RESOLUTION NO. 13581 A RESOLUTION APPROVING AN AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION AND THE PUEBLO DEVELOPMENT FOUNDATION, INC., A COLORADO NON- PROFIT CORPORATION, RELATING TO 1 JETWAY COURT, PUEBLO, CO 81001 AND AUTHORIZING THE PRESIDENT OF CITY COUNCIL TO EXECUTE SAID AGREEMENT BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The Agreement dated December 12, 2016 between the City and the Pueblo Development Foundation, Inc. (“PDF”) a copy of which is attached hereto and incorporated herein by this reference, having been approved as to form by the City Attorney, is hereby approved. SECTION 2. The President of the City Council is hereby authorized to execute and deliver the Agreement in the name of the City and the City Clerk is directed to affix the seal of the City thereto and attest same. SECTION 3. The officers and staff of the City are directed and authorized to perform any and all acts consistent with the intent of this Resolution and the attached Agreement which are necessary or desirable to effectuate the transactions described therein. SECTION 4. This Resolution shall become effective immediately upon final passage. INTRODUCED: December 12, 2016 BY: Robert Schilling City Clerk’s Office Item # Q-2 Background Paper for Proposed Resolution COUNCIL MEETING DATE: December 12, 2016 TO: President Stephen G. Nawrocki and Members of City Council VIA: Gina Dutcher, City Clerk CC: Sam Azad, City Manager FROM: Daniel C. Kogovsek, City Attorney SUBJECT: A RESOLUTION APPROVING AN AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION AND THE PUEBLO DEVELOPMENT FOUNDATION, INC., A COLORADO NON-PROFIT CORPORATION, RELATING TO 1 JETWAY COURT, PUEBLO, CO 81001 AND AUTHORIZING THE PRESIDENT OF CITY COUNCIL TO EXECUTE SAID AGREEMENT SUMMARY: Attached is a Resolution approving and authorizing the President of City Council to sign an Agreement relating to 1 Jetway Court, Pueblo, Colorado 81001 (the “Property”). Under the attached agreement, the Pueblo Development Foundation (“PDF”) has agreed to pay the City $2.1 million. PREVIOUS COUNCIL ACTION: See Background. BACKGROUND: PDF is the owner of 1 Jetway Court in the Pueblo Memorial Airport Industrial Park. The parcel consists of land (approximately 6.32 acres) and improvements (a 50,720 square foot building), located thereon. PDF acquired the Property from the City on February 14, 2005 as part of a job creating capital improvement project which culminated in a lease to Benshaw, Inc. At the time of the lease the Property was remodeled in accordance with the requirements of Benshaw. Benshaw remained on the Property for a period of approximately ten (10) years and fulfilled all of its obligations to City and PDF. PDF retained ownership of the Property in anticipation of further economic development projects. On February 1, 2015, PDF entered into a lease of the Property with Bechtel National, Inc. (the “Bechtel Lease”). Bechtel continues to lease and use the Property in conjunction with its responsibilities for the destruction of the chemical weapons stockpile at the Pueblo Chemical Depot. The initial term of the Bechtel Lease is five (5) years. Bechtel has the option to renew the lease for four (4) successive periods of one (1) year each. In conjunction with the Bechtel Lease and pursuant to an agreement between PDF and the City, PDF advanced $1,300,000.00 from its separate funds for the remodeling of the Property in accordance with Bechtel’s specifications. Bechtel’s monthly rent obligation is $47,304.00. Under its agreement with the City, PDF retains the sum of $23,359.30 (“Remodel Rents”) each month in order to recover its initial capital outlay, and the balance of $23,944.70 (minus PDF’s 5% management fee) is paid over to the City and applied by the City as repayment for its initial expenditures in constructing what was, at the outset, a shell building on the Property. PDF desires to continue its ownership of the Property and to manage the Bechtel Lease and, upon its expiration, to seek new primary tenants as part of economic development projects. In conjunction therewith, PDF also desires to acquire the City’s rights to the remaining Bechtel rents as well as an equitable portion (to be divided with the City) of the rents of future primary tenants. FINANCIAL IMPLICATIONS: Pursuant to the attached Agreement, PDF will immediately pay the City $2.1 million in exchange for an assignment of the City’s right to lease payments under the Bechtel Lease and subsequent leases. PDF will receive all rental income from the Bechtel Lease until PDF’s Remodeling Costs and the $2.1 million provided for in the attached Agreement are reimbursed in full. After PDF has been fully reimbursed, rental income from the Bechtel Lease and subsequent leases (less PDF’s 5% property management fee) will be paid to the City’s half cent economic development fund until that fund has been reimbursed in full for its investments in the Property. BOARD/COMMISSION RECOMMENDATION: Not applicable to this Resolution. STAKEHOLDER PROCESS: Not applicable to this Resolution. ALTERNATIVES: If this Resolution is not approved, the City will forfeit an opportunity to be paid $2.1 million. RECOMMENDATION: Approve the Resolution. Attachments: Proposed Resolution; Proposed Agreement AGREEMENT This Agreement is made and entered into as of the 12thday of December, 2016 by and between the City of Pueblo, a Municipal Corporation ("City"), and Pueblo Development Foundation, a Colorado Non-Profit Corporation ("PDF"). RECITALS PDF is the owner, by conveyance from City dated February 14, 2005, of the land (approximately 6.32 acres) and improvements (a 50,720 square foot building), located thereon, (collectively the "Property"), at 1 Jetway Court in the Pueblo Memorial Airport Industrial Park. PDF acquired the Property from City as part of a job creating capital improvement project which culminated in a lease to Benshaw, Inc. At the time of the lease the property was remodeled in accordance with the requirements of Benshaw; Benshaw remained on the property for a period of approximately ten (10) years and fulfilled all of f! its obligations to City and PDF. PDF retained ownership of the Property in anticipation of further economic development projects. On February 1, 2015, it entered into a lease of the Property with Bechtel National, Inc. (the "Bechtel Lease"). Bechtel continues to lease and use the property in conjunction with its responsibilities for the destruction of the chemical weapons stockpile at the Pueblo Chemical Depot. The initial term of the Bechtel Lease is five (5) years. Bechtel has the option to renew the lease for four (4) successive periods of one (1) year each. In conjunction with the Bechtel Lease and pursuant to an agreement between PDF and the City, PDF advanced $1,300,000.00 from its separate funds for the remodeling of the property in accordance with Bechtel's specifications. Bechtel's monthly rent obligation is $47,304.00. Under its agreement with the City, PDF retains the entire amount of monthly rents in order to recover its initial capital outlay; thereafter, the monthly rentals were to be paid over to the City (minus a PDF 5% management fee) and to be applied by the City as repayment for the initial expenditures in constructing what was, at the outset, a shell building on the property. PDF desires to continue its ownership of the property and to manage the Bechtel Lease and, upon its expiration, to seek new primary tenants as part of economic development projects. In conjunction therewith, PDF also desires to acquire the City's rights to the remaining Bechtel rents as well as an equitable portion (to be divided with the City) of the rents of future primary tenants. City and PDF have reached an agreement on these matters and now desire to set forth their agreement in writing. Page 1 of 4 NOW, THEREFORE, for and in consideration of the foregoing, and of the mutual covenants, terms, promises, and conditions set forth herein, City and PDF agree as follows: 1. ASSIGNMENT OF RENTS. City hereby assigns to PDF all of its right, title, and interest in and to its portion of the rents due under the Bechtel Lease. At such time as the primary term of the Bechtel Lease or any exercised renewal term expires or is sooner terminated in accordance with the lease terms, then PDF shall pursue, in good faith, a new primary tenant for the Property. At such time as a new tenant is secured and a new lease agreement is put in place, PDF and City shall negotiate an equitable division of the new rents with the mutual goal of allowing the City to recover any amount of its initial expenditure which remains unpaid and allowing PDF to recover its initial outlay under the Bechtel Lease, if any remains, and to fully recover its costs paid to the City under this Agreement. 2. CONSIDERATION. In consideration for the assignment by City and of the further terms and conditions set forth in Section 1 above, PDF shall pay to City at the closing on this Agreement, the sum of TWO MILLION ONE HUNDRED THOUSAND DOLLARS ($2,100,000.00) in cash or certified funds which funds shall, at the request of City, be transferred by electronic wire transfer. 3. OUTSTANDING OBLIGATION TO CITY. PDF acknowledges and agrees that upon the execution and closing of this Agreement the City is still entitled to recover from the Property, and/or its rent or other proceeds, for the benefit of that portion of its sales tax fund collected and used for job creating capital projects, the sum of NINE HUNDRED EIGHTY-ONE THOUSAND TWO HUNDRED NINETY-SIX DOLLARS AND FORTY-NINE CENTS ($981,296.49). As set for in Section 2 above, it is the expectation of the parties that this amount will be repaid from future rents or other proceeds generated by the Property, but such amount shall, until repaid in full to City, constitute a priority lien against the Property. Accordingly, PDF agrees that this obligation to the City shall be secured by a first Deed of Trust on the Property and PDF, as the owner, shall execute and deliver to City its Deed of Trust in a form and content approved by the City Attorney. The existing Deed of Trust on the Property which secured PDF's obligations under the 2005 agreement between City and PDF, shall be released by the City immediately upon and in conjunction with the execution and the recording of the new Deed of Trust to be delivered to the City as set forth herein. The new Deed of Trust shall be recorded immediately upon Closing of this Agreement. 4. CONTINUING DUTIES OF PDF. Page 2 of 4 PDF shall perform all covenants and conditions on the part of the Lessor to be performed under the Bechtel Lease and shall enforce all covenants and conditions on the part of the Lessee to be performed under the Bechtel Lease. PDF shall provide an annual report and accounting to City of performance by the parties, rents collected, and other matters related thereto under the Bechtel Lease. 5. DEFAULT. If PDF defaults in the performance of any covenant or provision of this Agreement, or of the Bechtel Lease, it shall within ten (10) days, after written demand is given to PDF by City, convey title of the Property to City by Special Warranty Deed free of liens and encumbrances, except the Bechtel Lease and PDF's Deed of Trust securing the obligation set forth in Section 3 hereof. In conjunction with any such required conveyance of the Property to City, PDF shall assign the Bechtel Lease to the City. The provisions of this Section may be specifically enforced. 6. SEVERABILITY. If any portion of this Agreement is declared by a Court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the other provisions of this Agreement which shall remain in full force and effect. 7. NO THIRD PARTY BENEFICIARY. The provisions of this Agreement are, and will be, for the benefit of City and PDF only and not for the benefit of any third party and, accordingly, no third party shall have any right or remedy hereunder, or the right to enforce any provision of this Agreement. 8. MISCELLANEOUS. When executed by the parties, this Agreement shall be binding upon and inure to the benefit of the City and PDF and their respective successors, and permitted assigns. PDF may not assign this Agreement or any of its rights and duties hereunder without the prior written consent of City, which consent shall not be unreasonably withheld. This Agreement may be modified only by a subsequent writing making reference to this Agreement and signed by each of PDF and City. This Agreement consists of 4 pages of which this is the 3rd Page 3 of 4 Executed at Pueblo, Colorado the day and year first above written. PUEBLO, A MUNICIPAL COR' :RATION-----, 40gw°m1 I°/B Preside. • v •• - - Attest: City rk Approved as to form: 70 142--e City Attorney PUEBLO DEVELOPMENT FOUNDATION By P sident / , Attest: S-cretary Page 4 of 4