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HomeMy WebLinkAbout14135 City Clerk’s Office Item # M-14 Background Paper for Proposed Resolution COUNCIL MEETING DATE: December 26, 2018 TO: President Christopher A. Nicoll and Members of City Council VIA: Brenda Armijo, Acting City Clerk CC: Sam Azad, City Manager FROM: Daniel C. Kogovsek, City Attorney SUBJECT: A RESOLUTION APPROVING AND AUTHORIZING THE SALE OF 60 GREENHORN DRIVE, PUEBLO, CO 81004 TO FRE COMPOSITES USA INC., A DELAWARE CORPORATION AND FURTHER AUTHORIZING THE PRESIDENT OF CITY COUNCIL TO EXECUTE A SPECIAL WARRANTY DEED AND RELATED DOCUMENTS AT THE CLOSING OF THE SALE TRANSACTION SUMMARY: Attached is a Resolution which authorizes the sale of 60 Greenhorn Drive, Pueblo, CO 81004 to FRE Composites, Inc., a Delaware Corporation (“Company”) and further authorizes the President of City Council to execute a Special Warranty Deed and related documents at closing. PREVIOUS COUNCIL ACTION: The Company is a Delaware corporation associated with a Canadian pipe manufacturer. Since 2011, the Company has operated a fiberglass composite pipe manufacturing facility located at 60 Greenhorn Drive, Pueblo, CO, 81004. On January 25, 2011, economic incentives in the amount of $1,266,800 were provided to the Company as follows:  $750,000 used for the purchase of the industrial building located at 60 Greenhorn Drive, Pueblo, CO 81004;  $5,300 for an appraisal, environmental inspection and closing costs;  $1,500 to Pueblo Development Foundation for managing the renovation of 60 Greenhorn Drive;  $510,000 distributed as follows: - $240,000 for the acquisition of equipment; - a lease subsidy of $240,000 applied toward the Company’s “Triple Net” Lease; - $30,000 to remodel and renovate the building located at 60 Greenhorn Drive, In exchange for the economic incentives from the City, the Company agreed to hire 30 full-time employees whose annual compensation would average at least $43,000 per employee. The Employment Commitment agreed to by the Company is from February 1, 2014 through January 31, 2021. Amendment No. 1 to the Employment Agreement was agreed to by the parties on July 24, 2012. That Amendment approved an exchange of collateral whereby the City’s first security interest in the Company’s equipment located in Pueblo County was replaced by cash collateral in the amount of $240,000. Amendment No. 1 required a gradual release of cash collateral to the Company as the Company fulfilled its employment commitment over time. On August 8, 2016, by Resolution No. 13496, the City Council approved the following changes to the contractual obligations of the Company to the City: (1) The lease subsidization terminated, effective July 1, 2016. In exchange for the eventual transfer of 60 Greenhorn Drive from the City to the Company at the end of the lease term, the Company agreed to pay $337,500.00 in future lease payments to the City. However, the City also agreed to reimburse the Company $69,428.64 for the previously accrued but unused rent subsidy. (2) The Company agreed to satisfy and discharge the $510,000 in economic incentives by continuing to employ 30 full-time employees (whose annual compensation shall average at least $43,000) through January 31, 2021. In the event Company defaults in its Employment Commitment, the Company agreed to repay the remaining balance of the $510,000 in economic incentives on a pro-rata basis. (3) To secure the repayment of the $510,000 in economic incentives, the Company granted the City a first security interest in the Company’s manufacturing equipment situated at the Company’s manufacturing facility located at 60 Greenhorn Drive, Pueblo, CO 81004. (4) As a result of the Company giving the City a new first secured position in the Company’s equipment located in Pueblo, the City released the remaining cash collateral by making a payment of $202,582.68 to the Company. Said sum was computed by subtracting from the current cash collateral balance of $211,439.69 the sum of $5,528.49 owed by the Company for failing to meet its employment commitment in 2014 and the sum of $3,428.52 owed by the Company for failing to meet its employment commitment in 2015. BACKGROUND: Pursuant to Article 22 of the 08-08-16 Lease, Company has the option of purchasing 60 Greenhorn Drive by paying the remaining balance owed to the City under the Lease. Company has paid rent through December, 2018 in the amount of $181,250 (29 months @ $6,250 per month) and still owes the City $156,250 (25 months @ $6,250 per month). FINANCIAL IMPLICATIONS: The Lease balance of $156,250 will be paid to the City at closing. However, the City, pursuant to Article 23 of the Lease, will pay the Company $69,428.64 for the previously accrued but unused rent subsidy. BOARD/COMMISSION RECOMMENDATION: Not applicable. STAKEHOLDER PROCESS: Not applicable. ALTERNATIVES: If this Resolution is not approved, the City will be in breach of its previous agreements with the Company. RECOMMENDATION: Approve the Resolution. Attachments: Resolution; Special Warranty Deed RESOLUTION NO. 14135 A RESOLUTION APPROVING AND AUTHORIZING THE SALE OF 60 GREENHORN DRIVE, PUEBLO, CO 81004 TO FRE COMPOSITES USA INC., A DELAWARE CORPORATION AND FURTHER AUTHORIZING THE PRESIDENT OF CITY COUNCIL TO EXECUTE A SPECIAL WARRANTY DEED AND RELATED DOCUMENTS AT THE CLOSING OF THE SALE TRANSACTION BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The sale of 60 Greenhorn Drive, Pueblo, CO 81004 to FRE Composites USA Inc., a Delaware corporation, shall be and hereby is approved and authorized. SECTION 2 The President of City Council is authorized to execute and deliver a Special Warranty Deed, in substantially the form attached hereto. The President of City Council is also authorized to execute and deliver such other documents as are customarily required at real estate closings, at the closing of this sale transaction. SECTION 3. The officers and staff of the City are authorized and directed to perform any and all acts consistent with this Resolution which are necessary or appropriate to effectuate the transaction described herein. SECTION 4. This Resolution shall become effective immediately upon final passage. INTRODUCED: December 26, 2018 BY: Ed Brown MEMBER OF CITY COUNCIL APPROVED: PRESIDENT OF CITY COUNCIL ATTESTED BY: ACTING CITY CLERK Reception 2126868 01/02/2019 08:46:52 AM AFTER RECORDING RETURN TO: Thomas P.Kearns,Esq. Fairfield and Woods,P.C. 1801 California Street,Suite 2600 Denver,CO 80202 SPECIAL WARRANTY DEED THIS DEED is dated December 26,2018,and is made between PUEBLO,a Municipal Corporation,whose address is c/o The City Attorney,Pueblo Law Department, One City Hall Place,3`d Floor,Pueblo,CO 81003,the"Grantor,"and FRE COMPOSITES USA, INC., a Delaware corporation, whose legal address is 60 Greenhorn Drive, Pueblo, CO 81004,the"Grantee." WITNESS, that the Grantor, for and in consideration of the sum of TEN DOLLARS ($10.00), the receipt and sufficiency of which is hereby acknowledged,hereby grants, bargains, sells,conveys and confirms unto the Grantee and the Grantee's successors and assigns forever,all the real property,together with any improvements thereon,located in the County of Pueblo and State of Colorado,described as follows: Lots 9 and 10, Minnequa Industrial Park,First Filing, County of Pueblo,State of Colorado. Also known as 60 Greenhorn Drive,Pueblo,CO 81004 Assessor parcel numbers: 1524001008 and 1524001002 TOGETHER with all and singular the hereditaments and appurtenances thereunto belonging, or in anywise appertaining,the reversions,remainders,rents, issues and profits thereof,and all the estate,right,title,interest,claim and demand whatsoever of the Grantor, either in law or equity, of, in and to the above bargained premises, with the hereditaments and appurtenances. TO HAVE AND TO HOLD the said premises above bargained and described, with the appurtenances, unto the Grantee and the Grantee's successors and assigns forever. The Grantor, for itself and its successors and assigns, does covenant and agree that the Grantor shall and will WARRANT TILE TITLE AND DEFEND the above described premises, but not any adjoining vacated street or alley, or other right-of-way that adjoins the real property, in the quiet and peaceable possession of the Grantee and the successors and assigns of the Grantee, against all and every person or persons claiming the whole or any part thereof, by,through or under the Grantor except and subject to general property taxes and those created by acts or any default of Grantee and subject to the easements, rights-of-way, conditions, covenants, restrictions, reservations, and limitations of record and those created by acts or any default of Grantee and subject to,those matters disclosed on Exhibit A attached hereto and made a part hereof by this reference. IN WITNESS WHEREOF,the Grantor has caused this Special Warranty Deed to be executed,on the date set forth above. 044 4 ' o GRANTOR: ATTEST: ry , + G •UEBLO,a Mu,'•',. Corporation impft Ounsi ,. 1101°F p eul►tCity Clerk `a,°C1 iilllllrMllBtill 46' Na •- %•.' opher A.Nicoll III"III"0 Title: President of the City Council 44, Recording Requested by: No.16B.Rev.10-09. SPECIAL WARRANTY DEED (From a Corporation) (Page 1 of 3) FNTG-NCS Colorado 2126868 Page 2 of 3 01/02/2019 08:46:52 AM STATE OF COLORADO ) )ss. County of Pueblo ) The foregoing instrument was acknowledged before me this 26th day of December,2018,by Christopher A.Nicoll, as President of the City Council of Pueblo,a Municipal Corporation. Witness my hand and official seal. My commission expires: 6 Y 0 4/0:4,d-<, K o DANIEL C.KOGOVSEK Notary Public NOTARY PUBLIC STATE OF COLORADO yp ID 00640.4831, • .- rgibikevtly Created Legal Description(08-35-106.5,C.R.S.) No.16B.Rev.10-09. SPECIAL WARRANTY DEED (From a Corporation) (Page 2 of 3) 2126868 Page 3 of 3 01/02/2019 08:46:52 AM EXHIBIT A 1. Water rights,claims of title to water,whether or not these matters are shown by the Public Records. 2. Taxes and assessments for the year 2018 and subsequent years,a lien not yet due or payable. 3. Terms,conditions,provisions,agreements and obligations contained in the Agreement as set forth below: Recording Date:January 9, 1974 Recording No.:Book 1770 Page 247 4. Terms,conditions,restrictions,provisions,notes and easements but omitting any covenants or restrictions,if any,including but not limited to those based upon race,color,religion,sex,sexual orientation,familial status, marital status,disability,handicap,national origin,ancestry,source of income,gender,gender identity,gender expression,medical condition or genetic information,as set forth in applicable state or federal laws,except to the extent that said covenant or restriction is permitted by applicable law,as set forth on the Plat Minnequa Industrial Park,First Filing set forth below: Recording Date:January 9, 1974 Recording No:Book 1770 Page 252 and 253 5. All interest in all oil,gas and other mineral rights as reserved in the instrument set forth below,and any and all assignments thereof or interests therein: Recording Date: September 12, 1974 Recording No.:Book 1793 Page 437 (Affects Lot 10) 6. Terms,conditions,provisions,agreements and obligations contained in the Easement Agreement as set forth below: Recording Date:March 28,2008 Recording No.:Reception No. 1763524 Assignment of Easement Agreement as set forth below: Recording Date:March 28,2008 Recording No.:Reception No. 1763524 (Affects Lot 10) No.16B.Rev.10-09. SPECIAL WARRANTY DEED (From a Corporation) (Page 3 of 3)