2004-11-22PLEASE TURN OFF AT CELL PHONES & PAGERS IN COUNCIL CHAMBERS.
AGENDA
Page
1. Open meeting
2. Discussion with representatives of BFL2
1-2
3. Adjourn
FENSKE &
ATTORNEYS AT LAW
SUND, P.A.
DAVID R. FENSKE*
JAMES F. MORRISON
BRIAN M. SUND
MARC L. KI~UGER**
JILL N. BROWN
ERIC G. NASSTROM
PEGGY A, BONTHIUS
DAVID A, SCOTT
tRICIA a. OLSON
JONATHAN G, MOBBS
Housing and Redevelopment Authority
5341 Maywood Road
Mound, MN 55364
Attn: Executive Director
SUITE I0:~
COUNTY ROAD IOI
MINNETONKA, MINNESOTA 55345
F/riter 's Direct' Dial: 952.277.0116
mkruger~morrisonfenske, corn
November 12, 2004
REOE Vt D
200t
OUND PLA[VNING & INSR
TEL; (9521 97.5-0050
FAX: 19521 975-0058
www. morrisonfenske.oom
*ALSO ADMITTED IN WISCONSIN
**REAL PROPERTY SPECIALIST,
CERTIFIED BY THE MINNE*~O*fA
STATE BAR ASSOCIATION
VIA CERTIFIED MAIL
Contract for Private Redevelopment dated as of October 25, 2004 (the
"Contract") by and between the Housing and Redevelopment Authority in and
for the City of Mound (the "HRA'9 and BFL 2, LLC ("BFL 2'9
Dear Executive Director:
On behalf of BFL 2, this letter is being sent to you for purposes of exercising the rights of
BFL 2 to terminate the Contract, as more particularly described below. This action is not taken
lightly, as BFL 2 continues to have a strong interest in being involved in the HRA's redevelopment
of Auditors Road. As you know, many months of effort have been put forth by both sides in this
transaction, trying to understand and manage the many, often moving, parts needed to assemble this
redevelopment. From the start, BFL 2 and its representatives have been committed to find a way to
make its hotel project fit within the physical and financial constraints presented by this
redevelopment, even as those constraints became more and more burdensome for reasons beyond the
control of BFL 2. As the site became ever smaller, and the costs of the hotel project increased as a
result, BFL 2 continued to spend many hours and incur substantial costs (including costs to be
reimbursed to the HRA for its stafftime and consultant costs). That commitment was further
evidenced by the execution of the Contract, even though the most important of those constraints were
at the time of such execution still unresolved, with the understanding that the parties would work to
resolve the same by November 1, 2004.
Unfortunately, in spite of its best efforts, BFL 2 has been unable to satisfy itself as to any of
the conditions that were to be resolved by November 1, 2004, most particularly being, of course, the
financial feasibility of its hotel project. As of November 1, 2004, and continuing to this date, BFL 2
has been unable to satisfy itself that it will be able to bridge the gap in the sources and uses of funds
for the hotel project that was identified by the parties in our meeting at the City on October 25, 2004.
As was discussed at that meeting, the principal financial challenge of the hotel project is the cost of
constructing structured parking, the need for which has been created by the physical limitations put
on the hotel site by the demands of Mound Harbor Renaissance for ever more intense development of
the overall Auditors Road project. Simply stated, there is no way for BFL 2 to obtain anything near
to a reasonable return on its investment for the hotel project if it is obliged to pay the cost of
constructing that structured parking. At this time, BFL 2 has no other source of payment for those
costs, and it appears that it will be no sooner than November 23, 2004, when the HRA and the City
propose to hold a joint meeting to consider the financial feasibility of the hotel project and the desire
A PROFESSIONAL ASSOCIATION DEDICATED TO CLIENT SERVICE
-1-
MORRISON FENSKE & SUND,
Housing and Redevelopment Authority
NoVember I2, 2004
Page 2
P.A.
and ability of either body to provide any form of assistance for the payment of such costs, before
BFL 2 will have any additional information which might brighten the picture with respect to this
financial feasibility concern. While BFL 2 has not been encouraged by the discussions to date with
the HRA on the matter of obtaining additional assistance, and indeed has recently been greatly
discouraged to hear that Mound Harbor Renaissance is asking for more than $3 Million of additional
assistance itself, BFL 2 has indicated to the HRA its willingness to wait until after that joint meeting
on the 23rd before it takes any action with respect to its rights to terminate the Contract, provided that
the HRA would agree to extend the date for payment of the so-called Relocation Contribution until
after that meeting. The HRA has refused to grant such extension. It is under these circumstances that
BFL 2 is forced to exercise its right to terminate the Contract under Section 3.2(a) (1) of the
Contract, based on its determination made on November 1, 2004 that sufficient progress has not been
made in determining the financial feasibility of the hotel project.
Please note also that BFL 2 is exercising its right to terminate the Contract for failure of the
HRA to satisfy the conditions in items (1) and (2) of Section 3.2(b), namely, failure to obtain
execution of the MCES agreements on or before September 30, 2004, and (more significantly, given
its demands for additional assistance), the failure of the Mound Harbor Renaissance to execute its
Contract with the HRA on or before November 1, 2004.
As indicated above, BFL 2 continues to have a strong interest in this redevelopment project
and a desire to be involved in the hotel portion thereof, if and when the constraints described above
can be put into a condition which in its opinion makes the hotel project financially feasible for BFL
2. To that end, BFL 2 will be seeking to convene a personal workshop with the City Council both to
review the history of this transaction, and to explore whether there may be any future for BFL 2 in
this redevelopment.
Finally, on behalf of all who have been involved for BFL 2 in this matter, I would like to
thank the HRA team for its sincere and substantial efforts to attempt to move this project forward,
and of course the good working relationship which we have enjoyed with them.
MLK/cs
cc: Rick Bloomquist
John Seibert
John Dean
Very truly yours,
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