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City Council Regular
Consider Subrogation Agreement, 8500 Evergreen Blvd.
Matt Brown, Economic Development Coordinator
The Council is asked to consider a Subrogation Agreement with JMS Holdings, LLC related to economic development loans for a project at 8500 Evergreen Boulevard.
In 2010, the EDA and City Council approved an economic development assistance package for Biovest International, LLC, located at 8500 Evergreen Boulevard. Biovest, now known as The Cell Culture Company, completed a $1.1 million project that included an interior remodel and equipment purchase. The City received a Minnesota Investment Fund award from the State of Minnesota in the amount of $250,000. These funds were loaned to Biovest on a ten-year term with a variable interest rate and balloon payment. In addition, the EDA provided a $103,000 loan using funds from TIF District 1-29 with a matching term. The building owner, JMS Holdings, LLC, which is affiliated with Shamrock Development, funded the remaining improvements. The loan documents required that Biovest create at least 14 new jobs and retain at least 24 jobs in Coon Rapids within two years of completing the project. The loans are secured by both mortages on the real estate and a security in the equipment. Biovest previously met the job creation requirements of the project and is current on loan repayments. Both loans will be due in full in 2021.
JMS intends to sell the property to Cretex Properties, Inc. and Biovest will remain a tenant in the building. Rather than assign the mortgages to the buyer, JMS proposes entering into Subrogation Agreements with the City and EDA. These agreements establish that in the event of Biovest's default, the City and EDA can access an escrow account to repay the loans. An Escrow Agreement between Cretex and JMS establishes the account, in which JMS will deposit a sum of $297,395.18, which corresponds to the current loan balances, plus $50,000. JMS must provide satisfactions from both the City and EDA of each loan in order to have the escrowed funds released back to JMS. The Subrogation Agreement will allow, if necessary, JMS to seek from Biovest any monies paid from the escrow agreement to the City or Cretex. City Staff believes that the proposed escrow arrangement minimizes risks to the City and EDA and is a preferred form of security.
Staff recommends that the Council approve the Subrogation Agreement with JMS Holdings, LLC.
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