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HomeMy WebLinkAboutCity Council Packet 03-13-1996 Special 1PLYMOUTH CITY COUNCIL SPECIAL COUNCIL MEETING WEDNESDAY, MARCH 13, 1996 6:00 P.M. I. Approve Wetland Mitigation Plan for Lifetime Sports Complex located east of the intersection of 36th Avenue and Plymouth Boulevard. City of Plymouth and Lifetime Fitness (96003) DATE: March 7, 1996 for the City Council Meeting of March 13, 1996. TO: Dwight D. Johnson, City Manager through Fred G. Moore, P.E., Director of Public Works FROM: Daniel L. Faulkner, P.E. City Engineer SUBJECT: Wetland Replacement Plan Application (Impacting Greater than 10,000 sq. ft.) City of Plymouth Recreation Sports Facility CITY PROJECT NO. 541 ACTION REQUESTED: Make a motion to adopt the attached resolution approving filling wetlands and the Wetland Replacement Plan for City of Plymouth Recreation Sports Facility. BACKGROUND: On behalf of the City of Plymouth, McCombs Frank Roos Associates (MFRA) has submitted a Wetland Replacement Plan for the proposed Plymouth Recreation Sports Facility. The project will include the construction of a sports facility along Plymouth Boulevard including fitness area, swimming pools, and ice arena. The project will impact a 1.45 acres low quality PEMC/PUBF seasonally flooded) Wetland through utilizing the wetland as a storm water quality pond and additional site grading. Although mitigation may not be required for the entire impacted wetland basin, a 2.97 acre 2:1) mitigated PEMC/PUBF will be constructed on-site adjacent to existing nearby wetlands, as indicated by the following table: Basins Area' Acres Tvne Impacted Area. Acres Mitigated Area, Acres A 1.45 2 & 3/ PUBF 1.45 2.97 B 49.21 2&3 0 0 Total Wetland Impacted Under WCA = _ > 1.45 2.97 Notices of Project Application, as required by the State Wetland Act of 1991, (WCA) have been published and the 30 day review period established by the regulation ends on March 13, 1996. A copy of the application is available for review in the Engineering Department. Currently, we have not received any comments, however, any received comments or appeals will be reported to the Council accordingly. RECOMMENDATIONS AND CONCLUSIONS: I recommend that the City Council authorize the Mayor to sign the attached resolution approving the Wetland Replacement Application for the Plymouth Recreation Sports Facility Daniel L. Faulkner, P.E. attachment : Resolution Findings of Fact GAENGMETLANDMURMSPORTS. DOC CITY OF PLYMOUTH RESOLUTION NO. 96 - PROVING FILLING WETLANDS AND THE WETLAND REPLACEMENT PLAN FOR Recreation Sports Facility CITY PROJECT NO. 541 WHEREAS, the developers of City of Plymouth Recreation Sports Facility propose to fill wetlands for the construction of Recreation Sports Facility; and WHEREAS, there are no reasonable alternatives for the location of this facility, and WHEREAS, a Mitigation Plan was prepared replacing the wetlands in kind at a 2 to 1 ratio which is required by the Wetland Conservation Act of 1991; and WHEREAS, the Replacement Plan meets the requirements of the Wetland Act. NOW, THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF THE CITY OF PLYMOUTH, MINNESOTA: That the Mayor is authorized to execute the LGU'S Findings of Facts, approving the filling of wetlands and the Replacement Plan for on-site wetland restoration subject to the following conditions: 1. The replacement wetland must be monitored for a five (5) year period from the date of completion. 2. The Engineering Department shall prepare an annual monitoring report to the city of Plymouth on the anniversary date of the completion of the replacement wetland for a period of five (5) years containing information required in WCA rule 8420.0620. 3. The replacement wetland must be constructed concurrently with building construction. 4. A deed creating a restrictive covenant running with the land for the replacement area must be recorded. The deed shall be submitted to the City for approval before recording. Adopted by the City Council on March 13, 1996. O:\ENC\W 7LANDS\RESOLVSPORTRES.DOC Applicant: WETLAND CONSER VA TION A CT - SEQUENCING/REPLACEMENT PLAN LGU's FINDINGS OF FACT CITY OF PLYMOUTH Recreation Sports Facility CITY PROJECT NO. 541 City of Plymouth 3400 Plymouth Blvd. Plymouth, MN 55447-1482 ph # (509)-5000 Proiect Location: S 1/2 Sec. 16, & N1/2 Sec. 21, Township 118, Range 22 File No.: City Project 541. Authorized Agent: McCombs Frank Roos Associates (MFRA) I. DETERMINATION OF IMPACT AVOIDANCE 1) Is project wetland dependent F-1 yes FX I no 2) Has applicant provided at least 2 alternatives in addition to the roposed project such as: Alternate sites X yes no Alternative project configurations X yes no No build alternative X yes no a) Are the 2 alternatives considered good faith efforts 0 yes F-1 no Why or why not? (If no, proposal must be denied) b) Have all feasible and prudent alternatives available that F—R] yes F-1 no would avoid impacts to wetlands been considered? If no, proposal must be denied, if yes, proceed to items II -IV) II. DETERMINATION OF IMPACT MINIMIZATION 1) Has the applicant demonstrated an effort to minimize impacts to wetlands by considering modification of the project? Size X yes no not feasible Scope X yes no not feasible Configuration X yes no not feasible Density X I yes no 2) If any are answered no, explain objections Applicant has 30 days to modify proposal if warranted, or it is denied) G:\ENG\WECLANDS\FFACfSVSPORTFF.DOC III. DETERNIINATION OF IMPACT RECTIFICATION 1) An activity may qualify for a no -loss determination if all of the questions below are answered yes. a) Will all of the physical characteristics of the affected F7yes a no wetland be restored to pre -project conditions?? b) Will the physical characteristics of the wetland be restored F7yes F_x no within 6 months? c) Has the applicant provided a performance bond sufficient F-1 yes 0 no to cover costs of restoring the wetland? IV. DETERMINATION OF REDUCTION OR ELIMINATION OF IMPACTS OVER TIME 1) Will additional wetland impacts be reduced or eliminated 0 yes F-1 no through sound project operation and maintenance? 2) Will best management practices be used to protect wetland 0 yes 1-1 no functions and values? V. UNAVOIDABLE IMPACTS 1) Will unavoidable wetland impacts that remain be replaced? 0 yes F-1 no If all of the above questions are answered yes, then sequencing has been adequately addressed. Sequencing Adequately Addressed X Sequencing NOT Adequately Addressed VI. REPLACEMENT PLAN The Replacement Plan as proposed in the application from City Of Plymouth along with supporting reports and documents: Approved INDenied The approval is subject to the conditions established in Resolution 94- as adopted by the LGU. Authorized LGU Official Date G:\ENG\WErLANDSTFACTS\SPORTFF.DOC 4G S _ L I PYQ •. 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As we discussed, I would like this to be included with the information for the downtown zoning meeting on Wednesday, March 13, 1996. I would like to discuss the enclosed concept plan with both the planning staff and the downtown subcommittee prior to the meeting. I would request that the zoning on our piece of land remain as it currently is so that we can move forward with this project. I appreciate your help. Sincerely, CARLSON RE ESTATE COMPANY, INC. Brd Lis Managing Director of Investments 612)333-9869 enclosures 2222 Plaza VII, 45 South Seventh Street, Minneapolis, Minnesota 55402 612-333-9898 11 6 W B R W INC. Planning Transportation Engineering Urban Design Thresher Square 700 Third Street So. Minneapolis, MN 55415 612/370-0700 Fax 612/370-1378 Denver Milwaukee Minneapolis Orlando Phoenix Portland San Diego Seattle DATE: TO: FROM: RE: March 5, 1996 Brad Lis Richard Wolsfeld, PE Memorandum Traffic Analysis of Proposed Development at 35th Avenue North/Vicksburg I have compared the proposed land use development plan of Carlson Real Estate Company with the land use assumed in the SRF "Downtown Concept Plan Traffic Study" dated September 11, 1995. The comparisons are as follows: Proposed Carlson Real Estate Company Development: 21,200 gross square feet of retail required parking Land use scenarios analyzed in the SRF Report appear to have the following land use assumptions on a site configured approximately the same as your site: 28,000 gross square foot theater 26,000 gross square feet of retail shopping transit station ramp parking The projected traffic from the proposed land use is as follows: 4,085 daily trips 179 PM Peak Hour Inbound 171 PM Peak Hour Outbound Obviously, your proposed development would generate less daily and PM peak hour trips than the land use assumed in the Downtown Concept Plan Traffic Study. Furthermore, the level of service at Vicksburg and 35th Avenue North would be improved over that reported. The attached drawings represent two conceptual alternative alignments for 35th Avenue North which will provide the same or better traffic operations than the alignment shown in the Downtown Concept Plan Traffic Study. RW/ch Attachments 523157 L l t TEL: 1-612-348-3932 Mar 8,96 16:19 No.037 P.01 PETER MC LAUGHLIN COMMIS310NER t FAA -948-03701 7. s l hMEsoi BOARD OF HBNNEPIN COUNTY COMMISSIONERS A-2400 GOVERNMENT CENTER MINNEAPOLIS, MINNESOTA 38487-0240 March 7, 1996 Joy Tierney, Mayor City of Plymouth 3400 Plymouth Boulevard Plymouth, MN 55447 Dear Ma rney: This past Wednesday, both of us participated in a conference call with other local officials and Secretary of Labor Robert Reich. Secretary Reich briefed us on the current status offunding for the Summer Youth Employment Program. Currently, the Senate is considering some funding for the 1996 Summer Youth Program. The House, however, continues to not be interested in funding this program. As you are probably aware, the Summer Youth Program, in both Hennepin County and the City of Minneapolis, provides valuable work experience for young people as well as providing valuable community improvements. A majority of the young people in the program are 14 and 15 years of age and cannot obtain employment in the private sector, Marty young people in the program participate in academic enrichment classes in addition to their work activities. We urge you to immediately call members of the Minnesota congressional delegation and urge their support for funding a 1996 Summer Youth Program. This funding decision must be made by the middle of this month. Thank you for your help and support. Sincerely Peter McLaughIin, Chair Hennepin County Board of Commissioners Sincerely, 5taro Sayles Belton Mayor City of Minneapolis ca W9 PR1NTFn ON NECYCIA',I) PAPRK FRIDAYFAxLc;r;.. Vol. l, No. 8 Lmc 8Ax"O""" A weekly legislative update front the League ofMin.n.esota Cities March 8, 1996 Tac bills move toward conference committee The House passed their omni- bus tax bill Thursday evening and the Senate is expected to take up their version late on Friday. The two bills bear little resemblance to each other, so we expect entertaining and possibly explosive negotiations as the conference committee meetings begin early next week. House bill hits a new low The House omnibus tax bill includes an amendment success- fully offered by Representatives Ron Abrams and Bob Milbert (and apparently supported by the business community) that would require cities, counties and town- ships to slash their 1997 levies to pay for property tax relief for cabins, commercial, industrial, apartments and homestead property. Under this amendment, the legislature decides who receives relief and local units pay for the relief. The county auditor would reduce each city, county and township 1997 levy by an amount equal to the difference between the net tax capacity computed using 1996 class rates and 1997 class rates multiplied by the local unit's 1996 tax rate. This sounds complicated but using a little shorthand, you can compute an estimated amount for your city. The class rate changes in the House tax bill reduce nearly every major class by an average of approximately 4.6 percent. So if you take 4.6 percent of your net tax capacity and multiply it by your 1996 tax rate, you will approxi- mate your city's mandated levy reduction. Tax Chair Ann Rest opposed the amendment, but the House approved it on a 78 to 54 vote. It is likely that many legislators did not understand the amendment but given the floor debate, that can hardly be considered an excuse. Call your Representative and tell them that it is ridiculous policy to require local units to slash their budgets to pay for property tax reductions granted by the state. Other notable features of the House bill include an increase in transportation financing by a phased -in transfer of the motor vehicle sales tax from the state's general fund to the highway fund. Senate takes a stab at reform The Senate's 348 -page tax bill includes a series of major prop- erty tax reform provisions and new taxes. Of greatest concern to cities are the elimination of HACA, a requirement that certain levy increases be applied to market value and major class rate changes. The bill would eliminate city, township and special district HACA in 1997, while the counties' portion would be redirected to reduce county property tax levies within cities for categorical pro- grams like criminal justice or the court system. At the same time, LGA would increase by $50 million and be distributed without any grandfathering. Check this week's Cities Bulletin for a thorough description of the Senate tax bill. Will there be anything lett to tax? provision in the Senate tax bill would grant an almost total exemp- tion for private property located at public airports. Senator Pat Pariseau (R -Farmington) amended the bill in committee to create a new tax exemption for property (buildings and improvements) owned by any person or entity, used for an airport facility, and located on leased land at an airport owned by a city or a reliever airport owned or operated by the Metropolitan Airports Commission (MAC) in a city of less than 50,000. The exemption would only become effective if the business and the city agree on payment for police and fire protection. Schools, counties, or other taxing districts would not be compensated. The House tax bill does not have a similar provision. Because city owned airports could adjust their leases, the tax ex- emption would be most significant for cities with MAC -owned airports or others. Reliever airports that would be affected include Lake Elmo, Eden Prairie, Crystal, Anoka, and Lakeville. For more information on City legislative Issues, contact any member of the League of Minnesota Cities Intergovernmental Relations team. T'd WUST:20 96, 60 ddW GROUND LEASE and between CITY OF PLYMOUTH, MINNESOTA and FCA, LTD, d/b/a LIFE TIME FITNESS 1 moved from here; text not shown} 33862.11 RNK/JRW:A3/O7/98 TABLE OF CONTENTS Page Recitals....................................... 1 Definitions ..................................... 2 Article One - Lease of Property 4 Article Two - City Residential Use Covenants and Minimum Operational Standards ......... 4 Article Three i S;,hool Teistr et Use Covenants Artiele - Use of Property - Site Development and Construction of Club/Pool Complex .............. 13 Article Construction Disbursement ........ Article tx -Name of Complex and Signage .... {2-0} UM Article City's Right of First Refusal ....... f2* Article fEeveq Life Time Option to Purchase ..... {24f Article fT - Payment of Taxes and Other Impositions ................................ {24 33862.11 RNK/JRW:A3/07/98 i Article Thirteen - '(Su endef+ 23 Article Fourteen ee-25 Use of Insurance Proceeds ............ Article {Sixteen) City's Right to Perform Life Time's Covenants ........................:> Article ; ......::::<•::;::<;:: Changes and Alterations . . {34} IM Article 1I - Discharge of Liens ....... . Article Twenty {-Ane}- Use of Club/Pool Property ....... {38} Article Twenty (Two) - Entry on Club/Pool Property by thf Article Twenty -{wee} - Indemnification of the City ...... Article Twenty -Four - 41 Article Twenty -Five - Article Twenty -Six - vryvn;± v.:^Cps?i{i:i:'Ji;::4?i^{j6i?fi}:}ffi•'.:{?:•'.C•'.i:;:j^:;:;ii:F?;::::i::::::iArticleTwenty -Seven - J;}:..::.. scEineos . >..><:.::..<::,::«:::< 4 Article Twenty -Eight - {Miseellaneots 48 Artiele Twenty Nine Contin encies ................. g f49 33862.11 fiNKNRW:r03M7/BE ii 16 AGREEMENT dated this day of 1996 by and between the CITY OF PLYMOUTH, a Minnesota municipal corporation, as Lessor and hereinafter referred to as the "City," and FCA, LTD., a Minnesota corporation, doing business as LIFE TIME FITNESS, having its principal office and place of business at Suite 275, 6442 City West Parkway, Eden Prairie, MN 55344, as Lessee and hereinafter referred to as "Life Time" `and R4DEPE DENT SGI10 ,r DISTRICT - IST I T 284, a publ ,, sehe l V RECITALS The City owns property near 36th Avenue and Plymouth Boulevard which it is developing in conjunction with Life Time into a recreational center ("Recreation Center Property"). The Recreation Center Property shall be subdivided into four parcels: (1) the Ice Arena parcel which the City is developing into an indoor ice arena ("Ice Arena Complex"); 2) a parcel which Life Time is developing into a combined Fitness Center and swimming and diving complex ("Club/Pool Complex"); (3) the City -owned parking lot parcel ("Parking Lot"); and (4) a City -owned parcel ("City Owned Undeveloped Parcel"). The City is leasing to Life Time the property upon which the Club/Pool Complex shall be developed pursuant to this Agreement. The City is contributing $2.6 million toward the cost of tenant improvements for the Club/Pool Complex and site work [andtheSeheel Distnet, -assubles,ee ,f Life T4me for- 33862.11 1rwwJaw:ro3ro7roe u.rte cavenans and agxmerset forth as errdt#eenen four.#.ne tta'"ti` xsttuet,..a d-ate its hear. uh tsxuesg n the .ntot t r..:.:: - ::.1: .::.::.... s:-:::.::-::::..•:. :,:::::::::::::.::::.::::::. . ::.::::: .:::.:... ::.::::::.:.::::::............................................. .... xd;r tl rldee Lz t o onse. an n ::fae.lt ear z an tts normal dealt two additional leisure pools[, This agreement ("Agreement") sets forth the rights and obligations of the parties, their successors and assigns, relating to the lease of the Club/Pool Property (as defined below) to Life Time by the City, the construction and operation of the Club/Pool Complex. NOW, THEREFORE, the parties agree as follows: 1. "Agreement" shall mean this Ground Lease and ensatet}en} j@0#" Agreement. 2. "Contribution" shall mean.the cash contribution of the City in the amount of million,eash eentfibutien- and the cash contribution of Life Time in the amount of [$700,9W.00} disbursed pursuant to Article Five of this Agreement. 3. "City" shall mean the City of Plymouth, a municipal corporation under the laws of Minnesota. 4. "City Residential Use Covenants and Minimum Operation Standards" shall mean the covenants and standards as described in Article Two of this Agreement. 5. "City Owned Undeveloped Parcel" shall mean the real property described on Exhibit " of 33862.11 RNK/JRW:r03/07/D6 2- J 6. "Club/Pool Complex" shall mean all improvements located upon the real property described on Exhibit "_" attached hereto. 7. "Club/Pool Property" shall mean the real property described on Exhibit "—I' attached hereto. 8. "Daily Rates" shall mean the fees charged by Life Time to Plymouth residents(, the eel -D 1t), for use of the Club/Pool Complex as described in Article 2.02 of this Agreement. ii:iC:^i:^:: ':: i:i;•iiiiiiii?iii"'.i?i v«.:::::.::.:.::.:::::::::::::::::::.::::::.v:::::::::::.::.:::::::::::......... ............. Ice Arena Complex" shall mean the real property and its improvements described on Exhibit " " attached hereto. 14 . "Impositions" shall mean the obligations and charges described in Article Twelve of this Agreement. 33862.11 R"K/JRW:M/07/9E -3- I ri-11 - ) T.T [ "Leasehold Mortgage" shall mean the mortgage described in Article Six W of this Agreement. W. "Life Time" shall mean FCA Ltd., a Minnesota corporation, doing business as Life Time Fitness. Parking Lot" shall mean the real property and improvements described on Exhibit "—" attached hereto. Recreation Center Property" shall mean the combination of the Parking Lot, Club/Pool Property, Ice Arena Complex and the City Owned Parcel. Mr.-MV.-INW. ==IWWV-IXP Iff.AIRU%-n 2TV=I%M-%rT.T5FU-W.T d"PUTM.N.— W.. .... I aw Distriet, as Sublessee, a eepy of whieh is aff—ae-1-1--ed U--eete as Exhibit 1111. ARTICLE ONE Lease of Property 1.01 Lease. The City hereby leases to Life Time the Club/Pool property located at 36th Avenue and Plymouth Boulevard in the City of Plymouth, Hennepin County, Minnesota hereinafter "Club/Pool Property"). 1.02 Term. The lease shall be for a term of forty (40) years commencing on 2036.} end puMarsh 3 ......... 33862.11 F"K/JRW:r03/07/96 -4- 1.03 Rent. M lieu ef pefiedie lease payments and as) consideration for thefeapital eie ttt :neat Dade: of the Citfand Seheel DistfW for the Club/Pool Complex building, site improvements by the City and this Agreement, the Club/Pool Complex shall be subject to, and Life Time, its successors and assigns, shall be bound by, during the term of this Agreement, the "City Residential Use Covenants and Minimum Operational Standards" set forth in Article Two herein and the fta ARTICLE TWO City Residential Use Covenants and Minimum Operational Standards 2.01 The "Residential Use Covenants and Minimum Operational Standards" set forth below are an integral part of the consideration of the City leasing the Club/Pool Property to Life Time and the City malting the City's Contribution toward the cost and construction of the Club/Pool Complex Without the Residential Use Covenants and Minimum Operational Standards, the City would not lease the Club/Pool Property to Life Time and agree to the other obligations herein. 2.02 The Club/Pool Complex shall be available to all Plymouth residents, at the corresponding rates per person for a period of one year commencing on the date the Club/Pool Complex opens: Rate a) Adults $8.00 ($6.00 pool use only) (daily) 33862.11 RNK/JRW:A3/07/B! -5- b) Second Adult Family Member or Child ages 13 through 17 $5.00 (daily) c) Under 13 $3.00 (daily) d) Daycare (Parent must remain $2.00 per child for on Club/Pool Property while child is {if} two (2) hours 0.: Daycare) e) Life Time shall offer a summer pool rate to be determined pass similar to other public outdoor by the City pools once Life Time has obtained a membership base of 10,000 members. A resident of the City of Plymouth is not required to be a member of Life Time Fitness to use the Club/Pool Complex under the Daily Rate structure. For the period of one (1) year following the opening for business of the Club/Pool Complex, persons aged 13 and under of members of Life Time Fitness shall not be charged a separate initiation fee and, when accompanied by their parent or legal guardian, shall have admission to the Club/Pool Complex without separate charge or payment of dues during family hours and subject to age limitations on the use of the Club/Pool Complex applicable to children and families generally during family hour. 33862.11 RNK/JRW:r03/07196 _6_ FFMHW WiAPA Daily Rate Stmeture. 244 M Effective March 1 of each year of this Agreement commencing March 1, 1998, the {ply} Rates set forth in -(Seetiens) 2.02 (and 2:$3) shall be subject to a maximum adjustment for inflation. The adjustment formula is: the applicable Daily Rate shall be multiplied by a fraction, the numerator of which is the Consumer Price Index for December of the preceding year and the denominator of which is the CPI for December of 1995. This formula is expressed by the following numerical example which is designed to demonstrate the January 1, 1998 estimated adjustment: Applicable (CPI Dec. 1997 Daily Rate x (CPI Dec. 1995) = New 1998 Daily Rate This annual adjustment shall be determined by using as the CPI the "Consumer Price Index for all Urban Consumers (CPI -U) U.S. City Average, All Items," published by the Bureau of Labor Statistics. 33862.11 FNK/JRW:r03/07/96 -7- If the name of the aforesaid "Consumer Price Index" as described above shall be changed, or a similar index substituted for the aforesaid index by the United States Government, the substituted index shall be used by the City and Life Time in determining the adjustment. Should the publication of the "Consumer Price Index" be discontinued by the Bureau of Labor Statistics, U.S. Department of Labor, then the parties by agreement shall substitute a comparable index. XOT ..... WEe ..... If Life Time enters into an agreement with another City in Minnesota in which Daily Rates, pass rates, or initiation fees are established, the rates in this Agreement may, at the City's discretion, be adjusted so that each rate under this Agreement is no higher than such other rates. 2.05) Any resident of the City (who ehees* Offl§fi" to become a member of Life Time shall be fefifit4ed tel (M a fifteen percent 15 %) discount off of the lowest membership initiation fee then available to the public at any 0 r ......... s den crW -i .......... club owned or operated by Life Time. . . ......... zt The initial initiation fees and sale of memberships to Plymouth residents shall be at the prices set forth below. This price shall be available for at least the 90 -day period prior to the Club/Pool Complex opening. 33862.11 RNK/JFtW:rO3/O7/06 -8- Initiation Fee Monthly Membership Fee Rate guaranteed for 12 months) Single Person $125 $29 per month Two People $210 $49 per month Three People $295 $69 per month Four People $380 $69 per month 85.00 for each additional Person) IFer the ffst year- fepem6en e€-the-Club/PeelGe,,plex, ne-ihitiatien fee shal 2:04 t I The use of the Club/Pool Complex by Plymouth residents(, Se ee'str-iet shall be subject to the same rules, regulations, conditions and limitations of usage as all regular Life Time members, including requirements for written parental consent on file for anyone under the age of 18. n...:.':r:.:.::::::::::}i}`:,v: isi::::::::::::i::i::::i::::::::::::ii::i::iA:::::::i^ii:ti iiiiii: }i:6ii:: :iiiiiiii ii:4: i"{::.i:i{:.ii: •. ::::::.::.::::::::::::::::. :::::::::::::::... 12-07} x ept as _athexw se pyres I p a ded ita t3 s gr. a Life Time shall not discriminate between Plymouth residents(, Seheel Distfiet studentsand residents paying the Daily Rate and Life Time members with respect to the use of the facilities, provisions of services, reservation rights, and daycare services. 2.-0811 The Club/Pool Complex shall be open and operatingar r daily from 5:00 a.m. to 11:00 p.m., except for partial daily hours on five holidays. Certain non -athletic services provided in the Club/Pool Complex (e.g. daycare services, massage services) may be limited as reasonably determined by Life Time. The limitation of certain services shall only be based on the lack of demand for such services. 2.091 MM Life Time shall provide lifeguards for the leisure pools and the outdoor pool as part of Life Time's operation of the Pool/Club Complex. Lifeguards shall be on 33862.11 WK/JRW:,03I07/Q8 -9- RM Mt n i , a ......... . The Ice Arena shall be available without additional fees to Life Time members during public skating hours. 12-121 M The Ci rh Seheel ,Dish,,. and Life Time shall establish procedures to handle complaints regarding the operation of the Club/Pool Complex including, but not limited to complaints relating to the "Residential Use Covenants and Minimum Operational Standards" eheel Distfietse Gei ." ' <> Life Time shall promptly furnish the City-SeheelBistfiet} with a copy of all written complaints it receives. The City+, SeheelBistfie* and Life Time shall meet at least quarterly to discuss all matters relating to this Agreement and the operation of the Club/Pool Complex. Life Time shall provide quality customer service equal to or exceeding the level of serviced provided by Life Time to its customers in 1996. 12-13) M All pools shall be maintained and repaired by Life Time and must maintain and pass public health standards at all times. 2.14} M The temperature of the pool water in the leisure and outdoor pools must be approved by the City and shall be 85 (degrees (pl ene degree). Thee Distr-iet and shaH be 801 degrees (plus or minus one degree). 33862.11 RNKMRW:r03M7XG _10- fo lrzl '* T,.,,T M The Club/Pool Complex must meet all OSHA standards. 2.16} = The Club/Pool Complex must meet all fire codes and may be inspected by the City for compliance. The Club/Pool Complex must meet all Americans With Disabilities Act requirements for public buildings. Life Time shall make reasonable efforts as determined by the City to work with fspeeifd needs pepulation. Speeial needs peptilatien sheR fa—een. M"j%WMtime availability, the City may rent the is for its exclusive use for swimming lessons at times selected by the City at market rates offered by facilities in the Twin City Metropolitan Area. V. -I 2.19 Within sixty (60) days of the opening of the Club/Pool Complex, {Life Tim shaH pi-evide a senier- Mete fer- s i i - eeptable te the City fef- Plymeeth fesidents whieh ineludes a r-edueed initiatien fee. The senier mtes pr-evided by Life Time te the Gity undef this seetien shaR alse be ffya}}able to the fesidents ef the Seheel Distfiet. 2.20 WRhin sixty (60)-d-ays e. fling ef the GlubiPeel Geffiplexj Life Time shall provide a program satisfactory to the City allowing low income residents of the City access to the Club/Pool Complex. The [rates pr-evided by Life Time te the Gity undff this seeti shall alse be available to the residents ef the Sehee4 Distfiet.1 I 33862.11 FNKMRW:r03/07196 -11 NNW.' 2.21) M Life Time shall cooperate with the City Park and Recreation Department on two jointly sponsored community events per year. Life Time shall cooperate with the City's Park and Recreation Department and the School District on joint programming. The City may have bulletin board display space in the Club without charge to the City. 2.23} . No membership cap shall apply to Plymouth residents fer- fesident the geheeHNStfi f*-,] MFA Y.V.W a Z7. rMIM 2fVM"WaK4WWI. M.. ArIJE11% is MMMMMMUMM. GL w 14. tell I A&Q MW I- 33862.11 F"K/JFtW:r03/07/Q0 -12- MfinMWAAM 'r." i• ii i i •:ME i U -11:w 3; N i \ 1 • \ i i•i i i w i i iwi ii i Use of Property - Site Development and Leasehold Improvements of Club/Pool Complex r,, -T Life Time Fitness shall design, construct, own, market and operate the Club/Pool Complex on the Club/Pool Property in accordance with the provisions of this Agreement. The parking area constructed upon the Parking Lot shall service the Recreation Center Property without cost to any user of the Club/Pool Complex under this Agreement. Construction shall commence no later than September 1, 1996 and shall be completed no later than September 1, 1997. 3+ The Club/Pool Complex which includes the fitness center, 25 yard competition 8 -lane pool, diving pool, indoor leisure pool with waterslide and other play 33862.11 RNK/JRW:M/07roE -13- features, whirlpool and outdoor leisure pool with waterslide shall be constructed and equipped by Life Time, at its cost, in accordance with the following plans and specifications: (identify plans and specs). 4.031Life Time shall pay for the cost of all site lighting for the Parking Lot parcel, the parking lot construction including sub -base, gravel base, bituminous surfacing, storm sewers, NURP pond construction (except grading), outdoor signage, concrete curb and gutter and striping. 4-041 M The City shall be responsible for the following site work for the Club/Pool Property: traffic circle on Plymouth Boulevard and 36th Avenue, wetland mitigation or reclamation, site fencing, landscaping and irrigation. Life Time shall be responsible for the following site work for the Club/Pool Property and Parking Lot: site clearing, grading, sub -base for the Parking Lot, grading and excavation for a NURP pond, drain lines, sanitary sewer and watermains to the Club/Pool Complex. Prior to constructing the Club/Pool Complex on the Club/Pool Property, Life Time shall perform an inspection. The City makes no express or implied warranties concerning the site work. 4.05} . The City shall separately contract for civil site engineering services for the Recreation Center property. The City shall pay the civil site engineering costs relating to the NURP pond and wetland mitigation. All other civil site engineering costs shall be apportioned in accordance with the construction costs identified in paragraphs 4.03 and 4.04 above. 4:06} M All site work for the Club/Pool Property and Parking Lot shall be in accordance with the following plans and specifications: (identify site plans) 33862.11 RHK/JRW:.03/07/98 -14- M Life Time shall construct at its cost the Club/Pool Complex inT_rTUTT accordance with the following plans and specifications: (identify). All material change orders relating to or affecting the design and features of the Club/Pool Complex must be approved by the City in writing, which approval shall not be unreasonably withheld. 4.08} M The City shall advertise for bids and award the construction contract for the Ice Arena Complex according to applicable law if the bids are satisfactory to the City. M The City shall contribute $2.6 million toward the cost of improvements to the Club/Pool Complex. (The Sebeel Distfiet shEd! a - W01. X _ 4 —:: V 11..... 11 -on tow—Eir-d leaseheld impfeveffients fef the GubiPeel Gemplex.1 Life Time shall be solely responsible for all costs in excess of the [$4.2 contributed by the City d- Seh—eal. Distr4etI, including but not limited to financing, all administrative, architectural, engineering, construction management, surveying and legal costs, but excluding any City staff time or City attorney expense. 4.19} M The Club/Pool Complex shall not open for business prior to completion of the Ice Arena Complex, unless significant unforeseen circumstances as reasonably determined by the City cause the Ice Arena Project to be delayed. 4. 111 MM Life Time shall pay permit fees, sewer availability charges ("SAC" fees), and City sewer and water connection charges associated with the Club/Pool Property and Club/Pool Complex. 33862.11 FWK/JRW:r03/07/98 -15- POME} Construction Disbursement 5.01]? T All monies to be deposited by the City ($2.6 million)(, Seheel Di;ei 1.6 -„i"ien') and Life Time [($700,000 AA}} ( Qt} l) in connection with improvements to the Club/Pool Complex on the Club/Pool Property and other site work shall be disbursed by a title company approved by the City -(and-Seheel-Bistfiet) in accordance with a disbursement agreement acceptable to the City, Seheel Distf et) and Life Time. Any interest on money deposited by the City {afid-SeheelBistfiet} shall be turned over to the iixr;.•:.'l,:. :?ti•:ti: {:i:v}:?J:'_:ii}::::?:::F,..:i::.:ii:0i::ii:j:S:Y,.:.?i,::::F: i::i(:::: ; i:::: .... ., .,..; City fand Seheel Distfiet en a quffter4y[bel+ort; aetaat1+o cy issuedo Life Time shall pay all charges imposed by the title company. No portion of the Contribution of the City feel Bim} shall be advanced and deposited with the title company as provided herein until the following documents are received or the following conditions are met: a. A 1987 ALTA form of mortgagee title insurance policy from a company and agent acceptable to the City which policy (the "Title Policy") shall, prior to or contemporaneously with the first advance: (i) insure the priority and sufficiency of any Leasehold Mortgage placed upon the property pursuant to Article Six herein as a first lien upon the Club/Pool Property; (ii) show all easements or other matters affecting the Club/Pool Property, all subject only to such exceptions or qualifications as are acceptable to the City {end-Seheel D}; (iii) insure unconditionally against all possible contractors', suppliers' and mechanics' lien claims; (iv) contain any endorsements or assurances that the City f and Seheel Distfiet.), may reasonably request for 33862.11 RNKNRW:,03I07/G9 -16- protection of its interests, including but not limited to pending disbursement and interim mechanic's lien endorsement. b. The disbursement agreement described in Section 5.01 is fully executed. C. Evidence of insurance as required by this Agreement is received and approved by City (md Seheel-Bistfiet}. d. A written opinion by a third party attorney acceptable to the City mel Distfieti, covering such matters as the City MWO necessary, including, without limitation, statements of opinion to the effect that: 1. Life Time is a legal entity duly created in accordance with and in a condition of good standing under the laws of the state of its formation, with full authority to transact business in Minnesota. 2. The execution and delivery of this Agreement and the Leasehold Mortgage and the completion and operation of all improvements, does not violate, conflict with, or constitute a default under any terms of the Life Time's formative documents, or any mortgage, indenture, lease, agreement, license, permit, judgment, decree, order, statute, ordinance, rule or regulation to which Life Time is subject or bound. 3. There is no pending litigation or judgment entered of record against Life Time or directly related affiliates. 4. Life Time shall pay for the cost of such written opinion. e. A Sworn Construction Statement in a form acceptable to the City{, -&-heel Diet} and to the title company, indicating the total costs for actual or 33862.11 RNK/JRW:Mt07/9G -17- estimated construction and development of the Club/Pool Complex that will or have been incurred by Life Time and containing line items and amounts as required by the City (and -Seheel-Bistfiet}. f. A contract between Life Time and a general contractor acceptable to the City feel Distfiet} with a guaranteed maximum cost for construction of the Club/Pool Complex, and accompanied by copies of all subcontracts thereunder. g. A contract between Life Time and the architect designing the Club/Pool Complex, together with acknowledged collateral assignments of the Life Time's interest in the Plans and Specifications to the City [and Sehee Distfiet}. The assignment to City—Seheel-Diet} as required in this section shall be subordinate to a prior assignment in favor of the holder of the Leasehold Mortgage. h. A building construction schedule acceptable to the City ian=a Seheel Di^`^^•' i. A certification from the Architect stating that the Plans and Specifications are complete in all respects and contain all details requisite for construction of the Club/Pool Complex which , when built in accordance therewith, shall comply with all zoning and building codes, laws, ordinances and regulations. j. Life Time's deposit with the title company of sufficient funds to complete the construction of the Club/Pool Complex and Life Time's share of site improvement and engineering costs. k. Life Time's deposit of the debt service escrow with the City pursuant to Section 6.06. 33862.11 RNK/JRW:A3/07/98 -18- 1. A loan commitment in form and content acceptable to City and School District. 5-$3) M The requirement of this Article satisfies the requirements of the City's Zoning Ordinance for financial security to guaranty the completion of extension amenities ad of tfi's subtly -afar dvelopmenf areeii Permitted Leasehold Mortgage 6:911 = Life Time may place a mortgage upon the Club/Pool Complex in an amount which shall not exceed $4 million or such higher amount as the City (and feel Dom} shall-Beintlyl approve, which approval shall not be unreasonably withheld Leasehold Mortgage"). The mortgage is for the sole purpose of securing construction and subsequent permanent financing for Life Time's share of the cost of constructing the Club/Pool Complex. 6:9-2} MN The Indebtedness secured by the Leasehold Mortgage shall be amortized over a period of thirty years or less. Life Time may refinance the indebtedness secured by the mortgage provided the amount of the remaining principal balance is not increased and the new debt is not amortized for a period of time extending beyond {the j M.??:;}:jy.:j;:M::?:i: iiiY ':v v]i$:ti:k':%]0.... X931 MM Any mortgage allowable hereunder shall contain (s (a)} a provision which requires that the City (and -Seheel-Bistriet} receive notice of default and opportunity to cure rights from the mortgag ; 33862.11 RNK/JR W: A3/07/BB -19- 6:04} M Life Time shall not secure any additional debt with the Club/Pool Complex without the prior written consent of the City . Y The City shall subordinate its fee interest >rt'erest> this in the Club/Pool Complex to the leasehold mortgage 061 Life Time shall deposit with the City an amount equal to four months of debt service on the Leasehold Mortgage to be placed upon the Club/Pool Property by Life Time as permitted herein. The funds are to be held in escrow by the City and used by the City, at its option, to cure any default under the leasehold mortgage. Accrued interest on the escrow funds, shall be paid on a quarterly basis to Life Time. ARTICLE {SEVEN) r Parking Lot 7.01) M Life Time and any successor to Life Time occupying the Club/Pool Complex is hereby granted a non-exclusive perpetual easement in and to the Parking Lot for the purpose of customer and employee parking. The Parking Lot shall contain a minimum of 670 improved parking spaces to be used by users of the Club/Pool Property and shall be constructed by Life Time in accordance with the site plans and specifications identified in Section 33862.11 - 20- RNK/JRw:,03107/OC Prior to the first construction disbursement, a non-exclusive parking easement in the form attached hereto as Exhibit " " shall be filed against the Recreation Center Property. 7-03} M The City at its cost shall provide snow and ice control for the Parking Lot and maintain the landscaping including the lawn irrigation system. All other repairs and maintenance of the Parking Lot shall be performed by Life Time, with the costs shared equally by Life Time and the City. Life Time shall be solely responsible for the repair, maintenance, replacement and energy cost for the parking lot lighting. ARTICLE {EIGHT -1 (M Covered Walkway and Common Wall Agreement 8-011 MM A temperature -controlled enclosed walkway shall be constructed alongside and connecting the Ice Arena Complex and the Club/Pool Complex. Life Time and the City shall grant to the other a reciprocal easement for pedestrian passage to and from the respective facilities via the enclosed walkway in the form depicted on Exhibit The City shall have the option at the City's expense to extend the enclosed walkway to abutting property owned by the City. 8.021 M Each party shall be responsible for the costs of operation and maintenance of the covered walkway located on their respective parcels. M The wall between the Ice Arena Complex and the Club/Pool Complex is a common wall. The parties respective rights and obligations pertaining to the wall are as follows: a. The cost of designing and constructing the common wall shall be paid for fifty percent (50%) by Life Time and fifty percent (50%) by the City. 33862.11 R"K/JRW:r03/07/9E -21- b. A common wall covenant to be recorded against the title to the Club/Pool Property is attached hereto as Exhibit "—of . 8.04) M The City may in the future construct an additional building abutting the Club/Pool Complex. The same terms as specified above shall be applied to the common wall. ARTICLE Name of Complex and Signage 9.01} The name of the Recreation Center Property shall be The name of Life Time Fitness Club shall be included on signage near the main entrance to the property in accordance with the plans and specifications identified in Section 4.07. The City reserves the right to alter the signage configuration so long as the visibility of the Life Time Fitness Center sign is not unreasonably impaired. ARTICLE (T -EN) V" The City's Right of First Refusal For a period ending five (5) years after the Club/Pool Complex 33862.11 ftNKJJRW:,03/07/Q9 -22- ii}}}:}Y.}}}}i::: }::..: .,y;OKI: :• .: .{•Y::ti: •i•i":•:: '.i}}}:•}"•}i}}%vvCSi}Y...... tii ......:..:................ ............. OWN sad ours wat ...:.::...:::>:00 ;'`>t ears ate tt less th'; > .er>ter In addition if Life Time receives a bona fide offer from any entity to acquire Life Time's interest under this Agreement which Life Time intends to accept, Life Time shall notify the City eheel Dish-7ieti by sending to the City {mel Di } a copy of the proposed contract and notify the City of Life Time's intention to accept such offer. The City shall have the right within ninety (90) days after receipt of the notice from Life Time to accept the terms of such contract to purchase, assignment or sublease in its own name, or in the name of a nominee, and on the terms specified in the proposed contract. If the City does not exercise its right of first refusal by sending Life. Time notice within such ninety -day period, Life Time may then sell, assign or sublease its rights to the Club/Pool Complex to the entity who made the bona fide offer provided that such sale, assignment or sublease is on the same terms and conditions, as set forth in proposed contract. ARTICLE Life Time Option to Purchase Life Time shall have the right at the expiration of the term and only at the expiration of the term of this Agreement to purchase the Club/Pool Property by paying to the City the sum of One Hundred Thousand Dollars ($100,000.00) ("Purchase Price"). Life Time shall give the City one hundred twenty (120) days notice of Life Time's intention to exercise its right to purchase the Club/Pool Complex and shall pay the Purchase Price to the City on the expiration date of this Agreement. Life Time shall not have the 33862.11 rNK/J W:rosio7ioe —23— right to purchase the Club/Pool Property if there has been a default under the terms of this Agreement and the default exists at the time this Agreement terminates. 11.02) M The City shall, upon payment of the Purchase Price, deliver to Life Time a limited warranty deed conveying title to the Club Pool Property subject to all encumbrances, liens, restrictions, covenants, and easements (then of-rceef} It . ARTICLE {AVE} Payment of Taxes and Other Impositions 2. 9I}Q Life Time shall pay or cause to be paid (except as provided in Section 12.02), before any fine, penalty, interest or cost may be added thereto, all real estate taxes, assessments, water and other public utility charges and all other charges or burdens whatsoever kind and nature, which at any time prior to or during the term of this Agreement may have been, or may be assessed, levied, confirmed, imposed upon, or grow or become a lien on, the Club/Pool Property or any part thereof, or any appurtenance thereto, or the rent of income received from subtenants or licensees, or any use or occupancy of the Leased Club/Pool Property, or such rights, obligations, easements, and franchises as may now or hereafter be appurtenant, or appertain, to the use of the Club/Pool Property, all of which charges are hereinafter referred to as "Impositions." Life Time shall pay any Impositions which are incurred or accrue prior to the date of execution of this Agreement to the extent such imposition is a direct or indirect result of action taken by the Life Time with respect to the construction of the Club/Pool Complex. 33862.11 R"K/JRW;A3/07/9E -24- Life Time shall be responsible for the payable 1996 real estate taxes and installments for special assessments and for every year thereafter during the term of this Agreement. 12.04} M An Imposition relating to a fiscal period of the taxing authority, a part of which period is included within the term of this Agreement and a part of which is included in a period of time after the expiration of the term of this Agreement, shall, whether or not such imposition shall be assessed, levied, confirmed, imposed upon or in respect of or become a lien upon the Club/Pool Property, or shall become payable, during the term of this Agreement, be adjusted between the City and Life Time as of the expiration of the term of this Agreement, so that Life Time shall pay that portion of such imposition which that part of such fiscal period included in the period of time before the expiration of the term of this Agreement bears to such fiscal period, and the City shall pay the remainder thereof, provided, however, that Life Time shall not be entitled to receive any apportionment, if Life Time shall be in default in performing any of the terms of this Agreement. ARTICLE (THIRTEEN) MYM Surrender Life Time shall on the last day of the term hereof (unless Life Time has exercised its right to purchase the Club/Pool Property) or upon any earlier termination of this Agreement, or upon any entry or re-entry by the City upon the Club/Pool Property pursuant to this Agreement, surrender and deliver to the City the Club/Pool Property including the Club/Pool Complex, fixtures, equipment and furnishings without fraud or delay, subject to the provisions of this Agreement, in good order, condition and repair, reasonable wear and tear excepted, free and clear of any mortgages, liens or encumbrances. 33862.11 RNK/JRW:r03/07/96 -25- All furnishings, fixtures and equipment installed in, affixed to, placed upon or used in connection with the operation of the Club/Pool Complex shall become the property of the City upon termination of this Agreement (unless Life Time shall purchase the Club/Pool Property under the terms of this Agreement) or surrender of the premises to the City. Life Time shall keep and maintain such furnishings, fixtures and equipment at all times throughout the term of this Agreement in good and usable condition with all necessary replacements thereof, sufficient for the operation of the Club/Pool Complex, and shall deliver the same in such condition to the City as additional rent at termination of Life Time's tenancy hereunder. Upon the date fixed for the expiration of the term of this Agreement (unless Life Time Purchases the Club/Pool Property pursuant to the terms of this Agreement) or upon the sooner termination of the term thereof, as the case may be, the Club/Pool Complex, fixtures and furnishings shall automatically and without further act upon the part of Life Time or the City become the property of the City and title thereto shall vest in the City free and clear of all liens and encumbrances and without payment therefor by the City. Life Time will, upon request of the City, promptly execute and deliver to the City a deed or such other appropriate instrument of conveyance as the City may deem necessary or desirable to evidence or confirm the vesting of title to the Club/Pool Complex in the name of the City, in recordable form reasonably satisfactory to the City. 1 The Club/Pool Complex is and shall remain the property of Life11M Time until the date herein fixed for the expiration of the term of this Agreement or until the sooner termination thereof. Life Time's estate, title or interest in the Club/Pool Complex shall not be subleased, assigned, transferred or otherwise conveyed or encumbered in whole 33862.11 RNK/JRW:rO3/07/G8 _26_ or in part, nor purported to be subleased, assigned, transferred, or otherwise conveyed or encumbered in whole or in part, separate and apart from Life Time's interest under this Agreement, nor shall there be any sublease, assignment, transfer or conveyance of the estate, title or interest of Life Time in the Club/Pool Complex in whole or in part by operation of law or by judicial order, decree or judgment, separate and apart form Life Time's interest under this Agreement except as permitted in this Agreement. 13:03} 1 5 It is the intention and agreement of the parties that Life Time's interest in this Agreement and all of Life Time's right, title and interest in and to the Club/Pool Complex shall be nonseparable and that any attempts to transfer or mortgage either of such interests, except as expressly permitted under the terms of this Agreement, shall be void and of no force and effect unless there shall be a complete transfer or mortgage, as the case may be, of Life Time's interest under this Agreement and of all Life . Time's right, title and interest in and to the Club/Pool Complex to the same party. It is also the intention and agreement of the parties that the separation of title to the Club/Pool Property from title to the Club/Pool Complex is not to change the character of the Club/Pool Complex as real estate. 13:96} The provisions of this Article Thirteen shall survive any termination or expiration of this Agreement. ARTICLE {EAURTEEAI} M Insurance 14.011 Life Time, at its sole cost and expense, shall keep the Club/Pool Complex and all the fixtures, furnishings and equipment therein, insured against loss or damage by fire and against loss or damage by such other risks now or hereafter embraced by 33862.11 RNKfJRW:A9ro7,V6 -27- Extended Coverage," so called, and against such other risks or hazards and in an amount not less than 100% of the full replacement value of the Club/Pool Complex and Contents. During the construction of the Club/Pool Complex or any alterations thereto, Life Time shall provide Builders Risk Insurance written on Completed Value Form. rum liez shall hst the £rty a a lost p y m .art ar ourit dual to ttie C t' c jrt utl+ 2 14.02) In addition to the insurance r uired in Section#> 1 } above, Life Time, at its sole cost and expense, shall purchase and maintain during the entire term of this Agreement: a. Comprehensive bodily injury and property damage liability insurance against claims for bodily injury, death or property damage, occurring in, on, or about the Club/Pool Property, the Club/Pool Complex, or any elevator or escalator therein and on, in or about the adjoining parking lots and passageways, naming the City and the Life Time as the insured, such insurance to afford minimum protection, during the term of this Agreement, of not less than Two Million Dollars ($2,000,000.00) enepef-sen, and e€ fiet less .,i.... i11ien Fr-W.W1rOMM aa:41i.r:. rr:1•rrQ wTAAATAwAIMi szr gl lr ts badrly rtr`f a`zi a "a t i>T'hre hundred *phaud Rid la lig , b. Boiler and pressure vessel (including, but not limited to, steam pipes, pressure pipes, and condensation return pipes) insurance, provided the Club/Pool 33862.11 RNKMRW:'03/07/69 -28- Complex contains a boiler or other pressure vessel or pressure pipes, in an amount not less than Two Hundred Fifty Thousand Dollars ($250,000.00) and plate glass insurance upon store fronts wherever located and upon any other plate glass installed on the ground floor of the Club/Pool Complex; C. Rent, rental value or business interruption insurance against loss of rent or income due to fire and the risks now or hereafter embraced by "Extended Coverage," in an amount at least equal to the annual gross operating income of Life Time at the Club/Pool Property. Such rent, rental value or business interruption insurance shall be made payable to the City and any Leasehold Mortgage holder described in Article Six. In the event that the Club/Pool Complex shall be destroyed or damaged, the proceeds of such rent or rental value insurance shall be applied periodically to the payments due the Leasehold Mortgage holder or the City pursuant to this Agreement until the restoration of the Club/Pool Property, at which time any balance of such proceeds shall be returned to Life Time, provided Life Time is not in default under this Agreement or the Leasehold Mortgage. e. Such other insurance insuring against such risks, in such amounts with such protective provisions as may be reasonably required from time to time by the City {feel-Bistfiet} of the Club/Pool Property and Club/Pool Complex. f. Demolition and restoration insurance for the benefit of the City to insure that, in the event the Improvements on the Club/Pool Property are destroyed by fire or other casualty and not rebuilt by the Life Time, the remains of the improvements are demolished and the Club/Pool Property are restored to their 33x62.11 FNKIJRw:103i07ne _29_ present condition (i.g. , a level, grassy field on grade). The proceeds of the policy shall be payable solely to the City. x.03} All insurance policies set forth in this Article Fourteen shall name the City[, the Seheel Distr-iet) and any Leasehold Mortgage holder as additional parties insured, or as {ffiertgages) a or loss payee, whichever is applicable. All insurance shall be effected under valid and enforceable policies issued by insurers of recognized responsibility which are licensed to do business in the State of Minnesota and which have been approved by the City (and Sehe ,' Distr- etj as to the qualifications of insurers and the amounts of insurance to be written by each. Upon the execution of this Agreement, and thereafter not less than thirty (30) days prior to the expiration dates of any expiring policy or policies theretofore furnished pursuant to this Article ear} zeeri of this Agreement, originals of the policies, copies thereof, or certificates of insurance, in the case of bodily injury and property damage liability insurance, bearing notations evidencing the payment of premiums or by other evidence of such payment, shall be delivered by Life Time to the City farad Seheel Distfiet i Each policy required in this Articleshall te the extent ebt6naWe-j have attached thereto (a) an endorsement that such policy shall not be cancelled r offi .: without at least ROOM ;` c r..(bt j days prior written notice to the City (and Seheel Distr-iet); and (b) an endorsement to the effect that no act or omission of the Life Time shall invalidate the interest of such person or entity entitled to such notice. 33862.11 RNKMRW:103/07/BQ -30_ Each policy shall be reviewed and increased every year with minimum protection amounts adjusted based upon the increase in the CPI as set forth in the formula provided in Section. 2.04 of this Agreement. ARTICLE Q` Use of Insurance Proceeds 85.01 i 1M In case of damage to or destruction of the Club/Pool Complex by fire or other casualty, Life Time, shall at Life Time's sole cost and expense, whether or not the insurance proceeds, if any, shall be sufficient for the purpose, and irrespective of the amount of any loss, restore, repair, replace, rebuild the Club/Pool Property or the Club/Pool Complex and other improvements thereon, as nearly as possible to its value, condition and character immediately prior to such damage or destruction in accordance with plans approved by the City [and S,,,.ee Distfieti. Such restoration, repairs, replacements, rebuilding or alterations shall be commenced with due diligence, and in good faith, and prosecuted with due diligence and in good faith, unavoidable delays excepted. 15.02} " All insurance money paid pursuant to this Agreement on account of such damage or destruction, less the actual cost, fees and expenses, if any, incurred in connection with the adjustment of the loss, shall be applied to the payment of the cost of the aforesaid demolition, restoration, repairs, replacement, rebuilding, including the cost of temporary repairs for the protection of Club/Pool Property or the Club/Pool Complex. pending the completion of permanent restoration, repairs, replacements, rebuilding (all of which temporary repairs, protection of property and permanent restoration, repairs, replacement, rebuilding are hereinafter collectively referred to as the "Restoration"). The insurance proceeds shall be paid out from time to time as such Restoration progresses by a 33862.11 RNK/JRW:103M7] roe -J 1- title company or other dispersing agent agreed to by the parties with normal lien waivers and other requirements. 15.03i `? No destruction of, or damage to, the Club/Pool Property or any part thereof by fire or any other casualty shall permit Life Time to surrender this Agreement or shall relieve Life Time from its liability under the terms and conditions of this Agreement including additional rent payable under this Agreement, and Life Time waives any rights now or hereafter conferred upon it by statute or otherwise to quit or surrender this Agreement or the Club/Pool Property or any part thereof or to any suspension, diminution, abatement or reduction of rent on account of any such destruction or damage. ARTICLE The City's Right to Perform Life Time's Covenants 1 If Life Time shall at any time fail to pay any Imposition in accordance with the provisions of Article Twelve hereof, or to take out, pay for, maintain and deliver any of the insurance policies provided for in Article Fourteen hereof, or shall fail to make any other payment or perform any other act on its part to be made or performed in accordance with any terms and provisions of this Agreement, the City { after ten (10) business days' prior written notice to Life Time (or without notice in case of an emergency) and without waiving, or releasing Life Time from, any obligation of Life Time contained in this Agreement, may, but shall be under no obligation to: a) a: 33862.11 RNK/JRW;103/07/95 pay any Imposition payable by Life Time pursuant to the provisions of Article Twelve hereof, or take out, pay for and maintain any of the insurance policies provided for in Article Fourteen hereof, or 32- c) make any other payment or perform any other act on Life Time's part to be made or performed as in this Agreement provided including, but not limited to payments due under the Leasehold Mortgage or performance of any terms or conditions of the Leasehold Mortgage; and may enter upon the Club/Pool Property for any such purpose, and take all such action thereon, as may be necessary therefor. 16.021 All sums so paid by the City (ef Seheel-Bistiiet} and all costs and expenses, including attorney's fees, incurred by the City f er-Seheel Distfiet.) in connection with the performance of any such act, shall be paid by Life Time to the City fef as the case may be on demand, and the City shall not be limited in the proof of any damages which the City may claim against Life Time arising out of or by reason of Life Time's failure to provide and keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not paid or incurred by Life Time and which would have been payable upon such insurance, but the City {ate-Seheel Dis shall also be entitled to recover damages for such breach, the uninsured amount of any loss (to the extent of any deficiency in the insurance required by the provisions of this Agreement), damages, costs and expenses of suit, including reasonable counsel fees, suffered or incurred by reason of damage to, or destruction of, the Club/Pool Property and the Club/Pool Complex or any part thereof, occurring during any period when Life Time shall have failed or neglected to provide insurance as aforesaid. 3 Under no circumstances shall the exercise by the City fef of the right granted in this Article +Sixteef4f to enter upon the Club/Pool Property or the Club/Pool Complex for any purpose specified herein and take such 33862.11 FWK/JRW;103M7/9E _' action as may be necessary, or the exercise of any other right or remedy granted to the City er-Sebes under any other provision of this Agreement to cure, prevent or take any other action with respect to any default by Life Time, constitute an eviction of Life Time, result in a termination of this Agreement, or in any manner whatsoever relieve Life Time from liability to pay any amounts due under this Agreement or to comply with the Residential Use Covenants and Minimum Operational Standards re- S;,: eel DiJuzct Use Eevenaetsj and from the performance of any term of this Agreement by Life Time. 16.04) RM The exercise of any right by the City ier Seheel Distf t under this Agreement shall not alter, abridge, supersede or otherwise affect the obligations of the City ice} under this Agreement to give any notice required by any provisions of this Agreement, nor alter, abridge, supersede or otherwise affect the rights of any Leasehold Mortgage to cure any default of Life Time or to take any action permitted hereunder in connection therewith. 16.0§j 1 The provisions of this Section (16.051 shall have no application to the City's right to terminate this Agreement under any other term covenant or condition of this Agreement or to the City's rights to enter, re-enter or to obtain possession of the Club/Pool Property and the Club/Pool Complex following termination of this Agreement in accordance with the provisions hereof. 33862.11 RNK/JRW:r03/07/9E -34- ARTICLE Repairs and Maintenance of the Club/Pool Property 7.0 Throughout the term of this Agreement, Life Time, at its sole cost and expense, shall take good care of the Club/Pool Complex, furnishings, fixtures and equipment, and shall keep the same in good order and condition reasonable wear and tear excepted, and make all necessary repairs thereto, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen._ When used in this Article {&everrtee}n, the term "repairs" shall include all necessary replacements, renewals and alterations needed to maintain the Club/Pool Complex as a first class facility of its type. All repairs made by Life Time shall be at least equal in quality and class to the original work. In December of each year, Life Time shall provide the City-Sehee} Diet} documentation summarizing all repair, maintenance and repair activities occurring in the previous twelve months. The City at its own expense, may inspect the Club/Pool Complex. Deficiencies noted by the City ier Sehe .' Dista t to Life Time must be corrected within sixty (60) days at Life Time's expense. 7021 f' Life Time may temporarily close portions of the Club/Pool Complex for necessary repairs from time to time after reasonable notice to City (and Seh—e.el Distriet}. The necessity for and adequacy of repairs to the Club/Pool Complex and the fixtures therein pursuant to this Agreement shall be measured by the standard which is appropriate for buildings of similar construction and class, provided that Life Time shall in any event make all repairs necessary to avoid any structural damage or deterioration to the Club/Pool Complex. 33862.11 RWK/JRW:,W107/08 -35- Li MMI C Life Time shall keep and maintain all portions of the Club/Pool Property, and the sidewalks, curbs, entrances, passageways and, to the extent required by law all areas adjoining the same in a safe, clean and orderly condition, free of dirt, rubbish, snow, ice, and unlawful obstructions. A41 The City (an shall not be required to furnish any services or facilities or to make any repairs or alterations to the Club/Pool Property and the Club/Pool Complex. Life Time hereby assumes the full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Club/Pool Property and the Club/Pool Complex subject to the terms of this Agreement. isisisii:::i<:`:;:;''':Y;:::;iii:?: '. i... •;rGi:::iii:R:ni:^:•ii" :}:Fi":i0i....• ;•.:•::::::: :..:.:::..... . ::: • :•::: ::... :: :•:::::::.............................................. i::::Y::.... - .... .... :: ilii ..: '.: .. }; ;; ... .. ..::.T ..;:':.: ': },..iiii::.ii::: ':.::i :}'.:.:: :: ^}..::...: •'G::i>` _ .,y..>.:::::?.... :•R;?::;..:,}::::: 1.{x.€35 ;::,:: nua1<Bud efi:f'Yme shallubnut. a. annum bud et.fi;the :::: a t na,:pY nentsy ar d.r plasement 'he.ud et shall be..subm ed:<:c ri:'iir: f.. . Qvember wally for theex calendarears;: ART4GLE EIGHTEEN] (. gMgMM Compliance with Laws, Ordinances and Regulations 18:911 M Throughout the term of this Agreement, Life Time, at its sole cost and expense, shall promptly comply with all present and future laws, ordinances, orders, rules, opinions, directives, regulations and requirements of all federal, state, and city governments, courts, commissions, attorneys general, any national or local insurance rating bureau, or any other body exercising functions similar to those of any of the foregoing, 33x62.11 RNK/JRW:r03107/88 -36- which may be applicable to the proposed operations and activities on the Club/Pool Property, the Club/Pool Complex or any part thereof. Life Time shall likewise observe and comply with, or shall cause to be observed and complied with, all the requirements of all policies of public liability, fire and other insurance at any time enforce with respect to the Club/Pool Property and the Club/Pool Complex. ARTICLE...... Changes and Alterations 1$ Life Time shall have the right, at any time and from time to time during the term of this Agreement, to make, at its sole cost and expense, changes and alterations in, to or of the Club/Pool Complex, subject, however, in all cases to the following: a) No structural change or alteration, involving in the aggregate an estimated cost of more than Seventy -Five Thousand Dollars ($75,000.00), shall be made without the prior written consent of the City which consent shall not be unreasonably withheld. a withheld. 1 by the 8 1r diving peel and felslted faeilities shall be wuuLR 1, .+.1... ted t times to t rr the Seheel f b) No change or alteration shall be undertaken until Life Time shall have procured and paid for, so far as the same may be required from time to time, 33862.11 FNK/JAW:r03/07/98 -37- all permits and authorizations of any federal, state, or city government or departments, or subdivisions of any of them, having jurisdiction. c) Any structural change or alteration, involving in the aggregate an estimated cost of more than Seventy -Five Thousand Dollars ($75,000.00) shall be conducted under the supervision of a licensed architect or a licensed professional engineer selected by Life Time and approved in writing by the City and no such structural change or alteration shall be made except in accordance with detailed plans and specifications and cost estimates prepared and approved in writing by such architect or engineer, and approved in writing by the City (such approval not to be unreasonably withheld). d) Any change or alterations shall, when completed, be of such a character as not to reduce the value and utility of the Club/Pool Complex below its value and utility immediately before such change or alteration. e) Any change or alteration shall be made promptly (unavoidable delays excepted) and in good and workmanlike manner and in compliance with all applicable permits and authorizations and building and zoning laws and with all other laws, ordinances, orders, rules, regulations and requirements of all federal, state, and city governments, departments, commissions, boards and officers, any national or local insurance rating bureau, or any other body hereafter exercising functions similar to those of any of the foregoing. f) The cost of any such change or alteration shall be paid in cash or its equivalent, so that the Club/Pool Property shall at all times be free of liens for labor and materials and the Club/Pool Complex and free from any 33852.11 RNK/JRW:,09/07/BE -38- encumbrances, chattel mortgages, conditional bills of sale, or security interests. g) Whenever appropriate the fire insurance with "Extended Coverage," as required to be maintained during the term of this Agreement in Section 7.01 of Article 7 hereof, shall be adapted to provide, during any period of building construction, for Builder's Risk Insurance written on the Completed Value Form or on the Monthly Reporting Form. h) If the estimated cost of any such structural change or alteration shall in the aggregate be in excess of Seventy -Five Thousand Dollars ($75,000.00) Life Time shall, before commencement of work, at Life Time's sole cost and expense, furnish to the City a surety company performance bond, issued by a surety company acceptable to the City, in an amount at least equal to the estimated cost of such change or alteration, guaranteeing the completion thereof within a reasonable definite time, free and clear of all liens, encumbrances, security interests, chattel mortgages, conditional bills of sale, and other charges, and in accordance with the plans and specifications approved by such obligee. In connection with any such structural change or alteration for which amounts have been deposited or are to by used pursuant to this Agreement, no such performance bond or other security shall be required except to the extent that such estimated costs exceed the amount deposited or to be used pursuant to this Agreement. The dollar amounts listed in Sections -{19.01} f (a) (c) and (h) shall be adjusted for inflation as set forth herein. The adjustment formula is: 33862.11 RNK/JRW:rO3/07/R8 120 75,000.00 , andf-elate multiplied by a fraction the numerator of which is the CPI for the month preceding the expiration of the Term and the denominator of which is the consumer price index for December, 1995. This adjustment shall be determined by using as the CPI the "consumer price index for all urban consumers (CPI -U) U.S. City Average, all Terms" Bureau of Labor Statistics. If the name of the "consumer price index" as described above shall be changed a substituted index shall be used as set forth in Section 2.03 of this Agreement. ARTICLE 1-'Iar .. Discharge of Liens 20-0i) 1R#<l Except for the Leasehold Mortgage, Life Time shall not create or permit to be created or to remain, and shall discharge, any lien, encumbrance or charge, levied on account of any Impositions or any mechanic's, laborer's or materialman's lien or any mortgage, conditional sale, title retention agreement, security interest or chattel mortgage, or otherwise which might be or become a lien, encumbrance or charge upon the Club/Pool Property or any part thereof provided that any Imposition may, after the same becomes a lien on the Club/Pool Property, be paid or contested in accordance with this Agreement and any mechanic's, laborer's or materialman's lien may be discharged in accordance with Section 1fl of this Article ite 132J If, because of any act or omission of Life Time, any mechanic's lien or other lien, charge or order for the payment of money shall be filed against the Club/Pool Property or the City except as provided herein, Life Time shall, at its own cost and expense cause the same to be discharged of record or bonded within ninety (90) days 33862.11 RNK/JRW;r03/07/98 -40- after written notice from the City to Life Time of the filing thereof; and Life Time shall indemnify and save the City harmless against and from all costs, liabilities, suits, penalties, claims and demands, including reasonable counsel fees, resulting therefrom. 20:03} Nothing in this Agreement contained shall be deemed or construed in any way as constituting the consent or request of the City, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials for any specific improvement, alteration to, or repair of the Club/Pool Property or any part thereof or for the demolition or the replacement of the Club/Pool Property or any part thereof. ARTICLE TWENTY (-9NEI Use of Club/Pool Property 21-011Life Time may use the Club/Pool Property for the Club/Pool Complex pursuant to the terms and conditions set forth in this Agreement only and for no other purpose. Life Time shall construct, operate, maintain, repair and reconstruct (the latter as provided herein) the Club/Pool Complex in accordance with all applicable zoning and building codes and regulations and the terms and conditions of this Agreement. Life Time shall not use or allow the Club/Pool Property or any part of either to be used or occupied for any unlawful purpose or in violation of any certificate of compliance covering or affecting the use of the Club/Pool Property or any part thereof and shall not suffer any act to be done or any condition to exist on the Club/Pool Property or any part thereof or any article to be brought thereon which may be dangerous, unless safeguarded as required by law, or which may, in law, constitute a nuisance, public or private, or which may make void or voidable any insurance then in force with respect thereto. 33862.11 RNK/JRW:rO3M7/08 _A .. I. Life Time shall not do or suffer any waste or damage, disfigurement or injury to the Club/Pool Property, the Club/Pool Complex or any part thereof. ARTICLE TWENTY Entry on Club/Pool Property by the City In addition to the City's (and Sehee Distf eti' ::........::.:.. ,,..., ,., J right of entry under any other provision of this Agreement, Life Time shall permit the City and {Seheel t authorized representatives to enter the Club/Pool Property or the Club/Pool Complex at all reasonable times for the purpose of (a) inspecting the same and (b) making any necessary repairs thereto and performing any work therein that may be necessary by reason of Life Time's failure to make any such repairs or perform any such work or to commence the same for thirty (30) business days after written notice from the City or Se::eelDist iet-e4 without notice in case of an emergency. Nothing herein contained shall create or imply any duty upon the part of the City for ;eheel Distfiet) to make any such repairs or do any such work; and performance thereof by the City for- S,.,.ee Distfietl shall not constitute a waiver of Life Time's default in failing to perform the same. The City fejid Seheel Distfiet) may during the progress of any work in the Club/Pool Property or the Club/Pool Complex keep and store therein or elsewhere upon the Club/Pool Property all necessary materials, tools, supplies and equipment. The City SeheeHNstfieq shall not be liable for inconvenience, annoyance, disturbance, loss of business or other damage of Life Time by reason of making such repairs or the performance of any .such work, or on account of bringing materials, tools, supplies and equipment into or through the Club/Pool Property during the course thereof and the 33862.11 RNK/JRW:r03/07/9a —42- 2— obligations and liabilities of Life Time under this Agreement shall not be affected or released thereby. In making any such repairs or performing any such work, however, the City fefid SeheelDistfiet} shall proceed with a minimum of inconvenience to the Life Time. ARTICLE TWENTY Indemnification of the City 23.011 (M Notwithstanding any provision to the contrary contained in this Agreement, Life Time shall indemnify and save harmless the City Seheel-Distfiet} against and from all liabilities, obligations, damages, penalties, claims, costs, orders, charges and expenses, including reasonable architects' and attorneys' fees, which may be imposed upon or incurred by or asserted against the City fafld Seheel-Bistfiet} by reason of any of the following occurring during the term of this Agreement: a) any work or thing done in, on or about the Club/Pool Property, Club/Pool Complex or any part thereof by Life Time or its employees agents, contractors, licensees or invitees; b) any use, non-use, possession, occupation, condition, operation, maintenance or management of the Club/Pool Complex or Club/Pool Property or any part thereof or any street, avenue, alley, sidewalk, curb, passageway, entrances, or structures, or space adjacent thereto; c) any negligence on the part of Life Time or any of its agents, contractors, servants, employees, licensees, or invitees; d) any accident, injury or damage to any person or property occurring in, on or about the Club/Pool Property or the Club/Pool Complex or any part thereof or 33862.11 MJK/IPW. -M 7.. / any street, avenue, alley, sidewalk, curb, passageway, entrances; or structures or space adjacent thereto; e) any failure on the part of Life Time to keep, observe and perform any of the terms, covenants, agreements, provisions, conditions or limitations contained in this Agreement on Life Time's part to be kept, observed and performed; or f) Any claim or allegation relating to Life Time's (or Life Time's officers, employees and agents) management or operation of the Club/Pool Complex including, but not limited to, claims or allegations related to violations of Minn. Stat. Chapter 325G (as may be amended); false advertising or other deceptive practices; consumer fraud; civil rights violations; or human rights discrimination claims. 23:92} In case any action or proceeding is brought against the City f er Seheel Distfieq by reason of any such claim, Life Time upon written notice from the City f er-Seheel-Bistfiet} shall at Life Time's sole cost and expense, including attorneys' fees, resist or defend such action or proceeding by an attorney approved by the City (of: Sebeel Distf:ietj in writing, such approval not to be unreasonably withheld, but no approval of attorney shall be required in each and every instance where the claim is resisted or defended by an attorney of an insurance carrier obligated so to resist or defend such claim. ARTICLE TWENTY Condemnation 3Q1: In the event that the Club/Pool Property or part thereof shall be taken in condemnation proceedings or by the exercise of any right of eminent domain, or by appropriation or through private purchase in lieu thereof, the parties to this Agreement shall 33862.11 RNK/JRW:A3I'07/06 -44- attempt to value Life Time's interest in the improvements f , the Sehe ' D' t ' t- leaseheld 44 and the City's land value and reversionary interest in the Club/Pool Complex. If agreement is not reached within thirty (30) days after the submission by the parties to each other of a proposed distribution, then any party may request arbitration as hereinafter provided to establish the value of their respective interests under the value premise stated above. In no event shall the amount received by the City be less than the value of theutlpp'o3>:e` takenen as if it were unencumbered by this Agreement and valued at the time of taking. f77 If at any time during the term of this Agreement title to the whole or materially all of the Club/Pool Property or the Club/Pool Complex shall be taken by the exercise of the right of condemnation or eminent domain or as otherwise provided above, this Agreement shall terminate and expire on the date of such taking. Life Time shall, in all respects, keep, observe and perform all the terms, covenants, agreements, provisions, conditions and limitations of this Agreement on Life Time's part to be kept, observed and performed up to the date of such taking. For purposes of this Article Twenty-(Feur-} QNM materially all of the Club/Pool Property or the Club/Pool Complex shall be deemed to have been taken if the portion of the Club/Pool Complex not so taken cannot be so repaired or reconstructed as to constitute a complete structure capable of being operated as a the Club/Pool Complex as required by the terms and conditions of this Agreement. 3::.::.; If at an time duriny g the term of this Agreement title to less than the whole or materially all of the Club/Pool Property shall be taken, as aforesaid, this Agreement shall continue and Life Time shall promptly, except for unavoidable delays, at Life Time's expense, and subject to compliance with the provisions of Article 19 of this 33862.11 RNK/JRW:,03/07/99 -45- Agreement relative to changes and alterations, restore the Club/Pool Property and the Club/Pool Complex, to the extent as nearly as possible, to the condition and character immediately prior to such partial taking. All of the compensation collected by Life Time pursuant to Section {24:04} {# of this Agreement, shall be applied and paid over toward the cost of demolition, repair and restoration of such partial taking, substantially in the same manner and subject to the same conditions as those provided in Section 15.02 of this Agreement with respect to insurance and other monies. Any balance of the award or other compensation for such partial taking of the building remaining after payment of such costs of demolition, repair and restoration, as aforesaid, shall be paid over to the Leasehold Mortgage holder, or if there be no Leasehold Mortgage holder, then the balance of the net award shall ii}};{•:r.;:: v}i•.:{{.?•.. y;:J;???•1;%{.{ iii:vi'?viiiiii:0"•iii:{{...:{.•ry.....ii?ii::.A.iiiii}i::^:ii}:.}v{.;::: ..v .................. v. ::: v.vw:::: :v ...: ............. ......... be paid to Life Time the Calttootsroor i ate to Life Tttie's'rl the Cxtr' rs tntr In the event that the costs of suchbuoastfd :been . demolition, repairs and restoration shall exceed the compensation collected, Life Time shall pay the deficiency forthwith. ARTICLE TWENTY (MIF) MQM Default Provisions 21` The occurrence of any one of the following events shall be considered a default by Life Time entitling the City to exercise any and all remedies set forth herein. a) Life Time's sale, assignment, sublease or other transfer of any interest in this Agreement or the Club/Pool Complexeeepof the Subleasel 33862.11 RNK/JRW:r031O7/96 -46- b) Notwithstanding any other provision contained herein, no occurrence of any event specified in this Section -(25. x}(W11 hereof or any other breach or default under this {6retind-ase} (ft§@M@M shall constitute an Event of Default permitting City to exercise any remedies under this fGfeund beasel unless the subject of said occurrence, breach or default shall constitute a material term or provision of this Agreement and the City shall have given Life Time at least thirty (30) days notice of such occurrence, breach or default and Life Time shall have failed to cure or otherwise correct such occurrence, breach or default within said time, provided that if the occurrence, breach or default is of a nature or kind as to require more than thirty (30) days to cure or correct, City shall not exercise any remedies hereunder provided that Life Time has commenced said cure or correction and is pursuing such cure with reasonable diligence. In the event of a good faith dispute by the parties regarding the existence of such an occurrence, breach or default, such dispute shall be subject to arbitration under Article 26 hereof and during the pendency of such arbitration any notice of an Event of Default given by City to Life Time hereunder shall be deemed tolled until the expiration of ten (10) days after the final decision of the arbitrator. No breach of any obligation of Life Time under Article 2 hereof shall be deemed incurable or not cured as long as Life Time has taken reasonable steps or precautions to assure that said breach shall not occur in the future. No default or breach by Life Time under the Leasehold Mortgage shall constitute an Event of Default hereunder unless the Leasehold Mortgagee shall have 33862.11 RNK/JRW:iO3/p7/9e —47— affirmatively commenced the undertaking of a remedy (other than the mere sending of a notice of default) under the Leasehold Mortgage or related security documents; c) Any material representation or warranty made by Life Time in this Agreement, or in any certificate or document furnished under the terms of, or in conjunction with, this Agreement is untrue, false or misleading. d) Because of action or inaction on the part of the Life Time, construction on the Club/Pool Complex is substantially abandoned, delayed or discontinued for more than thirty (30) days. e) The City determines that the remaining undisbursed Leasehold Mortgage Proceeds together with the (Ganita, Gent b Aoc of the Ci ty {anand Life Time's Capital Contribution, are insufficient to fully pay all of the unpaid costs of the Club/Pool Complex and estimated expenses of completion, and Life Time fails after thirty (30) days written demand to deposit with the title company disbursing the foregoing sufficient funds as may reasonably be required by the City, so as to permit the payment of all such costs and the completion of the Club/Pool Complex. f) Life Time commits waste or allows the Club/Pool Complex to deteriorate. g) Life Time fails to keep the Club/Pool Complex insured as required by the terms of this Agreement. 33862.11 wrivJmv: A3/07/OE -48- h) The institution of any proceeding against Life Time, or/any officer or director of Life Time for which the potential penalty is forfeiture of the Club/Pool Complex, any portion thereof or any other assets. i) Lifetime applies for, or consent in writing to, the appointment of a receiver, trustee, or liquidator of Life Time or of all or substantially all of Life Time's assets; 6) Life Time files a voluntary petition in bankruptcy, or, admits in writing of its inability to pay its debts as they become due; k) Life Time makes a general assignment for the benefit of creditors; 0) Life Time files a petition or an answer seeking reorganization or arrangement with creditors or to take advantage of any insolvency law; or m) If an order, judgment or decree shall be entered by any court of competent jurisdiction on the application of a creditor adjudicating Life Time a bankrupt or insolvent. 25.021 M No failure by the City to insist upon the strict performance of any term, covenant, agreement, provisions, condition or limitation of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or of such term, covenant, agreement, provision, condition or limitation. No term, covenant, agreement, provision, condition or limitation of this Agreement to be kept, observed or performed by Life Time, and no breach thereof, shall be waived, altered or modified except by a written instrument executed by the City. No waiver of any breach shall affect or alter this Agreement, but each and every term, covenant, agreement, 33862.11 f NK/JRW:r03/07/96 -49- provision, condition and limitation of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. 25-031 RM Upon the occurrence of any Event of Default this Agreement shall be terminated and the City shall be entitled to possession of the Club/Pool Property, and all improvements, fixtures, furnishings and equipment. At its sole discretion, the City may exercise any and all other remedies at law or equity allowed in lieu of or in addition to its contractual right to terminate the Agreement. 25.04 If Agreement is terminated as provided in Artiele 25.03 theit (4), For the remainder of what- weuld have been the tem of the Lease, and (2) so long as the City owns the ClubiPeel Prepei4y, the Seheel Distr-iet Use Gevenant and Subkease—,hafl survive. Under sueh eireunist-anees, the Sebeel Distriet shaH make monthly pa ellts t the City fer its share of the eest of operation and maintenanee ef the Club/Pool Complex as agreed by the Gity*nd LLye"--. Distriet or in the event of a dispute, by an arbitrator seleeted in aeeer-danee with Ai4iele 26.01. If the Cib, sells the 40ubMeel Weperty prier to what would have been the end of the term of this Agreentent and th Sublease, the preeeeds from sueh sale shaH be divided as Mew M -M I(!) AH eneumbranees against the Club -MO -1 I-pet4y shall be F"41WIFINYOiler-TWI • tr"Tr-W.ff R-M&WAV, MWM ".% IMOMMOVI-Mon 33862.11 FtNK/JRW:r03/O7/90 -50- Except as provided in Section 2 any dispute arising out of this Agreement shall be submitted to binding arbitration through the American Arbitration Association. Arbitration shall be conducted in accordance with the Rules of Commercial Arbitration. In the event either or both parties to this lease apply to the arbitrator, all parties shall be bound by, comply with, and perform and fulfill the final award or finding, without recourse to any other court of tribunal except as is necessary to enforce the final award in accordance with the Minnesota Laws on arbitration. This arbitration clause shall not apply if the City declares that an event of default has occurred and seeks to terminate this Agreement and recover the Club/Pool Property. In such an event, the City shall have the right to initiate action in the appropriate court without any duty to arbitrate. ARTICLE TWENTY- {SEVl-} MM Notices All notices required under the terms of this Agreement shall be deemed to have been properly served or given three (3) days after their deposit in the United States mail if sent by registered or certified mail, return receipt requested, postage prepaid or two (2) days after deposit in a nationally recognized overnight courier service, addressed to Life Time or the City at the address set forth below; to Life Time: 33x62.11 RNK/JRW:r03/07re0 -51- Suite 275 6442 City West Parkway Eden Prairie, MN 55344 to the City: 3400 Plymouth Boulevard Plymouth, MN 55447 or to such other address within the continental limits of the United States and to the attention of such party as the parties may from time to time designate by written notice to the other. ARTICLE TWENTY (EIGHT-) t Miscellaneous 28.01)No third party is entitled in any way to rely upon any provision Time{;} - in this Agreement. This Agreement is intended solely for the benefit of Life Time , f. the City fedid the Seheel Dist6eq and no third party shall have any rights or interest in any provision of this Agreement, or as a result of any action or inaction of the City in connection therewith. 28-021 . The exhibits attached to this Agreement are considered an integral part of it as if fully set forth within it. 28.03j All prior understandings, letters of intent, discussions and agreements are merged in the governing terms of this Agreement, which is a complete and final written expressions of the intent of the parties. This Agreement may be amended only pursuant to the terms of an exhibit, if attached and executed for that purpose, or by a 33862.11 FNX/JFtW:,03/07/98 -52- separately signed writing between the parties. This Agreement may not be amended or modified orally. Section headings are for the convenience of reference only, and shall not govern the interpretation of any provisions. Time is of the essence of this Agreement. 28.06) MM The invalidity, illegality or unenforceability of any provision of this Agreement or any other document executed in connection with this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement. 28.071 r The parties agree that nothing contained in this Agreement is intended or shall be construed to establish the parties as joint venturers or partners. 28-081 This Agreement has been freely negotiated. This Agreement shall not be construed against the drafter. This Agreement shall be liberally construed to protect the public interest and any ambiguities shall be resolved in favor of the City +ind Seheel ARTIGLE IWENTY NWEI '( Gentingeneies+ E-29-01 This AgFeement is subjeet to -H.. N` ...... .......... U M 33862.11 FNK/JRW:r03/O7/96 -53- Y,.+OOSr ...F}:SaY.?x .,.y}Y.!^:•:jjt;i:...ii:?;; ;:: ::?i:•:•:•ii:: :iiiii%ni:i<•iii}ii:•i:ai'v^ia::iii:S{:iiiii "iii^:{.;.}•: r: r.}:•: Y!. s.c"`Tx'`...-...'•.., ... pns nc r the Ag t s jt o the following conditions: a) The City's approval of any necessary amendments to its comprehensive plan and zoning ordinance, zoning and subdivision approval, and all other necessary City approval including variance and conditional use permits M. b) The City and Life Time obtaining any other necessary permits from other public regulatory entities necessary to carry out the terms of this Agreement c i---:::i;.....;«:<:>:>::>::;::i:::<;ii..; ....i::i:::;:i::::;i:.iii:.;;':..>:.;:.;<:::..;:.::..:.;:.:.:.;:: .:.:..:::...::.>ii::..:: a:: ',.•'.:a:.;:::.:,..:::::.;.:...:.:.:::.::::::::.::..:.:..:,.::::.::.,.:...., Li#`em and fndependn tehiolsrielo4 ("Sr1 oo11's#r i;:,:::,:;:::'»::ik::t<;i::;::i;;:.:::::f::;:>:::;.;h.:$::::? en rg 1ntchiea e ,envng the b1 osnlex terri aceptahl A. n..v rn::.ry::('i(i:"",'Y;i::ti::isL:::'.iit:ir:;i:`ij:::;....{;:;i-:•::.\\ti?-v}'.Yf,.MKa.•'i.\:,'a;;:n;niv,.}}i..:!.:x;:j::},:hi $;.v:;%.n; ':i::::::'.:: ..'...':":::: t.`• aid tie , ©.aier. fan ,t. ,. 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'•i:•ii'??::•i:v ,t ::a:::{?:i, ,;ris::i::?...•:i::'y;i:;•iiY:a;.f•}y:i::•}:ai?•:{i?a}:: ::..:: •: ::•:::::::::: :.::::::. :::: • :v::: :•-•:: :.: .::: ;...... ••.: : ••.w :•.::•vn apeeifi < Ez r e c Cc nt}r . if the t'bi t ! earici s are > o. -i,i iv tir dl iled> > Zis IN TESTIMONY WHEREOF, as of the day and year first hereinabove written the parties have executed this Agreement. 33862.11 RNK/JRW:,03/07/96 —54— CITY OF PLYMOUTH NOW SEAL) GRED Joycelyn Tierney, Mayor Dwight Johnson, City Manager FCA LTD., doing business as LIFE TIME FITNESS BY: Its AND _ Its STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of 1996, by Joycelyn Tierney and by Dwight Johnson, respectively the Mayor and City Manager of the City of Plymouth, a Minnesota municipal corporation, on behalf of the corporation and pursuant to the authority granted by its City Council. Notary Public 33862.11 NNK/JHW;103/07/06 -55- STATE OF MINNESOTA ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of 1996, by and the and of FCA Ltd., a Minnesota corporation, doing business as Life Time Fitness, on behalf of said corporation. 33862.11 RNK/JRW:r03107/6E Notary Public 56- ATTACH EXHIBIT "_°' - ICE ARENA COMPLEX CITY OWNED UNDEVELOPED PARCEL CLUB/POOL COMPLEX PARKING LOT PROPERTY CLUB/POOL PROPERTY COMMON WALL COVENANT RECIPROCAL PARKING AND ACCESS AGREEMENT NON-EXCLUSIVE PARKING EASEMENT 33862.11 FNK/JR v:A3ro7ro/ -57- Pmr-TIRTIF-FRIFEW. In". ATTACH EXHIBIT "_°' - ICE ARENA COMPLEX CITY OWNED UNDEVELOPED PARCEL CLUB/POOL COMPLEX PARKING LOT PROPERTY CLUB/POOL PROPERTY COMMON WALL COVENANT RECIPROCAL PARKING AND ACCESS AGREEMENT NON-EXCLUSIVE PARKING EASEMENT 33862.11 FNK/JR v:A3ro7ro/ -57- GROUND LEASE and DEVELOPMENT AGREEMENT between CITY OF PLYMOUTH, MINNESOTA and FCA, LTD, d/b/a LIFE TIME FITNESS 33862.11 RNK/JRW:r03/07/88 TABLE OF CONTENTS Page Recitals ....................................... 1 Definitions ..................................... 2 Article One - Lease of Property ........................ 4 Article Two - City Residential Use Covenants and Minimum Operational Standards ..................... 4 Article Three - Use of Property - Site Development and Construction of Club/Pool Complex ................... 10 Article Four - Construction Disbursement .................. 12 Article Five - Permitted Leasehold Mortgage ................ 15 Article Six - Parking Lot ............................ 16 Article Seven - Covered Walkway and Common Wall Agreement ............................ 17 Article Eight - Name of Complex and Signage ............... 18 Article Nine - City's Right of First Refusal ................. 18 Article Ten - Life Time Option to Purchase ................. 19 Article Eleven - Payment of Taxes and Other Impositions ................................. 20 Article Twelve - Surrender ............................ 21 Article Thirteen - Insurance ........................... 23 Article Fourteen - Use of Insurance Proceeds ................ 26 33862.11 iHNKOW103/07/66 Article Fifteen - City's Right to Perform Life Time's Covenants ............................. 27 Article Sixteen - Repairs and Maintenance of the Club/Pool Property .............................. 30 Article Seventeen - Compliance with Laws, Ordinances and Regulations ........................... 31 Article Eighteen - Changes and Alterations ................. 32 Article Nineteen - Discharge of Liens ..................... 34 Article Twenty - Use of Club/Pool Property ................. 36 Article Twenty -One - Entry on Club/Pool Property by the City ..... 36 Article Twenty -Two - Indemnification of the City ............. 37 Article Twenty -Three - Condemnation .................... 39 Article Twenty -Four - Default Provisions .................. 41 Article Twenty -Five - Arbitration ....................... 44 Article Twenty -Six - Notices .......................... 45 Article Twenty -Seven - Miscellaneous .................... 45 Article Twenty -Eight - Contingencies ..................... 47 33862.11 1RNK/JRW: 103/07/98 i 1 AGREEMENT dated this day of March, 1996 by and between the CITY OF PLYMOUTH, a Minnesota municipal corporation, as Lessor and hereinafter referred to as the "City," and FCA, LTD., a Minnesota corporation, doing business as LIFE TIME FITNESS, having its principal office and place of business at Suite 275, 6442 City West Parkway, Eden Prairie, MN 55344, as Lessee and hereinafter referred to as "Life Time". RECITALS The City owns property near 36th Avenue and Plymouth Boulevard which it is developing in conjunction with Life Time into a recreational center ("Recreation Center Property"). The Recreation Center Property shall be subdivided into four parcels: (1) the Ice Arena parcel which the City is developing into an indoor ice arena ("Ice Arena Complex"); 2) a parcel which Life Time is developing into a combined Fitness Center and swimming and diving complex ("Club/Pool Complex"); (3) the City -owned parking lot parcel ("Parking Lot"); and (4) a City -owned parcel ("City Owned Undeveloped Parcel"). The City is leasing to Life Time the property upon which the Club/Pool Complex shall be developed pursuant to this Agreement. The City is contributing $2.6 million toward the cost of tenant improvements for the Club/Pool Complex and site work in exchange for the covenants and agreement set forth herein as an inducement for Life Time to locate, construct, and operate its health club business in the City of Plymouth City Center and in order to induce Life Time to construct an operating facility larger than its normal health club, including two additional leisure pools and a competition pool. 33862.11 R"K/JRW:r03/07/B8 - 1- This agreement ("Agreement") sets forth the rights and obligations of the parties, their successors and assigns, relating to the lease of the Club/Pool Property (as defined below) to Life Time by the City, the construction and operation of the Club/Pool Complex. NOW, THEREFORE, the parties agree as follows: 1. "Agreement" shall mean this Ground Lease and Development Agreement. 2. "Contribution" shall mean the cash contribution of the City in the amount of 2.6 million, and the cash contribution of Life Time in the amount of $500,000.00 disbursed pursuant to Article Five of this Agreement. 3. "City" shall mean the City of Plymouth, a municipal corporation under the laws of Minnesota. 4. "City Residential Use Covenants and Minimum Operation Standards" shall mean the covenants and standards as described in Article Two of this Agreement. 5. "City Owned Undeveloped Parcel" shall mean the real property described on Exhibit 6. "Club/Pool Complex" shall mean all improvements located upon the real property described on Exhibit " " attached hereto. 7. "Club/Pool Property" shall mean the real property described on Exhibit "—I' attached hereto. 8. "Daily Rates" shall mean the fees charged by Life Time to Plymouth residents for use of the Club/Pool Complex as described in Article 2.02 of this Agreement. 9. "Family Hours" shall mean hours when children under age 13 may use the Club/Pool Complex. Family hours during the first 12 months the Club/Pool Complex is open shall be at least: 33862.11 INK/JRW:r03/07/08 -2- Sunday 8:00 AM - 4:00 PM Monday 12 Noon - 2:30 PM Tuesday 12 Noon - 2:30 PM and 6:00 PM - 8:00 PM Wednesday 12 Noon - 2:30 PM Thursday 12 Noon - 2:30 PM Friday 8:00 AM - 4:00 PM Saturday 2:00 PM - 8:00 PM Outdoor Pool (in season) Monday - Saturday 10:00 AM - 5:00 PM Family hours may be adjusted by agreement between the City and Life Time. 10. "Ice Arena Complex" shall mean the real property and its improvements described on Exhibit " " attached hereto. 11. "Impositions" shall mean the obligations and charges described in Article Twelve of this Agreement. 12. "Leasehold Mortgage" shall mean the mortgage described in Article Six of this Agreement. 13. "Life Time" shall mean FCA Ltd., a Minnesota corporation, doing business as Life Time Fitness. 14. "Parking Lot" shall mean the real property and improvements described on Exhibit " " attached hereto. 15. "Recreation Center Property" shall mean the combination of the Parking Lot, Club/Pool Property, Ice Arena Complex and the City Owned Parcel. 33862.11 RNK/JRW;103/07/96 -3- ARTICLE ONE Lease of Property 1.01 Lease. The City hereby leases to Life Time the Club/Pool property located at 36th Avenue and Plymouth Boulevard in the City of Plymouth, Hennepin County, Minnesota hereinafter "Club/Pool Property"). 1.02 Term. The lease shall be for a term of forty (40) years commencing on April 1, 1996, and expiring on March 31, 2036. 1.03 Consideration. As consideration for the tenant improvement allowance of the City for the Club/Pool Complex building, site improvements by the City and this Agreement, the Club/Pool Complex shall be subject to, and Life Time, its successors and assigns, shall be bound by, during the term of this Agreement, the "City Residential Use Covenants and Minimum Operational Standards" set forth in Article Two herein and the other terms and conditions of this Ground Lease. ARTICLE TWO City Residential Use Covenants and Minimum Operational Standards 2.01 The "Residential Use Covenants and Minimum Operational Standards" set forth below are an integral part of the consideration of the City leasing the Club/Pool Property to Life Time and the City making the City's Contribution toward the cost and construction of the Club/Pool Complex. Without the Residential Use Covenants and Minimum Operational Standards, the City would not lease the Club/Pool Property to Life Time and agree to the other obligations herein. 33862.11 R"K1JRW:r03/071B6 -4- 2.02 The Club/Pool Complex shall be available to all Plymouth residents, at the corresponding rates per person for a period of one year commencing on the date the Club/Pool Complex opens: a) Adults b) Second Adult Family Member or Child ages 13 through 17 c) Under 13 d) Daycare (Parent must remain on Club/Pool Property while child is in Daycare) Rate 8.00 ($6.00 pool use only) (daily) 5.00 (daily) 3.00 (daily) 2.00 per child for two (2) hours e) Life Time shall offer a summer pool rate to be determined pass similar to other public outdoor by the City pools once Life Time has obtained a membership base of 10,000 members. A resident of the City of Plymouth is not required to be a member of Life Time Fitness to use the Club/Pool Complex under the Daily Rate structure. For the period of one (1) year following the opening for business of the Club/Pool Complex, persons aged 13 and under of members of Life Time Fitness shall not be charged a separate initiation fee and, when accompanied by their parent or legal guardian, shall have admission to the Club/Pool Complex without separate charge or payment of dues during family hours and subject to age limitations on the use of the Club/Pool Complex applicable to children and families generally during family hour. 2.03 Effective March 1 of each year of this Agreement commencing March 1, 1998, the Rates set forth in Section 2.02 shall be subject to a maximum adjustment for inflation. The adjustment formula is: the applicable Daily Rate shall be multiplied by a 33862.11 RNK/JRW;r03/0719G -5- fraction, the numerator of which is the Consumer Price Index for December of the preceding year and the denominator of which is the CPI for December of 1995. This formula is expressed by the following numerical example which is designed to demonstrate the January 1, 1998 estimated adjustment: Applicable (CPI Dec. 1997) Daily Rate x (CPI Dec. 1995) = New 1998 Daily Rate This annual adjustment shall be determined by using as the CPI the "Consumer Price Index for all Urban Consumers (CPI -U) U.S. City Average, All Items," published by the Bureau of Labor Statistics. If the name of the aforesaid "Consumer Price Index" as described above shall be changed, or a similar index substituted for the aforesaid index by the United States Government, the substituted index shall be used by the City and Life Time in determining the adjustment. Should the publication of the "Consumer Price Index" be discontinued by the Bureau of Labor Statistics, U.S. Department of Labor, then the parties by agreement shall substitute a comparable index. Daily rates may not, however, be adjusted a higher percentage than the percentage adjustment Life Time makes to the monthly membership fee for a single person which is currently $29.00 per month. If Life Time enters into an agreement with another City in Minnesota in which Daily Rates, pass rates, or initiation fees are established, the rates in this Agreement may, at the City's discretion, be adjusted so that each rate under this Agreement is no higher than such other rates. 33862.11 RNK/JRW:103/07/98 2.04 Any person who is a resident of the City at the time they choose to become a member of Life Time shall be given a fifteen percent (15%) discount off of the lowest membership initiation fee then available to the public at any club owned or operated by Life Time. Life Time shall inform all eligible residents of their right to this discount. The initial initiation fees and sale of memberships to Plymouth residents shall be at the prices set forth below. This price shall be available for at least the 90 -day period prior to the Club/Pool Complex opening. Initiation Fee Monthly Membership Fee Rate guaranteed for 12 months) Single Person $125 29 per month Two People $210 49 per month Three People $295 69 per month Four People $380 69 per month 85.00 for each additional Person) 2.05 The use of the Club/Pool Complex by Plymouth residents shall be subject to the same rules, regulations, conditions and limitations of usage as all regular Life Time members, including requirements for written parental consent on file for anyone under the age of 18. 2.06 Except as otherwise expressly provided in this Agreement, Life Time shall not discriminate between Plymouth residents paying the Daily Rate and Life Time members with respect to the use of the facilities, provisions of services, reservation rights, and daycare services. 2.07 The Club/Pool Complex shall be open and operating at a minimum daily from 5:00 a. m. to 11:00 p.m., except for partial daily hours on five holidays. Certain non -athletic services provided in the Club/Pool Complex (e.g. daycare services, massage services) may 33862.11 eNKunw:ro3ro7iee —7— be limited as reasonably determined by Life Time. The limitation of certain services shall only be based on the lack of demand for such services. 2.08 Life Time shall provide lifeguards for the leisure pools and the outdoor pool as part of Life Time's operation of the Pool/Club Complex. Lifeguards shall be on duty during all Family Hours. 2.09 (reserved) 2.10 The Ice Arena shall be available without additional fees to Life Time members during public skating hours. 2.11 The City and Life Time shall establish procedures to handle complaints regarding the operation of the Club/Pool Complex including, but not limited to complaints relating to the "Residential Use Covenants and Minimum Operational Standards". Life Time shall promptly furnish the City with a copy of all written complaints it receives. The City and Life Time shall meet at least quarterly to discuss all matters relating to this Agreement and the operation of the Club/Pool Complex. Life Time shall provide quality customer service equal to or exceeding the level of serviced provided by Life Time to its customers in 1996. 2.12 All pools shall be maintained and repaired by Life Time and must maintain and pass public health standards at all times. 2.13 The temperature of the pool water in the leisure and outdoor pools must be approved by the City and shall be 85 degrees (plus or minus one degree). 2.14 The Club/Pool Complex must meet all OSHA standards. 2.15 The Club/Pool Complex must meet all fire codes and may be inspected by the City for compliance. 33862.11 RNK/JRW:r03/07/99 -8- 2.16 The Club/Pool Complex must meet all Americans With Disabilities Act requirements for public buildings. Life Time shall make reasonable efforts as determined by the City to work with persons with disabilities. 2.17 Subject to time availability, the City may rent the pools for its exclusive use for swimming lessons at times selected by the City at market rates offered by facilities in the Twin City Metropolitan Area. 2.18 Within sixty (60) days of the opening of the Club/Pool Complex, Life Time shall provide a senior rate, age 60 and above, for swimming acceptable to the City for Plymouth residents which includes a reduced initiation fee. 2.19 Within sixty (60) days of the opening of the Club/Pool Complex, Life Time shall provide a program satisfactory to the City allowing low income residents of the City access to the Club/Pool Complex. The City may purchase from Life Time up to 500 daily passes per calendar year for children under age 13 and up to 200 daily passes per calendar year for children age 13 through 17. The purchase price shall be two-thirds of the otherwise applicable Daily Rate for Plymouth residents. 2.20 Life Time shall cooperate with the City Park and Recreation Department on two jointly sponsored community events per year. Life Time shall cooperate with the City's Park and Recreation Department and the School District on joint programming. 2.21 The City may have bulletin board display space in the Club without charge to the City. 2.22 No membership cap shall apply to Plymouth residents. 33862.11 RNK/JRW:r03fO7/68 -9- ARTICLE THREE Use of Property - Site Development and Leasehold Improvements of Club/Pool Complex 3.01 Life Time Fitness shall design, construct, own, market and operate the Club/Pool Complex on the Club/Pool Property in accordance with the provisions of this Agreement. The parking area constructed upon the Parking Lot shall service the Recreation Center Property without cost to any user of the Club/Pool Complex under this Agreement. Construction shall commence no later than September 1, 1996 and shall be completed no later than September 1, 1997. 3.02 The Club/Pool Complex which includes the fitness center, 25 yard competition 8 -lane pool, diving pool, indoor leisure pool with waterslide and other play features, whirlpool and outdoor leisure pool with waterslide shall be constructed and equipped by Life Time, at its cost, in accordance with the following plans and specifications: (identify plans and specs). 3.03 Life Time shall pay for the cost of all site lighting for the Parking Lot parcel, the parking lot construction including sub -base, gravel base, bituminous surfacing, storm sewers, NURP pond construction (except grading), outdoor signage, concrete curb and gutter and striping. 3.04 The City shall be responsible for the following site work for the Club/Pool Property: traffic circle on Plymouth Boulevard and 36th Avenue, wetland mitigation or reclamation, site fencing, landscaping and irrigation. Life Time shall be responsible for the following site work for the Club/Pool Property and Parking Lot: site clearing, grading, sub - 33862.11 RNKNRW:A3/07/B6 _10- base for the Parking Lot, grading and excavation for a NURP pond, drain lines, sanitary sewer and watermains to the Club/Pool Complex. Prior to constructing the Club/Pool Complex on the Club/Pool Property, Life Time shall perform an inspection. The City makes no express or implied warranties concerning the site work. 3.05 The City shall separately contract for civil site engineering services for the Recreation Center property. The City shall pay the civil site engineering costs relating to the NURP pond and wetland mitigation. All other civil site engineering costs shall be apportioned in accordance with the construction costs identified in paragraphs 4.03 and 4.04 above. 3.06 All site work for the Club/Pool Property and Parking Lot shall be in accordance with the following plans and specifications: (identify site plans) 3.07 Life Time shall construct at its cost the Club/Pool Complex in accordance with the following plans and specifications: (identify). All material change orders relating to or affecting the design and features of the Club/Pool Complex must be approved by the City in writing, which approval shall not be unreasonably withheld. 3.08 The City shall advertise for bids and award the construction contract for the Ice Arena Complex according to applicable law if the bids are satisfactory to the City. 3.09 The City shall contribute $2.6 million toward the cost of improvements to the Club/Pool Complex. Life Time shall be solely responsible for all costs in excess of the sums contributed by the City, including but not limited to financing, all administrative, architectural, engineering, construction management, surveying and legal costs, but excluding any City staff time or City attorney expense. 33862.11 FWK/JRW:rO3/O7/88 - 11- 3. 10 The Club/Pool Complex shall not open for business prior to completion of the Ice Arena Complex, unless significant unforeseen circumstances as reasonably determined by the City cause the Ice Arena Project to be delayed. 3.11 Life Time shall pay permit fees, sewer availability charges ("SAC" fees), and City sewer and water connection charges associated with the Club/Pool Property and Club/Pool Complex. ARTICLE FOUR Construction Disbursement 4.01 All monies to be deposited by the City ($2.6 million) and Life Time 500,000.00) in connection with improvements to the Club/Pool Complex on the Club/Pool Property and other site work shall be disbursed by a title company approved by the City in accordance with a disbursement agreement acceptable to the City and Life Time. Any interest on money deposited by the City shall be turned over to the City before a certificate of occupancy is issued for the Club/Pool Complex. Life Time shall pay all charges imposed by the title company. 4.02 No portion of the Contribution of the City shall be advanced and deposited with the title company as provided herein until the following documents are received or the following conditions are met: a. A 1987 ALTA form of mortgagee title insurance policy from a company and agent acceptable to the City which policy (the "Title Policy") shall, prior to or contemporaneously with the first advance: (i) insure the priority and sufficiency of any Leasehold Mortgage placed upon the property pursuant to Article Six herein as a first lien upon the Club/Pool Property; (ii) show all 33862.11 - 12- RNK/JRW:r03/07169 0 C. U easements or other matters affecting the Club/Pool Property, all subject only to such exceptions or qualifications as are acceptable to the City; (iii) insure unconditionally against all possible contractors', suppliers' and mechanics' lien claims; (iv) contain any endorsements or assurances that the City may reasonably request for protection of its interests, including but not limited to pending disbursement and interim mechanic's lien endorsement. The disbursement agreement described in Section 5.01 is fully executed. Evidence of insurance as required by this Agreement is received and approved by the City. A written opinion by a third party attorney acceptable to the City, covering such matters as the City deems necessary, including, without limitation, statements of opinion to the effect that: 1. 2. 3. Life Time is a legal entity duly created in accordance with and in a condition of good standing under the laws of the state of its formation, with full authority to transact business in Minnesota. The execution and delivery of this Agreement and the Leasehold Mortgage and the completion and operation of all improvements, does not violate, conflict with, or constitute a default under any terms of the Life Time's formative documents, or any mortgage, indenture, lease, agreement, license, permit, judgment, decree, order, statute, ordinance, rule or regulation to which Life Time is subject or bound. There is no pending litigation or judgment entered of record against Life Time or directly related affiliates. 33862.11 RNK/JRW:,03107/68 -13- 4. Life Time shall pay for the cost of such written opinion. e. A Sworn Construction Statement in a form acceptable to the City and to the title company, indicating the total costs for actual or estimated construction and development of the Club/Pool Complex that will or have been incurred by Life Time and containing line items and amounts as required by the City. f. A contract between Life Time and a general contractor acceptable to the City with a guaranteed maximum cost for construction of the Club/Pool Complex, and accompanied by copies of all subcontracts thereunder. g. A contract between Life Time and the architect designing the Club/Pool Complex, together with acknowledged collateral assignments of the Life Time's interest in the Plans and Specifications to the City. The assignment to City as required in this section shall be subordinate to a prior assignment in favor of the holder of the Leasehold Mortgage. h. A building construction schedule acceptable to the City. i. A certification from the Architect stating that the Plans and Specifications are complete in all respects and contain all details requisite for construction of the Club/Pool Complex which , when built in accordance therewith, shall comply with all zoning and building codes, laws, ordinances and regulations. j. Life Time's deposit with the title company of sufficient funds to complete the construction of the Club/Pool Complex and Life Time's share of site improvement and engineering costs. k. Life Time's deposit of the debt service escrow with the City pursuant to Section 6.06. 33862.11 RNK/JRW:103/07/88 -14- 1. A loan commitment in form and content acceptable to City and School District. 4.03 The requirement of this Article satisfies the requirements of the City's Zoning Ordinance for financial security to guaranty the completion of extension amenities and of the City's subdivision ordinance for a development agreement. ARTICLE FIVE Permitted Leasehold Mortgage 5.01 Life Time may place a mortgage upon the Club/Pool Complex in an amount which shall not exceed $4 million or such higher amount as the City shall approve, which approval shall not be unreasonably withheld ("Leasehold Mortgage"). The mortgage is for the sole purpose of securing construction and subsequent permanent financing for Life Time's share of the cost of constructing the Club/Pool Complex. 5.02 The Indebtedness secured by the Leasehold Mortgage shall be amortized over a period of thirty years or less. Life Time may refinance the indebtedness secured by the mortgage provided the amount of the remaining principal balance is not increased and the new debt is not amortized for a period of time extending beyond thirty (30) years. 5.03 Any mortgage allowable hereunder shall contain a provision which requires that the City receive notice of default and opportunity to cure rights from the mortgagee. 5.04 Life Time shall not secure any additional debt with the Club/Pool Complex without the prior written consent of the City. 5.05 The City shall subordinate its fee interest and interest under this Agreement in the Club/Pool Complex to the leasehold mortgage and shall execute a subordination agreement if required by the Leasehold Mortgage. 33862.11 RNK/JRW:r03/07/96 -15- 5.06 Life Time shall deposit with the City an amount equal to four months of debt service on the Leasehold Mortgage to be placed upon the Club/Pool Property by Life Time as permitted herein. The funds are to be held in escrow by the City and used by the City, at its option, to cure any default under the leasehold mortgage. Accrued interest on the escrow funds, shall be paid on a quarterly basis to Life Time. ARTICLE SIX Parking Lot 6.01 Life Time and any successor to Life Time occupying the Club/Pool Complex is hereby granted a non-exclusive perpetual easement in and to the Parking Lot for the purpose of customer and employee parking. The Parking Lot shall contain a minimum of 670 improved parking spaces to be used by users of the Club/Pool Property and shall be constructed by Life Time in accordance with the site plans and specifications identified in Section 6.02 Prior to the first construction disbursement, a non-exclusive parking easement in the form attached hereto as Exhibit " Property. of shall be filed against the Recreation Center 6.03 The City at its cost shall provide snow and ice control for the Parking Lot and maintain the landscaping including the lawn irrigation system. All other repairs and maintenance of the Parking Lot shall be performed by Life Time, with the costs shared equally by Life Time and the City. Life Time shall be solely responsible for the repair, maintenance, replacement and energy cost for the parking lot lighting. 33862.11 F NK/JRW:r03fO7/96 -16- ARTICLE SEVEN Covered Walkway and Common Wall Agreement 7.01 A temperature -controlled enclosed walkway shall be constructed alongside and connecting the Ice Arena Complex and the Club/Pool Complex. Life Time and the City shall grant to the other a reciprocal easement for pedestrian passage to and from the respective facilities via the enclosed walkway in the form depicted on Exhibit " The City shall have the option at the City's expense to extend the enclosed walkway to abutting property owned by the City. 7.02 Each party shall be responsible for the costs of operation and maintenance of the covered walkway located on their respective parcels. 7.03 The wall between the Ice Arena Complex and the Club/Pool Complex is a common wall. The parties respective rights and obligations pertaining to the wall are as follows: a. The cost of designing and constructing the common wall shall be paid for fifty percent (50%) by Life Time and fifty percent (50%) by the City. b. A common wall covenant to be recorded against the title to the Club/Pool Property is attached hereto as Exhibit " ". 7.04 The City may in the future construct an additional building abutting the Club/Pool Complex. The same terms as specified above shall be applied to the common wall. 33862.11 RNK/JRW:,03/07/96 -17- ARTICLE EIGHT Name of Complex and Signage 8.01 The name of the Recreation Center Property shall be selected by the City, but it shall include a reference to Life Time. The name of Life Time Fitness Club shall be included on signage near the main entrance to the property in accordance with the plans and specifications identified in Section 4.07. The City reserves the right to alter the signage configuration so long as the visibility of the Life Time Fitness Center sign is not unreasonably impaired. ARTICLE NINE The City's Right of First Refusal 9.01 For a period ending five (5) years after the Club/Pool Complex opens for business, Life Time may not sell or assign its interest under this Agreement or sell or assign the Club/Pool Complex except as provided herein. Life Time may sell its interest under this Agreement at any time during the first five years after the Club/Pool Complex opens for business, if Life Time pays the City $500,000 if the sale occurs within one year after the Club/Pool Complex opens for business, $400,000 if the sale occurs within two (2) years after the opening, $300,000 if the sale occurs within three (3) years after opening, $200,000 if the sale occurs within four (4) years of opening, or $100,000 if the sale occurs more than four 4) years after opening but less than five (5) years after opening. In addition, if Life Time receives a bona fide offer from any entity to acquire Life Time's interest under this Agreement which Life Time intends to accept, Life Time shall notify the City by sending to the City a copy of the proposed contract and notify the City of Life Time's intention to accept such offer. The City shall have the right within ninety (90) days after receipt of the 33862.11 RNKNRW:A3/07/89 -18- notice from Life Time to accept the terms of such contract to purchase, assignment or sublease in its own name, or in the name of a nominee, and on the terms specified in the proposed contract. If the City does not exercise its right of first refusal by sending Life Time notice within such ninety -day period, Life Time may then sell, assign or sublease its rights to the Club/Pool Complex to the entity who made the bona fide offer provided that such sale, assignment or sublease is on the same terms and conditions, as set forth in proposed contract. ARTICLE TEN Life Time Option to Purchase 10.01 Life Time shall have the right at the expiration of the term and only at the expiration of the term of this Agreement to purchase the Club/Pool Property by paying to the City the sum of One Hundred Thousand Dollars ($100,000.00) ("Purchase Price"). Life Time shall give the City one hundred twenty (120) days notice of Life Time's intention to exercise its right to purchase the Club/Pool Complex and shall pay the Purchase Price to the City on the expiration date of this Agreement. Life Time shall not have the right to purchase the Club/Pool Property if there has been a default under the terms of this Agreement and the default exists at the time this Agreement terminates. 10.02 The City shall, upon payment of the Purchase Price, deliver to Life Time a limited warranty deed conveying title to the Club Pool Property subject to all encumbrances, liens, restrictions, covenants, and easements contemplated by this Agreement. 33862.11 - 19- 9NK/JRW:N3/07/BO ARTICLE ELEVEN Payment of Taxes and Other Impositions 11.01 Life Time shall pay or cause to be paid (except as provided in Section 12.02), before any fine, penalty, interest or cost may be added thereto, all real estate taxes, assessments, water and other public utility charges and all other charges or burdens whatsoever kind and nature, which at any time prior to or during the term of this Agreement may have been, or may be assessed, levied, confirmed, imposed upon, or grow or become a lien on, the Club/Pool Property or any part thereof, or any appurtenance thereto, or the rent of income received from subtenants or licensees, or any use or occupancy of the Leased Club/Pool Property, or such rights, obligations, easements, and franchises as may now or hereafter be appurtenant, or appertain, to the use of the Club/Pool Property, all of which charges are hereinafter referred to as "Impositions." Agreement, be adjusted between the City and Life Time as of the expiration of the term of this Agreement, so that Life Time shall pay that portion of such imposition which that part of such fiscal period included in the period of time before the expiration of the term of this Agreement bears to such fiscal period, and the City shall pay the remainder thereof, provided, however, that Life Time shall not be entitled to receive any apportionment, if Life Time shall be in default in performing any of the terms of this Agreement. ARTICLE TWELVE Surrender 12.01 Life Time shall on the last day of the term hereof (unless Life Time has exercised its right to purchase the Club/Pool Property) or upon any earlier termination of this Agreement, or upon any entry or re-entry by the City upon the Club/Pool Property pursuant to this Agreement, surrender and deliver to the City the Club/Pool Property including the the same in such condition to the City as additional rent at termination of Life Time's tenancy hereunder. 12.03 Upon the date fixed for the expiration of the term of this Agreement (unless Life Time Purchases the Club/Pool Property pursuant to the terms of this Agreement) or upon the sooner termination of the term thereof, as the case may be, the Club/Pool Complex, fixtures and furnishings shall automatically and without further act upon the part of Life Time or the City become the property of the City and title thereto shall vest in the City free and clear of all liens and encumbrances and without payment therefor by the City. Life Time will, upon request of the City, promptly execute and deliver to the City a deed or such other appropriate instrument of conveyance as the City may deem necessary or desirable to evidence or confirm the vesting of title to the Club/Pool Complex in the name of the City, in recordable form reasonably satisfactory to the City. 12.04 The Club/Pool Complex is and shall remain the property of Life Time until the date herein fixed for the expiration of the term of this Agreement or until the sooner termination thereof. Life Time's estate, title or interest in the Club/Pool Complex shall not be subleased, assigned, transferred or otherwise conveyed or encumbered in whole or in part, nor purported to be subleased, assigned, transferred, or otherwise conveyed or encumbered in whole or in part, separate and apart from Life Time's interest under this Agreement, nor shall there be any sublease, assignment, transfer or conveyance of the estate, title or interest of Life Time in the Club/Pool Complex in whole or in part by operation of law or by judicial order, decree or judgment, separate and apart form Life Time's interest under this Agreement except as permitted in this Agreement. 33862.11 RNK/JRW:r03/07/98 -22- 12.05 It is the intention and agreement of the parties that Life Time's interest in this Agreement and all of Life Time's right, title and interest in and to the Club/Pool Complex shall be nonseparable and that any attempts to transfer or mortgage either of such interests, except as expressly permitted under the terms of this Agreement, shall be void and of no force and effect unless there shall be a complete transfer or mortgage, as the case may be, of Life Time's interest under this Agreement and of all Life Time's right, title and interest in and to the Club/Pool Complex to the same party. It is also the intention and agreement of the parties that the separation of title to the Club/Pool Property from title to the Club/Pool Complex is not to change the character of the Club/Pool Complex as real estate. 12.06 The provisions of this Article Thirteen shall survive any termination or expiration of this Agreement. ARTICLE THIRTEEN Insurance 13.01 Life Time, at its sole cost and expense, shall keep the Club/Pool Complex and all the fixtures, furnishings and equipment therein, insured against loss or damage by fire and against loss or damage by such other risks now or hereafter embraced by "Extended Coverage," so called, and against such other risks or hazards and in an amount not less than 100% of the full replacement value of the Club/Pool Complex and Contents. During the construction of the Club/Pool Complex or any alterations thereto, Life Time shall provide Builders Risk Insurance written on Completed Value Form. All insurance policies required herein shall list the City as a loss payee in an amount equal to the City's contribution. 13.02 In addition to the insurance required in Section 13.01 above, Life Time, at its sole cost and expense, shall purchase and maintain during the entire term of this Agreement: 33862.11 - 23- RNK/JRW:r03/07/9G a. Comprehensive bodily injury and property damage liability insurance against claims for bodily injury, death or property damage, occurring in, on, or about the Club/Pool Property, the Club/Pool Complex, or any elevator or escalator therein and on, in or about the adjoining parking lots and passageways, naming the City and the Life Time as the insured, such insurance to afford minimum protection, during the term of this Agreement, of not less than Two Million Dollars ($2,000,000.00) with single limits bodily injury/property damage and a Three Hundred Thousand Dollar ($300,000.00) umbrella policy; b. Boiler and pressure vessel (including, but not limited to, steam pipes, pressure pipes, and condensation return pipes) insurance, provided the Club/Pool Complex contains a boiler or other pressure vessel or pressure pipes, in an amount not less than Two Hundred Fifty Thousand Dollars ($250,000.00) and plate glass insurance upon store fronts wherever located and upon any other plate glass installed on the ground floor of the Club/Pool Complex; C. Rent, rental value or business interruption insurance against loss of rent or income due to fire and the risks now or hereafter embraced by "Extended Coverage," in an amount at least equal to the annual gross operating income of Life Time at the Club/Pool Property. Such rent, rental value or business interruption insurance shall be made payable to the City and any Leasehold Mortgage holder described in Article Six. In the event that the Club/Pool Complex shall be destroyed or damaged, the proceeds of such rent or rental value insurance shall be applied periodically to the payments due the Leasehold 33862.11 RNK/JRW:r03/07/98 -24- Mortgage holder or the City pursuant to this Agreement until the restoration of the Club/Pool Property, at which time any balance of such proceeds shall be returned to Life Time, provided Life Time is not in default under this Agreement or the Leasehold Mortgage. e. Such other insurance insuring against such risks, in such amounts with such protective provisions as may be reasonably required from time to time by the City of the Club/Pool Property and Club/Pool Complex. f. Demolition and restoration insurance for the benefit of the City to insure that, in the event the Improvements on the Club/Pool Property are destroyed by fire or other casualty and not rebuilt by the Life Time, the remains of the improvements are demolished and the Club/Pool Property are restored to their present condition (i.e., a level, grassy field on grade). The proceeds of the policy shall be payable solely to the City. 13.03 All insurance policies set forth in this Article Fourteen shall name the City and any Leasehold Mortgage holder as additional parties insured, or as mortgagee or loss payee, whichever is applicable. 13.04 All insurance shall be effected under valid and enforceable policies issued by insurers of recognized responsibility which are licensed to do business in the State of Minnesota and which have been approved by the City as to the qualifications of insurers and the amounts of insurance to be written by each. Upon the execution of this Agreement, and thereafter not less than thirty (30) days prior to the expiration dates of any expiring policy or policies theretofore furnished pursuant to this Article Thirteen of this Agreement, originals of the policies, copies thereof, or certificates of insurance, in the case of bodily injury and 33862.11 WK/JRW:r03/07/89 -25- property damage liability insurance, bearing notations evidencing the payment of premiums or by other evidence of such payment, shall be delivered by Life Time to the City. 13.05 Each policy required in this Article Thirteen shall have attached thereto (a) an endorsement that such policy shall not be cancelled or not renewed without at least sixty (60) days' prior written notice to the City; and (b) an endorsement to the effect that no act or omission of the Life Time shall invalidate the interest of such person or entity entitled to such notice. 13.06 Each policy shall be reviewed and increased every year with minimum protection amounts adjusted based upon the increase in the CPI as set forth in the formula provided in Section. 2.04 of this Agreement. ARTICLE FOURTEEN Use of Insurance Proceeds 14.01 In case of damage to or destruction of the Club/Pool Complex by fire or other casualty, Life Time, shall at Life Time's sole cost and expense, whether or not the insurance proceeds, if any, shall be sufficient for the purpose, and irrespective of the amount of any loss, restore, repair, replace, rebuild the Club/Pool Property or the Club/Pool Complex and other improvements thereon, as nearly as possible to its value, condition and character immediately prior to such damage or destruction in accordance with plans approved by the City. Such restoration, repairs, replacements, rebuilding or alterations shall be commenced with due diligence, and in good faith, and prosecuted with due diligence and in good faith, unavoidable delays excepted. 14.02 All insurance money paid pursuant to this Agreement on account of such damage or destruction, less the actual cost, fees and expenses, if any, incurred in connection 33862.11 - 26- RNK/JRW:r03/O7/96 with the adjustment of the loss, shall be applied to the payment of the cost of the aforesaid demolition, restoration, repairs, replacement, rebuilding, including the cost of temporary repairs for the protection of Club/Pool Property or the Club/Pool Complex pending the completion of permanent restoration, repairs, replacements, rebuilding (all of which temporary repairs, protection of property and permanent restoration, repairs, replacement, rebuilding are hereinafter collectively referred to as the "Restoration"). The insurance proceeds shall be paid out from time to time as such Restoration progresses by a title company or other dispersing agent agreed to by the parties with normal lien waivers and other requirements. 14.03 No destruction of, or damage to, the Club/Pool Property or any part thereof by fire or any other casualty shall permit Life Time to surrender this Agreement or shall relieve Life Time from its liability under the terms and conditions of this Agreement including additional rent payable under this Agreement, and Life Time waives any rights now or hereafter conferred upon it by statute or otherwise to quit or surrender this Agreement or the Club/Pool Property or any part thereof or to any suspension, diminution, abatement or reduction of rent on account of any such destruction or damage. ARTICLE FIFTEEN The City's Right to Perform Life Time's Covenants 15.01 If Life Time shall at any time fail to pay any Imposition in accordance with the provisions of Article Twelve hereof, or to take out, pay for, maintain and deliver any of the insurance policies provided for in Article Fourteen hereof, or shall fail to make any other payment or perform any other act on its part to be made or performed in accordance with any terms and provisions of this Agreement, the City, after ten (10) business days' prior 33862.11 RNK/JRW:,03/07/68 -27- written notice to Life Time (or without notice in case of an emergency) and without waiving, or releasing Life Time from, any obligation of Life Time contained in this Agreement, may, but shall be under no obligation to: a) pay any Imposition payable by Life Time pursuant to the provisions of Article Twelve hereof, or b) take out, pay for and maintain any of the insurance policies provided for in Article Fourteen hereof, or c) make any other payment or perform any other act on Life Time's part to be made or performed as in this Agreement provided including, but not limited to payments due under the Leasehold Mortgage or performance of any terms or conditions of the Leasehold Mortgage; and may enter upon the Club/Pool Property for any such purpose, and take all such action thereon, as may be necessary therefor. 15.02 All sums so paid by the City and all costs and expenses, including attorney's fees, incurred by the City in connection with the performance of any such act, shall be paid by Life Time to the City as the case may be on demand, and the City shall not be limited in the proof of any damages which the City may claim against Life Time arising out of or by reason of Life Time's failure to provide and keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not paid or incurred by Life Time and which would have been payable upon such insurance, but the City shall also be entitled to recover damages for such breach, the uninsured amount of any loss (to the extent of any deficiency in the insurance required by the provisions of this Agreement), damages, costs and expenses of suit, including reasonable counsel fees, suffered or incurred by reason of damage to, or 33862.11 RNK/JRW:r03/O7/96 -28- destruction of, the Club/Pool Property and the Club/Pool Complex or any part thereof, occurring during any period when Life Time shall have failed or neglected to provide insurance as aforesaid. 15.03 Under no circumstances shall the exercise by the City of the right granted in this Article Fifteen to enter upon the Club/Pool Property or the Club/Pool Complex for any purpose specified herein and take such action as may be necessary, or the exercise of any other right or remedy granted to the City under any other provision of this Agreement to cure, prevent or take any other action with respect to any default by Life Time, constitute an eviction of Life Time, result in a termination of this Agreement, or in any manner whatsoever relieve Life Time from liability to pay any amounts due under this Agreement or to comply with the Residential Use Covenants and Minimum Operational Standards and from the performance of any term of this Agreement by Life Time. 15.04 The exercise of any right by the City under this Agreement shall not alter, abridge, supersede or otherwise affect the obligations of the City under this Agreement to give any notice required by any provisions of this Agreement, nor alter, abridge, supersede or otherwise affect the rights of any Leasehold Mortgage to cure any default of Life Time or to take any action permitted hereunder in connection therewith. 15.05 The provisions of this Section 15.05 shall have no application to the City's right to terminate this Agreement under any other term covenant or condition of this Agreement or to the City's rights to enter, re-enter or to obtain possession of the Club/Pool Property and the Club/Pool Complex following termination of this Agreement in accordance with the provisions hereof. 33862.11 RNK/JRW:r03/07/68 -29- ARTICLE SIXTEEN Repairs and Maintenance of the Club/Pool Property 16.01 Throughout the term of this Agreement, Life Time, at its sole cost and expense, shall take good care of the Club/Pool Complex, furnishings, fixtures and equipment, and shall keep the same in good order and condition reasonable wear and tear excepted, and make all necessary repairs thereto, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen. When used in this Article Sixteen, the term "repairs" shall include all necessary replacements, renewals and alterations needed to maintain the Club/Pool Complex as a first class facility of its type. All repairs made by Life Time shall be at least equal in quality and class to the original work. In December of each year, Life Time shall provide the City documentation summarizing all repair, maintenance and repair activities occurring in the previous twelve months. The City, at its own expense, may inspect the Club/Pool Complex. Deficiencies noted by the City to Life Time must be corrected within sixty (60) days at Life Time's expense. 16.02 Life Time may temporarily close portions of the Club/Pool Complex for necessary repairs from time to time after reasonable notice to City. The necessity for and adequacy of repairs to the Club/Pool Complex and the fixtures therein pursuant to this Agreement shall be measured by the standard which is appropriate for buildings of similar construction and class, provided that Life Time shall in any event make all repairs necessary to avoid any structural damage or deterioration to the Club/Pool Complex. 16.03 Life Time shall keep and maintain all portions of the Club/Pool Property, and the sidewalks, curbs, entrances, passageways and, to the extent required by law all areas 33862.11 RNK/JRW:r03/O7/96 -30- adjoining the same in a safe, clean and orderly condition, free of dirt, rubbish, snow, ice, and unlawful obstructions. 16.04 The City shall not be required to furnish any services or facilities or to make any repairs or alterations to the Club/Pool Property and the Club/Pool Complex. Life Time hereby assumes the full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Club/Pool Property and the Club/Pool Complex subject to the terms of this Agreement. 16.05 Annual Budget. Life Time shall submit an annual budget to the City for maintenance, improvements, and replacement. The budget shall be submitted on or before November lst annually for the next calendar years. ARTICLE SEVENTEEN Compliance with Laws, Ordinances and Regulations 17.01 Throughout the term of this Agreement, Life Time, at its sole cost and expense, shall promptly comply with all present and future laws, ordinances, orders, rules, opinions, directives, regulations and requirements of all federal, state, and city governments, courts, commissions, attorneys general, any national or local insurance rating bureau, or any other body exercising functions similar to those of any of the foregoing, which may be applicable to the proposed operations and activities on the Club/Pool Property, the Club/Pool Complex or any part thereof. 17.02 Life Time shall likewise observe and comply with, or shall cause to be observed and complied with, all the requirements of all policies of public liability, fire and other insurance at any time enforce with respect to the Club/Pool Property and the Club/Pool Complex. 33862.11 RNK1JRW:,03/07/B8 -31- ARTICLE EIGHTEEN Changes and Alterations 18.01 Life Time shall have the right, at any time and from time to time during the term of this Agreement, to make, at its sole cost and expense, changes and alterations in, to or of the Club/Pool Complex, subject, however, in all cases to the following: a) No structural change or alteration, involving in the aggregate an estimated cost of more than Seventy -Five Thousand Dollars ($75,000.00), shall be made without the prior written consent of the City which consent shall not be unreasonably withheld. b) No change or alteration shall be undertaken until Life Time shall have procured and paid for, so far as the same may be required from time to time, all permits and authorizations of any federal, state, or city government or departments, or subdivisions of any of them, having jurisdiction. c) Any structural change or alteration, involving in the aggregate an estimated cost of more than Seventy -Five Thousand Dollars ($75,000.00) shall be conducted under the supervision of a licensed architect or a licensed professional engineer selected by Life Time and approved in writing by the City and no such structural change or alteration shall be made except in accordance with detailed plans and specifications and cost estimates prepared and approved in writing by such architect or engineer, and approved in writing by the City (such approval not to be unreasonably withheld). 33862.11 - 32- RNK/JRW:N3/OJ/68 d) Any change or alterations shall, when completed, be of such a character as not to reduce the value and utility of the Club/Pool Complex below its value and utility immediately before such change or alteration. e) Any change or alteration shall be made promptly (unavoidable delays excepted) and in good and workmanlike manner and in compliance with all applicable permits and authorizations and building and zoning laws and with all other laws, ordinances, orders, rules, regulations and requirements of all federal, state, and city governments, departments, commissions, boards and officers, any national or local insurance rating bureau, or any other body hereafter exercising functions similar to those of any of the foregoing. f) The cost of any such change or alteration shall be paid in cash or its equivalent, so that the Club/Pool Property shall at all times be free of liens for labor and materials and the Club/Pool Complex and free from any encumbrances, chattel mortgages, conditional bills of sale, or security interests. g) Whenever appropriate the fire insurance with "Extended Coverage," as required to be maintained during the term of this Agreement in Section 7.01 of Article 7 hereof, shall be adapted to provide, during any period of building construction, for Builder's Risk Insurance written on the Completed Value Form or on the Monthly Reporting Form. h) If the estimated cost of any such structural change or alteration shall in the aggregate be in excess of Seventy -Five Thousand Dollars ($75,000.00) Life Time shall, before commencement of work, at Life Time's sole cost and 33862.11 RNK1JRW:r03/07/Q6 -33- expense, furnish to the City a surety company performance bond, issued by a surety company acceptable to the City, in an amount at least equal to the estimated cost of such change or alteration, guaranteeing the completion thereof within a reasonable definite time, free and clear of all liens, encumbrances, security interests, chattel mortgages, conditional bills of sale, and other charges, and in accordance with the plans and specifications approved by such obligee. In connection with any such structural change or alteration for which amounts have been deposited or are to by used pursuant to this Agreement, no such performance bond or other security shall be required except to the extent that such estimated costs exceed the amount deposited or to be used pursuant to this Agreement. 18.02 The dollar amounts listed in Sections 18.01 (a) (c) and (h) shall be adjusted for inflation as set forth herein. The adjustment formula is: $75,000.00 multiplied by a fraction the numerator of which is the CPI for the month preceding the expiration of the Term and the denominator of which is the consumer price index for December, 1995. This adjustment shall be determined by using as the CPI the "consumer price index for all urban consumers CPI -U) U.S. City Average, all Terms" Bureau of Labor Statistics. If the name of the consumer price index" as described above shall be changed a substituted index shall be used as set forth in Section 2.03 of this Agreement. ARTICLE NINETEEN Discharge of Liens 19.01 Except for the Leasehold Mortgage, Life Time shall not create or permit to be created or to remain, and shall discharge, any lien, encumbrance or charge, levied on 33862.11 RNK/JRW:r03/O7f96 -34- account of any Impositions or any mechanic's, laborer's or materialman's lien or any mortgage, conditional sale, title retention agreement, security interest or chattel mortgage, or otherwise which might be or become a lien, encumbrance or charge upon the Club/Pool Property or any part thereof provided that any Imposition may, after the same becomes a lien on the Club/Pool Property, be paid or contested in accordance with this Agreement and any mechanic's, laborer's or materialman's lien may be discharged in accordance with Section 19.02 of this Article Nineteen. 19.02 If, because of any act or omission of Life Time, any mechanic's lien or other lien, charge or order for the payment of money shall be filed against the Club/Pool Property or the City except as provided herein, Life Time shall, at its own cost and expense cause the same to be discharged of record or bonded within ninety (90) days after written notice from the City to Life Time of the filing thereof; and Life Time shall indemnify and save the City harmless against and from all costs, liabilities, suits, penalties, claims and demands, including reasonable counsel fees, resulting therefrom. 19.03 Nothing in this Agreement contained shall be deemed or construed in any way as constituting the consent or request of the City, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials for any specific improvement, alteration to, or repair of the Club/Pool Property or any part thereof or for the demolition or the replacement of the Club/Pool Property or any part thereof. 33862.11 MK/JRW:r03/07/88 -35- ARTICLE TWENTY Use of Club/Pool Property 20.01 Life Time may use the Club/Pool Property for the Club/Pool Complex pursuant to the terms and conditions set forth in this Agreement only and for no other purpose. Life Time shall construct, operate, maintain, repair and reconstruct (the latter as provided herein) the Club/Pool Complex in accordance with all applicable zoning and building codes and regulations and the terms and conditions of this Agreement. Life Time shall not use or allow the Club/Pool Property or any part of either to be used or occupied for any unlawful purpose or in violation of any certificate of compliance covering or affecting the use of the Club/Pool Property or any part thereof and shall not suffer any act to be done or any condition to exist on the Club/Pool Property or any part thereof or any article to be brought thereon which may be dangerous, unless safeguarded as required by law, or which may, in law, constitute a nuisance, public or private, or which may make void or voidable any insurance then in force with respect thereto. 20.02 Life Time shall not do or suffer any waste or damage, disfigurement or injury to the Club/Pool Property, the Club/Pool Complex or any part thereof. ARTICLE TWENTY-ONE Entry on Club/Pool Property by the City 21.01 In addition to the City's right of entry under any other provision of this Agreement, Life Time shall permit the City and its authorized representatives to enter the Club/Pool Property or the Club/Pool Complex at all reasonable times for the purpose of (a) inspecting the same and (b) making any necessary repairs thereto and performing any work therein that may be necessary by reason of Life Time's failure to make any such repairs or 33862.11 WK/JHW:r03/07189 -36- perform any such work or to commence the same for thirty (30) business days after written notice from the City or without notice in case of an emergency. Nothing herein contained shall create or imply any duty upon the part of the City to make any such repairs or do any such work; and performance thereof by the City shall not constitute a waiver of Life Time's default in failing to perform the same. 21.02 The City may during the progress of any work in the Club/Pool Property or the Club/Pool Complex keep and store therein or elsewhere upon the Club/Pool Property all necessary materials, tools, supplies and equipment. The City shall not be liable for inconvenience, annoyance, disturbance, loss of business or other damage of Life Time by reason of making such repairs or the performance of any such work, or on account of bringing materials, tools, supplies and equipment into or through the Club/Pool Property during the course thereof and the obligations and liabilities of Life Time under this Agreement shall not be affected or released thereby. In making any such repairs or performing any such work, however, the City shall proceed with a minimum of inconvenience to the Life Time. ARTICLE TWENTY-TWO Indemnification of the City 22.01 Notwithstanding any provision to the contrary contained in this Agreement, Life Time shall indemnify and save harmless the City against and from all liabilities, obligations, damages, penalties, claims, costs, orders, charges and expenses, including reasonable architects' and attorneys' fees, which may be imposed upon or incurred by or asserted against the City by reason of any of the following occurring during the term of this Agreement: 33862.11 RNK/JRW:r03/071B8 -37- a) any work or thing done in, on or about the Club/Pool Property, Club/Pool Complex or any part thereof by Life Time or its employees agents, contractors, licensees or invitees; b) any use, non-use, possession, occupation, condition, operation, maintenance or management of the Club/Pool Complex or Club/Pool Property or any part thereof or any street, avenue, alley, sidewalk, curb, passageway, entrances, or structures, or space adjacent thereto; c) any negligence on the part of Life Time or any of its agents, contractors, servants, employees, licensees, or invitees; d) any accident, injury or damage to any person or property occurring in, on or about the Club/Pool Property or the Club/Pool Complex or any part thereof or any street, avenue, alley, sidewalk, curb, passageway, entrances, or structures or space adjacent thereto; e) any failure on the part of Life Time to keep, observe and perform any of the terms, covenants, agreements, provisions, conditions or limitations contained in this Agreement on Life Time's part to be kept, observed and performed; or f) Any claim or allegation relating to Life Time's (or Life Time's officers, employees and agents) management or operation of the Club/Pool Complex including, but not limited to, claims or allegations related to violations of Minn. Stat. Chapter 325G (as may be amended); false advertising or other deceptive practices; consumer fraud; civil rights violations; or human rights discrimination claims. 33862.11 RNK/JRW:r03/O7/86 -38- 22.02 In case any action or proceeding is brought against the City by reason of any such claim, Life Time upon written notice from the City shall at Life Time's sole cost and expense, including attorneys' fees, resist or defend such action or proceeding by an attorney approved by the City in writing, such approval not to be unreasonably withheld, but no approval of attorney shall be required in each and every instance where the claim is resisted or defended by an attorney of an insurance carrier obligated so to resist or defend such claim. ARTICLE TWENTY-THREE Condemnation 23.01 In the event that the Club/Pool Property or part thereof shall be taken in condemnation proceedings or by the exercise of any right of eminent domain, or by appropriation or through private purchase in lieu thereof, the parties to this Agreement shall attempt to value Life Time's interest in the improvements and the City's land value and reversionary interest in the Club/Pool Complex. If agreement is not reached within thirty 30) days after the submission by the parties to each other of a proposed distribution, then any party may request arbitration as hereinafter provided to establish the value of their respective interests under the value premise stated above. In no event shall the amount received by the City be less than the value of the Club/Pool Complex property taken as if it were unencumbered by this Agreement and valued at the time of taking. 23.02 If at any time during the term of this Agreement title to the whole or materially all of the Club/Pool Property or the Club/Pool Complex shall be taken by the exercise of the right of condemnation or eminent domain or as otherwise provided above, this Agreement shall terminate and expire on the date of such taking. Life Time shall, in all 33862.11 RNK/JRW:r03/07/98 -39- respects, keep, observe and perform all the terms, covenants, agreements, provisions, conditions and limitations of this Agreement on Life Time's part to be kept, observed and performed up to the date of such taking. For purposes of this Article Twenty -Three materially all of the Club/Pool Property or the Club/Pool Complex shall be deemed to have been taken if the portion of the Club/Pool Complex not so taken cannot be so repaired or reconstructed as to constitute a complete structure capable of being operated as a the Club/Pool Complex as required by the terms and conditions of this Agreement. 23.03 If at any time during the term of this Agreement title to less than the whole or materially all of the Club/Pool Property shall be taken, as aforesaid, this Agreement shall continue and Life Time shall promptly, except for unavoidable delays, at Life Time's expense, and subject to compliance with the provisions of Article 19 of this Agreement relative to changes and alterations, restore the Club/Pool Property and the Club/Pool Complex, to the extent as nearly as possible, to the condition and character immediately prior to such partial taking. All of the compensation collected by Life Time pursuant to Section 23.01 of this Agreement, shall be applied and paid over toward the cost of demolition, repair and restoration of such partial taking, substantially in the same manner and subject to the same conditions as those provided in Section 15.02 of this Agreement with respect to insurance and other monies. Any balance of the award or other compensation for such partial taking of the building remaining after payment of such costs of demolition, repair and restoration, as aforesaid, shall be paid over to the Leasehold Mortgage holder, or if there be no Leasehold Mortgage holder, then the balance of the net award shall be paid to Life Time and the City in amounts proportionate to Life Time's and the City's respective contribution as defined herein. In the event that the costs of such demolition, repairs and 33862.11 RNK/JRW:,03/07/88 -40- restoration shall exceed the compensation collected, Life Time shall pay the deficiency forthwith. ARTICLE TWENTY-FOUR Default Provisions 24.01 The occurrence of any one of the following events shall be considered a default by Life Time entitling the City to exercise any and all remedies set forth herein. a) Life Time's sale, assignment, sublease or other transfer of any interest in this Agreement or the Club/Pool Complex; b) Notwithstanding any other provision contained herein, no occurrence of any event specified in this Section 24.01 hereof or any other breach or default under this Agreement shall constitute an Event of Default permitting City to exercise any remedies under this Agreement unless the subject of said occurrence, breach or default shall constitute a material term or provision of this Agreement and the City shall have given Life Time at least thirty (30) days notice of such occurrence, breach or default and Life Time shall have failed to cure or otherwise correct such occurrence, breach or default within said time, provided that if the occurrence, breach or default is of a nature or kind as to require more than thirty (30) days to cure or correct, City shall not exercise any remedies hereunder provided that Life Time has commenced said cure or correction and is pursuing such cure with reasonable diligence. In the event of a good faith dispute by the parties regarding the existence of such an occurrence, breach or default, such dispute shall be subject to arbitration under Article 26 hereof and during the pendency of such arbitration any notice of an 33862.11 FWK/JRW:r03/07/96 -41- Event of Default given by City to Life Time hereunder shall be deemed tolled until the expiration of ten (10) days after the final decision of the arbitrator. No breach of any obligation of Life Time under Article 2 hereof shall be deemed incurable or not cured as long as Life Time has taken reasonable steps or precautions to assure that said breach shall not occur in the future. No default or breach by Life Time under the Leasehold Mortgage shall constitute an Event of Default hereunder unless the Leasehold Mortgagee shall have affirmatively commenced the undertaking of a remedy (other than the mere sending of a notice of default) under the Leasehold Mortgage or related security documents; c) Any material representation or warranty made by Life Time in this Agreement, or in any certificate or document furnished under the terms of, or in conjunction with, this Agreement is untrue, false or misleading. d) Because of action or inaction on the part of the Life Time, construction on the Club/Pool Complex is substantially abandoned, delayed or discontinued for more than thirty (30) days. e) The City determines that the remaining undisbursed Leasehold Mortgage proceeds together with the Tenant Improvement Allowance of the City and Life Time's Capital Contribution, are insufficient to fully pay all of the unpaid costs of the Club/Pool Complex and estimated expenses of completion, and Life Time fails after thirty (30) days written demand to deposit with the title company disbursing the foregoing sufficient funds as may reasonably be 33862.11 RNK/JRW:r03/07/86 -42- required by the City, so as to permit the payment of all such costs and the completion of the Club/Pool Complex. f) Life Time commits waste or allows the Club/Pool Complex to deteriorate. g) Life Time fails to keep the Club/Pool Complex insured as required by the terms of this Agreement. h) The institution of any proceeding against Life Time, or/any officer or director of Life Time for which the potential penalty is forfeiture of the Club/Pool Complex, any portion thereof or any other assets. i) Lifetime applies for, or consent in writing to, the appointment of a receiver, trustee, or liquidator of Life Time or of all or substantially all of Life Time's assets; 6) Life Time files a voluntary petition in bankruptcy, or admits in writing of its inability to pay its debts as they become due; k) Life Time makes a general assignment for the benefit of creditors; 1) Life Time files a petition or an answer seeking reorganization or arrangement with creditors or to take advantage of any insolvency law; or m) If an order, judgment or decree shall be entered by any court of competent jurisdiction on the application of a creditor adjudicating Life Time a bankrupt or insolvent. 24.02 No failure by the City to insist upon the strict performance of any term, covenant, agreement, provisions, condition or limitation of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or of such term, covenant, agreement, provision, condition or limitation. No term, 33x62.11 RNK/JRW:103/07/96 -43 covenant, agreement, provision, condition or limitation of this Agreement to be kept, observed or performed by Life Time, and no breach thereof, shall be waived, altered or modified except by a written instrument executed by the City. No waiver of any breach shall affect or alter this Agreement, but each and every term, covenant, agreement, provision, condition and limitation of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. 24.03 Upon the occurrence of any Event of Default this Agreement shall be terminated and the City shall be entitled to possession of the Club/Pool Property, and all improvements, fixtures, furnishings and equipment. At its sole discretion, the City may exercise any and all other remedies at law or equity allowed in lieu of or in addition to its contractual right to terminate the Agreement. ARTICLE TWENTY-FIVE Arbitration 25.01 Except as provided in Section 25.02, any dispute arising out of this Agreement shall be submitted to binding arbitration through the American Arbitration Association. Arbitration shall be conducted in accordance with the Rules of Commercial Arbitration. In the event either or both parties to this lease apply to the arbitrator, all parties shall be bound by, comply with, and perform and fulfill the final award or finding, without recourse to any other court of tribunal except as is necessary to enforce the final award in accordance with the Minnesota Laws on arbitration. 25.02 This arbitration clause shall not apply if the City declares that an event of default has occurred and seeks to terminate this Agreement and recover the Club/Pool 33862.11 RNK/JRW:,03/07/98 -44- Property. In such an event, the City shall have the right to initiate action in the appropriate court without any duty to arbitrate. ARTICLE TWENTY-SIX Notices 26.01 All notices required under the terms of this Agreement shall be deemed to have been properly served or given three (3) days after their deposit in the United States mail if sent by registered or certified mail, return receipt requested, postage prepaid or two (2) days after deposit in a nationally recognized overnight courier service, addressed to Life Time or the City at the address set forth below; to Life Time: Suite 275 6442 City West Parkway Eden Prairie, MN 55344 to the City: 3400 Plymouth Boulevard Plymouth, MN 55447 or to such other address within the continental limits of the United States and to the attention of such party as the parties may from time to time designate by written notice to the other. ARTICLE TWENTY-SEVEN Miscellaneous 27.01 No third party is entitled in any way to rely upon any provision in this Agreement. This Agreement is intended solely for the benefit of Life Time and the City and no third party shall have any rights or interest in any provision of this Agreement, or as a result of any action or inaction of the City in connection therewith. 33862.11 RNK/JRW ,03/07/BB -45- 27.02 The exhibits attached to this Agreement are considered an integral part of it as if fully set forth within it. 27.03 All prior understandings, letters of intent, discussions and agreements are merged in the governing terms of this Agreement, which is a complete and final written expressions of the intent of the parties. This Agreement may be amended only pursuant to the terms of an exhibit, if attached and executed for that purpose, or by a separately signed writing between the parties. This Agreement may not be amended or modified orally. 27.04 Section headings are for the convenience of reference only, and shall not govern the interpretation of any provisions. 27.05 Time is of the essence of this Agreement. 27.06 The invalidity, illegality or unenforceability of any provision of this Agreement or any other document executed in connection with this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement. 27.07 The parties agree that nothing contained in this Agreement is intended or shall be construed to establish the parties as joint venturers or partners. 27.08 This Agreement has been freely negotiated. This Agreement shall not be construed against the drafter. This Agreement shall be liberally construed to protect the public interest and any ambiguities shall be resolved in favor of the City. 27.09 If the City is prevented from carrying out any of its obligations under this Agreement because of a court order or judgment, Life Time shall have no recourse against the City for damages or any other relief. 27.10 The City agrees to build an indoor ice arena or the ice arena complex if it receives bids satisfactory to the City. 33862.11 - 46- f WK/JRW:r03/07/B8 27.11 The subject matter of any provision in this Agreement that requires Life Time and the City to cooperate or to agree in the future to do something is subject to arbitration if the parties do not agree. ARTICLE TWENTY-EIGHT Contingencies 28.01 The City's and Life Time's obligations under this Agreement are subject to and contingent upon the following conditions: a) The City's approval of any necessary amendments to its comprehensive plan and zoning ordinance, zoning and subdivision approval, variance and conditional use permit approval, and all other necessary City approval including variance and conditional use permits by not later than April 1, 1996. b) The City and Life Time obtaining any other necessary permits from other public regulatory entities necessary to carry out the terms of this Agreement by not later than April 1, 1996. c) Life Time and Independent School District No. 284 ("School District") entering into a sublease covering the Club/Pool Complex on terms acceptable to Life Time and the City by no later than April 1, 1996. d) City and School District entering into a non -disbursement agreement on terms acceptable to Life Time and the City by no later than April 1, 1996. 28.02 The contingencies set forth herein may be waived by either party provided the waiving party sends written notice to the other party no later than one week prior to the date specified for each contingency. If the contingencies are not waived or fulfilled, this Agreement shall be null and void. 33862.11 RNK/JRW:r03/07/88 -47- IN TESTIMONY WHEREOF, as of the day and year first hereinabove written the parties have executed this Agreement. CITY OF PLYMOUTH I Joycelyn Tierney, Mayor SEAL) AND Dwight Johnson, City Manager FCA LTD., doing business as LIFE TIME FITNESS BY: Its AND Its STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of 1996, by Joycelyn Tierney and by Dwight Johnson, respectively the Mayor and City Manager of the City of Plymouth, a Minnesota municipal corporation, on behalf of the corporation and pursuant to the authority granted by its City Council. Notary Public 33862.11 RNK/JRW:r03/O7/98 -48- STATE OF MINNESOTA ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this 1996, by day of and the and of FCA Ltd., a Minnesota corporation, doing business as Life Time Fitness, on behalf of said corporation. Notary Public 33862.11 - 49- RNK/JRW:A3/07/BB ATTACH EXHIBIT " - ICE ARENA COMPLEX CITY OWNED UNDEVELOPED PARCEL CLUB/POOL COMPLEX PARKING LOT PROPERTY CLUB/POOL PROPERTY COMMON WALL COVENANT If" - RECIPROCAL PARKING AND ACCESS AGREEMENT NON-EXCLUSIVE PARKING EASEMENT 33862.11 RNKIA W ,03/07/88 -50- CARLSON REAL ESTATE COMPANY VIA MESSENGER March 7, 1996 Mr. Dwight Johnson City Manager City of Plymouth 3400 Plymouth Boulevard Plymouth, MN 55447 RE: Downtown Plymouth Dear Dwight: Please find enclosed a memo I received from BRW regarding their review of the traffic and alignment of 35th Avenue in downtown Plymouth. As we discussed, I would like this to be included with the information for the downtown zoning meeting on Wednesday, March 13, 1996. I would like to discuss the enclosed concept plan with both the planning staff and the downtown subcommittee prior to the meeting. I would request that the zoning on our piece of land remain as it currently is so that we can move forward with this project. I appreciate your help. Sincerely, CARLSON RE ESTATE COMPANY, INC. Br Lis Managing Director of Investments 612)333-9869 enclosures 2222 Plaza VII, 45 South Seventh Street, Minneapolis, Minnesota 55402 612-333-9898 B R W INC. Planning Transportation Engineering Urban Design Thresher Square 700 Third Street So. Minneapolis, MN 55415 612/370-0700 Fax 612/370-1378 Denver Milwaukee Minneapolis Orlando Phoenix Portland San Diego Seattle DATE: March 5, 1996 TO: Brad Lis FROM: Richard Wolsfeld, PE Memorandum RE: Traffic Analysis of Proposed Development at 35th Avenue North/Vicksburg I have compared the proposed land use development plan of Carlson Real Estate Company with the land use assumed in the SRF "Downtown Concept Plan Traffic Study" dated September 11, 1995. The comparisons are as follows: Proposed Carlson Real Estate Company Development: 21,200 gross square feet of retail required parking Land use scenarios analyzed in the SRF Report appear to have the following land use assumptions on a site configured approximately the same as your site: 28,000 gross square foot theater 26,000 gross square feet of retail shopping transit station ramp parking The projected traffic from the proposed land use is as follows: 4,085 daily trips 179 PM Peak Hour Inbound 171 PM Peak Hour Outbound Obviously, your proposed development would generate less daily and PM peak hour trips than the land use assumed in the Downtown Concept Plan Traffic Study. Furthermore, the level of service at Vicksburg and 35th Avenue North would be improved over that reported. The attached drawings represent two conceptual alternative alignments for 35th Avenue North which will provide the same or better traffic operations than the alignment shown in the Downtown Concept Plan Traffic Study. RW/ch Attachments 73157 Uti 1 AMessage from the President In 1994 the Twin Cities commercial real estate market encountered significant absorption of office and industrial space. Several markets experienced their lowest vacancy in years. There is increased speculation among developers about the possibility of starting a new office project. Already underway are several speculative industrial developments. The apartment market has also picked up in activity. Properties of all sizes changed hands during the year. Net operating incomes have increased, and continue to increase, yielding Robert Dunbar better values and giving owners the opportunity to either divest entirely or reinvest in properties with more units. The increasing net operating income, resulting from declining vacancy and higher rents, will allow many of the 80's investors to finally see some investment appreciation which had been stymied following the 1986 tax act. The major buyers of today, Real Estate Investment Trusts (REITs), continue to increase their holdings in Twin Cities properties, particularly in retail and industrial. During the past year. several mid-sized shopping centers were acquired by large, national REITs. Similarly, industrial properties have been acquired by REITs and institutional investors. We anticipate increased activity in all areas during 1995. Continued lease -up in the commercial market will create a shortage of large blocks of space, particularly in office and industrial buildings. It is our opinion that once rental rates have appreciated to a high The Outlook.,, A Year of Opportunity &Challenges Looking out over the landscape of the year ahead, Griffin Companies sees a number of cross currents emerging in 1995 which will affect the market for commercial real estate: a strong economy... continuing corporate growth... imbalances in supply and demand in some market sectors... the re-emergence of speculative development... rising interest rates ... and the return of a bolder, more aggressive landlord determined to earn a return on his investment. Taken together, they have all the makings of an exciting year, full of challenges as well as opportunities. The following is a category -by -category look at what's in store, as seen by Griffin Companies and its specialists. 1995 OFFICE OUTLOOK Declining vacancies, climbing rates, fewer choices for tenants..." Vacancies will continue to decline as new construction remains non- existent. During 1994 total office space absorption reached 1,926,000 sq. ft. or 3.4% of the total market, approximately 1% stronger than the five-year average of 2.5%. We estimate a reduction in absorption during 1995 as rental rates rise and the availability of large block vacancies continues to diminish, to approximately half of the 1994 level, or a net increase in demand of 963,367 sq. ft. or about 1.7% of the total market. This would reduce overall market vacancies to single digit levels nearing 9.5%. Although capital is available, lenders will scrutinize each deal much more carefully and require equity to avoid the problem loan scenario suffered in the late '80's and early '90's. Steve Chirhart and J. Craig Kirkpatrick Office Sales & Leasing Net Absorption Trends - Sq. Ft. Total Market 2,000,000 1,500,000 1,000,000 500,000 1990 1991 1992 1993 1994 Lease Rates With improving occupancy, rate increases will follow. Net rate increases within the Minneapolis CBD and Southwest Quadrant will be strongest, followed by the western suburbs. The St. Paul CBD, South Airport Market and northern suburbs Continued on page 6 Continued on page 2 1995 RETAIL OUTLOOK ' Minneapolis has become an even stronger retail market" Russ McGinty Director, Retail Leasing In 1994 the overall vacancy rate in the Twin Cities was 8.3%. This was a reduction of 1.39% from the previous year and is the lowest rate over the past five years. Vacancy rates by property type were: im 194 Neighborhood 11.9% 11.2% Community 9.0% 7.4% Regionals - 4.0% The gross leasable area (TGLA) in 1994 stood at 40,033,142 and is expected to increase to 41,033,142 as seven new power centers are proposed to come on line in 1995. We estimate that the present vacancy rate will decline to the low 7% range in 1995 due to the following factors: Franchise expansion Strength of the economy Interest in the Twin Cities market by national retailers, both large and small Lack of development in the traditional community -size shopping center area 150,000 to 399,000 sq. ft.) Re -use of non-performing centers Improved financing opportunities for landlords and tenants Lease Rates The declining vacancy rates will swing the supply and demand pendulum in the landlord's favor. Anticipate seeing net rental rates rise from $ .50 to $1.00 with fewer buildout allowances and minimal free rent, if any. with some newer properties in the 15.00 range. Space Availability Quality locations in well positioned centers with strong anchors will be difficult to find. Retailers and agents should expect to broaden their rt arameters to find suitable space. ook for smaller neighborhood centersoemergeinthefastestgrowingommunitiesofEagan, Apple Valley, Eden Prairie, Plymouth and White Bear Lake. New Construction As previously mentioned, there are seven proposed power centers totaling one million square feet expected to VACANCY RATE BY GEOGRAPHIC SECTOR VACANCY RATE 1990 THROUGH 1994 BY TYPE OF CENTER 10.1% 1994,1993, 1992 COMPARED NORTHEAST 12.3% 11.2% W1111.2% 11.9% SOUTHEAST 8.0% 10.4% 7.4 % COMMUNITY 9.01% 9.6% SOUTHWEST 8.5% 10.2% 4.0% 8.3% ovi NORTHWEST 9.8% 24.0% U CBDs 0 TOTAL MARKET 8.3% 10.3% TOTAL MARKET 10.3% 10.2% 10.2% u 01994 1.0% 4.0% 8.0% 12.0% PERCENT VACANT 01993 PERCENT VACANT 269 Centers Reporting in 1994 1992 271 Centers Reporting In 1993 I BUSS MCGINTY: SALESPERSON OF THE YEAR Griffin Companies' top salesperson in1994wasRussMcGinty, Director ofRetailLeasing. Russ has over nine years hasofcommercial real estate experience andbeenworkingexclusivleasing, tenant representation and salespastsixyears. IDuring 1994, Russ completed leasetransactionsinexcessof2501000sq. feetinavarietyofretailproperties, such major transactions as five such completed leases for Office Depot, sale toSlumberlandof4.23 acres of land for anewretailstore, leasing a newSlumberlandClearanceCenter, lease with Independent.and a 191 for the lowr leel of DiaSchool 15istrict Mall. mondhead Expect net rates in the 8.00-$14.00 range, depend- ing upon property type and location come on line in 1995. The majority of these centers are intended for large block users (20,000+ sq. ft.) and are typically pre -leased prior to construction. One or two of these centers will probably be postponed in 1995 due to stalled lease negotiations and rising interest rates. Free Standing Retail Sites The Twin Cities retail market is experiencing a continuing trend with free standing retailers. Expect to see more large block retailers in well located parcels that were too small to support a larger project. Sales Activity The retail market should show a substantial increase in activity during 1995. Interest in land for retail property will also be in strong demand. If interest rates continue to rise, the current retail activity will be affected. Loans are becoming more readily available. However, higher equity will be required to complete financing. Conclusion Expect all areas of the retail market to show improvement in 1995. The economic growth of the country is improving at a moderate rate and will continue to positively influence the retail market. Retailers looking for sites will be surprised at their limited options. They may also find space more limited than anticipated. The lack of available space will put increased pressure on net rent rates and reduce landlords' flexibility in lease negotiations. VACANCY RATE BY TYPE OF CENTER 1994,1993, 1992 COMPARED 11.2% NEIGHBORHOOD 11.9% 7.4 % COMMUNITY 9.01% 9.6% 4.0% REGIONAL 114.0 24.0% U CBDs 0 TOTAL MARKET 8.3% 10.3% t 10.2% 1994 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 01993 PERCENT VACANT 1992 269 Centers Reporting in 1994 271 Centers Reporting In 1993 269 Centers Reporting in 1992 come on line in 1995. The majority of these centers are intended for large block users (20,000+ sq. ft.) and are typically pre -leased prior to construction. One or two of these centers will probably be postponed in 1995 due to stalled lease negotiations and rising interest rates. Free Standing Retail Sites The Twin Cities retail market is experiencing a continuing trend with free standing retailers. Expect to see more large block retailers in well located parcels that were too small to support a larger project. Sales Activity The retail market should show a substantial increase in activity during 1995. Interest in land for retail property will also be in strong demand. If interest rates continue to rise, the current retail activity will be affected. Loans are becoming more readily available. However, higher equity will be required to complete financing. Conclusion Expect all areas of the retail market to show improvement in 1995. The economic growth of the country is improving at a moderate rate and will continue to positively influence the retail market. Retailers looking for sites will be surprised at their limited options. They may also find space more limited than anticipated. The lack of available space will put increased pressure on net rent rates and reduce landlords' flexibility in lease negotiations. 1995 REPORT ON RETAIL REAL ESTATE I V, 0 H, ME MR, 0 A 1% L 11 Op% 09 e Q H d N j LA o 0 s L Ix 0 00 . 1995 MSCA RESEARCH COMMITTEE MEMBERS Eric R. Bjelland, United Properties - Chairperson METRO MEMBERS Christine Bright, Robert Muir Companv Craig Estrem - Madison/Marquette Catherine C. Faegre, Kraus -Anderson Realty Company Richard Sandbag, General Growth Company Sharon Emmons, Papa Johns Alan Bloom, The Ackerberg Group Norm Brody, Target/Mervyn's OUTSTATE MEMBERS Myron & Sharon Thomas, Commercial Leasing Services (Rochester) Curtis R. Fisher, Fisher & Lindstrom Commercial Realtors (Mankato) Sanford Hoff, P.I. Salter Company (Duluth) Clarence Reuter, Reuter Real Estate, Inc. (St. Cloud) The RESEARCH REPORT SURVEYS were conducted by Insight, Inc. Property information was provided by the Minnesota Real Estate Journal Statistical Analysis was performed by TheDataLink, Inc. Data in the Retail Surrey Report is the property of the Minnesota Shopping Center Association and may not he copied without the prior consent of the Minnesota Shopping Center Association. For additional copies, please contact the M.SCf1 offices. 01995 THE Minnesota Shopping Center Association 4248 Park Glen Road, Minneapolis, Minnesota 55416 • (612) 927-9220 MSCA RETAIL SURVEY REPORT FALL 1995 TABLE OF CONTENTS Page 2 Introduction Page 3 Significant Conclusions Page 4 Overview of the Retail Market Page 6 Regional Malls Page 9 Community Centers Page 11 Neighborhood Centers Page 13 Minneapolis Central Business District Page 13 St. Paul Central Business District Page 14 Freestanding Buildings Page 15 Duluth Page 15 Rochester Page 15 Mankato i Page 16 St. Cloud Opinion Section i Page 17 0 Real Estate Taxes Page 18 0 Rental Rates/Renewals Page 18 0 The Investment Market Page 19 0 Sales Performance Page 19 Opportunities/ Obstacles Page 20 Supplemental Graphs and Charts Appendix Minnesota Real Estate Journal - Detailed Survey Results W, IN I RODUMON he MSCA Research Committee is pleased to present our seventh Retail Survey Report. The report has been modified to allow for easy analysis between the different types of properties. We are confident this report will be valuable as you plan for 1996 and beyond. The MSCA first established a survey and database for retail properties in the Twin Cities Metropolitan Area in 1989. Although the focus of the Research Report continues to be the Twin Cities, we expanded the Research Committee to include "Outstate Members" in the four outstate markets that have been historically covered in the Research Report. We believe this initial step will ultimately lead to statistical property coverage and a broader understanding of the greater Minnesota retail market. The Research Report is divided into two primary sections - property and opinion. The property information was provided to the MSCA Research Committee by the Minnesota Real Estate Journal (MREJ). This year's Survey included 274 centers. The MREJ updates this information on a quarterly basis. A property listing is included in the Appendix, which includes information on the four outstate markets. The MREJ information was analyzed by TheDataLink, and they were a great help to our Committee in creating the Graphs/Tables for the Research Report. The Opinion Section of the Report is a summary of the responses the Research Committee received from surveying owners, service providers and merchants. We used three different databases for the survey. The Ownership database is a proprietary database of the MSCA and is updated annually. The Service Provider database is comprised of the MSCA membership. This year, the MSCA Research Committee started a proprietary Merchant Database for the MSCA. We identified 62 merchants in twenty retail categories to survey and we hope to expand this list over the next few years. For the first time we tried a telemarketing survey as opposed to a written survey. We will improve on this surveying vehicle next year. SIGNIFICANT CONCLUSIONS Significant New Development Labor is in very short supply We have only seen the first wave of retailer bankruptcies. The apparel industry continues to have poor sales. Interactive/Entertainment retailing is coming to our market. Freestanding buildings are in demand by merchants. Capital is inexpensive and plentiful Rents have increased It OVERVEEW The Universe: he total universe of properties in the metro area expanded to 274 centers from 269 centers last year. Although seven new centers have come on line this year, tR-o properties were deleted from the survey because they were fundamentally changed from retail to other uses. As predicted in last year's report. the metro Gross Leasable Area (GLA) increased by almost one million square feet. We estimate the GLA will increase nest year by another one million square feet as new centers are completed. Inforination on the new developments can be found tlu•oughout the report. TOTAL GROSS LEASABLE AREA BY TYPE OF CENTER 1995 Regional Community 32% 26% CBDs 5% Neighborhood 37% GRAPH #1 Graph =1 represents a significant statistical change from last year's report. The change was the reclassification of 38 community centers to neighborhood centers. This was done because the "community centers" under 150,000 square feet were included in the Community Center Section. The square footage definitions are outlined in each property type section. To further explain this change, we have outlined below two "Community Centers" that do not meet the square footage definition of a comnutnity center. Northcourt Commons Shopping Center, Blaine, MN 130,000 GLA Circuit City Plaza, Bloomington, MN 136,000 GLA The net result of the reclassification was a modest increase in the percentage of neighhorhood centers in the metro area. As outlined in Graph =2, the Southwest Metro area continues to have the greatest concentration of retail space, however. the Northwest and Southeast markets each gained three percent (3%) market share of the total GLA last year. This trend will continue through the turn of the century as major malls are planned for these markets. TOTAL GROSS LEASABLE AREA BY GEOGRAPHIC SECTOR 1995 St. Paul CBD Minneapolis CBD 1% 4% Northeast Southwest . 21% 35% Southeast Northwest 24% 1 S°io GRAPH #2 GROSS LEASABLE AREA BY CENTER TYPE WITHIN GEOGRAPHIC SECTORS 1995 TOTAL GLA - NORTHEAST Regional Gommurny 36°R. 32". iiiiD Neighborhood 34% TOTAL GLA - SOUTHEAST Rayonal 22% u e^M Neg borlq°0 JY. TOTAL GLA - NORTHWEST Regional Corn—noy 27-6 23•• COD 48% TOTAL GLA - SOUTHWEST , C -o IC. Ra°anal r. VACANCY I The following two graphs highlight average vacancy ratesinbygeographicsectorandtypeofcenter. The average Type of Center Sector Range Midpoint Centers Neighborhood NE 0.41.36% 4.541,; 38 NW 0-64.22°0 5.00% 58 SE 0.74.56% 8.36% 31 SIN 0.62.20% 2.73°6 76 Community NE 0-78.68% 5.141; 12 NW 0-27.27% 7.60% 10 SE 0-19.86% 1.29% 11 SN 0.35.18% 2.15°6 11 Regional NE 640,55.3190 8.700o 4 NW 2.70°69.17°6 4.95% 3 SE TFC IFC 1 SN 0.14.94% 3.65% 5 Neighborhood All 0-74.56% 4.5496 204 Community All 0-78.68% 2.42% 43 Regional All 0-55.30"6 3.8796 13 CBDs All 0-73.13% 12.20°6 13 All Types NE 0-78.68% 5.1096 54 All Types NW 0-64.22% 5.0096 71 All Types SE 0-74.56% 4.25% 43 All Types SIN 0-62.20% 2.45% 92 All Types MCBD 0-73.13% 8.10% 9 JAII Types SPC SD 12.20634.0% 23.60% 4 AA Centers All Markets 0-78.6806 4.45% 273 TABLE #1 Table =1 identifies the midpoint vacancy rate for centers in the Twin Cities. The overall midpoint vacancy rate for centers significantly decreased from 6.00% to 4.45%. This is in part due to the reclassification that was previously identified. The table below shows the three year trend. TABLE #2 I vacancy rate declined from 8.3%) to 8.0%. This is the lowest average vacancy rate since the inception of the Annual Research Report in 1989. Because the midpoint vacancy rate decreased significantly. one can assume the number of centers reporting lower vacancy significantly increased over the last year. I ON NEIGHBORHOOD CENTERSNRS In the Twin Cities metropolitan area, neighborhood shopping centers account for 37% of the overall retail GLA. Neighborhood shopping centers historically average 30,000 to 100,000 square feet and have been intended to conveniently service the day-to- day needs of the residential population within a one to two mile radius. With the emergence of value -oriented warehouse supermarkets, free-standing video stores and large discount drug stores drawing traffic from a much larger radius, the neighborhood center has experienced a change from its traditional tenant mix. Coffee shops, bagel bakeries and upscale restaurants have become more prevalent in today's neighborhood shopping center Larger in size (approximately 100,000 to 150,000 square feet) are power centers located close to freeways for maximum exposure. Due to their size these centers are also classified as neighborhood shopping centers. Their tenants, known as category killers, offer a vast selection of goods as well as competitive pricing. Ample parking and visibility are key to their success. The midpoint vacancy rate for neighborhood shopping centers is 4.54% with a range from zero to 74.56%. The table below highlights the historical trend for these centers: Midpoint Year Vacancy Rate 1993 5.70% 1994 6.30% 1995 4.54% The midpoint for real estate taxes remained at $2.36 per square foot. The range of taxes per square foot is from S.30 to $6.50. The midpoint is lower than in 1993, when it was $2.47 per square foot. While the tax expense remained flat, common area maintenance expenses increased slightly from $1.50 to S1.56 per square foot. This is only a modest increase from 51.54 that was reported in 1993. New tenants in the market are competing fiercely with established merchants for prime locations in neighborhood centers. Brueggers now competes with Chesapeake Bagels. Big City Bagels, and Twin City Bagel. Hollywood Video has joined the market in the rush to secure free-standing and end cap locations. Petsmart is planning to go head-to-head with Pet Food Warehouse, Grow Biz continues to expand heavily into the neighborhood centers with Once Upon A Child. Disc Go Round. Music Go Round. Play It Again Sports. and Computer Renaissance. Only Deals, a 510.00 or less value store has repositioned itself from enclosed malls, to 6,000 to 9,000 square foot neighborhood center locations. There continues to be significant activity in both large and small neighborhood shopping center categories. Opus Corporation is pre -leasing the long awaited redevelopment of the corner of Winnetka Avenue and State Highway 55. Golden Commons is a 47.000 square foot center anchored by Snyder Drug and D'Amico S Sons. Also committed are Boston Market and Starbucks. Construction is scheduled for March of 1996. Opus Corporation recently completed a similar project in Highland Park called Highland Crossings Shopping Center. Anchored by a Barnes S Noble. this +4,000 square foot project involved the redevelopment of a former Carson Pirie Scott building. Other tenants include Video Update, Boston Market and Old COuntr• Buffet. Higbland Crossing is a new neigbborbood center developed lip Opus at Ford Pcn•ku•ap and Clevelcnrd Avenue. T.F. lances Company has recently completed West Village Center in Chanhassen. This 110,000 square foot center includes Byerly's. hinko s. Paper W;trehouse, Premier Video and Century Bank. The Phase it project is on a five -acre parcel adjacent to the 13yerly'S. lVest Village Center in Ownbussen is anclia-ecl br 7h is 106.000 syucti-efoot c enter a •cis clet'elupecl this Deur kv 7be fames Cwnpclnies. Reliance Real Estate is under construction with a new 64.580 square foot neighborhood center at 80th Street and Cahill Road in Inver Grove Heights. Signed leases include Stephen's Cahill Market (Super Valu) - 43,930 square feet. Video Update, and Great Clips. The mord "neighborhood" can no longer be applied literally to this category of shopping center, as so much of the development of this size of centers are satellite centers around regional malls. Northtown and Maplewood Mall, Eden Prairie Center and Ridgedale are all examples of areas where neighborhood centers are r clustering around regional shopping malls. I OPINIONS REAL ESTATE TAXES Geographic Sector Range Midpoint Centers Overall 0.30-$17.85 2.70 227 Northeast 0.84-$9.00 2.21 45 Southeast 0.58-$10.00 2.41 34 Southwest 0.66-$17.85 3.00 77 Northwest 0.30-$4.86 2.43 60 Minneapolis CBD 0.30-$7.04 5.87 7 St. Paul CBD 01.20-$4.63 J 2.00 4 Type of Center Range Midpoint Centers Overall 0.30-$17.85 2.70 227 Neighborhood 0.30-$6.50 2.36 169 Community 0.75-$6.75 2.79 40 Regional 0.84-$17.85 4.12 7 CBDs 1.85-$7.04 4.63 11 As discussed in past reports, shopping center owners and merchants pay a disproportionate share of the total property tax burden, with a regional center in the survey reporting taxes as high as $17.85 per square foot. Following are several quotes from respondents to the survey summarizing the opinions of most people associated with commercial real estate: Property taxes are outrageous". Real estate taxes are out of control". The most outrageous in the country certainly are in the midwest!" RIDICULOUS!" The high property tax rate for commercial and industrial properties, specifically retail properties in the state of Minnesota, continues to be a significant factor in the profitability of retailers as well as the expansion of existing retailers. Furthermore, there is strong evidence that retailers new to the market sometimes forego opportunities due to the high rate of real estate taxes passed onto retailers. In the survey of merchants, 79% of the respondents said high real estate taxes were a major operational obstacle for them. Also, 55% of the respondents reported that they had been prohibited from entering or expanding in the marketplace due to the onerous real estate tax burden. Without question, the high real estate taxes have a negative impact on the market value of every center in. the state. This is especially critical now because of the continuing downward pressure on margins for retailers, and in turn, their ability to pay a certain percentage of their sales towards rent. Obviously, the thinning margins have a direct impact on the net rents that are achievable for all retail properties. National stores such as the Disney Store, Banana Republic, Williams Sonoma and Ann Taylor generally achieve above average sales for their stores in Minnesota, but tend to be well below average in terms of profitability and return on investment due to the property tax factor. Consequently, national retailers focus their attention on markets that are most profitable, and, therefore, place Minnesota lower on their priority market list. With respect to property tax appeals in the marketplace, many owners continue the trend of appealing property taxes on their respective properties. Last year, over 65% of owners responding to the survey had appealed their real estate taxes. The response for 1995 was not significant enough from property owners to conclude a specific percent of owners who had, in fact, appealed taxes. However, it appears that property tax assessments are coming more into line with appropriate market values, and may have hit the bottom in terms of the declining values of retail properties. Most notable in terms of property tax appeals is the Minnesota Supreme Court's upholding of the property tax refund for Rosedale Shopping Center of $3.1 million related to years 1991 and 1992. While there were special circumstances at Rosedale during this period, specifically the construction of the new Dayton's store and the retrofitting of the old Dayton's store, there is widespread speculation of the precedent this ruling sets for other property tax appeals. The same law firm which represented Rosedale, is currently representing Southdale, Maplewood Mall, Burnsville Center, Brookdale and Ridgedale in similar cases. The Southdale case has been heard and a ruling is expected in November of 1995. The results of these higher profile appeals are much anticipated by both property owners and retailers throughout the market. In conclusion, property taxes continue to be a major business expense for owners and merchants. Because of political issues, the likelihood of any significant reduction in property taxes is generally low. Meanwhile, owners and merchants will continue to have to fight the high tax climate which negatively impacts the valuation of properties and the profitability of the merchants' businesses. The MSCA supports comprehensive reform to the Minnesota property tax system in conjunction with the N w N OPINIONS ICSC. The two groups have combined with other commercial and industrial property tax associations in lobbying and working towards true property tax reform. Only with the support of all merchants, property owners and managers throughout Minnesota is there a chance of seeing any meaningful property tax relief. We strongly encourage all retailers and owner:, to become involved in the efforts for reform. RENTAL RATES/RENEWALS Of the service providers surveyed. 62% have experienced constant rental rates for new and renewal leases in 1994: and 29% reported increases in rental rates of ten percent or more. In 1994, owners reported 4811% achieved increases of ten percent or more: and 48'N) experienced constant rental rates. ;Merchants overwhelmingly (700/0 thought rental rates stayed flat. The disparity between owners and merchants could be because most of the merchants surveyed are locked into long term leases, while owners are dealing with constant lease rollover. i RENTAL RATE CHANGE LAST YEAR OWNERS, SERVICE PROVIDERS, MERCHANTS 1995 Increase more than 10% Stayed the Same 70.00•: Decrease more than 10% 01: 10°1. 20% 30% 40°x: 50% 60°: 70% 0 OWNERS SERVICE PROVIDER MERCHANTS 54% of the owners thought rental rates would increase nest year. Conversely, only 20% of merchants believed this will happen. Given that most owners and service providers believe the value of their properties have increased (see The Investment Market Section), merchants can probably expect to pay higher rents in 1996. RENTAL RATE PREDICTION FOR NEXT YEAR OWNERS. SERVICE PROVIDERS, MERCHANTS 1995 Increase more than 53.70°. 10•: 35.79°. 20.00°. IN111111 x2 50•. Stayed the Same eei 70.00•. Decrease more than 1.65° 10°. .t.0.... 10.00°. 0% 10°. 20•. 30'. 40°. so% 60•. 70•. i OWNERS a SERVICE PROVIDER: 0 MERCHANTS THE INVESTMENT MARKET In 1993, 99% of the owners that responded to the survey question "What trends do you see with respect to the value of retail properties?" indicated that values were down. Last year 50% had a similar response. This year, the owner's perception of market value has changed as 55% thought their properties had increased in value and 43% answered "stayed the same." The service providers were not quite as optimistic as they answered 35% and 62% respectively. Life insurance companies, pension fund advisors, and REITs are having difficulty finding quality retail property to acquire in the Twin Cities that meets their minimum yield requirements. Most of these investors prefer grocery/drug anchored centers or power centers. The only sale in the past two years that meets this criteria was Mapleridge Shopping Center ($82.00/SF). The problem foethis group of investors is that demand significantly exceeds the supply. The banks and life companies are clearly back in the mortgage market. Only five owners tried to refinance this year and all were successful. The availability of debt financing has allowed more investors to enter the market. which has increased the perceived value of properties. With all the cash (both equity and debt) chasing retail properties, one would think there would have been numerous transactions in 1995. Although several properties are under contract. only three properties NOrthCOurt Commons. Winnetka Commons. The Crossings at Roseville) have closed this year. Northcourt was acquired by a local investment group. Winnetka Commons was purchased by a local syndicator, and The 31A/1. longs I Stayed the Same 70.00•: Decrease more than 10% 01: 10°1. 20% 30% 40°x: 50% 60°: 70% 0 OWNERS SERVICE PROVIDER MERCHANTS 54% of the owners thought rental rates would increase nest year. Conversely, only 20% of merchants believed this will happen. Given that most owners and service providers believe the value of their properties have increased (see The Investment Market Section), merchants can probably expect to pay higher rents in 1996. RENTAL RATE PREDICTION FOR NEXT YEAR OWNERS. SERVICE PROVIDERS, MERCHANTS 1995 Increase more than 53.70°. 10•: 35.79°. 20.00°. IN111111 x2 50•. Stayed the Same eei 70.00•. Decrease more than 1.65° 10°. .t.0.... 10.00°. 0% 10°. 20•. 30'. 40°. so% 60•. 70•. i OWNERS a SERVICE PROVIDER: 0 MERCHANTS THE INVESTMENT MARKET In 1993, 99% of the owners that responded to the survey question "What trends do you see with respect to the value of retail properties?" indicated that values were down. Last year 50% had a similar response. This year, the owner's perception of market value has changed as 55% thought their properties had increased in value and 43% answered "stayed the same." The service providers were not quite as optimistic as they answered 35% and 62% respectively. Life insurance companies, pension fund advisors, and REITs are having difficulty finding quality retail property to acquire in the Twin Cities that meets their minimum yield requirements. Most of these investors prefer grocery/drug anchored centers or power centers. The only sale in the past two years that meets this criteria was Mapleridge Shopping Center ($82.00/SF). The problem foethis group of investors is that demand significantly exceeds the supply. The banks and life companies are clearly back in the mortgage market. Only five owners tried to refinance this year and all were successful. The availability of debt financing has allowed more investors to enter the market. which has increased the perceived value of properties. With all the cash (both equity and debt) chasing retail properties, one would think there would have been numerous transactions in 1995. Although several properties are under contract. only three properties NOrthCOurt Commons. Winnetka Commons. The Crossings at Roseville) have closed this year. Northcourt was acquired by a local investment group. Winnetka Commons was purchased by a local syndicator, and The OPINIONS • Crossings by a regional investor. 1996 Should be an active year for the investment market. If Congress passes a meaningful capital gains reduction, individual owners may consider selling assets. Owners should consider the best way to get the top dollar and the buyers (both institutional and local) should be prepared to bid quickly and aggressively for assets. SALES PERFORMANCE The "soft landing" as predicted by the Federal Reserve Board seems to reflect retail sales perti rmance this past year. The majority of survey respondents indicated sales performance "stayed the same". As outlined in the second graph below, this trend is expected to continue next year. SALES PERFORMANCE CHANGE FROM LAST YEAR OWNERS, SERVICE PROVIDERS, MERCHANTS 1995 Increase more than 15°. Stayed the Same Oeuease more than 15% 0% 10% 20-: 30% 401. 50% 60% 7M: W. O OWNERS SERVICE PROVIDER 9 MERCHANTS SALES PERFORMANCE PREDICTION FOR NEXT YEAR OWNERS, SERVICE PROVIDERS, MERCHANTS 1995 Increase mora Men 15% Stayed the Same Decrease more than 0', 10°. 20 30°° 40°. 5011. 609. 70°. 6011. OWNERS SERVICE PROVIDERS MERCHANTS OPPORTUNITIES/OBSTACLES There are several obstacles that were noted by both service providers and owners of shopping centers that will have a future impact on this business. Owners felt that real estate taxes were their biggest obstacle. Nearly 50% of the respondents to the survey indicated their concern for high taxes. They also indicated that new developments and specifically "big boxes" are causing concerns for smaller centers and smaller retailers. Service providers also showed concern over high real estate taxes, but they are more concerned with the effect of the larger retailers. The}' noted difficulticS with filling; space after a large user vacates, finding enough retailers to use the large boxes, the lack of small retailers, the decline in women's apparel sales and the overall increase of competition and saturation of the marketplace. One comment that both owners and service providers mentioned is the increase in crime. This is the first year that such comments have been made, and therefore, deserves noting. While this is not something that was statistically measured in this year's survey, it could become a major concern in the future. Opportunities are being created by some of the same factors that were considered obstacles to some. Namely, the infusion of big box retailers means there can be some wonderful areas to create a niche market, or expand with new and creative ideas. Positive remarks from owners, retailers and service providers indicated the large number of rehabs of older centers and more neighborhood specialty areas were a good way to combat the "power center" and "big box" trend that is driving new development in this market. The loosening of financing requirements was also noted as a positive for further expansion of both centers and retail stores. f(Air s t " YF is \ !v •dA a'. 1 z vr.ta ` t RJa VA x rr- 7T*.. ,(-,. { 147;1 A i 1 ` Ij,..,,+.'s lLl'+sT5TU!, C,?C y 1 .. s- „A r .-v, i• I Y t,j3 ' . r t x. 'l ti! y t^ l•Mi :.. , `''. +`< 17, t 4 7y ` 1` A r q Si€Cw P A i s• r a , Cluca a it1 anInsturarom r< 2i !`1l 4• tr t s t'F `r .,{•d ! sy y^ ''.F i.st 1 r of 1. 1 r s. f 'lk Td'v }..,. J . )'} S bWMA.RY OF CONTENTS L 1995 Forecast Competition Chairman's Letter IL National and Minnesota Economic Profile III. Retail Forecast Kathleen Nye-Reiling, Towle Real Estate Co. VS. Whitney Peyton, CCIM, CB Commercial Real Estate Group IV. Financial Forecast Curt Glaser, Glaser Financial Group VS. Mike Meents. Towle Financial Services V. Office Forecast Kurt Knoff, CB Commercial Real Estate Group VS. Steven Chirhart, SIOR, Griffin Companies VI. Industrial Forecast Dennis Panzer. Koll/Shelard VS. Mark Sims, United Properties YI. Multi -family Housing Forecast Kevin Doyle, CCIM, Welsh Companies VS. Bob Fransen, CCIM. CRB. Fransen Real Estate VII. Acknowledgement of Technical Support LWIMinnesota - South Dakota CCIM Chapter Your Professional Commercial -Investment Real Estate Source September 22, 1995 To All Guests: The Minnesota/ South Dakota CCIM Chapter in association with the University of St. Thomas and the Minnesota Real Estate Journal with their corporate sponsor Chicago Title Insurance Company, is pleased to present our First Annual Twin Cities Commercial Forecast Competition. Thanks to our committee members, who donated many hours of their time, we have put together a program that promises to be informative, yet fun! Special thanks should go to the companies that provided technical assistance. The Minnesota Real Estate Journal and Apartment Search Profiles compiled the base information from which our presenters will make future predictions. The Minnesota/South Dakota Chapter will determine the winners of the competition based on their predictions compared to actual 1996 results. Additional thanks to our sponsor Chicago Title Insurance Company who has contributed their financial resources to help underwrite this program. We sincerely hope that you will enjoy yourself and return for our 1996 Second Annual Competition. Let the competition begin! Sincerely, 5 Edward T. Rymer, CCIM 1995 Minnesota/South Dakota Chapter President 5750 Lincoln Drive • Edina, Minnesota 55436 . (612) 933-9020 The Designation Certified Commercial Investment Member is Awarded by Election of the Board of Governors of the REALTORS NATIONAL MARKETING INSTITUTE© of the NATIONAL ASSOCIATION OF REALTORS®, 430 Michioan Avenue. Chicaao. Illinois 60611 (3121440-8502 ccim Commercial Forecast Competition 1995 PARTICIPANT PROFILES Retail Market Kathleen Nye-Reiling athleen Nye-Reiling, co-owner of E'WTowle Real Estate Co., hasn't always worked in real estate. In fact, she spent 15 years working in mar- keting. For the first 10 years she worked for Levi Strauss, and then spent five years work- ing for an advertising agency. But I had always dabbled in real estate. I used to restore houses and sell them," Nye- Reiling says. She was licensed in 1985 and started work- ing at Towle where she syndicated and set up partnerships throughout the real estate world. With her strong marketing background, Nye- Reiling soon began using her old contacts to work on retail deals through the late 1980s. She spent four years working at Towle before setting out on her own for four years. She returned to Towle as a co-owner two years ago. Nye-Reiling split her college experience between one year at Drake University and two years at the University of Illinois before grad- uating with a degree in political science. She is the president of the Minnesota Shop- ping Center Association, serves on the board Of directors for the National Association of Industrial and Office Properties, and is a mem- ber of the Minneapolis Board of Realtors for Commercial and Industrial Developments. Reprinted with permission of the Minnesota Real Estate Journal The Minneapolis/St. Paul Retail Market Kathleen Nye-Reiling, Principal Towle Real Estate Company/Colliers International Observations Enormous changes in the consumer world and in the financing markets have created new waves of retail development. Just six years ago, our retail universe was 30 million sq. ft. Today, according to the MREJ survey, it approaches 41 million square feet with 5 million sq. ft. planned for 1995 and 1996. Almost all of the development in the past few years has been in "power centers" - groupings of retailers who share common architecture and access and a common bond of being destination retailers. In spite of huge growth in the market, vacancy levels will decrease slightly because little spec space is coming into the market with the new development. Further, regional malls are finding value retailers to release available spaces. There will be strong absorption of space but older centers will continue to deteriorate. Many should be recycled for education, government or housing. Two things are influencing the health and profitability of retail operations: increased competition, and rising costs for employment, health care insurance, advertising, taxes and CAM costs. Retailing growth may be limited by the unavailability of retail workers. Additional national and regional retailers will come into our market. The Mall of America has called attention to our high spending power and the relative strength of our retail market. Competition between category killers will be fierce. This is a game of survival of the fittest. Landlords accepting long leases with third or fourth string competitors will be looking at vacated space well before the lease expires. In downtown Minneapolis, some retail space in Gaviidae I and in Riverplace was converted to office space to satisfy a hungry office market seeking location and identity. ` FOUR TRENDS INFLUENCING RETAIL REAL ESTATE: The Four E's" Efficiency: Consumers have less discretionary time. Convenience and access are important. Catalog sales and other types of electronic retailing will continue to grow providing "retailing without the store". Economy: The consumer wants value and has knowledge of the products, brands and prices. Promotional, value oriented retailers are being recruited by regional malls. Price wars will continue. Entertainment: Consumers seek fun environments that are stimulating and offer many activities. Amusement parks, theaters, golf, family parks and other attractions are co -existing and competing with retailers for the consumers time and money. Environment: The consumer wants to feel safe. Security personnel, good lighting and clear signage are important components to providing a safe environment for retailing. Il I A IV PROPOSED SHOPPING CENTERS - 1995 & 1996 TWIN CITIES METROPOLITAN AREA `- Development Name City Square Footage Roseville Crossings Roseville 31,639 Stillwater Marketplace Stillwater 35,240 Golden Valley Commons Golden Valley 47,000 Westbrook Marketplace Brooklyn Park 95,310 Shops of Lyndale, Phase I1 Richfield 100,000 Hartford Place Eden Prairie 165,000 Northtown Village Blaine 175,000 Maplewood Power Center Maplewood 240,000 Vadnais Square Vadnais Heights 240,000 Boulevard Gardens Minnetonka 250,000 Maple Grove Crossings Maple Grove 267,000 Brooklyn Park Commons Brooklyn Park 3311,590 Park Place Plaza St. Louis Park 325,790 Eagan Promenade Eagan - 416,000 The Quarry Minneapolis 430,000 Midway Marketplace St. Paul 486,099 Inver Grove Marketplace Inver Grove Heights 670,000 Tamarack Village Woodbury 749,300 Total 5,054,698 Data compiled by Towle Real Estate Co. as of September 5, 1995. All inforniation furnished to The Towle Real Estate Co. and/or The Towle Company is from sources judged to be reliable, however, no warranty or representation is made as to its accuracy or completeness. Property is subject to price change, prior sale, or lease and withdrawal from market, all without notice. ccim Commercial Forecast Competition 1995 PARTICIPANT PROFILES Retail Market Whitney Peyton AMinneapolis native, Whitney Peyton joined CB Commercial, then called Coldwell Banker Commercial, in 1977, work- ing with office and retail properties. Before long, he was dealing exclusively with retail properties. He graduated from Minneapolis West High School in 1970. A short stint in the Army reserve was followed by a few years at the University of Minnesota. Peyton left the Uni- versity in 1975 to accept a position with First Bank System, where he wrote residential and real estate loans until 1977, when he joined CB Commercial. After gaining considerable experience in selling retail centers, Peyton was named as a vice president and sales manager in January 1992. He held that position until February 1994, when he was named a senior vice pres- ident and a managing officer. Peyton is a past president and member of the Minnesota/South Dakota CCIM, the first vice president of the Minnesota Shopping Center Association, and a member of the board of directors for the National Association of Industrial and Office Properties. II Reprinted withp permission of the Minnesota Real Estate Journal 1A rN-C L_L3vV COMMERCIAL TWIN CITIES MARKET OVERVIEW FOR THE MINNESOTA/SOUTH DAKOTA CCIM By: Whitney Peyton, CCIM Sr. V.P./Managing Officer Unlike other specialties, to understand retailers one must understand the consumer. The consumer's wants and needs drive the retailer's decisions. Those needs are as follows: has less time, wants more value and more choices. This equates to value -oriented retailers that are accessible and have the inventory (good, better, and best). In an effort to meet the consumer needs the retailers have segmented themselves into categories (electronics, toys, office products, etc.). The consumer knows that by going to shop at one of these categories they will have the optimum number of choices, in the minimum amount of time, delivered at a reasonable price. Winners: power centers and new power center construction. Losers: specialty stores in regional malls. Retailers need to be the biggest (Toys R Us), cheapest (Wa1Mart), hottest (GAP) or easiest Walgreen), if not, they will die. Demand for retail in the Twin Cities continues to be strong. Currently there are approximately 5 million square feet of shopping centers planned or under construction. Virtually all of this new space is pre -leased to "large box users". This 5 million would be a shade over a 10% increase on the existing base. Some of these properties will not bring space to the market until 1997. It is reasonable to believe some may not be built. Retailers who will be new to the market from July 1, 1995 to June 30, 1996 include: Home Depot; PETSmart; Gander Mountain; Warehouse Shoes; Strouds; Today's Man; Lands End; Old Navy; Hollywood Video; Incredible Universe; Baby Superstore; Mervyn's; AMC Theatre; Bed, Bath & Beyond; Media Play and 4-6 new restaurants. Some consolidation in these box users has occurred with the departure of F&M (2-3 other retailers will be on their heels). The large discount drugs were unable to carve out a niche as Target, Cub and Rainbow aggressively priced and strengthened their inventory levels in the health and beauty aids sector. Other categories will also have consolidation in this survival of the fittest" environment.` CB C(1\I%1F. at im RE a1 E,14TF Gmot P. I( .BR()AERA(.rk%D\1A%AGE%11%T.I K EMED RE 41 ESTI T E BR(IkER Form No 204 Rev 4 191 Forecast for 1995 through July, 1996 is as follows: 1,620,000 square feet of new construction will come online. Vacancy will be 7.73%. Continued activity among large box users will drive additional development. Landlords will build side shop space cautiously. Side shop rents in new projects will increase. Some older centers will reach functional obsolescence. Our market boasts high household income with well educated consumers. Although they are not trendsetters, they continue to perform well as measured against the rest of the nation. Any discussion of the Twin Cities real estate market would not be complete without focusing on the high commercial real estate tax environment. At 5-6% of market value, Minnesota is one of the leaders in the nation. This makes property ownership a difficult proposition as the real estate taxes can eat into net operating income in a dramatic manner if the space is vacant. In conclusion, there will be additional development into the future. This will create a shakeout among existing properties as well as among retailers as they compete for the consumer dollars. CB COMMERCIAL REAL ESTATE GROUP. INC, . BROKERAGE AND MANAGEMENT • LICENSED REAL ESTATE BROKER Form No. 204.01 Rev 4/91 Mery Bj erke 15925 4th Avenue North _ 1 (612) 473-1946 Plymouth, MN 55447 o-, March 7 1996 Mayor Joy Tierney 3400 Plymouth Blvd. Plymouth, MN 55447 9 Dear Mayor Tierney, Thank you for taking the time this morning to meet with Jim Guddal and me to discuss the Plymouth City Center regarding the Westland property. Ruth and I first moved to Plymouth in 1964 and feel this is a wonderful place to live. In 1982 we decided to invest in Plymouth. We become a partner in Westland Equities, which then purchased about three acres in what is now Plymouth City Center. We are seeking your support in zoning this area as retail and not office tech. Property both to the north and south is zoned retail. From our observations it does not appear that any significant research has been done to assess the need for office tech or opposing retail. The type of zoning has a significant impact on the value of our investment. Office tech does not seem very descriptive and is not understood by most potential buyers, thus making the property less attractive. We realize that location is a major factor on the type of development and the ultimate use could be non retail. All we are asking for is the opportunity to maximize our investment, which will also provide the greatest tax benefit to the City and residents of Plymouth. We are confident that the skill and expertise of the city staid planning commission, and council will guide the development of the site to insure consistency with Plymouth standards. Again, thank you for your time. I really appreciate elected officials that take time from their busy schedules to meet with constituents. If you have any questions please feel free to call me at 473-1946 (H) or 790-4704 (B). Sincerely, Mery