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Home My WebLink About9B - City-Owned Property 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: CITY COUNCIL AGENDA REPORT June 6, 2006 9B Frank Boyles, City Manager Consider Approval of a Resolution to Award the Purchase and Authorizing the City Attorney to Negotiate a Development Agreement for the Sale and Development of City-owned Property at Franklin Trail and Park Nicollet Avenue and Main Avenue and Hastings. One of the vision elements contained in both the 2020 and 2030 Vision is Downtown Redevelopment. To revitalize the Downtown, the City Council has initiated or been supportive of numerous programs including fa9ade improvement, downtown streetscaping, Rotary Gateway, and the construction of new buildings like Lakefront Plaza and the Speiker Building. The City owns two parcels of land downtown, which are excess to its needs. The City Council on May 2,2005, indicated its desires that these excess properties be sold in hopes that it might facilitate further economic development. The first is an .88-acre property at the intersection of Franklin Trail and Park Nicollet Avenue (Park Nicollet Property). The second is the 49' X 145' parcel at Hastings and Main Avenue (Hastings Property). At the May 2, 2005, meeting, the City Council authorized the staff to prepare a request for proposal for each parcel and place a public notice in the Prior Lake American. CURRENT The deadline for the submission of proposals was May 27,2005, at 4:30 p.m. CIRCUMSTANCES: Three proposals were submitted. One proposal was for the Park Nicollet property and two were for the Hastings property. Park Nicollet Property The proposal was submitted by Daniel O'Keefe on behalf of a proposed Limited Liability Corporation (LLC). The bid for the land was $204,000 (the minimum bid amount) with a $15,000 cashier's check as a performance security . The proposed LLC intends to purchase the City's .BB-acre property and the adjacent one-acre property owned by Park Nicollet Clinic. The intent is to place one 30,000-square-foot, Class A building on the parcels. The building would be three floors with the first and second floors 12,000 square feet, and the third floor 6,000 square feet. The intended use of the building is offices. Greystone Construction is tentatively identified as the builder. The proposal indicated verbal commitment to lease 20,000 square feet of the building. No sketch of the building, biography of LLC members, letter of financial position, or confirmation of lessees was included. The proposal contains two contingencies: www.cityofpriorlake.com 1:\COUNCIL\AGNRPTS\2005\0606 Sale ~n~~!44Ff~12~~ FjBr'FOOf~~2?~~7 .4245 1 1. Buyer needs 60 days to determine if the combined lots are large enough for the proposed building, parking, ponding, etc. 2. The City will be responsible for any soil remediation necessitated by (for instance) oil from the previous car repair shop. The proposal states that if the buyer cannot acquire the Park Nicollet land, or if it is unable to fit the building on the combined lots, the $15,000 retainer will be refunded by the city at the end of the sixty-day period. Clarification of the purpose of the $15,000 security deposit may be appropriate as the O'Keefe proposal characterizes it as a "retainer" to be refunded after completion of the building or on failure of contingency. Hastings Property Two bids were received from Prior Lake based firms: Rock Creek Designers and Builders, LLC, and IVEX, 5500 Cottonwood Lane. Rock Creek Desianers and Builders. LLC Dan Schaefer, on behalf of Rock Creek Designers and Builders, LLC, submitted a proposal in the amount of $200,000 for the property (minimum bid was $128,000). Their proposal includes a $15,000 cashier's check. The proposal is a three-story building with 4,000 square feet of gross rentable space per floor. A rooftop terrace is to be included for outdoor entertainment and tenant usage. A sketch of the building (attached) shows the Main and County Road 21 exposures of the building. Building uses included retail/restaurant and financial/professional on the first floor. The second floor is targeted for financial, real estate, title and professional tenants. A broker is being retained to list the building for lease. It is anticipated that Rock Creek will occupy the third floor. Neither a letter of financial commitment from a bank nor letters of commitment from lessees equal to 500/0 of the building square footage were included in the proposal. IVEX Steve Sammis, on behalf of IVEX, LLC, submitted a proposal in the amount of $128,000 (the minimum bid) and included a $15,000 cashier's check. The IVEX proposal describes the construction of a mixed-use building containing commercial office space and retail/restaurant uses. The building design is three stories excluding basement, and will have a footprint of 3,000 to 3,200 square feet. The proposal includes sketches of two building types. The building is intended to be 40 feet wide on Main Avenue and 80 feet wide on Hastings. Space is to be included for a seven-stall parking lot. The top floor of the building is designed to house IVEX and IVEX Mortgage. The second floor would house Realty House with a combination of retail and professional office space on the main level and basement level. Potential candidate occupants include 1:\COUNCIL\AGNRPTS\2005\0606 Sale & Development of Franklin & Park Nicollet.DOC 2 chiropractic, real estate, title company and photography. The restaurant primarily planned for the basement would be "Cheers"-type, piano-based or sports-themed for the family market. Their proposal includes an overview of the company, biography of owners, letters of commitment from lessees, letter of financial interest from a bank and letters of recommendation. The IVEX proposal is subject to the following conditions: . IVEX will receive $25,000 in fac;ade improvement money the City previously committed. . No environmental contamination of the site exists. If any exists, IVEX has the right to terminate the agreement and be refunded all submitted funds. . If the property is not suitable to support the building without special footings or pilings, then IVEX has the right to terminate the agreement and be refunded all submitted funds. . IVEX will have the right of first refusal to develop the City-owned property directly south of the parcel if the City disposes of the property in the future so their fac;ade investment on the south side of the building is not wasted. The first condition would require the City to reassign fac;ade funds from the IVEX Colorado Avenue property to the Hastings property. The next two conditions would require the City to give IVEX time at its expense to have specialists make the necessary findings. The fourth condition is not possible, as the City Attorney has advised that this disposal of excess City real property must be made to the highest bidder. ISSUES: Each proposer estimated their construction timeline to completion. O'Keefe and Rock Creek indicated 14 months while IVEX estimates 17 months. All estimates are within acceptable parameters. There are a number of issues the Council should consider. All bidders bid at least the minimum amount. In the case of O'Keefe, the City Council should consider whether it is comfortable with the two contingencies set forth in their proposal. A suggestion would be to approve the purchase conditioned on the buyer verifying that both contingencies are satisfied within 60 days at his cost (parcel suitability/size and soil remediation). If not, the parcel could be re-bid. If the buyer removes the two contingencies within 60 days in writing, then the $15,000, which is not a retainer, but a performance guarantee, would be lost in the event of failure to comply with any requirements of the project. Rock Creek Design and Builders was the highest bidder by $72,000 on the Hastings property. They did not identify contingencies in their proposal, whereas the IVEX proposal included the four conditions addressed above. The Rock Creek proposal is not as complete as IVEX, but there is to exigent circumstances that the staff is aware of that would preclude Rock Creek from being given the opportunity to enter into a development agreement to construct the proposed building on the Hastings property. 1:\COUNCIL\AGNRPTS\2005\0606 Sale & Development of Franklin & Park Nicollet.DOC 3 ALTERNATIVES: RECOMMENDED MOTION: The City Attorney advises that once a procedure for disposal of the property was adopted, the City must, absent exigent circumstances, sell the land to the highest bidder meeting the minimum bid criteria. 1. Adopt the attached resolution authorizing the City Attorney to work with Daniel O'Keefe and Rock Creek Design and Builders to enter into a development agreement with each to construct buildings on parcels to be purchased from the City. 2. Take no action and direct the staff to provide additional information. 1 . Alternative 1. 1:\COUNCIL\AGNRPTS\2005\0606 Sale & Development of Franklin & Park NicoHet.DOC 4 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 RESOLUTION OS-xx A RESOLUTION AUTHORIZING THE CITY ATTORNEY TO NEGOCIATE A DEVELOPMENT AGREEMENT FOR THE SALE AND DEVELOPMENT OF TWO CITY-OWNED PARCELS Motion By: Second By: WHEREAS, The City of Prior Lake is the owner of an approximate .88-acre parcel at the intersection of Park Nicollet Avenue and Franklin Trail (Park Nicollet property); and WHEREAS, The City of Prior Lake is the owner of an approximate 49' X 145' parcel at Main Avenue and Hastings Street (Hastings property); and WHEREAS, Both properties are excess to the City's needs; and WHEREAS, On May 2, 2005, the City Council authorized the staff to prepared requests for proposal and notice of bid in the City's official newspaper; and WHEREAS, Three proposals were received by 4:30 p.m., May 27, 2005; and WHEREAS, One proposal submitted by Dan O'Keefe on behalf of a proposed LLC was received for the Park Nicollet property in the amount of $204,000 which was the minimum bid amount; and WHEREAS, The O'Keefe bid was subject to two conditions and proposed the $15,000 security deposit as a retainer; and WHEREAS, Two proposals were received for the Hastings property (minimum bid $128,000) as follows: · Rock Creek Design and Builders - $200,000 and subject to zero contingencies · IVEX - $128,000 subject to four contingencies; and WHEREAS, Barring exigent circumstances the City is required to award to the highest bidder. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The bid of Dan O'Keefe in the amount of $204,000 for the Park Nicollet property is hereby accepted subject to the following: a) conformance with all aspects of the RFP and proposal execution of a development agreement satisfactory to the City Attorney within the time frame set forth in the proposal. b) Removal of site size and site clean-up questions within 60 days of the date of this resolution at the proposer's cost. R:\RESOLUTI\ADMINRES\2005\060605 sale of two par~6&Yofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 -_______....~....~.._..~~____._~____..."..."._..w__...,'_,~,+>_ -"t" I c) Clarification that the $15,000 cashier check is a security deposit to be returned under either of the following conditions: . after the 60-day site contingency period the proposer elects not to proceed and notifies the City in writing as such within ten (10) days, or . if any balance is available and unused for enforcement prior to the issuance of a permanent certificate of occupancy. 3. The bid of Rock Creek Design and Builders in the amount of $200,000 for the Hastings property is hereby accepted subject to the following: a) a continuance with all aspects of the RFP and proposal, execution of a development agreement satisfactory to the City Attorney, within the time frame set forth in the proposal. 4. The $15,000 security deposit submitted by IVEX is to be returned forthwith. PASSED AND ADOPTED THIS 6th DAY OF JUNE, 2005. HauClen Haugen Flemino Fleming LeMair LeMair Petersen Petersen Zieska Zieska YES NO Frank Boyles, City Manager R:\RESOLUTI\ADMINRES\2005\060605 sale of two parcels.DOC