HomeMy WebLinkAboutPurchase of 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
~:tober 3, 2005 ('\1.
Frank Boyles, City Managetj1
CONSIDER APPROVAL OF A SOLUTION AUTHORIZING
THE MAYOR AND CITY MANAGER TO ENTER INTO A
DEVELOPMENT AGREEMENT AND AN AGREEMENT
REGARDING THE PURCHASE OF CITY-OWNED PROPERTY
AT HASTINGS AND MAIN AVENUE.
Introduction
The purpose of this agenda item is to receive City Council
authorization to enter into two agreements prepared by the City
Attorney which set forth the legal relationship, default provisions,
penalties and securities with respect to a new downtown
development proposed for the Main Avenue and Hastings city-
owned lot.
History
The City owns a 49' X 145' parcel at the intersection of Main
Avenue and Hastings. On June 6, 2005, the City Council awarded
a proposal to sell this property for development to Rock Creek
Designers and Builders, represented by Dan Schaefer. The
transaction is subject to the conditions contained in the request for
proposal and the proposal submitted by Rock Creek Designers
and Builders. In addition to authorizing the sale of the property in
the amount of $200,000, the City Council directed that the
developer and City enter into a development agreement by
October 7, which is 120 days from the Council's June 6 action.
Current Circumstances
The City Attorney has prepared two documents. The first is an
agreement regarding the purchase of City-owned property. The
second is a development agreement. The agreement sets forth
the terms of the purchase transaction and the responsibilities of
each party. The development agreement specifies the timeline
within which various actions are to take place which ultimately end
with the issuance of a permanent certificate of occupancy. The
document also defines default and the penalties in the event of a
www.cityofpriorlake.com
I\COU'-'("iL\C".dU' 1\\2\105\ I 0()3,1., d~'Pi1(jfl.~11cJg2':\!l2l!7l.tt230&J'I;;Fc!i<"952.44 7 .4245
breach of the agreement. The document seeks to assure that title
to the land does not transfer to Rock Creek until we are certain
that the building will be constructed in accordance with the RFP,
proposal and development agreement.
On August 18, 2005, the City Attorney and staff met with Mr.
Schaefer and his attorney to review the documents. We agreed
that Mr. Schaefer's attorney would "red-line" the document and
then return it to the City Attorney for review and modification. The
documents as revised by the City Attorney are attached. We
believe that the documents protect the City satisfactorily, but raise
some policy questions for the Council.
During the meeting with Mr. Schaefer and his attorney regarding
the agreements drafted by the City Attorney, Mr. Schaefer
indicated that Rock Creek Designers and Builders may not be able
to meet one or more of the deadlines set out in their RFP proposal
and memorialized by the City Attorney in the development
agreement. Specifically, Rock Creek indicated it would provide
"financing satisfactory to the City" by August 27,2005, and begin
construction by November 1, 2005. At the August 18 meeting, Mr.
Schaefer indicated that he would not be able to obtain construction
financing until 50 percent of the space is pre-rented. This could
put off construction until the pre-leased space requirement is met.
During the meeting we tried to accommodate this dilemma while
protecting the City. One of the City's preliminary objectives in
disposing of the property using our RFP process was to avoid a
developer acquiring the property for speculation and not building,
but turn the property over after the value of the property
appreciated. To avoid this, the development agreement sets out a
timeline for substantial milestones.
Proof of construction financing is a significant event on the
timeline. Therefore, the City proposed extending the schedule
upon the developer paying $15,000 for each forty-five day delay.
The $15,000 increments would remain in place until
commencement of construction which must occur no later than
forty-five (45) days.
The developer proposed the $15,000 increments should be
returned if the developer commences construction by April 7,
2006, rather than November 1, 2005, as proposed by the
developer in response to the City's RFP. The City Attorney
disagrees. The City Council should provide the City Attorney with
input regarding whether the Agreement, which is in your agenda
l:\C,'<H : NCiL.....r\()NlU' lSJ.,llOS\l Oii3t)5 (kvc;lol'ment agre("IIl(~11t I h(';tiq's&ivlainDUC
package, should be revised and what revisions should be made, if
any, in light of the comments by the developer's attorney.
The developer has submitted a completed site plan and a
conditional use permit application. The conditional use permit
request is required in the C-3 (Downtown) district for buildings in
excess of 35 feet tall. The proposed building is to be 42 feet tall.
The Planning Commission heard and approved this request at its
September 26, 2005, meeting.
ISSUES:
The key issue is whether the Council believes that the documents
protect the City against various contingencies. A considerable
amount of effort has been spent both by the developer's attorney
and the City Attorney crafting language which is satisfactory to the
developer, but also addresses the City's concerns. We believe
that the documents before you accomplish their intended objective.
FINANCIAL
IMPACT:
If the Council approves the two attached documents, we will
complete a lease agreement for City Council consideration. The.
lease would authorize the developer to use the majority of the
public parking lot to the south of this parcel during normal business
hours for five years at a cost of $1,000 per month. A portion of the
lot would remain available for public use, and all of the lot would be
available to the general public on weekends and evenings.
The purchase price of this property is $200,000, which is in excess
of the $128,000 appraised value. The City did purchase the LBJ
Grain property for $5,000 and waiver of the Downtown special
assessment of $1,071. Any title work will be the City's
responsibility. The City Attorney's fees are reimbursed by the
developer. The parking lease revenues would be set aside in a
fund for future parking facilities.
ALTERNATIVES:
1. Motion and second to adopt a resolution authorizing the Mayor
and City Manager to execute the agreement regarding the
purchase of City-owned property and the development
agreement for the Main Avenue and Hastings property.
2. Take no action.
RECOMMENDED Alternative 1.
MOTION:
hO.)ll\( 'l! ;\G\ f\ P \5\2005\ I onn" Ik\dopment agH~(>lntm 1 hl';rin,:\&ivh\!1l iXl(.
16200 Eagle Creek Avenue S.E.
Prior Lake, MN 55372-1714
RESOLUTION 05-xx
A RESOLUTION AUTHORIZING THE MAYOR AND CITY MANAGER TO ENTER INTO
A DEVELOPMENT AGREEMENT AND AN AGREEMENT REGARDING THE PURCHASE
OF CITY-OWNED PROPERTY AT HASTINGS AND MAIN AVENUE
Motion By:
Second By:
WHEREAS, The City Council has deemed a 49' X 145' parcel located at the intersection of Main
Avenue and Hastings Avenue to be surplus to the City's needs; and
WHEREAS, The City Council, in accordance with the 2030 Vision and Strategic Plan, desires to
continue with the redevelopment of the Downtown area; and
WHEREAS, Rock Creek Home and Design has submitted a proposal to build a three-story building
on the parcel consistent with the Downtown Redevelopment Plan and in accordance
with their proposal dated May 27, 2005; and
WHEREAS, The City Attorney has drafted a development agreement and agreement regarding the
purchase of city-owned property which has been reviewed and approved by Rock
Creek Homes and Design.
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 Mayor and City Manager are authorized to execute the developer's agreement and agreement
regarding the purchase of city-owned property.
PASSED AND ADOPTED THIS 3rd DAY OF October, 2005.
YES
NO
Haugen Haugen
Fleming Fleming
LeMair LeMair
Petersen Petersen
Zieska Zieska
Frank Boyles, City Manager
R\RESOLUTl\ADMINRES\2005\ 100305 Dev AgreemGnWW\N~~~li\9d9~~tyDOC
Phone 952.447.4230 / Fax 952.447.4245
---~---....-_-----~..,...
AGREEMENT REGARDING THE PURCHASE OF CITY OWNED PROPERTY
This Agreement is entered into this _day of , 2005 by and between the City of
Prior Lake, Minnesota, a Minnesota municipal corporation (hereinafter "City"), and Rock Creek
Designers and Builders, LLC, a Minnesota Limited Liability Corporation (hereinafter
"Purchaser") .
RECITALS
WHEREAS, the City is the owner of two parcels of land on unimproved real property
located at Main Avenue and Hasting Streets in the City of Prior Lake, Scott County, Minnesota
("Property"), as legally described on Exhibit _ attached hereto and incorporated herein; and
WHEREAS, on May 2, 2005 the City Council pursuant to applicable State Statutes and
City Code requirements declared the Property surplus and authorized the City Manager to
undertake a sealed competitive Request for Proposal process to dispose ofthe Property; and
WHEREAS, on June 6, 2005 the City Council accepted the Proposal from Purchaser, in
the amount of Two Hundred Thousand Dollars ($200,000.00), to purchase the Property, subject
to entering into an agreement with the City to construct the structure described in the Purchaser's
response to the City's Request for Proposals ("Proposal"), dated May 27, 2005 and which is
attached hereto and incorporated herein as Exhibit _; and
WHEREAS, this Agreement is intended to set forth the terms and conditions under which
the City will (1) enter into a real estate purchase agreement with the Purchaser and (2) close with
the Purchaser on the sale of the Property; and
WHEREAS, the process hereinafter described in this Agreement for the sale and
purchase of the Property is designed to ensure that the Purchaser is not acquiring the Property to
hold until the value ofthe Property exceeds the Purchaser's purchase price.
NOW THEREFORE, based on the mutual promises and covenants set forth herein, the
sufficiency of which is not disputed, the parties agree as follows:
1. The Recitals set forth above are incorporated herein as if fully set forth.
2. The City will sell Purchaser the Property for the total Purchase Price of Two
Hundred Thousand Dollars ($200,000.00), subject to the terms and conditions described in this
Agreement and the purchase agreement attached hereto and incorporated herein by reference
(hereinafter "Purchase Agreement").
3. The Purchaser shall prepare plans for the construction of a three-story commercial
retail and office building with a roof top terrace. Each floor of the building will be
approximately Four Thousand (4,000) square feet. The architecture of the building, in the
judgment of the Planning Director and City Engineer of the City, shall be consistent with the
rendering and narrative description of the building submitted with the Purchaser's ProposaL The
Building Plans shall be submitted to the City on or before August 27,2005.
I:\Agreements\Purchase Agreements\Rock Creek Option and Developm~t Agreement (Oct 3 2005).doc
-'._"'''-''~'--.'.''---''--~~---"-''--~--~~--_._~---_.,.,-'~-_._-~-
4. The Purchaser shall provide the City proof of construction and permanent /..-...
fmancing, satisfactory to the City's Finance Director, for the construction of the building
described in Paragraph 3 by August 27,2005.
5. The Purchaser shall apply for and secure a building permit for the building
described in Paragraph 3 on or before October 7, 2005.
6. The Mayor and City Manager shall execute the Purchase Agreement within five
(5) days of the issuance of a building permit for the building referenced in Paragraph 5 above.
7. On or before the date for the closing as provided for in the Purchase Agreement,
the Purchaser shall execute a Development Agreement with the City, a copy of such
Development Agreement attached as Exhibit _ and incorporated herein ("Development
Agreement"). The Development Agreement shall be required to be executed by the parties
designated therein to assure that the Purchaser constructs the building for which the building
permit is issued. The Development Agreement sets out a project development timeline and the
City's remedies in the event the Purchaser fails to meet the project development timeline.
8. The City and Purchaser shall close on the sale of the Property within ten (10)
business days from the date the Purchase Agreement is executed by both parties.
9. The document of conveyance for the sale of the Property shall contain a rescission
provision. The City shall be entitled to rescind the sale of the property AND retain the purchase
price of the Property if the Purchaser breaches any of the terms and conditions of the .'~,
Development Agreement, including the project development timeline specified therein.
Purchaser acknowledges that the City selected Purchaser's bid to purchase the Property based on
the Purchaser's representations to the City of its intent to develop the Property as provided for
herein and in accordance with the Development Agreement. Purchaser agrees that the City is
entitled to regain fee title to the Property and retain the Purchase Price in the event of a default of
any provision in the Development Agreement; but only after Purchaser has received notice of a
default and an opportunity to cure the default. Upon the completion of the improvements to be
constructed by the Purchaser on the Property in accordance with the terms and conditions hereof,
and the issuance of a certificate of occupancy by the City, the rescission provisions hereinabove
provided for shall become null and void and no longer be enforceable as of such date specified in
the certificate of occupancy. .
10. If Purchaser fails to enter into the Purchase Agreement within five (5) business
days from the date the building permit is issued or close on the Property within the time specified
in Paragraph 6 of this Agreement the City may, in its sole discretion, terminate this Agreement
and retain the Purchaser's Irrevocable Letter of Credit in the amount of Fifteen Thousand Dollars
($15,000.00). The Purchaser agrees that the City is entitled to retain the Irrevocable Letter of
Credit as damages owed to the City for the delay Purchaser caused in the development of the
Property consistent with the City's 2030 Vision and Strategic Plan.
11. This Agreement is not assignable by the Purchaser without the prior written
consent of the City Council, which consent may be withheld by the City for any reason
whatsoever.
I:\Agreements\Purchase Agreements\Rock Creek Option and DevelopmCZ1t Agreement (Oct 3 2005).doc
12. There shall be no amendments to this Agreement unless in writing, signed by the
parties and approved by resolution of the City Council. The City's failure to promptly take legal
action to enforce this Agreement shall not be a waiver or release. .
13. If any portion, section, subsection, sentence, clause, paragraph, or phrase of this
Agreement is for any reason held invalid by a court of competent jurisdiction, such decision shall
not affect the validity of the remaining portions of this Agreement. This Agreement shall survive
the closing on the Property.
14. This Agreement shall be governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Seller and Buyer have executed this Agreement as of
the day and year first above written.
CITY OF PRIOR LAKE
By:
Frank Boyles, City Manager
By:
Jack Haugen, Mayor
ROCK CREEK DESIGNERS AND BillLDERS,
LLC
By:
Its
STATEOFMINNESOTA )
) ss.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this _ day of
2005, by Jack G. Haugen, Mayor, and by Frank Boyles, City Manager, of the City of Prior Lake, a
Minnesota municipal corporation, on behalf of the corporation and pursuant to the authority granted
by its City Council.
Notary Public
I:\Agreements\Purchase Agreements\Rock Creek Option and Developm91t Agreement (Oct 3 2005).doc
STATE OF MINNESOTA )
) ss.
COUNTY OF )
~
The foregoing instrument was acknowledged before me this day of
, 2005, by , President of Rock Creek Designers and
Builders, LLC, a Minnesota limited liability company, on its behalf.
Notary Public
THIS INSTRUMENT WAS DRAFfED BY:
Suesan Lea Pace, Esq.
Halleland, Lewis, Nilan & Johnson
600 U.S. Bank Plaza South
220 South Sixth Street
Minneapolis, MN 55402-4501
612-338-1838
"'--"\
,---.,
I:\Agreements\Purchase Agreements\Rock Creek Option and Developm2Pt Agreement (Oct 3 2005).doc
DEVELOPMENT AGREEMENT
This Agreement is entered into this _ day of , 2005 by and between the City
of Prior Lake ("City"), a Minnesota municipal corporation and Rock Creek Designers and
Builders, LLC ("Developer"), a Minnesota Limited Liability Corporation.
RECITALS
WHEREAS, the City and Developer have executed a Purchase Agreement dated
, 2005, which Purchase Agreement is attached hereto and incorporated herein
as Exhibit 1; and
WHEREAS, the sale of the Property is subject to an AGREEMENT REGARDING THE
PURCHASE OF CITY OWNED PROPERTY dated ,2005, which Agreement
is attached hereto and incorporated herein as Exhibit 2; and
WHEREAS, the City sold Developer real property located at Main Street and Hasting
Avenue, Prior Lake, Scott County, Minnesota as legally described in the aforementioned
Agreement in the preceding recital; and
WHEREAS, the Developer submitted a written proposal to the City dated May 27,
2005, which proposal is attached hereto and incorporated herein as Exhibit 3; and
WHEREAS, the City desires to ensure that the property sold to the Developer IS
developed as set forth in Developer's proposal.
NOW THEREFORE, based on the mutual promises and covenants set forth herein, the
sufficiency of which is not disputed, the parties agree as follows:
1. The Recitals set forth above are incorporated herein as if fully set forth herein.
2. The Developer shall execute this Development Agreement on and after October 7,
2005 but before the date of Closing as provided for in the Purchase Agreement. The Irrevocable
Letter of Credit provided to the City with Developers' proposal dated May 27, 2005 shall remain
in place as security for performance pursuant to this Development Agreement.
3. Developer shall construct a three-story commercial retail and office building on
the Property in conformance with its May 27,2005 proposal. The Developer's proposal provides
for a specific Project Development Timeline set forth as follows, to wit:
a. Submit Land Development RFP:
b. Execute City Development Agreement:
c. Submit Building Plans for City Review:
d. Submit Plans for and Secure a Building Permit:
e. Provide Financing Satisfactory to City:
f. Commence Construction:
g. Complete Construction
h. Final Certificate of Occupancy
May 27,2005
October 7, 2005
August 27, 2005
October 7, 2005
August 27, 2005
November 1, 2005
June 1,2006
August I, 2006
I:\Agreements\Purchase Agreements\Rock Creek Option and DevelopmS1t Agreement (Oct 3 2005).doc
which the parties hereto reaffirm, adopt and ratify.
4. Developer shall construct the building and complete the project described in
Exhibit 3 in accordance with the Project Development Timeline formally set out in Paragraph 3
above. The failure of the Developer to meet any of the dates set forth in the Project
Development Timeline shall constitute a material breach of this Development Agreement.
,~
5. In the event Developer fails to commence construction, as described herein, on or
before November 1, 2005, or on or before the extended construction commencement date, as
provided for above, the City shall provide the Developer with (1) written Notice of the breach
describing the breach and (2) a specified amount of time within which to cure the breach or if
such cure requires more than thirty (30) days to complete, such additional time as reasonably
required provided Developer commences cure within five (f) days from receipt of notice. In the
event the Developer does not cure the breach within the time provided for in the Notice, the City
shall have the right to: (1) rescind the sale of the Property, (2) retain the Irrevocable Letter of
Credit in addition to the Purchase Price paid for the Property by the Purchaser, and (3) retain
each of the fifteen Thousand and no/lOO Dollar ($15,000.00) extension payments described
above. If the sale of the property is rescinded the City shall be entitled to retain the Purchase
Price and Developer hereby agrees to re-convey the Property to the City by appropriate
documents of conveyance approved by the City. Upon commencement of construction by
Developer, the right of rescission shall terminate and the City shall release the termination right
by execution and delivery of a quit claim deed to the Property. To commence construction,
Developer must commence construction of foundation footings and foundation, at a cost of not
less than $100,000, and must enter into a construction loan in an amount sufficient to fund,
together with Developer's equity, the completion of construction.
,~,
6. The Notice provided for in Paragraph 5 shall be sent to:
Rock Creek Designers and Builders, LLC
16817 Duluth Avenue, SE
Prior Lake, MN 55372
7. Failure of the City to declare an event of default based on any of the dates in the
Project Development Timeline shall not constitute a waiver of the default or any subsequent
defaults. The City's failure to take prompt legal action to enforce any provision in this
Development Agreement shall not be deemed a waiver or release.
8. The Developer shall indemnify, defend and hold the City, its City Council, agents,
employees, attorneys and representatives harmless against any and all claims, demands, actions,
suits, proceedings, liens, losses, costs, expenses, obligations, liabilities, damages, recoveries or
deficiencies, including interest, penalties, and attorneys' fees, that the City incurs or suffers,
which arise out of, result from or relate to this Development Agreement.
9. This Development Agreement may not be assigned by Developer without the
prior written consent of the City. The City is not obligated for any reason to consent to an
assignment. /~
I:\Agreements\Purchase Agreements\Rock Creek Option and Developm51t Agreement (Oct 3 2005).doc
10. If any portion, section, subsection, sentence, clause, paragraph, or phrase of this
Development Agreement is declared invalid by a court of competent jurisdiction, such decision
shall not affect the validity of the remaining portion ofthis Development Agreement.
11. There shall be no amendments to this Development Agreement unless in writing,
signed by the parties and approved by a resolution of the City Council.
12. This Development Agreement shall be governed by the laws of the State of
Minnesota.
CITY OF PRIOR LAKE
By:
Prank Boyles, City Manager
By:
Jack Haugen, Mayor
DEVELOPER:
ROCK CREEK DESIGNERS AND BUILDERS,
LLC
By:
Its:
STATEOFMINNESOTA )
) ss.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this _ day of ,
2005, by Jack G. Haugen, Mayor, and by Frank Boyles, City Manager, of the City of Prior Lake, a
Minnesota municipal corporation, on behalf of the corporation and pursuant to the authority granted
by its City Council.
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF )
I:\Agreements\Purchase Agreements\Rock Creek Option and Developmept Agreement (Oct 3 2005).doc
The foregoing instrument was acknowledged before me this day of
, 2005, by , President of Rock Creek Designers and
Builders, a Minnesota limited liability company, on its behalf.
~
Notary Public
DRAFTED BY:
City of Prior Lake
16200 Eagle Creek Avenue SE
Prior Lake, Minnesota 55372
~\
~~
I:\Agreements\Purchase Agreements\Rock Creek Option and DevelopmfJIt Agreement (Oct 3 2005).doc