On April 11, 2011, the City Council approved two property purchase agreements for land and buildings that are located on the north side of Montana Ave., between N. 27th and N. 28th. These properties will be used for the proposed Empire Parking Garage. The property sellers are Bill Honaker (Alley Cat) and Chris and Mike Nelson (Northern Hotel or Zootist). The staff reports for those items and the presentation at the Council meeting noted that there are several conditions in each purchase agreement that must be satisfied before the properties transfer to the City. Those conditions include that the present owners:

1.may buy or lease parking spaces and retail space in the new parking garage
2.may lease the parking lot and parking garage free until site preparation begins
3.may be co-owners in a condominium or unit ownership if they choose to purchase parking spaces or retail space
4.have a first right of refusal to repurchase the property if the City tries to sell it
5.may repurchase the properties if the City fails to build a parking garage within 2 years
6.may participate in the parking garage design

At its April 25 meeting, City Council approved lease and option agreements with Alley Cat and the City purchased the property on May 4th.  Closing with Zootist was delayed because these agreements weren't  finalized until after April 25th.  In addition to the elements contained in the Alley Cat agreements, the City must provide replacement parking for the Northern Hotel contractors and guests if the present garage has been demolished and the new garage is not completed.  The City would also be required to replace the parking spaces for the hotel if it demolishes the structure and then does not build the planned garage.  Lease and Option-Repurchase Agreements that will satisfy the conditions described above have been prepared for Zootist and these agreements are submitted to the City Council for approval. 

The City Council may approve or disapprove the agreements.  If the Council does not approve the agreements, Zootist will not close on the property purchase and the City will own only a portion of the land needed for the proposed Empire Parking Garage.

The property purchase totals $810,000. The estimated cost or lost revenue of each item that corresponds with the numbered items above are as follows:
1.Parking spaces will be purchased for approximately $4,300/space while the cost is approximately $20,000/space to build. The retail space will be purchased at a market rate that will be determined after the design is completed and the garage is ready for construction. The parking space subsidy is worth about $2,936,000 and there should not be a retail space subsidy. The owner may also choose to lease parking or retail space and those market rates will be determined after design and before completing the structure.
2.The potential revenue loss at $50/space is approximately $3,500 per month.
3.There is no direct cost for participation in a unit ownership but there will be costs for creating the condominium documents. The document preparation cost is unknown at this time.
4.The first right of refusal has no out-of-pocket costs but staff time will be expended to execute the necessary agreements and transfers.
5.The previous item conditions apply to this repurchase.
6.Owner participation in the design process should not have a cost. However, if there is a dispute over the design, both parties will incur staff and legal costs to resolve the dispute.

The other elements in the agreement cannot be priced at this time, but the customer valet parking operation could cost several thousands of dollars each month that the hotel is open and the City has not completed its garage construction.

Staff recommends that the City Council approve the lease and option agreements with Zootist Hospitality that meet the requirements of the previously-approved purchase agreement.