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

In addition, 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.  Lease and Option-Repurchase Agreements that will satisfy the conditions described above have been prepared for the Alley Cat transaction (Windsor Court building and adjacent parking lot).   These agreements are submitted to the City Council for approval.  Approval at this meeting is necessary so that the property purchase closing can occur on April 29th.  The Northern Hotel/Zootist Garage is a more complex transaction and the agreements that are needed for the closing are not completed.  The agreement will be submitted for the Council's May 9 meeting and the property closing will be delayed accordingly.

The City Council may

• approve the agreements, or
• disapprove the agreements

Approving the agreements will allow the property purchase to close on April 29th and conform to the purchase agreements.  Disapproving the agreements will delay or cancel the property purchase closing.  Either delay or cancellation will make it more expensive for the City to acquire the property or the present owners may not be willing to sell the property to the City in the future.

The property purchase totals $1,625,000.  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 $393,000 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 $2500. 
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.

Staff recommends that the City Council approve execution of the agreements that satisfy conditions of the property purchase agreements with Alley Cat Investments LLC.