The City of Billings is constructing the Empire Parking Garage on Montana Avenue between N. 27th and N. 28th Street (Broadway).  The structure's ground floor that faces Montana Avenue is designed to accommodate 16,500 sq. ft. of retail/office space.  The City intends to sell all of the spaces to a single or to multiple owners/operators.    The owner of the Asian Sea Grill submitted an unsolicited offer of $251,000 for the approximate 5,000 sq. ft. restaurant space.  In accordance with BMCC 22-902, staff advertised all of the property for sale, scheduled a public hearing and notified surrounding property owners.  Staff requests that the City Council conduct a public hearing and consider approving the unsolicited offer plus any others that are submitted prior to the deadline of July 16.

The City Council may:

• Approve the unsolicited offer from the Asian Sea Grill and/or any others received by the deadline date
• Disapprove the offer but accept some or all competing offers
• Decline to approve any offers at this time and provide guidance to staff on selling the property

The Empire Parking Garage budget anticipates receiving at least $500,000 for the retail spaces.  Anything above that amount will lessen reliance on the Tax Increment District Fund in FY 2014 and 2015. 

The City of Billings is constructing the Empire Parking Garage on Montana Avenue between N. 27th and N. 28th Street (Broadway). The structure's ground floor that faces Montana Avenue is designed for eight (8) retail/office spaces in approximately 16,500 sq. ft. The structure should be ready for occupancy in April or May, 2014. The City intends to sell all of the spaces to a single or to multiple owners/operators.  Council approved the unit ownership (condo) agreement in January, 2013. The space on the corner of N. 27th and Montana will accommodate a restaurant and it is the largest of the planned units at about 5,000 sq. ft. The City's construction cost is about $50/sq. ft. and a market analysis valued the space at about $45/sq. ft.

Mr. Bill Honaker (Alley Cat/Securities Bldg.) had an option to purchase the corner property but he declined to purchase it at the stated price.  City staff and Mr. Honaker worked for several months to develop an alternative valuation but were unsuccessful and he abandoned his purchase option. He has the first right of refusal to purchase the property until it is completed and ready for occupancy.   

The owner of the Asian Sea Grill submitted an unsolicited offer of $251,000 for the approximately 5,000 sq. ft. restaurant space.  The major advantage of accepting the offer is that it represents about 1/2 of the needed income from selling all of the retail/office units, but represents only about 1/3 of the available square footage.  The offer covers most of the City's building construction costs for that space.  It does not cover all costs and when land and site development costs are added, the total is over $70/sq. ft.  This corner space is unquestionably the most desirable and valuable space among the retail units.  Selling it without simultaneously selling the interior units will make marketing the interior spaces harder.  The City may be unable to sell the remaining units before the garage opens and potential buyers can see who and what uses will occupy the other units.  The interior units are less likely to sell for prices that cover construction costs because the most desirable space has already been sold.

In accordance with BMCC 22-902, staff advertised all of the property for sale, scheduled a public hearing and notified surrounding property owners.  Other than an early effort by the DBP, this is the first time the property has been advertised for sale because staff and Mr. Honaker were engaged in negotiations that included attempting to establish price through an appraisal.  Given that situation, the property has not been adequately marketed and selling the most desirable unit may be premature.  If Council accepts or rejects the offer, the staff will work with downtown stakeholders to develop a comprehensive marketing package and will more aggressively market the property.  The City could also consider engaging a real estate professional to market the retail/office units.