REVISED: Consider Resolution #19-188 Approving Right of Re-Entry Agreement for Lot 1, Block 1, Anderson Dahlen South Addition; Case of Knoll Properties LLC.

PURPOSE
Consider Recommendation of Approval of Right of Re-Entry Agreement between the City of Ramsey and Knoll Properties, LLC.

BACKGROUND (Subject Property)
This 9.3 acre site is located at the SE corner of 143rd Avenue NW and Jaspar St NW, just west of Molin Concrete and is currently zoned E-2 Employment District.  The entire 19.88 acre property was purchased by the City in 2008 for redevelopment / Public Works purposes for a price of $1,593,500.  The site is vacant, tax exempt, and is available.  The City had the north 9.3 acres property listed on MNCAR through Anoka County for $1,000,000. This is not a CBRE listing.  Proceeds from the sale of this property would go to Public Works. The City entered into a Purchase Agreement with Knoll Properties dated April 23, 2019. The PA references the execution of a Right of Re-Entry Agreement with a Certificate of Occupancy date of July 31, 2020.  Knoll Properties, LLC has requested that the Certificate of Occupancy date be moved to December 31, 2020.

BACKGROUND (Andersen Dahlen & Knoll Properties, LLC)
Knoll Properties LLC is a holding company based out of Ramsey and managed by Tom and Dave Knoll.   Both entities are in good standing with State of Minnesota (business and lien system).

Anderson Dahlen was founded in the 1940s and was purchased by Richard Knoll in 1978.  In 1984, Tom and Dave Knoll purchased 20% of the company. Tom and Dave Knoll purchased the remaining 80% of the company and consolidated into a 48,000 facility in Coon Rapids. In 2000, Anderson Dahlen built a 84,000 SF facility and moved its operations to Ramsey. In 2018, a 101,000 expansion opened at their Ramsey location. Currently, Anderson Dahlen employs over 300 employees.  

Anderson Dahlen is now out of space at their current location and needs to secure additional space for the growth of its business.  The development proposal includes commencing construction of 60,000-75,000 square feet of manufacturing space (with the ability to add 40-60,000 square feet at a later date) on the Subject Property (City owned property).  The project would be completed no later than July 31, 2020.  The total investment in Phase one of this project is anticipated to be near $6 Million Dollars.  Anderson Dahlen plans to (a) keep their existing facility and (b) construct/operate from the new facility in Ramsey on the Subject Property.  Anderson-Dahlen currently has over 300 full time employees and plans to add 60 over the next 3 years as a result of this proposed business expansion. 

BACKGROUND (Right of Re-Entry Agreement)
Attached to this case is the proposed Right of Re-Entry Agreement with language pertaining to the extension of the Certificate of Occupancy date from July 31, 2020  to December 31, 2020 and the reimbursement of the $675,000 purchase price if construction does not commence, less City costs incurred related to the Purchase Agreement. 

Notification is not required.

OBSERVATIONS

• Zoning/Use: The proposed development concept fits within the City's existing zoning regulations and the Site plan was approved on June 25, 2019 
• Sale Price: The asking price for the subject property is $2.47 per square foot ($1,000,000). The offer price is $1.66 per square foot ($675,000).  The offer price is  "below the mid-range" (but within the total deal range) of the City's adopted "deal-range" for the subject property. 
• Property Taxes: The proposed development is based on a 75,000 square foot building with the possibility for an additional 40,000 square foot expansion.  Based on an estimated taxable market value of $4,000,000 for Phase 1, this project will generate about $133,000 in total annual property taxes, with the City receiving approximately 25% ($33,250) annually when it hits the tax rolls.
• Earnest Money: This PA does include earnest money ($67,500.00, 10%).  Earnest money will become hard if the initial closing date is extended by the buyer.  The Developer has provided a down payment of $67,500 to the title escrow company according to the terms of the purchase agreement.
• Broker Commission: There is no broker commission for this transaction
• Net Proceeds: $675,000.
• Closing Date: To be determined.  Developer has expressed interest to close in August 2019.
• Land Sale Policy: The  PA  meets the intent of the City's draft "Land Sale Policy" and has been reviewed by the City Attorney, and staff.  Several changes (and negotiations) have taken place between staff and the buyer. 
• Buyer: The buyer (Knoll Properties / Anderson Dahlen) has a history of success and delivering on projects in Ramsey as shown by its expansion to its original building onsite and its commitment to creating "living wage" jobs in the community.
• Right of Re-Entry Agreement:  A draft Right of Re-Entry Agreement is attached.  Certificate of Occupancy date has been moved from July 31, 2020 to December 31, 2020.  A clause was added to allow for partial reimbursement of the $675,000 purchase price if the project does not move forward.

ALTERNATIVES
 

This case is being handled as part of normal Staff duties.

Staff recommends that the EDA recommend to the City Council adoption of Resolution #19-188 Approving Right of Re-Entry Agreement for Lot 1, Block 1, Anderson Dahlen South Addition; subject to City Attorney review and approval.

Motion to recommend to the City Council adoption of  Resolution #19-188 Approving Right of Re-Entry Agreement for Lot 1, Block 1, Anderson Dahlen South Addition; subject to City Attorney review and approval.