Adopt Resolution #23-044 Approving Purchase Agreement for a Portion of Lot 1, Lot 2 and Lot 3, Block 1, COR TWO; Case of ALDI
(Portions may be closed to the public)

The City Council may choose to go into closed session pursuant to Minnesota Statutes section 13D.05, subdivision 3(c)(3) to consider offers or counteroffers for the purchase or sale of real or personal property.  If the City Council chooses to enter into to closed session the statute and reason above needs to be referenced along with legal description of Lots 1, 2 and 3, Block 1, COR TWO, Anoka County Minnesota Property Tax ID Numbers 28-32-25-23-0011, 28-32-25-23-0012 and 28-32-25-23-0013

The City of Ramsey and ALDI have been in negotiations for over a year to bring a 20,664 square foot grocery store to the COR. The City executed a LOI outlining general terms to begin negotiations for a formal Purchase Agreement n September 9, 2022.  The LOI included provision that required the use of an Aldi corporate purchase agreement rather than the typical purchase agreement the city uses.  City Staff, the City Attorney and representatives form Aldi have negotiated to modify the purchase agreement to include concessions from typical deals from both Aldi and the City.  The asking price for the land is $8.00 / SF ($986,200) and a purchase price has been negotiated for $5.88 / SF ($725,000). Staff believes that the addition of Aldi to the COR will bring another option for Ramsey residents that will compliment the existing Coborn's in North Star Marketplace.  In addition, it will bring a tax-exempt parcel onto the tax rolls and allow the city to continue to recoup costs associated with land acquired in the COR in 2009. The time periods, and extensions outlined in the term sheet and PA are generally consistent with recent PA templates aside from the requirement for a Certificate of Occupancy being 24 months rather than the usual 12. The Right of Re-Entry Agreement has significant deviation from the typical agreement which calls for the purchase price to be refunded to the developer if the City chooses to exercise the right of re-entry.  The change of the C/O date is due to the longer timeframes the construction industry is seeing for obtaining building materials. Staff is asking the City Council to consider approving the Purchase Agreement, which includes Use Restrictions and form of Right of Re-Entry Agreement.   

The Planning Commission and City Council will still need to review the formal site plan and plat submittal to ensure the layout, building facade and building materials are consistent with COR zoning and city code.  Aldi has provided some preliminary Building elevations.(Attached) Staff has communicated that the back of the building facing Sunwood Drive NW will need to have some additional articulation and potentially some windows added or enlarged to enhance street presence based on the COR framework.

Notification is not required.

Observations: 

The Ramsey EDA met on February 9, 2023 to review the Purchase Agreement, Use Agreement and Right of Re-entry Agreement.  The proposed site will be +/- 2.83 acres upon completion of the Final Plat.  The proposed 20,664 SF building is depicted on the attached concept plan and in the Purchase Agreement.  The purchase price of $725,000 ($5.88 / SF). This price per/SF is within the approved "deal range".    The City has worked with brokers to help bring this deal forward and broker commission compensation is highlighted below.  The developer has communicated a desire to obtain site plan approval in April / May 2023 and to construct the project in 2023. As previously mentioned in this case above, there are a number of new items, that are different to our standard purchase agreement which are underlined below.

Key Items from the Purchase Agreement include:

Real Estate                         Tax ID Numbers: 28-32-25-23-0012, 28-32-25-23-0013 and a Portion of 28-32-25-23-0011. Lots 2, 3 and Part of Lot 1, COR TWO (Parcel 42a, 42b, 42c)

Acreage                               Approximately 2.83 acres or 123,275 SF

Asking Price                       $986,200 ($8.00 / SF)

Offer Price                          $725,000 ($5.88 / SF) (SF Subject to change based on approved Plat)

Earnest Money                 $10,000 Non-refundable upon Closing of the property unless RORE exercised.

Contingency Period        180 days from Effective Date (Date City Council approves) (city requires plat/ site plan approval before sale). Note: there is not a Notice to Proceed clause that renders the Earnest Money to be non-refundable.

Closing                                 Within 30 days of after Contingency Date.

Commission                       Staff has worked with the Broker for ALDI (David Daly from CBRE) and Brian Pankratz from CBRE to put this project together. David Daly will receive 4% ($29,000) Commission and Brian Pankratz will receive 3% ($21,750) Commission Per the terms of the listing/broker agreements.

Extensions                          Developer will deposit $10,000 in escrow for each 30 day extension (2 extensions allowed) of the Contingency Period. The $10,000 extensions are applied to the purchase price. 

City take care of               Provide existing ALTA Survey and updated Title Work. The Developer will contract to plat the property as part of the site plan process and work with City to complete.

Performance                     City to require construction of a minimum 20,664 SF commercial/retail building (Aldi Grocery Store) compliant with COR Zoning requirements and obtain a Certificate of Occupancy 24 months after Closing.  If this is not done, the City may exercise the Right of Re-Entry. If the project does not move forward the Purchase price will be refunded to Aldi.

Assignment                        Requires city approval if not same owners / company.

Contingencies                   Section 3.02 of the Purchase Agreement defines the contingencies.
 
Use Restrictions               Exhibit C of PA lists the restricted uses on the lots Aldi is purchasing and the lot retained by the City of Ramsey. An ECR Agreement will be drafted as part of the platting process defining required easements, use restrictions.

Property Tax and Job Creation
The City is not providing a business subsidy, so there will not be a minimum assessment agreement or a requirement for job creation on the site.  Staff does estimate that the project will be valued over 2 Million dollars which would generate over $60,000 on property taxes annually. Currently, due to the tax-exempt status, the property currently does not generate any property taxes.  A representative form Aldi shared that the store will likely employ 10-20 people which would provide job opportunities for Ramsey residents.     Facilitating new tax base and job creation are key elements to the function of the EDA and are consistent with the Strategic Plan adopted by the City Council.

Alternatives:

1. Adopt Resolution #23-044 Approving Purchase Agreement for a Portion of Lot 1, Lot 2 and Lot 3, Block 1, COR TWO; Case of ALDI (as presented) Subject to City Attorney Review (Staff/EDA recommendation)
2. Adopt Resolution #23-044 Approving Purchase Agreement for a Portion of Lot 1, Lot 2 and Lot 3, Block 1, COR TWO; Case of ALDI (with changes) Subject to City Attorney Review.
3. Something else.

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

The EDA met on February 9, 2023 and unanimously passed a motion approving a recommendation to the City Council to approve the attached Purchase Agreement, Use Restriction and Right of Re-Entry Agreement as presented, subject to City Attorney review.

As noted above. Planning Commission has yet to review this site concept, so this will be handled during the site plan application process and is subject to change.  

Motion to Adopt Resolution #23-044 Approving Purchase Agreement for a Portion of Lot 1, Lot 2 and Lot 3, Block 1, COR TWO; Case of ALDI (as presented) Subject to City Attorney Review