Consider Alternative Development Scenario - Sunwood Retail

On a number of occasions over the last 18 months, the HRA has considered a number of items related to the development of the area known as the Sunwood Retail area.  This approximate five-acre parcel is located within the Sunwood Drive re-alignment area, bound on the north and east by the new Sunwood Drive, on the west by Armstrong Boulevard, and on the south by property owned by Sophia Ramsey, LLC.

For reasons unknown, the previous construction of Sunwood Drive was incorrect, and the current location is unsustainable, as the executed joint powers agreement with Anoka County, and the physical constraints of the current location relative to the intersection of Armstrong Boulevard and US Highway 10, preclude the current roadway alignment from remaining.


It has been contemplated that this area, currently owned by the HRA, would be re-platted, developed by the HRA and sold to three end-users.  Agreements with these users are currently at different stages of completion.

Also contemplated in this project, is a resolution to significant concerns and damages expressed by Sophia Ramsey, LLC related to the loss of access they have realized through the roadway project.  Understanding the significant value of this user to the overall project, the development team has worked with Sophia Ramsey for the last 12 months to arrive at a mutually acceptable solution to the issues at hand.  This resolution includes:

• The contribution of a small parcel of land adjacent to their parcel
• The contribution of a larger share of the vacated Sunwood Drive
• The reconstruction of a shared access drive serving their lost connection to Sunwood.
• Construction of additional parking to serve their two parcels and relative current parking constraints
• Various construction coordination items related to lighting, irrigation, seed/sodding, stormwater treatment, etc.

After considerable discussion and a number of meetings to consider the matter, the HRA approved the purchase agreement and sale of Lot 3, Block 1, COR TWO to M&W Holdings, an entity owned by Jeff Wise, a sitting HRA Member. The issue of any potential conflict of interest related to this sale was addressed on a number of occasions, and the process outlined by the city attorney was followed and documented in a resolution passed on February 14th, 2012.

On October 9th, 2012, the HRA, in a regular meeting, voted 3-2 against entering into an agreement to purchase M&W's existing property, and tabled the agenda item related to the sale of Lot 3 to M&W indefinitely.

Acting on the direction form City Council and the HRA who previously approved both the acquisition and sale of these properties, the development team has spent considerable time and expenses on outlining, negotiating, and documenting the development of the project.  Subsequent purchase agreements, term sheets, and negotiations with buyers of lots 4 and 5 have contemplated the sale of Lot 3 initiating the development, and performing certain improvements necessary for all 5 parties in the development.

 

The HRA's decision not to complete the transaction with M&W Holdings does not relieve it's obligation to perform under agreements with the other three parties in the development, and accordingly must consider an alternative approach to that which was outlined previously where M & W Holdings was completing those obligations under the agreement approved at that time.

Essentially, the HRA must now step in to the role outlined in the agreement and perform the initial improvements as outlined. This not only involves the construction of the improvements, but also the preparation of plans and specifications, construction administration and surveying, and the revisions to all the existing real estate documents, easements, covenants, restrictions, and ongoing maintenance obligations of the development.  Once an eventual buyer for Lot 3 takes possession, the proceeds realized from that sale will recover some of these costs, and the buyer will assume all ongoing maintenance obligations.

The costs associated with this effort is outlined in the attached exhibit.

Failure to perform on the obligations outlined would result in a default on existing agreements on Lot 5, a potential loss of the sale on Lot 4, and significant degradation of the relationship with Sophia Ramsey, LLC.  The likely outcome of these defaults would be considerable additional costs to the HRA.

The development team recommends the HRA perform on the obligation outlined in the agreements associated with the development of the Sunwood Retail area, and ask the HRA to direct the development team modify all necessary plans, specifications, and legal documents as necessary, and perform on the obligations outlined in those agreements.

The development team recommends the HRA proceed with the approval and execution of the Development Agreement with the City and perform on the obligations therein as outlined in the case to follow.

The development team recommends the HRA proceed with the recordation of the final plat and all related documents as outlined in the case to follow.

Future Land Sales

Approve the alternative development scenario outlined in the case and based on discussion, and direct the development team to proceed with the effort to assume the responsibilities related to the development and construction of the initial improvements.

Approve the revised budget for expenses related to the revision of documents necessary to perform on contracted obligations.

Approve the work order from Landform in the amount of $58,100 to provide all necessary plans, specifications, construction administration, and construction staking necessary to complete the project.