Original Purpose of Case (EDA September 2016)
(1) should the city move forward with renewing another long-term contract with CBRE now?  If we are good with the current strategy, no further discussion may be warranted. 

(2) should the city take a step back, not renew a long term contract with CBRE now, and look at all available options for marketing city owned land, including CBRE? 

 

CBRE listed 19 different properties (about 25 parcels).  CBRE has placed signs on available properties, and completed professional listing brochures for all 19 properties.  Said listings have been placed on CoStar, MnCAR, LoopNet, CBRE's website, and on the City's website.  CBRE has shared these listings via email blasts to their contacts monthly.  CBRE has reached out to a long list of prospects individually RE their listings in Ramsey. 

Periodically, CBRE provides the EDA/ City Council with updates.  In late 2015, CBRE worked with staff to create a detailed community profile--that highlights the momentum taking place throughout the community (attached).  Additionally, CBRE and staff developed a detailed pricing strategy table for the sale of city-owned properties. 

CBRE has acted as an advisor to the City's Economic Development and Community Development staff on many occasions.  The working relationship between staff and CBRE is positive and professional.  CBRE has closed four deals, has three deals under contract (purchase agreements), and are currently working to get two more deals under contract. 

CBRE has been paid $150,938 in commissions.  If the currently executed purchase agreements close, CBRE would be paid an additional $63,750 (total of $214,688 in commissions).  This contrasts with the 3-year Landform "development manager" contract for which the City paid nearly $2M (commissions plus other professional services).  The CBRE contract includes a six-month carryover commission clause.  This contrasts with the former Landform contract that had an 18-month carryover commission clause.

(1) Closed Deals: since 2013, the City has closed on the sale of eight properties, totaling 39.82 acres, and $4.216M.  CBRE was involved with four sales.  These sites include: the former municipal center site (GS Land), Windsorwood (former park), McDonald's, Common Bond, Casey's, PSD LLC, Purmort deal #1, and Purmort deal #2.

(2) Deals Under Contract: the City (and CBRE) currently have three purchase agreements executed and in-play, totaling roughly 15.68 acres of land, and about $1.275M.  These include Aeon, Lifestyle Homes, and Platinum Properties.

(3) Potential Deals: the City (and CBRE) are currently in negotiations on two more purchase agreements, totaling roughly 2 acres of land, and about $350K.  These purchase agreements include OGA and a daycare/ children's academy.  Today, staff feels cautiously optimistic about both prospects.

(4) Past Prospects: CBRE brought two deals to the City in 2015 that were eventually turned down, totaling roughly 8 acres. These included Dominium and SCA (both senior apartment projects).

(5) Remaining Opportunity: the City has 17 land listings remaining, totaling about 90 acres of land, with a roughly $19M total asking price. 
 

 

(1) Template PA: The City has developed a template purchase agreement and policy for selling City owned land.  This has drastically increased the efficiency/ effectiveness of negotiations with prospects.

(2) Pricing Strategy: The City has developed a detailed pricing/ land sales table that clearly outlines all basic data (numbers) needed to make decisions on deals (offers) that come into the city.  This table tracks the number of listings, asking prices, deal ranges, actual sales, sales dates, brief site specific notes, etc.  This table has drastically increased the efficiency/ effectiveness of negotiations with prospects.

(3) Community Profile: The City has developed a detailed community  profile.  This profile outlines basic demographic information on Ramsey.  Additionally, as suggested by CBRE, this document was created to clearly identify the great momentum taking place in Ramsey--within the development community.  This document has helped staff convey basic information on Ramsey quickly and professionally.  Additionally, this document helps "sell" the city.

(4) Marketing Materials: The City has completed a basic refresh of all materials/ documents/ marketing materials (2015).  This basic refresh has allowed staff to update a handful of basic marketing materials, and make custom marketing materials on-the-fly and as-needed.  This has helped staff be more consistent, professional, and efficient with the materials and messages sent to potential customers.

(5) Shovel Ready: The City is in the process of completing MN DEED Shovel Ready Certifications for the majority of city-owned parcels.  This process essentially prepares all information needed by a developer to conduct a preliminary analysis of a land purchase--upfront and ahead of time.  This increases the efficiency of the city's development team, and makes city-owned land more marketable.

(6) Website Upgrade: The City Council has budgeted enough dollars in 2017 to allow for a website revamp.  Said redesign could be an opportunity to improve the functionality of the City's economic development pages--including a mobile friendly website.  This is an opportunity staff plans to explore with the EDA/ Council in 2017.  It should also be noted, in 2014, for the first time, the City began keeping an inventory of available properties within the community online--which has made communications with prospects/ developers much more effective and efficient.

(7) Infrastructure Analysis: Staff is planning to bring a work order request to the EDA/ Council specifically related to The COR.  Staff would like to complete a preliminary infrastructure analysis, sign plan, and regional strom water plan for The COR.  For a number of reasons, not having this work completed creates complexities/ ambiguities/ and delays when negotiating land transactions in The COR.  Additionally, not having this work completed now could put the city in a disadvantaged position in future (as we may not understand what obligations we are assuming, or pushing off, as master developer, when working on isolated deals today).  Attached is an overview of outstanding master developer items for The COR.

(8) 2017 Additional Resources: At this point, it appears the City Council will be approving a 2017 budget that will include a $25,000 increase in the EDA marketing budget and a 20-hour per week position to aid the economic development manager.  Although the exact scope of the work to be completed with these additional resources is not 100% finalized today--these resources will certainly put the City is a position to take a stronger, and more pro-active, approach on economic development in 2017.

GENERAL UPDATE ON ACTIVITY
Staff has experienced a significant increase in inquires, prospects, and proposed deals over the past 12 months.  Generally, it appears the market for development projects in Ramsey is improving.  The strongest markets appear to be residential, followed by industrial.  The market for office and retail (including restaurants) appears remains soft. 

(1) Traditional Broker (current method)
Broker creates professional listings, lists properties on websites, places real estates signs, sends email blasts, connects with networks/ contacts, and provide market updates to city.  A traditional real estate broker typically gets paid a commission between 5-7% on land sales.  This marketing alternative is typically the most cost-effective, and requires the least amount of exposure to the city financially, in terms of upfront expenses. 

Staff believes CBRE is a great fit for this particular strategy.  CBRE's 3-year contract is due in January of 2017.  The background section of this case provides more information on CBRE.  One option to consider is keeping CBRE, and enhancing their services by hiring a PR firm for targeted marketing campaigns (for example, to restaurants or retail), or hire a research firm to help us further refine or prospects.
 

(2) Value-Added Broker
Organizations that provide traditional brokerage services, along with additional value-added services.  For example, some firms provide professional engineering and land use services, along with broker, or broker-like, services (i.e. Landform).  Another example is a firm that provides broker services with a more robust marketing, public relations offering, and professional consulting (i.e. IAG, Jeff Lafavre).  Typically, these firms cost more than a traditional broker--and often times include a combination of both higher commission payments (6-8%) and regular monthly professional service payments ($300-$15,000). 

These firms would be a little more "hands on" with staff and our elected officials.  Staff would expect these firms to have a higher emphasis on supporting Ramsey's vision, values, and zoning.  These firms would go above and beyond listing properties and connecting with known relationships--they would be more pro-active.  They would also work closer with known developers/ investors.  These firms would act more of as an extension of staff.  Although this type of broker would have a high motivation to close deals, it would not be their exclusive mission (as is for a traditional broker).  The scope of work for a custom broker is variable, and highly customizable.

If the city were to select this alternative, staff would recommend we send a RFQ to our broker list, and within the RFQ specifically require certain services be provided (i.e. services we want above and beyond the role of a traditional broker).  For, example, we want the broker to produce (or contract out) targeted marketing materials for restaurants and retail--and we want them send to a minimum XXX entities per year, directly and personalized (not just via a mass email blast of a generic message), and they should follow up with at least one direct phone call to each.  Staff would also ask for the scope/ expectations for updates/ and progress reports to be clearly defined.
 

(3) Public Relations/ Marketing Firms
Private organizations that specialize in providing detailed/ specific marketing for real estate--including in-depth targeted marketing campaigns.  This could be useful for Ramsey in the areas of retail (restaurants and shopping), anchor users (theaters), hotels, and office users.  This could also be useful in aiding staff with keeping our content/ data fresh and out in the public eye (i.e. more press releases, facebook posts, etc.).

These firms would likely bill like any professional services firm--by project or by hourly rate.  These firms would pay a lot of attention to Ramsey's customized marketing/ PR needs.  These firms would not have a high motivation to close deals.  The City would use our EDA marketing dollars to fund this work (and potentially EDA professional services dollars).  A benefit of this alternative is no commission payments on land transactions (i.e. we could maximize land proceeds).  Also, we wouldn't be tied into a contract.

If this route was utilized, staff would suggest hiring a PR firm to complete a specialized marketing package for three campaigns (retail, restaurants, and destination users--like hotels, theaters, community centers, etc.).  Upon completion of marketing packages, the PR firm would develop a long list of prospects.  The PR firm would send information to the prospect list.  Then, either staff/ or the PR firm would follow up with the prospect list.
 

(4) Private Economic Development Services
Organizations that specialize in aiding government agencies (and large utility companies) in maximizing the effectiveness of their economic development departments.  Range of services is highly variable.  Often times, these agencies have a plug-in to a base of traditional economic development prospects/ contacts.  Additionally, these agencies typically target website improvements and advertising campaigns.

One example to consider is WEDA (World Economic Development Alliance), they are based out of Texas and work across the US.  For a fixed annual fee, they provide a pallet of economic development services.  WEDA only works with 2-3 cities from each State.  WEDA delivers 100+ leads of businesses considering relocation on an annual basis (traditional economic development, i.e. manufacturing).  WEDA attracts prospects via their magazines, ads, websites, event attendance, relationships, the WEDA partnership board, and their brokerage.  WEDA also has a network of nearly 8,000 restaurants and retailers--they would create a customized marketing campaign for our target market--and send out on our behalf.  Any prospects Ramsey has would be managed by WEDA, via their CRM system.  WEDA also offers website design and maintenance services.  Lastly, WEDA has very strong tracking and reporting capabilities--they can track if prospects are opening our emails, if they are clicking on our website, etc.
 

(5) Event Attendance & Networking
The development world is a relationship business.  The city could put more of an emphasis on staff attending various networking events, trade shows, etc.  Examples (site selectors events, commercial real estate development association, and the global retail convention). 

 

(6) Master Developer
Private sector organizations that specialize in managing large developments.  This opportunity comes in many forms.  On one end, the city could sell all city owned land in/ near The COR to a master developer.  Then, let the master developer work with the city to develop their property (much like PSD LLC).  On the other end of the spectrum, the city could simply hire a master developer for consulting/ professional services.  The city would maintain control of land.  Another option is in the middle, the city to allow a developer an option to purchase, or a commission for sale, on all city owned land.  However, the master developer would manage/ partner in all development services/ planning/ marketing.

The positives with this alternative include: an organization that has experience successfully managing and completing large developments, the ability to bring in owner equity or equity partners, the city would only be dealing with one entity rather than several, and a "partnership relationship."  The drawbacks would include: master developers often have their own opinion, vision, and priorities, master developers may only work with certain users, and may exclude other users, master developers may pressure the city to reduce development standards and development fees to get deals done, and if master developer were to pick up all city-owned land upfront, they would likely only do so for a discounted price.

Lastly, it should be noted, the city may want to consider engaging PSD LLC about strategy for marketing The COR.  They are a major land owner, and a partnership may yield certain efficiencies and synergy.  Regardless of which alternative is selected as part of this discussion, staff will recommend formally connecting with PSD LLC.
 

(7) Market Research Firms
Private organizations that specialize in providing detailed/ specific research for real estate--including in-depth marketing analysis, and demographic analysis.  This could be useful for Ramsey in the areas of retail (restaurants and shopping), anchor users (theaters), hotels, and office users.  This could also be useful in aiding staff/ brokers with better understanding what our best, and most market realistic, development opportunities in Ramsey are, and will be into the future.  This could also help us better understand the customer profiles of potential shoppers.

These firms would likely bill like any professional services firm--by project or by hourly rate.  These firms would pay a lot of attention to Ramsey's customized research needs.  These firms would not have a motivation to close deals.  The city would use our EDA marketing dollars to fund this work (and potentially EDA professional services dollars).  A benefit of this alternative is no commission payments on land transactions (i.e. we could maximize land proceeds).  Also, we wouldn't be tied into a contract. 

This city did complete two retail studies, similar to what is being proposed here, in 2008 and 2011.  The city did contact all leads identified in the study.  Unfortunately, no actual land transactions transpired as a result of this study.  With that in mind, timing was not the best (i.e. since the Great Recession retail has been a challenging market).  Attached is the 2011 study for example.
 

STAFF RECOMMENDATION
Staff is generally comfortable with the "traditional broker approach" which is currently being deployed (i.e. CBRE).  This approach is cost-effective.  CBRE charges 5% commission only on deals that close (market ranges from 5-8%).  CBRE doesn't charge any other fees (many other options do).  Utilizing CBRE puts the city in a low risk situation (if a deal closes, they get paid, if not--we don't lose anything).  CBRE has a large network of contacts, they utilize many other well-known listing networks, and they have a big reach.  CBRE is a respected and well established firm--their listing materials, website, and staff are very professional.

This case is being presented to the EDA with several alternatives because staff has received continues feedback from various elected and appointed officials, members of the public, and businesses about the city's need to attract restaurants and retail.  Which, has resulted in the direct questioning of the city's current approach (utilizing a traditional broker, currently CBRE).

EDA RECOMMENDATION
(1) The EDA was not comfortable with executing a long-term contract with CBRE at this time (i.e. 3 year contract).  The EDA was comfortable with entering into a short-term contract with CBRE (i.e. 6 month contract).

General EDA feedback on CBRE: the EDA is not opposed/ against another long-term CBRE contact, and hopes to get a proposal from CBRE as this process unfolds.  The EDA understands, respects, and appreciates the services that CBRE has/ can provide (see background section of this case for details). 

However, the EDA is not satisfied with the current scope of services being provided by CBRE (this could mean the City needs to more clearly define our scope).  The EDA does not feel that Ramsey is being represented as a truly valued individual customer by CBRE-- the EDA is concerned Ramsey is instead being treated as a commodity to the larger CBRE real estate listing portfolio across the Twin Cities.  In other words, Ramsey's unique needs, unique questions, unique properties, unique policy items are not being answered/ addressed with customer service unique to Ramsey--rather are being generically responded to/ addressed (same answer that would be provided to all clients).  Also, the EDA was generally frustrated that CBRE does not keep Ramsey updated on new listings (in other cities) that they take on, that are in direct competition to Ramsey (i.e. Anoka Station listings).  The EDA does not feel that CBRE attempts to develop new relationships/ new contacts/ new leads on Ramsey's behalf, and rather works within existing networks and relationships only.  Lastly, the EDA feels the City may need a greater level of professional consulting services than provided by CBRE (i.e. aiding staff with research, reports, presentations, negotiations, etc.).

(2) The EDA is interested in further evaluating other options for marketing/ selling city owned land.  Specifically, value-added brokers and master developers.

The EDA had a robust discussion about the many alternatives available to market/ sell City owned land (see alternatives section of this case).  The EDA was generally interested in private sector real estate firms (i.e. brokers and developers) rather than considering general professional services firms (i.e. public relations firms, marketing firms, economic development firms, more city staff, etc.). 

(3) Eventually, the EDA wants to submit a RFP to various real estate brokerages and developers.  However, the EDA first wants to determine the City's scope (what are the City's expectations).  In order to get that process kick started, the EDA wishes to complete informational interviews.

Informational interviews will allow for open dialog between the city and various brokers/ developers.  It will give an opportunity for the EDA to get a better idea of market realities/ what options exist for Ramsey.  Additionally, this will allow for Q&A for both parties.  It will allow for this conversation to happen first-hand.  These informational interviews are expected to take place at the February EDA meeting (likely 02/09).  The Council is invited to attend--staff will record these interviews.

Ultimately, the EDA will use this information to develop a scope of expected services for a future RFP process (which needs to be reviewed and approved by Council).  The EDA has indicated they may consider multiple RFP's (i.e. one RFP for brokers, one RFP for developers, and one RFP for selling the entire project to investors).

Please see EDA recommendation.  Staff would like to know if the Council is comfortable with the general direction of the EDA.  The EDA/ staff are open to suggestions/ changes.  Staff intends to bring this case back to the Council as updates are available.