7.12.
CC Regular Session
- Meeting Date:
- 01/24/2017
- Submitted For:
- Patrick Brama
- By:
- Patrick Brama, Administrative Services
Information
Title:
Stone Brook Academy Purchase Agreement for 1-acre of City-Owned Land located within The COR [PORTIONS MAY BE CLOSED TO THE PUBLIC]
Purpose/Background:
PURPOSE
The desired outcome of this case, for Stone Brook, is direction on what site location they can move forward with. Stone Brook strongly desires Site #1--just west of the existing Yolite intersection. Stone Brook is hoping to get clear direction from the City--as they want to enter into a formal purchase agreement and begin the entitlement process as soon as practicable (i.e. plat and site plan). They are hoping to have a project completed in 2017.
REVIEW
This case was reviewed by the EDA on 12/08/16 and 01/12/2017. This case was reviewed by the Planning Commission on 01/05/2017.
CASE PROCESS
This case is being addressed in several separate steps:
BACKGROUND
Site Locations/Site Logs-
Attached to this case are logs for eight potential site locations. The first site (Site #1) contains the most information, as it has drawn the most discussion and continues to be Stone Brook's desired location. Sites #2 and #4 are potential alternative options--Stone Brook would accept these sites if the City opposed Site #1, and was able to obtain those sites at like costs. Sites #3, #5, #6, #7, and #8 are not options for Stone Brook (regardless of price). Included in these site logs are background information on each site, staff review comments, EDA review comments, and Planning Commission review comments.
Stone Brook/ Prestmore Academy-
Mr. Michael and Mrs. Kristen Johnson are former Ramsey residents (now Andover residents) and are both practicing professionals. They would like to establish a new children's academy in The COR.
This is a project they've been researching and planning for over two years. They have reviewed the project with two developers, an architect, and with two banks. At this point, they are ready to make their dream a reality--they have their equity lined up--financing arranged--they are ready to apply for State Licensing--they are ready to go through the real estate entitlement process--they are ready to begin hiring/ training employees--and they are ready to enter into a purchase agreement with the City. Their goal is to begin construction in early summer 2017.
The new children's academy will be called Stone Brook. This startup company has an advantage in that Mrs. Johnson's father started a children's academy franchise in Florida called Prestmore Academy, therefore, Mr. and Mrs. Johnson will have the support of an experienced operator to assist with planning, preparation, and operation of the project. Here is a link to the Prestmore Academy website http://www.prestmoreacademy.com/. Please see "about" page for details. To begin, Mrs. Johnson will quit her current practice to operate Stone Brook. Mr. Johnson will continue his practice, until the businesses is self sustaining.
Mr. and Mrs. Johnson, Stone Brook Academy have described this venture as much more than a business idea. They believe this project is the accumulation of several personal and professional goals, that fulfills a deep-rooted passion to give back to the world--through the education and development of children. To them, this is their dream.
Mr. and Mrs. Johnson have also said it is very important for them to make strong connections to other users in The COR (and the community), to have a high-quality/ high-tech/ high-security facility, and to provide high-quality service offerings (academy). They have indicated they hope to be more than a childcare center, they are also an educational institution and asset to the community, and should not be compared to a purely traditional daycare center Horizon.
Both Mr. and Mrs. Johnson strongly believe in the vision of The COR-- especially the center of The COR. They believe in the principles of a walkable development, with close proximity to residential, close proximity to rail, high-quality architecture, and density. They believe their project is best located in (or near) the center of The COR, as a destination (140 kids, 20 employees). This is the main reason they want to be on Site #1.
Proposed Project-
The proposed 10,000 sf, 1-story, Stone Brook Academy & Daycare facility will include seven class rooms, a gym, kitchen, offices, reception area, and a playground. The academy will be staffed by 15-20 employees (including State certified instructors), and will serve 140 children. Mr. and Ms. Johnson have indicated they intend to construct a very nice looking building (including brick/ glass) and they generally understand design standards for The COR. Also, they want to create a facility that becomes an asset for the community, interacts with residents, and draws people to The COR.
Mr. and Ms. Johnson reviewed sites in Ramsey and neighboring cities (Coon Rapids, Andover, Elk River, Otsego, Rogers, etc.). The central part of The COR is their ideal location, and where they are proposing their new facility. They looked at multiple site locations within The COR. Site #1 is their most desired location. At this point, they estimate a need for 0.9-1-acres of land.
Stone Brook Academy has proposed to purchase roughly 1-acre portion of land located within The COR to establish a childcare and children's academy in Ramsey. The majority of sites they are considering, along with their #1 desired site, are city-owned properties.
The desired outcome of this case, for Stone Brook, is direction on what site location they can move forward with. Stone Brook strongly desires Site #1--just west of the existing Yolite intersection. Stone Brook is hoping to get clear direction from the City--as they want to enter into a formal purchase agreement and begin the entitlement process as soon as practicable (i.e. plat and site plan). They are hoping to have a project completed in 2017.
REVIEW
This case was reviewed by the EDA on 12/08/16 and 01/12/2017. This case was reviewed by the Planning Commission on 01/05/2017.
CASE PROCESS
This case is being addressed in several separate steps:
Step 1: Concept. The purpose of this case is to provide feedback to Stone Brook from a master developer perspective (site location feedback, review initial deal terms).
Step 2: Real Estate transaction. The purpose of this case will be to consider the formal purchase agreement and final details of a development agreement. This will be a future case.
Step 3: Land Use, zoning, and site approvals from City (also known as Entitlements).
Step 2: Real Estate transaction. The purpose of this case will be to consider the formal purchase agreement and final details of a development agreement. This will be a future case.
Step 3: Land Use, zoning, and site approvals from City (also known as Entitlements).
Site Locations/Site Logs-
Attached to this case are logs for eight potential site locations. The first site (Site #1) contains the most information, as it has drawn the most discussion and continues to be Stone Brook's desired location. Sites #2 and #4 are potential alternative options--Stone Brook would accept these sites if the City opposed Site #1, and was able to obtain those sites at like costs. Sites #3, #5, #6, #7, and #8 are not options for Stone Brook (regardless of price). Included in these site logs are background information on each site, staff review comments, EDA review comments, and Planning Commission review comments.
Stone Brook/ Prestmore Academy-
Mr. Michael and Mrs. Kristen Johnson are former Ramsey residents (now Andover residents) and are both practicing professionals. They would like to establish a new children's academy in The COR.
This is a project they've been researching and planning for over two years. They have reviewed the project with two developers, an architect, and with two banks. At this point, they are ready to make their dream a reality--they have their equity lined up--financing arranged--they are ready to apply for State Licensing--they are ready to go through the real estate entitlement process--they are ready to begin hiring/ training employees--and they are ready to enter into a purchase agreement with the City. Their goal is to begin construction in early summer 2017.
The new children's academy will be called Stone Brook. This startup company has an advantage in that Mrs. Johnson's father started a children's academy franchise in Florida called Prestmore Academy, therefore, Mr. and Mrs. Johnson will have the support of an experienced operator to assist with planning, preparation, and operation of the project. Here is a link to the Prestmore Academy website http://www.prestmoreacademy.com/. Please see "about" page for details. To begin, Mrs. Johnson will quit her current practice to operate Stone Brook. Mr. Johnson will continue his practice, until the businesses is self sustaining.
Mr. and Mrs. Johnson, Stone Brook Academy have described this venture as much more than a business idea. They believe this project is the accumulation of several personal and professional goals, that fulfills a deep-rooted passion to give back to the world--through the education and development of children. To them, this is their dream.
Mr. and Mrs. Johnson have also said it is very important for them to make strong connections to other users in The COR (and the community), to have a high-quality/ high-tech/ high-security facility, and to provide high-quality service offerings (academy). They have indicated they hope to be more than a childcare center, they are also an educational institution and asset to the community, and should not be compared to a purely traditional daycare center Horizon.
Both Mr. and Mrs. Johnson strongly believe in the vision of The COR-- especially the center of The COR. They believe in the principles of a walkable development, with close proximity to residential, close proximity to rail, high-quality architecture, and density. They believe their project is best located in (or near) the center of The COR, as a destination (140 kids, 20 employees). This is the main reason they want to be on Site #1.
Proposed Project-
The proposed 10,000 sf, 1-story, Stone Brook Academy & Daycare facility will include seven class rooms, a gym, kitchen, offices, reception area, and a playground. The academy will be staffed by 15-20 employees (including State certified instructors), and will serve 140 children. Mr. and Ms. Johnson have indicated they intend to construct a very nice looking building (including brick/ glass) and they generally understand design standards for The COR. Also, they want to create a facility that becomes an asset for the community, interacts with residents, and draws people to The COR.
Mr. and Ms. Johnson reviewed sites in Ramsey and neighboring cities (Coon Rapids, Andover, Elk River, Otsego, Rogers, etc.). The central part of The COR is their ideal location, and where they are proposing their new facility. They looked at multiple site locations within The COR. Site #1 is their most desired location. At this point, they estimate a need for 0.9-1-acres of land.
Notification:
NA
Observations/Alternatives:
↵OBSERVATIONS
Listed below are terms/ conditions/ observations related to the a future proposed purchase agreement that staff considers important to highlight for potential discussion. At this point, due to the unresolved site location discussion, staff did not attached a detailed/ actual purchase agreement.
(2) Earnest Money
$10,000 or 5% (whichever is more).
(3) Contingency Period
07/01/2017. Closing takes place 10 days after.
(4) Extension Option
If the buyer decides to extend the PA, they will be required to place $2,500 of additional non-refundable dollars in earnest for each 30 day extension, maximum two extensions.
(5) Construction Deadline
This agreement does include a construction deadline. 9,900 sf commercial building must be constructed by 08/01/2018. If the buyer defaults, City can either collect a $25,000 payment or reclaim property.
(6) Assignment
The buyer intends to establish a new entity to own/ manage this project. The principals of that new entity will be Mr. and Ms. Johnson. Therefore, staff expects this agreement to be reassigned at some point. We intend to include language in this agreement that allows.
(7) Development Agreement
This agreement requires the buyer to complete the entitlement process before closing. This ensures the City knows what will be constructed, and that it will comply with zoning code.
CONSIDERATIONS
Listed below are terms/ conditions/ observations related to the a future proposed purchase agreement that staff considers important to highlight for potential discussion. At this point, due to the unresolved site location discussion, staff did not attached a detailed/ actual purchase agreement.
(1) Offer Price
$3.00 per square foot is currently being offered by Stone Brook. Asking price is $5.00 per square foot. They expect to purchase about 1-acre ($130,680). Please reference Site #1 log for details on the land price negotiation process.
$3.00 per square foot is currently being offered by Stone Brook. Asking price is $5.00 per square foot. They expect to purchase about 1-acre ($130,680). Please reference Site #1 log for details on the land price negotiation process.
(2) Earnest Money
$10,000 or 5% (whichever is more).
(3) Contingency Period
07/01/2017. Closing takes place 10 days after.
(4) Extension Option
If the buyer decides to extend the PA, they will be required to place $2,500 of additional non-refundable dollars in earnest for each 30 day extension, maximum two extensions.
(5) Construction Deadline
This agreement does include a construction deadline. 9,900 sf commercial building must be constructed by 08/01/2018. If the buyer defaults, City can either collect a $25,000 payment or reclaim property.
(6) Assignment
The buyer intends to establish a new entity to own/ manage this project. The principals of that new entity will be Mr. and Ms. Johnson. Therefore, staff expects this agreement to be reassigned at some point. We intend to include language in this agreement that allows.
(7) Development Agreement
This agreement requires the buyer to complete the entitlement process before closing. This ensures the City knows what will be constructed, and that it will comply with zoning code.
(A) An acre of development fees is estimated at about $60,000 (2016): $3,966 park, $1,090 trail, $6,131 water, $3,391 sewer, $4,577 storm water management, $40,000 COR storm water.
(B) Tax base is estimated at about $45,000 per year gross. Typically, the city receives about 1/4 of property taxes. However, in this particular scenario, the project is located in an existing TIF District (#14). Therefore, the City would collect roughly just over 50% of the tax base via TIF. This tax base is helpful for the city--as their is need to develop funding sources for other improvements in The COR.
(C) Stone Brook believes this project will drive 100+ families, and 15-20 employees, to The COR on a daily basis (2x). Increased traffic counts help drive retail and restaurants.
(D) Stone Brook has indicated they intend to construct an impressive looking building that will fit in well with The COR, and they intend to become engaged in the community and The COR--and would like to develop relationships with organizations such as PACT Charter School.
(B) Tax base is estimated at about $45,000 per year gross. Typically, the city receives about 1/4 of property taxes. However, in this particular scenario, the project is located in an existing TIF District (#14). Therefore, the City would collect roughly just over 50% of the tax base via TIF. This tax base is helpful for the city--as their is need to develop funding sources for other improvements in The COR.
(C) Stone Brook believes this project will drive 100+ families, and 15-20 employees, to The COR on a daily basis (2x). Increased traffic counts help drive retail and restaurants.
(D) Stone Brook has indicated they intend to construct an impressive looking building that will fit in well with The COR, and they intend to become engaged in the community and The COR--and would like to develop relationships with organizations such as PACT Charter School.
Funding Source:
NA
Recommendation:
ALTERNATIVE A
The City supports Stone Brook's originally proposed location (Outlot B, Site #1),
The City supports Stone Brook's originally proposed location (Outlot B, Site #1),
Stone Brook needs direction on whether or not Yolite Street is a required public road connection, or if a private stub road is sufficient. Also, an agreed upon land price per square foot is desired.
The EDA was generally in support of this alternative. The Planning Commission was generally opposed to this alternative. Please see attached Site #1 log for details.
The EDA was generally in support of this alternative. The Planning Commission was generally opposed to this alternative. Please see attached Site #1 log for details.
ALTERNATIVE B
The City DOES NOT support Stone Brook's originally proposed location (Outlot B, Site #1), however the city IS interested in helping with funding the financial gap on other sites via a "formal business subsidy."
The City DOES NOT support Stone Brook's originally proposed location (Outlot B, Site #1), however the city IS interested in helping with funding the financial gap on other sites via a "formal business subsidy."
Stone Brook is asking the City to address their questions/ and issues on other sites (mainly pricing). Likely, the gap in costs, from Site #1 to other sites (i.e. #2 and #4), would range from $335,000-$531,000. It should be noted, Stone Brook has made their opinion clear to staff, that even if they are able to get another site for like cost, they would still strongly prefer to be located on Site #1. They will only locate on another site if the City is telling them no to Site #1.
With this mind, Stone Brook needs 0.9 - 1.0 acre of land. If Site #1 was purchased at $3 per square foot (psf), it would cost $117,612 to $130,680. If Stone Brook paid 20% of arterial infrastructure costs (Yolite, $284,880) it would cost them about $56,976. The combined costs of the Site #1 and a 20% portion of Yolite would be roughly $174.588 for Stone Brook, as proposed.
The McDonald's site (Site #2) and the PSD site (Site #4) are the two other locations Stone Brook would consider. They range in cost from $522,720 to $705,672 (asking prices). Therefore, a gap of roughly $335,000 to $531,000 exists. Stone Brook is requesting, for the City to discount that gap, in order to make those sites "like costs." In summary, get prices on other sites down to $3-$3.50 psf. Below are some options to consider, to fill the funding gap.
With this mind, Stone Brook needs 0.9 - 1.0 acre of land. If Site #1 was purchased at $3 per square foot (psf), it would cost $117,612 to $130,680. If Stone Brook paid 20% of arterial infrastructure costs (Yolite, $284,880) it would cost them about $56,976. The combined costs of the Site #1 and a 20% portion of Yolite would be roughly $174.588 for Stone Brook, as proposed.
The McDonald's site (Site #2) and the PSD site (Site #4) are the two other locations Stone Brook would consider. They range in cost from $522,720 to $705,672 (asking prices). Therefore, a gap of roughly $335,000 to $531,000 exists. Stone Brook is requesting, for the City to discount that gap, in order to make those sites "like costs." In summary, get prices on other sites down to $3-$3.50 psf. Below are some options to consider, to fill the funding gap.
(1) The City has the ability write down the cost of land (i.e. selling the land for less market rates). For example, the sites adjacent to McDonalds could be sold at $3-4 psf rather than $12 psf. Staff believes this level of discount goes beyond a standard land price negotiation process, and will trigger the need to comply with the City's "formal business subsidy" policy. Staff is concerned this project would require an "exception" to our business subsidy policy due an insufficient number of jobs being created at a high enough wage level. Staff is also generally uncomfortable with the general level of subsidy that would be required in this scenario (doesn't compare well to past projects, in which we have provided a formal business subsidy).
(2) The City has the ability to subsidize the project via Tax Increment Financing (TIF) via TIF District 14. This project is anticipated to collect $315,000 of PV TIF over the next 20 years (or $500,000 FV). Although we do have the "ability" to cover the gap for this project via TIF, staff is also cognizant of the City's many other financial obligations for The COR--in which TIF District 14 would be an ideal funding source. This option would also trigger the need to comply with the City's "formal business subsidy" policy.
(2) The City has the ability to subsidize the project via Tax Increment Financing (TIF) via TIF District 14. This project is anticipated to collect $315,000 of PV TIF over the next 20 years (or $500,000 FV). Although we do have the "ability" to cover the gap for this project via TIF, staff is also cognizant of the City's many other financial obligations for The COR--in which TIF District 14 would be an ideal funding source. This option would also trigger the need to comply with the City's "formal business subsidy" policy.
The EDA and Planning Commission were generally opposed to this alternative. Please see attached Site #1 log for details.
ALTERNATIVE C
The City DOES NOT support Stone Brook's originally proposed location (Outlot B, Site #1), and the City IS NOT interested in helping out with the funding financial gap on other sites via a "formal business subsidy" however, the City remains interested in selling city-owned land to Stone Brook
Stone Brook may need to reconsider their approach and expectations for this project altogether (land accusation costs, potentially timing, location, city willingness to formally subsidize, etc.). If this alternative is selected, staff would recommend the EDA provide Stone Brook with as much feedback as possible, so they can understand and consider their options moving forward. Examples below:
(1) The sites adjacent to McDonalds are available (Site #2), and the City believes these sites are a good fit for this project, the City encourages Stone Brook to make an offer on these sites. The City would be able to arrive at a non "formal business subsidy" negotiated price (i.e. the City still could agree on a price less than the asking price). Please see Site #2 log for details/ comments from Stone Brook/ Staff.
(2) The parcel sites adjacent to Casey's are available (Site #3), the City thinks these sites are a good fit for the project, the City encourages Stone Brook to make an offer on these sites. The City would be able to arrive at a non "formal business subsidy" negotiated price (i.e. the City still could agree on a price less than the asking price). Staff would note, these sites result in many land use questions/ concerns/ other project costs. Please see Site #3 log for details/ comments from Stone Brook/ Staff.
(2) The parcel sites adjacent to Casey's are available (Site #3), the City thinks these sites are a good fit for the project, the City encourages Stone Brook to make an offer on these sites. The City would be able to arrive at a non "formal business subsidy" negotiated price (i.e. the City still could agree on a price less than the asking price). Staff would note, these sites result in many land use questions/ concerns/ other project costs. Please see Site #3 log for details/ comments from Stone Brook/ Staff.
The Planning Commission was generally supportive of this alternative. Please see attached Site #1 log for details.
Action:
Please see "Recommendation Section" of this case and the attached "Site 1 Log" for details. Below are concept recommendations from the Economic Development Authority and Planning Commission.
EDA Recommendation: Motion to advise Stone Brook Academy:
Planning Commission Recommendation: Motion to advise Stone Brook Academy:
EDA Recommendation: Motion to advise Stone Brook Academy:
(1) the City supports Site #1 as a location for their project
(2) the City will not require Yolite Street be constructed as a public road, but will require a private drive connection
(3) the City supports discussion of a cost-share arrangement for the private drive connection
(4) the City will require an approximate $3 psf price
(5) direction for staff to bring back a formal purchase agreement for this project in February
(2) the City will not require Yolite Street be constructed as a public road, but will require a private drive connection
(3) the City supports discussion of a cost-share arrangement for the private drive connection
(4) the City will require an approximate $3 psf price
(5) direction for staff to bring back a formal purchase agreement for this project in February
Planning Commission Recommendation: Motion to advise Stone Brook Academy:
(1) the City does not support Site #1 as a location for this project
(2) the City supports Sites #2 through #8 as alternative options, with an emphasis on Site #4.
(2) the City supports Sites #2 through #8 as alternative options, with an emphasis on Site #4.
Attachments
- Site 1
- Site 2
- Site 3
- Site 4
- Site 5
- Site 6
- Site 7
- Site 8
- Site 1 Support Info (Yolite)
- Site 1 Support Info (Ref Maps)
- Site 1 Support Info (Example Master Plans)
- CBRE MEMO (RE site 1)
- CBRE MEMO 2 (RE Site 1)
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Brian Hagen | Tim Gladhill | 01/18/2017 10:57 AM |
| Kurt Ulrich | Kurt Ulrich | 01/19/2017 03:19 PM |
- Form Started By:
- Patrick Brama
- Started On:
- 01/17/2017 12:04 PM
- Final Approval Date:
- 01/19/2017