Review McDonald's Project Alternatives

Attached is a copy of a memorandum from the City's attorney in regard to the McDonald's restaurant development and the current options under consideration due to the fact McDonald's has not meet its construction obligations under the development contract.

The property was purchased by McDonald's from the Ramsey HRA for $470,000 on February 26, 2014.  As part of the development agreement, the City installed about $300,000 of improvements (i.e., street, sewer, water, and storm water) to service the three lots of the COR II commercial subdivision.  McDonald's paid for $40,870 of these costs.  McDonald’s planned to construct a new restaurant on the property and agreed to do so by a certain date.

As the attorney reviews in the attached document, the Deed contained a right of re-entry in favor of the Ramsey HRA. With this provision in the contract, the HRA (now the City) may commence an action in Anoka County District Court seeking an order re-vesting title to the Property to the City if McDonald’s does not commence construction of the improvements on the Property within 720 days after the date of the Deed (deadline was February 16, 2016), or McDonald’s does not substantially complete the construction of the improvements within 1080 days after the date of the Deed (deadline was February 10, 2017).

McDonald’s has not obtained a building permit or taken any steps to commence construction on the Property, so the various dates relating to the Deed, Restrictive Covenant, and the escrow agreements have all lapsed.  McDonald’s has informed the City that it desires to continue to hold the property and develop the site when there is an appropriate level of demand to support the restaurant.

Current actions for consideration:
1.         Deed to the Property.  Since McDonald’s did not substantially complete the construction of the improvements by February 10, 2017, the City, as assignee or the HRA, can commence an action in Anoka County District Court seeking an order re-vesting title to the Property. The City’s current options are to:
            A.  Start the district court action seeking an order re-vesting title to the Property.
            B.  Do nothing and wait for McDonald’s to develop the Property.
            C.  Negotiate a new settlement with McDonald’s.
2.         Restrictive Covenant.  Upon the execution of an affidavit by a City representative indicating that no construction has taken place and that McDonald’s is not operating a restaurant at the Property, the Examiner of Titles for Anoka County has agreed to issue an examiner’s directive ordering the removal of the Restrictive Covenant from the various certificates of title for the property it was originally recorded against. The affidavit and examiner’s directive are in process.
3.         Escrow Agreements.  The City requested the release of the Sign Escrow Funds and the Soil Escrow Funds in February after the last date had passed and the escrow agent has returned all funds to the City (with the consent of McDonald’s).  Note, the City has set-aside $120,000 of this escrow money to be used for a future multi-tenant sign for the three-lot development.
 

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City Administrator

Staff is seeking direction in regard to exercising the right of re-entry, or another alternative, as outlined above and by the attorney in the attached document.