7.9.
CC Regular Session
- Meeting Date:
- 06/13/2017
- Submitted For:
- Patrick Brama
- By:
- Patrick Brama, Administrative Services
Information
Title:
Maple Investments LLC (dba Sharp & Associates) Purchase Agreement [portions of this case may be closed to the public]
Purpose/Background:
PURPOSE
Consider the attached purchase agreement (purchase offer of $606,622) from Maple Investments LLC (dba Sharp & Associates). for a 9.33-acre City-owned property located just south of Vision Ease Lens for an industrial development, including the immediate construction of a 50,000 square foot speculative industrial building.
BACKGROUND
Site Information
This site is zoned E-2 Employment District; which generally allows for "business park" type users. This site is located in one of the City of Ramsey's established business parks, with access to 143rd Ave and Jaspar Street.
The City of Ramsey purchased the "Bury & Carlson" site in 2008 for $1.75M, or $1.90 psf (1.84 psf for land only). The City purchased the roughly 20 acre Bury & Carlson site for the purpose of locating a new City Public Works Campus. In late 2015, the City completed a Space Needs Analysis for a new Public Works Campus. As a result of that exercise, it was identified, a 9.33 acre portion of land was unneeded for the Public Works Campus, on the north side of the former Bury & Carlson site. Per informal Council direction, staff was asked to market this parcel for economic development purposes.
The City purchased this site with the following funding sources:
The InterFund loan has a current balance of $513K, and is being paid back by the General Fund/ General Levy. If this transaction moves forward, staff will recommend the InterFund loan be paid back first, as much as possible, with the benefit of removing a debt service burden from the General Levy.
Consider the attached purchase agreement (purchase offer of $606,622) from Maple Investments LLC (dba Sharp & Associates). for a 9.33-acre City-owned property located just south of Vision Ease Lens for an industrial development, including the immediate construction of a 50,000 square foot speculative industrial building.
BACKGROUND
Site Information
This site is zoned E-2 Employment District; which generally allows for "business park" type users. This site is located in one of the City of Ramsey's established business parks, with access to 143rd Ave and Jaspar Street.
The City of Ramsey purchased the "Bury & Carlson" site in 2008 for $1.75M, or $1.90 psf (1.84 psf for land only). The City purchased the roughly 20 acre Bury & Carlson site for the purpose of locating a new City Public Works Campus. In late 2015, the City completed a Space Needs Analysis for a new Public Works Campus. As a result of that exercise, it was identified, a 9.33 acre portion of land was unneeded for the Public Works Campus, on the north side of the former Bury & Carlson site. Per informal Council direction, staff was asked to market this parcel for economic development purposes.
The City purchased this site with the following funding sources:
-TIF 2 $134K, Water Fund $292K
-Sewer Fund $292K
-Stormwater Fund $292K
-Water Utility Fund) $719K.
The InterFund loan has a current balance of $513K, and is being paid back by the General Fund/ General Levy. If this transaction moves forward, staff will recommend the InterFund loan be paid back first, as much as possible, with the benefit of removing a debt service burden from the General Levy.
Property Listing
The City has not officially listed this property with a broker. However, staff was informally provided direction to begin marketing this property, with CBRE, for sale in late 2015. Because this property is not officially listed, the City has not established an official asking price; or subsequent formal deal range. Traditionally, City owned parcels with similar zoning, and the City's future business park (privately owned), carry asking prices ranging from $1.75 per square foot on the low end up to $2.50 per square foot on the high end. NOTE: asking price is not the same as deal range prices.
Sharp & Associates
Sharp & Associates is perhaps the most well known "business park" developer in Ramsey. Sharp has several properties in Ramsey, and several others located in Anoka, Maple Grove, and Elk River. The majority of Sharp's buildings are small-bay multi-tenant buildings. This type of product is rare for a developer to specialize in, and to do so successfully.
Staff believes the buildings that Sharp has established in Ramsey have played a major role in Ramsey's overall success in economic development. Reason being, Sharp has created a model very close to a private sector business incubator(s). Sharp attracts new and small business to his affordable, right-sized multi-tenant buildings... then, when they are ready to expand or build a new building, they work with Sharp (and typically stay in Ramsey). Sharp has constructed 10+ owner-occupied buildings in Ramsey for said tenants. Staff believes Sharp is one of Ramsey's greatest development relationships/ partners. This project generally fits the mold outlined above.
Proposed Project
Sharp is proposing using about half of the property for a 50,000 square foot multi-tenant, small-bay, industrial building. Sharp plans to construct the first building immediately. Please see attached concept map and renderings.
The other half of the property will be used by Sharp, in the future, to construct owner occupied projects (2-3, 15,000-30,000 facilities). Sharp is currently working with multiple prospects interested in the owner-occupied land. Staff believes Sharp's approach is to Ramsey's benefit--as the type of user interested in owning a new 15,000-30,000 sf building usually doesn't have the resources or expertise to mange such a project. Sharp works well with these prospects, as he is affordable, does quality work, makes the process turn-key, and allows the buyers to own their new building (many business park developers will only lease back).
The City has not officially listed this property with a broker. However, staff was informally provided direction to begin marketing this property, with CBRE, for sale in late 2015. Because this property is not officially listed, the City has not established an official asking price; or subsequent formal deal range. Traditionally, City owned parcels with similar zoning, and the City's future business park (privately owned), carry asking prices ranging from $1.75 per square foot on the low end up to $2.50 per square foot on the high end. NOTE: asking price is not the same as deal range prices.
Sharp & Associates
Sharp & Associates is perhaps the most well known "business park" developer in Ramsey. Sharp has several properties in Ramsey, and several others located in Anoka, Maple Grove, and Elk River. The majority of Sharp's buildings are small-bay multi-tenant buildings. This type of product is rare for a developer to specialize in, and to do so successfully.
Staff believes the buildings that Sharp has established in Ramsey have played a major role in Ramsey's overall success in economic development. Reason being, Sharp has created a model very close to a private sector business incubator(s). Sharp attracts new and small business to his affordable, right-sized multi-tenant buildings... then, when they are ready to expand or build a new building, they work with Sharp (and typically stay in Ramsey). Sharp has constructed 10+ owner-occupied buildings in Ramsey for said tenants. Staff believes Sharp is one of Ramsey's greatest development relationships/ partners. This project generally fits the mold outlined above.
Proposed Project
Sharp is proposing using about half of the property for a 50,000 square foot multi-tenant, small-bay, industrial building. Sharp plans to construct the first building immediately. Please see attached concept map and renderings.
The other half of the property will be used by Sharp, in the future, to construct owner occupied projects (2-3, 15,000-30,000 facilities). Sharp is currently working with multiple prospects interested in the owner-occupied land. Staff believes Sharp's approach is to Ramsey's benefit--as the type of user interested in owning a new 15,000-30,000 sf building usually doesn't have the resources or expertise to mange such a project. Sharp works well with these prospects, as he is affordable, does quality work, makes the process turn-key, and allows the buyers to own their new building (many business park developers will only lease back).
Notification:
Observations/Alternatives:
OBSERVATIONS
Listed below are terms/ conditions/ observations related to the attached purchase agreement that staff considers important to highlight for potential discussion.
Staff has no policy compliance concerns.
This project is not requesting a formal business subsidy, the City's Revolving Loan Fund, or State DEED Programs. The attached PA is simply an edited version of the City's adopted "template PA." Therefore, generally appears to be in compliance with City's Land Sale Policies.
(2) Offer Price
$1.50 per square foot or $606,622.
The buyer is making an offer that is below the City's standard asking prices for industrial land ($1.75-$2.50 psf). However, it is within the City's acceptable deal range. If desired, this item should be discussed in closed session.
Staff did add a contingency RE this item in the agreement (See Section 29). We are asking for a $150,000 letter of credit. If the speculative building is not constructed by the deadline, we would receive an additional $150,000 in land proceeds, and push us well within the City's asking price.
Lastly, the buyer has completed geotechnical soil evaluations on the property. It appears 1-3 feet of topsoil will need to be removed from the property, and replaced with buildable soils. Additionally, the site will need to be slightly raised allow for proper drainage. Finally, this site will require some minor redevelopment work/ minor clean up, as it is not a green-field site. With these three items in mind, the buyer has indicated the cost to remediate will be in the hundreds of thousands of dollars. Therefore, buyer has indicated he cannot pay more than $1.50 per square foot--as the property is not shovel ready. If there was not soil remediation issues, the buyer indicated they could pay closer to $2.00 per square foot.
Staff did add a contingency RE this item in the agreement (See Section 29). We are asking for a $150,000 letter of credit. If the speculative building is not constructed by the deadline, we would receive an additional $150,000 in land proceeds, and push us well within the City's asking price.
Lastly, the buyer has completed geotechnical soil evaluations on the property. It appears 1-3 feet of topsoil will need to be removed from the property, and replaced with buildable soils. Additionally, the site will need to be slightly raised allow for proper drainage. Finally, this site will require some minor redevelopment work/ minor clean up, as it is not a green-field site. With these three items in mind, the buyer has indicated the cost to remediate will be in the hundreds of thousands of dollars. Therefore, buyer has indicated he cannot pay more than $1.50 per square foot--as the property is not shovel ready. If there was not soil remediation issues, the buyer indicated they could pay closer to $2.00 per square foot.
(3) Earnest Money
$10,000, to become hard after inspection period.
(4) Inspection Period
September 29, 2017 (close 30 days after).
(5) Extension Option
If the buyer decides to extend the PA, they will be required to place $5,000 of additional non-refundable dollars in earnest for each 60 day extension.
(6) Construction Deadline
07/01/2019, 50,000 square foot certificate of occupancy issued.
(7) Removal of Materials
The subject property includes stockpiles of con-bit and a large quantity of retaining wall blocks (concrete blocks). The City shall retain ownership of said items, and will remove from the subject property by September 15, 2017.
Funding Source:
NA
Recommendation:
STAFF REVIEW
If there are questions, concerns, or desire to make a counter offer on price, staff will suggest the attached purchase agreement be discussed in closed session. At this point, staff is not making that request. RE price, staff would note, a negotiation on price has gone back-and-forth between staff and Sharp over the past few weeks. $1.50 was not Sharp's first offer.
Below are some project benefits worth noting:
If there are questions, concerns, or desire to make a counter offer on price, staff will suggest the attached purchase agreement be discussed in closed session. At this point, staff is not making that request. RE price, staff would note, a negotiation on price has gone back-and-forth between staff and Sharp over the past few weeks. $1.50 was not Sharp's first offer.
Below are some project benefits worth noting:
- This project does not include any incentives, such as TIF. As a result, it will have an immediate positive impact to the general tax levy. This project is estimated to generate about $90,000 in total annual property taxes.
- This project is speculative--meaning, tenants are unknown at this point. Therefore, job count predictions are challenging to make. However, at full occupancy, staff would predict the creation of 30-200 jobs, depending on the tenants.
- This project will collect development fees, estimated at about: Park $20K, Trail 5K, Water 30K, Sewer $17K, Storm 22K.
- This project does help Ramsey accomplish goals outlined in the Council Strategic Action Plan and EDA Workplan.
- The above benefits do NOT account for the roughly 4.5 acres of extra land Sharp will utilize for owner occupied buildings. In other words, the long-term benefit to the City for this transaction will be greater.
- Staff believes Sharp is a quality developer with a good track record in Ramsey; especially with Ramsey's business community.
- Staff believes this project compliments the new business park (PSD's projects) well. Sharp is looking at a 18' clear building, with small bays, for small tenants. He will have land available for small, 15,000-30,000 sf owner occupied buildings. PSD is constructing 24' clear buildings, with large bays, for medium to large size tenants. PSD would only consider selling land, or constructing owner occupied buildings, for medium to large size tenants (40,000+ sf).
- EDA reviewed this case on 06/08/2017. The EDA is generally supportive of, and excited for, this proposed project.
- The EDA voted 5-1 to recommend the City Council approve the attached purchase agreement.
- The EDA unanimously suggested the CBRE 5% commission payment be pulled from this agreement. That update has been made by staff.
- The EDA did not move into closed session. The EDA did not feel price needed to be discussed.
- One EDA member did vote against the attached purchase agreement. Said EDA member is not opposed to the project or the concept. They are simply opposed to the deal structure. They do not support two items. (1) they are not comfortable using the proposed $150,000 letter of credit to ensure performance on the 50,000 s.f. speculative building. This EDA member would prefer the developer pay full price of land upfront (i.e. $2.00 psf rather than $1.50 psf). Then, if the developer performs, they would be reimbursed the delta (much like the previous deal structure with Platinum Properties). Staff noted the developer was opposed to this arrangement. (2) this EDA member is also not comfortable with the second half of this 9.33 acre site development occurring on a speculative basis. In other words, no performance guarantees are built into this agreement.
Action:
Motion to:
[Approve/ deny/ amend] the attached purchase agreement between the City of Ramsey and Maple Investments LLC for 9.33 Acres of City-owned land.
[Approve/ deny/ amend] the attached purchase agreement between the City of Ramsey and Maple Investments LLC for 9.33 Acres of City-owned land.
Attachments
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Kurt Ulrich | Kurt Ulrich | 06/08/2017 03:42 PM |
- Form Started By:
- Patrick Brama
- Started On:
- 06/06/2017 11:06 AM
- Final Approval Date:
- 06/08/2017