Adopt Resolution #17-06-159 Authorizing Staff to Commence an Action in Anoka County District Court Seeking an Order Re-vesting Title to Lot 2, Block 1, COR TWO, City of Ramsey

Purpose:  To authorize staff to commence an action in Anoka County District Court seeking an order re-vesting title to Lot 2, Block 1, COR TWO, City of Ramsey

Background:  In February 2014, the City executed a Quit Claim Deed conveying Lot 2, Block 1, COR TWO, within the City of Ramsey to McDonald's USA, LLC.  The deed contained a right of re-entry in favor of the City.  Pursuant to the terms of the right of re-entry, the City may commence an action in Anoka County District Court seeking an order re-vesting title to the property if McDonald's did not commence construction of the improvements on the property by February 16, 2016; or if McDonald's did not substantially complete the construction of the improvements by February 10, 2017.  At this point in time, McDonald's has not obtained a building permit or taken any steps to commence construction on the property and all deadlines have passed.  McDonald's has indicated they would like to continue to hold on to the property and develop the site when there is an appropriate level of demand to support its restaurant. At this time, McDonald's is not willing to pay an annual fee to hold the title to the property.

Council was updated on this project at their June 13, 2017 Work Session.  Part of the discussion centered around the fact that this is a prime commercial property that is just sitting, and the City's Real Estate broker has indicated that their has been significant interest in this piece of property.  The value of the property to larger users is also enhanced if it is combined with adjacent parcels.

A consensus was reached that formal action should be considered to seek a District Court order re-vesting title to the property to the City.  A resolution authorizing formal action has been drafted and is attached for Council consideration.

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.
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 have 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.
Deed.  Since McDonald’s did not substantially complete the construction of the improvements by February 10, 2017, the City, as assignee of 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.
The timeframe of the re-vestment action will be dependent on McDonald's response to the Complaint and lawsuit.  The estimated expense of this action if it goes through trial, is expected to be no less than $64,500.  However, many of the fees and costs may be unnecessary based on McDonald's response to the Complaint and lawsuit, or substantially reduced, if the number of documents, party deponents, third-party witnesses and experts is small.   Both the timeframe and the expense will be greatly reduced if McDonald’s does not contest this action.
Under the re-vestment process, the McDonald’s is not required to receive any compensation for the property.  The City invested over $300,000 of improvements in reliance upon McDonald’s commencing with development and the added value that McDonald's would bring as the anchor for this commercial retail node.
Taking the action to re-vest the property allows the City to recoup the cost of preparing the land for development, and would allow the City to sell the land to another development for the purpose of improving the selection of retail and restaurant services, to increase the local tax base, and to provide employment opportunities.

 

Legal costs will be deducted from land proceeds at the time of resale.

It is recommended that the City Council adopt Resolution #16-06-159 Authorizing Staff to Commence an Action in Anoka County District Court Re-vesting Title to Lot 2, Block 1, COR TWO, City of Ramsey.

Motion to adopt Resolution #16-06-159 Authorizing Staff to Commence an Action in Anoka County District Court Re-vesting Title to Lot 2, Block 1, COR TWO, City of Ramsey.