Adopt Resolution #19-272 Approving New/Extended Purchase Agreement for Lot 1, Block 1, Anderson Dahlen South Addition; Case of Knoll Properties LLC

PURPOSE
The purpose of this case is to consider adoption of Resolution #19-272 approving a Purchase Agreement for Lot 1, Block 1, Anderson Dahlen South Addition.  This new Purchase Agreement would replace the previously executed Purchase Agreement with an Effective Date of April 23, 2019. While the technical application is a new Purchase Agreement, as a practical matter, the request is to extend the date to provide a Notice to Proceed to January 31, 2020. The City has not refunded any Earnest Money, and the Buyer has not proposed depositing additional Earnest Money.

BACKGROUND (Subject Property)
This 9.3 acre site is located at the SE corner of 143rd Avenue NW and Jaspar St NW, just west of Molin Concrete and is currently zoned E-2 Employment District.  The entire 19.88 acre property was purchased by the City in 2008 for redevelopment / Public Works purposes for a price of $1,593,500.  The site is vacant, tax exempt, and is available.  The City had the north 9.3 acres property listed on MNCAR through Anoka County for $1,000,000. This is not a CBRE listing.  Proceeds from the sale of this property would go to Public Works. The City entered into a Purchase Agreement with Knoll Properties dated April 23, 2019 and approved changes to the Right of Re-Entry Agreement extending the deadline to construct and occupy to project to December 31, 2020.  The Purchase Agreement has now technically expired as the Inspection Period has ended and a Notice to Proceed has not been given.  The Buyer has provided a letter outlining the difficulties to perform under the April 23, 2019 Purchase Agreement and has requested an extension to try to see if the project can still be completed.  

BACKGROUND (Andersen Dahlen & Knoll Properties, LLC)
Knoll Properties LLC is a holding company based out of Ramsey and managed by Tom and Dave Knoll.   Both entities are in good standing with State of Minnesota (business and lien system).

Anderson Dahlen was founded in the 1940s and was purchased by Richard Knoll in 1978.  In 1984, Tom and Dave Knoll purchased 20% of the company. Tom and Dave Knoll purchased the remaining 80% of the company and consolidated into a 48,000 facility in Coon Rapids. In 2000, Anderson Dahlen built a 84,000 SF facility and moved its operations to Ramsey. In 2018, a 101,000 expansion opened at their Ramsey location. Currently, Anderson Dahlen employs over 300 employees.  

Anderson Dahlen is now out of space at their current location and needs to secure additional space for the growth of its business.  The development proposal includes commencing construction of 60,000-75,000 square feet of manufacturing space (with the ability to add 40-60,000 square feet at a later date) on the Subject Property (City owned property).  The total investment in Phase one of this project is anticipated to be near $6 Million Dollars.  Anderson Dahlen plans to (a) keep their existing facility and (b) construct/operate from the new facility in Ramsey on the Subject Property.  Anderson-Dahlen currently has over 300 full time employees and plans to add 60 over the next 3 years as a result of this proposed business expansion.

BACKGROUND (Purchase Agreement)
Attached to this case is a Draft Purchase Agreement defining the new terms of the extended time period to close and complete the project.  The purchase price remains at $675,000 and the size of the proposed project remains unchanged.   

Notification is not required.

OBSERVATIONS

• Zoning/Use: The proposed development concept fits within the City's existing zoning regulations and the Site plan was approved on June 25, 2019 
• Sale Price: The asking price for the subject property is $2.47 per square foot ($1,000,000). The offer price is $1.66 per square foot ($675,000).  The offer price is  "below the mid-range" (but within the total deal range) of the City's adopted "deal-range" for the subject property. 
• Property Taxes: The proposed development is based on a 75,000 square foot building with the possibility for an additional 40,000 square foot expansion.  Based on an estimated taxable market value of $4,000,000 for Phase 1, this project will generate about $133,000 in total annual property taxes, with the City receiving approximately 25% ($33,250) annually when it hits the tax rolls.
• Earnest Money: This PA does include earnest money ($67,500.00, 10%).  Earnest money will become hard after the Notice to Proceed is given by the Buyer (No later than January 31, 2019) .  The Developer has provided a down payment of $67,500 to the title escrow company according to the terms of the purchase agreement.
• Broker Commission: There is no broker commission for this transaction
• Net Proceeds: $675,000.
• Closing Date: no later then 45 days after the Notice to Proceed has been provided to the City. (No later than March 16, 2020). 
• Land Sale Policy: The  PA  meets the intent of the City's draft "Land Sale Policy" and has been reviewed by the City Attorney, and staff.  Several changes (and negotiations) have taken place between staff and the buyer. 
• Buyer: The buyer (Knoll Properties / Anderson Dahlen) has a history of success and delivering on projects in Ramsey as shown by its expansion to its original building onsite and its commitment to creating "living wage" jobs in the community. This project has taken longer than originally anticipated by Anderson Dahlen.
• Right of Re-Entry Agreement:  The current Right of Re-Entry Agreement is attached with a Certificate of Occupancy date of  December 31, 2020.  A clause was added to allow for partial reimbursement of the $675,000 purchase price if the project does not move forward.
• Project Readiness: Survey, site plan and plat are approved.  Building plans drafting and environmental is complete and paid for by Buyer.  This project is ready to go if a manufacturing contract can be secured by Buyer by January 31, 2020.

The Developer's Attorney requested some clarifying changes to the Purchase Agreement the EDA reviewed on November 14, 2019.  The City Attorney has reviewed and accepted those changes and has determined that they do not have a material change to the agreement.

There has been some general interest in the site by another commercial user.  The City is also in the process of defining the future public works campus.  If the purchase agreement is approved and the Buyer does not give a Notice to Proceed by January 31, 2020, it would make sense to potentially re-evaluate the future use of this parcel.
   
ALTERNATIVES
 

This case is being handled as part of normal Staff duties.

The EDA reviewed this case at its November 14, 2019 meeting and unanimously approved a recommendation for the attached Resolution and Purchase Agreement.

Motion to adopt  Resolution #19-272 approving Purchase Agreement for Lot 1, Block 1, Anderson Dahlen South Addition; subject to City Attorney review and approval.