Consider Letter of Intent for Outlot A, Gigi Addition; Case of The Schiebout Family Limited Partnership, LLLP 
(Portions may be closed to the public)

The EDA may choose to go into closed session pursuant to Minnesota Statutes section 13D.05, subdivision 3(c)(3) to consider offers or counteroffers for the purchase or sale of real or personal property.  If the EDA chooses to enter into to closed session the statute and reason above needs to be referenced along with legal description (Outlot A, Gigi Addition) and the Anoka County Tax ID number 28-32-25-23-0020.

The purpose of this case is to consider a binding Letter of Intent (LOI) and general terms of a purchase agreement to sell Outlot A, Gigi Addition. Staff has been working with The Schiebout Family Limited Partnership, LLLP (the "Developer") over the winter.  This ownership group has the same members of the Delta Mod Tech project and they want to do more to help build their business and this community. This group has shown that they have the capacity to build a project from the ground up and be successful.  The Developer been in discussions with major hotel flags (Hilton, Marriot) and others like Cobblestone.  The developer is new to the hotel business and is relying on other experts in the industry and at the City to help guide them through the development process.  The group is aware of the the Cobblestone project and the financial TIF assistance the City committed to, and would like to do of something similar size (around 60 units) but not including a steak house. The group has reviewed pre-Covid Market Demand Study information that supports investment in Ramsey but will need to conduct a more current demand analysis to re-evaluate the Ramsey market. This analysis will cost money and take some time and the developer would like to control the site before making these expenditures. If the City enters into a LOI with the Developer they will share the Market Demand study with the city at no cost.

With the impacts of Covid-19 lessening and the hotel market slowly recovering, there is a preliminary ask for assistance for the project in the form of a land cost write down in the LOI submitted by the Developer.  Like the proposed Cobblestone project, a third party analysis will need to be done by Ehler's to see if assistance is truly warranted at a later date.   In the event that the EDA and City Council are comfortable entering into a purchase agreement with TIF contingencies, Staff would ask the developer to submit a business assistance application to be acted on in a separate action by the EDA and City Council at a later date.  The attached LOI simply gives the Developer 90 days to control the site and to complete the Market Demand Study and to further define their project.  Staff is looking for EDA to provide a recommendation on the concept of entering into a LOI and acceptance of general terms of the proposed purchase agreement, including a land cost write down in order to keep this project moving forward. 

Staff has received interest from other developers, including another LOI without project specifications, on this site but the Developer is the first to provide a LOI with a specific project to consider. Based on the history in working with the Developer Staff is asking EDA to consider entering into a LOI with The Schiebout Family Limited Partnership, LLLP 

 

Notification is not required.

Observations:

Letter of Intent
Considering that the Developer has shown the ability and financial capacity to build a project from the ground up (Delta ModTech) and the continued interest in further investment in Ramsey, Staff is asking the EDA to consider entering into the attached LOI. The LOI gives the Developer 90 days to complete the Demand Market Study and to work on the the specific details of a formal Purchase Agreement.   The cost of this LOI is $5,000 which is refundable if the Developer decides not to move forward with a PA.  If the the Developer submits a business subsidy application and enters into a PA the $5,000 will be retained to cover the costs of TIF Analysis and TIF Agreement.  Staff is asking the EDA to take action in the form of a recommendation on the attached LOI.  The City Attorney has reviewed the attached LOI as to form and is comfortable with entering into the agreement.

General Project Description (to be further refined)

• 60 unit, Three Story Hotel with hot breakfast and indoor pool; a Certificate of Occupancy one year after Closing (could be extended to 16 months based on supply chain issues or force majeure).  If this is not done, the City may exercise the Right of Re-Entry. 
• Assessed Value 5-6M
• Estimated Taxes - $155,000 annually

Future Purchase Agreement
The Developer would like to understand the willingness of the EDA to consider the terms similar to the proposed Cobblestone project that provided an upfront land cost right down in the form of TIF.  The preliminary terms of negotiations of a future PA are listed in the Term sheet of the LOI.   Staff is looking for direction on this item. The EDA certainly could go into closed session to discuss negotiation strategies and counteroffers if necessary.

Alternatives:

1)   EDA Recommendation to the City Council to enter into the attached LOI with The Schiebout Family Limited Partnership, LLLP (as presented) (Staff recommendation).
2)  EDA Recommendation to the City Council to enter into the attached LOI with The Schiebout Family Limited Partnership, LLLP (with changes).
3) Do not enter into LOI an continue to work with The Schiebout Family Limited Partnership, LLLP and other interested parties.
4) Something else.
 

This case is being handled as part of normal Staff duties. If financial assistance is provided, TIF District 14 will be a funding source.

Staff recommends an EDA Recommendation to the City Council to enter into the attached LOI with The Schiebout Family Limited Partnership, LLLP (as presented), subject to City Attorney review.

Motion to Recommendation to the City Council to enter into the attached LOI with The Schiebout Family Limited Partnership, LLLP (as presented), subject to City Attorney review.