Adopt Resolution #22-095 Entering into Binding Letter of Intent for Outlot A, Gigi Addition; Case of The Schiebout Family Limited Partnership, LLLP (Portions may be closed to the public)

The City Council 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 City Council chooses to enter into 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 entering into a binding Letter of Intent (LOI) and reviewing the 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 fall/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 had committed to, and would like to do a similar project (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 binding 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.   The EDA discussed this at the April 14, 2022 meeting and was comfortable considering this type of assistance.  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 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 looking for approval by the City Council to enter into a binding 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 City Council 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.    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. 
• Estimated 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.   The City Council could go into closed session to discuss negotiation strategies and counteroffers if necessary.

Alternatives:

1)   Adopt Resolution #22-095 Entering into Binding Letter of Intent for Outlot A, Gigi Addition; Case of The Schiebout Family Limited Partnership, LLLP (as presented); subject to City Attorney Review (EDA recommendation).
2)  Adopt Resolution #22-095 Entering into Binding Letter of Intent for Outlot A, Gigi Addition; Case of The Schiebout Family Limited Partnership, LLLP (with changes); subject to City Attorney review.
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.

The EDA met on April 14, 2022 and unanimously recommended that the City Council enter into the attached LOI with The Schiebout Family Limited Partnership, LLLP (as presented), subject to City Attorney review.

In addition, The EDA was generally supportive of the future purchase agreement terms that included consideration on an up-front land cost write down for the property. These terms will still need to be reviewed again by the EDA and City Council if the LOI is moved forward and a purchase agreement is presented for consideration.

Motion to Adopt Resolution #22-095 Entering into Binding Letter of Intent for Outlot A, Gigi Addition; Case of The Schiebout Family Limited Partnership, LLLP (as presented); subject to City Attorney Review