Adopt Resolution #23-173 Approving Purchase Agreement for Portion of Outlot A, COR TWO; Centra Homes - Parcel 46

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, COR TWO and the Anoka County Tax ID number 28-32-25-22-0058.

The purpose of this case is to consider entering into a Purchase Agreement with Centra Homes LLC to develop approximately 16 acres of Parcel 46 with 103 detached townhomes.    A representative from Centra Homes will be present to answer questions relating to their development proposal.  

Staff worked with both Centra Homes and Capstone Homes over the past several months to bring proposals to the EDA and City Council for consideration.  The EDA met on July 13, 2023 to review both proposals.  It should be noted that both of the offers by Capstone and Centra were at the low end or below the deal range for Parcel 46.  The City will also be spending additional funds for tree removal, grubbing, incidental wetland filling, soil importing and compaction on Parcel 46 to prepare it for development (~ $1,145,800). Zeolite Street NW and W. Ramsey Parkway adjacent to the site will also need to be constructed to bring this project to market. (~ $2,368,000)  Based on the offers, it is clear that the purchase price alone will not cover the cost of these improvements. However, when you consider the purchase price and expected TIF generation for each project, the projected revenue exceeds the expenditures in most cases.  Each project also generates over 1 Million in development fees. Both proposed projects will require a re-zone to a different residential zoning district.  The Centra project met the COR Framework Design standards and would require a rezone to COR 4A or COR 4B.  The Capstone project is not compliant with COR Framework design standards and the developer requested a rezone to R-2 which does not have the higher COR Framework standards. The addition of 103-130 new housing units will result in a significant population increase that helps draw interest in retail and restaurants. It should also be noted that both developers expressed an interest in developing the three acre commercial site on the Northeast corner of Sunwood Blvd and Armstrong Blvd residentially, but this was not included in the analysis based on the EDA and Council preference to see commercial development on that corner.  The offers were very similar in net financial impact to the City.  However, based on the fact that the Centra project was compliant with COR zoning and did not ask for a reduction in Park Dedication fees the EDA made a recommendation to work with Centra Homes on a Purchase Agreement and to present it to City Council for consideration.

N/A

The economics outlined above and on the attached exhibits show all proposed projects and the potential financial impacts for the City of Ramsey.   All of the proposed housing projects do not maximize the land sale revenue for the north portion of Parcel 46, but the future tax revenue and TIF does make up some of that gap.  A large format retail user, other commercial uses and apartment projects would likely command a higher per square foot cost.  However, both the City Council, Planning Commission and the EDA have been supportive of single family, owner-occupied, townhome housing developed on this site and the City has been unsuccessful in attracting a big box retailer to this location.  Both Capstone and Centra are proposed quality products that will generate significant tax revenue and will result in an increase of population density in the COR. However, the Centra proposal was recommended by the EDA based on its compliance with the COR Design Framework and that it did not ask for a reduction in Park Dedication fees.

Key Terms of Purchase Agreement:
Property Description - Part of Outlot A, COR TWO (pt, 28-32-25-22-0058)
Lot Size - 16.3 acres (710,028 SF)
Sales Price  - $640,042 ($6,214 / approved unit or $0.90/SF)
Earnest Money - $25,000
Commission - 5% of sales price to CBRE
Development - 103 detached town home units
Right of Re-Entry- Required - 40 units in 5 years- (Format same as previous Centra Land Sale)
Closing - 30 days from Notice to Proceed (2 - 10K extensions)

The City Council should consider the following questions before providing staff direction for the development of Parcel 46:

1) Is the City Council supportive of the proposed single family residential development on Parcel 46 instead of waiting for a large format commercial user or other development type?
2) Does the City Council like the housing product and layout that is being proposed in the COR?
3) Is the City Council supportive of a zoning change from a COR Zoning District to COR 2A, COR 2B or R-2?
4) Is the City Council supportive of a housing product that is not compliant with COR Framework?
5) Is the City Council supportive of a reduction in Park Dedication Fees to support affordability as referenced in the Capstone proposal?

Alternatives:
1) Motion to Resolution #23-173 Approving Purchase Agreement for Portion of Outlot A, COR TWO; Centra Homes - Parcel 46 (as presented)
2) Motion to Resolution #23-173 Approving Purchase Agreement for Portion of Outlot A, COR TWO; Centra Homes - Parcel 46 (with changes)
3) Motion to reject the attached offer and hold the land for future development
4) Something else

N/A

The EDA passed a motion (it was not unanimous) to recommend the City Council select Centra Homes as developer and to execute a Purchase Agreement with the terms included in the developer's proposal.  A copy of the draft minutes from the July 13, 2023 EDA Meeting is attached which includes the discussion related to the approved motion.

Resolution #23-173 (as presented) reflects the terms of the purchase agreement and right of re-entry agreement that the EDA recommended for approval at the July 13, 2023 EDA meeting.

Alternatives:
1) Motion to Adopt Resolution #23-173 Approving Purchase Agreement for Portion of Outlot A, COR TWO; Centra Homes - Parcel 46 (as presented); subject to City Attorney review (EDA Recommendation)
2) Motion to Adopt Resolution #23-173 Approving Purchase Agreement for Portion of Outlot A, COR TWO; Centra Homes - Parcel 46 (with changes; subject to City Attorney review
3) Motion to reject the attached offer and hold the land for future development
4) Something else