Adopt Resolution  #23-193 Approving Purchase Agreement and Right of Re-Entry Agreement for Part of Outlot A, COR TWO: Norhart Architecture LLC

The purpose of this case is to consider sale of approximately 4 acres of Outlot A, COR TWO to Norhart Architecture LLC (the "Developer) to construct a 200 unit market-rate apartment project.  Staff brought this proposed project to the City Council worksession to determine if there was general support for the sale of City property in the COR for a market rate apartment project.  The project was generally well received by the Council and Staff has been working with the developer on the terms of a purchase agreement since that meeting. The EDA met on August 10 to review the proposal from Developer and adopted a motion to approve the Terms in Resolution #23-193.

Staff has worked diligently with Norhart, and legal counsel to draft a Purchase Agreement and Right of Re-Entry Agreement that all parties are comfortable with.  The purchase agreement and right of re-entry agreement have provisions similar to the Affinity at Ramsey (174 unit 55+ senior project) that extend deadlines for performance and restricts the city ability to re-enter the property if a building permit and associated fees is pulled and are paid, development/platting fees have been paid, a foundation is constructed and evidence of construction financing has been provided to the city.  Staff has discussed this at great length with the City Attorney and the requests by the developer are not uncommon based on the ability to obtain financing for a project of this magnitude.  The City will still have the ability to impose a $100,000 penalty if the project is not completed by 2027.    The negotiated purchase price for the land is $2.50 per square foot ($435,600) which is within the City deal range for this parcel.  Norhart has also committed to contribute $256,600 toward the construction of West Ramsey Parkway NW.  If the contribution of $256,600 for West Ramsey Parkway is taken into account the total consideration is $691,600, or $3.97 per square foot which is over the asking price of $3.50/SF.  It should be noted that the Developer is not asking for any financial assistance or a reduction in development fees from the city.

None required

Staff believes that this project will be a great addition to the COR and will provide a visibly appealing project at the entrance of the COR.  The 200 units of high-end market rate housing and its proximity to the retail area and future Waterfront park will provide great synergy and walkability.  The property tax revenues for a project of this size help finance past, current and future infrastructure improvements in the COR.

Representatives from Norhart will be present to provide more detail relating to the proposed project and to answer questions the City Council may have.

Project Highlights
Project Description - 200 Units - Market-rate, 5,000 Retail Cap on West Side of Building (Mixed Use)
Estimated Project Costs - 45M
Amenities - On Site Staffing, Community Room, Game Room, Coffee Station, Fitness and Yoga Center, Dog Run, Pet Spa, Movie Room, Outdoor Lounge & Pool, Heated Underground Parking
Job Creation - 6
Tax Assessed Valution (Estimate) - 40M
Annual Property Tax (Estimate) $495,000
Annual Local (City,School, County Estimate) $410,000 
Annual Property Tax - City Portion (Estimate) $164,000
Aids Unit Density Calculations in COR - 50 units/acre
Required a rezone to a COR 4b or 4c Subdistrict

Key Purchase Agreement Terms
Buyer - Norhart Architecture LLC
Seller - City of Ramsey                                         
Property Address - Northern corner of Sunwood Drive NW, Ramsey Parkway and Zeolite Street NW.
Proposed Units - Approximately 200
PID# - 283225220058                                     
Acres - Approximately 4 acres
Purchase Price - $435,600 ($2.50/SF)
Road Development - $256,600 to be contributed to road extension costs of W Parkway (between  Sunwood Drive NW roundabout and Zeolite Street)
Earnest Money  - Earnest Money of $25,000.00 will be held by Stewart Title upon full execution of Purchase Agreement. Said deposit would be refundable to Buyer in the event the escrow does not close, unless failure to close is the result of default by Buyer under the Purchase Agreement (in which event the deposit would be released to the Seller as liquidated damages). Additional Earnest Money events may occur upon discussion and agreement in Purchase Agreement.
Inspection Period - Buyer shall have two-hundred forty (240) days following Effective Date to investigate property.
Right of Re-entry - Within 24 months from the Closing Date, Buyer shall have achieved completion of a ±200-unit Market Rate apartment building compliant with COR Zoning requirements to be further defined by an approved Site Plan.  At Closing, a “Right of Re-Entry Agreement” shall be executed and recorded against the Property. The Seller agrees to waive the right to re-enter and take physical possession of the Property, providing that Buyer has submitted the building permit and associated fees, City development and platting fees, the building foundation has been set and evidence of sufficient financing for substantial completion of the project.  
Closing - Closing shall take place 30 days after Buyer delivers Notice to Proceed to Seller. Two (2) additional one hundred fifty (150) day extensions will be granted with each extension requiring a $15,000 earnest money deposit that is nonrefundable but applicable to the purchase price.

Alternatives include:
1) Adopt Resolution #23-193 Approving Purchase Agreement and Right of Re-Entry Agreement for Part of Outlot A, COR TWO: Norhart Architecture LLC (as presented); subject to City Attorney review.
2) Adopt Resolution #23-193 Approving Purchase Agreement and Right of Re-Entry Agreement for Part of Outlot A, COR TWO: Norhart Architecture LLC (with changes); subject to City Attorney review.
3) Something else.

N/A. There is no assistance being provided.

The EDA met on August 10, 2023 and unanimously adopted a motion to recommend the City Council to approve Purchase Agreement and Right of Re-Entry Agreement as presented, subject to City Attorney review.

The Draft Minutes from the August 8 EDA meeting are attached for more detail.

Motion to Adopt Resolution #23-193 Approving Purchase Agreement and Right of Re-Entry Agreement for Part of Outlot A, COR TWO: Norhart Architecture, LLC (as presented); subject to City Attorney review.