FOR DISCUSSION ONLY: Receive Update and Consider Plan to Complete Stage I Improvements for COR TWO (Sunwood Retail Area) Located at the Southeast Intersection of Sunwood Drive and Armstrong Boulevard.

This case is for informational and discussion purposes only; no action is being requested at this time. The City Council approved the plat entitled COR TWO on August 13, 2012 (revised February 19, 2013). This development is also known as the Sunwood Retail development. The Final Plat approval required several Stage I Improvements. These Stage I Improvements are also referred to as the Common Improvements as it relates specifically to this development. These improvements generally include, but not necessarily limited to the shared access, sanitary sewer, water, and storm water systems. The attached plans provide the details of the required improvements.

Before the City can release the Plat for recording, the City requires that a work plan and appropriate security be provided. Essentially, the City needs the assurance that the Stage I Improvements will be completed if it is to be able to issue a Building Permit. The HRA agreed to be responsible to construct the Stage I Improvements as part of the Development Agreement with the City, if the Plat was to be recorded. The Development Agreement alone did not authorize the expense of actually constructing the improvements, as the HRA could choose to construct the improvements itself or require a future buyer to construct the improvements. The HRA could choose not to authorize construction of the improvements; however, the Plat would not be authorized to be finalized and recorded. In addition, the HRA does have an existing real estate contract with McDonald's USA, LLC that would be affected if the Stage I Improvements are not constructed.

This case is to discuss scenarios to complete the Stage I Improvements in order to allow the Plat to be recorded. At this time, no action is being requested to advertise for bids or award a contract. Staff needs additional time to properly analyze the current plans and cost estimates, as final plans were submitted to the City for review on April 3, 2013. In order to provide requested feedback from McDonald's, Staff is forwarding this discussion topic at this time, prior to formal action by the HRA at a future date. Based on discussion, Staff would anticipate forwarding an action item on the April 23, 2013 HRA Agenda to potentially advertise for bids.

Notification is not required at this stage.

On October 16, 2012, the HRA approved a work order with Landform Professional Services, LLC for 'soft costs' related to the design of these Stage I Improvements in the amount of $34,600. Specifically, the HRA did not approve construction of these improvements, but design only. The City received the final plans for review on April 3, 2013. City Staff has been reviewing preliminary plans, cost estimates, and alternative scenarios over several occasions since the work order was approved. The current cost estimate provided by Landform Professional Services is $327,467.73. It would be the intent to recoup the costs of these improvements through the sale of all three (3) parcels created by the Plat. The purchase price for Lot 2 (McDonald's) is $470,000.  Super America has also expressed an interest in construction of a convenience store/gas station this year.  The sale of a parcel in COR 2 to Super America, and along Ramsey Boulevard, is currently under negotiation.

The HRA has an active Real Estate Contract with McDonald's USA, LLC, attached hereto. In order to meet obligations and timelines of said contract, Staff understands that a resolution to the matter will need to occur as soon as possible. Staff has received an Application for Building Permit from McDonald's USA, LLC. McDonald's USA, LLC desires a status update related to the Stage I Improvements. With that in mind, this topic report has been prepared for discussion only at this point, as the next available HRA meeting is not until April 23, 2013.

Alternatives

Alternative #1 - HRA Awards Contract to Construct. This alternative would allow the HRA the highest degree of control over the Stage I Improvements, but does require that the HRA be responsible for the initial cost of the improvements. It would be anticipated that the cost of the improvements could be recouped through land sales of the development. Staff advises the HRA that construction on the improvements should not commence unless timed in conjunction with closing of a parcel within the Plat that provides the necessary capital to construct the improvements. Additionally, this process would require that the HRA authorize an advertisement for bids and awarding of a contract. The advertisement for bids would likely be a 3-4 week period before a contract could be awarded. Assuming the HRA would motion to direct Staff to advertise for bids on April 23, 2013, a contract could be anticipated to be awarded at the end of May or early June. Additionally, Staff will need the lead time prior to the April 23rd date to review the current pro-forma to ensure adequate cash availability.

Alternative #2 - HRA Requires Buyer to Construct. Currently, the HRA has an active real estate contract with McDonald's USA, LLC. The existing Purchase Agreement with Super America necessitates a renewal due to original deadlines that were part of that agreement. Staff would need additional time to negotiate these terms with one of these buyers. This would have a cumulative effect on current and future agreements with buyers of the three (3) COR TWO parcels.

Alternative #3 - HRA Chooses Not to Construct Improvements. If the HRA chose not to construct the improvements or would not be successful in negotiating with a buyer to construct the improvements, the City would not authorize the Plat to be recorded. It appears that there would be a default with the real estate contract with McDonald's USA, LLC. Staff would need more time to discuss with legal counsel the liabilities of said potential default.

Legal Counsel has advised the HRA that the preferred scenario for the Stage I Improvements is for the HRA to complete said improvements, if the HRA is to honor the terms of the existing contract with McDonald's USA, LLC (Alternative #1), and to have the most control over the installation of the improvements to ensure there completion. It has been anticipated costs of the improvements are to be allocated to the three (3) new lots created with the Plat as part of the sale of property.

Funding for the Stage I Improvements would come from the proceeds of the sale of property. Staff would advise the HRA not to proceed forward with the Stage I Improvements unless in conjunction with closing of land within the COR TWO plat. The HRA fund currently does not have sufficient funds to complete the improvements unless land proceeds are captured. A more detailed financial analysis, including determination of net proceeds (gross proceeds minus HRA costs) will be provided with any request to advertise for bids, which is anticipated for April 23, 2013.

There is no action being requested at this time. This topic report is for informational and discussion purposes only. Staff anticipates forwarding a request for action to authorize an advertisement for bids on April 23, 2013 in order to honor the terms of the current real estate contract with McDonald's USA, LLC, and to prepare the other two parcels for sale.