5.2.
HRA Regular Session
- Meeting Date:
- 10/14/2014
- Submitted For:
- Patrick Brama
- By:
- Patrick Brama, Administrative Services
Information
Title:
Consider New/Revised Purchase Agreement from PSD LLC for HRA Owned Land within The COR
Purpose/Background:
PURPOSE
Consider a new/revised Purchase Agreement (PA) between the Ramsey HRA and PSD LLC.
BACKGROUND (PA - Brief)
The proposed PA includes a $1.897M offer from PSD LLC to purchase 13.97 acres of HRA owned land within The COR. The land included in the PA can be referenced in the City's existing property listing with CBRE; specifically, listing #49.
The agreement currently under review is considered a "new/revised" PA due to the fact the City previously entered into a nearly identical PA with PSD LLC on August 06, 2014. Included below is additional background; which details the the original PA.
BACKGROUND (PA - Detailed)
The Ramsey HRA originally entered into a Purchase Agreement (PA) with PSD LLC for 13.97 acres of Ramsey HRA owned land located within The COR on August 06, 2014. The proposed closing date for this original agreement was no later than September 15, 2014 (also referred to as the termination date within the PA). Attached to this case is a copy of the original PA.
On September 11 Staff received a formal request from PSD LLC to extend the September 15 closing date to December 25, 2014. Said request is attached to this case. PSD LLC requested an extension to the original PA to provide sufficient time for the City to amend COR-1 Zoning Code; which would allow PSD LLC to construct their proposed project (which the Council reviewed in CONCEPT on September 09).
The HRA reviewed PSD’s request to amend the original PA on September 23, 2014. The HRA chose to not extend the original PA with PSD LLC for the reasons outlined below. The HRA did indicate interest in continuing to pursue this project; and, the HRA directed Staff and CBRE to renegotiate a new/revised PA that addresses concerns raised.
Consider a new/revised Purchase Agreement (PA) between the Ramsey HRA and PSD LLC.
BACKGROUND (PA - Brief)
The proposed PA includes a $1.897M offer from PSD LLC to purchase 13.97 acres of HRA owned land within The COR. The land included in the PA can be referenced in the City's existing property listing with CBRE; specifically, listing #49.
The agreement currently under review is considered a "new/revised" PA due to the fact the City previously entered into a nearly identical PA with PSD LLC on August 06, 2014. Included below is additional background; which details the the original PA.
BACKGROUND (PA - Detailed)
The Ramsey HRA originally entered into a Purchase Agreement (PA) with PSD LLC for 13.97 acres of Ramsey HRA owned land located within The COR on August 06, 2014. The proposed closing date for this original agreement was no later than September 15, 2014 (also referred to as the termination date within the PA). Attached to this case is a copy of the original PA.
On September 11 Staff received a formal request from PSD LLC to extend the September 15 closing date to December 25, 2014. Said request is attached to this case. PSD LLC requested an extension to the original PA to provide sufficient time for the City to amend COR-1 Zoning Code; which would allow PSD LLC to construct their proposed project (which the Council reviewed in CONCEPT on September 09).
The HRA reviewed PSD’s request to amend the original PA on September 23, 2014. The HRA chose to not extend the original PA with PSD LLC for the reasons outlined below. The HRA did indicate interest in continuing to pursue this project; and, the HRA directed Staff and CBRE to renegotiate a new/revised PA that addresses concerns raised.
(1) The original PA with PSD LLC technically expired before the HRA had an opportunity to review the PSD LLC proposed amendment; therefore, the original PA became null and void. The HRA indicated a preference for a new/revised PA to be signed with appropriate closing/termination dates; rather than attempting to retro-activate a terminated agreement.
(2) The major reason PSD LLC requested an amendment to the original PA was to allow for more time to complete contingency item F (Government Approvals). Specifically, PSD LLC is interested in making sure the concept development scenario reviewed by the City Council on September 09 would meet City Zoning Ordinances. In order to allow the PSD LLC concept development scenario, the City will need to complete a Zoning Amendment to change the existing minimum floor area ratio (FAR) from .75 to .65 within the COR-1 Zoning District.
The HRA indicated a change to the City’s Zoning Ordinances may change how the HRA would respond to a purchase offer for the subject property. It was requested, a new/revised PA come forward and be considered based on the newly proposed zoning standards RATHER than amending the original PA; which, was considered and executed based upon on previous zoning standards. In summary, the HRA preferred to review a new PA based on existing market conditions (in this case, the proposed Zoning Amendment).
Included in this case are comments from CBRE, the City's real estate broker, related to how the proposed Zoning Amendment would effect the City's adopted pricing strategy for the subject property. In summary, with the proposed zoning amendment in mind, CBRE has indicated the existing pricing strategy for the subject property would not change; and, that the existing offer from PSD LLC is still a fair, market-rate, offer.
(2) The major reason PSD LLC requested an amendment to the original PA was to allow for more time to complete contingency item F (Government Approvals). Specifically, PSD LLC is interested in making sure the concept development scenario reviewed by the City Council on September 09 would meet City Zoning Ordinances. In order to allow the PSD LLC concept development scenario, the City will need to complete a Zoning Amendment to change the existing minimum floor area ratio (FAR) from .75 to .65 within the COR-1 Zoning District.
The HRA indicated a change to the City’s Zoning Ordinances may change how the HRA would respond to a purchase offer for the subject property. It was requested, a new/revised PA come forward and be considered based on the newly proposed zoning standards RATHER than amending the original PA; which, was considered and executed based upon on previous zoning standards. In summary, the HRA preferred to review a new PA based on existing market conditions (in this case, the proposed Zoning Amendment).
Included in this case are comments from CBRE, the City's real estate broker, related to how the proposed Zoning Amendment would effect the City's adopted pricing strategy for the subject property. In summary, with the proposed zoning amendment in mind, CBRE has indicated the existing pricing strategy for the subject property would not change; and, that the existing offer from PSD LLC is still a fair, market-rate, offer.
Notification:
Observations/Alternatives:
Attached to this case is a new Purchase Agreement. Below is an outline of changes made to the original agreement:
1. Termination and closing dates were changed to May 01, 2015.
These changes were made to reflect the actual project timeline and allow sufficient time for Buyer due-diligence; and, to add consistency with other contingencies outlined in this Purchase Agreement (e.g. F. Government Approvals). Staff did discuss this amendment with CBRE, the City's real estate broker. It was indicated by CBRE, a 6-9 month due-diligence period on a large land transaction is not uncommon in the marketplace.
2. Government Approvals Contingency Updated
Previously, this contingency was vague and provided reference to no specific government approvals. As a result, it was unclear what the Buyer's expectations were; and, what specific government approvals would trigger completion of this contingency. This amendment provides clarity within the PA; and allows for a realistic timeline to be established for this contingency to be executed (subsequently, for the PA to be closed).
In addition to the items mentioned above, reference to the proposed COR-1 Zoning District Amendment discussed in the background section of this case was added. This Zoning Amendment is being discussed by the Planning Commission on October 09. Details on this case can be found on the published Planning Commission agenda.
3. Project Assistance Notification Section.
The Buyer has indicated they would like a clause added to this agreement notifying the City of their position on potential project assistance. The PA currently under consideration by the HRA is a market-rate land transaction requiring no government subsidies or financial assistance. However, the Buyer has indicated, in the future (i.e. outside of this PA) a request for project assistance is a possibility. A potential future project assistance request would be made based off of existing market conditions and project pro forma; which, are unknown today. The Buyer has requested this clause to added to the PA to provide transparency to their position on developing the subject property.
In 2013, the City adopted a Housing Assistance Policy. If/when a request for project assistance from the Buyer comes forward, staff would recommend it be reviewed in context of the Housing Assistance Policy, along with other applicable City policies and standards, at the time of the request. Staff would like to note, this clause does not require, bind or obligate the City to provide any project assistance to the Buyer.
These changes were made to reflect the actual project timeline and allow sufficient time for Buyer due-diligence; and, to add consistency with other contingencies outlined in this Purchase Agreement (e.g. F. Government Approvals). Staff did discuss this amendment with CBRE, the City's real estate broker. It was indicated by CBRE, a 6-9 month due-diligence period on a large land transaction is not uncommon in the marketplace.
2. Government Approvals Contingency Updated
Previously, this contingency was vague and provided reference to no specific government approvals. As a result, it was unclear what the Buyer's expectations were; and, what specific government approvals would trigger completion of this contingency. This amendment provides clarity within the PA; and allows for a realistic timeline to be established for this contingency to be executed (subsequently, for the PA to be closed).
In addition to the items mentioned above, reference to the proposed COR-1 Zoning District Amendment discussed in the background section of this case was added. This Zoning Amendment is being discussed by the Planning Commission on October 09. Details on this case can be found on the published Planning Commission agenda.
3. Project Assistance Notification Section.
The Buyer has indicated they would like a clause added to this agreement notifying the City of their position on potential project assistance. The PA currently under consideration by the HRA is a market-rate land transaction requiring no government subsidies or financial assistance. However, the Buyer has indicated, in the future (i.e. outside of this PA) a request for project assistance is a possibility. A potential future project assistance request would be made based off of existing market conditions and project pro forma; which, are unknown today. The Buyer has requested this clause to added to the PA to provide transparency to their position on developing the subject property.
In 2013, the City adopted a Housing Assistance Policy. If/when a request for project assistance from the Buyer comes forward, staff would recommend it be reviewed in context of the Housing Assistance Policy, along with other applicable City policies and standards, at the time of the request. Staff would like to note, this clause does not require, bind or obligate the City to provide any project assistance to the Buyer.
ALTERNATIVES
A. Approve the proposed purchase agreement (staff recommendation)
This alternative is discussed in the staff recommendation section of this case.
B. Amend the proposed purchase agreement
It is possible, portions of this agreement are undesirable/not acceptable to the HRA. If so, Staff would recommend amending and approving the proposed agreement. For example, HRA members may prefer the COR-1 Zoning District to be effectively amended before signing this PA.
C. Reject the proposed purchase agreement
A. Approve the proposed purchase agreement (staff recommendation)
This alternative is discussed in the staff recommendation section of this case.
B. Amend the proposed purchase agreement
It is possible, portions of this agreement are undesirable/not acceptable to the HRA. If so, Staff would recommend amending and approving the proposed agreement. For example, HRA members may prefer the COR-1 Zoning District to be effectively amended before signing this PA.
C. Reject the proposed purchase agreement
Funding Source:
NA
Recommendation:
Per direction from the September 23 HRA meeting, Staff has revised the attached PA to address HRA the two identified concerns. The proposed PA meets the City's adopted pricing strategy. The proposed land transaction does not include any subsidies or financial assistance.* Attached is a general concept map indicating the proposed use. This concept was reviewed and generally accepted by the HRA (not officially). This PA requires PSD LLC to fund the required new City roadway. PSD LLC has a track record within The COR of completing and maintaining quality projects and working well with City Staff. Lastly, based on market input from CBRE, by approving this PA, the HRA will be sending a strong, positive, message to the development community; and should generate additional interest in HRA owned property within The COR. Considering the items above, and the previous direction from the HRA with a similar purchase offer, Staff would recommend accepting the proposed purchase agreement.
*As outlined in the observations section of this case, PSD LLC has added a "Financial Assistance Notification" clause to the proposed PA.
Action:
Motion to approve the attached Purchase Agreement between PSD LLC and the Ramsey HRA for 13.97 acres of HRA owned land within The COR.
Attachments
- NEW Purchase Agreement 10 14 2014 (partially executed)
- NEW Purchase Agreement 10 14 2014 (redline)
- ORIGINAL Purchase Agreement 08 06 2014 (VOID)
- ORIGINAL Purchase Agreement Amendment Request (VOID)
- Government Approvals Timeline
- Subject Property Listing and Specs
- Memo from CBRE
- Site Concept Plan 09082014
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Brian Hagen | Tim Gladhill | 10/09/2014 08:06 AM |
| Kurt Ulrich | Kurt Ulrich | 10/09/2014 11:01 AM |
- Form Started By:
- Jo Thieling
- Started On:
- 10/08/2014 03:50 PM
- Final Approval Date:
- 10/09/2014