Consider Purchase Agreement between NIK Management Group and the City of Ramsey for the Former Municipal Center Site (PORTIONS MAY BE CLOSED)

 

Purpose
Consider offer from NIK Management Group INC. to purchase City owned property.

Background (Site)
The City owns a 21.5 acre property located at 15153 Nowthen Boulevard.  This site is currently located in the Public/Quasi Public Zoning District and is the temporary home of the City's Fire Station #2.  The City is currently processing a Zoning Amendment for this property from the Public/Quasi Public District to the R-1 Residential (MUSA) District.  Additionally, the City is in the process of designing a new, permanent, location for Fire Station #2.  The City will consider taking action on a potential new Fire Station #2 in January/February 2015 (i.e. the Council will consider letting bids).  The new location of Fire Station #2 is proposed for just northeast of this site.

This site is currently being listed by CBRE, the City's real estate broker.  This property is currently listed at $40,000 per acre (about $820,000 total asking price).  Development of this site for single family residential will require significant building demolition and site clean up costs (estimated at about $150,000). 

Background (NIK Management)
This Purchase Agreement comes from NIK Management Group (management arm for Bridgeland Development INC).  NIK Management Group would act as the developer.  NIK Management Group would enter into a LLC Partnership with Rice Creek Building for this specific project.  Rice Creek Building's web address is: ricecreekbuildingandremodeling.com.  NIK Management Group has completed several projects in Minnesota, Wisconsin and the Dakotas.  Attached is background information on NIK Management Group, and their previous projects.

Background (Offer)
The attached NIK Purchase Agreement includes a two-phased closing approach.  The buyer would close a purchase on all developable land in April/May 2015 (about 14 acres of the 20.5 total acres); and close on a second purchase for the remaining land (about 7.5 acres) in May of 2016.  The second closing requires the City to deliver "clean site" to the buyer; which means: removal of existing structures and improvements at the sole cost of the City (including capping wells, septic tanks, etc.).  The City Attorney has reviewed the attached Purchase Agreement.  The observations section of this case includes highlights.

Background (Case)
This case was reviewed by the City Council on Tuesday, December 09, 2014.  At the time, the Council was considering two offers.  General direction from the Council was to negotiate a Purchase Agreement with NIK Management; and to bring it back in January 2015 for consideration.  The attached NIK Management Purchase Agreement was reviewed by the EDA on 01/08.  The EDA did pass a motion to recommend the City Council approve this agreement.  Below are comments made by the EDA:

• Staff should work with NIK Management to negotiate earnest money terms (i.e. amount and when it becomes hard).  The EDA was especially concerned with the second closing.  Staff will attempt to renegotiate this term before 01/13 (improve the City's position).
• The EDA did discuss an option to remove the second phase of this project from this particular PA.  This alternative was considered by the EDA to allow the City time for "uncertainties" of the second phase to become clearer (i.e. access resolution and site clean-up costs to be finalized).  After discussion, the EDA did not move forward with this alternative.  Reasons included: existing NIK deal ties up phase two with a competitive offer price, both access and site clean up need to occur (now or in the future, may be a moot point), this deal will support the initiative for a new Fire Station #2, the PA includes protective language regarding phase two (in the event Fire Station #2 is not built).
• The EDA had questions regarding minimum architecture.  The City's Community Development Director Mr. Gladhill indicated what minimum standards are in place today; and that minimum standards will result in a product similar to the surrounding neighborhood.
• The EDA had questions regarding internal traffic circulation, if phase two never occurred. The City's Community Development Director Mr. Gladhill indicated that a future development agreement with the buyer for phase one of the proposed development would require a contingency to address said issue (i.e. dollars to pay for cul-de-sacs).
• If available, minutes from the EDA meeting will be forwarded to the City Council before 01/13.

Background (Land Use)
From a land use perspective, the proposed project is set for review by the Ramsey Planning Commission on 01/08 (from a preliminary plan perspective).  Results of said meeting will be disclosed during the presentation of this case; or may be viewed online at QCTV.org.
 

NA

Observations
Listed below are highlights of the proposed Purchase Agreement with NIK Management:

1. $929,000 total offer price ($41,500 per acre for phase one and $43,500 for phase two).  NOTE: the total listing price for this property was $860,000 ($40,000 per acre).
2. The proposed deal includes a two-phased closing (first closing on 14 acres in June of 2015 and second closing on 7.5 acres in June of 2016).
3. The second closing requires the City to deliver a "construction-ready" site.  Meaning, removal of existing structures, improvements (parking, driveways, etc.), capping wells, removal of septic tanks (if needed), etc.  This work is estimated to cost the City about $150,000-$200,000.
4. The second closing will require implementation of a "new/re-aligned" access to this site from Nowthen Boulevard.  This will affect the City's NET Proceeds.  See background section of this case or item 7 below for details.
5. $10,000 of earnest money will be put down on the project (1.07%).  Earnest money is scheduled to be utilized 50% at closing one and 50% at closing two.  $1,500 will become hard after 60 days.
6. Major contingencies include site plan, plat, development agreement, and financing approvals before closing.
7. NET PROCEEDS: depending on several unknowns, City staff is estimating NET Proceeds ranging from $101,887 to $301,887 for the proposed deal.  Attached to this case is a feasibility analysis.  NOTE: the City may be able to significantly improve NET Proceeds by utilizing County HRA dollars to offset required City redevelopment expenses. This item is discussed in the feasibility analysis.

Alternatives
Accept
Staff believes the proposed offer is fair for both parities and recommends the City Council consider accepting.  The proposed offer meets the City's asking sale price.  The proposed terms and timelines are reasonable to staff, CBRE and the City Attorney.  The proposed project accomplishes multiple City goals: selling surplus city owned land, getting tax-exempt land back on the tax-rolls, attaining land proceeds to help offset the cost of Fire Station #2, and help perpetuate the initiative to relocate Fire Station #2.

Revise
The City Council may be interested in amending a number of terms included in this agreement before considering approval.  Based on input from the City Attorney and CBRE, staff is not currently recommending any specific amendments (several amendments have been requested by staff and the attorney, and have been made).  However, any number of terms and conditions could be renegotiated further (not uncommon to request).

Deny
Staff has not identified concerns or issues with the proposed Purchase Agreement that would result in a recommendation to deny.  If the Council is in disagreement with any terms/conditions of the proposed agreement, staff would recommend renegotiating said terms/conditions rather than denying this agreement entirely.

NA

Staff recommends the City Council consider adopting the attached Purchase Agreement with NIK Management INC.  Explanations are included in the "alternatives" section of this case.

Note:  The draft EDA meeting minutes have been attached to this case as of 1/13/15.

Motion to (approve/amend/deny):
the attached Purchase Agreement between the City of Ramsey and NIK Management INC. for 21.5 acres of City owned land contingent upon final review and amendments from the City Attorney.