Platinum Properties Concept Development Proposal

PURPOSE (Planning Commission)
The purpose of this case is to provide the Planning Commission an opportunity to review the attach concept development proposal (please see Platinum MEMO).  It is standard practice--when the City reviews a purchase agreement for the sale of city owned land--to allow the Planning Commission an opportunity to provide initial feedback on the site concept.  [NOTE: this case was copied from the EDA Agenda]


PURPOSE (EDA/ Council)
Consider the attached purchase agreement (purchase offer of $500,000) from Platinum Properties Group, INC. for a 9.3-acre City owned property located just south of Vision Ease Lens for a 123,840 square foot industrial project.


BACKGROUND
Site Information
This site is zoned E-2 Employment District; which generally allows for "business park" type users. This site is located in one of the City of Ramsey's established business parks, with access to 143rd Ave and Jaspar Street. 

The City of Ramsey purchased the "Bury & Carlson" site in 2008 for $1.75M, or $1.90 psf. The City purchased the roughly 20 acre Bury & Carlson site for the purpose of locating a new City Public Works Campus. In late 2015, the City completed a Space Needs Analysis for a new Public Works Campus. As a result of that exercise, it was identified, a 9.3 acre portion of land was unneeded for the Public Works Campus, on the north side of the former Bury & Carlson site. Per informal Council direction, staff was asked to market this parcel for economic development purposes.
The City purchased this site with the following funding sources:

1. TIF 2 $134K, Water Fund $292K
2. Sewer Fund $292K
3. Stormwater Fund $292K
4. Water Utility Fund) $719K.

The InterFund loan has a current balance of $513K, and is being paid back by the General Fund/ General Levy. If this transaction moves forward, staff will recommend the InterFund loan be paid back first, as much as possible, with the benefit of removing a debt service burden from the General Levy.

Property Listing
The City has not officially listed this property with a broker.  However, staff was informally provided direction to begin marketing this property for sale in late 2015.  Because this property is not officially listed, the City has not established an official asking price; or subsequent formal deal range. Traditionally, City owned parcels with similar zoning, and the City's future business park (privately owned), carry asking prices ranging from $1.75 per square foot on the low end up to $2.50 per square foot on the high end. For this this transaction in particular (9.3 acres), the math works out to $708,939 to $1,012,770.

The prospect buyer, Platinum Properties Group LLC, was brought to the City by CBRE (Brian Pankratz).  CBRE recently worked with Platinum Properties Group LLC on a project in our neighboring city (Andover).  As reflected in the attached purchase agreement, staff will be recommending CBRE be paid their standard commission on this land transaction (5%), due to the fact they specifically recruited this buyer. 
Platinum Properties Group INC
For background information on Platinum Properties Group INC, please see the attached MEMO and check out their website: http://platinumproperties.com/.  In summary, Platinum is a Minnesota based developer that specializes in commercial real estate (office, retail, and industrial).


Anchor Tenant, Adrenaline Sports Center
Adrenaline Sports Center began operations in Coon Rapids about eight years ago, under the name Gold Kick.  Four years ago, it was converted to Adrenaline Sports Center.  Today, Adrenaline leases 25,000 square feet of space.  The primary use of space is soccer training/ practice.  Secondary users of the Adrenaline Sports Center include cross-fit and baseball training/ batting practice.  Lastly, on occasion, Adrenaline is used for various events.  Today, Adrenaline attracts an estimated 4,000-5,000 families to their facility on an annual basis.

Moving forward, Adrenaline Sports Center needs to expand.  They would like to move to a location that provides 40,000 square feet of space (60% increase from 25,000 square feet), has room for future expansion, and can be ready by summer 2017.  Staff began working with Adrenaline in June.  At the same time, staff was working with two developers interested in purchasing the subject property.  A connection was made by staff, which brings us to this proposed development.  Adrenaline Sports Center is the proposed anchor tenant to the proposed 123,840 square foot Platinum Properties Group industrial development.

Through conversations with staff, Adrenaline Sports Center has indicated a desire to make strong connections/ partnerships with the local community (schools, city, non-profits, business parks, residents, etc.).


Proposed Project
Platinum Properties is proposing a two-building 123,840 square foot industrial development.  Outside of Adrenaline Sports Center, this development is being constructed on spec (speculation).  One building is 51,840 square feet, and the other is 72,000 square feet.  Platinum desires to construct the entire project in 2017 (note: staff needs to confirm this item).  In order to keep rental rates competitive for Adrenaline Sports Center (a private and quasi public operation), and to take on the risk of building a spec project, Platinum Properties is asking a land write-down (reduction in the land purchase price).  Platinum Properties Group is proposing a land transaction cost of $500,000.  Please see attached MEMO for additional details.
 

OBSERVATIONS
Listed below are terms/ conditions/ observations related to the attached purchase agreement that staff considers important to highlight for potential discussion.

(1) Policy Compliance
This project is not requesting Tax Increment Financing (TIF), Tax Abatement, the City's Revolving Loan Fund, or State DEED Programs. However, the buyer is making an offer of $1.23 psf; which is below the City's standard asking prices for industrial land ($1.75-$2.50 psf). This item should be discussed by the EDA in closed session. The attached PA is simply an edited version of the City's adopted "template PA." Therefore, appears to be in compliance with City's Land Sale Policies.

(2) Offer Price
$1.23 per square foot or $500,000.

(3) Earnest Money
$10,000 (2%), all to become hard after inspection period.

(4) Inspection Period
February 28, 2017

(5) Extension Option
If the buyer decides to extend the PA, they will be required to place $5,000 of additional non-refundable dollars in earnest for each 60 day extension.

(6) Construction Deadline
01/01/2018 Phase 1 (72,000 sf) and 01/01/2019 (51,840).

(7) Removal of Materials
The subject property includes stockpiles of con-bit and a large quantity of retaining wall blocks (concrete blocks). The City shall retain ownership of said items, and will remove from the subject property by 90 days after the Effective Date.

NA

EDA/ Council (not Planning Commission)
(1) Staff will suggest the attached purchase agreement be discussed in closed session (sale price, and deal terms).  Staff will send the EDA a closed session MEMO before the EDA meeting.

(2) Staff will suggest the EDA invite Platinum Properties Group to apply for a business subsidy ($7,500).  This will require the Platinum Property Group pro-forma to be audited/ underwritten by Ehlers & Associates.  This will tell the City if the requested subsidy can be justified (mathematically and from a market perspective).  

It should be noted, because this is a spec building, it will not meet job goals outlined in the City's business subsidy policy.  However, the policy specifically indicates exceptions can be made, on a case-by-case basis.  Due to the significance of this development (estimated at about $9M), the large amount of property taxes that will be paid by this development (about $86K total per year, or ), the ancillary effects it will have on economic development for the City of Ramsey (BR&E and business recruitment), recruiting a destination user nearby The COR (will help generate traffic for other desired users in The COR), and the recruitment of a Adrenaline Sports Facility (services desirable by many organizations/ residents), staff believes it would be reasonable to consider this project an exception to the job requirements outlined in the City's Business Subsidy Policy.

PURPOSE (Planning Commission)
The purpose of this case is to provide the Planning Commission an opportunity to review the attach concept development proposal (please see Platinum MEMO).  It is standard practice--when the City reviews a purchase agreement for the sale of city owned land--to allow the Planning Commission an opportunity to provide initial feedback on the site concept.  [NOTE: this case was copied from the EDA Agenda]


PURPOSE (EDA/ Council)
Consider the attached purchase agreement (purchase offer of $500,000) from Platinum Properties Group, INC. for a 9.3-acre City owned property located just south of Vision Ease Lens for a 123,840 square foot industrial project.