View Agenda Item

4.1.

Economic Development Authority (EDA)

Meeting Date:: 10/06/2016
Submitted For:: Patrick Brama
By:: Patrick Brama, Administrative Services

Title:

Platinum Properties Purchase Agreement [Portions may be Closed to the Public]

Purpose/Background:

PURPOSE
Consider the attached purchase agreement (purchase offer of $810,000) 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 (1.84 psf for land only). 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:

TIF 2 $134K, Water Fund $292K
Sewer Fund $292K
Stormwater Fund $292K
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 Soccer. 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 and 2018 (note: PA shows more conservative timeline). 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 business subsidy cash incentive payment from the City of Ramsey in the amount of $310,000 to be included on this deal. Please see attached MEMO for additional details.

Notification:

Observations/Alternatives:

OBSERVATIONS
Listed below are terms/ conditions/ observations related to the attached purchase agreement that staff considers important to highlight for potential discussion. EDA members should reference the "Closed Session MEMO" for additional details/ talking points.

(1) Policy Compliance
This project is not requesting Tax Increment Financing (TIF), Tax Abatement, the City's Revolving Loan Fund, or State DEED Programs. The attached PA is simply an edited version of the City's adopted "template PA." Therefore, generally appears to be in compliance with City's Land Sale Policies.

(2) Offer Price
The offer price is market rate, at $2.00 psf ($810,000). However, the PA includes a $310,000 incentive payment from the City to the Buyer (difference between $2.00 psf and $1.23 psf). After the $310,000 incentive payment is considered, 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). As a result, staff is considering this request a "business subsidy." Staff worked with our attorneys to add required language to this agreement to come into compliance with State Statute and our City Policy for business subsidies.

(3) Earnest Money
$10,000 to become non-refundable 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 & Incentive Payments
Phase 1 completed by 03/01/18 (72,000 sf), $155,000 payment, certificate of occupancy required.
Phase 2 completed by 03/01/21 (51,840 sf), $155,000 payment, certificate of occupancy required.*
*additional $100,000 if phase 2 completed by 03/01/19

(7) Commissions & Reassignment
This project is anticipated to be reassigned from Platinum Properties to HK Ramsey LLLC. Jeff Hagan, of Platinum Properties, will be a partner in the new HK Ramsey entity. This is called out in the PA, section 18. Additionally, the PA now includes a split commission payment between Platinum Properties and CBRE (split of 7%).

Funding Source:

Recommendation:

(1) This purchase agreement MAY be discussed in closed session (sale price, and deal terms). Staff will send the EDA a closed session MEMO before the EDA meeting.

(2) The City invited Platinum Properties Group to apply for a business subsidy ($7,500) in September. Platinum Properties did apply, and Ehlers did complete an an audit/ underwriting. Please see attached Ehlers MEMO for results.

(3) The EDA and City Council reviewed this project in September (09/01 and 09/13), and provide general direction to continue working with the developer on this project.

(4) The Planning Commission met regarding this project on 09/01 from a land use perspective. Generally, the Planning Commission is excited for this project, and comfortable with the proposed land use--from a very preliminary perspective. Below are specific comments:

Commissioner VanScoy believed this was a great fit for the proposed property.
Commissioner Nosan understood this development had a retail element and questioned if the site had adequate parking. Community Development Director Gladhill explained the site was permitted to have commercial retail recreation and had sufficient parking.
Commissioner Nosan believed this was an exciting development.
Commissioner Brauer agreed and wished this development was closer to The COR.
Commissioner Andrusko was excited about the project, but had some concerns with the proposed terms.

Action:

Motion to:
Recommend the City Council approve the attached purchase agreement with Platinum Properties for 9.3 acres of city-owned land.

NOTE: we do expect some minor changes with the purchase agreement to occur before Council review on 10/25. Council review will also include a resolution and public hearing related to the business subsidy.

Attachments

Form Review

Inbox	Reviewed By	Date
Kurt Ulrich	Kurt Ulrich	09/30/2016 03:32 PM

Form Started By:: Patrick Brama
Started On:: 09/30/2016 01:57 PM
Final Approval Date:: 10/04/2016