Approve Settlement Agreement and Mutual Release by and between the City of Ramsey, Minnesota and McDonald's USA, LLC and Adopt Resolution #17-08-206 Authorizing Transfer of Right of Re-Entry Contained in Deed

Purpose: 
Approve Settlement Agreement and Mutual Release by and between the City of Ramsey, Minnesota and McDonald's USA, LLC, thereby eliminating the need for additional legal action by the City to assert its right to re-vest title to Lot 2, Block 1, COR TWO, City of Ramsey and adopt Resolution #17-08-206 Authorizing Transfer of Right of re-Entry Contained in Deed.

Background:
In February 2014, the City executed a Quit Claim Deed conveying Lot 2, Block 1, COR TWO, within the City of Ramsey to McDonald's USA, LLC.  The deed contained a right of re-entry in favor of the City.  Pursuant to the terms of the right of re-entry, the City had the option to commence an action in Anoka County District Court seeking an order re-vesting title to the property if McDonald's did not commence construction of the improvements on the property by February 16, 2016; or if McDonald's did not substantially complete the construction of the improvements by February 10, 2017.   McDonald's did not obtain a building permit or take any steps to commence construction on the property and all deadlines passed.

Council was updated on this project at their June 13, 2017 Work Session.  Part of the discussion centered around the fact that this is a prime commercial property that is just sitting vacant, and the City's Real Estate broker has indicated that there has been significant interest in this piece of property.  The value of the property to larger users is also enhanced if it is combined with adjacent parcels.

A consensus was reached that formal action should be considered to seek a District Court order re-vesting title to the property to the City.  A resolution authorizing staff to work with the attorney to pursue court action was approved at the June 27, 2017 Council meeting.  Subsequently, staff worked with the attorneys to reach this out-of-court settlement agreement that meets the needs of both parties and avoids costly litigation.

 

At the time the Council authorized Court action to revest the property, the timeframe of the re-vestment action was unknown, and dependent on McDonald's response to the complaint and lawsuit.  The estimated expense of this action, if it went to trial, was anticipated to substantially exceed the $10,000 offered in the current settlement. The settlement agreement attached releases both parties of any liabilities, requires the City to make a payment to McDonald's of $10,000 and pay deed transfer expenses, and releases the deed to the City.   This is a good outcome for both parties as it releases the property immediately, and avoids any future legal expenses or other obligations.

The City’s current options are to:
A.  Accept the settlement Agreement as proposed
B.  Modify the Settlement Agreement and counter-offer
C.  Continue the district court action seeking an order re-vesting title to the property.
D.  Do nothing and wait for McDonald’s to develop or sell the property to another developer (with City's approval).
         


 

Funding for the transaction will be taken from the Tax Increment District as an administrative/legal expense.

Staff recommends Council approve the settlement agreement mutual release by and between the City of Ramsey, Minnesota and McDonald's USA, LLC, and adopt Resolution #17-08-206 Authorizing Transfer of Right of Re-Entry Contained in Deed.  McDonald's has agreed to the settlement terms and has executed the agreement.

Motion to approve the settlement agreement and mutual release by and between the City of Ramsey, Minnesota and McDonald's USA, LLC, and adopt Resolution #17-08-206 Authorizing Transfer of Right of Re-Entry Contained in Deed and authorizing the Mayor and City Administrator to execute and record the Quit Claim Deed.