09/30/2014 - City Council Finance CommitteeFINANCE COMMITTEE MEETING
TUESDAY, SEPTEMBER 30, 2014
10;30 A.M.
CONFERENCE ROOMS 2 A &B
AGENDA
I. AGENDA ADOPTION
II. BLUE GENTIAN CORPORATE CENTER - MCGOUGH PROPERTY
III. STATUS OF 3795 PILOT KNOB ROAD PROPERTY
IV. CEDAR GROVE TIF DISTRICT EXTENSION -- ISD 191
V. OTHER BUSINESS
VI. ADJOURNMENT
Agenda Information Memo
Finance Committee Meeting
September 30, 2014
II. BLUE GENTIAN CORPORATE CENTER— MCGOUGH PROPERTY
DIRECTION TO BE CONSIDERED:
To discuss options for the future use of the Blue Gentian McGough property in light of
the company's plan to sell the site.
FACTS:
McGough Development has partnered with the Eagan EDA on the acquisition and
assembly of property at the northwest corner of Hwy 55 and Blue Gentian Road for
redevelopment purposes. The property is part of Northeast Eagan Redevelopment
District #2 -5. The EDA and McGough have a TIF Development agreement for the site
that runs through May 1, 2015. The five year rule for the property was extended to
April 28, 2017 through general legislation in the 2014 session.
In September, 2008, McGough received approval of a plan for the Blue Gentian
Corporate Center project, a 200,000+ sf high -end office project that was intended to
take advantage of the site's profile and visibility above the 1 -35E -1 -494 interchange
to attract one or more corporate users. McGough has marketed the site in the time
since that time. While some prospects came forward, the market for new Class A
office developments in the suburban market has not recovered since the recession.
The TIF Development Agreement anticipated financial assistance to a project on the
site through a pay as you go note for up to 75% of the increment created by the
project. The purpose for the assistance was to offset the additional costs
anticipated for structured parking, which would be necessary to provide adequate
parking to support Intense, vertical development of the scale contemplated by the
approved plan.
In recent months, McGough staff has approached City staff regarding the continued
challenges they are experiencing in marketing the property for its intended use and
to share that the market response they have received has come in the areas of
multi - family residential or office /warehouse /showroom products. They have asked
for feedback as to whether the City would be open to such other approaches, with
the understanding that the City may or may not continue to offer TIF assistance for
an alternative,
• In the alternative, if the City is committed to pursuing the Class A plan for the site,
McGough has raised the potential for the EDA to purchase the site and carry it until
the market may support that alternative.
Staff shared that the EDA and Council have considered alternatives to original plans
in their redevelopment districts in the past, but that it would be necessary to begin
the conversation in the context of the prior approvals and current agreements.
Staff has also shared that there may be special concerns about a residential use in
this location due to aircraft noise and its isolation from other residential areas and
amenities, but that the Finance Committee would be the first entity to respond to
the future expectations for any development in the area.
• Mark Fabel and Greg Munson of McGough will beat Tuesday's meeting to discuss
the options with the Committee.
ATTACHMENTS:
• Location map on page
• Blue Gentian Corporate Center site plan on page q
• Letter form McGough on page I
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September 17, 2014
Jon Hohenstein
Director of Community Development
City of Eagan
3830 Pilot Knob Road, City Hall
Eagan, MN 55122
t �� McGOUGH
EEIE
SEA' 18 2014
RE: Request for Finance Committee Meeting
Sale of McGough Property: Blue Gentian Corporate Center (Approximately 18 Acres)
Dear Jon,
In 2001 McGough initiated the acquisition of multiple residential properties within the Blue Gentian
neighborhood to repurpose the site into a high density, corporate office environment consistent
with the City's vision for this prime location. Since the final property assemblage, we have
partnered with a commercial office broker to market the site to Class A office users and other
commercial brokers working the Eagan market. To date, our effort to find an office user seeking a
multi- story, Class A corporate environment at this location has been unsuccessful. We believe that
our challenge in securing a Class A office user for a multi -story corporate campus is not a reflection
on our marketing efforts or the quality of the site but instead based on the reality that new office
construction has been significantly limited and may continue to be limited into the near future.
Despite our continued belief that it would be an excellent Class A corporate office location,
McGough has determined that it is not economically feasible to continue to hold and wait for such
an opportunity to emerge. As a result, McGough has initiated the process to sell the property.
In our effort to sell the property we have heard from a number of interested prospective buyers and
or brokers that the immediate best use for the property is either as a multi - family residential
development or as a single story office /warehouse (showroom) development. We believe that
either of those uses would be viable on the site but neither meet the vision as set forth by the City
of Eagan and supported by McGough during our ownership.
We would like to request a meeting with the City of Eagan Finance Committee to discuss what we
have collectively learned in our effort to sell the property and to offer the City the opportunity to
purchase the Blue Gentian Corporate Center land to best control the outcome of a premier
intersection and gateway into the City.
Thank you in advance for your consideration.
Sincerely,
Mark Fabel
Vice President — Development
McGough
Agenda Information Memo
Finance Committee Meeting
September 30, 2014
III. POTENTIAL PURCHASE OFFER FOR FORMER FIRE ADMINISTRATION BUILDING
DIRECTION TO BE CONSIDERED:
To receive an update on a possible purchase offer on the former Fire Administration
Building and provide direction to staff in its regard.
FACTS:
In consideration of the space needs studies the City has undertaken for future
facilities needs, the listing agreement for the sale of the former Fire Administration
Building at 3795 Pilot Knob Road was allowed to lapse at the end of July, 2014.
After that occurred, the former listing broker, Cassidy and Turley, contacted staff to
share that they had been approached by a software firm expressing interest in the
property. Cassidy Turley shared with the prospect that the listing had lapsed, but
they contacted us to indicate the firm said they might be willing to make a full asking
price offer, if they were permitted to tour the property and found it to be desirable
for their needs.
Since one of the reasons for permitting the listing to expire was that no offers had
been received that approached the asking price and one may be coming forward
now, it was decided to arrange for Cassidy Turley to do a walk through with the firm.
That is scheduled to occur on Monday, September 29. If an offer or response is
received prior to the Committee meeting on Tuesday, that will be provided at that
time.
As the Committee is aware, the City also has a contingent lease agreement with
Dougherty, Molenda, Solfest, Hills and Bauer, which would permit the firm to occupy
and rent the building for some period through December 31, 2014. We do not know
at this time whether the firm will exercise the contingency, but the City would need
to consider any purchase offer it receives with that timeline in mind.
ATTACHMENTS: None.
0
Agenda Information Memo
Finance Committee Meeting
September 30, 2014
IV. CEDAR GROVE TIF DISTRICT EXTENSION — ISD 191
DIRECTION TO BE CONSIDERED:
To receive an update on discussions with the ISD 191 School Board regarding its action
regarding the extension of the term of the Cedar Grove TIF District and provide direction
to staff in its regard.
FACTS:
Mayor Maguire and members of City staff have had a number of meetings with ISD
191 elected officials and staff with respect to the requirement in the special law
permitting the extension of the Cedar Grove Redevelopment TIF district. At this
time, the City has been asked to present information in this regard to the School
Board workshop meeting on the evening of October 9, 2014, in anticipation of
formal action on the resolution to approve two weeks later on October 23.
To date, information has been provided to the District by the City's development
finance consultants, Ehlers and Associates, and by their school finance consultants,
which is another division of Ehlers. Some additional information has been requested
by the Board and discussions are underway regarding the presentation that will be
made at the workshop on the 9�h. The purpose of the discussion on Tuesday will be
to clarify and refine the elements of the presentation.
ATTACHMENTS; None — background will be shared at the Committee Meeting.
I