07/30/2018 - City Council Finance CommitteeFINANCE COMMITTEE MEETING
MONDAY, JULY 30, 2018
1:00 P.M.
EAGAN FIRE STATION #2
1001 STATION TRAIL
UPPER CONFERENCE ROOM
AGENDA
I. AGENDA ADOPTION
II. CEDAR GROVE DEVELOPMENT UPDATE
III. FIRE STATION #5
IV. OTHER BUSINESS
V. ADJOURNMENT
July 30, 2018
Finance Committee
Agenda Information
II. Cedar Grove Development Update
Action to Be Considered:
Provide direction to Staff and the EDA on a request from Commercial Investment Properties to extend
the terms of the Repurchase Agreement.
Attachments:
➢ Letter from Commercial Investment Properties
➢ Analysis of Commercial Investment Properties Extension Request
Ill. Fire Station #5
Action to Be Considered:
Provide Direction to Staff on the preferred proposer for the acquisition of Fire Station #5 to engage in
further discussions on possible terms and conditions of a purchase agreement
Facts:
➢ The City received four proposals for consideration for the acquisition of Fire Station #5.
➢ Staff has interviewed three of the proposers and communicated with the 4th over the telephone
➢ Staff has provided additional information to the Finance Committee on the key findings from
the proposals and conversations with each of the four proposer and will seek direction on
which of the four to engage in further discussions on possible terms and conditions of a
purchase agreement
Attachments:
➢ Key findings on each of the four proposals
Commercial Investment Properties
Development & Asset Management
July 23, 2018
Eagan Economic Development Authority
c/o Mr. Dave Osberg
City Administrator - City of Eagan
3830 Pilot Knob Road
Eagan, MN 55122
Mr. Robert Bauer
Dougherty, Molenda, Solfest, Hills & Bauer P.A.
14955 Glazier Avenue, Suite 525
Apple Valley, MN 55124
VIA EMAIL
RE: Sale and Purchase Agreement by and between the Eagan Economic Development
Authority ("EDA") („Seller") and Commercial Investment Properties ("Buyer")
("Developer") dated March 7, 2017 for real estate described as Lot 1, Block 1, The
Preserve at Cedar Grove, Eagan, Minnesota (the "Purchase Agreement").
Gentlemen:
As clarification of my previous correspondence with Jill Hutmacher, i submit the following for
your consideration:
Exhibit B of the Purchase Agreement allows an extension of the Construction Commencement
Deadline if agreeable to both parties. At this time, we are officially requesting such an extension
to April 1,2019. It is my understanding that the Finance Committee will first consider the request
and make a recommendation to the EDA, and that the EDA will consider that matter at their
August 6th meeting. The Developer will pay a non-refundable Extension Fee of $10,000 prior to
the EDA meeting.
In the meantime, we are preparing revised renderings and civil drawings for The Preserve at
Cedar Grove eliminating the restaurant component and adding twenty (20) additional dwelling
1065 North 1151h St., Ste 200 * Omaha, NE 68154
Phone: 402 -434 -RENT (7368) • Fax: 402-436-3499
www.RentCIP.com
a 'Providing those we serve with exceptional experiences.'
units. By the end of July we will make a submittal to the City requesting an amendment to the
Final Planned Development encompassing these changes (the "Amendment"). The Developer
will pay a non-refundable Amendment Fee of $10,000 with the submittal. Upon approval of the
Amendment by the Advisory Planning Commission and the City Council, the Developer will pay a
Final Amendment Fee of $220,000.
The Developer will keep the 75 stalls in the adjacent city -owned parking ramp pursuant to Exhibit
A to the Purchase Agreement,
While it is regrettable that we were not successful in securing a restaurant as an integral part of
the project, it was not due to any lack of energy devoted to that common goal. (We did engage
in conversations with Paul Dzubnar. Unfortunately, in Paul own words, the deal he proposed was
"well below (the) market rate." That just wasn't a prudent economic decision for us.) I trust that
the City is aware of all our other efforts, but if not, I am glad to forward the final report from
Colliers outlining those efforts.
Please advjww� atthe next steps are as we anxious to proceed.
LE;a �
I
,Charles V. Sullivan
Senior Vice President
Director of Construction + Development
CC Peter Coyle
ANALYSIS OF EXTENSION REQUEST
COMMERCIAL INVESTMENT PROPERTIES (CIP)
1. BACKGROUND.
• The initial Purchase Agreement was dated March 7, 2017 with a 180 -day due
diligence period.
• A First Amendment was signed on August 15, 2017 to extend the due diligence to
November 7rn
• A Second Amendment was signed on November 6, 2017 to extend the due diligence
period to February 15, 2018.
• The transaction closed on February 20, 2018.
II. KEY DEAL TERMS.
• Sale Price: $1,736,000.00
• Authorized 151 apartment units
• An 7,600 sq. ft. restaurant
• 75 stalls in the ramp were leased and we offered $128,012.60 in SAC credits upon
issuance of a building permit for restaurant build out.
I1I. REPURCHASE AGREEMENT.
• With any sale of EDA property, there is a requirement that the EDA has the option
to repurchase the property is a developer fails to commence construction. We gave
CIP 180 days from February 20, 2018 to commence construction.
• We defined "Commenced Construction" as "the installation of footings and
foundations for the construction of a Class `A' multifamily residential property and
restaurant."
• The repurchase deadline ends Sunday, August 19, 2018 (180 -days from February 20,
2018).
IV.
V.
EXTENSION REQUEST.
• CIP is requesting an extension of the Repurchase to eliminate the requirement for the
restaurant to allow them to redesign their development to have only apartment units
with potential for townhomes.
OUTSTANDING ISSUES.
• Exercise Repurchase Right. The EDA can repurchase the property for the sum of
$1,562,400.00:
Pro
o Potential for increase of purchase
price. If similar to the Quarry
development, we would achieve
another $450,000.00.
o Potential for more units/density
o New developer may do mixed-use
concept to include restaurant.
Con
o Need to engage broker to market
the property—unsure of market
interest
o Will lose approximately
$260,000.00 in TIF revenue
o Potential for lawsuit if CIP does
not willingly convey the property
back to the EDA
o Possibly could still not obtain a
restaurant
• Grant Extension RepuestlAllow New Zoning Application.
Pro
o Potential ground breaking in
November 2018, but more likely
spring 2019 construction
o Extension fee payment could make
up for potential lost TIF revenue and
market increase
o Grant extension request—but retain
restaurant requirement
2
Con
o The City's vision for a restaurant
in the Cedar Grove area will be
lost.
o Only a $20,000 extension fee
o Potential criticism from other
developers who would like to do
an apartment -only project or
potentially a mixed-use
development
o The current market could exceed
$15,000.00 per unit
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