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Memo Suburban Chevrolet Property , . C I TV OF HOPKINS MEMORANDUM DATE: February 2, 1994 TO: Honorable Mayor and City Council FROM: ~{Jim Kerrigan, Director Planning & Economic Development SUBJECT: SUBURBAN CHEVROLET PROPERTY Overview In March of 1993 the Hopkins HRA entered into an option agreement with Grossman Investments for the possible purchase of the Suburban Chevrolet property. The purchase price as detailed in this agreement is $950,000. . In order to complete this purchase the HRA is required to submit to the seller a purchase agreement by no later than March 5. The actual closing on the property must be completed March 15. In consideration of these dates the city Council and the HRA need to make a decision on whether to purchase the property by no later than their first meeting in March. This memo is meant to provide the Council with information concerning the various issues as relates to purchasing or not purchasing the subject property. As part of the discussion concerning this matter the Council needs to request from staff any information that they feel is relevant and necessary to making a decision. Also there needs to be a determination on when the appropriate time is to place this item on the agenda for action. Analysis At the time that Copeland Mithun informed the city that they were not proceeding with their project on the Suburban Chevrolet site staff began to contact other potential developers. As part of these discussions the following information was conveyed: 0 A retail project, and most specifically entertainment . oriented, i.e., theater/restaurant was the most desirable project for the site. However, any type of project would be considered, at least for discussion purposes at this early stage. - ~ Honorable Mayor & city Council Page 2 . o A publicly owned performing arts facility might be constructed at some future date on a portion of the subject property. This facility could go either on the north or south parcel. This facility should be taken into account when planning for the potential development of the site but should not act to restrict development. In other words, if a developer has a project which would utilize the entire site completely, it would not automatically be eliminated from consideration. o In order to make the project feasible the City is willing to provide land write-down assistance for the IIright project.1I The City would be willing to provide the cleared land at basically no cost should it be necessary to make the project workable. At the present time there appear to be 3 or 4 developers interested in the site. Of the projects discussed one would involve a mixed use residential/retail use. The others would all be retail in nature with potentially a movie theater component. staff has asked that developers contemplating a project for the .. subject site provide a letter of interest which details their background and scope of the project. It is hoped that these letters will be available to the Council prior to making a final decision on the purchase. It should be noted that HBCA has formally gone on record as supporting the acquisition of the property. A letter is forthcoming from them which will fully explain their position. The question of acquiring the property was also specifically asked during the focus groups. The results of this question will be provided on February 15. Staff also desires direction as to whether the Council desires a recommendation from the Neighborhood Advisory Board. Environmental Issues Following execution of the option agreement the city contracted to complete a Phase II analysis of the subject site. This involved a number of borings on both the north and south parcel. Although this work concluded that there was some minor environmental concerns that need to be addressed there was, for the most, no significant contamination found. _ . In response to concerns about contamination under the building a number of borings were recently taken through the floor of the showroom/maintenance area. Although a small amount of oil was found adjacent to one of the hydraulic lifts, based on the field --- .--.--------..-. . -, Honorable Mayor & City Council 'Page 3 . analysis there was nothing found of any major significance. The lab work is being undertaken on these soil samples and should be completed within the next week. The Phase II environmental report will then be updated with this new information. In conjunction with all of the environmental analysis completed to date staff has also directed RLK to prepare a report which details the environmental issues which will need to be addressed in order to facilitate redevelopment and their related costs. This report should be completed within the next couple of weeks. Alternatives 1. Authorize staff to prepare, execute and submit a purchase agreement for the subject property. 2. Authorize staff to notify Grossman Investments that the HRA will be allowing the option agreement to lapse. This alternative assumes that the City may approach the Grossmans at a later date to acquire the property if a project were able to be worked out. 3 . Work on an extension to the option agreement. city staff . has already talked to Tom Grossman concerning this option. He stated that this would probably only be workable if the HRA agreed to make the monthly tenant payment, i.e, approximately $11,000 per month. The following are advantages and disadvantages to purchasing the subject site at the present time: Advantaqes - Maintains momentum on redeveloping this site and shows City commitment. - Ensures that the City will be able to purchase the subject property at the price which is detailed in the option agreement and is below the appraised value. - Allows the city to move in an expedient manner with a development project should it become necessary. - Would ensure that a use which may not be in the best interest of the downtown is not operated out of this site on an interim basis. Disadvantages . - Requires that the City expend a large amount of dollars for purchase of the property without the assurance that a project will be undertaken in the immediate future. ~. .- Honorable Mayor & city council 'Page 4 . - Eliminates the possibility that the property could potentially be purchased at a lower price at a future date. - Eliminates the ability to use condemnation at a later date for purposes of acquiring the property. It is assumed that no matter what action the city council and HRA takes on this matter, staff will still continue to work with potential developers on a redevelopment project. It would seem that if staff is able to secure interest from a number of developers, that the following process be undertaken: 0 city Council reviews various letters of interest and determines which projects they wish to continue to pursue. 0 Request that these developers provide more detail within a 30 to 60 day time period. Another alternative would be to issue a formal RFP to the entire development community to solicit development interest. 0 Review additional information and execute a preliminary development agreement with the developer which is . determined to be proposing the best project for the site and having the greatest capability of ensuring that he/she can get it built. JK02014A ,'. --.