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Memo Copeland-Mithum Entertainment Project r ~ . C I T Y o F HOP KIN S M E M 0 RAN DUM DATE: August 7, 1992 TO: Honorable Mayor and city Council FROM: Jim Kerriga~ . Director of lanning & Economic Development SUBJECT: COPELAND-MITHUN ENTERTAINMENT PROJECT --~-~--------------~-~-------~ I. Purpose of Discussion This item has been placed on the August 11 Council Workshop agenda to provide the Council with a status report on this project. It was originally anticipated that Mr. Robert . Copeland would be present at this meeting. However, he has informed staff that he will be out of town. II. Backqround Although there have been no significant strides made in implementation of this project since the Council last met, the following has taken place: 0 Copeland-Mithun has been looking at alternative sites to the Suburban Chevrolet property 0 Staff has submitted a letter to the owner of Suburban Chevrolet detailing the terms under which the HRA would consider a possible purchase of this property. A meeting to discuss these terms was recently held with the owner. The previous action by the City council on this project was to authorize execution of a preliminary development agreement. This agreement required that both Copeland- Mithun and Child's Play Theatre complete a number of items. Although Mr. Copeland will not be at the August 11 meeting, staff has requested that he provide a summary detailing what he has accomplished to date, Steve Barbario with Child's . Plan Theatre has informed staff that he has completed all of the required items and will be providing this information to staff in the near future. Attached is a copy of the predevelopment agreement. .----- - ,- f Honorable Mayor and City Council' August 7, 1992 - Page 2 It appears that the major issues regarding this project relate to the following: 0 Location 0 Funding 0 Timing 0 Priorities III. Discussion of Issues A. Location From previous discussions it appears that most people concur that the Suburban Chevrolet site is probably the best location for this project due to the size of the site, its location to the parking ramp, and the understanding that Suburban will be vacating the property. However, although it appears the site will become available at some time in the future, there has been no firm commitment as to when this might be. In talking with the owners of the site it now appears that . Suburban may not be moving their operation until sometime in 1993. Staff and the developer have discussed alternative sites for the project. They include sites in and outside the CBD including the following: 0 Bursch's property 0 Rudy Luther property 0 Commercial property east of parking ramp (i.e. Fowler property) 0 R.L. Johnson property 0 pines Trailer Court site All of the downtown alternative sites, other than the Suburban Chevrolet site, would probably only accommodate one of the three users proposed for the entertainment project. . The entire project could be incorporated into development of the 13 acre R.L. Johnson site. On the smaller parcel north of the tracks, one or possibly two uses at best could be accommodated. The pines Trailer Court site would be large enough to accommodate the entire project. However, it would take a fairly lengthy period of time to assemble all of this . property and relocate the existing occupants (i.e. twel ve months). Also, there would be potential financing problems as there would be with the R.L. Johnson site because there is not excess tax increment Honorable Mayor and City council August 7, 1992 . Page 3 available in these districts to provide the needed subsidy. From a locational perspective the recommendations from the strategic Planning Task Force support a downtown location. B. Funding To undertake the project as proposed will require a substantial amount of public assistance. The developer has stated that to facilitate a project involving a movie theater and restaurant will require that the city provide the land on whatever site is selected at zero cost. The public cost due to the project then increases substantially when Child's Play becomes a component. Because they have limited rent paying capability, it is estimated that it will take close to $1 million additional subsidy to make the project financially feasible. The public cost of locating a project on one of the alternative sites will vary depending on the following: . 0 The cost of acquiring and preparing the site for the development. The developer is proposing the City pay 100% of the cost. 0 Whether Child's Play is a component of the project. A number of the sites would allow for a single use. rf that use was Child's Play Theatre, it is estimated the public cost would relate to acquisition and site preparation plus the additional subsidy to offset the lower rent which Child's Play Theatre can pay ($1 - 1.5 million). C. Timing Child's Play Theatre has stated that they would like to be into their new facility by fall of 1993. This means that construction would have to be started in early spring in order to meet this time schedule. Therefore the site would need to be identified within the very near future and a development agreement executed. The developer would then need to be working on securing financing and preparation of site and construction plans. steve Barbario with Child's Play Theatre has stated . that he feels that the fall 1993 date is probably no longer realistic. He has stated they are willing to consider extending their time period for moving into a new facility. However, he has stated that he needs to feel comfortable that progress is being made and that a Honorable Mayor and city Council August 7, 1992 ~ Page 4 site can be identified within the reasonably near future. The developer has stated that he is presently working with a movie theater group. He has stated that they have expressed an interest in being part of the proposed project in Hopkins. However, he has stated that they are also looking at Eden Prairie. It appears that from a timing standpoint, if a site is not available in Hopkins and the movie theater is built in Eden prairie, any future possibilities of locating a facility in Hopkins wouJd probably be eliminated. This doesn't mean there might not be another theater group that would express an interest in the project. D. Priorities Priorities seems to be the final issue that needs to be addressed. The two large scale projects that are being discussed for the CBD are the grocery store and the entertainment complex project. Both of these projects require the following: 4It 0 A fairly large site to accommodate the building footprint and required parking o Substantial public investment. Both of these projects would each require probably over $2 million in public subsidy Depending on the specifics of these projects, i.e. location and cost, the Council may only be allowed to undertake one project, or perhaps both with one being scaled back somewhat frpm what is presently being proposed. In addition, both projects could possibly be accomodated but it may require a reallocation of resources from other downtown activities. The city Council recently identified four potential sites for the grocery store. At least two of these sites has been discussed for the entertainment project, one of them being Suburban Chevrolet, IV. Summary Comments Based upon the above issues it would appear that decisions the Council will need to make in the near future relate to 4It the following questions: o Is the Suburban Chevrolet site the preferred location for the entertainment project. If so, is the Council Honorable Mayor and City council August 7, 1992 . Page 5 (and Child's Play/Copeland-Mithun) willing to wait until it becomes available? o Would the Council consider another location in the downtown which might only accommodate a single tenant from the proposed entertainment complex? It should be noted that even though the project may be scaled back, it will still require a very substantial public subsidy. Also, if a single user project is acceptable, which specific tenant should be accommodated - movie theater, Child's Play Theatre, restaurant facility? Again, child's Play Theatre will be the most expensive from a public subsidy standpoint because of their limited rent paying capabilities. o Would the Council be willing to consider facilitating this project outside of the CBD? It would seem that the most logical site would be the R.L. Johnson property. If the entire project was to be undertaken on this site, it would have to be built on the 13 acre parcel. North of the railroad tracks would seem to only accommodate one or possibly two of the tenants. . If the project was built on the R.L. Johnson site there would be additional tax increments generated over and above what would be provided in the downtown in order to offset some of the public cost, but there would be a fairly significant land acquisition cost. o Is the city willing to provide whatever subsidy is necessary to make this project workable or is there a limit which can be identified? o What is the major project priority for the CBD - the grocery store project or the entertainment complex project? Does the grocery store issue need to be resolved, i.e. location and financing prior to the entertainment complex project. o Should a voter referendum be considered to finance a free standing community theater facility of which Child's Play Theatre was a major user? Although staff is not asking that the Council take any official action at the workshop session, it appears some decisions will need to be made in the near future so both the staff and developer have some direction. The developer of the entertainment project would be available at a future date to meet ~ with the City Council/HRA to discuss the specifics of the project .., in more detail. JK08062E ------- . PRELIMINARY DEVELOPMENT AGREEMENT THIS AGREEMENT is made and entered into this day of , 1992, by and between the Housing and Redevelopment Authority In and For the city of Hopkins, Minnesota, a public body politic and corporate (the "Authorityll) organized and existing under Minnesota statutes, Sections 469.00l-.047 (hereinafter referred to as the IlAct"), with its principal office at 1010 First street South, Hopkins, Minnesota 55343, and Copeland-Mithun, Inc., a corporation (the "Redeveloper"), with its principal office at 7625 Metro Boulevard; Suite 145; Edina; Minnesota 55435. WITNESSETH: WHEREAS, the Authority was created pursuant to the Act and was authorized to transact business and exercise its powers by a resolution of the City Council of the City of Hopkins (the "City"); and WHEREAS, in furtherance of the objectives of the Act, . the Authority has undertaken a program for the clearance and reconstruction or rehabilitation of blighted, deteriorated, deteriorating, vacant, unused, underused or inappropriately used, areas of the City and is carrying out a redevelopment project known as the Redevelopment Project (the "Project"); and WHEREAS, the Redeveloper has presented to the Authority a proposal for the development within the Project of an entertainment complex consisting of a movie theater, restaurant and children's theater facility (which development is hereinafter referred to as the "Minimum Improvementsll); and n~EREAS,the Redeveloper has located a potential tenant for the children's theater portion of the Minimum Improvements, which potential tenant is Child's Play Theater company ("Child's Playll); and WHEREAS, the Authority's Board of Commissioners has reviewed the Redeveloper's development proposal and desires to enter into this Agreement to allow the Redeveloper to further refine its proposal and to negotiate with the Authority concerning the proposed development. NOW, THEREFORE, in consideration of the covenants and obligations of the parties hereto, the Authority and the . Redeveloper hereby agree as follows: . Section 1. preliminarv Nature of Agreement. The Authority and the Redeveloper agree that this agreement is intended to be preliminary in nature. Its purpose is to allow the Redeveloper an opportunity to refine its development proposal, to negotiate with potential tenants of the Minimum Improvements and to identify sites on which the development might be located. It is the intent of the Authority and Redeveloper that subsequent to the term of this agreement, if the parties determine to proceed with the development they will negotiate concerning the execution of a Contract for Private Redevelopment (the "Redevelopment Agreement") which will set forth the rights and responsibilities of the Authority and the Redeveloper with respect to such deveJopment. Section 2. Exclusive Neqotiations. The Authority agrees that during the term of this Agreement, or unless this Agreement is terminated, it will not negotiate with any third party concerning the provision of financial assistance by the Authority in connection with the development of movie theatre. The Authority shall, however, have the right to negotiate with third parties concerning the development, with or without the Authority's financial participation, of facilities in which a . restaurant or in which Child's Play's operations could individually be located. Section 3. Additional Redeveloper Requirements. The Redeveloper agrees that it will, within sixty (60) days of the date of this Agreement, complete all of the following actions: (a) Identify and analyze the feasibility of various sites within the City's central business district, including the Suburban Chevrolet and Rudy Luther blocks, as possible locations for the Minimum Improvements. In connection with the Redeveloper's identification and analysis of potential sites, the Redeveloper will also: (i) prepare a site plan for each site d~tailiilg the location of buildings, parking, landscaping, and other site improvements; and (ii) prepare a pro forma for each site detailing the total estimated project cost and the amount of public subsidy, if any, to be requested. (b) Identify potential tenants and obtain and furnish to the Authority preliminary letters of intent from such tenants. (c) Identify sources of financing to be obtained to finance the development. e 2 - --. -- - -.-- . (d) Prepare a schedule detailing time periods for completion of the components of the development. Section 4. Activitv of Child's Play. In addition to the activities to be undertaken by the Redeveloper, the Redeveloper will work with Child's Play and cause Child's Play to undertake the following activities: (a) Prepare an overall five (5) year operating budget reflecting a realistic level of expenses and income during the five (5) year period. (b) Pr.epare and furnish to the Authority information relating to Child's Play capital campaign program. (c) Secure commitments, in a form and from parties reasonably acceptable to the Authority, pledging a total of at least 25% of the funds identified as necessary to be obtained in Child's Play's capital campaign program. Section 5. Redevelopment Aqreement. Upon receipt of the . information and documentation referenced in sections 3 and 4 of this Agreement, the Authority shall review the same and determine whether it desires to proceed to work with the Redeveloper to negotiate a Redevelopment Agreement relative to the development. Such determination shall be in the sole discretion of the Authority. If the Authority determines that based upon the information provided or based upon a failure by Redeveloper to provide required information or to otherwise perform its obligations hereunder, it is not in its best interests to continue to work with the Redeveloper, it shall so notify the Redeveloper, whereupon this Agreement shall terminate and neither party shall have any rights or obligations to the other or to any third party under or with respect to this Agreem9nt~ If :fter receiving and r~vi~~ing all requested information, the Authority determines to continue to work with the Redeveloper, the Redeveloper and the Authority will proceed to attempt to negotiate within the next sixty (60) days a Redevelopment Agreement. Section 6. Termination. Unless terminated earlier pursuant to the terms of this Agreement or unless extended by amendment, this Agreement shall terminate sixty (60) days after the date of this Agreement. In addition, either party hereto may terminate this Agreement upon the giving of fourteen (l4) days written notice to the other party of its intent to terminate. Upon such termination, neither party shall have any rights or obligations ~ to the other or to any third party under or with respect to this Agreement. 3 . IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf and its and the Redeveloper has caused this Agreement to be duly executed in its name and behalf on or as of the date first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF HOPKINS By By STATE OF MINNESOTA) )SS. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 19 -, by and . the and of The Housing and Redevelopment Authority in and for the City of Hopkins, a public body politic and corporate, on behalf of the Authority. . Notary Public COPELAND-MITHUN, INC. By By STATE OF MINNESOTA) )SS. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 19 -, by , and , the and of Copeland-Mithun, Inc. , a Corporation, on behalf of the corporation. Notary Public . 4