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Memo Discussion Future Action - Bursch's PropertyCITY OF HOPKINS MEMORANDUM DATE: July 2, 1991 TO: Mayor and City Council FROM: Jim Kerrigan, Director of Planning and Economic Development SUBJECT: Discussion of future action RE: Bursch's Property BACKGROUND The City of Hopkins /HRA has previously undertaken a number of actions to facilitate the redevelopment of the Bursch's Property by Marcus Corporation. The development as proposed would be for the construction of a four screen budget price movie theater. These actions included the following: o Approval of preliminary tax increment application. o Approval of final tax increment application. • Approval of redevelopment agreement and authorization for execution (not executed to date). o Public hearing approving the sale of the subject property to Marcus Corporation. • Approval of conditional use permit. Over the -last several months, Mark Senn has been working with a number of lending institutions to secure financing for this project. To date, he has been unsuccessful in this endeavor. In accordance with the approved redevelopment agreement and the option agreement with Midcontinent Theaters, Mr. Senn.was to have started construction by no later than June 1. Due to an inability to secure project financing, this deadline date has not been met. During the process of working with Marcus Corporatibn on this project, a second individual approached staff concerning a possible redevelopment of this site. This proposal, presented by Michael Madden, the son of the former building owner, involved the City /HRA financing the property to utilize the site and existing building for a restaurant use. (The HRA accepted a preliminary tax increment application for the project, but tabled it for any further action due to the ongoing negotiations with Marcus Corporation.) PRESENT SITUATION Marcus Corporation is continuing to work with a number of lending institutions to finance this project. To date they have been unsuccessful in securing a commitment. The written option agreement with the owner of the property has expired. Basically, Marcus Corporation now has a verbal first right of refusal on the site. Finally, because Marcus Corporation was unable to start construction by the June 1 deadline date, the terms of the lease agreement with Midcontinent Movie Theaters has expired. Mark Senn has informed staff that at the present time terms of the lease agreement with Midcontinent, other than the start and finish date, are still in effect, but that they no longer have exclusive rights for construction of this facility. Midcontinent wishes to construct a movie theater this year and are now no longer looking at Hopkins'as their only option. The redevelopment agreement has not yet been executed by Marcus' Corporation. Although this document was approved by the City /HRA a number of months ago, Marcus Corporation has been hesitant to sign until they felt comfortable in their ability to secure financing. Therefore, at the present time there are no binding agreements between the City, HRA, and Marcus Corporation. ALTERNATIVES AVAILABLE There are two alternatives available to the City Council /HRA at this time. These are as follows: 1. Continue to work with Marcus Corporation. Under this alternative, there are three options available. A. Set no specific time limit for Marcus Corporation to satisfy the requirements of the redevelopment agreement. Progress under this alternative could be reviewed on a periodic basis by the Council. B. Establish a set time for Marcus Corporation to meet the requirements of the redevelopment agreement, i.e., 60 to 120 days. Any further action by the City /HRA would be terminated if this deadline was not met. C. Provide additional public assistance to make the project "financible." The specifics of the amount and type of financing would need to be reviewed by staff. Either tax increment or economic development funds could be utilized. 2. Terminate any further action at this time with Marcus Corporation. As a redevelopment agreement has never been executed, no formal procedure is required to facilitate this alternative. With this action, Marcus Corporation could still return at a future date for reconsideration of a redevelopment agreement if they were able to secure financing for this project. If the HRA elected to follow this alternative, the following options would be available: A. The City /HRA undertake no further action at this time. This is a fairly passive role for the City as relates to this property. Under this action Russ Bursch could list the subject property with a real estate agent. The City /HRA would only get involved if there was an interested party that required public assistance in order to make the acquisition /redevelopment of the project feasible. Prior to the Marcus Corporation project, this was the role that the City Council /HRA requested that the staff follow as relates to this property. The Council /HRA should be aware that an office tenant presently located in Hopkins has expressed an interest in this site. Under this scenario the staff would attempt to work with this group if they approached the City. B. Have the City /HRA actively and aggressively work with Russ Bursch to find a user for the property. Under this option, the Council /HRA needs to identify the following for the staff: o Type of users the staff should pursue, i.e., restaurant, movie theater, office use, general retail use. o Level of public assistance to be provided. A request for proposal would be prepared by staff which would detail the specifics of the project. This document would be disseminated to interested parties. Staff has met with Russ Bursch concerning the City's involvement under an option of this type. He is more than agreeable to having the City take a more aggressive stance to facilitate the sale of his building. Under this option, it would also be assumed that Mr. Bursch would probably list his property with a real estate agent. 0 C. HRA /City purchase of Bursch's property Under this option, the City could use tax increment bond proceeds which have been allocated to this project to facilitate the purchase. Once acquired, the RFP process could be followed in order to locate a developer for the site. 0 D. Have staff work with a specific user /developer. Recently, staff had discussed the potential of , availability of this site with a number of interested users /developers. Some of these parties have expressed an interest in possibly undertaking a project. Some of these include the following: o The T. Wrights Restaurant owners have stated that they would be interested in possibly looking at this site again., They have, however, stated that if they did pursue a project on this site, they would need a substantial public subsidy— Also,, they feel that they might have a,difficult time in securing financing for a project of this type. o Michael Madden has proposed using the existing building for a restaurant /bar. His proposal would involve the HRA purchasing and reselling the property to him (possibly at a reduced price). o Staff has met with an individual who coordinated with a developer the recent construction -of a movie theater project near the metropolitan area. He has talked to this group about the project site, and they have expressed an interest in possibly undertaking a theater project. They have stated they would require substantial,public assistance to do this project. o An office user has expressed an interest in redeveloping the site with approximately 10,000 to 15,000 square feet of office service space. This user ' is-presently located within the City of Hopkins and is now - looking for a new location to expand their operation. The Bursch property would fit their needs from a locational /size standpoint. At this time, the staff would recommend that the City Council /HRA consider alternative 2, option A.- Under this alternative, the City would notify Marcus Corporation by letter that they are terminating any further action as relates to the redevelopment agreement at this time. The City would take a somewhat passive role at this time. Also, staff should work with developers /purchasers expressing an interest to either the City, Russ Bursch, or a real estate agent in doing a project on this site. Under this alternative, Marcus Corporation could still be working to secure financing for the theater project. If they were successful, they could return to the Council for reconsideration of-a redevelopment agreement. However, if the Council /HRA did find an interested party for this site, this individual /developer would-probably request approval of a redevelopment agreement which would provide them with some type of exclusionary development rights to the site. This alternative allows staff the flexibility to concentrate at this time on some of the other redevelopment activities, i.e., grocery store project, Tech Center project, etc. On the other hand, if staff was aggressively involved with the Bursch property, such action would limit the amount of time able to be spent on these other projects. The City Council needs to be aware that with present market conditions, many of these types of uses that have been previously discussion, i.e., restaurants and movie theaters, will have a problem in securing financing in today's market. Basically, unless a project is really "solid" financially, a lending institution will not want to get involved. This situation should hopefully improve over the next several months.