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.