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CR 91-48 Terminate Redevelopment Agreement - Marcus Corporation ~ ' . ~, , .y '" February 25, 1991 o P K \ ';I- Council Report: 91-48 , . TERMINATE REDEVELOPMENT AGREEMENT - MARCUS CORPORATION Proposed Action. staff recommends adoption of the following motion: Move to terminate agreement between Marcus Corporation and the City of Hopkins dated Auqust 20. 1990 for the redevelopment of the city owned property on the northwest corner of Blake Road and Second street N.E. Approval of this action will allow staff to undertake the process with legal counsel to terminate this agreement. Overview. In February 1990 staff solicited proposals for the sale and development of the abandoned city owned well site on Blake Road and Second Street N.E. . As a result of this solicitation, the City Council agreed to the sale of the subject property to Marcus Corporation. for the constru~\ion of a The project as detailed for this site calls 6600 square foot retail facility. The developer stated that in order to construct the project he needed access both from Blake Road and Second Street N.E. The developer has been working for a number of months with the County in an attempt to secure the Blake Road access. He has stated that recently he was able to secure a right-in/right-out which he feels is adequate for this type of development. . In accordance with the Redevelopment Agreement, the developer should have started the project sometime around early November 1990. In December the City Council agreed to extend the time limits of the agreement for 90 days and review the developers progress on March 54. It appears the developer has made progress on securing the necessary access off Blake Road. He feels, however, that from a timing standpoint he may not be able to produce the project on the subject site within the near future based upon the following: 0 existing financing market 0 time constraints due to the movie theater project At this time, because of a lack of any significant performance by the developer, Marcus Corporation, on the development of this site, staff is recommending that the existing redevelopment agreement be terminated. primary Issues to Consider. 0 Does the Council have the ability to terminate the agreement? 0 What are the consequences of this action to Marcus Corporation? 0 What are the consequences of this action to the City? 0 What direction should be undertaken as relates to this site if the existing agreement is terminated? 0 What action should be undertaken if the agreement is not . terminated? supporting Information. 0 Letter from Holmes & Graven dated 12/4/90 0 ,Better from Marcus Corporation dated 1/23/91 k'l' err gan, Planning & Deve opment Director ", , 1 ' CR: 91-48 Page 2 . Analvsis of Issues. Based on the recommended action, the City Council has the following issues to consider: o Does the council have the ability to terminate the agreement? In a letter dated December 4, 1990 Bob Dieke of Holmes & Graven stated that he felt the city does have the legal ability to give the redeveloper notice that he is in default and to therefore terminate the agreement. A 30 day notice of cancellation needs to be provided to the developer in order to complete this process. o What are the consequences of this action to Marcus Corporation? Mark Senn of Marcus Corporation, in a letter dated January 23, 1991 stated that he would like to continue to work on undertaking the redevelopment of the subject site. However, he states that if the Council does have concerns as relates to. timing, he appears to be agreeable to terminating his designation as developer for this site. Even if he is terminated, Mr. Senn still has the possibility if he is . able to secure a tenant and possible financing to execute a new development agreement. This would be based on the basis that \ there has been no obligation made by the Council on this 'site prior to his request. o What are the consequences of this action to the city? The city Council needs to be aware that there might not be strong interest from developers on doing something with this site because of the present soft real estate market. staff has talked to a few developers that have expressed a possible interest in this site should the existing agreement with Marcus be terminated. However, even these caution that with the existing market conditions it maybe difficult to facilitate a project in the near future. o What direotion should be undertaken as relates to this site if the existing agreement is terminated? If the Council makes a decision to terminate the agreement with Marcus corporation it would be logical to direct ,staff to discuss the availability of the subject site with potentially interested developers. . 0 What aotion should be undertaken if the agreement is not terminated? If the Council does not wish to terminate the redevelopment agreement, staff should be provided direction as to how to revise the agreement to reflect anew time limits. t , CR: 91-48 Page 3 . Alternatives. Based upon the action recommended, the City council has the following alternatives: 1. Approve the action as recommended by staff. This will allow staff and legal counsel to undertake the necessary action to terminate the existing Redevelopment Agreement. 2. Approve an amendment to agree to allow Marcus corporation an extension to undertake the project. Under this action the Council should provide direction on any specific language or length of extension they would like to see in the amendment. . . l.?,/()--1/'?U .Li:::,: -!:~: HOU'n:::::; :,,;, L,F:r:1:"H! f'ID. ()~~;=: 002 -- - - ............... ii" 'f. . HOLJ\,1ES & GRAVEN <:HARTEktD ROBERT J. D EIKE ~1U PlIl&bl")' ('~n!.t.I'o1Jntl~a(lOII!. r.Unnt.<)" %402 At/I)"",!.l L.", T.l.phollt: (0/21331-9300 f~<.Jll\lIt (6121.lJ7-'1JIO DIrect 01.1 (m).H7-921J.C December 4, 1990 Ji m K errfgan CIty ot Hopkins 1010 First Street South Hopkins, MN 55343 R.E: Purchase a.nd Sale Agreement between The City of Hopkins and Marcus Corporation Dear Jim; . This is In responSle to your letter d~ted November 12. 1990 r-equtJsting a.dvice conMrning: the status of the above-refe:-tmced contract. ! understand tha.t the Redeveloper, Marcus Corporation, has not yet provIded the City with final corntruction plans or evidence of financing. No closing hflS be~n hiJld on the sale of the subject property. You inquIred as to what the City's .rem edl~s ere as a result of these taIlures on the psrt of the Redeveloper. The Redeveloper, is obl1g.Qted under Section 4.2(b) of the contract to provIde to the City finnl Construction P1<<ns wIthin 15 days after the Redeveloper obtQlns c-Ol'ldltional use permit il.pproval tor the prop<:>sed Impr()\lem~mt.s. A failure on the part of the Redeveloper to provide constru~tion plAns constItutes an Event O!' Detl1ult under Section 9.1 of the contra~t. Under Section 9.2, the CIty is entitled to €lxero{se varIous remedi~st including termination of the contract, after giving 3C-<:lays! wrItten notice of the default to the Redeveloper. I understand that the Redeveloper has also' failed to submit evidence to the City that the Redeveloper has financing sufficient to construct the proposed improvements. Under Section 7.1 of the contract, such evidence of financing is required to be submitted with 60 days after the Redeveloper obtains conditiona.l use permit approval tor the improvements. I understand that that 60-cay period has expired. Again, the Redeveloper's failure to provide the evidence of finanCing constitutes an Event of Default allowing the City to exercise its remedies after provi(ling 30-days' written notice of the default. . Under the contract, the City does have the legal ability lit this point to give the Redeveloper notice that it is in default and then proc~ed to exercise its remedies. If one of th('J remedJ,es the City intends to exercise i.~ ter-mination of the contract, that tcrmimition must ultimately be accomplished in a.ccordance with the statutory cancellation ['Jl'ocedures pl'escdbed by Minnesota la.w. Those procedures require the .. ~- -' --- .l '_'. '1_' '-.I'._ILI Ii_,:"':::' \-:; LW,..l-;'..'l::I' ILl. (::1'::'::; f)D~: " " . Jim KerrIgan December 4, 1990 Page 2 . '. ~ servIce or a 30-day notlce ot. cancellation. We would be happy to ad'rIse you on the specifics of that cancellation procedure 1f you desire. I hope that this letter Is su.fficient for your pUrposes. Sincerely, R~JD~ Robert J. Deike RJDsjes . '. , " Mll.RCUS i Real E,state Development .CORPORATION January 23, 1991 Mr. Jim Kerrigan City of Hopkins 1010 'First street South Hopkins, MN 55343 RE: Well site Dear Jim: commissioner Keefe got back to me on Tuesday, January 22, 1991. According to John, there will be a new letter coming out shortly from the County agreeing to the right-injright- out off Blake Road to the Well site. He wasn't certain if the letter would come to me or to the city, however, we should be receiving it soon one way or the other. Now that we have obtained this concession from the County we can renew our marketing effort for leasing the project on the . Well site. We should sit down and discuss the timeline because I have a concern that what you (the city) expects and what I can deliver maybe two different things. Practically speaking the Theater Project is a pretty much done deal and is requiring most of our attention right now and for the foreseeable future. I think from both my perspective and the City's, this would be the priority. As time allows we can push our leasing effort, however, short of leasing the space in todays' slow market I cannot see us easily obtaining financing or consequently, beginning the project. The problem is, given the slump the market, has been in and continues to be in as well as the uncertainty existing in the market due to numerous factors, I cannot guarantee when lea~ing will occur or the ploject can begin. We would very much like to continue in our pursuit of the project, however, I have to agree that if your urgency doesn't accommodate this, then possibly we should bow out. If you feel the city has better alternatives at this point that might be what is best from your perspective. with the long duration of time involved in obtaining at least a workable situation from the county, other time factors have worked against us. The market has continued to soften and the Theater project has become a reality and is a higher priority in our eyes. . 1 0001Wayzata Blvd,. Suite 100. Minnetonka MN 55343. (612) 593-1177 ,~~ .. .- ," " . ~f ; ,. When you return, please give me a call and let me know your thoughts. I would be happy to sit down at that time and further discuss our options. Sincerely, . #U,vL Mark o. Senn MOSjbjm I . .