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Memo- Park Nicollet Site UpdatePlanning & Economic Development MEMORANDUM To: Honorable Mayor nd City Council From: Kersten Elverum re or of Planning and Economic Development Tara Beard, Community Development Coordinator Date: December 9, 2011 Subject: Park Nicollet Site Update A discussion of the Park Nicollet site has been scheduled for the December 13, 2011, work session. The purpose of the discussion is to provide the City Council with an update on the redevelopment project and reach agreement on the next steps. Background In June 2010 the city issued a request for proposals (RFP) for redevelopment of the vacated Park Nicollet Clinic site at 8th Avenue South and 1St Street South. The site was acquired (with the help of an $850,000 Transit Oriented Development grant from Hennepin County) to begin implementing the vision for 8th Avenue South as a connection between the future Downtown Hopkins Light Rail Station at 8th Avenue South and Excelsior Boulevard and Mainstreet. This connection is imperative to ensure that Mainstreet and all of Downtown Hopkins benefits from future transit riders who will need a visual reason to cross Excelsior Boulevard and an experiential reason to continue north toward Mainstreet. Three proposals were submitted in response to the RFP. One proposal proposed senior housing with no retail and did not meet the vision set forth in the RFP. The remaining two proposals were both compelling with different strengths, but ultimately the City Council selected Klodt Incorporated as the preferred developer, largely because of Klodt's ability to self -finance the entire project and begin in a timely manner. Unfortunately, shortly after this decision, Klodt's owner suffered a serious health complication that brought to light potential capital considerations that now prevented the company from self-financing the project, and in fact put in jeopardy the company's ability to develop the project at all. Klodt was given until December 1, 2011, to find the necessary capital and/or investment partners to move forward with the project. Alternative Analysis Staff began to brainstorm how to move forward with the project if Klodt was unable to continue. One issue of concern was that Klodt's proposal did not include first floor retail and, indeed, we heard from many developers that the market was not ready for retail in that location. In an effort to mitigate the loss of the active uses that are imperative to fulfill the vision for 8th Avenue South, Klodt was prepared to locate community spaces such as leasing offices, workout and community rooms, and possibly live/work units on the first floor. Staff still found this compromise to fall short of the true potential of the 8th Avenue South corridor as a gateway to downtown Hopkins, and sought alternative concepts in light of the uncertainty of Klodt's participation. At that time staff was made aware of a unique funding opportunity through a national endowment called ArtPlace. ArtPlace was requesting letters of inquiry (LOI) for projects that would accomplish placemaking and economic development through art. Hopkins has a rich history with the arts and there has been a lot of discussion about the role art could play in the creation of a "pedestrian seductive" gateway to Mainstreet along 8th Avenue South. Staff further considered if artist -specific live/work units on the first floor of the 8th Avenue South could be the way to provide the sort of active first floor uses that would truly draw pedestrians, bicyclists, vehicles and transit riders toward Mainstreet. Such a concentration of artists might allow for additional creative uses of the first floor, including gallery, studio, or rehearsal space. Staff collaborated with members of the arts community and submitted an LOI to ArtPlace for funding to support a community process to determine how art could be a part of the placemaking needed on 8th Avenue South, and to subsidize the design of an artist's live/work development on the Park Nicollet site. ArtPlace will be notifying the city in January if they would like to invite a full grant application. Current Conditions Staff met with Klodt on December 1St to determine the future of a partnership on the redevelopment of the Park Nicollet site. Klodt informed staff that they were able to partner with a real estate and property management company that they had sold properties to in the past. This company would purchase and manage the proposed rental housing built by Klodt on the Park Nicollet site, allowing Klodt to take on the financial commitment of land acquisition and construction. Staff was also able to share with Klodt the new ideas explored for the site in the interim. They had a positive response to the concept, and seemed to feel that it would align well with their own concepts for first floor units along 8th Avenue South. Continued discussion about how these units would be designed, marketed, and managed would be required to implement this concept, and if supported by Council, the redevelopment agreement should possibly include terms around the idea. The acquiring company is interested in the purchase as a part of a tax strategy that allows them to sell some of their older properties. This structure creates an aggressive strategy for construction. Klodt is preparing to begin environmental investigation immediately that will inform decisions about stormwater management and possible remediation costs (the investigation was awarded a $30,000 grant from Met Council). Klodt is also preparing to make an offer this month on the Lutheran Digest property, which would allow for a larger project. They have assured the city that there is still a viable project on only the Park Nicollet site, however. Other timelines include planning approvals in the first quarter of 2012 and building permits by July 2012, allowing for summer 2012 construction commencement and 2013 completion. The project is still proposed as phased development with the 8th Avenue South building erected first and a second building at 9th Avenue South and 1St Street South as phase II. Many of the site features, however, (underground parking, stormwater management) are shared by both phases and will be constructed with the first building. Next Steps Klodt will be joining us at the December 13th work session to answer questions about their investment partner and their proposed project/schedule. Staff is looking for confirmation that Klodt is still the preferred developer for the project, what development agreement terms should be addressed, and the Council's reaction to the concept of the artist live/work project . Attachments: ArtPlace Letter of Inquiry Letter from John Bell, Klodt Incorporated Name of organization or individual applicant: City of Hopkins, Minnesota One sentence description of the work for which you are seeking support: Development of an artists' live/work building and the transformation of the surrounding public space into an outdoor interactive gallery on a key transit -oriented development site in Downtown Hopkins, Minnesota. Amount Requested from ArtPlace: $350,000 Annual operating budget: $10,300,000. Name of fiscal agent (if applicable): Name of contact person: Tara Beard Address: 1010 1St Ave S City: Hopkins State: MN Zip: 55343 Email: tbeard@hopkinsmn.com Phone: 952-548-6343 Website: www.hopkinsmn.com Type of Organization (Non-profit, For -Profit, Government, Individual): Government Address of the proposed work (if different from address above): 815 1St St S Hopkins MN 55343 How did you become aware of this funding opportunity? (Please select all that apply) National news article Local news article Social media Web Industry publication or email Funder (Please list) Association (Please list) Other (Please list source) Stages Theatre Company Describe the work you want to do for which you are seeking ArtPlace support. (250 words maximum) The two blocks from the future downtown light rail transit station to historic Mainstreet is a crucial corridor, linking a transit hub to a charming downtown. Hopkins would like to build on its reputation as a place for artists, add creative capital to the community, and draw transit users into downtown using pedestrian -seductive, interactive public art to energize this corridor. The art should tell a story, encourage movement, and create a sense of place. The vision we seek will highlight the unique character of Hopkins and the merging of the new (light rail transit) with the old (Mainstreet). An ArtPlace grant will allow us to work with the local arts community and other partners to flush out the story that should be told and create a vision for the art that will tell it. This will be achieved through a collaborative community process to inform the call to artists. Having a clear vision will improve our ability to obtain funding to implement it and to supplement the design budget for a new building in the heart of the corridor. Mid -way between the future transit station and Mainstreet is a 1 -acre site acquired by the city of Hopkins for redevelopment that will create a vibrant street scene, support transit and draw riders to Mainstreet. While the majority of the public art will occur in the public realm, this city -led redevelopment provides an opportunity to expand the project onto that site through its site design and fagade to its programming. What impact do you hope your work will have? (100 words maximum) Transit users will be compelled to cross a busy road to reach the energetic, art -infused corridor this project will create. A live/work development for artists will allow Hopkins to retain and attract artists to live in a location highly desirable for its livability, walkability, and transit access. Designing such a building and the art -filled public realm around it will allow for great place -making in a location that must draw pedestrians, bicyclists, and transit riders to Mainstreet for the long term sustainability of this important downtown. Housing, urban design, and economic development goals will come together in one successful project. If your work is part of a larger portfolio of strategies to change the trajectory of your community, please name the major partners in the development and execution of those strategies. (Please do not list supporters, only full partners.) (100 words maximum) The City owns the Hopkins Center for the Arts (HCA) which houses theatre performance spaces, a dance studio, and art gallery. It also is home to Stages Theatre Company, a professional children's theatre. In spring 2011, the City partnered with the Hopkins Business and Civic Association and the Friends of the HCA to launch Hopkins Artstreet — a public art walk. Through the City's marketing initiative, Think Hopkins, the arts are promoted through a variety of channels. The desire is to continue to partner with area artists and art organizations to build on the City's reputation as an arts - supportive community. KLODT INCORPORATED DEVELOPERS,CONTRACTORS 50 GROVELAND TERRACE, SUITE A MINNEAPOLIS, MINNESOTA 55403-1100 Phone: 612/374-1770 Fax: 612/374-1814 Kersten Elverum December 8, 2011 Director of Planning and Development City of Hopkins Kersten: This letter is to update you, the city staff and the Mayor and City Council on our status and intention on the redevelopment of the Park Nicollet site. In September of this year, I wrote to you explaining some of the difficulties we were experiencing with our ability to commit the needed equity to this development. We asked for, and were granted, a 60 day period to work out a solution. Per our conversations over the last few weeks, I am happy to say that I believe we have a solution in hand and that we are now in a position to proceed with the development. Over the past 20 years or so, we have sold 3 new multi -family residential properties (424 dwelling units) to a local family owned real estate holding and management company. The name of the company is Sidal Reality and its Managing and General Partner is Bruce Rubinger. The three properties that we sold to them were located in St. Louis Park and Minnetonka. They are now interested in upgrading the older part of their portfolio into newer buildings and we have agreed with them in principle to develop the Park Nicollet site and sell the buildings to them upon their completion. They are also interested in acquiring up to three separate buildings, which makes the inclusion of the Lutheran Digest lot and the redevelopment of the Elks and City Parking lot more realistic than before. A majority of the financing will be from their own equity. Sidal is also interested in moving as quickly as possible on the redevelopment, which would mean a summer of 2012 start on the first phase. The first phase would be a 73 unit, 5 story building on Eighth Avenue. The second phase may start as early as the spring of 2013. Its size would be dependent on the acquisition of the Lutheran Digest site, which we hope to have resolved one way or the other, by the end of this year. They are interested in exploring solutions for the Elks Club, but that third phase is still too undefined to put dates on. This new scenario means that we will be trying to move on land use approvals as quickly as reasonably possible so that we can have adequate time to complete design and working drawings. So, we obviously are looking for the City Council to re -instate our position as the developer of the site so that we can proceed with confidence. 1 want to thank the Council, the Mayor and the Staff for their patience in allowing us the time to work out a development solution. Sincerely, John Bell VP, Construction Klodt Incorporated