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1. Resolution 5114 - Sale of Armory Property - Hilton Garden InnCity of Kalispell Charles A. Harball Office of City Attorney City Attom y 312 First Avenue East P.O. Box 1.997 Kalispell, MT 99 -1997 MEMORANDUM TO: Mayor Pamela ela . IZen.nne y and Kalispell City Council FROM: Charles HarbalL City .Attorney James H. Patrick, City Manager Tel 406.758.7708 Fax 406.758.7771 charbalI@kalispel1.com SUBJECT: Resolution. No. 511 — A Resolution to Sell the Armory Property to Gateway Hospitality Group, Inc. MEETING DATE: Monday, May 1, 2003 — Regular Council Meeting BACKGROUND: Earlier this calendar year, the Montana National Guard moved out of the Armory property at 1840 Highway 93 south and ownership of the property revertod back to the City of Kalispell. The 3.4 acres that comprises this property has been used as an armory since the .50's and is located within the Kalispell Airport Tax Increment District and previously found by City Council to be blighted and in need of urban renewal. The City obtained an appraisal of the property and determined that the fair market value gas approximately 1..2 million dollars. Based upon the urban renewal plan approved y council., a Request for Proposals with specific criteria was then generated and published to seek interest from the development community to inject capital into this property. Gateway Hospitality Group, Inc. [Gateway] was the sole respondent to the RFP, but submitted a substantial proposal. The proposal meets the criteria of the RFP on many points. The full. -appraised market value is being offered although Gateway has no need of the structures on the property. Gateway will invest approximately 15 to is ni.11ion, dollars in the property with i.n.-groun.d improvements expected to be in the range of 12 million dollars ro it-ing a much needed boost to the tax base within this TIF district. The proposed 117,300 square foot facility is a Hilton Hotel and conference center with a full service restaurant and casino. The conference center meets the RFP criteria by bringing in and circulating out of area dollars into our local economy. other hotels in the area can expect to benefit from the conference overflow. Although the facility is in the service industry, it will create a substantial number of jobs, including some higher management positions. Gateway desires to be located adjacent to the City Airport as it anticipates benefit from fly-i.n. Sale of Annor .April 27, 2006 Page consumers. The City Airport will also benefit from the additional businessthis may generate. RECOMMENDATION: The City Council should consider and pass Resolution No, o 114 authorizing the sale of the Armory property to Gateway Hospitality Group, Inc. The property was marketed by the City as a TIF project for the purpose of attracting investors such as this. As urban renewal is the impetus to this project, the City should use the statutory tools available to it to make the project happen. Gateway came to the City with the anticipation that up to 0 of its hard costs investment could be contributed by the City through its TIT district. It was for this reason that Gateway responded to the RFP. staff is recommending that the developer's agreement allow the 0-ty to contribute up to $890,000 on the project, which is approximately Y2% of the anticipated hard costs that will be invested by Gateway. Gateway is further offering to enter into a Net Proceeds Agreement of 0% with the City, which gives the City the additional opportunity fox additional payback of its investment upon the sale, refinancing or exchange of the property. Staff further recommends that the Council direct that the proceeds of the sale be held in an interest bearing account until such time as the Community Center Committee has developed ecommendatio .s for a Community Center and a public hearing can be held to elicit public comment regarding the use of the sale proceeds toward the development of a Community Center and the City Council makes its final determination. It seems appropriate that the matter of the sale of the property be kept separate from the issue of how the City will best use the proceeds. FISCAL EFFECTS: It can be anticipated that the fiscal effects to the City from this sale and agreement will be substantially favorable. The increased tax base will generate increased tax ever e. The facility will be an anchorto the south entrance to the City which will likely spur* additional much needed investment and urban renewal to this part of our City. The additional Jobs created by the facility will circulate more dollars within the community as will the additional tourist dollars generated by the conference center. Respectfully submitted, ,J S ._,. Charles lf r .11, �it� Atto x ey es Patrick, City Manager Office of City Attomey City of Kalispell RESOLUTION No, 5114 A RESOLUTION To SELL CERTAIN REAL ESTATE OWNED BY THE CITY of K LISPELL AND MORE PARTICULARLY DESCRIBED AS TRACT I OF CERTIFICATE OF SURVEY NO, 170459 A TRACT OF LAND, , SITUATED, LYING, AND BEING IN THE NORTH HALF of THE NORTHWEST QUARTER of SECTION 20, TOWNSHIP 28 NORTH, RANGE 21 WEST, P.M.M#, FLATHEAD COUNTY, 'IONT NA To GATEWAY HOSPITALITY GROUP, INC. WHEREAS, the City of Kalispell owns certain real property commonly known as 1840 Highway 93 South, Kalispell, Montana (the Armory), consisting of approximately 3.4 acres and more particularly described as Tract 1 Of Certificate Of Survey No, 17045, a tract of land., situated., lying, and being in the North Half of the Northwest Quarter of Section 20, Township 28 North, Range 21 West, '.M.M., Flathead County, Montana; and WHEREAS, the subject property is located within the Kalispell ,Airport Tax Increment District which has been previously found by the City to be blighted. and in need of urban renewal; and WHEREAS, the City obtained are appraisal for the subject property which established a fair market value for the real property and improvements at the sum o 1,21 ,000; and WHEREAS, the City published a request for proposals for the purchase and investment in the subject property with certain criteria required to meet the reeds of the urban renewal plan for the Kafispell Airport Tax Increment District; and WHEREAS, Gateway Hospitality Group, Inc. submitted a proposal that met the criteria set forth in the City's R P, which included a substantial investment In the property consisting of the construction of a 117,300 square foot hotel, restaurant and conference center carrying the franchise of a major hotel chain., and. offered to purchase the property for the appraised fair market value. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL of THE CITY of KAL S ELL AS FOLLOWS: SECTION 1. The City Manager is hereby authorized to eater into a Purchase and Sale .Agreement with Gateway Hospitality Group, Inc. for the above --described real property, for the total sum of S 1,216,000 on the conditions that the property be developed as a hotel and conference center and that the purchaser complies with all terms of a developer's agreement approved by City Council. SECTION 11. The City Manager shall further hold the proceeds of the Sale in are interest bearing account until such time as the Community Center Committee has developed comma d a io .s for a Community Center and a public hearing can be held to elicit public comment regarding the use of the sale proceeds toward the development of a Community Cantu- and the City Council makes its final determination. PASSED AND APPROVED Y THE CITY COUNCIL AND SIGNED BY THE MAYOR O THE CITY OF KALISPEL , THIS I ST DAY OF MAY, 2006. Pamela B. Kennedy Mayor ATTEST - Theresa White City Clerk AGREEMENT TO SELL AND PURCHASE DATED this day of May 2006 at Kalispell, Montana. Gateway Hospitality Group, Inc., an Ohio coTorat.ion, of 8920 Canyon Falls Blvd, Twinsburg, off 44087, hereinafter called "BUYER" agrees to purchase, and. CAY of Kalispell, municipalcorporation, of 312 1 st Avenue East, Kalispell, Montana 59901, the undersigned SELLER., agrees to sell the following described real estate hereinafter referred to as "premises" i the City of Kalispell, Flathead County of Montana, legally described as: Tract 1 of Certificate Survey No. 17045, a tract land, situated, lying, and being in the North HWof the Northwest Quarter of .section 20, Township 28 North, , 21 West, Q.M.M.# Flathead County, Montana. Total Purchase Price is ONE MILLION TWO HUNDRED SIXTEEN THOUSAND AND N0100HS 1,2 1 ,000. oo DOLLARS U.S. payable at closing. SPECIAL PRO VISIONS Li or Liter Conti n This purchase and sale is contingent upon BUYER successfully exercising its option on, or in any other way obtaining, a fall service liquor license for the subject property within the timeframe set forth for the closing of this transaction. CONVEYANCE The SELLER shaJJ convey the real property by Warranty .deed, free of a.11 hens and encumbrances except hose described above or those otherwise acceptable to the BUYER as described in the title insurance section of this agreeM nt. TITLE INSURANCE SELLER.., at SELLER'S expense, shall famish UYER -ith Title Insurance in the amount equal to the purchase price, committing to insure merchantable title to the real property in the BUYER'S name, free and clear of all liens and encumbrances except: zoning ordinances, building and use restrictions, reservations in federal patents, beneficial utility easements apparent or of record, easements of record, and any other encumbrances acceptable to BUYER. 1f the SELLER'S tine is not merchantable and cannot be made merchantable before the stated closing date, 30 ADDITIONAL DAYS SMALL BE ALLOWED FOR THE SELLER To PURCHASE AND SALE AGREEMENT - 1 MAKE SUCH TITLE MERCHANTABLE. Encumbrances to be discharged by the SELLER shall be satisfied prior to closing or from SELLER'S proceeds at time of closing. TAXES AND ASSESSMENTS SELLER and BUYER agree to prorate taxes and special improvement assessments for the current tax year, if any, as of the date of closing, unless otherwise agreed. CLOSING T The date of closing shall be on or before July 1, 2006 or sooner if BUYER has completed it financing agreements. 30 ADDITIONAL I' IONA DAYS SHALL ALLOWED FOR. THE BUYER TO OBTAIN SUCH AGREEMENTS,, IF NECESSARY. The BUYER and SELLER will deposit with the closing agent all instruments and monies necessary to complete the purchase i accordance with this agreement. ADDITIONAL TERMS If the Seller accepts the offer er contained in this agreement but refuses or neglects to consummate the transaction within the time period provided in this agreement, the BUYER may: (1) Demand d that SELLER specifically er `on-n SELLERS obligations under this agreement; or (2) Demand monetary damages from. SELLER for SELLER'S failure to perform the terns of this agreement. .t. SELLER'S REMEDIES If the SELLER accepts the offer contained in this agreement and BUYER. refuses or neglects to consummate the transaction within the time period provided in this agreement, the SELLER may- I Demand that BUYER specifically perform BUYER'S duties and obligations under this agreement; or (2) Demand that BUYER pay monetary damages forBUYER'S failure to perform the terms of this agreement. UE'S CE. R TIFICA TION y entering into this agreement, each person or persons executing this agreement as BUYER represents that he/she is eighteen 1 years of age or older, of sound. mind, and legally competent t to own real property in the State of Montana; and if acting on behalf of a corporation, PURCHASE AND SALE AGREEMENT partnership,.,, or other nonhuman entity that he/she is duly authorized to enter into the agreement on behalf of such entity. y entering into this agreement, each person or persons executing this agreement as SELLER represents thathe/she is eighteen 18) years of age or older, of sound mind, and legally competent to own real property in the State of Montana.; and if acting on behalf of a corporation, partnership, or other nonhuman entity that he/she is duly authorized to enter into this agreement on behalf of such entity. CONSENT TO DISCLOSE INFORMA TN BUYER and SELLER hereby consent to the procurement and d1sclos .re by BUYER, S�, and sales representatives and their attorneys, agents and other parties .having interest essential to this agreement, of any and all information reasonably necessary to consummate the transaction described in this agreement,, specifically including access to escrows for review o contracts, deeds, trust indentures, or sim.11ar documents as prior transactions coneeming this property of underlying obligation pertaining thereto. POSSESSION SELLER shall allow BUYER access to the subject property, pr'or to closing, and shall allow BUYER to proceed with preliminary construction requirements, including demolition o the existing structures. In the event that this Purchase and Sale noes not close, for any reason not attributable to the SELLER, and the structures have been demolished, BUYER agrees that SELLER is entitled to damages from BUYER in the amount of the fair market value of the structures demolished. BUYER agrees to hold SELLER harmless and. indemnify SELLER in all respects for any and all damages or injury suffered by any party on the premises upon the date BUYER. is given access to the sect property. BUYER agrees to obtain and maintain liability insurance on the subject property in the amount o 1.5 million aggregate and $ 50,o o per occurrence and name the SELLER as an additional named insured. Otherwise, SELLER shall deliver possession and occupancy to the BUYER on the closing date unless otherwise agreed. SK OF LOSS All loss or damage to any of the above -described real proper or personal property by any cause is assumed by SELLER through the tinn.e of closing unless otherwise specified. TIME IS OF THE ESSENCE Time is of the essence in this agreement and a-11 clauses hereffi. PURCHASE AND SALE AGREEMENT BINDING EFFECT AND NON -ASSIGNABILITY This agreement ent is binding porgy the heirs, successors, and assigns of each of the parties hereto; however, BUYER'S rights under this agreement are not assignable without the SELLERS express written. consent. . TTORNE Y FEES In any action brought by the BUYER or the SELLER to enforce any of the terms of this agreement, the prevailing party in such action shall be entitled to such. reasonable attorney fees as the court or arbitrator shall determine Just. BUYER acknowledges that be :has examined the real and personal property, the BEER eaters into this agreement ent full reliance upon his independent investigation and judgment, that prior verbal representations by the SELLER or SELLER'S agents or representatives do not modify of affect this agreement, and that by silting this agreement BUYER acknowledges having read and understood this entire agreement, including the Additional 'berms above. We agree to purchase the above -described property on the tens and conditions set Forth in the above offer. FWE HEREBY ACKNOWLEDGE receipt of a copy of this AGREEMENT TO SELL AND PURCHASE bearing my/our signatures BUYER: y: Robert Voelker for Gateway Hospitality Group, hie. PURCHASE AND SALE AGREEMENT SELLER'S COMMITMENT UWe agree to sell and convey to BUYER the above -described property on the terms and conditions hereinabove stated. UWe acknowledge receipt of a copy of this agreement fearing my/our signatures) and that of the BUYER named above. Dated this day of 120 SELLER.: By: James H. Patrick, City Manager PURCHASE AS AND SALE AGREEMENT Kalispell o vn.to m Association 17 Main Street Kalispell, MT 5990 1. (406) 7 -700 April 26, 200 Mayor Pan- Kennedy and Kalispell City Council P. o. Box 1997 Kalispell, MT 50-97 RE: Hilton Garden Inn Proposal Ladies and Gentlemen 'lease he advised that the Kalispell Do vntown Association Board of Directors, at its meeting held April 10, 2006, enthusiastically and unanimously passed a resolution supporting and encouraging all appropriate actions by the Kalispell City Commission for the development of the "Armory Property"' as a hotel and convention facility and specifically to support the Hilton Garden Inn proposal as presented to the meeting by City Manager Jinn Patrick. It was the consensus of the directors present and commenting that the proposed facility would help the overa.11 fiscal vitality of the Flathead Valley and the Kalispell Downtown area, that It has the potential to help sustain businesses during the so-called ""shoulder s asons�� and to improve the tax base without significant, additional infrastructure costs. The hotel by itself would present a. competitive challenge to some of our members, while a hotel with a convention center would actually complement those members because o the overflow from. meetings (conventions) exceeding the Hilton's available sleeping rooms. Please add this letter to the official records supporting your approval of the Planned Unit Development and taking such other actions necessary to meet the developers' time frame and move the project forward as expeditiously as possible. Thank you for the opportunity to comment. Sincerely Y-ours, : x Thomas o. McElwain CC: KDA Board of Directors M" FlatLead Convention 6 Visitor Buren. April 2, 200 ilm Patrick City of KaRspell PO Box 1997 KaPeR, MT 59903-1997 Dear Jim, On ealf of the Flathead Convention Visitor Bureau CVand its Board of Directors, I would hke to provide you ffiis letter of support for the Hilton Garden project that is proposed at the site of the current Armory Building in downtown Kahse .. Tourism is vital to the econonucs of the Flathead VaRey. The proposed project will provide a much needed convention center which will draw larger groups to our area and provide over- flow lodging to established hotels in downtown KLSeR. recently had the opportunity to see the property that GHG just built M Missoula and it is fabulous! The quality and ambiance that such a project would big to KahspeR is much needed. 'lease let me know what more the FCVB can do in suppoirt of this project. If s a wm-w-in for our ommunity Sincerely, j,Q, \ 4-rt, � Dori Halton Executive Director Flathead Convention & visitor Bureau 170 US H,7, Eiist, # 1.4 Kah8pell, MT 5 01 -54 - 1 5 €� Y7 0-� 1 Fax �)6-2�7-2500 1LAC LvLorg www n�O otai1as flatheabaIley, COM