Rosauers Supermarkets/Redevelopment Proposal for Daley FieldREDEVELOPMENT PROPOSAL
for
DALEY FIELD
Kalispell, Montana
Presented by:
Rosauers Supermarkets, Inc.
West 1815 Garland Avenue
Spokane, Washington 99209
August 12, 1997
10SAUE&S
EMPLOYEE OWNED SUPERMARKETS
August 11, 1997
Mr. Clarence W. Krepps
City Manager
The City of Kalispell
P.O. Box 1997
Kalispell, MT 59903-1997
Re: Daley Field Redevelopment Opportunity
Dear Mr. Krepps:
Rosauers is pleased to provide the accompanying Offer package on the Daley Field
site. We have been serving the south Kalispell and north lake communities for
nearly 30 years and look forward to many more.
With our existing store's lease expiring soon, and site constraints thereon, we
cannot expand at that location. The timing of your Offering and the potential that
Daley Field presents as a retail location are outstanding. The site provides us an
opportunity to build a 50,000 square foot Rosauers Food and Drug store to take
the place of our existing facility. We have the ability to build an optimal size store
allowing us to provide our full line of services and offer customer selection from
more than 40,000 individual products.
Daley Field offers a unique opportunity for the City of Kalispell to facilitate a full
site community retail center. While we are looking specifically to an approximate
5+ acre site, the site lays out well for many other retail users to join us. We look
forward to working with the City and other interested tenants in fulfilling this
vision. In doing so, we both win.
We look forward to the City's decision to accept our Offer and welcome the
opportunity to work with you towards a quick closing on this parcel.
Sincerely,
Larry D. Geller
President/CEO
LDG/cg
Rosauers Supermarkets, Inc. West 1815 Garland, Mailing Address PO Box 9000, Spokane, Washington 99209-9000 e 509 / 326-8900 - FAX 509 / 328-2483
Table of Contents
Executive Summary ......................... Page 1
The Offer ................................. Page 2
Tax and Economic Impact .................... Page 4
The Proposed Development ................... Page 6
The Development Team ...................... Page 8
Appendix:
Artist Rendering of Similar Rosauers Grocery Store ... Page 11
Preliminary Site Plan ....................... Page 12
Redevelopment Proposal August, 1997
Daley Field Page ii
UP
.r
EXECUTIVE SUMMARY
Having served greater Kalispell for nearly 30 years, Rosauers Supermarkets, Inc. is proud to
renew our commitment to providing the south Kalispell and north lake residents with the quality
products and service they have come to expect from us. Our existing lease expires in the year
2000, and due to site constraints, we cannot expand at that location. However, the timing of the
Daley Field offering works well in providing us the opportunity to build a new, larger facility that
will take the place of our existing store.
The Daley Field site offers great potential not only for Rosauers, but for the City, its residents,
and the tourist trade. With Rosauers as the anchor tenant, there is a very real opportunity for the
entire Daley Field site to be developed as a good sized neighborhood retail center. This certainly
would be the highest and best use of the site, maximizing not only property values and related ad
valorem tax revenues, but also bringing many new jobs, providing economic enhancement and
increased vitality to the south Kalispell area, and creating an attractive "gateway" at the City's
south entrance.
As set forth herein, we want to acquire somewhere between 5 1/4 and 5 3/4 acres of the Daley
Field site, on which we will build a new 50,000 square foot Rosauers Food and Drug Store. We
are offering to pay a fair price, a minimum of $743,311, and will pay all cash at the time of closing.
Our schematic site and store designs are based on providing impetus to a "full site" neighborhood
retail center. We offer to work on a proactive basis with the City and adjoining property owners
in an effort to maximize the site's potential through possible in -line construction and joint use
agreements.
Our construction schedule will coincide with the current timing of the Highway 93 and Third
Avenue projects. While we cannot commit to a formal store design or construction method at
this time, we can assure the City that it will be of first class design, workmanship, and materials.
Both Rosauers and the City should be proud to have it as the centerpiece of this exciting
development.
Redevelopment Proposal August, 1997
Daley Field Page 1
THE OFFER
Purchaser
A to -be -formed Montana Limited Liability Company, whose initial primary member will be
Rosauers Supermarkets, Inc.
Site
Not less than 5.25 acres (228,711 square feet) and not more than 5.75 acres, beginning at the
centerline of the new Third Avenue East extension ("New Private Lane") onto the property
and continuing south until adequate site area is achieved. The east and west property lines will
be the Highway 93 frontage and airport property line, respectively.
Offer Price
Minimum price of $743,311 for the 5.25 acres, plus $3.25 for each additional square foot as
determined by survey of the final site configuration.
Terms
Payable ALL CASH AT CLOSING, including the $37,166 in Earnest Money paid herewith.
In the event this Offer is not accepted, or the conditions required herein are not met, said
Earnest Money shall be returned to Purchaser. It is the preference of the Purchaser that,
during the pendency of this transaction, the Earnest Money be placed in an interest -bearing
account, with any interest thereon accruing to the benefit of the party entitled to the Earnest
Money.
Redevelopment Proposal August, 1997
Daley Field Page 2
Conditions
Pre -Closing Items
Completion as soon as possible of mutually acceptable Developer Agreement with the City of
Kalispell, specifying all things necessary for us to determine our final development plan,
including, but not limited to, such items as code requirements, utilities (including sanitary and
storm sewer requirements), environmental review, setbacks, stoplight, etc.
Purchaser shall enter into a satisfactory joint use agreement with the property owner to the
north of the our proposed site as it relates to the New Private Lane and its shared access,
maintenance, parking, and other related items.
Other Items
Provided Third Avenue is realigned and the new Third Avenue stoplight is in place (or the
City's assurance that it will be in place by June, 2000), Purchaser will begin construction in the
Fall of 1999, with opening scheduled for June or July of 2000. However, the new stoplight
must be assured to be in place before construction will commence.
At closing, the City will record a "restrictive covenant" on the balance of the Daley Field site
that prohibits the sale, lease, development, and/or operation of any competing grocery store
and/or pharmacy. This restrictive covenant shall expire if Rosauers is not in operation by
January 1, 2001, or one year from the date of completion of the Third Avenue realignment
and new Third Avenue stoplight, whichever is later.
Purchaser shall not be subject to any future assessments for the new Third Avenue realignment
and stoplight, the proposed new stoplight at the south end of the Daley Field site (Kelly
Road), the costs associated with the widening of Highway 93, or any storm sewer costs of the
State or the City.
If the New Private Lane has not been improved prior to the time of the Rosauers
development, Purchaser will agree to pave and curb it as a cost of our development.
Subject to the use and configuration of the development to the immediate south of our site,
Purchaser will allow cross -over ingress and egress for the convenience of each others
customers.
Purchaser will allow the use of our site by the City as a ball field for the 1998 season provided
City will indemnify Purchaser from any liability.
Closing Items
Rosauers is prepared to close this transaction within 15 days from the date that the above
Conditions have been resolved in writing between the parties. We recognize the City's desire
to close a transaction as soon as possible and are prepared to work diligently towards this goal.
Redevelopment Proposal August, 1997
Daley Field Page 3
TAX AND ECONOMIC IMPACT
While the proposed development of the Rosauers grocery store takes maximum advantage of
the highest and best use for that specific parcel, the remaining balance of the site should inure
benefit from the "draw" that our development will bring to the location. Other retailers
generally congregate around such anchor tenants, and thus the balance of the site should tend
toward retail as well. This type of higher density retail is a large contributor of income to local
municipalities in many ways. The City of Kalispell will benefit not only from the additional ad
valorem taxes generated directly by such retail development, but the whole south end market
should be re -energized, overall property values should increase, and more jobs will be
produced than would be the case with a lesser development.
As proposed, the subject development will be a substantial contributor of ad valorem taxes for
the tax increment district. We calculate the first year taxes due as being $142,757, as follows:
Market Value - Land
$
800,000
Market Value - Improvements
3,200,000
TOTAL MARKET VALUE
$4,000,000
Class Four Classification
x
.0386
TAXABLE VALUE
$
154,400
Market Value - Personal Property
$2,000,000
Class 8 Classification
x
.08
TAXABLE VALUE
$
120,000
TOTAL MARKET VALUE
$
274,400
Combined Mill Levy 1996
x
.520252
AD VALOREM TAX DUE 1996
$
142,757
Redevelopment Proposal August, 1997
Daley Field Page 4
The new, larger Rosauers store as proposed for the site is expected to employ a total of 95
people, which is 26 more than work at our current store. It is expected that all existing
employees will work at the new store when it opens. With this as the "anchor" development
for the entire Daley Field site, the City stands to further gain significant net benefit in
employment, both directly and indirectly, as other retailers join us at the site to offer the
products and services needed by the south Kalispell and north lake communities.
Since Rosauers only leases, and does not own their current store location, no commitments
can be made to the future of that location. While it has served Rosauers and its Kalispell
customers well over the past many years, the building is too small to provide the optimum
level of service and products to meet our current customer demands. It is, however, in a very
good location and the building configuration should be attractive to other retailers and
business users. Upon Rosauers' lease expiration, it is very likely that a new tenant, or tenants,
will be found and the building updated and improved to accommodate the new use. Not only
will there be additional new ad valorem taxes generated by this, but there should be additional
employment for the area. In essence, the City stands to win "twice" through the benefits of
our Offer.
Redevelopment Proposal August, 1997
Daley Field Page 5
THE PROPOSED DEVELOPMENT
Rather than consider only our own best interest in site and store design, we have attempted to
create the potential for increased value and economic enhancements for the entire Daley Field
site. We feel south Kalispell is at a critical point in its development future. With a Rosauers
super market as the anchor tenant, there is an opportunity for the development of a contiguous
15.6 acre community retail center. The City is in a good position to take maximum advantage
of the parcel's potential for highest and best use, related ad valorem taxes, new jobs, and
participate in the creation of an attractive property that will enhance the south entrance to the
City.
As designed and further set forth herein, we have set up our store to be the anchor tenant in a
potential "full site" retail development. While we are not in a position to take down any
additional land on a speculative basis, we trust at e City wi have the foresight to consider
h----best �nage the sale of the remain to in a way that takes advantage of the
0pporturu y presented through thus Offer. ---
The new Rosauers Food and Drug Store proposed for the Daley Field site will be very similar
and resemble the existing Rosauers super stores in Missoula, Lewiston, and Spokane. All of
these stores offer our customers excellent service and product selection at competitive prices in
a clean, contemporary store environment.
Our new store will be approximately 50,000 square feet in size, which is about 38% larger
than our current store in Kalispell. It will feature a number of departments:
• The Deli/Bistro will be larger than most and offer a wide selection of hot and cold
foods prepared in the store for take-out or consumption in a large dining area.
• The Bakery will offer a tempting selection of products made from scratch. We will also
sell locally produced specialty products such as bagels and European crusty breads.
Redevelopment Proposal August, 1997
Daley Field Page 6
• Our Meat Department will offer USDA Choice meats and the best of seafood, both at
our Self -Service and Service Meat counters.
• Rosauers' Produce Departments are recognized for excellence of quality, selection,
service, and price.
• The Pharmacy will continue to provide professional counseling with every
prescription.
• Our Grocery and General Merchandise Departments offer an amazing variety of
products. There will be approximately 40,000 different products in the store to choose
from.
• Rosauers was among the first supermarkets in the nation to any themselves with
boutique tenants such as banks, video rentals, espresso bars, etc. We will seek quality
tenants to provide such extra services to our Kalispell customers.
Some of the major areas of construction, and description of what will be provided within our
store, are as follows:
• The building exteriors will be of contemporary style, similar to the enclosed architectural
rendering of another Rosauers store. Because of the site configuration, the store will
need two "fronts," one towards Highway 93 and the other to the north. There will
likely be two entrances to the store, both emphasizing the northeast corner.
• Exterior walls will be one of three systems, depending on local market availabilities and
seasonal factors:
✓ Sand -textured stucco on a light metal system.
✓ Tilt -up concrete with a smooth finish.
✓ Broken -faced concrete masonry.
• It is anticipated the exterior color will be off-white, with an accent banding. Metal
roofing and wall copings will also be an accent color, probably a "brick red" color as used
in many Rosauers locations.
• Building signage will be similar to that on our existing Kalispell store.
• Building illumination will be limited to pathways and/or landscape lighting and
entrances. Parking lot lighting will be contemporary pole -mounted metal halide
fixtures.
• The roof system will consist of a mechanically attached, non -reflective EPDM
membrane on metal decking with steel bar joists and truss girders.
Redevelopment Proposal August, 1997
Daley Field Page 7
THE DEVELOPMENT TEAM
The proposed development will involve three entities:
Rosauers Supermarkets, Inc. - Rosauers will lease the property pursuant to a long term lease
from the ownership entity, a to -be -formed Limited Liability Company ("LLC"). The
minimum lease term will be 20 years, with extension options available beyond the minimum
term. Rosauers will fixture the store, provide inventory, maintain the premises, and operate
the 50,000 square foot facility.
Kiemle & Hagood Company - Kiemle & Hagood will manage the development of the
property, and arrange and sponsor the investment group which will develop and own the
property through the LLC.
Ownership LLC - This entity will acquire the Daley Field land from the City, and enter into a
long-term development and lease agreement with Rosauers for the improved property.
Initially, Rosauers will be the primary LLC member. However, as we prepare for
construction, a number of individual investors will replace Rosauers as the LLC members.
The same parties and a similar structured relationship was recently used to develop a like -sized
Rosauers store in Lewiston, Idaho. Based on the mutual success of that project, Kiemle &
Hagood Company has become the developer of choice for Rosauers. Both parties look
forward to continuing their successful track record with the new store in Kalispell.
Rosauers Supermarkets, Inc. is a regional supermarket chain, headquartered in Spokane, with
18 stores located in Washington, Oregon, Idaho, and Montana. We operate supermarkets
under three different banners - Rosauers Food and Drug (14 stores - conventional), Super 1
Foods (2 stores - warehouse hybrid), and Huckleberry's Fresh Markets ( 2 stores - natural
foods). We have been providing service to the Kalispell market for 30 years, having opened
our store there in September of 1967.
Redevelopment Proposal August, 1997
Daley Field Page 8
The company was founded and incorporated in 1949 by Mert Rosauer. We are proud to be
among the top three supermarkets, in terms of market share, in each of the markets where we
do business. Our principal competitors are the national chains, namely Safeway and
Alberstons. We employ approximately 1,600 full- and part-time employees throughout our
system.
In July, 1990, Rosauers management and an employee stock ownership plan (ESOP)
purchased 15 stores from URM, a grocery wholesaler, for $25.5 million in a stock transaction.
(URM had previously purchased the stores from Mert Rosauer.) Since then, the company has
built one new store, and acquired two new stores, to bring the total number of stores under
ownership to 18.
Thirty three members of Rosauers management own common stock in the company
representing 17% of the outstanding shares. The ESOP owns the remaining 83%. All
employees took an average 10% reduction in their wages over the repayment term of the
initial acquisition loan. We are proud to report that all wages have recently returned to local
market rates as the original loan was repaid in full on March 31, 1997.
Our conventional and warehouse stores range in size from 30,000 to 60,000 square feet, and
average 45,000 square feet. Approximately 65% of our store area is devoted to sales area, with
the balance used for inventory storage and mechanical needs. These stores offer a full line of
groceries, meats, produce, dairy, general merchandise, delicatessens, scratch bakeries, and
pharmacies. All but two of these stores have a full service pharmacy, five have a full service
restaurant, seven have an in-store bank, and many have contract post offices and espresso bars.
The two natural foods stores have all of the same departments but feature organic produce and
grocery products, hormone -free meats, and health and beauty products made from natural
ingredients without animal testing.
All of our stores are modern, well maintained, and carry more variety and higher quality
merchandise than the competition. All stores have ATM's and also accept credit or debit cards
through our checkstands. Half of the stores are open 24 hours a day, while the others are open
from 6 am to midnight, seven days a week. Each is equipped with electronic scanning registers
which communicate daily with the company's IBM AS400 computer.
Kiemle & Hagood Company, also located in Spokane, is one of the Inland Northwest's
leading full service commercial real estate companies, specializing in the management, leasing,
selling, counseling, and development of commercial, multi -family, and industrial properties.
The company's corporate staff of 55 professionals includes CPMs, CCIMs, CPAs, an SIOR,
and a highly efficient and talented support staff. At present, they manage in excess of two
million square feet of commercial, office, and industrial properties and over 2,600 apartment
units in the greater Spokane area. In addition, they have continuously been a sale volume
leader within their market area.
In 1993, Kiemle & Hagood Company developed a new store for Rosauers in Lewiston,
Idaho. The successful relationship created by that venture resulted in Kiemle & Hagood
Redevelopment Proposal August, 1997
Daley Field Page 9
becoming Rosauers preferred developer for their stores. The subject transaction will be
structured along the same lines as the Lewiston project.
Other recognizable developments completed by Kiemle & Hagood Company include Itron
Corporation's World Headquarters, Deaconess Medical Buildings No. 1 and 2, North
Spokane Financial Center, CXT Paver Plant, and Northpointe Medical Park.
Major management properties include Washington Mutual Financial Center, US Bank
Building, Paulsen Buildings, North 9 Post Building, the Sacred Heart Medical Center
Buildings, Holy Family Medical Building, and the Episcopal Diocese housing projects
throughout the area.
Major lease/sale projects include the Itron Headquarters, Seafirst Bank Credit Card Facility,
the Spokane Boeing site, SAFECO Insurance site, the Flour Mill, US Bank Building (twice),
and the Washington Mutual Financial Center.
Redevelopment Proposal August, 1997
Daley Field Page 10
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