01. Reject Proposal - Daley Field Lot 1City of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758
The Honorable Mayor Boharski and City Council
FROM: Susan Moyer, Community Development Manager
Chris A. Kukulski, City Manager
SUBJECT: Sale of Lot 1
MEETING DATE: November 19, 2001
RECOMMENDATION: The City decline the offer from Northwest Investments Partnership, Inc. and re -
advertise the property in the form of a bid document with the requirement that
cash at closing is a mandatory requirement, closing on the property would be
accomplished within the next sixty to ninety days, and a requirement that
construction would begin no later than summer of 2002.
BACKGROUND: Daley Field was advertised for redevelopment in July 1997 through a formal
Request For Proposal (the "July 1997 RFP") procedure. The RFP contained the
entire site of 15.6 acres (681,758 sq. ft.). Rosauers responded to the proposal to
purchase 5.25 acres (228,711 sq. ft.) of what became Lot 2, beginning at the
centerline of the new Third Avenue East extensions ("new Private Lane") onto the
property and continuing south until adequate site area was achieved. Rosauers
offered a minimum price of $743,311 for the 5.25 acres or $3.24 per sq. ft., plus
$3.25 for each additional square foot as determined by survey of the final site
configuration.
As a result of the site acquired by Rosauers, Lot 1 was replatted to contain 2.98
acres (129,808 sq. ft.) and Lot 3 to contain 7.414 acres (303,047 sq. ft.). City
Council instructed the City Manager and the Community Development
Department to prepare and advertise Requests for Proposals on Lot 1 in April
1999, June 2000, and again in October 2001 with the intent of generating revenue
to be utilized for eligible activities within this Urban Renewal District No. 2.
All three of the RFP packets requested the same submittal criteria and established
ranking criteria as had been done in the July 1997 RFP. The City of Kalispell
failed to receive responses to the April 1999 or to the June 2000 Request for
Proposals for Lot 1. Response to the October 2001 RFP request was received
from Northwest Investments Partnerships, Inc. dba Peak Developer on October
29, 2001 that did not contain the submittals as requested in the RFP. As a result,
staff was unable to establish ranking criteria to evaluate the proposal.
The attached staff evaluation of the offer and comments as to the conditions of the
offer is attached for Council's review. The major points in the offer that staff
encourages the Council to consider are listed on Page 2 of the evaluation as well
as stated below:
1. Only $5,000 earnest money is being offered, and the offer is really
contingent.
2. The closing and payment of the purchase price ($356,974) would not
occur until the developer had completed the improvements proposed for
the construction on the site.
3. The developer is not obligated to commence construction of
improvements until 60% of the total square footage of the improvements
is under binding lease agreements.
4. The developer wants the City to subordinate its security interest in the
property to a lender who extends a loan to the developer for the purpose of
financing construction of the improvements.
5. The developer desires the City to be responsible for approximately
$68,000 (as estimated by the Public Works Department) worth of
improvements on and off site that the City does not typically do on behalf
of a developer.
In order to realize the value of the land, the City then has a vested interest in the
success of this commercial venture that would be in competition with other
commercial ventures within the City.
Mae Nan Ellingson, Dorsey & Whitney, had informed staff in response to a
previously unsolicited offer from Peak Development that was substantially similar
to the October response "there is no authority in either the urban renewal law or
general statutory provisions relating to local governments that enable a Montana
municipality to become an equity partner in a real estate transaction." The request
for the City to allow the site to be subordinated so that the developer could obtain
"construction financing" and the closing would not take place until such
construction was completed do not appear to meet either the intent or the
requirements of the urban renewal law.
Staff is in receipt of a letter from another developer expressing a firm desire to bid
on this property should the City decide to re -offer the site.
FISCAL EFFECTS: Upwards of $356,974.
ALTERNATIVES: As suggested by the Council.
Respectfully submitted,
Susan Moyer, A- ¢�
ommumty Development
Report compiled on November 9, 2001
Final Staff Evaluation of Lot 1 Proposal
Offer Received from Northwest Investments Partnerships, Inc. dba Peak Development
Description of Property: 2.98 Acres (129,808 sq. ft.) - Zoned B2
Does proposal contain information in the format requested in the RFP?
1 - Site Plan drawn to scale, showing proposed layout of all structures and other
No
improvements including driveways, pedestrian walks, landscaped areas, fences, walls,
off-street parking & loading areas.
_
2 - Architectural drawings or sketches, drawn to scale, including preliminary floor plans,
No
with sufficient detail to permit computation of all site development criteria (Le., setbacks,
lot coverage, off-street parking requirements, building heights. Drawings "will show" all
elevations of proposed structures and other improvements as they will appear upon
--
completion, including all roof mounted equipment, trash storage areas & utility
equipment.
Can the Council evaluate the proposal as to the impact on the site, the surrounding
No
neighborhood and the City's tax base if the award is made based on the response.
-
Offering Price
$356,974
Earnest Money
$5,000 -
Price Per Square Foot
$2.75
Realtor Commission
N/A
Purchase Money Available When?
1 - $5,000 earnest money at time of closing and the offer is really contingent.
2 - $351,974* upon purchaser's completion of the improvements
proposed to be constructed on the premises.
_
Note: Purchaser not obligated to commence construction of improvements
until "60%" of the total square footage of the improvements are under_
binding lease agreements.
Closing Date Required
December 31, 2001
Purchase Money Available When?
1 - $5,000 earnest money at time of closing
2 - $351,974 payable upon completion of proposed improvements.
11 /15/2001
Final Staff Evaluation of Lot 1 Proposal
Conditions Attached By Proposed Developer
1 - Title Insurance provided by Seller to Purchaser on or before November 30, 2001.
1 - Standard
2 - Purchaser's obtaining satisfactory financing for purposes of constructing
2 - Standard if the offer was to obtain purchase financing and did not contain
improvements on the subject property.
the request to use the land as collaterial for construction financing and not
to close until the construction was leased and completed.
construction financing & not to close until the construction was leased and
completed.
3 - Taxes and Assessments: All property taxes and assessments for 2001 and earlier
3 - Standard
be responsibility of seller. Purchaser responsible for all 2002 and subsequent
_
property tares.
4 - All SIDS & other assessments due & payable by seller after closing
4 - N/A - Per Amy none exist on the properties
5 - Closing fee by closing agent to be shared equally
5 - Standard
6 - Recording Fee for deed to be paid by seller at closing.
6 -Standard
7 - Seller to pay for any and all recording feels to release liens or other obligations
7 - Standard
8 - Each party is responsible for their own attorney fees
8 -Standard
9 - Seller shall be responsible for brokerage fee or commission
9 - Not Applicable
10 - Unusual Conditions Attached by Purchaser:
a - City to survey the subject property no later than 60 days of closing.
a - Not Standard - The City would want the liability of a survey in the private sector if it
were to acquiese to this requirement. (Private sector estimates $000) cost)
b - City to pave the access road currently used by Strand Aviation no latem
b - Depending on season at time of closing, weather could delay the
than 60 days after closing.
deadline date. Also, City required by law to pay Mini-Davis/Bacon wage
rates; therefore, it is considerably more expensive for a governmental entity
-
to undertake this action. (Public Works estimates $18,000)
c - City to install 3 curbcuts, curb work, street lighing, and sidewalks relative to what is
c - Not Standard - Same comments as above. (Public Works estimates $16,500)
referred to as "New 3rd Street" no later than 60 days after closing.
_
d - City to landscape a greenbelt in the right of way area.
d - Time not a condition. Mini-Davis/Bacon wage rates still apply. (Public
Works estimates $6,500)
e - City to pay the developer to bring sewer, water, electric and gas utilities to the subject
e - Same comments as above. (Public Works estimates $26,700 water & sewer)
property boundary.
f - City to subordinate land for Purchaser to use as collateral for obtaining
f -Per Mae Nan Ellingson's review of Peak Development's previous
construction financing.
unsolicited development proposal, provisions of Sections 7-15-4262 through
7-15-2466, M.C.A. of the Urban Renewal Act (the "Act"), she does not
11/15/2001
Final Staff Evaluation of Lot 1 Proposal
see any specific authorization for the City to participate in a project in this
way and further states there are "specific provisions in those sections that
would suggest that this type of involvement in the development of the
property is implicitly disallowed. --
g - Purchaser would not be obligated to commence construction of the improvements until
purchaser enters into binding agreements for lease of no less than 60% of the total
square footage of the improvements.
g -The Act calls for the city to dispose of property within an Urban Renewal
District in a timely fashion. Not only could the 60% of binding lease
requirement delay the City receiving the purchase price in a timely fashion,
a deep recession or economic setback could be created for the Purchaser
or tenants which could then place the City in an additional financial hardship.
11/15/2001