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3. Resolution 4365 - Irwin Davis Proposal - KDC SiteAgenda -September 15, 1997 AGENDA ITEM 3 - RESOLUTION 4365- IRWIN PROPOSAL-KDC SITE BACKGROUND/CONSIDERATION: Enclosed are the minutes from a special KDC Executive Board Meeting and a memo from Larry Gallagher to me explaining the final Staff recommendation for the Irwin Davis Company's proposal for this project. Please read Larry's memo and the newest proposal from Irwin Davis. The scope of the purchase has been "negotiated" to a different proposal that: 1. Eliminates the City as a lessor 2. Includes earnest money 3. Meets the minimum of $6.65 per square foot as required in our prior advertisements 4. Does not include National Flood Property (building site or parking areas). The advertisement of the National Flood property as proposed in the Consent Agenda will allow Irwin Davis to bid on the property if they so decide. 5. Continues to reflect a deduction of the brokerage fees as a deduct from our purchase pnce. 6. Retains the contingencies that the City will relocate the above ground utilities and complete the other improvements within the street right-of-way, i.e. landscaping, sidewalks, etc. RECOMMENDATION: I concur with the recommendation of the KDC Executive Board and the PECDD Director that this project should move forward to achieve some of the long term goals of your urban renewal plan. I concur with the comments made at the last meeting about the broker's Agenda -September 15, 1997 fees and would prefer to have these removed from the deal. I will, in our final negotiation, if approved, continue to press for the removal of these fees. ACTION REQUIItED: APPROVAL of Resolution 4365 is needed to finalize the sale of property and the associated development agreement. iheCllyoiKalispell Incorporated 1892 Planning, Economic & Community Development Department P.O. Box 1997 Kalispell, MT 59903-1997 To: Clarence Krepps, City Manager From: Lawrence Gallagher, PECDD Director Subject: Staff Recommendation - KDC Site Date: September 12, 1997 248 Third Avenue East (406) 758-7740 (406) 758-7739 (office fax) (406) 758-7758 (City Hall fax) I have attached a new offer from David Thornquist, Woods and Water Realty, as agent for Irwin Davis & Company for the purchase and redevelopment of the KDC Site. Irwin Davis & Company will form a new partnership called Kalispell Center Partners to purchase and redevelop the KDC Site as previously offered for sale by the City. The Kalispell Center Partners offer to purchase and redevelop all of the KDC Site property previously offered for sale by the City of Kalispell. The property includes Parcel 1 - Lots 13 and 14 of Block 36, Parcel 2 - Lots 1 thru 12 of Block 36, and Parcel 3 - Lots 1, 2, 3, 4 and the northern 7" of Lot 5 of Block 45. The purchase price offered is exactly $6.65 per sq ft. Mr. Davis will deliver the earnest money referenced in the offer equal to 5% ($21,000) at the City Council Meeting on Monday, September 15, 1997. The new offer is submitted in response to concerns expressed by the City Council and the Kalispell Development Corporation (KDC) during their review of Mr. Irwin's first offer. Specifically, he has removed the contingency that the City become a tenant in one of the buildings to be built. Secondly, he has clearly established a minimum offer at $6.65 per sq ft for all of the property previously advertised by the City. He has removed from this offer any reference to Lots 15 and 16 and Lot 24 in Block 36, the National Flood Services building and parking lot, which is now subject to a separate legal offering with proposals due October 7, 1997. Mr. Irwin may or may not submit a proposal at that time to purchase this additional real estate. The City Council will consider the sale of those properties and the impact on this proposal as separate issues. IMT OPPORTUNITY Clarence Krepps, City Manager Page 2 September 12, 1997 Mr. Irwin continues to emphasize that his purchase price offer ($419,493.04) meets the $6.65 per sq ft minimum purchase price advertised and that typically brokerage fees paid on closing are based on a percentage of the sale or contract price for the property. The Kalispell Center Partners will be paying their broker to represent them with their funds placed in escrow to close the transaction, which is not uncommon in real estate transactions. Mr. Irwin wants to discuss this issue with the City Council if it remains a concern during their deliberation of this recommendation next Monday night at the City Council Meeting. I recommend that the City Council authorize the City Manager to negotiate the final terms of a purchase and sale and redevelopment agreement with the Kalispell Center Partners so that it may proceed with tenant solicitation and satisfying the contingencies set forth in the offer. The purpose of the request is to provide assurance to the Kalispell Center Partners that they have an exclusive agreement with the City for the purchase and redevelopment of the subject property. The new offer from the Kalispell Center Partners also addresses all of the concerns expressed by the KDC during its September 9, 1997, review of the proposal. The KDC encourages the project and has agreed to do whatever it can to assist with the development of the site. SEP f 1 '00- " S F_dafisis_qn tR&cve�ionaf _fakeixo rE PROFESSIONAL HOMES HANDLING A(aterACREAGE OF YOUR 04 '� LOTS REAL ESTATE RANCHES NEEDS REALTY BUSINESS BOX 460 •LAKESIDE, MT 59922 PROPERTIES (406) 844-3395 FAX (406) 844-2031 September 11, 1997 Mr. Lawrence Gallagher Director Planning, Economic & Community Development Dept. City of Kalispell 248 3rd Avenue East Kalispell, MT 59903-1997 Re: Kalispell Downtown Center Kalispell, Montana Dear Mr. Gallagher: The following letter will serve to outline the terms and conditions under which Kalispell Center Partners would purchase the above -referenced property: Buyer: Kalispell Center Partners Seller: The City of Kalispell Property: Parcel 1 consisting of 7000 s.f., all of lots 13 & 14 of Block 36 Parcel 2 consisting of 42,000 s.f, all of lots 1 duu 12 of Block 36 Parcel 3 consisting of 14,081.66 s.f., described as 14V x 100.5833', consisting of lots 1,2,3,. 4 and the norther 7" of lot 5. Purchase Price: $419,493.04 cash payable at closing (less earnest money deposit). Earnest Money: $21,000.00 refundable up until Buyer's removal of all contingencies. Contingency Period: Buyer will have until March 1, 1998 to satisfy itself of certain conditions of its purchase, including, but not limited to the following: 1. Review and approval of all environmental, soils, and engineering reports associated with the property; 2. Completion of Buyer's feasibility analysis in a form acceptable to Buyer; 3. Receipt of all necessary zoning and planning approvals, building permits, and any other municipal approvals necessary to commence construction of improvements; 4. Receipt of any financing commitments, if necessary; 5. Completion, or in lieu of completion, an agreement setting forth an acceptable completion schedule, for the Project Requirements outlined below as numbers 1 through 4. Buyer shall have the right to extend the Contingency Period for an additional sixty (60) days by forwarding a $10,000.00 non-refundable deposit to the Seller. Project Requirements: The following Project Requirements will be provided by the Seller: 1. Delivery of all environmental assessments for the subject property; 2. Relocation of all existing above -ground utilities (electrical and phone); 3. Completion of necessary curb, gutter, sidewalk, landscape, and street improvements within City right-of-ways. Closing: Closing shall occur within 30 days of end of Contingency Period. Documentation: Seller shall prepare a Purchase and Sale Agreement within 15 days of acceptance of this Letter of Intent. Buyer and Seller shall negotiate in good faith towards a mutually acceptable agreement. Brokerage Fees: Buyer and Seller acknowledge that Woods and Water Realty (Broker) has been the only agent/broker involved in this transaction and as such, the Broker shall be paid a fee of six percent (61/o) of the Purchase Price at time of closing from proceeds placed in escrow by the Buyer for the proposed purchase of the property. The Broker's fees will be subtracted from the total Purchase Price. Acceptance: The acceptance of the above term and conditions is not intended to bind either the Seller or Buyer. Only a fiilly-executed Purchase and Sale Agreement will bind the parties. If the Seller is in agreement with the above business terms, please acknowledge below and return one copy of this letter to Buyer by September 30, 1997. We look forward to working with the City of Kalispell toward a successful completion to this project. Z Y Yours, L�,y (! � David C. Thornquist Broker Associate AGREED TO AND ACCEPTED: Its: Date: AGREED TO AND ACCEPTED: By: David B. Irwin Its: Principal Date: September 11, 1997 Incorporated 1892 Office of the Ci.iT Aftorney Glen Neier, City Attorney Richard Nickel, Asst. City Attorney Theresa White, Legal Secretary September 12, 1997 TO: Manager, Mayor and City Council FROM: Glen Neier, City Attorney Telephone (406)758-7708 P.O. Boa 1997 Kalispell MT 59903-1997 Fax (406)758-7758 RE: Advertisement on KDC Site (Lots 1-14,Block 36 & Lots 1-4 and North 7" Lot 5, Block 45) and National Flood (Lots 15, 16 and 24, Block 36). At the Council Workshop of September 8, a question was asked as to the requirements on advertising the sale of the KDC site and the National Flood site prior to accepting an offer to purchase the property by the Irwin/Davis Group --(Kalispell Center Partners). My review of the file on the KDC site indicates the City has on at least two prior occasions offered all or part of the KDC site through public advertisement. In 1992, the City advertised Lots 1- 4 and the North 7" of Block 45, in connection with a proposal from the owners of the Liberty Theater to expand their operation. In the fall of 1996, the City advertised the entire KDC site for sale in response to a proposal from a Lloyd Abrams. In neither case was an offer to purchase and redevelop the KDC site received from the respective developers. It has been widely known, at least locally, that the City desired to move the KDC site for a number of years. The National Flood site, purchase in the Spring of this year, has never formally been offered by the City for sale and redevelopment, although the City Council express an interest in disposing of the site as soon as possible after the purchase. Real property under the Urban Renewal Law, Title 7, Chapter 15, Parts 42 &43 Montana Code Annotated cannot be disposed of for less than the "fair value". However, price is not the only factor to be j:\wp\natop.wpd considered by the entity offering the same for sale. Other factors include the uses in the urban renewal plan, the restrictions and covenants, conditions and obligations assumed by the purchasers, and the objectives of the plan. In disposing of real property the city must follow the provisions contained in S 7-15-4263, MCA, that is invite by public notice proposals from private redevelopers by advertisement for three consecutive weeks and accept the proposal that the Council deems in the public interest and furtherance of the redevelopment plan. The Kalispell Center Partnership originally presented an offer to purchase the KDC site as well as the National Flood site as part of a redevelopment plan on all City owned property in Blocks 36 and 45. Legally, the KDC site may be considered subject to sale and redevelopment by reason of the fact that it has been offered for sale, pursuant to S 7-15-4263 and the City has actively sought redevelopment proposals on the site. Further, the advertisements both in 1992 and 1996 contained the following language: Should the successful prospective purchaser fail to purchase the property, the City reserves the right to consider and sell property to another prospective purchaser. Should the City fail to receive any bids for the property or should the bids received not be at least the minimum fair market value established by the City Council, the City reserves the right to sell the property at private sale at an amount agreeable between the City and a purchaser which shall be in the best interests of the City of Kalispell and its inhabitants. The inclusion of the above language noticed other prospective purchasers that the property would remain available for sale if the advertisement did not result in a sale. However, because the National Flood site has never been advertised in accordance with the Urban Renewal Law, either by itself or as a part of the KDC site, it is the opinion of this office that in order to sell the property it must be advertised. Therefore, this j:\wP\natop.wpd office has prepared a Notice of Sale document, included in your packets, for consideration at the meeting of September 15, 1997 j:\wp\natop.wpd SPECIAL KDC EXECUTIVE BOARD Finance Committee Meeting September 9, 1997 7:15 a.m. Planning, Economic & Community Development Conference Room Members Present: Lee Berger, Paul Wachholz, Gordon Pirrie, Virginia Sloan, Tom Weaver, Jim Meyers, Wayne Saverud, Chuck Mercord, and Steve Olson. City Staff Present: Clarence Krepps, Larry Gallagher, Ross Plambeck, and Debbie Woodham. A special meeting of the KDC Executive Board Finance Committee was held on Tuesday, September 9, 1997, at 7:15 a.m. The purpose of the meeting was for the committee to prepare a final recommendation to the City Manager regarding the KDC Site Proposal as well as the Daley Field proposals. 1. KDC Site Proposal. Larry reported to the group that negotiations with David Irwin of Irwin Davis & Company for the KDC Site have been ongoing. At issue is the City leasing space in the building proposed for Phase 1 of,the project. In his original proposal Mr. Irwin requested that the City lease approximately 7,000 sq ft for 10 years in the $14.00 per sq ft range. After talking with Mr. Irwin he stated that a commitment of only 3,500 sq ft of space for five years in the $11.00 per sq ft range would be acceptable. Mr. Irwin has stated that he needs a firm anchor tenant for financing purposes. There is a five month contingency period in Mr. Irwin's proposal. He also stated that he would be willing to take the National Flood Building out of the deal and would offer the City $350,000 for the land only. The offering price for the entire offering is $600,000, less the 6% broker's fee. The City's only responsibility besides leasing space for the specified period would be to underground utilities. It is estimated the taxes generated from the first building in Phase I and the land will be $32,000 per year. Mr. Irwin has limited his project to 44,000 sq ft so that all parking can be contained on site. Therefore, no variance would be needed. During a discussion regarding space needs for City departments, Clarence told the group that the City has budgeted for a space needs study which will take at least 45-60 days to complete. Committee members agreed that it is premature for the City to make a commitment for space prior to the completion of the space needs study. Committee members are in favor of Mr. Irwin"s project, however, they feel the City should not be a lessor. The KDC encourages the project and will do whatever it can to assist Mr. Irwin. Several members volunteered to meet with him. 2. Daley Field Proposals. The City received two proposals for the Daley Field site. A presentation was given to the KDC Executive Board on Tuesday, September 2, 1997, by representatives of both King Management and Rosauers. All committee members were provided with copies of the two proposals, a draft of a Memo from Diana Harrison, Zoning Administrator, regarding zoning, a draft of a Memo from Ross Plambeck, Redevelopment Manager, and a draft of a Comparative Analysis of the Daley Field Purchase Proposals. After a discussion of the proposals, Steve Olson made a motion for the KDC to recommend to the City Council to accept the Rosauers Proposal. Lee Berger seconded the motion. After further discussion, Tom Weaver called for the question. The motion passed unanimously. Paul Wachholz abstained from voting because of a possible conflict of interest. Members also agreed that the remaining portions of the property located north and south of the parcel that Rosauers wants to purchase should be offered for sale either together or as two separate parcels only. RESOLUTION NO. _4.3.6-5— A RESOLUTION AUTHORIZING THE SALE OF LOTS 1 THROUGH 14, BLOCK 36 AND LOTS 1 THROUGH 4 AND THE NORTHERLY 7" LOT 5, BLOCK 45, KALISPELL, FLATHEAD COUNTY, MONTANA, TO KALISPELL CENTER PARTNERS, A PARTNERSHIP, AND AUTHORIZING THE CITY MANAGER TO ENTER INTO A DEVELOPMENT AGREEMENT WITH KALISPELL CENTER PARTNERS. WHEREAS, the City of Kalispell, a municipal corporation, owns certain real property described as Lots 1 through 14, Block 36 and Lots 1 through 4 and the North 7" Lot 5, Block 45, Kalispell, Flathead County, Montana, and WHEREAS, by Ordinance No. 1065 the City Council established as projects the acquisition of property within the Downtown Redevelopment Plan Area for the purpose of eliminating blight and the creation of additional parking with the downtown area of Kalispell, and WHEREAS, pursuant to said Ordinance No. 1065 the City purchased the above described real property on October 14, 1988, and WHEREAS, on October 7, 1996, pursuant to an advertisement published in accordance with § 7-15-4263, MCA, the City accepted proposals for the purchase and redevelopment of said property, however, no proposals were received, and WHEREAS, on August 18, 1997, Kalispell Center Partners submitted a proposal for the purchase and redevelopment of said property for purposes consistent with the Downtown Redevelopment Plan, Ordinance No. 933, as amended, and WHEREAS, the City and Kalispell Center Partners desire to enter into negotiations on a Development Agreement which adequately addresses the obligation of Kalispell Center Partners to redevelop the property, and WHEREAS, the City Council desires to sell said property to Kalispell Center Partners for redevelopment as specified in the Development Agreement, and WHEREAS, said property is not held in trust for a specific purpose and an election is not necessary to affect its sale, and j:\wp\irwin.wpd WHEREAS, the Development Agreement shall in all respects comply with Ordinance No. 933, as amended and Ordinance No. 1065 and said sale will be in the best interest of the City of Kalispell and its inhabitants, and NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL, AS FOLLOWS: SECTION I. That the Manager is hereby authorized to enter into negotiations with Kalispell Center Partners and reduce to writing a Development Agreement consistent with the Kalispell Downtown Redevelopment Plan, the Kalispell Downtown Center Offering Document, and the Redevelopment Proposal of Kalispell Center Partners. SECTION II. That upon review and approval of the Development Agreement by the City Council, the Mayor and City Clerk of Council are, hereby, authorized execute all legal documents necessary to transfer, by Grant Deed, all the City's right, title and interest in the property described as Lots 1 through 14, Block 36 and Lots 1 through 4 and the North 7" Lot 5, Block 45, Kalispell, Flathead County, Montana, to Kalispell Center Partners, said sale being contingent on receipt of the sum of not less than $419,495.00 less any amounts previously received. PASSED AND APPROVED BY THE CITY COUNCIL AND MAYOR OF THE CITY OF KALISPELL, THIS DAY OF SEPTEMBER, 1997. DOUGLAS D. RAUTHE - MAYOR Attest: Debbie Gifford, CMC Clerk of Council j:\wp\irwin.wpd