081711completeagendaCITY OF RICHFIELD, MINNESOTA
WEDNESDAY, AUGUST 17, 2011
SPECIAL CITY COUNCIL MEETING
RICHFIELD MUNICIPAL CENTER
COUNCIL CHAMBERS
6700 PORTLAND AVENUE
7:00 P.M.
AGENDA
Call to order
Roll call
1. Consideration of:
• By motion, close meeting to consider letter of intent from Wellington Management,
Inc. for purchase of Lot 2, Block 1, Heyman Addition;
• By motion, acceptor extend a counterproposal to letter of intent;
• By motion, approve first reading of ordinance providing for sale of certain real
property of city and schedule second reading for September 13, 2011;
• By motion, provide City's consent to inclusion of Lot 2, Block 1, Heyman Addition in
Wellington's planned unit development for that site and adjacent former Kmart site
Staff Report No. 175
Notes:
2. Adjournment
Auxiliary aids for individuals with disabilities are available upon request. Requests must be
made at least 96 hours in advance to the City Clerk at 612-861-9738.
AGENDA ITEM # 1
REPORT # 175
J STAFF REPORT
SPECIAL CITY COUNCIL MEETING
AUGUST 17, 2011
REPORT PREPARED BY:
REVIEWED BY CITY
MANAGER:
CITY ATTORNEY
Nance, TITLE
ITEM FOR COUNCIL CONSIDERATION:
Consideration of proposed sale of land to Wellington Management, Inc. and inclusion of -land in
Wellington's development plans
I. RECOMMENDED ACTION:
• By motion, close the meeting to consider a letter of intent from
Wellington Management, Inc. for the purchase of Lot 2, Block 1,
Heyman Addition
• By motion, accept or extend a counterproposal to the letter of
intent
• By motion, approve first reading of an ordinance providing for
the sale of certain real property of the city and schedule second
reading for September 13, 2011
• By motion, provide the City's consent to the inclusion of Lot 2,
Block 1, Heyman Addition in Wellington's planned unit
development for that site and the adjacent former Kmart site
II. BACKGROUND
At the regular meeting of the City Council on August 9, 2011, the City Council
considered and approved a planned unit development plan for the former Kmart
site, to be redeveloped by Wellington Management, Inc. That development
includes land legally described as Lot 2, Block 1, Heyman Addition, which both
Wellington and the Richfield HRA believed to be owned by the HRA, based on
county property tax records. Further investigation has shown that the property is
owned by the City, not the HRA.
Wellington has provided the City and HRA with a letter of intent to acquire Lot 2,
which is attached.
III. BASIS OF RECOMMENDATION
A. POLICY
• The City of Richfield actively encourages and supports the
improvement and redevelopment of functionally obsolete or
economically disadvantaged properties, in order to improve the
city's tax base and provide jobs.
B. CRITICAL TnvmvG ISSUES
• ellington proposes to close on the Kmart site in September.
• Wellington needs to obtain control of all properties to be included in
its development plan.
C. FINANCIAL
• The City Council must determine the price and/or conditions upon
which it is willing to convey Lot 2 to Wellington.
• Hennepin County Assessors value of this property is $68,000.
D. LEGAL
• The City Attorney has provided a memorandum, which is attached.
The City Attorney will be at the meeting to answer questions.
E. ENVIRONMENTAL
CONSIDERATIONS
• N/A
TERNATIVE
• i ne Louncn may approve
to Wellington.
V. ATTACHMENTS
• Memorandum from City Attorney Corr
• Letter of Intent
• Ordinance.
2 to the HRA, for reconveyance
Heine
VI. PRINCIPAL PARTIES EXPECTED AT
MEETING
• Representatives of Wellington Management, Inc.
!- I
BILL NO.
AN ORDINANCE PROVIDING FOR THE SALE OF CERTAIN REAL
PROPERTY OF THE CITY
THE CITY OF RICHFIELD DOES ORDAIN:
Section 1. The following property of the City is hereby authorized to be sold to
Wellington Management, Inc. or such other entity as Wellington Management, Inc. may
designate in writing.
Lot 2, Block 1, HEYMAN ADDITION, Hennepin County, Minnesota
Sec. The mayor and city manager are authorized and directed to sign all
documents necessary to effect the sale contemplated by this ordinance, in accordance
with the terms and conditions of the purchase agreement as approved by the City Council.
Sec. 3. This ordinance will be effective in accordance with Section 3.09 of the
City Charter.
Adopted this day of September, 2011.
By:
Debbie Goettel, Mayor
ATTEST:
Nancy Gibbs, City Clerk
l~~
Kennedy
Graven
CHARTERED
Conine A. Heine
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis MN 55402
(612) 337-9217 telephone
(612) 337-9310 fax
http://www.kennedy-graven.com
cheine@kennedy-graven. com
MEMORANDUM
TO: Mayor Debbie Goettel and City Council Members
FROM: Corrine A. Heine, City Attorney
DATE: August 12, 2011
RE: Lots 2 and 3, Block 1, Heyman Addition
The Wellington development of the former Krnart site, as proposed, includes Lot 2, Block 1,
Heyman Addition. Lot 2 is the triangular parcel labeled as "42" on the attached excerpt from the
Hennepin County property tax information website. As shown on the attached, the property tax
website identifies the owner as the Housing and Redevelopment Authority of Richfield. From
examination of the torrens title certificate, however, we recently determined that the property is
owned by the City of Richfield.' This memo summarizes how that ownership information impacts
both the proposed sale of the property to Wellington, as well as the status of the land use approval
that Wellington recently received.
Sale of Property
Wellington has initiated negotiations with the HRA by presenting a proposed letter of intent, which
the HRA has not yet considered. The draft letter of intent contemplates the sale of Lot 2 to
Wellington for the sum of $L00, which is less than the property's estimated fair market value of
$68,000.00.
Absent statutory authority, the City does not have the ability to make gifts of public property. The
City, however, may convey real property for less than fair market value under the following
circumstances:
• Pursuant to Minn. 5tat. § 465.035, a city may convey property to another
governmental subdivision for nominal consideration or such consideration as the
parties may agree. The City has used § 465.035 previously to convey land to the HRA for
The City also owns the adjacent Lot 3, which is the long narrow strip labeled "42" on the attached map. Wellington
has not proposed to purchase Lot 3, and it is presumed that Lot 3 is not included in the Wellington development.
390461v1 CAHRC160-1
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redevelopment projects, including the Cedar Point development. The HRA, in turn, has the
authority to convey the land for less than nominal consideration to a private entity, after
following a public hearing process. The conveyance instrument also must include terms and
conditions reasonably imposed by the HRA to ensure compliance with the development
plan.
• Under Minn. Stat. § 469.185, a city may convey land that it owns in fee simple "for
nominal consideration to encourage and promote industry and provide employment
for citizens." This statute does not require the creation of a development district or
development plan, nor does it require the City to impose any terms or conditions on the sale
to ensure that development or employment goals are met. In the collective memories of
City staff and legal counsel, the City has not made use of this authority. As a policy matter,
however, I would recommend that the City impose conditions on the sale of the property as
the Council deems appropriate to counter-balance the below-market purchase price.
The City may decide to sell the property for a negotiated price that represents its fair market value.
Procedures and Timing for Sale
Under Section 13.04 of the City Charter, sales of real property must be approved by ordinance.
Adoption of an ordinance requires a first and second reading, and the ordinance is not effective until
30 days after publication of the ordinance. City Charter, § 3.09. In the absence of scheduling any
additional special meetings of the council, the most expedited process would be: first reading on
August 17, 2011; second reading on September 13, 2011; publication on September 22, 2011;
closing to occur on or after October 22, 2011.
The City can ignore its charter requirements if it conveys the land to the H1ZA. Minn. Stat. § 471.64
allows a city to convey land to another political subdivision without regard to other statutory or
charter requirements. However, the HRA is required to hold a public hearing prior to any sale of
real property. The hearing must be at least 10 days and not less than 30 days after publication of the
notice of hearing. With the use of special meetings, the sale ,could occur in September 2011.
Without special meetings, the sale could not occur until October.
The proposed sale should also be submitted to the planning commission for review prior to closing,
consistent with Minn. Stat. § 462.356.
Sales of property for less than fair market value can in some instances require compliance with the
business subsidy requirements in Minn. Stat. § 116J.994. Because the value of the property is less
than $150,000, no public hearing is required under that statute. The Wellington redevelopment also
qualifies for exemption from the business subdivision provisions, because its investment in purchase
of the Kmart site and site preparation will be greater than 70 percent of the assessed land value for
the site.
390461v1 CAHRC160-1
i.~
Land Use Issues
Wellington has already received its land use approval, conditioned only upon initiating good faith
negotiations with the HRA for the purchase of Lot 2. Whether the City or HRA sells the land to
Wellington, no change in the land use plans will be required so long as Wellington ultimately owns
or controls all of the land in its planned development. The City Council, however, should formally
ratify the inclusion of the City property in the planned unit development.
If the City land is not sold to Wellington, then Wellington must amend its development plan for its
site to remove the City land from the planned unit development.
390461v1 CAHRC160-1
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LETTER OF INTENT TO PURCHASE
August 8, 2011
PROPERTY
Approximately 14,001 sf of land area on the northeast corner of Lyndale and 66`~ Street in
Richfield, MN, which is legally described as Lot 2, Block 1, Heyman Addition("Property").
BUYER
Lyndale Station LLC
SELLER
City of Richfield ("City") and/or the Richfield Housing and Redevelopment Authority ("HRA")
PRICE
$1.00
TERMS
Cash at closing.
ADDITIONAL CONDITIONS, BUYER:
Buyer agrees to construct an approximately 8,500 s.f. retail building {"Corner Retail Building")
and to make sidewalk, patio, public art, lighting and landscaping improvements on the Property
as described more fully an Exhibit A. In addition, Buyer will provide {via deed restriction or
declaration) that the property outlined in Exhibit B may be used only as public space {"Public
Area") but would include shared use by the Corner Retail Building for access and outdoor
amenities such as outdoor seating. A temporary deed restriction will also restrict Buyer from
selling the parcel to another party unless that sale is to an entity that would perform on the
intended development as described in this agreement. Buyer will be 100% responsible for all
operation and maintenance costs associated with the Public Area during the period it owns the
Public Area. Should Buyer not commence construction of the Corner Retail Building by
September 1, 2014, Buyer agrees to convey the Property back to the HRA, including any and all
improvements made to the Property.
ADDITIONAL CONDITIONS, SELLER:
HRAICity of Richfield agrees to work collaboratively with Buyer to submit to Hennepin County
and/or to the Metropolitan Council a grant application for no less than $350,000 to provide
financial assistance to Buyer for construction of public improvements adjacent to the Corner
Retail Building and along the major transit ways of 66~' Street and Lyndale Avenue.
i -1
DUE DILIGENCE AND CLOSING
provide Buyer with all of the following materials-(if any) in Seller's possession:
1. A property survey;
2. All blueprints and engineering plans available;
3. A Phase I environmental report;
4. A title insurance commitment or title insurance policy; and
5. Information regarding septic tanks, wells, and soils affecting the Property.
Buyer shall be provided a 120-day due diligence period. This due diligence period shall
commence after a binding Purchase Agreement is signed by both parties and after the date Buyer
receives all of the information listed above. Seller shall cooperate with Buyer to resolve at
Seller's expense any title, utility or environmental issues discovered during Buyer's due
diligence period. Seller shall not be obligated to clear title, but must notify Buyer immediately of
its intentions and Buyer will have the right, but not the obligation to terminate the Purchase
Agreement within 10 business days without penalty. Buyer may terminate the Purchase
Agreement at Buyer's option at any time during the 120-day due diligence period. Seller shall use
all reasonable efforts to cooperate with Buyer and Buyer's representatives during the due diligence
period, including, without limitation, supplying such documents and records regarding the Property
as Buyer shall reasonably request.
Seller shall also be provided a 120-day due diligence period for the related public hearings and
findings to allow for the conveyance of the Properly. Seller agrees to provide Buyer written
updates during that period.
The date of closing shall be no sooner than the closing by Buyer on the acquisition of the
adjacent former K-Mart property and no later than June 1, 2012. Buyer may simultaneously
close on its purchase of the Property and the former K-Mart property, and will not have to
purchase the Property unless it also purchases the former K-Mart property. The HRA shall
convey the Property to Buyer via quick claim deed.
TRANSACTION COSTS
Buyer and Seller will each be 100% responsible for its own legal fees. No brokerage fees will be
paid by either Buyer or Seller. Buyer will pay 100% of all recording fees, title insurance fees and
state deed tax.
PURCHASE AGREEMENT
Buyer and Seller acknowledge that time is of the essence and that they will use commercially
reasonable efforts to sign a mutually acceptable purchase agreement ("Purchase Agreement")
and or development agreement ("Development Agreement") within fifteen {15) days after the
execution of this Letter of Intent. Within five (5) business days after Seller's acceptance of this
2
Letter of Intent, Buyer will submit a draft Purchase Agreement to Seller for Seller's review. The
Purchase Agreement will contain customary conditions to closing, the terms outlined in this
Letter of Intent, and other, customary requirements. Upon Seller's acceptance of this Letter of
while the parties are in the process of negotiating a definitive Purchase Agreement. Seller will also
be charged with preparing a Development Agreement in the event one is required.
If the terms of this Letter of Intent are acceptable, please sign in the space provided below and
return one original of this Letter of Intent to my attention no later than five (5} days following the
date of this letter. We will then have our counsel prepare the Purchase Agreement. If Seller has
not executed this Letter of Intent and delivered a copy to Buyer by 5:00 p.m. on August 26,
2011, the terms of this Letter of Intent shall be automatically revoked.
This letter of intent is submitted for your review and consideration, is non-binding, and does not
constitute a binding offer to purchase the Property. No agreement shall exist until a complete
Purchase Agreement is signed by both Buyer and Seller.
CONTACT
Stephen B. Wellington, 7r., President
Wellington Management, Inc.
65i-999-5501
swellin on(a,wellingtonmgt.com
Tanya L. Bell
Vice President, Development and Acquisitions
651-999-5511
tbell(~a wellingtonm tg~com
AGREED AND ACCEPTED:
BUYER:
Lyndale Station LLC
AGREED AND ACCEPTED:
SELLER:
Richfield Housing and Redevelopment
Authority
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Print Name:=''~_}~-'`".P. "l~ - ln1~l•~ p int Name:
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Date: August ~, 2011 Date: August , 2011
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