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EDA 2003 07 28CHANHASSEN ECONOMIC DEVELOPMENT AUTHORITY SPECIAL MEETING JULY 28, 2003 Chairman Furlong called the meeting to order at 8:35 p.m. MEMBERS PRESENT: Tom Furlong, Brian Lundquist, Bob Ayotte, Craig Peterson and Jim Bohn MEMBERS ABSENT: Steve Labatt STAFF PRESENT: Todd Gerhardt, Roger Knutson and Justin Miller CONSIDER REDEVELOPMENT PROPOSALS FOR RED-E-MIX SITE. Miller: Good evening Mr. Chair, commissioners. About two months ago the City received a proposal from New Horizon Daycare to relocate their existing facilities to the corner of Highways 101 and Highway 5. The former Apple Valley Red-E-Mix site and the Chanhassen Taco Shoppe. This is city owned property. At the time that we received their request, it was the EDA's direction to send this out for an RFP to see if there were any more proposals out there. We did send that out. We received two and those two proposals are here tonight before your, for your consideration. The two presentations came from Allendorf Real Estate which is the New Horizons proposal and Arima LLC which is a town office proposal which they'll explain more during the presentation. We did flip the coin earlier to select who would go first, and the first will be the Allendorf Real Estate and New Horizon proposal. Each proposal will have about 5 minutes to go over their project. Furlong: Okay. Thank you. Are there any questions for staff before we begin the presentations? If there are none, Mr. Allendorf. Good evening. Dick Allendorf: Chair Furlong, commissioners. My name is Dick Altendorf, 4624 Mounthall Terrace, Minnetonka and I represent Mr. Gene Peterson, the developer. First of all I want to thank staff for guiding us through the process. They're very professional and you should feel proud. Our proposal is a two building proposal. Let me see if I can. We have a two building proposal. In the east side of the property you'll find a 10,500 square foot New Horizon. That New Horizon is meant to replace the smaller New Horizon currently within your city but to maintain the service of New Horizon for your citizens. The second building is a two story, 25,000 square foot total office building with underground parking. It's meant to serve the small businesses of Chanhassen and therefore it will be Class A in nature. The materials are all according to the City's design standards. We have brick in beige color and that beige color. We have stucco and we have 50 percent glass. You'll see that the roofs are light blue on the New Horizon. They are all metal and that's so the 50 percent of the roof that can be seen from the highway will be of a quality nature. The building design has, and now I'll switch just for a minute. This is the look of the New Horizon. It is in fact the prototype which is being used now by New Horizon. You'll see that all of the faces are modulated so that you don't just see a straight line as you coming down 101. You do see some interest Also, if I now switch to the office building, hopefully it's obvious from that photo that the windows are in fact different sizes and they have a pitched roof to them. The two buildings again together should make a statement to those coming into Chanhassen. If ! go back here to the layout. The buildings are sited as to not provide a continuous wall look. With the two building complex, the parking lot is split in two Economic Development Authority - July 28, 2003 smaller lots, thus reducing the impact of surface parking and surface parking is also reduced because we do in fact have underground parking for the office building. The site layout is designed to work with the natural slope of the site, thus reducing considerably the need to level the site. For example, if we expose part of the lower level of the office building we can provide a short ramp for underground parking. There's also the possibility at the east side of the site where we have a potential wetland to make that be a design and interesting feature even if it isn't a wetland, and that hasn't been determined yet. We would like to make that a design feature for the property. The development will be built on the 3 parcels and constructed without any request for a variance. There is no request for a variance, nor is there any request for help from the City. Nor is there any...legat difficulties. We intend to have this be a simple purchase agreement. We also would fence the development using materials from your bridge. We think that interest will tie all the way around the property. On the east side of the property, that is the 101 side, we would also intend to have an entry feature which would include the Chanhassen leaf logo, along with the words Chanhassen New Horizon Child Care. The west piece of property, although it would be incorporated into the developer would have a perpetual conservation easement to the City so that it would always remain in it's green state. I was asked to end on the time line, and I will end there. The current New Horizon prototype has been built in a number of communities. Therefore the architectural drawings exist and adaptation to this site has already been done. In addition in the existing New Horizon site on Lake Drive East is being offered to Park Nicollet to allow them to move forward with their construction. Any delay in building this child care facility will delay Park Nicollet's plans, therefore the developer would intend to begin construction as soon as city planning and approval process is completed. The office building would commence as soon as half of that office building, half of that 25,000 square foot office building is pre-leased and currently we have letter of intent interest from a 5,000 square foot user. So in conclusion out of our last session we were asked to bring something clear and crisp. Something where you, as an EDA could choose the best, or in this case better plan for a very prominent area of your city. We hope we have done that. It was not our intent in these RFP response to negotiate a price. This piece of property is quite unique in that it does have one access and an active railroad associated with it. However we're very confident that if this is chosen as the best use for the property, we can meet with your staff and come to a fair market price for the property. Thank you. Furlong: Thank you. Are there questions of Mr. Allendorf?. Mr. Peterson. Peterson: I wanted to...talked about the building material. Specifically, what are the roof lines and the roof going to look like? Is it going to be a metal roof? Is it going to the standard bright blue, or is it? Dick Allendorf: Well it certainly will not look like Culver's, if that was the question. I have been told commissioners so I was prepared for that. What we really want to have is a light blue tint to the roof. That does in fact carry the New Horizon look. It is not meant however, you can see it much better if you were to zoom in on that picture. It was not meant to be anything that is a dark blue. It's a light blue tint. Gene Peterson: Dick, we had this basic... Furlong: I'm sorry sir, if there's other comments if you'd come forward. Otherwise if there are other questions from the commissioners. Excuse me. Peterson: I think the only other one is, as we, the last time we met we voiced a general concern about safety of that playground out there. I still am concerned about that. Maybe you could Economic Development Authority - July 28, 2003 address that but could you spend just a minute or two talking about maybe... Are there any options for removing that from that comer or is that a prerequisite? Dick Allendorf: Chair Furlong, Commissioner. There is no thought about removing it. We did look at the safety aspects of the site itself. Certainly there, as you can imagine, there's no one who would be more concerned about safety, or the perception of safety than New Horizon if they tried to keep this center filled with kids. But if you look at the wall, as we talked about the wall along here. That wall, the grade difference and the ponding element, everyone we have had look at this from an engineering standpoint have said safety is addressed through those means and the kids are not going to be in peril. But it's a very good question. We did hear you ask it last time and we attended to it. Peterson: Thank you. Furlong: Other questions? I guess one question i had was with regard to the, in addition to others posed, with regard to the office building, and you specifically state that you would begin construction after one half is leased or commitments to, what you have about 5,000 right now of the 12,500 needed. I guess my question is what have you looked at in terms of current office vacancy rates and expected absorption of those vacancies? And specifically I'm, the EDA has, as well with the redevelopment of downtown bowling alley site which will include some office space as well, which will come to the market. I guess my question is what's your expectation in terms of the timing of receiving those commitments and beginning construction. Dick Allendorf: Chair Furlong, this office building is meant to be a Class A little gem sitting right where it can be looked at. The access may be tough to it, but it's designed for the small professional. 2,000 to 3,000 to 5,000 square foot user in Chanhassen and we don't think there's any other space which can compete with it. That being said, you put your finger on the softest area of real estate within the Twin Cities and that's the office market. However, something this small, this unique with underground parking, we believe that we can lease it up, we would think, well we know that you have a one year window on any improvement. We don't think we would encroach on that window at all. Furlong: So you would expect to obtain the commitments and begin construction within a one year time frame for this office building? Dick Allendorf: Oh, very safely within one year, yes. Given approval, what we will do is we'll start the New Horizon right away. We will put the sign up and take reservations for the office. Gene Peterson: ...in addition to the 5,000 that just approached me. A national company...but it's more than just a passing... Furlong: Okay, thank you. Dick Allendorf: That's Gene Peterson, the developer. Furlong: Thank you. Thank you, any other questions? Bohn: Yes I have one. These office, are there going to be any signage or anything for this office building? Permanent signage. Economic Development Authority - July 28, 2003 Dick Allendorf: Well, we fully intend to meet all your signage ordinance for the office building. You can see that there is space on the front. This is the west, oh I'm sorry. You can see that the fagade does have room for signage, but again your staff has been very vigilant in telling us that we must stay within your sign ordinance. We're going to ask for no variances for either one of these buildings to include signage. Furlong: Any other questions Mr. Bohn? Bohn: No, that's it. Furlong: Okay. Any other questions for the applicant? Okay, thank you. Is Mr. Westby here? Good evening. John Westby: Good evening gentlemen. I also wish to thank you for this opportunity to make this presentation and my thanks also in a particular way to Justin, and the way that he has led us through this process. What you have before you is a project that has some of it's roots in some other projects in townoffice parks that the companies of, a gentleman by the name of Amir Marafie that brings together a series of businesses, one of which is Arima LLC, and the project really took it's conception off of one piece of your information that you made public when you said that you wanted something to beautify the entrance to Chanhassen. We took that as seriously as we possibly could and put together what we believe would be a wonderfully beautiful townoffice park as a statement to the beauty of Chanhassen itself. The townoffice park is divided in such a way that we have approximately 80,000 square feet of office, but it's divided into different segments. I believe one of the statements in your preliminary material indicates that there are 4 smaller buildings. Actually there are 3. Each of the smaller buildings are approximately 6,080 square feet and in our proposal that we made in terms of presenting a gift of one of those buildings to the City, it was the center one. If you look upon this part of your presentation, that center building is a 6,080 square foot building, approximately. And then if you flip that over and take a look at the artist's conception on the other side you will see that it really was designed in such a way to make a statement for Chanhassen. The buildings are designed in such a way that we would have a number of those units available for sale. We would have a number of those units that would be retained and used as leased property. At the present time we have I believe 3 letters of intent to engage property here by people who are interested in this property. The interest that we have was to do everything possible to make a contribution to the City of Chanhassen in terms of the creation of new jobs, and the creation of a beautiful place, Class A office space in which to work. So that was the idea that brought us to this table. If you take a look again at this conception, I believe originally there was an idea in the artist's mind of being able to enter the parking area from this side. We know that's not possible and so we'll just simply re-direct the area of entrance into the property. I think that I will leave the presentation with that. If there are questions that you may have, we'd be glad to entertain them. Furlong: Okay, thank you. Questions. Peterson: Do we know whether or not, if you're talking about 100,000 square feet, did I hear that? John Westby: No, 80,000. Approximately 80,000. Peterson: 80,000. So the parking that you've got noted here, does that meet our current code for parking do you know or not? Economic Development Authority - July 28, 2003 John Westby: The parking was put together with the understanding of the square footage that was available, so the design should take care of that particular requirement, yes. Peterson: There is no underground parking? John Westby: There is none. Furlong: Other questions? A quick question with regard to the pedestrian bridge that crosses there. I see the hash marks there. Has there been thought at this point in terms of redirecting that or dealing with the grade at all? To accommodate that point on the property. Has that been done yet? John Westby: I don't believe we've addressed that. You're talking about this? Furlong: At the west end of the last building there's little hash marks across the highway which may or may not be the exact location. John Westby: Oh I see. Yeah. To be perfectly honest with you Mayor, I'm not sure if that's been addressed or not but it certainly would be. We're asking no, nothing within this proposal would require any additional variances from the City, that I'm aware of. Furlong: Okay. With regard to again office space and projected absorption rates, when would you anticipate. John Westby: In terms of construction? Furlong: Construction and this type of new office space in terms of the current market. John Westby: Were we awarded the opportunity to proceed with this proposal, we would be prepared to move almost immediately upon the acceptance of the council. Immediately. Furlong: Okay. Another question I would have, you proposed, and I don't want to use the wrong terms here but with regard to providing the City with the center building and in lieu of payment. Would you be interested in proceeding at the, with the proposal, if that was not part of the proposal in terms of what that does to the purchase price? John Westby: Just one word of a prelude to that. The idea of this gift comes out of the way in which Mr. Marafie has presented himself to several cities within the Twin Cities, and we were just simply unaware of the fact that there may be some legalities prohibiting that kind of a transaction. But by all means, that not being possible, whatever would have to be worked out we would be delighted to negotiate it. So yeah, we're not stuck on that idea. We just thought it was an appropriate way to proceed at that time. Ernie Peacock: One other thought. My name is Ernie Peacock. I'm also with Arima. It came to my thought when I looked at the previous presenter that these, the concept seems to be very much similar and it would appear that maybe we, the City wants to act to retain the New Horizon concept for a facility here. I think with this we'd be willing to work with the other fellows and try to accommodate their needs for a New Horizon facility. Maybe you could have both .... under this scenario. Furlong: Okay. Economic Development Authority - July 28, 2003 John Westby: It is evident that one of the things that we would be just very pleased with would be the opportunity of working with continuing in this negotiation with EDA and carrying on. We're not in concrete with this, but this is, we're prepared to go forward with it with any of the other nuances required through those negotiations. Furlong: Okay, thank you. Any other questions? No? None, thank you. John Westby: You bet. Furlong: Are there any follow-up questions for staff. I guess one I'll have Mr. Gerhardt or Mr. Miller. I hate to put you on the spot but I've asked both applications questions about current office vacancy rates. Are we familiar with the process in terms of specifically with regard to the EDA's issue perhaps with the redevelopment of the bowling alley or other vacancy rates for office space here in town? Both of these proposals would bring us new office space. Gerhardt: I'm not familiar with what the percentage of vacancies are in Chanhassen. The last I heard in the southwest metro area they were running around 18 to 20 percent. The second proposed development, the way I understand it is more for the individual business person. Not so much like a real estate agent or anything of that sort. Am I correct in how your product works? John Westby: There are any number of things. We're open to use...smaller office type of thing. Furlong: Alright. Okay. Any other questions for staff? If not, we can open it up to discussion. Do you have any questions or discussion items? Would anybody like to start? Ayotte: Sure. I like the idea of maybe getting some testimonial on where else these folks have provided a gift to a city. I'd be curious what that's all about. I certainly like the flexibility of doing anything it takes to make a sale, but right now in going back to staff's point about getting, going out with negotiations with both, I think it's a starting point. And then bring them up to a... see if there's a combination. So if there is some possibility of reciprocity between the two parties, that certainly should be something to consider. I like the idea of continuing the negotiations and bring it back to the EDA. Furlong: Okay, thank you. Other comments. Mr. Lundquist. Lundquist: I'll keep mine brief. I think both proposals have merit. However I'm concerned about the offer price on both of them and I think at this time for me neither one, although I know that New Horizon hadn't proposed anything other than you know fair market value, and that I guess is up for debate but until we approach that 9 to 11 dollar range, I'm not real excited about proceeding with either one so, if we want to go back and do some negotiations on price, that would be fine. If not, I think we say no tonight and keep it in the cue until some, until we find a party that's willing to offer that range. Furlong: Okay. Thank you. Other comments Mr. Bohn? Bohn: I agree with Mr. Lundquist. Furlong: Okay, thank you. Mr. Peterson. 6 Economic Development Authority - July 28, 2003 Peterson: Sure. I think I agree. I think i'd be willing to sit on the property if we can't get it for... I'm not overly motivated to give it a fire sale. I think my perspective is $9 is the lower range, taking into consideration some of the unique nuances of the property has to offer. I like the office building on the first presentation. I think it had a little bit of creativity. I'm still not sold on whether or not I want a child care facility being one of the first visual aspects of Chanhassen. It is one of the, if not the primary entrance that our community has and I just don't know whether or not that's what I want in there, and maybe if I saw different renderings of the buildings it may change me. But I think for me to make a decision, I do need to see numbers. Just as we had numbers in the bowling alley site. I don't know how we can make a decision tonight without clearly saying this proposal is going to offer this. This kind of building. This proposal's going to offer this with this kind of building so, we're not there yet. With that I'd, as far as the gift of the building, you know I can't fathom that we would want a building. I don't know either of these two gentlemen to be subleasing space. I don't think we need to, although it'd be nice... Those are my... Furlong: Okay, thank you. I think from my standpoint, we started this process when New Horizon approached the city in terms of seeking to acquire it and I think we properly went out and sought other proposals. We have two. Both of them, or both of which fell short on the financial aspects and in both cases and I'm not inclined, from my view we don't need to be selling this property at this time. In responding to a request, I think we went through the process. At this point I wouldn't exclude either one if it was the EDA's decision to go forward in terms of trying to negotiate out a price, or the financial aspects of it. At the same time we seem to be pretty far apart on both of them in terms of what we include and what, we had the discussion before in terms of what we thought as an EDA was reasonable financially, and these have come in less than that. Substantially less than that. My questions with regard to adding more office space, while I like the concept of the town offices and the smaller office, 80,000 square feet's quite a bit to bring on the market at this point. I don't know if, given the area vacancy rates, if this is the time to be selling land for office buildings. Or if we should wait when office vacancy rates are lower and then if we choose to go forward, that might be the time to be able to support the price better. So my sense is, and 1'11 be open if the rest of the members of the commission want to proceed, I would recommend that we have staff continue negotiations with both of them with regard to price. I would concur with Mr. Peterson's comments with regard to having a daycare at this location. Entering the city. Concerned about it from a safety standpoint. Clearly there's no motivation for New Horizon to build facilities in an unsafe location, but nonetheless, I'm concerned about that. And as well the looks of both of these, i'd need to see some more to be convinced that these are the looks that we're looking for at that gateway. So I would be comfortable at this point either proceeding with both, and saying let's continue the negotiations, or if the EDA would prefer to just say well we looked at it and now doesn't seem the time from a financial standpoint in terms of the two proposals we received, I'd be happy with that too. So from that standpoint. Lundquist: A question? Furlong: Absolutely. Lundquist: How much time Justin, Todd would you guys like to have for negotiation? What would be a reasonable, 2 weeks? A month? Gerhardt: 30 days. Furlong: Okay. Is there, I mean that's be fine if somebody'd like to move that. Economic Develop~nent Authority - July 28, 2003 Lundquist: I would move that we direct staff to go back in negotiation with either party as a final offer on a purchase price and within 30 days and come back with the proposal with that updated final purchase price. Furlong: Okay. Is there a second? Ayotte: Second. Furlong: Any discussion? Point of clarification I guess Mr. Lundquist. When you say with either party, are you really dictating with both parties? Lundquist: With both parties, yeah. Furlong: Okay. So we can amend that to read both parties as opposed to either party. Okay. Alright, is there any other discussion? If there's none, we'll proceed with the vote. Lundquist moved, Ayotte seconded that the Economic Development Authority direct staff to negotiate with both parties and present a final purchase price to the commission within 30 days. All voted in favor and the motion carried unanimously with a vote of 5 to 0. Furlong: Motion prevails. Thank you. APPROVAL OF MINUTES: Lundquist moved, Bohn seconded to approve the Minutes of the EDA meeting dated July 14, 2003 as presented. All voted in favor and the motion carried unanimously with a vote of 5 to 0. Lundquist moved, Ayotte seconded to adjourn the meeting. All voted in favor and the motion carried. The EDA meeting was adjourned at 9:10 p.m. Submitted by Todd Gerhardt Executive Director Prepared by Nann Opheim