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EDA 2004 01 12CHANHASSEN ECONOMIC DEVELOPMENT AUTHORITY SPECIAL MEETING JANUARY 12, 2004 Chairman Furlong called the meeting to order at 8:20 p.m. MEMBERS PRESENT: Tom Furlong, Steve Labatt, Brian Lundquist, Bob Ayotte, and Craig Peterson STAFF PRESENT: Todd Gerhardt, Justin Miller, Elliott Knetsch, and Bruce DeJong UPDATE ON CHANHASSEN BOWLING ALLEY PROJECT. Miller: Commissioners, we just wanted to provide you a brief update. It's a bit of a history meeting too. It's the first meeting without Jim Bohn in 24 years ! think so. Furlong: Yes. Miller: Just wanted to give you a brief update on where we are and the bowling alley project. We originally were supposed to close on this project back in November. The developer asked for an extension of the purchase agreement, which was in the contract that we signed with them. That put them through to December 14th. Staff and the developer and all the interested parties were working very hard, were very close to coming to a conclusion on this. A few circumstances came up right at the last minute. They kind of derailed us for a little while. Then with the Christmas holiday and the New Year's holiday, everything kind of just laid low. People were out of town. It's now the first of the year. Everybody's back in town. We're starting to get back on track. Basically everything' s, all the city requirements are done. We vacated all the easements we need. The park and ride's been in theory relocated. The documents haven't been signed but it's been relocated. Most all the parking for the site plan process has been approved. Everything's been done on the city side. The main hang-up right now is between Market Street Station, which is the master developer for the site, and the movie theater owners. You might be aware, or you probably remember that the movie theater has cross access, cross parking easements over the entire site, as well as Bloomberg Companies. They, Market Street Station is still in negotiations with the movie theater as to the final terms of releasing of some of these easements. That's been the last little hiccup in this. The movie theater owner was gone over the holidays. Just returned back to town last week, so Market Street Station representatives and the movie theater have been trying to negotiate a time to get together. They've had a few phone calls. We've had some phone calls with those parties. We think we're getting closer to agreement, but as of right now things are just kind of going along. Standing by. We just wanted to provide you with this update tonight and to let you know that we aren't just letting this kind of drift in the water. We are trying to make progress on this. Both sides are, or all three sides I should say are working very hard to get this done and we just wanted to give the council an update on that. I'd be happy to answer any questions. Economic Development Authority - January 12, 2004 Furlong: Thank you. Any questions for staff?. Peterson: Justin, you said that you think you're getting closer. You prefaced saying they're getting closer by, have they had a meeting yet since they got back or? Miller: They've had some phone discussions but they're still trying to arrange a face to face meeting. Peterson: Okay. Ayotte: Do you have a sense of a time line? Miller: You know ! hate to give time lines because every time ! do it seems that it doesn't happen. You know it's one of these issues where if both sides wanted to, it could be done tomorrow and ! would hope, you know ! hate to put a time frame on it but if tomorrow both sides came to an agreement on what needed to be done, it would probably take then another 2 weeks just to get documents ready and to get everything ready for closing. Ayotte: Is there risk the longer we go? And what is that risk? Is there correlation between time going on and not getting it resolved and risk? Gerhardt: ! can answer that one Justin. ! don't know if it's, if you could call it risk. I'd say other alternatives kick in. We have to start looking at other alternatives as the time ticks along. ! would recommend that we provide you with an update again at our January 26th meeting on the progress that occurs in the next week and a half. We'll have a packet out next, not this coming Wednesday but the following Wednesday, and can give you an update at that point. ! know that the two parties, the cinema and the partnership are trying to schedule a head to head meeting in person and from that ! think that's going to be the telling story of where we go from here and until those two parties get together, ! think the phone conversation that they had last Tuesday was very helpful. It laid out where each party was standing and what their expectations are. Right now they're doing their due diligence to try to accommodate those expectations and if they can be accommodated. So that's where we're at and ! would ask that the council give us an additional 2 weeks to see how our next meeting turns out. Peterson: Can one, or somebody walk me through what our options are and the merits of giving our 30 day notice? ! know we've got a 30 day notice to come to the table with, or bring to the table. How does it work and what happens if we do evoke the 30 day notice? Somebody just walk me through the whole thing. Gerhardt: Do you want to do it? Give them the legal aspect of it. Knetsch: Well as far as the purchase agreement goes, we have the right to, since they have gone past the extended date of December 15th, we would have the right to terminate 2 Economic Development Authority - January 12, 2004 the purchase agreement. We would do that by giving a formal notice and that triggers the 30 days you're speaking of. Basically then they still have that 30 days to consummate the transaction and close on the deal. If they did that we would be obligated to honor the purchase agreement. If they let that 30 days go by, then the purchase agreement would be terminated and then we would be free to seek a different buyer. So that's just the nuts and bolts of the purchase agreement itself. Whether that's a good idea or not or there are other potential buyers, I'll let Todd address that. Lundquist: So that's an automatic 30 day termination or we have the option to terminate after that 30 day? Knetsch: The purchase agreement as written says that we have the right to terminate it. So if we start that, we could still change our mind. So we get to the 29th day and we say, we rescind our notice of termination, that would start the clock again that to terminate after we stopped the termination would take 30 days. So in other words we could start it and stop it if we so chose. Knowing that if we did that it would extend it another 30 days if we chose to start it up again. It would be, ! guess ! would, while we may have the legal right to do that, ! think it's kind of, ! don't know if it's really gamesmanship. My suggestion is you wouldn't use that as a negotiating technique or as a law for leverage. That would not be my suggestion. It's there. We have the right to invoke it but unless you are convinced that if the thing doesn't happen in 30 days you really don't want the deal, ! would not suggest invoking it. Unless you plan on going through with it and 30 days is up and that's done. You want to move onto the next deal, or attempt to make a new deal. Peterson: ! don't disagree with your perspective. I'm frustrated to hear that they still haven't got a meeting yet, and as Justin eloquently said, if they wanted to get it done, they can get it done tomorrow and it's just simply frustrating. It's been a long time. And ! know all the parties want to make it happen, but yet it still hasn't happened you know SO. Lundquist: When was the, Justin when was the original purchase agreement signed? Miller: May 29th. Lundquist: Okay, so we've been 6 lA months? Miller: It was May 29th with the original closing date scheduled for November 14th. So it was signed with the intention to go through November. Lundquist: Right. Furlong: ! see there is a representative or Mr. Korsh is it from Kraus Anderson. Mike Korsh: Yes. Economic Development Authority - January 12, 2004 Furlong: Would you like to address the EDA at all and help answer some of our questions? Mike Korsh: Sure. Furlong: Maybe start with giving us an update, either confirming or expanding upon information that the staff provided and where we are. Mike Korsh: Well ! just want to say that we have been working daily. Working with the cinema, kind of the last hurdle here and we've come to an agreement on 99 percent of the issues. We have one or two last issues to negotiate and we have sent our position to the cinema owner. We will have the meeting sometime this week with that information we sent. Sort of outlined our position. We are this close to getting this thing done. ! don't know what else to say other than we've been working daily. Discussing these issues and ! don't think that there's really anything we can do to, or anything that can be done to convince us to work any harder towards getting this resolved. Peterson: Do you feel as though you've made progress since the first of the year? ! mean just to give me some sense. ! know it was stopped abruptly before Christmas and then our intent was to hopefully get something before this meeting accomplished. Has there been progress since January? Mike Korsh: Yes. The cinema owner left town and we were unable to discuss the issues for a couple of weeks there, but we are back on track and having discussions and things sort of settled down since that point. So we are, we picked up those issues and moving forward. Peterson: So on behalf of you and your client you feel that there's an extremely high probability that it will come to fruition? Mike Korsh: Yes. Peterson: Good. Furlong: What sort of timeframe are you thinking at this point? Mike Korsh: I guess that all depends on this meeting later this week. If it goes very smoothly then, as Justin said, we can start putting the paperwork together at that time. There's a few little more negotiating that needs to be done. It all depends on how that meeting goes and we'll have an update to these guys on that as soon as the meeting happens. Furlong: Okay. 4 Economic Development Authority - January 12, 2004 Labatt: ! don't know if you need to be real, very specific but the one or two issues that are remaining, are they big issues on behalf of the cinema or is it your issue that they can't, ! mean what are we dealing with here? Mike Korsh: They are, you know a little bit of both. There's been a significant amount of concessions given by the Market Street Station group. The few issues remaining are several are issues that are very difficult for Market Street Station to bend on. It starts to affect the property and it's ability to be leased. Parking issues, things like that. ! might be overly optimistic but it seems to me that they're minor issues and now that things have sort of cooled off and we're back at it, ! expect that we'll be able to take care of it. Furlong: Okay. Any other questions, comments at this time? Okay, thank you sir. Mike Korsh: Thank you. Furlong: Any other questions for staff?. If not, I'll bring it back to commissioners for comments. Discussion. Lundquist: I guess I'm kind of with Commissioner Peterson. I think given that we've been here since May 29th. We passed our November 14th. We passed our December 14th. It's nearly January 14th and it sounds like although there's only a couple of small issues, as we've heard, ! sense a negotiation has been going on for a while and if we have parking issues that may or may not affect the property's ability to be leased with Market Street Station, they sound like big issues and ! guess although we have a meeting later this week, or the parties have a meeting later this week, ! would recommend that we force the issue a little bit and help the process along. And that if we're going to make significant progress it sounds like with the meeting later this week, that progress could be made and just to wait another 2 weeks is just another 2 weeks and ! feel like we've been every time we ask for an update on this, it's well there's just a couple of things left. And well, there's just a couple of things left, and although it's a complex process with all of the easements and Southwest Metro and all of the other things that have gone by, clearly ! think sufficient time has been given and I'd be in favor of pushing for the 30 day notice and helping to force the issue a little so that we can get it done. And if it doesn't go, we can get that property back out there and get a buyer who will get the place, get the deal done. Ayotte: Are you talking about the 30, you want to initiate the termination now or do you want to wait until the 26th and do it? Lundquist: ! would prefer that we do it tonight rather than wait another 2 weeks. Furlong: Other discussion? Peterson: Yeah, right now I'm leaning that way but I'd like to hear other people's comments on it. ! think that, in 2 weeks do we hear another story that we're close? Economic Development Authority - January 12, 2004 Sometime we're going to have to pull the trigger and ! don't know whether or not tonight is the night or not but it's like I'm tired of, when do we pull the trigger? Labatt: That's a valid point Craig, but the other side of the coin is, if we pull the trigger on them and 30 days from now we get a note that it's a no go, now we're dealing with, right now we're dealing with two people. The one person owns the other property and we sell it to a third party, now we're dealing with a third party that has to work out an agreement with the movie theater and the original property owner. We're going to be so far out in left field because now we've got 2 non-willing participants trying to deal with a third party now. We're not going to get anywhere so I'd say we take the 2 weeks here between now and the 26th. Let them get going on it and give them a swift kick in the posterior side and say you've got 2 weeks or else we will drop the 30 day on you. Peterson: Is that where you're at? ! mean I'm just trying to get a sense of when you'd pull the trigger. You say. Labatt: I'd give them, I'd send a message to them tonight, and ! think we're doing that by, you know in 2 weeks come back and give us an update and we'd prefer to hear we're going to close on February 7th. And if you come back in 2 weeks and say well we still haven't come to an agreement on these 1 or 2 issues, then we say okay, well here's our notice for 30 days. We will be at the table in 30 days from today to close. And if you don't show up, then it's termination time. But if we do that, we're going to be in a worst position because we don't have willing participants. Right now they're down to 1 or 2 issues. If we go to a third party, if we go to Gold's Gym, then you've got Bloomberg who's going to be hard to deal with and you've got the movie theater's going to be hard to deal with and you're going to be in a triangle and. Peterson: Whatever we do it's not going to be easy. Labatt: Well the easiest option is right now. When you've got one of the willing property, you know the property owner who's wanting to do it. You don't have as many people involved so that would be my recommendation is we send them with a message that you know, come back in 2 weeks with a closing date and, because we're only going to put ourselves in a bigger jam. Peterson: Different jam. Ayotte: Question. Now you've met with whom? On this issue. Miller: Everybody. Ayotte: How often? Miller: In the month of December it was probably twice a week. Ayotte: Is there a benefit to have more staff involvement? Economic Development Authority - January 12, 2004 Gerhardt: No, it's not an issue on our side of the table. Ayotte: I understand that. Is there anyway that we could be a catalyst or no? Gerhardt: No. We're part of the issue you know. Our relations with the cinema over the years has not been positive. ! don't want to get into too many details but you know ! think Elliott put it best that invoking your 30 day notice is not really a method of sending a message. It's a matter of the cinema feeling comfortable about their long term decisions on this redevelopment. Ayotte: If you, you've just stated that history has something to do with this and this city's relationship with the cinema has had an issue, do we work, go a little harder with trying to. Gerhardt: We're getting beyond that. ! mean whenever you're kind of negotiations or it gets heated, everything comes out. You start throwing everything out and I've had conversations with Ray Mithun and ! think he' s definitely at the table. He just has to feel comfortable because you're talking about the livelihood of his business and he wants to make sure that the livelihood of that business is taken care of in the future, which is a good business decision. Not everybody's going to dictate to our time table or the partnership's time table. They're going to operate by their drummer. Ayotte: Well here's the problem that I'm having. We agreed to follow a certain time line, and are we being inappropriate, less than objective if we don't act upon it? ! mean it was a collective, there was a vote by this council, by this commission to have a certain time line and live by a time line and we have allowed some deviation to it. Are we being inappropriate in the way we're operating? By allowing this to creep along. Gerhardt: Well think about the time and commitment that you've invested in this. The Planning Commission's invested in it. Your staff has invested in this, in getting the site plan that you think is appropriate for this area. We talk about Bloomberg. We talk about the cinema but trying to relocate Southwest Metro on utility issues. ! mean we've got thousands of hours into this and ! think we need another 2 weeks to see if the two parties can come together without the pressure of us invoking the 30 day notice. Ayotte: I'm not comfortable with invoking the 30 day notice right now. ! don't agree with Brian on that point but Craig to my right, ! do feel a little uncomfortable in that ! voted to adhere to a certain time line, in deference to the point that we put in a lot of time. There's been a lot of activity going on around this. I'm concerned that ! don't know what ! will do in 2 weeks. It's an ! don't know. Why not say 4 weeks time if we put so much time in. But ! feel uncomfortable because ! don't have a sense as to what the real issues are and we're sitting here kind of helpless while other people are trying to hammer something out and we have a responsibility to the community to move this thing along and ! don't have a comfort level in knowing that truly we're going to have a resolution Economic Development Authority - January 12, 2004 with the cinema. ! don't have a comfort level there. You haven't convinced me. You said the word issue too many times. You didn't give me any hard statements. Gerhardt: Well Mike doesn't have any control over the cinema either. Ayotte: My very point. Gerhardt: And we don't, so we can't give you that comfort level. There's only one individual that can give that to you, and right now he's the drummer. Ayotte: Does he want to come and chat with us? Peterson: That's part of what I was just going to say Bob is I think if we do wait 2 weeks before we make any determination, ! think ! would like a more formal presentation by the parties involved so that ! can make a more informed decision versus just purely an emotional one I'm making tonight. That ! would like to go through the current status and what their expectations are and hopefully it's a celebration that they got it done, but if they didn't get it done, why didn't they and where the status is and then we can make, get the parties here telling us their individual's perspective and make a decision. Furlong: And ! would agree and talk about the options. The...issue and a 30 day notice and maybe that's the one event within the purchase agreement. ! agree with Commissioner Ayotte. ! don't know where I'm going to be in 2 weeks. I'm not there tonight. As much as all the parties have put in a lot of time and effort and cost, there are some costs but I'm just looking at it from a fiduciary standpoint to the city, what's the quickest way that we can get this property redeveloped and for the most benefit for everybody and ! think this is still that option. In 2 weeks, is that? ! don't know if that's the right deadline. But getting some more formal presentation ! think in terms of our duty and timeline, this is our first time that we had a regular meeting of the council and that's why we're meeting as the EDA since the passing of the December 17th, or 12th, or whatever, 14th deadline is. So ! think we're meeting timely. ! think it makes sense to meet again in 2 weeks. We'd certainly like to see some progress and successful completion of the negotiations so that we know that a closing date has been set. ! think that's to everybody's interest. ! don't get the impression that the parties are not interested in doing that. So ! think we still have willing buyers here and we're certainly willing sellers and we've got the plan. So it'd be nice to have a little more definitive answers as to what's going on and if that's a presentation by the parties, so be it, but ! think, you raise the issue correctly. Is that right now this is as much an emotional reaction ! think on my part and ! sense that from others as it is, what's the logical step for us to take as the EDA for the benefit of the city of Chanhassen? If it is a few issues, let's turn that into an action plan and a closing but let's move to where we're getting it done. But if it's just a few issues, if they were far apart, and that this was a no win, then let's talk about our options. If the parties can't come together, what are our options? Is it just cancel it and start over fresh and now we're looking at months and, or even longer and this has already been going on for years so ! guess from my standpoint 2 weeks, let's, ! think the sense is clearly we're interested in getting this done and if that's not clear, ! will tell you. We're Economic Development Authority - January 12, 2004 interested in getting it done, but let's see. Let's come back, and ! want to be back here on the 26th and let's talk about it and have some presentations on where we are, and then that should have been enough time for the parties to meet as necessary, if it's just a couple issues and we'll figure out where they are. So that would be, ! would concur with staff's recommendation at this point. Labatt: If I'm hearing you Tom, we'll on the 26th meet. Invite Market Street Station, the cinema and the City will be here and we'll get an update from, a presentation from...the sellers and the cinema. Furlong: Clearly the, well you know our relationship isn't with the cinema. It'd be great if they'd like to come if it's still an issue. But certainly from Market Street. Gerhardt: We can invite them. Furlong: You know, they're the ones working on it. ! assume that this isn't the only issue that you've been dealing with the cinema owners on. ! know there were multiple issues. Mike Korsh: There were many, many issues. Furlong: So you've been able to come to agreement on a lot of issues. Labatt: Like issues like the party wall and all that has been resolved? Mike Korsh: Yes. Furlong: Yeah. So it isn't like this is the only issue. Labatt: ...some parking easement issues? Mike Korsh: Yeah, ! mean many, many issues we've come to agreement on and there's, from our last conversation it sounds like there's one sticking point left. Labatt: How sticky of a sticking point? Maybe you don't want to say. I don't want to put you on the... Peterson: Let's have them make that presentation next time. Labatt: Come back in 2 weeks and see what they can get done in 2 weeks. Peterson: Furlong: Gerhardt: Then we'll have cake, right? We'll be back and talk about it. Champagne and... Economic Development Authority - January 12, 2004 Labatt: Maybe we can go down and go blow a couple wings or something. Furlong: I don't think we need, unless somebody would like to propose an action or make a motion. Lundquist: ! would actually. ! guess ! still go back to when you sign your name on a piece of paper that says you're going to take action, a purchase agreement on the 29th of May, that has a 30 day notice in it already that's still past 30 days, And we've repeatedly been given updates that it's going fine, it's going fine. It's going fine. The only card that we have to play to protect our interest to get it done, ! don't see why waiting another 2 weeks is going to get it done. If they're going to get it done, if they want to get it done, they could get it done tomorrow. So another 2 weeks ! think is just another 2 weeks that we're allowing the process to drag on, and it's drug on already so ! would move that we invoke our 30 day cancellation, formal cancellation notice to the purchase agreement with Market Street Station. Furlong: Okay, thank you. Is there a second? Hearing none, motion will die for lack of a second. Is there any other action on this item or motions? If not ! don't think we need a motion to adopt staff s recommendation so if there's no other items we'll move on. APPROVAL OF MINUTES: Labatt moved, Ayotte seconded to approve the Minutes of the Economic Development Authority meeting dated November 10, 2003 as presented. All voted in favor and the motion carried unanimously with a vote of 5to0. Furlong: If there are no other items to come before the EDA this evening, is there a motion to adjourn? Ayotte moved, Peterson seconded to adjourn the EDA meeting. All voted in favor and the motion carried. The EDA meeting was adjourned at 8:50 p.m. Submitted by Todd Gerhardt Executive Director Prepared by Nann Opheim 10