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HomeMy WebLinkAbout2017-12-12 PACKET 04.01. TO: Honorable Mayor and City Council Charlene Stevens, City Administrator FROM: Christine Costello, Economic Development Director DATE: December 6, 2017 RE: Re-authorize of the Letter of Intent to Purchase Real Estate Background In 2014 the City of Cottage Grove completed a market study report by Hospitality Marketers International, Inc., to determine if Cottage Grove could support an additional hotel, in particular on the City-owned parcel at the intersection of Harkness Avenue and Hardwood Avenue. The report concluded that an 80-room, limited-service, mid-scale hotel with traditional rooms, a few suites, and a few “extended-stay” style rooms would satisfy the lodging demand for the Cottage Grove market. Based on the findings of the market report, a request for proposal (RFP) was sent to 31 hotel developers to gauge their interest in development of the site. The City received interest from one developer but they did not pursue further interest in the city-owned site. Then in August 2016 the Ruby Tuesday restaurant located next to the site was closed by their corporate headquarters. The Tennessee-based restaurant chain had made a decision earlier that month to close 95 of its 274 locations nationwide, including all but one location in the Twin Cities metro. The City has continued to market both sites at the 2017 ICSC RECon convention for hotel and restaurant/commercial development. Both sites gained interest from developers at the convention and expressed that a smaller format hotel that consisted of less than 80 rooms was more viable for the City-owned parcel since it is under two-acre minimum threshold hotels require for development. Honorable Mayor, City Council, and Charlene Stevens LOI with HAF Development December 5, 2017 Page 2 of 2 On July 11, the City met with HAF Development (HAF) to discuss the development and the redevelopment of the City-owned and former Ruby Tuesday sites. HAF expressed interest in the construction of a hotel and repurposing the former Ruby Tuesday as another restaurant user. Both properties are zoned B-2, Retail Business. A hotel located in this zoning district is a conditional use and a restaurant is a permitted use. The hotel use will require going before the Planning Commission and City Council for final approval. HAF also expressed interest in moving quickly and starting construction on the hotel this year with completion of the project in late 2018. On July 17th the City received a Letter of Intent (LOI) from HAF to facilitate the proposed purchase of the City-owned parcel. The LOI was valid until July 25, 2017, so no additional time under the LOI was available to take the request to the EDA prior to the City Council for consideration. Therefore, the City Council authorized the City Administrator sign the LOI and begin to negotiate a purchase agreement. On August 9th the City-owned parcel was conveyed to the EDA. The EDA is the development entity of the City. The City Council cannot conducted economic development because they are charged with conducting public purpose for the community (public health, safety, welfare, security, etc.) therefore the property was conveyed to the development entity of the City. On September 12th the City met with HAF to continue the discussions of the redevelopment of the parcel at the intersection of Harkness Avenue and Hardwood Avenue. A purchase agreement was also provided to HAF to begin the negotiation process for the parcel. HAF has informed staff that they are continuing to develop their proposal. HAF was also informed that their initial LOI had expired and they needed to submit a new LOI if they wanted to maintain their exclusivity of the site and not have the parcel marketed to other developers. Discussion On November 21st the City received a second LOI from HAF to facilitate the proposed purchase of the parcel. The current LOI is valid until December 15, 2017. A request has been made to HAF to revise their LOI for a date in January 2018 so that it is valid for the remainder of the year. A purchase agreement and developer’s agreement will still need to go before the EDA and City Council for development to take place. Recommendation Authorize the City Administrator to execute the Letter of Intent (LOI) with HAF Development for the purchase of the EDA-owned parcel of land at the intersection of Harkness Avenue and Hardwood Avenue.