HomeMy WebLinkAbout4.5 Letter of Intent (LOI) with Mesaba Capital for 7516 80th Street South, the former City Hall Site
TO: Economic Development Authority
FROM: Christine Costello, Economic Development Director
DATE: September 6, 2018
RE: Letter of Intent to Purchase Real Estate at 7516 80th Street South
Background
In June 2011 it was determined that a new Public Safety/City Hall building would be built, and
research was conducted for viable reuse of the former city hall building. The decision was to
repurpose the building to house a business incubator, known as the Business Enterprise Center
(BEC). The intent of the BEC was to help grow small businesses in Cottage Grove and with their
success those businesses would then relocate into the Business Park.
The BEC remained open until the Summer of 2016, and at its closing none of the businesses that
started in the BEC remained in the community. Though the concept of the BEC was bold there
was not the funding available to support the businesses in their growth. The building became
vacant for approximately six months and then it became the temporary home for approximately
one year for Fire Station #2 as a new Central Fire Station was being constructed at the previous
location of Station #2. The Central Fire Station opened in July 2018, and again the former city
hall site became vacant.
Since 2017 City staff and Washington County staff have been meeting with the understanding
that the Park Grove Library has been in need of repairs and updates that is estimated in the
millions. The library has also stated that the needs of library patrons and the essential functions
of a library have changed over the years as well.
When discussions with County staff began on the library consideration was given to include the
two parcels on the east side of Hemingway Avenue across from the former city hall site and library.
The potential redevelopment area also included the partial closure of Hemingway Avenue and
would have increased the redevelopment area to over seven acres.
Economic Development Authority
September 6, 2018
Page 2 of 6
The landowners to the east of Hemingway Avenue are open to selling their parcels but their
proposed sale price is significantly greater than the current market conditions. Based on the
County’s estimated market value (EMV) and the requested sale prices, negotiations would need
to take place before including these two parcels becomes a viable option to include in the
redevelopment footprint.
The County hired an architecture firm to design a new building for the library. As part of the design
process three community engagement meetings were held (March, April and May) in order to get
feedback from the community and patrons of the Park Grove Library. County staff informed City
staff that some of the outcomes of the engagement process included separation the adult and
children sections, a book drop, meeting room space, and enhanced technology. The County also
expressed that the visibility of the library was important and that they do have concerns about the
operations of a two-story library.
During this time the City was approached by a developer, Mesaba Capital who was initially looking
to develop senior housing but in conversations with City staff they realized there was a need for
market-rate multifamily in the community and changed their proposal to market-rate multifamily
housing with a small amount of retail on the first floor that would also be beneficial to library
patrons. The City and County staff, the County’s consultant along with Mesaba Capital have been
meeting to discuss various site design layouts for the site.
Mesba Capital has designed a development that will fit on the former city hall parcel. The housing
element could have the third and fourth floors step back to the west exposing more of the existing
library site to 80th Street. The proposed retail component could include a use that could have a
drive-thru and other uses that would be beneficial to the new residents and library patrons.
Economic Development Authority
September 6, 2018
Page 3 of 6
On August 30th the City received a Letter of Intent (LOI) from Mesaba Capital to facilitate the
proposed purchase of the City-owned parcel. The LOI is valid until February 28, 2019, so after
consideration by the EDA the request will also be considered by the City Council for approval.
The area of 80th Street and East Point Douglas is one of two “downtown” areas (the other being
Jamaica Avenue and East Point Douglas) in Cottage Grove that service as our main commercial
nodes. It is important that as the community develops and redevelops thoughtfully in these areas
to ensure that the community receives the best use and design for the community. There is a
synergy being developed at 80th Street and East Point Douglas that is important to foster and the
momentum for good design and developing a plan that benefits the entire community.
Economic Development Authority
September 6, 2018
Page 4 of 6
Option A
Economic Development Authority
September 6, 2018
Page 5 of 6
Option B
Discussion
On September 4th Washington County Public Works held a County Board Workshop to review
the Park Grove Library project. The County Public Works Department provided a project overview
and three options for the direction of the Park Grove Library. County staff was looking for direction
from the County Commissioners in terms of which direction they would like to pursue. The options
included:
Construction a new two-story 25,000 square foot building on their existing parcel,
Renovation of the existing library facilities (interior and exterior, lighting and HVAC), or
Request more land from the City of Cottage Grove.
Economic Development Authority
September 6, 2018
Page 6 of 6
The County Board expressed that they wanted to remain at or near their current location due to
the proximity of housing and schools. A request for information was made to County staff by the
County Board and that was for information on the life expectancy of libraries including renovations.
The County Board discussed all three options and felt the desired direction was to request that
the City of Cottage Grove explore the acquisition of the parcels adjacent to the existing library
site. The City received a letter from the County for this request, which is attached.
The County has stated that they would need four acres for a one-story library. They have
suggested the parcels on the east side of Hemingway Avenue, a site near the current library as
well as the former city hall site, in which we have received an LOI from Mesaba Capital.
Development of the former city hall site to market rate housing and a retail component on the first
floor would provide numerous benefits to the community. First, it would put the property back on
the tax records, the development would provide a form of housing that the community is in need
of in order to retain our younger workforce, the retail component being near the Grove Plaza
redevelopment continues to foster the 80th Street and East Point Douglas area as a major
commercial node in Cottage Grove, and finally the proposed 2040 Comprehensive Plan has re-
guided this area to mixed use, thus demonstrating the proposed future land use is in keeping with
the trends we are seeing in the development community.
In previous work sessions with the County staff, site design layouts did allow for the construction
of a 25,000 square foot library on their existing parcel but also provided the challenges listed in
their attached letter. From the City’s perspective there are other potential options available to the
library rather than the former city hall site. The opportunity to redevelop the former city hall site
outweighs placing the library in this location, but there are other more appropriate locations for
the library in the community.
Recommendation
Authorize the City Administrator to execute the Letter of Intent (LOI) with Mesaba Capital for the
purchase of the EDA-owned parcel of land at 7516 80th Street South, the former City Hall site.
Attachment
Letter of Intent from Mesaba Capital
Letter from Washington County Administrator
Letter of Intent to Purchase Real Estate
The purpose of this letter is to set basic terms and conditions of the proposed purchase by the undersigned
(the “Buyer”) of certain real estate owned by you (the “Seller”). The terms set forth in this Letter will not
become binding until a more detailed “Purchase Agreement” is negotiated and signed by the parties, as
contemplated below by the section of this Letter entitled “Non-Binding.”
1.PROPERTY ADDRESS: The property proposed to be sold is located:
PID: 08-027-21-43-0006
2.PRICE: The proposed purchase price is: to be negotiated
3.POSSESSION: Possession be negotiated at time of binding purchase agreement. Settlement
would be made at the closing, immediately prior to possession.
4.INSPECTION: After the final acceptance of a binding Purchase Agreement Buyer may have the
Real Estate inspected by a person of Buyer’s choice to determine if there are any structural,
mechanical, plumbing, or electrical deficiencies, structural pest damage or infestation, any unsafe
conditions or other damage, including the presence of radon gas, any lead-based paint hazards,
and inspections for other conditions that are customary to the locality and/or that are required by
law.
5.FINANCING: tbd
6.CLOSING COSTS: Traditional Distribution of closing costs
7.STANDARD PROVISIONS: The Purchase Agreement will include the standard provisions that
are customary to the locality and or that are required by law.
8.TIMELINE: Upon acceptance of this Letter of Intentdk design & development group, inc.will
begin determining feasibility of contemplated usage of the site. This to include, but not limited to
market feasibility study, financial proforma, site plans,architectural fit plans, civil engineering,
environmental and geotechnical investigation, risk factors and presentation to financial teams, as
well as reviewing and understanding the municipal approvals with the City of Cottage Grove.
9.STAND STILL: Seller shall not initiate or carry on negotiations for the sale of the Real Estate
with any party other than Buyer unless either (1) Buyer and Seller fail to enter into a binding
Purchase Agreement from the time of acceptance of this agreement or (2) Buyer and Seller agree
inwriting to abandon this Letter of Intent. dk design & developmentgroup Inc. is executing
moves to determine if this is a viable site for contemplated usage. dk design & development
group is engaging into a due diligence effort of which there is substantial cost involved.
1 | Page
PID: 08-027-21-43-0006
OWNER: City of Cottage Grove
3 | Page