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Home My WebLink About4.2 Renew Letter of Intent with DK Design Group TO: Economic Development Authority FROM: Christine Costello, Acting Community & Economic Development Director DATE: February 4, 2019 RE: Renew Letter of Intent to Purchase Real Estate at 7516 80th Street South Background In September 2018, the EDA approved (vote 7-to-0) a Letter of Intent (LOI) with dk design and th development group. Inc. for 7516 80 Street South, the former City hall site. Then at the October 3, 2018, City Council workshop the Council also approved (vote 5-to-0) the LOI with dk design and development group, Inc. At the time of the original LOI both City staff and Washington County staff had been meeting with the understanding that the Park Grove Library has been in need of repairs and updates that is estimated in the millions, and that the Library was considering construction of a new Park Grove Library. During this time the City was approached by a developer, dk design and development group, Inc. 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 dk design and development group, Inc. had been meeting to discuss various site design layouts for the site. In September 2018, Washington County Public Works held a County Board Workshop to review the Park Grove Library project. The County’s 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 the direction they would like to pursue. The options for the Library 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. The County Board expressed that they wanted to remain at or near their current location due to the proximity of housing and schools. 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 reached out to the land owners and brokers for the sites on the east side of Hemingway to inquire about their interest in selling. Though both were open to selling, their proposed sale prices are well above market condition, thus making the cost prohibitive for acquisition. The City Council also expressed concern that the proposed layout would remove two parcels from the tax roll. Economic Development Authority February 4, 2018 Page 2 of 2 The City Council also expressed that they were uncomfortable with pursuing the purchase of land for a library without knowing how the new library would be programmed and what amenities would accompany a new design. The City Council did share with the County that they hoped they would be a part of the community center process to determine if a future Park Grove Library may be an element of a future community center in the community. The City and Washington County will be exploring this avenue for the future of the Library as an element of a potential community center. Discussion dk design and development group, Inc., has been working diligently on the proposed financing of a multi-family market rate housing project since the LOI was signed in October 2018. Through this process it was discovered that a retail component as part of the project would not be possible due to retailers requested parking requirements as well as the overall size of the site being limited to just the former City hall site. dk design and development group, Inc., is continuing to refine its financials to provide market-rate multi-family housing on the site. The applicant will be at the meeting to provide a status update on their project. Recommendation Authorize the City Administrator to execute the Letter of Intent (LOI) with dk design and development group, Inc., 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 dk design and development group, Inc. Dk design Powerpoint Presentation 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 Intent dk 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 & development group 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 present: Shelter Corporation, Board Member 2007: Best Buy Real Estate Leadership 2011: Target Real Estate & Facility Management Leadershippresent: dk design & development & Mesaba Capital Development2006: Regis Corporation2010: Shelter Corporation, CFO – ----- 199320072011199620072010 2015: The Waters Senior Living Group, President & Founding Member ••••••• Over 25 years in Architecture, Facility Mgmt. & Real Estate DevelopmentManaged and developed over 16 million SF of real estate projects.Senior Executive with over 30 years experience in Finance, Real Estate Development & Organizational Effectiveness. ••• 93921336 SmallLarge –– 1 BR 1 BR 1 BR + Den 2 BR & 2 BA3 BR & 2 BAMail/Package Room, Community Room, Roof Deck, Leasing Office, Entry Lobby, Bike Storage, Maintenance Office, Outdoor Play Area and walking paths. •••••• Unit Key