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HomeMy WebLinkAbout4.3 Letter of Intent for the Sale of Real Estate - Hardwood Avenue Hotel Site TO: Economic Development Authority FROM: Matt Wolf, Economic Development Specialist DATE: January 31, 2019 RE: Letter of Intent for the Sale of Real Estate – Hardwood Avenue Hotel Site 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 EDA-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. The City has continued to market the site at the ICSC RECon convention for hotel and restaurant/commercial development. The site 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 the two-acre minimum threshold hotels require for development. The site also received interest from Cobblestone Hotels in 2018 but no deal could Figure 1 Aerial of the Hardwood Avenue Hotel Site be made due zoning and other development related issues. Economic Development Authority January 31, 2019 Page 2 of 2 Discussion In December of 2018 staff attended the Minnesota Marketing Partnership meeting and were able to make a connection with a representative from Stahl Construction. Stahl Construction was formed in 1981 and specializes in the construction of hospitality development projects. They are based out of Urbandale, Iowa but most of their projects are in the Twin Cities region. Their projects include a wide variety of brands that include Hyatt, Mariott, Hampton, and Holiday Inn. They recently have branched out from not only hotel construction but also development. On January 31, the EDA received a Letter of Intent (LOI) from Stahl Construction to facilitate the proposed purchase by either Stahl Construction or its assigned buyer of the 1.67 acres site owned by the EDA known as the Hardwood Avenue Hotel Site. The offered price for the property is set at $1. The LOI lasts for a period of ninety (90) days during which time Stahl Construction will undertake feasibility of the site to include market study, analysis of pro formas and risk factors, and presentation to potential investors and funders. During this period of time the EDA agrees to not initiate or carry on negotiations with any other entity or person for the sale of the property. Figure 2 Examples of completed Stahl Construction projects in Bloomington, MN Recommendation By Motion: Authorize the EDA Executive Director to execute the Letter of Intent (LOI) with Stahl Construction for the sale of the EDA-owned parcel of land known as the Hardwood Avenue Hotel Site. Attachment Letter of Intent from Stahl Construction LETTER OF INTENT FOR THE SALE AND PURCHASE OF REAL ESTATE THIS LETTER OF INTENT (“LOI”) sets forth some of the basic terms and conditions of the proposed purchase by Stahl Construction Company or its assigns (the “Buyer”) of certain real estate of approximately 1.67 acres owned by the City of Cottage Grove (the “Seller”) and known as the Hardwood Avenue Hotel Site (the “Property”). Except for the stand-still agreement below, the terms of this LOI shall not be binding until a more detailed Purchase Agreement has been negotiated and signed by the parties to this LOI. TERMS AND CONDITIONS 1. PRICE. The offered purchase price for the Property from the Seller by the Buyer is $1. 2. POSSESSION. The taking of possession of the Property by the Buyer shall be negotiated and included in the executed Purchase Agreement between the parties. 3. INSPECTION. The Purchase Agreement between the parties must include a right of the Buyer to inspect the Property, which may include third-party testing and investigation. Such inspections shall be at Buyer’s sole expense and may include Said right of inspection includes the right (without limitation) of the Buyer to have its own survey, mapping work, environmental, and geophysical testing and investigation, The Purchase Agreement shall give the Buyer a right to cancel the Purchase Agreement in its sole discretion in the event the Buyer is not fully satisfied with the results of its inspections. 4. CLOSING COSTS. To be negotiated and agreed to by the parties in the signed Purchase Agreement. 5. STAND-STILL AGREEMENT. In consideration of the Buyer making efforts to complete the development and improvement of the Property for hotel use, the Seller agrees that it shall not initiate or carry on negotiations with any other person or entity for the sale of the Property other than the Buyer or its assigns for a period of ninety(90) days following the complete execution of this LOI. The terms of this stand-still agreement may be modified or abandoned by the parties by execution of a written instrument signed by both parties. This stand- still agreement is binding on the parties pending expiration of the ninety (90) days or until such further date specified in the signed, written agreement of the parties. Time is of the essence with respect to the 90-day period. 6. TIMELINE. The Buyer estimates completion of its efforts to determine feasibility of the Property for hotel development, which may include market study, analysis of pro formas and risk factors, and presentation to potential investors and funders within the above 90-day period and shall promptly notify the Seller if it believes the 90-day stand-still period shall not be sufficient to complete its efforts. 7.NON-BINDING EFFECTS. Except for the above stand-still agreement, the terms and conditions of this LOI are not intended to bind contractually the Buyer and Seller and is meant to be only a basic expression of the conditions to be incorporated into a binding Purchase Agreement. This LOI does not require either party to negotiate in good faith or to proceed to the completion and execution of a binding Purchase Agreement. Except for the above stand-still agreement, the parties shall not become contractually bound unless and until they execute a binding Purchase Agreement, which must be in form and content satisfactory to both parties and their respective legal counsel, in the sole discretion of each, and neither party may rely on this LOI as creating a legal obligation of any kind. The above stand-still agreement shall be binding on both parties regardless of whether the parties are able to negotiate and execute a binding Purchase Agreement. 8. ASSIGNMENT. The Buyer shall have the right to assign this LOI or the Purchase Agreement to a partnership, corporation, limited liability company or limited liability partnership currently in existence, or to be formed by the Buyer or on the Buyer’s behalf, or to an entity of the Buyer’s choosing, at the Buyer’s sole cost and expense, without the Seller’s consent. Dated: ________________________ SELLER: CITY OF COTAGE GROVE By: ________________________________ Its: ________________________________ Dated: January 31, 2019 BUYER: ________________________________ STAHL CONSTRUCTION COMPANY By: ________________________________ Its: Director of Strategy and Development ________________________