DATE: March 21, 2017 TO: FROM: SUBJECT: Mayor and City Council Mark McNeill, City Administrator Letter of Intent Village at Mendota Heights Parcels COMMENT: INTRODUCTION The Council is asked to approve a Letter of Intent with Trammell Crow for the proposed development of three parcels and an outlot in the Village at Mendota Heights development. BACKGROUND Trammell Crow has approached the City about the development of an active adult apartment building. This project would be located on land owned by the City, adjacent to Dodd Road in the Village development. It would be part of a new concept for the Twin Cities, whose target market is for younger seniors who desire independent living, but will also want to be able to choose from an ala carte menu of services. Trammell Crow indicates that this market is currently underserved, but is anticipated to be in high demand as the Baby Boom generation ages. They note that it would allow area residents to sell their current homes, yet remain in the community. Trammell Crow is a national company, with presence in more than 30 states. It has several market-rate multiple unit residential developments in the Twin Cities. This Mendota Heights development is proposed to be located on three parcels totaling 1.72 acres of land, and Outlot D, which is a parcel containing a blanket utility and drainage easement. Maple Street between Dodd Road and Linden Street would be vacated, and become part of the development. The development would consist of between 150 and 164 units of apartments, in a structure which would be five stories in height. The project density without Outlot D factored in would be 57 units per acre, which is comparable to the 63 units per acre at the Reserve at Mendota Heights development at the Mendota Plaza location, across TH 1010.
All but 4 of the proposed parking spaces for the building would be underground. There would be a small pocket park at the southerly end of the site. Trammell Crow has proposed to buy the site directly from the City, with a price to be determined by a mutually-agreed upon appraiser. Trammell Crow has proposed a timeframe which will need to have preliminary work to commence immediately, so as to meet their desired closing on the land by the end of this year. This project location is part of a PUD; the property had been anticipated as 19 townhouses (similar to those on Linden and Oak Streets in the Village development). For that reason, in order for this is to proceed, the PUD will need to be amended. So as to meet the May Planning Commission deadline, an appraisal and traffic study will need to be commenced very soon. In order to get those activities can get underway, a Letter of Intent (LOI) has been drafted by Trammell Crow, which is being reviewed by City staff. This LOI will be presented to Council for its consideration at the March 21 st meeting The Letter of Intent is not a contractual obligation, but does allow the developer assurance that the City will support the further exploration of this concept through the Planning Commission consideration. Trammell Crow is open to holding a neighborhood meeting in advance of the formal consideration by the Planning Commission to answer questions which may arise from the surrounding property owners and residents. BUDGET IMPACT The LOI provides that Trammell Crow will deposit $30,000 in earnest money. The company will also fund the appraisal and traffic study. Development fees would be determined, should the project move forward. RECOMMENDATION If the Council desires to investigate this development further, it should authorize execution of the LOI. ACTION REQUIRED If the Council concurs, it should, by motion, authorize the execution of the Letter of Intent with Trammell Crow for the Mendota Heights Active Adult Apartments concept.
March 17, 2017 Mark McNeill City Administrator 1101 Victoria Curve Mendota Heights, MN 55118 RE: Letter of Intent for Proposed Purchase and Development of Mendota Heights Site ( Property ), consisting of Parcel Identification Nos.: 274833503020, 274833503010, and 27483350210 Dear Mr. McNeill: This letter constitutes a summary of the agreements from the discussions between Trammell Crow Chicago Development, Inc. ( Buyer ) and the City of Mendota Heights ( City ) with respect to the Property and outlines the general terms and conditions upon which Buyer desires to negotiate with the City for the purchase and sale of the Property for Buyer s intended purpose of developing an active adult, multi-family residential facility, as generally set forth in the design concept plans attached hereto as Exhibit A ( Project ). The Project scale will include approximately 150-165 units. Except as provided in Section B below (which terms will be binding), this letter does not constitute a binding agreement or contract, and unless or until the parties negotiate and enter into a binding written agreement for the sale and development of the Property ( Purchase Agreement ), neither Buyer nor the City will be bound to purchase or sell the Property. The purpose of this letter is to establish certain terms concerning the purchase and sale of the Property and to set forth a basis upon which the parties, together with their respective attorneys, may proceed to draft and negotiate toward the execution of a definitive and binding Purchase Agreement. It is understood that either party may terminate negotiations at any time and for any reason. A. Based on the foregoing understanding, the parties desire to negotiate a Purchase Agreement pursuant to the following basic terms and conditions: 1. The Property The Property consists of three separate parcels and Outlot D, and is located in Mendota Heights, Minnesota, between Linden Street and Dodd Road, as generally depicted on attached Exhibit A. 2. Purchase Price The Purchase Price will be the fair market value of the Property, as determined by a MAI appraiser mutually agreeable to the parties, in an appraisal to be completed before April 24, 2017. The Purchase Price will be paid in 1
cash at Closing. 3. Earnest Money Buyer will place $30,000.00 ( Earnest Money ) into an interest-bearing escrow account to be held by First American Title Insurance Company ( Title Company ), as escrowee, within three (3) business days following the effective date of the Purchase Agreement. The City will have no obligation to perform under the Purchase Agreement if the Buyer does not deposit the Earnest Money in a timely manner. The Earnest Money (or the applicable portion thereof, as further set forth in Section 5 below), plus any interest earned thereon, will be refunded to Buyer if Buyer terminates the Purchase Agreement during the Due Diligence Period (described below). If Buyer does not terminate the Purchase Agreement and proceeds to Closing, the Earnest Money, plus any interest earned, will be applied to the Purchase Price. 4. Title and Survey Buyer will obtain an ALTA survey and a title insurance commitment issued by the Title Company, each in a form satisfactory to Buyer, together with copies of all recorded documents evidencing the exceptions to title that are described in Schedule B of the title commitment. At closing, Buyer will obtain an ALTA Owner s Title Insurance Policy issued by the Title Company (a) in the amount of the Purchase Price, (b) including extended coverage, (c) showing Buyer (or its assignee) as sole owner of the Property, and (d) subject only to encumbrances and such other title-related matters that are reasonably acceptable to Buyer. 5. Due Diligence Period Buyer will have an initial 180-day Due Diligence Period commencing on the Effective Date of the Purchase Agreement. At any time during the Due Diligence Period, Buyer may terminate the Purchase Agreement if any one or more of the Conditions Precedent described in Paragraph 7 below are not satisfied. The City will cooperate with Buyer and timely provide Buyer with all documents and other materials reasonably requested by Buyer. Buyer may extend the Due Diligence Period for an additional 30 days; provided, however, that if Buyer terminates the Purchase Agreement during such 30-day extension period (as opposed to a termination during the initial 180-day period), Buyer will be entitled to a refund of only $20,000 of the Earnest Money, and all interest earned thereon, and the remaining $10,000 thereupon be paid to City. Buyer may further extend the Due Diligence Period for an additional 30 days; provided, however, that if Buyer terminates the Purchase Agreement during such additional 30-day 2
extension period (as opposed to a termination during either the initial 180-day period or the first 30-day extension period), Buyer will be entitled to a refund of only $10,000 of the Earnest Money, and all interest earned thereon, and the remaining $20,000 (and all interest earned thereon) will thereupon be paid to City (or retained by City if same has already been paid to City). Buyer may further extend the Due Diligence Period for a third additional 30 day period; provided, however, that if Buyer terminates the Purchase Agreement during such third 30-day extension period (as opposed to a termination during either the initial 180-day period, the first 30-day extension period or the second 30-day extension period), Buyer will not be entitled to a refund of any Earnest Money, and the Earnest Money will thereupon be paid to City (or retained by City to the extent same has already been paid to City). 6. Closing The purchase of the Property will close ( Closing ) within 30 days after the earlier to occur of (a) expiration of the Due Diligence Period or (b) Buyer s waiver of the Due Diligence Period. The Closing will occur at the offices of the Title Company or at some other location mutually acceptable to the parties. 7. Conditions Precedent Buyer s obligation to purchase Property will be contingent upon Buyer s determining (in its sole discretion) during the Due Diligence Period that: (a) Buyer is satisfied with the results of all environmental investigations, studies and tests completed by an environmental testing firm acceptable to Buyer. (b) (c) (d) (e) Buyer is satisfied with the results of all soil and other site engineering investigations, studies and tests, which Buyer deems appropriate. Utilities, storm water detention and curb cuts necessary to serve the Property are available at a reasonable cost. All zoning and governmental approvals desired by Buyer to develop the Property into a residential development can be obtained prior to closing. Buyer is satisfied with its review of all agreements 3
relating to the Property. (f) (g) (h) Buyer is satisfied with its review of all documents provided to Buyer by City. City will provide such documents at no recourse to City. Buyer is satisfied with its review of the status of title to the Property. Buyer s acquisition and use or development of the Property will meet its financial requirements (or those of its lender or investors, if any). 8. Property Condition Buyer agrees that it will purchase the Property as-is and with all faults, with no warranty by City of any kind, expressed or implied, except as provided in the Purchase Agreement. 9. Site Work The City agrees to cooperate and assist with Buyer s efforts to accomplish the necessary site work for the Project, including without limitation the partial vacation of Maple Street and the relocation of the existing utilities currently under Maple Street. Notwithstanding the foregoing, the City will have no financial responsibility for the necessary site work for the Project. The Buyer may additionally be financially responsible for future public infrastructure improvements that may be required due to the scope and size of the Project, including but not limited to a new sanitary sewer lift station. 10. Traffic Impact Study Within 45 days after the execution of this Letter of Intent, Buyer will cause a traffic impact study to be conducted with respect to certain aspects of the Project. B. The following terms of this letter are binding on Buyer and City: 1. Broker Commission Buyer and City will indemnify each other against any losses, claims, damages, costs, expenses and liability, which Buyer or City may incur which arise from any entity claiming a brokerage commission in connection with this transaction to the extent such claim arises from the activities of the other party. 2. Existing Due Diligence Materials City shall provide Buyer, within three (3) business days of City's counter execution of this letter, any and all documents, reports, studies, tests, engineering drawings, surveys or other 4
pertinent materials which City has in its possession (or access to) which relate to the Property. All such documents shall be returned to the City if Purchaser does not close on the Property. 3. Due Diligence Investigations Following City s execution of this letter of intent, Buyer, at its own cost and expense, with reasonable notice to City, may enter the Property to conduct environmental, geotechnical, and soil and engineering investigations, studies and tests of the Property. Any damage to the Property caused by Buyer during the Due Diligence Period shall be repaired at Buyer s sole cost, and Buyer shall return the Property to its condition before the Due Diligence Period, whether or not any damage was caused by Buyer. Buyer shall provide evidence of all insurance satisfactory to City prior to entry on the Property. Buyer hereby agrees to indemnify and hold harmless City for, from and against any losses, claims or costs incurred by City relating to Buyer s entry and/or inspections at the Property prior to Closing. 4. Marketing of Property City agrees that for the period commencing on the date of this letter and expiring on the Effective Date of the Purchase Agreement (it being the understanding of the parties that the Purchase Agreement will contain exclusivity provisions), City will neither (a) promote the sale of the Property to, or solicit offers to purchase the Property from, other parties, nor (b) discuss or negotiate with other parties regarding the purchase or development of the Property. 5. Project Design/Use City Council and City staff has reviewed and generally supports Buyer's design proposal, attached as Exhibit A, including the building design, height and number of units and (b) Buyer s proposed entitlement milestone schedule, attached hereto as Exhibit B. Buyer acknowledges and understands the City Council must approve the terms of the Purchase Agreement and that the City Council and the City s Planning Commission intend to consider various land use approvals relating to the Project. Any general support for the Project may be absolutely and unconditionally revoked based upon future circumstances and the land use approval process. Buyer and City will endeavor to negotiate and execute a Purchase Agreement immediately upon the City's acceptance of this letter. We look forward to working with the City on this exciting development. Thank you. 5
Sincerely, John Carlson Trammell Crow Chicago Development, Inc.: Agreed to and Accepted By the City of Mendota Heights: By: Title Date: EXHIBIT A Design Concept Plans See Attached 6
April 24 th : Planning Commission Submittal Due Traffic Study Appraisal Preliminary Civil Engineering Concept Design May 23 rd : Planning Commission June 6 th : City Council PUD Approved EXHIBIT B Proposed Entitlement Milestone Schedule