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HomeMy WebLinkAbout3.a. Consideration of Proposal from Chase-Brackett Company to Complete a Motel Feasibility StudyCITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR ACTION PORT AUTHORITY COMMISSION MEETING DATE: JANUARY 19, 1993 AGENDA ITEM: AGENDA SECTION: MOTEL MARKET FEASIBILITY STUDY NEW BUSINESS PREPARED BY: JOHN MILLER, ECONOMIC DEVELOPMENT COORDINATOR AGENDA IT A,r ATTACHMENTS: MEMO, CORRESPONDENCE FROM THOMAS AP VED Y: TORGERSON, PROPOSAL FROM CHASE-BRACKETT F Z Please see attached memo. RECOMMENDED ACTION: Motion to approve the motel market study and financial analysis proposal submitted by Chase -Brackett Company for a cost not to exceed $4,500. PORT AUTHORITY ACTION: MEMO TO: Port Authority Chairperson Dunn Commissioners Anderson, Edwards, Mawe, McMenomy, Sinnwell, Wippermann FROM: John Miller, Economic Development Coordinator DATE: January 19, 1993 RE: Item 3. A., Consideration of Proposal from Chase -Brackett Company to Complete a Motel Feasibility Study Presently I'm working with three persons on development of a motel at C.R. 42 and T.H. 3. They are: • John Thomas • Ray Anderson • Emmett Erpelding Both John Thomas and Ray Anderson are working through Americinn. Thomas is presently committed to building an Americinn motel in Hutchinson and is the front runner for the franchise in Rosemount. The people at Americinn have established a working relationship with Thomas and introduced him to the site before they had contact with Ray Anderson, and for those reasons have advised everyone involved that he is their number one candidate. Mr. Thomas is an extremely thorough man and has been gathering information about Rosemount for the past several weeks. For example, he visited the City Council on December 15 because he wanted to see the manner in which local issues were resolved. On January 7, he again visited with Koch Refining -- this time with Rose Bauer -- to get detailed information about referrals from the refinery. You will remember Mr. Anderson from his motel proposal to you from last summer. At this time he assembled a group of investors and can raise much more equity than in the first proposal you saw. He has visited with Americinn and as I suggested earlier has been told he's number two on the list. In the meantime Anderson has been looking at other -sites including land south of C.R. 42 owned by the Carlson family. The third person is Emmett Erpelding who was referred to me by John Sullivan, an economic development consultant. Sullivan incidentally lives in Apple Valley and has done work in Princeton and Hinckley, but that's another story. Erpelding has visited Rosemount on two occasions and is considering the city as a site for a Holiday Express Motel and an adjacent family restaurant. The Holiday Express would be about 20 rooms larger than the approximate 50 room Americinn. With regard to the restaurant, Erpelding first considered a Perkins. Unfortunately he found that a franchise would not be available because the site is too close to the Perkins in Apple Valley. Presently they are pursuing Denny's and Country Kitchen. Page 2 I last visited with Erpelding on January 11 when he called from his car phone. He explained he was leaving for Mexico for two weeks but was still interested in Rosemount. At that time he asked if the Port Authority would complete a market and feasibility study for a motel at the C.R. 42 and T.H. 3 site. I said I would take the request to the Port Authority if he would have someone send a letter requesting the action. Attached is a letter from his associate -- who I've never met -- Thomas Torgerson. Now for an interesting bit of detail. On December 29 I was visiting with Janene McBride, an appraiser with Chase -Brackett who had been hired by (I believe) Marquette banks to complete an appraisal and market study for the old Brockway property. Debbie Widstrom interrupted the meeting to tell me that Emmett Erpelding was in city hall to see me. McBride asked if the city was doing a motel project - she knew Erpelding! Previously Ms. McBride has worked for Laventhol and Horwath, this was before the firm's bankruptcy. As you're probably aware, Laventhol and Horwath at one time had a virtual monopoly on hospitality industry feasibility studies, a "no" from them could kill a project deader than a door nail. As McBride left I made sure she met Erpelding and they briefly discussed the old days after exchanging greetings. I later asked Ms. McBride to submit a quote for a "market study and financial analysis proposal." That is also attached for your review. As you will see the cost is from $4,000 to $4,500. What's my recommendation? Normally I would recommend against paying for the feasibility study arguing that if the private sector person is really interested he/she can pay for it. In this case though I'm recommending it be done because: • The possible construction of a lamer motel with the family restaurant is very desirable. We're looking at names we would expect "west of Rosemount. This would be a good start for our quality development program. • Erpelding is interested in our bait but isn't hooked yet. • If Ray Anderson becomes the developer, he will ask for a Port Authority loan. We will need a similar document at that time, anyhow. Preliminary results could be available in three weeks and a final report in five weeks. rom 01/12/1993 10:54 FROM CHASE-BRACKETT CO. TO 4235203 P.02 MARKET STUDY AND FINANCIAL ANALYSIS_P-BQEQSAL Of Proposed Limited Service Hotel Rosemount, Minnesota Prepared for Mr. John Miller Economic Development Coordinator City of Rosemount 2875 145th Street West Rosemount, Minnesota 01/12/1993 10:54 FROM CHASE-BRACKSTT CO. TO 4235203, January 12, 1993 Mr. John Miller, Economic Development Coordinator City of Rosemount 2875 145th Street west P.O. Box 510 Rosemount, Minnesota 55068-5510 RE: Proposed Limited Service Hotel Rosemount, Minnesota Dear Mr. Miller: Please find enclosed our proposal for valuation services on the above referenced property. This proposal includes an overview of Chase -Brackett Company and our Qualifications as well. It is broken down into the following sections: 1. Overview of Chase Brackett Company, Qualifications of Appraisers and Scope of Services to be provided regarding the engagement. 2. Professional Fees and Timing 3. Contract for Professional Services We appreciate the opportunity to make this proposal to you and look forward to discussing this in greater detail with you.. As stated in our proposal, we propose to provide these consulting services to you for a :fee of $4,000 to $4,500. Please advise us with any questions which you may have regarding the proposal. Pest Regards, Janne McBride A: D. Kline, MAI, SRA Appraiser Snwor Vice President P.03 ' 01/12/1993 10:55 FROM CHASE-BRACKETT CO. TO 4235203 P.04 TABLE OF CONTENTS 1. Overview of Chase -Brackett Company 2. Professional. Qualifications 3. Scope of Services 4. Professional Fees and Timing S. Contract for Professional Services 6. Document and Information Request Form 01/12.,1993 10:55 FROM CHASE-BRACKETT CO. TO 4235203 P.05 OVERVIEW OF CHASE-BRACKETT The CFHASF BRACKETT COMPANY is in its 33rd year of appraising residential and all types of commercial property in the Twin City Metropolitan area. In the beginning, most of our business was mortgage appraising for the First Banks. Land acquisition for the Interstate Highway System was in its early stages so appraising for the Minnesota State Highway Department was an important part of our client base too. Relocation appraising for clients such as Honeywell and 3M also became a part of our client base in the early years, and has now evolved into the third party transfer companies. Today, CSAS&BRACKETT COMPANY has a diverse clientele, which includes: 1) Focal and outstate mortgage companies, savings and loan associations, and commercial banks. 2) Numerous municipal and government related authorities (i.e. Minneapolis Community Development Agency (MCDA),_Hemepin Parks System, Minneapolis Park Board, various City and County Housing Authorities). 3) Resolution Trust Corporation (RTC). 4) Attorneys representing clients. 5) Insurance Companies. 6) Relocation Companies. 7) Prospective sellers, buyers, and other entities dealing with significant real property decisions. As noted above, homeowners, municipalities, and attorneys are all part of our clientele which has required our testifying in district court and in City and County condemnation hearings. Both commercial and residential reports are prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) and in accordance with the regulations developed by the Lender's Federal Regulatory Agency as required by FIRREA. These reports are all created on our new network of computers. Our appraisers each keyboard their own reports to maximize accuracy and completeness. We pride ourselves in our new system which ultimately will be adapted to electronic mail. 01%12%1993 10:56 FROM CHASE-BRACKETT CO. TO 4235203 P.06 Our sources of information include, but are not limited to: 1) Company ales (i.e. Appraisal Data Network member) 2) Residential and Commercial/Industrial Multiple Listing Services 3) City and County Assessors 4) BOMA and NAIOP 5) Market participants (i.e. Management agents, brokers, buyers and sellers) Bill Chase and Russ Brackett initiated the company in 1959. Bill retired from the business in the fall of 1989 after serving as president for 30 years. Currently, the staff includes nine appraisers. The four principals are Russ Brackett, President; Al Kline, Senior Vice President; Steve Gergen, Vice President; and Paul Grace, Secretary - Treasurer. Five of the staff appraisers have the SRA designation, which denotes excellence in appraisal expertise by the Appraisal Institute, while Al Kline holds the MAI, and SRA designations. The locale we cover includes the entire seven county metro area. Appraisals are assigned to an appraiser who is well versed with the particular location of the property, and bas the expertise to complete the assignment. Appraising is not an exact science. However, the reason CHASE-BRACEETT COMPANY has been in business over 30 years is its philosophy that quality, accuracy and timeliness are of utmost importance to the client. We have in place, a quality control division headed by Al Kline to ensure a "State of the Art" product that effectively meets the clients needs. 01/12/1993 10:57 FROM CHASE-BRACKETT CO. TO 4235203 P.07 PROFESSIONAL QUALIFICATIONS ALBIN D. KLINE, MAI, SRA Senior lice ,President Education Graduated from the University of Minnesota in June 1977 with a Bachelor of Science Degree (B.S.B.) - School of Business Administration. Appraising Residential Property - Course 101 - Society of Real Estate Appraisers (SREA), 1978; Applied Appraisal Techniques - American Institute Of Real Estate Appraisers (AIREA), 1979, Single Family Residential Appraisal - Course VIII (AIREA), 1980; Principles of Income Property Appraising, Course 102 (SREA), 1980; Residential Housing Inspection, University of Minnesota, 1981; Narrative Report Writing Seminar (SREA), 1982; Energy Conservation Seminar: Application in New and Existing Homes, University of Minnesota, 1982; Building Construction McGraw-Hill Continuing Education, 1983; Computer -Applications in Appraising (SREA), 1984; Adjusting for Financial Differences (SRRA), 1985; Uniform Residential Appraisal Seminar (AIRRA), 1987, Capitalization Theory and Techniques, Part A and B, 1987 and 1988 (AR EA); Professional Practice and the Society of Real Estate, 1989 (SREA); Discounted Cash Flow Analysis, 1990 (AIREA). Applied Income Property Valuation Course 202 (SREA), 1990. Appraising Troubled Properties, 1991 (Appraisal Institute); Comprehensive Appraisal Workshop, 1992 (Appraisal Institute) . Appraisal Experience Since 1983 as Vice President of CHASE-BRACKETT COMPANY, Real Estate Appraisers and Consultants; 1981-1983 - Staff Appraiser, City of Brooklyn Park, Minnesota; 1978-1981- Staff Appraiser, CHASE-BRACKETT COMPANY, 1977-1978 Staff Appraiser, Minnesota. Federal Savings and Loan. Appraisals_ Fir Aid Insurance Company, Bank of St. Louis, Burlington Northern Railroad, Cargill Inc., Chicago & Northwestern Railroad, Citicorp Mortgage, Citizens State Bank, Coldwell Banker, Community State Bank, Corporate Transfer Service, Dunn and Bradstreet, Dupont Company, Eastman Kodak, Edina Financial Services, Employee Transfer Corp., Equitable Relocation Services, Executrans, FIBS Mortgage Corp., Glen Condo's, Holiday Inns, Investors Mortgage Corp., Josten's Inc., Knutson Mortgage Coxp., Maenner Relocation Co., Marquette Bank, North American Life Insurance, Norwest Mortgage, Norwest Trust, Prime Mortgage Corp., Prudential Relocation Services, Relocation Realty Service, Relocation Resources, Republic Sank of Dallas, Sperry Co., Transamerica Relocation, Transeqaity, TCF Mortgage Corp., Worldwide Relocation Services, LTD. 01!12'1993 10:57 FROM CHASE-BRACKETT CO. TO 4235203 P.08 PROFESSIONAL QUALIFICATIONS ALGIN D. KLINE, MAI, SRPA, SRA PAGE 2 Governmentand Municipalities Bloomington Housing Authority, FNMA. (Federal National Mortgage Association), Hennepin Parks, Minneapolis Community Development Agency (MCDA), Minneapolis Park Board, Richfield Housing Authority, Scott County Housing Authority, Attorneys representing clients, prospective sellers, buyers and others. jyM of Appraisai$ Single family and multi -family residences, townhouses, condominiums, commercial and industrial properties, vacant land, and special purpose properties. Qual,fflied expert witness in City and County condemnation actions. Professional Memberships Appraisal Institute, MAI (Member Appraisal Institute), Senior Residential Appraiser (SRA); Certified State Assessor, Affiliate member of the Minneapolis Area Board of Realtors; the St. Paul Hoard of Realtors; Dakota County Board of Realtors; the Anoka County Board of Realtors; Minneapolis Builders Association (NIRA). State of Minnesota Appraisers License #4000923 (Certified Federal General). 01/12/1993 10:59 FROM CHASE-BRACKETT CO. TO 4235203 P.09 PROFESSIONAL QUALIFICATIONS JANENE L. MCBRIDE 3eR0r_CbM_M_e_?Wa7 Appraiser Education Graduated from St_ Cloud State University in 1982 with a Bachelors Degree in Economics. Completed coursework for a Masters Degree from University of Wisconsin -Stout, 1983. App-misal Experience Since 1992 as an appraiser for CHASE-ERACKLrIT COMPANY, Real Estate Appraisers and Consultants; 1989-1991 appraiser for Marquette Partners (formerly Robert Boblett Associates); 1987-1989 Senior Consultant, Management Consulting Department - heal 11state Division, KPMG Peat Marwick; 1983-1987 Associate, Management Advisory Services Department - Real Estate and Leisure Time Industry Divisions, Laventhol & Horwath. Appraisals F9r Briggs & Morgan, Citi -Corp, Days Inn, Development Plus - Fargo, Dorsey & Whitney, Dotronix, Eastlund, Solstad & Hutchinson, First Bank, First Bank Eden prairie; First Bank Properties; First National Bank of Hudson; First Trust Co.; First Trust - St. Paul; Gehl Company; Gordon McDonald Corporation; Group Health, Inc.; Heitman Advisory; Integrated Lodging Services; investFast; Manufacturer's Hanover; Massachusetts Mutual Life; Mdewakanton Sioux Community; Mellon Bank; Michelin Tire Corporation; Michigan National Corporation; Midwest Saving Assoc. National City Bank; Norwest Bank; Openheimer, Wolff, & Donnelly; Our Own Hardware; Port Authority of St. Paul; Provident Mutual.; Prudential; Resolution Trust Corporation; St. Francis Regional Medical; Trizec; Twin City Federal; and, Welsh Companies. Consulting assignments for Days Inn, Embassy Suites, Holiday Inns Inc., Hilton, Hyatt, Quality Inns, Ramada Inns, Super 8, Vista Hotels and individual developers. Government and Municipalities Consulting Assitgzunents for the State of Minnesota, State of California, State of South Dakota, City of New Orleans, and local city and county offices. _TYi sof Appra MIS Commercial and industrial properties including: Single and Multi -Tenant Office Buildings; Regional, Community and Neighborhood Shopping Centers; Hotels, Motels and Resorts; Office - Warehouse and High Tech Buildings; Apartments; and Condominiums. Special purpose consulting assignments including Race Tracks, Theme Parks, and. Super Regional Shopping Centers, among others. 01/12/1993 10:59 FROM CHASE-BRACKETT CO. TO 4235203 P.10 PROFESSIONAL QUALIFICATIONS JANENE L. McBRIGE PAGE 2 Professional -Memberships, American Institute of Real Estate Appraisers - Candidate. State of Minnesota Appraiser License #4041889 Certified Federal General. 01/12%1993 10:59 FROM CHASE-BRACKETT CO. TO 4235203 P.11 SCOPE OF SERVICES We are pleased to provide a narrative market study and financial analysis of a proposed limited service hotel to be located in the Rosemount, Minnesota area. The purpose of the report is to estimate the prospective utilization and resulting financial performance of the proposed property. The report will be used to attract prospective developers, hotel franchising companies and management companies. PHASE-1--fi-MARKE1 O`7Fi RVEEW The study would be concerned with the determination of current and potential future demand for hotel accommodations in the market area; assessment of existing and potential future competitive supply; and the share of the market that could reasonably be attained by the proposed project. Our approach to such a study would be several tasks as follows: I. Slur We will evaluate the following factors regarding the proposed site: • Access • Visibility • Ambience • Present utilization ' Topography • Relationship to demand generators • Advantages/disadvantages of the site versus the major competitors Area Review We will gather and analyze relevant economic data regarding the market area to determine whether the overall economic environment in the area appears suitable for hotel development. Primary Research We will perform primary market research of the site area.. This research would consist of interviews with key demand generators, with persons familiar with development patterns occurring in the area and representatives of the local hotel market. They may include: • Major employers in the market area • Owners and managers of potentially competitive hotels • City officials in zoning, development and transportation • Prospective developers (which you have identified) An inspection and evaluation of competitive hotels will also be conducted. 01/12%1993 11x00 FROM CHASE-BRACKETT CO. TO 4235203 P.12 SCOPE OF SERVICES PAGE 2 Preparation of_Supply and Demand Estimates Based on research conducted, we would prepare estimates of future growth in demand for, and supply of, hotel accommodations in the market area. We will analyze historical growth in demand, and the characteristics of each of the principal segments of demand. Using information gathered in our research, we will estimate growth rates in demand for each market segment. Simultaneously, we will assess the historical growth in the competitive supply of hotels in the markeet. This will allow us to prepare an estimate of future supply of hotel .rooms, the demand for hotel accommodations and the expected occupancies of the competitive rooms supply over the next five years. Market Share Estimate and Market Position Upon completion of the estimate of the market area's future rooms supply and demand for rooms, we will estimate the share of the market which the proposed hotel should reasonably be expected to capture, by market segment, for its first five years of operation, and estimate occupancy percentage and average rates for the property for each of those years. We will examine correlations between key economic factors and the demand for hotel rooms, and will utilize any available forecasts of these indicators in our .evaluation. At the completion of Phase I, we will prepare a brief letter reporrt outlining our findings. We will prepare estimated operating results based on our market /research. We will estimate all revenue and expense line items in accordance with the Uniform System of Accounts for Hotels, to the level of income before interest, depreciation and income taxes. Because the operating results will be based on estimates and assumptions which are subject to uncertainty and variation, we will not represent them as results that will actually be achieved. At the completion of Phase II, we will present to you the 5 -year statement of estimated financial results and the assumptions used in formulating those results. O1i12�1993 11:01 FROM CHASE-BRACKETT CO. TO 4235203 SCOPE OF SERVICES PAGE 3 P.13 The report will be prepared in accordance with the Code of Ethics and Standards of professional Practice of the Appraisal Institute. The report will not necessarily conform to specific appraisal standards or policies of financial institutions that differ from the Appraisal Institute standards unless prior arrangements are made. Neither the report, the materials submitted, nor our firm name may be used in any prospectus or printed materials prepared in connection with the sale of securities or participation interests to the public. 01/12"1993 11=01 FROM CHASE-BRACKETT CO. TO 4235203 P. 14 PROFESSIONAL FEES AND TIMING Our professional fee for the market study and fb=cial analysis is estimated to be $4,000 to $4,500. We estimate Phase I at $2,500 to $3,000; Phase II at $500; and Phase III at $1,000. We will be reimbursed for any out-of-pocket expenses incurred in the performance of the assignment, such as mileage, long distance phone calls, computer costs, photocopying and report reproduction. 'Three (3) copies of the final report will be delivered upon completion of the assignment. If more copies are needed, they will be available at an additional change. Our receipt of an accepted copy of this proposal constitutes our authorization to proceed. We request that your full and timely cooperation in providing the. information indicated on the attached "Document and Information Request Form", no later that January 30, 1993. A delay beyond this date may result in a delayed report. This proposal is valid until January 30, 1993. If it correctly states the nature of the work you wish undertaken at this time, and the arrangements proposed are satisfactory, please sign the enclosed copy of this proposal where indicated and return it to us as our authorization to schedule the assignment. 01/1:"1y93 11:02 FROM CHASE-BRACKETT CO. TO .4235203 P.15 CONTRACT FOR PROFESSIONAL SERVICES 1. The Employment Agreement is binding upon Chase_Brackett Company, hereinafter refereed to as the "Consultant," and the City of Rosemount, hereinafter referred to as the "Employer." 2. The appraiser agrees to provide the Employer with 3 three on a proposed limited service hotel located in the RosemountMinaesotaarea�Ve report 3. It is understood that the report will be used to estimate the prospectiVe occupancy, average rate and result cash flow available for debt service .and. income tax to attract a potential developer. It is understood and agreed that the relied u report, or any information contained within, shall not be upon or utilized in any of the matters pertaining to arty syndication nor any State or Federal Securities and Exchange Commission registrations. 4 Said Phase I conclusion will be verbally communicated within three (3) weeks after signing this contract, and receipt of the documents and information requested in the pages accompanying this contract. The fail narrative report is to be delivered within five (5) weeks. Unavoidable delays may extend the delivery date, 5. In return for service, the Employer agrees to pay Appraiser a fee not to exceed a range of $4,000 to $4,500, plus hard costs, including mileage, production costs, photo costs, etc., payable upon delivery of the final report. 6. All outstanding fees and expenses are to be paid on the date the report is delivered.. It is further understood and agreed that if any portion of the Compensation the Appraiser become delinquent, the Employer will etthereon or costs due to 1.5 % per month on the unpaid balance and will Pay 'merest iherCon at the rate of reasonable attorney's fees and ex Pay � collection costs thereof, including expenses, count costs, et cetera. + 01/12/1993 11:02 FROM CHASE-BRPCKETT CO. TO 42352,03 P..16 CONTRACT FOR PROFESSIONAL SERVICES PAGE 2 7. 1' the event the .Pmployer desires to cancel this contract, written notice thereof must be delivered to the Appraiser, and it is agreed that the Appraiser shall receive compensation from the Employer for all expenses and all services rendered prior to cancellation at the following rates: Albin D. Kline, MAT, SRA, $100.00 per hour; 7anene McBride , $75. Per hour; Research Assistants00, $30.00 per hour; and offwe stag at $18.00 per hour. CITY OF ROSEMOUNT Employer CHM&BRACKETT Accepted: A. D. Kline, MAI, SRA Senior Vice President Janne McBride Appraiser Date Date Date 01/12/1993 11:03 FROM CHASE-BRACKETT CO. TO 4235203 P.17 DOCUMENT AND INFORMATION REQtIFQr Please submit the following in order to expedite the completion of theT assignment: 1. Plat of Survey 2. plotted Survey 3. Legal Description 4• Title Commitment 5. Topographical Map 6. Soil Test results 7. Any proposed plans, specifications or prototype in formati on 8 • other Physical Descriptive Information 9. Construction Cost Budget 10. Proposed Operating Budget - if available 11. Leases or Lease Abstracts 12. Management and Franchise Agreement 13. Ground Lease 14. Saxes Price and Terns of Land or Improved three years. roperty' xf ,purchased within last 15. Price and terms of any Peng option to purchase, sale contract or listing