HomeMy WebLinkAbout5.a. Sunrise Builder's Property' CITY OF ROSEMOUNT
EXECUTIVE SUMMARY FOR ACTION
CITY COUNCIL MEETING DATE: DECEMBER 3, 1991
AGENDA ITEM: Njjjj1W16 PROPERTY
AGENDA SECTION:
OLD BUSINESS
PREPARED BY: STEPHAN JILK, CITY ADMINISTRATOR
AGENDA � A
ATTACHMENTS: MEMO
A OV E Y
To consider the purchase of the Sunrise Builder's site property it is
necessary to
1. Decide the purpose of the acquistion
2. Decide on funding options for the acquisition
Mr. Mike McDonough, current owner of the property is a willing seller of
the property. Through financing agreements with Mr. McDonough and the
First State Bank of Rosemount the City could fund this purchase.
Council direction on both points need to be decided so staff can finalize
such agreements.
RECOMMENDED ACTION: MOTION to direct staff to finalize funding sources
and contract agreements for the purchase of the Sunrise Builders
property.
COUNCIL ACTION:
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PHONE (612) 423-4411 2875 - 145th Street West, Rosemount, Minnesota
FAX (612) 423-5203 Mailing Address:
P. O. Box 510, Rosemount, Minnesota 55068-0510
MAYOR
Vernon Napper
COUNCILMEMBERS
Sheila Klassen
John Oxborough
Harry Willcox
Dennis Wippermanh
ADMINISTRATOR
Stephan Jilk
TO: Mayor Napper
Council Members Klassen, Oxborough,`,W'll .,x, i- ann
FROM: Stephan Jilk, City Administrator
DATE: November 27, 1991
RE: Sunrise Builders Property
Pursuant to direction provided by the City Council I have
reviewed reasonable; options for the purchase of the Sunrise
Builders Property,
I am prepared to provide a recommendation in that regard.
The property is 10.8 acres currently zoned C-2 (Community
Commercial). It does not have municipalsewer or water to the
site. The improvements' on the site are several stand alone
structures ample size to support the current business which is a
builders supply operation.'
There have been two appraisals done on the property. The first
one completed in August of 1988 valued the property at $312,300.
The second one completed in 'September of 1991 for the City of
Rosemount set the value at $316,,000 using the "highest and best
use" approach.
The property has two mortgages against it. Both of these are
held by the First State Bank of Rosemount with a current combined
balance of $200,000. There are other business loans held by the
same bank but these loans have no lien on the property.
The property owner, Mr. Mike McDonough is interested in selling
the property to the City and is interested in working out an
arrangement by which he would lease back the property for up to a
three year period in order to make personal and business
decisions, relating to the relocation or closing of his business
operations.
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Sunrise Property Purchase
Page 2
City's Interest
The City recently adopted an "Erickson Park Square" Master Plan
which designates the property for future acquisition and eventual
development into the plan.
Funding
First State Bank of Rosemount is agreeable to the City taking on
the mortgage(s) for the property, combining them and negotiating
a term agreeable to the City for a 3, 4 or 5 year straight
amortization type loan.
The City's legal counsel has considered this type of purchase
agreement and find it legal to enter into such an agreement.
The City has certain unallocated funds available in its CIP
reserve accounts. The City could also consider funding sources
through its Park Dedication Fund and Storm Water Core Facility
Fund.
The City's EDA could possibly have interest in assisting in the
acquisitions for future development of the site or adjacent sites
and to assist the City's overall development of the Erickson
Community Square Project which includes the Armory site.
Following is a recommendation on the financing arrangements for
the purchase:
A. Assume a property value of $316,000
B. Assume Mr. McDonough is interested in maintaining his
business operations for a 1-3 year period.
C. City would purchase the property at a price of $316,000
- City takes on mortgage with First State Bank of
Rosemount at 9.5% for 5 years.
- City pays Mr. McDonough $50,000 cash at closing
- City takes on Contract for Deed with Mr. McDonough for
$66,000 at 8% simple interest for three years with
straight amortized schedule.
- Mr. McDonough pays city $750 per month for each month
he operates business. The maximum time Mr. McDonough
stays is 36 months. At his leaving he will remove all
items from property except existing structures.
D.
Sunrise Property Purchase
Page 3
Mr. McDonough agrees that no additional compensation
beyond the purchase price indicated above will be
provided for relocation purposes.
The City's potential cost for the property would be as
follows:
Annual Cumulative
1992 Down Payment $ 50,000
CD w/McDonough 24,818
First State Bank 50,404
Sub -Total $125,222 $125,222
1993 CD w/McDonough $ 24,818
First State Bank 50,404
Sub -Total $ 75,222 $200,444
1994 CD w/McDonough $ 24,818
First State Bank 50,404
Sub -Total $ 75,222 $275,666
1995 First State Bank $ 50,404 $326,070
1996 First State Bank $ 50,404 $376,474
Potential revenue would be any income from rental of the
property. This could be as little as zero to a maximum of
$27,000. Since the option for the continued use of the property
is up to Mr. McDonough we cannot estimate any amount and suggest
we look at zero for consideration of the purchase.
Recommendation:
I would suggest that the council consider the purchase of the
Sunrise Builders Property through the above referenced financing
method if:
1. Based upon the potential future use of the property
the council feels it is warranted.
2. The council is willing to prioritize the use of CIP
funds as the main source of revenue for the purchase.
The CIP reserve balance at 12-31-91 should be
$660,000±.
Sunrise Property Purchase
Page 4
3. That the overall development of the Erickson
Community Square Project supports this effort.
If the Council wants to proceed staff will develop discussion
with other committees and provide written agreements for Council
consideration on December 17th.
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