Memorandum

City of Lawrence

Legal Services Department

 

TO:

David L. Corliss, City Manager

 

FROM:

Toni Wheeler, Director of Legal Services

 

CC:

Charles Soules, Public Works Director

Matt Bond, Storm Water Engineer

Scott Wagner, Management Analyst, Legal Dept.

 

Date:

October 2, 2008

 

RE:

Agreement For Sale of Excess City Property

 

Please include the attached proposed Agreement for Purchase and Sale of Real Estate between the City of Lawrence and the North Mass Redevelopment Group, L.L.C. on the City Commission agenda for consideration.  Staff recommends the City Commission receive the Staff Report and Proposed Purchase Agreement on October 7, 2008 and take action on the Agreement on October 21st.    

 

Background

As you know from a City Manager’s Report on June 24, 2008, North Mass Redevelopment, L.L.C. desires to purchase excess property owned by the City in the City north of the Kansas River adjacent to the Kansas River levee for a private, mixed-use development.  See attached letter from Dan Watkins, attorney for North Mass Redevelopment. 

 

The group provided the following information:

 

North Mass Development, LLC, is owned and operated by Kansas businessmen, who have development experience with both large complex commercial projects, including development of flood control areas, as well as experience focusing on the redevelopment of neighborhood properties. The group has access to national tenants in the retail, restaurant, hospitality and entertainment industries.  The three principal owners are: (i)  Christian Ablah, a regional real estate developer located in Wichita, Kansas, (ii) HDD of Lawrence, a local real estate investment group represented by Jon Davis, a local businessman, and (iii) Rick Renfro, a partner  in several local and Kansas City restaurants and operator of Johnny’s Bar. All are property owners in North Lawrence.  

 

Recent development projects include:

 

1.      An approximate 250,000 square foot, $27.5 million commercial development currently under construction in the 21st and Maize area of Northwest Wichita.   

2.      An approximate 105,000 square foot, $15 million commercial development currently under construction in Salina, Kansas with Tax Increment Financing.   

3.      An approximate 250,000 square foot commercial development along South Iowa: the Home Depot/Best Buy shopping center, including the BP Gas Station, Long Horn and On the Border restaurants developed in 2002.

4.      An approximate 90 acre $150 million commercial development currently under construction in the Kansas Speedway/Legends Shopping area in Wyandotte County.

5.      Redevelopments of properties in North Lawrence along Locust Street and the Oread neighborhood.

    

Independent Appraisal

An independent appraisal of the City’s property, along with property in the vicinity owned by the Kaw Valley Drainage District, was performed by Keller and Associates, Inc. earlier this year.  The appraiser valued the entire real estate (the City’s property and the drainage district’s property) at $330,000.00 or $1.75 per square foot.  A purchase agreement, with the purchase price based upon the Keller and Associates appraisal, is attached for the City Commission’s review and consideration.

 

U.S. Army Corps of Engineers Review and Approval of Redevelopment Plans

North Mass Redevelopment, Inc. proposes a development project within the critical area of the flood control project, (Kansas River Levee), which will require review and approval of the U.S Army Corps of Engineers.  The Purchase Agreement contains a number of provisions to ensure the City maintains access to the levee so it can fulfill its operation and maintenance responsibilities for the levee, as the levee’s Sponsoring Agent.  The Agreement also provides for appropriate review and approval of the development’s plans by the Corps and other governmental regulatory agencies before the transaction closes.  The transfer of the property will not occur until the redevelopment project has obtained all regulatory approvals. 

 

Additional important provisions of the Purchase Agreement include the following:

 

Section

Summary

2. Premises

The City agrees to sell the City’s excess property north of the Kansas River Levee and west of North Second Street.  The City will retain the levee, any levee right of way, and any easements necessary to access the levee, storm water drainage and public utilities or infrastructure.   

3. Consideration

The purchase price is $1.75 per square foot, with the number of square feet to be determined by a boundary survey approved by the City.  The purchase price excludes any consideration for the land included in the street right-of-ways. 

4. As Is purchase

Purchaser takes the property as is and will not perform testing consisting of drilling or perforating the ground in the levee right-of-way without the City’s prior consent. 

5.  Due Diligence Feasibility Period

The Purchaser has 24 months from the execution of the agreement to conduct its due diligence on the property.  The Purchaser may seek three successive 12-month extensions of the due diligence period to afford the Purchaser time to obtain the necessary development plan reviews and approvals.  The due diligence includes two phases (i) a technical phase for survey and engineering work to determine what kind of project is feasible; and (ii) a design phase. 

6.  Termination of Agreement

The Purchaser can terminate the agreement for any reason during the feasibility period.  The City can terminate if the Purchaser attempts to close the Agreement and purchase the property without first receiving approval of the development or building plans from the appropriate authority or if the U.S. Army Corps of Engineers prohibits the sales of the property in the exercise of its authority over the levee.   

12.  Transfer

The purchaser cannot transfer the property without the City’s consent. 

         

City staff and North Mass Redevelopment representatives met with Army Corps of Engineers staff on Monday, September 30, 2008 to discuss the proposed transfer and redevelopment concept.  Corps Engineer Scott Loehr, Attorney Alice Edwards, and Real Estate Specialist Lora Vacca provided information and guidance on the procedures for Corps review of testing and design plans for redevelopment projects within the critical area of a flood control project. 

 

In addition to the terms of the Purchase Agreement, the City will have control over the development project through its land use regulations.  Rezoning, platting, site planning and public improvement plans require City review and approval. 

 

Recommended Action

The Proposed Purchase agreement provides an opportunity for a high quality redevelopment project near downtown while protecting the City’s interest in operating and maintaining the levee and other important City utility infrastructure.  Staff recommends the Commission authorize the City Manager to execute the Purchase Agreement, if appropriate.