Agenda - Council - 08/08/2006 - Laserfiche WebLink

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-54— making machines. Consensus of the Committee was to direct staff to proceed with making the townhome development address signs. Case #6: Approve Purchase Agreement and Loan Agreement for the Purchase of Property Located in the Highway 10 Corridor (7751 Highway 10 NW) City Attorney Goodrich stated the City has been negotiating with Todd Bialon (EZ Sales) for the acquisition of a parcel of land lying within the Highway 10 Corridor Official Mapped area. The parcel is located at 7751 Highway 10 NW and is approximately 51,063.6 square feet or 1.31 acres in size. The Anoka County tax ID parcel no. is 34- 32 -25 -31 -0004 and 34- 32 -25 -31 -0007. The funds for the purchase are from the Metropolitan Council RALF loan program. Jodi Ruehle of The Tinklenberg Group has negotiated the purchase agreement on behalf of the City. The negotiated amount and appraised value is $1,180,000.00 plus $62,900.00 as an Administrative Settlement. Mr. Goodrich advised a loan agreement between the Metropolitan Council and the City must also be entered into. The total proposed loan from the Metropolitan Council is $1,254,080.00, which amount includes $11,080.00 in administrative fees. City Attorney Goodrich reviewed the following proposed lease terms: 1. Leased space: 5400 square feet consisting of 1,000 square foot office; 1,000 square foot storage and 3,400 square foot heated warehouse. 2. Term: five year lease with options to extend. 3. Rent: 6.38 per square foot for office; 3.38 for warehouse with a total rent of $4,184.00 per month plus taxes. 4. Property taxes: tenant shall pay the property taxes. 5. Insurance: City (landlord) will maintain hazard insurance. City Attorney Goodrich advised Council needs to keep in mind that (1) all net rent proceeds are remitted to the Met Council, and (2) Council has previously agreed that to the extent possible, these leases need to be "market rate ". He advised MnDOT is recommending an 8% return; this would be 8% of the $1,254,080.00. Based on this, the rent received should be about $10,000. The rent included in this lease is less than half of that amount. Councilmember Jeffrey noted the Council discussed these leases needing to be market rate at the last Council meeting. Councilmember Strommen asked how MnDOT has come up with the recommendation of an 8% return. City Attorney Goodrich replied it may not have much to do with the market, but may be based on interest rates and a fair return on investment. Councilmember Strommen stated the Council has not received a good answer regarding the - market rate for these leases and it is not known why MnDOT has a benchmark of 8% She expressed concern in continuing with these types of leases without having these questions answered. City Council / July 11, 2006 Page 10 of 13