Closed board meeting february 26 2014 packet

Closed Board Meeting of the Capitol Region Watershed District (CRWD) Board Of Managers, for Wednesday, February 26, 2014 5:00 p.m. at the office of the CRWD, 1410 Energy Park Drive, Suite 4, St. Paul, Minnesota.

CLOSED BOARD MEETING AGENDA The Closed Board Meeting is a meeting with the Board of Managers of the Capitol Region Watershed District to consider a letter of interest in a property at 327 York Avenue, St. Paul.

I.

Call to Order of Closed Board Meeting (President Joe Collins)

II.

Review Property of Interest at 327 East York Avenue (CB Richard Ellis)

III.

Review Letter of Interest (CB Richard Ellis, Attorney Mogen) A) Discussion & Review

IV.

Adjournment

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Our Mission is to protect, manage and improve the water resources of Capitol Region Watershed District

COMMERCIAL REAL ESTATE SERVICES

th

Joseph Hughes Senior Associate

81 South 9 Street Suite 400 Minneapolis, MN 55402

CBRE, Inc. Brokerage Services

612 336 4293 Tel 612 336 4320 Fax joseph.hughes@cbre.com www.cbre.com

February 6, 2014 Barry Birnberg Northco Real Estate Services LLC 5353 Wayzata Blvd. #400 Minneapolis, MN 55416 RE:

Non-binding Offer to Purchase 327 York Avenue, St. Paul, MN

Dear Barry, On behalf of Capital Region Watershed District or their assigns (the “Buyer”), CBRE, Inc. has been authorized to present this non-binding letter of interest to set forth the principal terms and conditions under which the Buyer agrees to purchase the building located at 327 York Avenue in St. Paul, MN from the "Seller" under the terms and conditions outlined below.

The principal terms and conditions upon which Buyer and Seller agree to proceed are as follows: LOCATION:

327 York Avenue

PROPERTY OWNERSHIP:

Please state

SIZE:

Approximately 14,027 total square foot office building

PURCHASE PRICE:

Subject to the terms of the Purchase Agreement, Buyer agrees to purchase, and Seller agrees to sell, fee title to the Property for the purchase price in the amount of one million one hundred seventy five thousand and 00/100 dollars ($1,175,000.00) (the "Purchase Price") to be paid in cash at or before Closing Date as described below.

CLOSING DATE:

To be determined between buyer and seller, but in no event sooner than forty-five days following the due diligence period or later than January 15, 2015. Buyer’s current lease expires 3/31/15 and buyer is in need of time for construction and move in.

Barry Birnberg February 6, 2014 Page 2

EARNEST MONEY DEPOSIT:

Buyer will deposit Fifteen Thousand and 00/100 Dollars ($15,000.00) as earnest money (“Earnest Money”) upon execution of the Purchase Agreement, which Earnest Money shall be held by a buyer-selected title company, in an interest bearing account in accordance with an escrow agreement among Buyer, Seller and Title. The balance of the Purchase Price will be paid by Buyer in cash or by wire transfer of U.S. Funds to be received in the trust account of Title on or before the Closing Date (as herein defined).

Seller Lease Back:

In the event closing takes place prior to 12/1/14, buyer would prefer that seller lease back the building until a period between 12/1/14 - 1/15/15. Rates and Terms to be negotiated fairly in the Purchase Agreement.

PROPERTY CONDITION:

Buyer will accept the property in its AS-IS, WHERE-IS condition, subject to the due diligence rights and inspections defined below, and subject to any leases currently in place. In addition, Seller will include in the purchase price all furniture, fixtures, equipment, and personal property used in connection with the property.

PURCHASE AGREEMENT:

Parties shall execute a definitive Buyer drafted Purchase Agreement incorporating in form and content, and setting forth in more detail, the agreements of the parties with respect to this transaction, all as generally outlined by this letter of interest. Such Purchase Agreement shall contain, without limitation, the following reasonable covenants, representations and warranties of Seller: • Seller is, and immediately prior to the Closing shall be, the fee owner of the Property; • The Property is, or as of the Closing shall be, free and clear of all liens (except as approved in writing by the Buyer) and Buyer’s nonapproved encumbrances; • Seller has full ability and authority to convey the Property; • Conveyance of the Property by Seller will not violate any terms of any agreements, understandings, court orders, or government decrees to which Seller is a party or otherwise bound; • To the extent available, Seller shall provide all environmental, wetland, soil tests and survey in the Sellers possession; • The Seller shall deliver the property with all improvements constructed in its “as is” condition;

Barry Birnberg February 6, 2014 Page 3

•

•

Seller will be required to pay any levied, pending and deferred taxes and special assessments prior to closing and shall disclose any and all minimum assessment agreements, TIF agreements and/or property tax agreements affecting the Property.

Such other covenants, representations and warranties as may be appropriate to the terms of a transaction that may be mutually agreed to by and between the parties.

PRORATIONS:

It is Buyer’s expectation that all costs and expenses shall be prorated in accordance with the terms and provisions of the Purchase Agreement to include the following: (i) Seller shall provide at its expense a Commitment for Title Insurance with copies of all exception documents; (ii) Seller shall, at its expense, procure a certified ALTA/ACSM Land Title Survey and Phase I with full details; (iii) Buyer and Seller will share equally in the cost of the Title Insurance Premium, any Title Insurance Endorsements and the cost of searches for bankruptcy, state and federal judgments and liens, and other encumbrances and easements affecting the Property; (iv) Seller shall pay for any State Deed Tax; (v) Real estate taxes will be prorated on a due and payable basis on the day of closing; (vi) Seller will pay for any levied, pending and deferred special assessment installments due and payable prior to closing; and (vii) the closing fee charged by the Title Company will be split equally between the parties (viii) all other closing costs will be paid or prorated between the parties as is customary.

DUE DILIGENCE:

Buyer shall have sixty (60) days following execution of a binding Purchase Agreement to conduct, in its sole discretion, any and all due diligence deemed necessary or desirable which may include without limitation review of the condition of title to the Property, the environmental condition of the Property, the condition of the soils and any wetland delineations, the condition of all improvements and easements to the Property, and such other matters deemed necessary or desirable. Any invasive testing including, but not limited to, phase II environmental studies and soil borings shall require prior written approval by Seller. Buyer will also need confirmation from the city that Buyer’s use is compatible with the current zoning. In addition, Buyer will use this period to establish an acceptable financing source according to the terms by the Buyer’s sole discretion in acquisition of the property.

Buyer shall have the right to one (1), thirty (30) day due diligence extension periods. If buyer chooses to extend this period, buyer to increase the “earnest Money” by $10,000.

The Due Diligence period release of contingencies is the sole discretion of

Barry Birnberg February 6, 2014 Page 4

the Buyer, Buyer’s Earnest Money to become nonrefundable, along with decreasing Buyer proceeds due at closing by this amount.

SELLERS CONDITIONS PRECEDENT TO CLOSING:

EARLY ACCESS:

The only condition precedent to the performance of Seller's obligations under the Purchase Agreement for the purchase the Property (and all obligations related thereto), which condition precedent must be fulfilled or satisfied to Seller's satisfaction shall be the execution and delivery by both Seller and Buyer of a definitive and legally binding Purchase Agreement.

Effective as of the date of acceptance by Seller of this letter of interest, through the Closing Date or earlier termination of the Purchase Agreement, Seller shall grant Buyer and Buyer's representatives reasonable access to the Property, and shall otherwise cooperate in full with Buyer in all reasonable respects, for purposes of enabling Buyer to undertake such due diligence investigation, testing and analysis of the Property as may be expressly or impliedly contemplated herein.

ASSIGNMENT:

Buyer may assign all rights, title, interest and obligations under this letter of interest and subsequently executed Purchase Agreement any time prior to Closing to any affiliated entity.

GOOD FAITH:

This letter of interest evidences the parties' intent to proceed in good faith to undertake preparation of a Purchase Agreement in accordance with the terms of this letter of interest, and to proceed with diligence on the various undertakings envisioned by this Letter of Intent. Seller shall make available to Buyer within five (5) days of the date of full execution of this Letter of Intent all records and other information relating to the Property in Seller’s possession and created for/by Seller during the time of Seller’s ownership or in anticipation of Seller’s initial acquisition of the Property, as may be reasonably requested by Buyer, including but not limited to: (i) complete records of all previous phase I and phase II environmental assessments, or other environmental reports, performed at any time on the Property, (ii) any title commitments or policies issued with respect to the Property,(iii) any surveys of the Property, and (iv) and any documents, plans, and budgets

relating to improvements at the property STANDSTILL PERIOD:

Notwithstanding the fact that this letter proposal is not binding on either of the parties and notwithstanding anything expressly or apparently to the

Barry Birnbe erg February 6, 2014 2 Page 5

contrary herein, Seller recognizes that Buyer w will be expen nding significcant d of th he property, aand therefore e, Seller shall not resourcess on its due diligence offer the e Property fo or sale to, o or acquisition n by, any otther prospective purchase er or conductt any negoti ations for saale of the Property with any other pro ospective purrchasers for a period of tim me commenccing on the d date hereof and a continuin ng through and includin ng the date of a definitive Purchase e Agreement. Buyer and SSeller agree to include a ssimilar “Stand dstill Period” clause c in the Purchase P Agreeement.

BROKERA AGE:

Buyer’s broker b of reco ord shall be C CBRE, Inc. If a transaction is consummatted, CBRE sha all be paid a commission c o of 4% of the P Purchase Price e by the Selle er at closing.

ENTIALITY / CONFIDE NON-DIS SCLOSURE:

Seller, its agents and assigns a agree s to keep anyy and all terms or condition ns of this lettter of interesst and Purcha se Agreemen nt, including th he Buyer’s name, in strict confide ence and agreees not to discclose such co onfidential informatiion until such h time as Buyeer provides Seeller with written authoriza ation to do so o.

Seller exxecution and delivery of two copies o of this letterr of interest will constitute its formal approval to o enter into o a Purchase e Agreementt in nce with the terms t and co onditions outlined herein. IIt is understo ood, accordan however,, that this lettter of interestt shall be non n-binding on both Buyer a and Seller.

er of interest is acceptable, please have the Seller sig gn on the belo ow acceptancce page and return If this lette a copy to our attention n. If Seller, or any a authorize ed representa tive of Seller, has not so signed and uyer on or beffore 5:00 p.m.. (CDT), Febru uary 12, 2014, this Letter off delivered this letter of interest to Bu gether with an ny offer to pu urchase contained herein, sshall automattically termina ate. Upon Intent, tog acceptancce by Seller, we w will procure e the signature of the Buyeer and move directly to the e drafting of a Purchase Agreement.

Sincerely,

Barry Birnberg February 6, 2014 Page 6

Joe Hughes CBRE 612-336-4293 ACCEPTANCE OF TERMS: The Parties hereto commit to work in good faith toward the negotiation and execution of a binding purchase agreement for the 327 York Avenue, St. Paul, MN according to the terms and conditions outlined above.

SELLER: BY:

DATE:

, 2014

DATE:

, 2014

Its: BUYER: Capital Region Watershed BY: Its:

CBRE Š 2014 All Rights Reserved. All information included in this proposal pertaining to CBRE - including but not limited to its operations, employees, technology and clients - are proprietary and confidential, and are supplied with the understanding that they will be held in confidence and not disclosed to third parties without the prior written consent of CBRE. This letter/proposal is intended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The parties intend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered by the parties. The parties agree that this letter/proposal is not intended to create any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes no duty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm's length. Prior to delivery of a definitive executed agreement, and without any liability to the other party,

Comparison of Options

Buy 571 Snelling 7,786 $800,000 7,786

Buy 688 Hague 17,772 $495,000 8,861

Buy Becker Pro Bldg 10,817 $1,499,000 10,817

Buy 2336 Terr Rd 19,860 $775,000 15,872

Buy 327 York Avenue 14,027 $1,200,000 14,027

CF0 CF1 CF2 CF3 CF4 CF5 CF6 CF7 CF8 CF9 CF10

0 199,372 201,240 203,165 205,147 207,189 209,292 211,459 213,690 215,988 (783,869)

0 326,841 331,106 335,500 340,025 344,685 349,486 354,431 359,524 364,769 (979,923)

0 314,324 316,920 319,594 322,348 325,185 328,107 331,116 334,216 337,409 (1,324,670)

0 386,614 391,380 396,290 401,346 406,555 411,919 417,445 423,136 428,998 (1,229,937)

0 279,149 231,200 233,801 236,480 239,238 242,080 245,007 248,022 251,127 (802,219)

NPV NPV/ SF NPV/ sgl floor SF OPEX $$ over 10

912,709 117.22 117 714,062

1,686,791 94.91 190 1,629,889 Pros

1,383,473 127.90 128 992,038

1,951,057 98.24 123 1,821,381

1,152,270 82.15 82 964,823

address SF List Price Sgl Fl SF

Have a permanent solution Remove property from tax role Single Tenant Occupant Our own Landlord

Large outlay of cash required Own Landlord

Have a permanent solution Remove property from tax role Single Tenant Occupant Own Landlord Lowest NPV of three solutions Cons Large outlay of cash required Own Landlord

Notes: only hard & soft costs for construction are included.

Assumes sale of property at year 10

No need to bond More space & term flexible Timing is best

Not a permanent solution Most expensive solution Control of space (neighbors) Properties change Landlords

327 York Avenue

address SF List Price Sgl Fl SF

Buy 327 York Avenue 14,027 $1,200,000 14,027

CF0 CF1 CF2 CF3 CF4 CF5 CF6 CF7 CF8 CF9 CF10

0 279,149 231,200 233,801 236,480 239,238 242,080 245,007 248,022 251,127 (802,219)

NPV NPV/ SF NPV/ sgl floor SF OPEX $$ over 10

1,152,270 82.15 82 964,823 Pros Have a permanent solution Remove property from tax role Single Tenant Occupant Our own Landlord

Large outlay of cash required Own Landlord

Have a permanent solution Remove property from tax role Single Tenant Occupant Own Landlord Lowest NPV of three solutions Cons Large outlay of cash required Own Landlord

Notes: only hard & soft costs for construction are included.

Assumes sale of property at year 10

No need to bond More space & term flexible Timing is best

Not a permanent solution Most expensive solution Control of space (neighbors) Properties change Landlords

CRWD 327 York Buy Assumptions

Manufacturing Square Feet Office Square Feet Rentable Square Feet Land Cost Purchase Price Construction Costs Total Costs Total Cost/SF Construction Costs/SF Operating Expense Taxes (1 year only) Expense Growth Tax Rate Growth

Buy 327 York 14,027.00 14,027.00

1,200,000 300,000 1,500,000 106.94 21.39 6.00 3.60 3.00% 5.00%

Warehouse Rent Office Rent Blended Rate Rent Growth LTV Interest Rate Term Bond Amount Equity Required Annual Debt Service Sales Costs Appreciation Rate Discount Rate Holding Period Buyout Price (90% FMV)

100% 5.00% 15.00 1,500,000 144,513 8.00% 2.00% 6.00% 10

Notes: "Cost" include construction hard & soft costs only All scenarios do not include costs to move, furnish or te

327 York Year 0 Development Costs Operating Expenses Taxes Debt Service Reversion Net Rental Payments

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

-

-

Reversion Value less: costs of sale Remaning Loan Balance Net Sale Proceeds

1,828,492 (146,279) (625,668) 1,056,545

Net Present Value

1,152,270

84,162 50,474 144,513 279,149

86,687 52,998 144,513 231,200

89,287 55,647 144,513 233,801

91,966 58,430 144,513 236,480

94,725 61,351 144,513 239,238

97,567 64,419 144,513 242,080

100,494 67,640 144,513 245,007

103,509 71,022 144,513 248,022

106,614 74,573 144,513 251,127

109,812 78,302 144,513 (1,056,545) (802,219)