HomeMy WebLinkAboutLetter of intent from Weston Solutions, Inc. to purchase former City HallCommission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Chris Kukulski, City Manager
SUBJECT: Letter of intent from Weston Solutions, Inc. for purchase of the former
Bozeman City Hall located at 411 East Main Street
MEETING DATE: May 26, 2009
RECOMMENDATION: Authorize the City Manager to sign the letter of intent from
Weston Solutions, Inc. for purchase of the former Bozeman City Hall located at 411 East Main
Street.
BACKGROUND:
The former City Hall property has had two appraisals since January, 2008. The first appraisal,
performed in January, 2008 valued the property at $1,650,000. The City of Bozeman (City) was
unsuccessful in attracting offers. The January, 2008 appraisal expired after 12 months. The
Bozeman Municipal Code Chapter 2.05.060 – Appraisal Required for Certain Sales states:
“Unless otherwise provided, no sale of real property shall be made of any property unless it has been
appraised within one year prior to the date of the sale.” (emphasis added)
The City of Bozeman commissioned an update of the January, 2008 appraisal. The appraisal update,
performed in February, 2009 valued the property from $900,000 to $1,250,000 on a scale based on
eventual use, i.e., for a building demolition and re-development the property is valued at $900,000.
If the building remains standing and is utilized, the value increases to $1,250,000.
On January 16, 2009 the City of Bozeman, after Commission authorization, entered into a property
listing contract with the commercial real estate firm of Grubb & Ellis, Montana Commercial LLC
(Grubb & Ellis) to sell the former City Hall property. Since that time, Grubb & Ellis has
aggressively marketed the former City Hall property both locally and nationally. To date, Weston
Solutions, Inc. (Weston) has made the only offer on the property.
The Weston offer of $900,000 in cash presupposes a future demolition and redevelopment project on
both the former City Hall and the current Fire Station One sites. The Weston letter of intent to
purchase the former City Hall property, dated May 15, 2009 and attached hereto has been reviewed
by City Staff, including the City Attorney’s Office and includes the following highlighted provisions,
among others:
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1) Due Diligence Contingency
Weston is allowed 90 days from the date signatures are finalized on the letter of intent to complete an
onsite analysis of the properties and determine if the former City Hall and Fire Station One sites meet
the needs of the buyer while simultaneously seeking an appropriate relocation site for Fire Station
One. If Weston terminates the letter of intent, copies of the results of all analyses will be provided
to the City.
2) Public Private Partnership Contingency
Weston seeks to aggregate the former City Hall property and the current Fire Station One property
into one downtown redevelopment project. Several benchmarks must be achieved by both Weston
and the City before a sale of the former City Hall property occurs:
a) The City must commission an appraisal of Fire Station One and the property;
b) Weston must locate a piece of land deemed suitable by the City for the relocation of Fire
Station One;
c) The City Commission must conduct a public hearing, as was done prior to the sale of the
former City Hall, and find that the City no longer needs Fire Station One for the conduct
of City business;
d) Weston must purchase the property and the Fire Station One facility;
e) Weston must construct a new Fire Station One on property, the location of which is
agreed to by the City, to minimum design and operational specifications determined by
the City; and
f) Neither party shall be required to consummate the sale of the former City Hall property
without the concurrent transfer from Seller to Buyer, on terms acceptable to both parties,
of Fire Station One.
3) Purchase and Sale Agreement
The purchase and sale agreement will require that if Fire Station One is included in the sale, location,
design and operational functionality must be acceptable to the City. The City will discuss waste
disposal options with Weston when the former City Hall facility is demolished.
4) Non-Binding Agreement
With the following exceptions, this paragraph [from the signed letter of intent], and the paragraphs
entitled “Due Diligence Contingency,” “Public-Private Partnership Contingency,” and “Negotiations
with other Prospective Purchasers,” this offer is not binding on any party and is subject to delivery of
signed P[ublic] P[rivate] P[artnership] and Purchase and Sale Agreements to all parties which will
include all terms of the sale including those not listed in this [letter of intent].
5) Seller’s Negotiations with other Prospective purchasers
During the 90 day due diligence period, the City, or its representative, may continue to meet with and
show the property to interested parties but cannot enter into negotiations or otherwise commit the
property.
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6) Buyers Negotiations with other Prospective Purchasers
Upon signing of the letter of intent, Weston may market the former City Hall property to potential
purchasers or lessors contingent on the successful consummation and sale of the former City Hall
property. If the purchase and sale agreement is not consummated, the City maintains its right to
negotiate with any party interested in purchasing or leasing either the former City Hall or Fire Station
One property.
CONCLUSION:
The attached letter of intent provides more detail on the above sections and includes additional
sections not referenced in this memo. The intention of this memo is to call to the Commission’s
attention the most salient points of the letter of intent and reassure the Commission and the public
that the success or failure of this potential sale of the former City Hall property, or Fire Station One,
and any subsequent redevelopment or relocation opportunities will not be allowed to negatively
impact emergency services in the City of Bozeman in the short or long term.
FISCAL EFFECTS:
Entering into this letter of intent will not have any immediate fiscal effects. The letter obligates the
City to sell the former City Hall property for $900,000 cash if, and only if, an additional partnership
agreement can be made for the relocation of the existing Fire Station One and the sale of the current
Fire Station One property to the buyer.
In recent calculations of the General Fund reserve, we have estimated a price of $900,000 and a sales
commission of (6%) $54,000 for the Old City Hall property. This agreement is in line with those
estimates.
The letter does contemplate the disposal of site demolition debris at the City Landfill, pursuant to the
city’s original agreement with the County Solid Waste District. The details of disposal fee revenues
will be clarified in any future purchase and sale agreement.
ALTERNATIVES: As suggested by the City Commission
Respectfully submitted,
Chris A. Kukulski
City Manager
Attachments: Letter of intent to purchase the former Bozeman City Hall located at 411 East Main
Street signed by Mr. John Walker, Vice President for Real Estate Development, Weston Solutions,
Inc.
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