Loading...
HomeMy WebLinkAboutIV.C - Panache HEDRA MEMORANDUM To: HEDRA Commissioners From: Rusty Fifield, Economic Development Coordinator John Hinzman, Community Development Director Date: March 2, 2020 Item: Panache Action No specific action required. HEDRA will allow Extension No. 3 of the Real Estate Option Agreement with Rungoli, LLC (Panache’s Property Company) to purchase the two parcels north of Artspace commonly referred to as “Block 1” to expire on April 30, 2020. Background At the October 2019 HEDRA meeting, the Board approved Extension No. 2 of the Panache option to purchase agreement. The agreement set a purchase price of $470,700 with the provision that that HEDRA may consider a reduced price if necessary to make the project financially feasible. Extension No. 2 included the requirement for Panache to provide specific information about the proposed project. The additional information set forth in Extension No. 2 is as follows: a) Preliminary site plan (including building, parking, utilities, and stormwater discharge) illustrating limitations of Mississippi River setbacks and powerline easement, architectural renderings, floor plan for the building (including square footage of proposed uses), and preliminary construction budget prepared by a qualified engineer and architect. b) A table containing the sources and uses of funds for the Project in the form contained in Exhibit C (Attachment A of this memo). The table must: 1) Utilize the preliminary construction budget. 2) Cover all activities required to begin business operations on the Property. 3) Itemize all sources of funds including Developer and investor equity contributions. 4) Include the land purchase price requested by the Developer. c) A proforma including projected operating revenues and expenditures for all activities conducted on the property for the years 2020 through 2029. The proforma must include: Panache Option Agreement March 2, 2020 Page 2 1) Projected revenues by source, such as taproom, event space, apartments, and merchandise. 2) Projected operating expenses including cost of cider, food, merchandise and other goods sold; wages and benefits, business expense including office, marketing, maintenance, utilities, taxes, insurance, and professional services. 3) Calculation of cash-on-cash return on investment. 4) Explanation and supporting documentation for assumptions used in proforma. This information was required by December 31, 2019. Given a partial submission of information in December, good faith efforts by Panache and Ameeta Jaiswal’s plans to be out of the country in January, the Board approved Extension No. 3 moving the expiration date to April 30, 2019. The same required information was to be submitted by February 29, 2020. This process has given Panache four months to provide this information. Panache submitted the following information via email on February 28: 1) Preliminary site plan that is unchanged for December 2019 submittal. 2) Sources and uses of funds table. 3) Projections of operating revenues and expenses that are substantially unchanged from December submittal and do not form a complete pro-forma. 4) Memo from Panache requesting consideration of a revised approach to consider land in Business Park and Lot 1 and an opportunity to meet with the Board at the March meeting. 5) PowerPoint presentation for that meeting. All of these documents accompany this memo. Analysis Staff review and comment on the information provided pursuant to Extension No. 3 is contained in the table beginning on the next page. We offer the following observations: 1) Panache has failed to provide the information requested by HEDRA despite multiple extensions and attempts to provide guidance. 2) By sending no new information, Panache shows an unwillingness or inability to provide this information. 3) Nothing submitted to date demonstrates that Panache will create a viable business plan, secure the necessary financing, construct a building and open a business on Block 1 in the foreseeable future. 4) It is not in HEDRA’s best interests to maintain an exclusive agreement with Panache for the purchase of Block 1. Panache Option Agreement March 2, 2020 Page 3 Recommendation Staff recommends that no further extensions are granted. The option to purchase Block 1 will expire on April 30. The $1,000 deposit will be refunded to Panache. This action does terminate Panache’s ability to continue to plan for the operation of a cidery on Block 1 or at some other location. All that is the control over the potential to develop this property. Panache has been given more than adequate opportunity to create a viable plan. It is now necessary for HEDRA to move on and open the door for other uses of this key site in the Downtown.