From Monday's council
agenda. 11 million for the land now - what are these people smoking?
Section G - CITY MANAGER
GI) River Landing Parcel "Y"
RECOMMENDATION: that at the direction of City Council, Administration be authorized to negotiate a Sale Agreement with Lake Placid River Landing Inc.
for Parcel 'Y'and the lane, or pursue a Request for Proposals
process for the site.
BACKGROUND
On January 14, 2008, the City and Lake Placid River Landing Inc. (Lake Placid) entered into a
Sale Agreement for Parcel "Y", a site located in River Landing. The purpose of the Agreement
was to facilitate the construction on Parcel 'Y" of a very specific development which had been
proposed by Lake Placid through a Request for Proposals (RFP) process. Lake Placid
subsequently purchased the adjoining lane kom the City and obtained the necessary approvals to
proceed with the construction of the specified development. However, the Sale Agreement
ended on October 30, 2009, because the necessary hancial payment under the Agreement was
not forthcoming.
On November 23,2009, the Executive Committee instructed the Administration to bring forward
a new RFP process for Parcel 'Y', including new appraisals of the land. The Administration
was planning to bring this forward by the end of April 2010.
On March 22,2010, Mr. Michael Lobsinger, on behalf of Lake Placid, came to City Council and
requested that the City " ... re-open the purchase and sale agreement for Parcel 'Y" and lane,
which has expired." The intent of the request, as understood by the Administration, is to
facilitate the construction of the same development on Parcel "Y" as was proposed in 2008.
Mr. Lobsinger was supported in his request to Council by Dr. Karim Nasser. Council was
advised by Mr. Lobsinger that Lake Placid had executed an agreement with Dr. Nasser's
company, Victory Majors Investments Corporation "... for the purposes of developing River
Landing." Dr. Nasser confirmed that their purpose was to build the original development project
submitted by Lake Placid.
The requests of Mr. Lobsinger and Dr. Nasser were referred to the Administration for a report
back to City Council.
REPORT
City Council has before it a request to "re-open" the original Lake Placid Agreement and
development for Parcel 'Y". It also (through Executive Committee) has asked the
Administration to bring forward a new RFP process. These two requests cannot occur concurrently. In particular, once City Council starts an RFP process, it is legally required to
follow through with that process.
As a result, the Administration requires instruction iYom City Council as to whether, at this time,
City Council wishes to:
a) proceed with a new RFP process; or,
b) instruct the Administration to enter into negotiations with Lake Placid for the
purchase and development of Parcel 'Y" and the lane. This latter instruction would
include a financial due diligence process as set out below.
If the instruction is to bring forward a new RFP, the contents thereof will be included in that
report.
If the instruction is to negotiate with Lake Placid, the following are some of the main
components of that negotiation as anticipated by the Administration.
The Development
As mentioned, it is the Administration's understanding that the purpose of the Agreement would
be to facilitate the construction of the same development on Parcel 'Y" and the lane, as was
proposed in the January 2008 Agreement. This development has been approved by both City
Council and the Meewasin Valley Authority.
The Purchase Price
The purchase price for Parcel "Y' in 2008 was $4.765 million. The price for the lane was
$475,494.21. As instructed by the Executive Committee, the Administration has obtained new
appraisals for Parcel 'Y' from two separate companies.
The appraisal reports completed by Suncorp Valuations Ltd. and Beatty Appraisal and
Consulting Ltd. resulted in an estimate of value for Parcel 'Y" within a narrow range of $98 per
square foot to $110 per square foot. If these appraisals were used, the price average value
between the two appraisals is approximately $104 per square foot which would result in a
purchase price of $11 million. If City Council wished to look at the appraisals in more detail,
your Administration recommends the appraisal report be referred to the Executive Committee for
review and the appraisers be invited to the meeting to discuss their market research and rationale
for the estimates.
The Deposit
The original deposit made by Lake Placid for Parcel 'Y" was $250,000. This, together with
accrued interest, was forfeited to the City on October 30,2009.
The Construction Requirement and Option to Purchase
The original Agreement provided that the City was specifically selling the land for the purpose
of having constructed thereon, the specific development proposed by Lake Placid and approved
by the City and Meewasin Valley Authority. If that development did not occur in a timely
manner, the land was to be returned to the City.
In furtherance of this objective, the Agreement provided that a specific stage in the construction
had to be completed by a specific date. If Lake Placid failed to meet that requirement, the City
had the option of repurchasing the land for the same amount as was paid, less encumbrances. If
the Administration is instructed to negotiate a similar agreement to sell the land for the purpose
of facilitating the development of the same project, a similar construction requirement and option
to purchase would be necessary.
LEEDS and Limitations on Sale or Transfer
The original Agreement provided that "... Lake Placid will not undertake accreditation under the
LEED program; however, Lake Placid will use reasonable efforts to construct the development
to a standard that would match the minimum certification level had the development been
submitted for accreditation." The Agreement also contained provisions to prevent Lake Placid
from divesting itself of the majority ownership of the land until construction of the approved
development was complete.
If the Administration was instructed to negotiate a new agreement similar to the old Agreement,
we would expect to include the same or similar provisions.
Financial Due Diligence
From the beginning, the goal of City Council has been to not sell Parcel 'Y' or permit the
beginning of construction on the land, unless the City is satisfied that the purchaser has the
wherewithal to complete the entire development project. The Administration assumes that that
goal continues.
As a result, if the Administration is instructed to negotiate with Lake Placid, we would be
proposing to include in those negotiations a hancial due diligence process. We have taken the precaution of confirming with our outside auditors, Deloitte & Touche Inc., that they would be
able and willing to assist us in this process if required. Your Administration, and representatives
fiom Deloitte & Touche Inc., met with Mr. Lobsinger and Dr. Nasser on Wednesday,
April 7,2010. Mr. Lobsinger and Dr. Nasser, as an act of good faith, provided documentation
for review by Deloitte & Touche Inc. They indicated their willingness to provide further details
as required by the outside auditors.
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It's got some great points/ideas.
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