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HomeMy WebLinkAboutAugust 7, 2006 Work Session 590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692 Visit Our Website at: www.ci.columbia-heights.mn.us Mavor Gary L. Peterson Councilmembers Robert A. Williams Bruce Nawrocki Tammera Ericson Diehm Bruce Kelzenberg City ManaCler Walt Fehst CITY OF COLUMBIA HEIGHTS A DMINISTRA nON NOTICE OF CITY COUNCIL MEETING ************ to be held in the CITY OF COLUMBIA HEIGHTS as follows: Meeting of: Date of Meeting: Time of Meeting: Location of Meeting: Purpose of Meeting: COLUMBIA HEIGHTS CITY COUNCIL AUGUST 7,2006 7:00 P.M. CONFERENCE ROOM 1 WORK SESSION AGENDA 1. Liquor Store on 3 ill Avenue 2. Charter amendment ballot wording The City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or employment in, its services, programs, or activities. Upon request, accommodation will be prOv'ided to allow individuals with disabilities to participate in all City of Columbia Heights' services, programs, and activities. Auxiliary aids for handcapped persons are available upon request when the request is made at least 96 hours in advance. Pbase call the City Council Secretary at 706-3611, to make arrangements. (TDD/706-3692 for deaf or hearing impaired only) THE CITY OF COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVISION OF SERVICES EQUAL OPPORTUNITY EMPLOYER TO: Mayor and City Council Members FROM: Robert Streetar, Community Development Director DATE: 3 August 2006 SUBJ: Possible Acquisition Property for New Liquor Store at 3ih and Stinson The City Council is asked to discuss an offer by Pratt Ordway Properties to sell approximately 46,000 square feet of land to the City. This land is located on the site of the vacant Apache Theatre and would be used to construct a new municipal liquor store. Background The Apache Theatre, located at 2101 37th Avenue, closed permanently in September of 2003. On March 28, 2006 the EDA entered into a preliminary development agreement with developer Pratt Ordway Properties granting them six months to prepare a redevelopment plan. Initial Development Concept Initially, Pratt Ordway Properties, the developer, and Comforts of Homes, the builder, prepared a redevelopment concept that contemplated two - two to three story senior buildings. The first building included between 45 and 65 assisted living units, with 15 units serving memory care clients. The second building included between 45 and 65 independent senior units, where residents could purchase assisted living services on an al a carte basis. Modified Development Concept The Finance Department has indicated a desire to construct a new municipal liquor store at this location. Subsequently, in discussions with the developer, the developer agreed to offer approximately 46,000 square feet of space adjacent to 3ih Avenue and Hart Boulevard to the City for $11.00 per square foot or about $506,000. Under this modified concept Comforts of Home would build one 64-unit three-story building that would provide assisted living services and 15 memory care units. The acre adjacent to 3ih would include the City's new municipal liquor store. Please find attached a concept plan. The concept plan is illustrative as there would be some modifications made as the site plan is finalized. If the Council decides not to purchase the property the developer would build the initial concept. Daryl Gemar, of Pratt Ordway Properties, will be at the work session to answer Council Member questions. Recommendation: Staff recommends the City Council discuss the offer. 12 JULY 2006 . I . S ' ARCHITECTS,INC . I . E 215 N. Second St., Suite 204 ! River Falf.'l:, WI 54022 NOF\TH @ OPTION WITH HART BLVD. AND MUNICIPAL LIQUOR STORE COMFORTS OF HOME COLUMBIA HEIGHTS SITE PLAN 5 C ALE: 1" = 50'-0" ~~_~~f ^\\ ~~cC-<~f(~~,~~ ~~~~ omlorts ~ OF-Home OPTION 1 ,~(XmF<_11><ll"l.Nt~l'(J( (J'l~_~il/'tloE(<lI.N:Gl"" OR<CT~""'T>IOtl""tu.'< ~~uom:cr......:Glll.(I.MllC6ll.( IllA1'tG'~'" ~ ~ t"/.) 6 ~ ~ i~ ~& ~~ ~ lZl~ E-<~ ~ U; r::r.:l~ ~ ~ E-<~ ......~ en :I:~ " ~ ui ~~ ~ <~ COMFORTS OF HOME PROPOSED SENIOR LIVING COLUMBIA HElGI:ITS MINNESOTA PROJECT NO. PHASE ONE REDUCED DRAWING DATE: TO: FROM: RE: MEMORANDUM AUGUST 3, 2006 MA YOR PETERSON COUNCILMEMBER WILLIAMS COUNCILMEMBER NAWROCKI COUNCILMEMBER ERICSON COUNCILMEMBER KELZENBER? ~ WALT FEHST, CITY MANAGERt0<V CHARTER AMENDMENT BALLOT WORDING The City Clerk, City Attorney, Anoka County Elections Supervisor, and I are communicating regarding the Charter amendment ballot wording recommendation. This wording will be presented Monday evening for your review. Nature Page 1 of 1 Bill Elrite - Proposed Ballot Language Date: Subject: "James D. Hoeft" <jhoeft@bgs.com> < bill.elrite@ci.columbia-heights.mn.us>, <patty. muscovitz@ci.columbia- heights.mn.us> 8/7 /2006 1 :43 PM Proposed Ballot Language From: To: Bill: Per our phone conversation, try the following language: "Shall the home rule charter of the City of Columbia Heights be amended to establish a ward system of representation and create two additional council member positions, with the transition schedule of one council member elected from each ward in 2008 and two council members elected at-large in 2010." Sarah Thies Legal Secretary to Jim Hoeft Barna, Guzy & Steffen, Ltd. 400 Northtown Financial Plaza 200 Coon Rapids Boulevard Coon Rapids, MN 55433 DO: 763-783-5154 Fax: 763-783-5194 file:1 Ie: \Documents%20and%20Settings\CCH -U ser\Local %20Settings\ Temp\GW} 0000 1 . H... 8/7/2006 From: To: Date: Subject: "Rachel Smith" <RacheI.Smith@co.anoka.mn.us> "Bill Elrite" <BilI.Elrite@cLcolumbia-heights.mn.us> 8/2/2006 1 :23:48 PM Re: ballot question (Charter Amendment) Bill, As discussed, attached are the two Fridley ballots for your reference. Also, my main recommendation is that the ballot language be limited to the question only. I believe Minn. Rule 8250.0390 limits ballots to have the "question" only and does not permit additional information to be printed. My other reason for that recommendation is that I suspect that voters will not fully read the question and then automatically vote "no." Remember that we will have a very full ballot in November with US Senator, US Rep., State Senator & State Reps, State Constitutional officers, Judicial officers, etc. In any event, remember that we should also have some kind of title from you for the ballot itself (Le. Charter Amendment, see the ballots below). I hope this is helpful and please feel free to contact me if you have any additional questions. Rachel M.L. Smith Anoka County Election Supervisor 325 East Main S1., Room W 130 Anoka, MN 55303 Direct Dial: (763) 323-5277 Fax: (763) 422-7526 OFFICIAL BALLOT Judge Judge CITY ELECTION BALLOT CITY OF FRIDLEY NOVEMBER 8, 2005 CITY QUESTION FRIDLEY To vote for a question, fill in the oval next to the word "YES" for that question. To vote against a question, fill in the oval next to the word "NO" for that question. QUESTION PROPOSED CITY CHARTER AMENDMENT Shall the Fridley Charter be amended so as to permit water, sewer and storm water charges above the rate of inflation without the passage of a referendum for each such increase? _ YES _NO INSTRUCTIONS TO VOTERS To vote, completely fill in the oval(s) next to your choice(s) like this: . SCHOOL DISTRICT QUESTION INDEPENDENT SCHOOL DISTRICT NO. 13 (COLUMBIA HEIGHTS PUBLIC SCHOOLS) To vote for a question, fill in the oval next to the word "YES" for that question. To vote against a question, fill in the oval next to the word "NO" for that question. QUESTION REVOKING EXISTING REFERENDUM REVENUE AUTHORIZATION; APPROVING NEW AUTHORIZATION The board of Independent School District No. 13 (Columbia Heights Public Schools) has proposed to replace the portion of the school district's existing referendum revenue authorization which expires after taxes payable in 2005 ($486.51 per pupil) and to revoke the portion of the school district's existing referendum revenue authorization which will expire after taxes payable in 2007 ($65.11 per pupil) and to replace those authorizations with a new authorization that would increase its general education revenue by $879 per pupil. The proposed referendum revenue authorization would be applicable for ten years unless otherwise revoked or reduced as provided by law. Shall the school district's existing referendum revenue authorization be revoked and the increase in the revenue proposed by the board of Independent School District No. 13 be approved? _YES _NO BY VOTING "YES" ON THIS BALLOT QUESTION, YOU ARE VOTING FOR A PROPERTY TAX INCREASE. 12 JULY 2006 'I'S'B'I'E ARCHITECTS I'll' r..; S~tf'<Hd Sf " :\,;-1(" ?V4 , P.ivt<f f.a!h. ..'.II 5-4tl,;o1 NOf<TH ~~ <JL> OPTION WITH HART BLVD. AND MUNICIPAL LIQUOR STORE COMFORTS OF HOME COLUMBIA HEIGHTS SITE PLAN 5 C ALE 1" = 50'-0" ......=--~ ~ =--'~-, f ~~f~its ~ Oqfom~ OPTION 1 1_~MoT"'~1N:JIII:IQDI, (Jl1'fiJlllfB"_l'fIffftiDl\IIl'SiltfliHSRWl' 1:III8:f............1IfO'III>IiI'IMltu.V _M:Hl5I:lf_....~f:I'K -"...... ~I:~ 1JJ1rJ:l . I f-< !-flU u.1 =If-< . 00'::1:: I-iIU . I ~ ct:1<~ COMFORTS OF HOME PRoPOSED SENIoR LIvING COLUMBIA HEIGHTS MINNESOTA PROJECT NO, PHASE ONE REDUCED DRAWING City of Columbia Heights Pro- forma on the Relocation of Top Valu Liquor (37th Ave) Prepared 9-Jun-06 I ABC D Projected Projected Projected Projected 2008 2008 2008 2008 Current Location Owning Owning Owning Sales II 1 Liquor, Beer, Wine, Other 2,639,257 2,639,257 2,903,183 3,483,820 I " Operating Expense 2 Cost of goods sold 2,058,621 2,058,621 2,264,483 2,717,380 3 Operating Expense 361,597 361,597 361,597 361,597 4 Rent & C.A.M. Expense 165,935 - - - 5 Building Maintenance 1,000 1,000 1,000 6 Bond Interest 60,000 60,000 60,000 7 Depreciation/Bond Principal 100,000 100,000 100,000 8 Equipment Depreciation 13,597 13,597 13,597 13,597 9 Total Expense 2,599,749 2,594,814 2,800,676 3,253,573 10 Net income from operations 39,508 44,443 102,507 230,247 Other income 1,197 1,197 1,197 1,197 11 Net Income 40,705 45,640 103,704 231,444 Note 1 : Line 7 reflects depreciation/bond principal. On a cash basis of accouting we recognize the principal payment as an expense to the income statement. On an accrual basis of accounting depreciation of the building would be recognized. INote 2: Building maintenance is projected at a minimum for the first 20 years. After the bonds are paid off a larger amount should be reserved each year for major repairs and renovation, such as roof and hvac replacement etc; Note 3: This proforma does not include building and land appreciation which will be an additonal signifcant gain to the City. Based on Based on Based on land & land & land & building building building costs of costs of costs of 2,000,000 2,000,000 2,000,000 and and and No increased increased Increase sales of sales of in sales 10% 20% From: To: Date: Subject: "Stacie Kvilvang" <SKvilvang@ehlers-inc.com> <Bill. Elrite@ci.columbia-heights.mn.us> 7/25/20063:28:56 PM Liquor Store Feasibility Studies Hi Bill. Attached are the proposal from the 2 firms along with a excel chart that outlines what they each entail (please note there are two additional pdfs from McComb Group which are samples of mapping work, etc). Please review and Mark and I would be happy to meet with you to go over them. Stacie Stacie Kvilvang Ehlers and Associates 3060 Centre Pointe Drive Roseville MN 55113-1105 Phone: 651-697-8506 Fax: 651-697-8555 This email has been scanned for all viruses by the MessageLabs Email Security System. cc: "Mark Ruff' <mark@ehlers-inc.com> City of Columbia Heights Liquor Store Market Study Service McComb Group GVA x X X X X X X X X X $11,850 $1,475 $13,325 $6,500 $100-$250 $13,500 $0 $13,500 $6,750 $125-$225 GVA Marguette Advisors Real Estate Counselors Th: Valuation Group Th: Hospitality Group Th: Residential Analy tics Groop Th: Corporare and IlIVestmetU Groop The Aviation Group July 13,2006 Mr. Bill Elrite CITY OF COLUMBIA HEIGHTS 590- 40th A venue NE Columbia Heights, MN 55421 R.E.: Market & Financial Feasibility Study for Proposed New Liquor Stores Dear Mr. Elrite: Pursuant to our your request, we are pleased to submit this proposal to provide a market and financial feasibility study for proposed city-owned liquor stores in Columbia Heights. This proposal presents our understanding of the engagement, the scope of services we propose to provide, the time and fees required, and the conditions and limitations under which we would work. BACKGROUND AND UNDERSTANDING We understand that the City of Columbia Heights currently owns and operates off sale liquor stores at 37th & Stinson and 44th & Central. The City is now considering the construction of two new stores to replace these existing businesses. You are considerini the development of a new store as part of a redevelopment project at 37th and Stinson, while the 44 & Central store would be replaced with a new store at 50th & Central. In evaluating these redevelopment opportunities, we understand that the City is seeking the services of a consultant to exam ine the proposed locations, the surrounding demography, the historical operations of both stores and their market positioning, and the competitive supply of off-sale facilities in the relevant trade area to determine the marketability and economic feasibility of the new liquor store operations. To that end, you have invited GV A Marquette Advisors to submit this proposal to provide a study to assist you in this regard. We thank you for this opportunity and present in the following paragraphs a proposed work plan, timeframe and fee schedule for this assignment GV A Marq uette Advis ors OffICes: Mlnneapolli; OffICe: 333 South Seventh SIree~ Suite 2300, Minneapolis. MN 55402-3200 Phore: 612-335-8888; Fax: 612-334-3022 Seattle Office: 22525 SE64lhPlace, Suire 180, Seattle, WA98027 Phore: 425-392-7482; Fax: 425-392-7330 Mr. Bill Elrite City of Columbia Heil'!;hts July 13,2006 SCOPE OF SERVICES Proiect Team Mr. Brent Wittenberg, Vice President, will be the project manager and will personally provide all research, analysis, and report development. Brent has 10 years of experience as a real estate consultant based in Minneapolis, and has completed hundreds of market and financial feasibility studies pertaining to commercial, residential and mixed-use development projects throughout the United States. Mr. Louis Frillman, MAl, eRE, President, with more than 30 years in commercial real estate, will provide project oversight, analysis and review throughout this process. Professional biographies fur Mr. Frillm an and Mr. Wittenberg are attached hereto. Project Initiation Meetinl!: To begin the project, we would meet with you and the managers of the existing liquor store operations. The purpose of this meeting will be to exchange infonnation on the existing and planned businesses, including both market and financial information. The very important first step in evaluating the viability of liquor store operations is developing a clear understanding of the competitive trade area We will work with you and the store managers to identify the relevant trade area( s)( from which the majority of customers are draw n) and competitive liquor store operations within and near this area Site!Location Analvsis We will analyze the proposed development locations in terms of access, visibility, traffic volume, and proximity to the customer base and supporting development, clearly identifying the strengths and weaknesses of each location for liquor store development. Analvsis of Kev Demol!:raDhiclEcon omic Indicators We will analyze relevant demographic and economic indicators for the trade area, particularly population and household growth trends, population age data, and consumer spending & retail sales information. This will include a comparison of consumer spending on beer/liquor in the trade area with beer/liquor retail sales data. This will assist in determining the amount ofleakage of consumer spending on beer/liquor to stores outside the trade area, and the potential to recapture some of these consumer expenditures within the trade area through the development of modern, well located off sale facilities. GV A Marquette Advisors Page 2 Mr. Bill Elrite City of Columbia Heights July 13, 2006 Analysis of Competitive Market Conditions We will profile and analyze the historical financial performance of both stores, including a review of income and expense ratios and profitability in comparison with industry averages. We will also identify primary and secondary competitive liquor stores within and near the subject trade area(s). We w ill analyze the strengths and weaknesses of the existing and planned liquor stores compared to competitive off sale operations in the trade area. Financial Projections & Feasibility Analysis We will develop a projection ofliquor/beer purchases by census tract for the defined trade area, and provide a market share analysis for the subject facilities among a competitive set of off sale operations within and near the trade area. From this analysis, we will develop five-year financial projections for both liquor store operations, including income and expense projections to the level of cash flow available for debt service. Based upon project cost estimates and financing assumptions provided by you and other members of the project team, we will analyze the financial feasibility of the new liquor stores through a debt service coverage analysis. Meetin l!S One "project initiation meeting" at the beginning of the assignment to exchange information and clarify the objectives and desired outcomes from the study. Through meeting or conference call we will discuss the results of analysis with the client prior to delivery of written report. One meeting/pres en tat ion with the client, if desired, to discuss the findings of the market study. Work Product Our research findings and conclusions will be presented in a bound report. The report will summarize our research methodology and findings. GV A Marquette Advisors will provide five (5) copies of the final bound report. If needed, additional copies will be provided at cost to the client. GV A Marquette Advisors Page 3 Mr. Bill Elrite City of Columbia Heights July 13,2006 TIMING AND FEES Based on the Scope of Services outlined above and our current scheduling, we estim ate the market assessment will be completed within four to five weeks of our receipt of a signed contract and initial retainer payment, unless delayed by unexpected emergencies, forces beyond the control of the parties, or by written agreement of the parties. The fee required to complete the proposed Scope of Services is $13,500, payable as follow s: $ 6,750 $ 6,750 $13,500 retainer, due at engagement due at delivery of report in draft form total fee All fees and reimbursable expenses must be paid prior to our release of the report in final bound presentation fmu. This fee quote includes a total of three meetings with the client, and a total of five (5) copies of the report. Additional copies of the report wi\l be produced, if requested, at cost to the client Additional meetings requested by the client will be billed at our standard hourly rates for staff time, as follows: Louis W. Frillm an, President Brent E. Wittenberg, Vice President Associate Professionals $400/hour $225/hour $125/hour TERMS AND CONDrnONS Our report will be based on estimates, assumptions and other information developed from our research of the market, knowledge of the industry and meetings with you. The sources of information and bases of our estimates and assumptions will be stated in the report. The terms of this engagement are such that we will have no obligation to revise the report or the projected operating results to reflect events or conditions which occur subsequent to the completion of our fieldwork. However, we will be available to discuss the necessity for future revision because of changes in the economic or market factors affecting the project No effort will be made to ascertain the impact of energy shortages and the legal and regulatory requirements applicable to this project, including zoning, other state and local government regulations, pennits and licenses. Further, no effort w ill be made to determ ine the possible effect on this project of present or future federal, state or local legislation relating to environmental or ecological matters or interpretations thereof Some assurrptions inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our projections will vary from those described in our report, and the variations may be material. GV A Marquette Advisors Page 4 Mr. Bill Elrite City of Columbia Heights July 13, 2006 Our report is intended solely for your infonnation. It may also be shown to a lending institution and/or a limited number of sophisticated investors interested in the project. Otherwise, neither the report nor its contents may be referred to or quoted in any registration statement, prospectus, loan, appraisal or other agreement or document without our prior written consent. Such consent will not be unduly withheld. ACCEPTANCE PROCEDURES If this proposal meets with your approval, please contact us and we will promptly draft a contract for the engagement. If you would like to discuss this proposal further prior to accepting, please do not hesitate to call. We appreciate the opportunity to submit this proposal, and look forward to hearing from you. Sincerely, GV A MARQUETTE ADVISORS &t-ttt5 Brent E. Wittenberg Vice President GV A Marquette Advisors Page 5 PROFESSIONAL QUALIFICATIONS OF BRENT E. WITTENBERG Vice President G VA Marquette Advisors Brent E. Wittenberg is vice president of GV A Marquette Advisors, a Minneapolis-based firm providing comprehensive real estate consulting services to residential, retail, industrial, office, hospitality, gam ing, entertainm ent and recreational developments. Over his 10-year career, Mr. Wittenberg has experience both as a real estate consultant and in city and regional planning. Prior to joining GV A Marquette Advisors, he worked as a research analyst with Maxfield Research Inc., a Twin Cities real estate research firm. He has also worked in land use planning with Region Nine Development Commission in Mankato, Minnesota and in community development at the City of Spartan burg, South Carolina. Mr. Wittenberg has a diverse background and has completed numerous consulting assignments for income producing real estate developments. H is assignments have included market analyses, feasibility studies, appraisals, and economic and fiscal impact studies. Brent is known as an expert in the field of real estate research. He has completed numerous consulting assignments related to single-family and multifamily housing developments, seniors housing, golf courses, casinos, hotels, industrial warehouse and manufacturing facilities, multi-tenant office buildings, medical office buildings, retail shopping centers and individual retail store operations, gas station/convenience stores, truck stops, community centers and health clubs, and aviation-related real estate operations such as corporate hangar facilities and FBOs. Brent has developed an expertise in providing feasibility studies fOr complex mixed-use projects, redevelopment projects, and downtown development Brent has spoken at Urban Land Institute conferences and seminars sponsored by the Minnesota Multi-Housing Association and Institute of Real Estate Managem ent He has also been a guest lecturer at local universities. Mr. Wittenberg is regularly quoted in The Business Journal of Minneapolis-St. Paul, Minnesota Real Estate Journal, Finance and Commerce, The Minneapolis Star and Tribune. The Saint Paul Pioneer Press, Heartland Business Real Estate. National Real Estate Investor, and Apartment Finance Today regarding for-sale and rental housing market trends, and has provided articles for several of these publications. Brent has also served as a "Best in Real Estate" judge on behalf of The Twin Cities Business Journal in 2002 and 2003. Brent currently serves on the Board of Directors of the Minnesota Multi-Housing Association. Mr. Wittenberg earned a Master of City and Regional Planning Degree (MCRP) from Clemson University, where hewas recognized by the American Institute of Certified Planners (AICP) for outstanding attainm ent in the study of planning. He earned a Bachelor of Arts Degree in Local and Urban Affairs at St. Cloud State University. PROFESSIONAL QUALIFICATIONS OF LOUIS W. FRILLMAN President G VA Marquette Advisors Louis W. Frillman has been engaged in the real estate business nationwide since March 1975. During this time, he has developed skills in all areas of real estate practice including the acquisition, disposition, asset management, development, leasing, sale, financing, and valuation of industrial, commercial, and residential properties, including all major types of income-producing real estate. . Currently, Mr. Frillman is President ofGV A Marquette Advisors, a national commercial real estate consulting firm. GV A Marquette Advisors currently operates a national real estate counseling practice with offices in Minneapolis and Seattle. GV A Marquette provides comprehensive solutions to complex real estate problems and is practiced at managing and overseeing large real estate consulting projects nationwide. Mr. Frillman formerly was Executive Vice President of Marquette Partners, a 490- employee firm that managed and oversaw 45 million sf of investment properties of all types, including primarily regional and community shopping centers nationwide, and also office properties and industrial investment and corporate portfolios. In 1973, Mr. Frillman graduated from the College ofSt Thomas with a Bachelor of Arts Degree in Finance. He has completed all courses relating to earning and maintaining real estate valuation designations, licenses, and brokerage licenses, in multiple states. Mr. Frillman regularly attends professional educational seminars and has completed courses in a variety of related subjects including market feasibility analysis, syndication structure and analysis, subdivision development, the valuation of industrial real estate, the valuation of multiple-family properties, analysis of deminimus P U D s, methods of joint venture financing, valuation of bus inessenterprises, and others. In addition to attending courses in real estate, Mr. Frillman has lectured and taught real estate valuation for the University of St Thomas and has been a guest lecturer at numerous continuing education seminars for the Law Board, NAlOP, American Society of Real Estate Counselors, and CO REN ET. Mr. Frillman is a licensed and bonded real estate broker in the State of Minnesota and is an affiliate member of the National Association of Industria and Office Parks (NAIOP), and has served on multiple committees of that association. He has also served as judge for the NAlOP "Awards of Excellence". PROFESSIONAL QUALIFICA nONS OF LOUIS W. FRILLMAN - Continued His community activities include being a full member of the Greater Minneapolis Board of Realtors, a member of the Urban Land Institute, a member of the National Trust for Historic Preservation, the Ramsey County Historical Society, the Ramsey HilI Association, and the Riverfront Development Committee of the D ow n tow n Council of Minneapolis. Mr. Frillman is a member of the American Society of Real Estate Counselors, the real estate counseling affiliate of the National Association of Realtors. He is an elected member of the Appraisal Institute, has served on the MAl Demonstration Appraisal Reports Committee nationally, and was a member of the Board of Directors fer the local Institute Chapter as well as on the local admissions committee. He has also served as Chairman of the Candidate Guidance Committee. He is an invited member of both the Real Estate Counselors (CRE) and Lambda Alpha, the international Land Economics Fraternity. H is charitable activities include eight years as board director of Catholic Charities for the Elderly. In that capacity, he served as development coordinator of Marion Center, a skilled care and assisted living care facility. He was responsible for coordinating all aspects of development including facility design and review, construction management, marketing programming, and ongoing management supervision. He has completed counseling assignments dealing with significant decisions regarding real property utilized fur real estate tax petitions, market feasibility and absorption analysis studies, valuations and disposition of major business properties, and investment analyses for acquisition of property by investors of all types. Geographically, he has been active in providing counsel on complex property issues with no boundary limitations for over 20 years. He ahs completed projects in Europe, the UK, Bermuda, Hawaii, Canada, Mexico, and parts of Central America. He has developed all types of income properties, and in addition, has developed single-family custom housing. Finally, he has provided counsel to real estate buyers, sellers, investors and lenders concern ing virtually all types of real estate, w orldw ide. Currently, he resides at 24642 SE 36th Ct, Issaquah, Washington. He and his wife maintain a pied' a tierre at 459 Portland in St. Paul, Minnesota. Mr. Frillman is married to the former Carol A Motsinger, and has four children. UOO MCCOMB GROUE Ltd B~B : EET^^ ~ L ECSo TN~ ~ C T /NNT ~ July 21,2006 Ms. Stacie K vilvang EHLERS AND ASSOCIATES 3060 Centre Pointe Drive Roseville, Minnesota 55113-1105 RE: COLUMBIA HEIGHTS LIQUOR STORE RELOCATION Dear Stacie: In response to your request, we have prepared a work program to conduct market analysis and fmancial feasibility for two new locations for Columbia Heights liquor stores. The objectives of this engagement are summarized below. Evaluate the proposed liquor store locations. IdentifY and evaluate competitive liquor stores. Conduct customer spotting surveys for the two existing stores. Delineate trade areas for existing Columbia Heights liquor stores. Delineate trade areas for the proposed new liquor stores. Determine retail sales potential for the proposed new stores. Prepare a proforma income statemen t for each of the tw 0 new stores. The work program described below is designed to fulfill the above objectives. WORK PROGRAM The work program outlined below is designed to identifY market potential for two new municipal liquor stores in Columbia Heights. Specific work tasks are summarized below. . Location Evaluation The proposed location of each of the new liquor stores will be evaluated. Factors to be studied include, but are not limited to: access, ingress and egress, visibility, traffic counts, site configuration and size, and relationship to adjacent land uses and traffic generators. . Competitive Liquor Stores Locations of competitive liquor stores in adjacent commumtJes will be identified to evaluate their location and market position relative to Columbia Heights liquor stores. Competitive stores will be evaluated for size, merchandise, display techniques, and overall appearance. 222 South Niuth Street Suite 380 Miuneapolis, Minnesota 55402. (612)339-7000 Fax: (612) 338-5572 Ms. Stacie K vilvang July 21, 2006 Page 2 . Customer Spotting Customers at each of the existing liquor stores will be asked to complete a short survey questionnaire as they pay for their purchases to obtain their home address and why they shopped at the store. The survey will be conducted by store employees under the direction of McComb Group. Geographic distribution of existing customers of each liquor store will be geocoded and plotted by address to determine each store's trade area. This approach is more precise than using zip codes. The distribution of customers will be evaluated to determine how they relate to the new store locations. . Trade Areas Trade areas for the existing stores and the proposed new liquor stores will be delineated utilizing customer spotting results and McComb Group experience. Trade area demographic characteristics will be evaluated including population, households, age distribution and household income. Demographi c characteristic s will be evaluated for 1990,2000,2005 and 2010. Population and households will be estimated from 2006 through 2010 in each trade area. Liquor store purchasing power available within each trade area will be calculated using McComb Group's proprietary technology. Purchasing power will be estimated from 2002 to 2010 to determine past and future trends in potential liquor store spending. An example of customer spotting mapping and household income from a recent supermarket study is attached. This task will utilize microgrids described in the attached description of McComb Group's GIS capability. . Retail Sales Analysis Historic liquor store sales will be compared with trade area purchasing power to determine historic trade area market share for each of the existing liquor stores. The income and expense statements for the last five years for each of the existing stores will be reviewed to identifY trends in sales and market share. The proportion of retail sales derived from the trade area will be identified. Sales derived from inflow customers, or shoppers outside the trade area, will also be identified. Future retail sales potential for each proposed store will be estimated for the five-year period 2008 through 2012. . Financial Feasibility Utilizing retail sales projections derived from the previous task, an income and expense statement will be prepared for each of the proposed new stores. These financial statements will estimate retail sales for beer, wine, spirits, and other merchandise, gross margin, operating expenses, and estimate operating income for each store. The income and expense statements will reflect estimates for five years from the estimated first full year of operation. The results of our work will be documented in a final report designed to meet client needs. The report will contain appropriate graphics and explanations of our principal findings, conclusions and recommendations. Ms. Stacie Kvilvang July 21, 2006 Page 3 MEETINGS Three meetings are planned during the course of the evaluation to keep the client informed of our progress and findings. These meetings include the following: . Start-Up Meeting at the beginning of the engagement to finalize research objectives and obtain client-provided information. . Work Session to review results of customer survey, trade areas and sales projections. . Final Report Meeting to present results of financial feasibility analysis and present results of all work tasks and recommendations. This meeting will cover all aspects of the market and financial feasibility analysis. The budget provides for three client meetings as described above. Additional meetings will be billed at our normal hourly rates plus expenses. SCHEDULE Work tasks described in this proposal can be completed within an eight-week period following authorization to proceed. QUALIFICATIONS AND EXPERIENCE McComb Group, Ltd. is a full-service retail and real estate consulting firm specializing in market research and financial feasibility.. The firm has extensive experience in the retail industry and has conducted market research for retail stores and shopping centers of all types including regional malls, community centers and specialty centers. In the retail industry, liquor is a convenience good that is typically sold in stores located in neighborhood shopping centers. McComb Group has conducted market analysis and remerchandising studies for neighborhood and comm unity centers that contain liquor stores. This provides an understanding of how liquor stores compete for customers and their achievable market share. The firm's retail background and experience provides expertise related to merchandising, store operations, and financial analysis. Recent engagements which have involved liquor stores include the following: . City of Eden Prairie Liquor Stores . City of Maple Lake Liquor Store . City of Fridley Municipal Liquor Store . Midway Center, St Paul . Brighton Village, New Brighton . Village North, Brooklyn Park . Downtown St Michael . Prairie View Center, Eden Prairie . City of New Brighton Liquor Store . Shoreview Mall . Chalet Liquors, Crystal . Valley West Shopping Center, Bloomington . Texa- Tonka, S1. Louis Park . City of Sa uk Rapids Liquor Store . Downtown Sartell Ms. Stacie K vilvang July 21, 2006 Page 4 James B. McComb will direct this engagement and particIpate in all findings and recommendations. Site evaluations, field research, and competitive eval uation will be conducted by Bill Gorton. Linda Oie will evaluate survey results and conduct demographic analysis. Their experience is summarized below. . James B. McComb, President, founded the predecessor of McComb Group in 1974 following six years as a member of the corporate staff with Dayton Hudson Corporation. His experiences at Dayton Hudson and daily association with merchants and shopping center developers provided the impetus for McComb Group's approach to shopping center and retail market research and financial feasibility, which includes strong elements of design and merchandise sensitivities. The firm's approach to shopping center research and marketing has undergone continuous development and refinement over the past 20 years. . William A. Gorton, Executive Associate, has over 25 years experience developing supermarkets and retail shopping centers, representing supermarket chains as well as prominent independent supermarket owners. Mr. Gorton provides advice and assistance related to real estate development, leasing and contract negotiations, business acquisitions, project management, sales forecas ting, site evaluation and market analysis, financing, capital planning, financial forecasting, business planning, strategy development, business development and the marketing of programs and services. Mr. Gorton has provided these services while employed by Fairway Foods, Inc., subsidiary of Holiday Stations tores, Inc.; Kohl's Food Stores, Inc., subsidiary of the Great Atlantic & Pacific Tea Company; SuperValu, Inc.; Loblaw's, Inc.; and Stearns Bank N.A. St Cloud, MN. He received a 10 from William Mitc hell College of Law and is a member of the Minnesota State Bar Association. . Linda 0 ie, Senior Associate, conducts market research, demographic and consumer analysis for client engagements. Ms. Oie manages the firm's geographic information systems (GIS) and demographic databases using a variety of computer platforms and proprietary software. Prior to joining McComb Group, Ms. Oie was employed as Marketplace Information Manager at SuperValu, Inc. Her responsibilities included conducting strategic consumer- based analysis of existing and prospective supermarkets, profiling SuperValu customers, and delineating trade areas for existing and proposed stores. . Susan Nache, Consultant, performs market research, demographic analysis, and consumer research tasks. Ms. N ache conducts consumer research analysis and cross- tabulation on McComb Group's survey processing software; and is familiar with software programs used by McComb Group for financial feasibility and statistical analysis. Mr. McComb will be responsible for managing and directing the overall research program and will participate directly in findings and conclusions. Individual work tasks will be assigned to personnel within the finn based on qualification s and experience. Ms. Stacie K vilvang July 21,2006 Page 5 BUDGET The budget for the work program and work products described in this proposal is shown below. Professional Services Location Evaluation Competitive Liquor Stores Customer Spotting Trade Areas Retail Sales Analysis Financial Feasibility Report Preparation Meetings Total Professional Services Budl!et $ 1,000 1,500 2,000 1,500 1,500 2,500 600 1.250 $ 11,850 Expenses (Esdmated) Travel Demographics Computer Report Production Reproduction Miscellaneous Total Expenses $ 50 400 150 750 100 --12. $ 1.475 TOTAL BUDGET $ 13,325 The professional fees for the services outlined in this proposal total $11,850 and will be performed at a price not-to-exceed that amount. Expenses, estimated at $1,475, are to be reimbursed based on actual cost The budget is based on the amount of time required to perform the work tasks and our normal hourly billing rates of $250 for principals, $190 for executive associates, $125 for senior associates, $100 for associates, and $75-$100 for consultants. Company policy requires a retainer of approximately one half the estimated budget for the project or $6,500. The retainer will be applied to the final invoice as a credit for billing of professional services and expenses. Invoices for professional services and expenses will be rendered at mid-month and month-end as our work progresses. Standard billing terms are net ten days. A fmance charge of 1.5 percent will be charged on all unpaid balances outstanding more than 30 days. REPORT PURPOSE This proposal was prepared with the understanding that the results of our work will be used by the client to evaluate market and financial feasibility of two new liquor stores. Our report will be prepared for that purpose and will be subject to the following qualifications: Ms. Stacie K vilvang July 21, 2006 Page 6 . Our analysis will not ascertain the legal and regulatory requirements applicable to this project, including zoning, other state and local government regulations, permits and licenses. No effort w ill be made to dete rmine the possible effect on the proposed project of present or future federal, state or local legislation, or any environmental or ecological matters. . Our report and analysis will be based on estimates, assumptions and other information developed from research of the market, know ledge of the industry and discussions with the client. Some assumptions inevitably will not materialize and unanticipated events and circumstances may occur; therefore, actual results achieved w ill vary from the analysis. . Our analysis will not evaluate management's effectiveness or be responsible for future marketing efforts and other management acti ons upon which actual results are dependent. . Our report will be intended solely for the purpose described above and should not be used for any other purpose without our prior written permission. Permission for other use of the report will be granted only upon meeting company standards for the proposed use. These qualifications will be included in our final report. If the report is used for purposes other than specified above, we reserve the right to review the materi als for proper use of our work. ACCEPTANCE PROCEDURES To indicate acceptance of the proposal, please sign a copy of the proposal and return it to us together with your check for the retainer as authorization to proceed with this engagement. We appreciate the opportunity to submit this proposal and look forward to hearing from you soon. If you have any questions concerning th e proposal, please call me at (612) 339- 7000. Accepted By: McComb Group, Ltd. Company: Title: James B. McComb President Date: