Workshop Item - Erik Thorvig, Community Development Director
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Minnesota Training and Wellness Center Concept (MNTWC)
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Background
City staff has been approached by a group that is interested in constructing a privately owned and operated training and wellness center with the primary focus being basketball. Initial concepts show a 225,000 square-feet facility with 12 basketball courts/24 volleyball courts, training/fitness and wellness center and other community facilities including meeting rooms, family entertainment, etc. The project group has identified four keys to success which include:
1. Develop a premier sports and athletic complex/destination.
2. Create a significant drive of economic impact and vitality.
3. Serve as a community asset that drives a sense of place and quality of life.
4. Creating a self-sustaining business model that covers debt service and future repair and maintenance.
The group has identified the northeast corner of the National Sports Center (NSC) campus as a preferred location for this project given the potential synergies with the NSC and future redevelopment of the 105th and Nassau St. area. There are approximately 20 acres of land north on the NSC campus not identified as part of the 105th Avenue redevelopment plan that is available. The land is currently owned by the Minnesota Amateur Sports Commission.
The ownership team consists of local residents who have formed MNTWC. The ownership team has partnered with Anderson Companies, a local developer, to provide support related to physical development and construction, and Sports Facilities Company (SFC), who has expertise in operations related to sports facilities across the country.
The MNTWC has made a significant effort over the last two years to investigate the feasibility of the project both from a construction/cost standpoint and the operations. The group has met several times with representatives from the NSC to understand the land ownership and physical development challenges for the property. The development site has significant development challenges due to sand being removed from the property and backfilled with unbuildable soils. Therefore, there will be a significant cost to remove poor soils and replace with buildable soil along with other infrastructure. As mentioned, the land is owned by the Minnesota Amateur Sports Commission (MASC). Under current law, MASC can lease the land to a prospective user. A transfer of the land ownership is possible but would require special legislation. There have been multiple groups that have explored this land to locate facilities such as rugby and baseball. However, nothing has come to fruition. Staff is aware that these types of interests still exist, and it is ultimately up to the MASC to determine which proposal is in the best interest of the MASC/NSC.
The second challenge the group is facing is financing the facility. Preliminary estimates indicate the facility cost to be approximately $60 million. The ownership group has had discussion with private financing institutions and there is interest in financing 50% of the facility. Typically, development projects have several financial sources including bank financing and private equity. Given the uniqueness of this project, attracting private equity can be more challenging as investors may look at more traditional and proven development investments that offer less risk and a potentially higher return. The ownership group has asked initially if there is an opportunity for a public/private venture for construction of the facility.
Given the complexity and the potentially large financial request, staff has solicited assistance from Baker Tilly to understand what mechanisms are in place under current state law and what options may exists under special legislation. Several discussions have occurred with the ownership group about the existing challenges not only from a legal standpoint but also the overall desire of the City Council and public to partner. Such concepts that have been discussed include general obligation bonds, conduit debt, tax increment financing and tax abatement.
Conversations have only focused on financing and construction of the project and not issues that would be the responsibility of the ownership group such as ongoing operations, maintenance, or capital investment. Baker Tilly will provide further information at the workshop on what options exist for the city if there is a desire to explore further.
Staff Recommendation
The ownership group and city staff have come to a point in discussion where City Council feedback is needed prior to moving forward with further exploration on the various financing mechanisms for the project. Staff is seeking feedback from the City Council regarding general interest/desire for the project, however, more importantly want to understand receptivity from the City Council to explore various financing options for this project.
Attachment List
MNTWC Presentation