Bemidji City Council enters into contract with development marketer

"We need to sell this land now," Bemidji City Councilor Barb Meuers said at a Bemidji City Council work session Tuesday evening.

The council voted unanimously to hire Russ McGinty to market development of the south shore of Lake Bemidji. McGinty is an independent broker from Maple Plain, Minn., who owns his own business, North Central Commercial Real Estate. McGinty was present at the work session where he introduced himself to the City Council.

At a meeting in September, Dave Hengel, director of leadership and development with Headwaters Regional Development Commission, recommended McGinty to the council as a possible commercial real estate broker. Hengel had been in discussions with the city in deciding what role the HRDC could play in marketing and developing the south shore of Lake Bemidji to potential developers.

As part of the city council's approved motion to enter into an agreement with McGinty and HRDC, McGinty will work with the City Council to develop a package of incentives that will be used in recruiting developers. He will work with the city and other regional partners, such as the Northwest Minnesota Foundation, HRDC, Joint Economic Development Commission and others in support of development. A recruiting packet and marketing materials such as brochures and a website will also be developed.

This plan would cost the city a $2,500 monthly retainer, half of which would be reimbursed from commissions. The HRDC and the broker would share a 5 percent commission on sales; if an outside broker is used, a 7 percent commission would be shared.The council said it would negotiate the terms of the arrangement with McGinty and would designate the contingency funds for the source of payment to the marketing proposal through 2010.

McGinty said his contract offers the city an option of a 30-day "back-out" plan, where the city could terminate the contract with him within 30 days if it wanted to do so.

"I see minimal risks to the city and the taxpayers on this," said Councilor Kevin Waldhausen.

McGinty has worked with retail clients that have included national chains such as Wal-Mart, Target, Regal Cinemas, Trader Joe's and Bed, Bath & Beyond. Restaurant clients have included Ruby Tuesday's, California Pizza Kitchen and Panera Bread. He has also worked with developers such as Mills Corporation, CSM Corporation, Opus Corporation and Ryan Companies.

Most of his experience is in tenant representation of retailers and working with new development deals with big box national shopping chains. McGinty entertained the idea of having developments of restaurants, hotels, senior housing and boutiques along the south shore.

"You're losing so many resorts up here, people are looking for places to stay to enjoy the lake," he said. "I could easily see a hotel up there, possibly one with an indoor water park."

City Manager John Chattin noted the city did not disregard the option to hire a local broker.

"Every real estate agent in the region has been sent that brochure and was told we would be open to paying a commission on the sale," he said.

Mayor Richard Lehmann expressed concerns over McGinty's connection to the Pinnacle Village Outlets, a long-planned outlet mall proposed south of Bemidji.

"(Pinnacle developer Harry Takhar's) track record with us hasn't been very clean," Lehmann said to McGinty. "That's kind of a bad reflection on you because we're looking at something that been sitting there in dirt piles for a couple years now and nothing has happened."

McGinty responded by saying the deal with Pinnacle Outlets has been slow because of the economy.

"It's kind of extenuating circumstances. It's a difficult site. It's a difficult economy," McGinty said. "It makes things tougher and deals take a little longer."

McGinty acknowledged the possibility that he could be working with tenants interested in both sites, but he feels it will not be a conflict of interest.

"Whether I'm marketing both sites for one developer or not, it won't be my decision at the end of the day," McGinty said. "The majority of the tenants will prefer one site over another for a variety of reasons.

Lehmann responded by saying to McGinty, "I just want to make sure when you're on our dime, you're on our dime."

McGinty said the council could also see prospects being pulled away from Pinnacle.

"It cuts both ways," McGinty said. "I'm marketing this area. I'm marketing your site and I'm marketing their site. But I'm going after a lot of people. You're getting a lot more exposure."

McGinty added that because of his previous work in Bemidji, he is "up to speed" on the marketing and demographics of the Bemidji area.

Councilor Greg Negard expressed concerns with McGinty's experience in marketing a property like the south shore.

"I don't know if you have enough experience in this type of market," Negard said to McGinty. "You've done a lot of retail, but this is a whole different ballgame. We need some national exposure. We need to sell the land. I'm representing the city and that's why I question these things."

McGinty responded to Negard's concerns by stating he has served clients all over the Midwest.

"We can't wait forever," Meuers said. "This thing has to move forward. I think it will be more detrimental to the city of Bemidji if we don't move forward. We need to move ahead."

McGinty said the single biggest drawback to the south shore is the actual shoreline of Lake Bemidji, referring to the wood chips that line some parts of the shore instead of sand. Despite this challenge, McGinty said he is confident he can bring in developers.

"In real estate there is good meat and bad meat and I think this is good meat," McGinty said. "The site is great; I think your prices are very reasonable to impressive to this market. These are strong fees that should get people interested. I love the market up here."