HomeMy WebLinkAbout2017-06-20 HRA Work Session PacketAgenda
H ousing and Redevelopment Authority Work Session Meeting
City of Edina, Minnesota
Edin a City Hall Cou n cil Cham be rs
Tuesday, June 20, 2017
5:30 PM
I.Call to Order
II.Roll Call
III.Motion to close the work session of the Edina HRA as permitted by MS. 13D.05
subdiv ision 3(c) to consider the potential sale of the property located at 3925 and
3930-3944 Market Street
IV.CLOSE D SESSION: Potential Sale of Property - 3925, 3930 and 3944 Market Street
V.Motion to mov e back into Open Session
VI.Adjournment
The Edina Housing and Redevelopment Authority wants a ll participants to be
comforta ble being part of the public process. If you need assistance in the way of
hearing ampli5ca tion, an interpreter, large-print documents or something else,
please call 952-927-8861 72 hours in advance of the meeting.
Date: June 20, 2017 Agenda Item #: I I I .
To:C hair & C ommissioners of the Ed ina HR A Item Type:
R ep o rt / R ecommend atio n
F rom:Debra A. Mangen, C ity C lerk
Item Activity:
Subject:Mo tion to c lo s e the work session o f the Ed ina HR A
as p ermitted by MS . 13D.05 s ub d ivis ion 3(c) to
co ns ider the potential sale o f the property lo cated at
3925 and 3930-3944 Market S treet
Ac tio n
Edina Housing and Redevelopment
Authority
Established 1974
C ITY O F E D IN A
HO US I NG & R EDEVELO P ME NT
AUT H O R I T Y
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
A C TI O N R EQ U ES TED :
M otion to close the work session of the E dina H R A as permitted by M S. 13D .05 subdivision 3(c) to consider
the potential sale of the property located at 3925 and 3930-3944 M arket Street.
I N TR O D U C TI O N :
I n order for the H R A to move into close session to discuss the potential sale of real property located at 3925 and
3930-3944 M arket S treet, the H R A must first take action to close the meeting. T he meeting will continue to be
recorded.
Date: June 20, 2017 Agenda Item #: I V.
To:C hair & C ommissioners of the Ed ina HR A Item Type:
R ep o rt / R ecommend atio n
F rom:Bill Neuendorf, Ec o nomic Development Manager
Item Activity:
Subject:C LO S ED S ES S I O N: P o tential S ale o f P roperty -
3925, 3930 and 3944 Market S treet
Disc ussio n
Edina Housing and Redevelopment
Authority
Established 1974
C ITY O F E D IN A
HO US I NG & R EDEVELO P ME NT
AUT H O R I T Y
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
A C TI O N R EQ U ES TED :
N o action required; for discussion only.
I N TR O D U C TI O N :
T his item pertains to the sale and redevelopment of properties and portions thereof owned by the E dina Housing
and Redevelopment Association. Terms and conditions of a property sale and R edevelopment Agreement have
been negotiated. T hese terms will be discussed in closed session in accordance with M N S tatute 13D .05p; S ubd
3. Any action will be taken in a separate meeting that is open to the public.
AT TAC HME N T S :
Description
Financial analysis
North Ramp Budget
Summary - Sale and RDA
Collaborative Parking Overview
50th France 2 TIF Dis trict Propos al
SOURCES
Amount Pct.
Developer Financing - 1st Mortgage 41,900,000 56.42%
Equity - GP & LP 18,543,755 24.97%
Private Subtotal 60,443,755 81.39%
Affordable Housing Loan 700,000 0.94%
Met Council - LCDA Grant 1,441,565 1.94%
DEED/TBRA Grant 883,008 1.19%
Deferred Developer Fee 700,000 0.94%
GAP - Requested TIF 10,100,000 11.86%
Other Subtotal 13,824,573 18.61%
TOTAL SOURCES 74,268,328 100.00%
USES
Amount Pct.
ACQUISITION AND SITE COSTS 9,200,859 12.39%
Land - North 1,000,000 1.35%
Land - South 5,100,000 6.87%
North Retail Site - Private Cost Contributions 621,120 0.84%
Demolition - Center Ramp 315,000 0.42%
Utility Relocation & Updates 1,341,522 1.81%
Site Environmental 823,217 1.11%
CONSTRUCTION COSTS 51,404,068 69.21%
Residential Construction 31,542,175 42.47%
Retail Construction (South)3,070,100 4.13%
North Retail Landlord Work 672,880 0.91%
Plaza/Woonerf/Sidewalks 1,908,103 2.57%
South Public UG Parking - P1 4,187,286 5.64%
South Residential UG Parking - P2 4,187,286 5.64%
FF&E 825,000 1.11%
Retail Tenant Improvements 2,113,976 2.85%
Builders Risk Insurance 163,996 0.22%
Hard Cost Contingency (5%)2,733,266 3.68%
PERMITS/FEES 796,509 1.07%
SAC, WAC 440,499 0.59%
Met Council SAC/UAC 341,010 0.46%
Planning/Zoning 15,000 0.02%
SOFT COSTS
PROFESSIONAL SERVICES 3,860,683 5.20%
Architecture & Engineering 2,295,943 3.09%
Environmental 179,200 0.24%
Civil/Survey/Plat 50,000 0.07%
Legal 250,000 0.34%
City Third Party Costs 160,000 0.22%
Liability Insurance 12,500 0.02%
Market Study 10,000 0.01%
Retail Leasing Commissions 650,454 0.88%
Soft Cost Contingency 252,586 0.34%
FINANCING COSTS 5,140,282 6.92%
Title Insurance & Closing 146,042 0.20%
Draw Fees 5,400 0.01%
Mortgage Registration Tax / Recording Fee 145,600 0.20%
Lender Due Diligence/Legal 65,000 0.09%
Loan Financing Costs 650,000 0.88%
Interest During Construction 3,827,114 5.15%
Equity Placement Fee 263,156 0.35%
Real Estate Taxes (Escrow)37,970 0.05%
PROJECT MANAGEMENT 2,841,888 3.83%
Developer Fee 2,701,888 3.64%
Project Management Overhead 140,000 0.19%
CASH ACCOUNTS 1,024,038 1.38%
Start Up Costs - Operations & Marketing 302,500 0.41%
Operating Deficit 721,538 0.97%
TOTAL USES 74,268,328 100.00%
Non-North Ramp Components only
Edina Collaborative
Mixed Use - 32,523 sq ft retail and 110-unit Apartment Redevelopment
Income
Monthly # of Annual Unit Rent/
Rent Rent Units Revenue Sq/Ft Sq/Ft
1 BR - Alcove $1,620 6 $116,640 680 $2.38
1 BR - Alcove (60% AMI)983 11 $129,815 680 $1.45
1 BR - Exterior BR $1,990 23 $549,240 850 $2.34
2 BR - 2 BA $3,795 42 $1,912,680 1,440 $2.64
2 BR+Den - 2.5 BA $4,390 24 $1,264,320 1,680 $2.61
3 BR - 3 BA $4,920 4 $236,160 1,850 $2.66
Total Rental Income 350,738 110 $4,208,855 139,310 $2.52
Other
Parking $257,400
Storage $18,000
Pet Fees, Recovery $151,800
Total Other Income $427,200
Per Sq/Ft Bldg Sq/Ft
Commercial Rent
Center Retail $32.50 $771,014 23,724
Hooten Retail $32.50 $147,849 4,549
Edina Realty Retail $32.50 $138,125 4,250
CAM - Taxes $13.23 $430,165 32,523
CAM - Recovery $5.80 $188,633 32,523
Gross Revenue $6,311,842 32,532
Vacancy Loss - Units 6%($252,531)
Vacancy Loss - Other Income 6%($25,632)
Retail Vacancy Loss 6%($100,547)
5,933,131
Expense
Per
Operating Costs Total Unit
Administrative $55,000 $500
Payroll $285,000 $2,591
Marketing $66,000 $600
Total Utilities $82,500 $750
Insurance (Residential)$44,000 $400
Retail CAM $188,633 -
Turnover $22,000 $200
Total Maintenance $99,000 $900
Total Operating $842,133 $5,941
Management and Other Costs
Management Fees $177,994 3.00%% of EGI
Property Taxes $1,089,488
Reserves $55,000 500
Total Expenses $2,164,615
Net Operating Income $3,768,516
Effective Gross Income
City of Edina, MN
Market Street Redevelopment
Mixed Use - 32,523 sq ft retail and 110-unit Apartment Redevelopment
ASSUMPTIONS
Rental Revenue Inflation 2.00%
Other Income Inflation 2.00%
Commercial Inflation 2.00%
Inflation on Expenses 3.00%
Vacancy Rate Apartments 6.00%
Vacancy Rate - Retail 6.00%
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Income Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16
Rental Income
Housing 4,208,855 4,293,033 4,378,893 4,466,471 4,555,800 4,646,916 4,739,855 4,834,652 4,931,345 5,029,972 5,130,571 5,233,183 5,337,846 5,444,603 5,553,495 5,664,565
Less: Vacancy (252,531)(257,582)(262,734)(267,988)(273,348)(278,815)(284,391)(290,079)(295,881)(301,798)(307,834)(313,991)(320,271)(326,676)(333,210)(339,874)
Total Rental Income 3,956,324 4,035,451 4,116,160 4,198,483 4,282,452 4,368,101 4,455,463 4,544,573 4,635,464 4,728,174 4,822,737 4,919,192 5,017,576 5,117,927 5,220,286 5,324,691
Other Income
Parking 257,400 262,548 267,799 273,155 278,618 284,190 289,874 295,672 301,585 307,617 313,769 320,045 326,445 332,974 339,634 346,427
Storage 18,000 18,360 18,727 19,102 19,484 19,873 20,271 20,676 21,090 21,512 21,942 22,381 22,828 23,285 23,751 24,226
Pet Fees, Recovery 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800 151,800
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Less: Vacancy (25,632)(25,962)(26,300)(26,643)(26,994)(27,352)(27,717)(28,089)(28,468)(28,856)(29,251)(29,654)(30,064)(30,484)(30,911)(31,347)
Total Other Income 401,568 406,746 412,027 417,413 422,908 428,512 434,228 440,059 446,006 452,073 458,260 464,572 471,009 477,576 484,273 491,105
Commercial Income 1,675,787 1,709,302 1,743,488 1,778,358 1,813,925 1,850,204 1,887,208 1,924,952 1,963,451 2,002,720 2,042,775 2,083,630 2,125,303 2,167,809 2,211,165 2,255,388
Less: Vacancy (100,547)(102,558)(104,609)(106,701)(108,836)(111,012)(113,232)(115,497)(117,807)(120,163)(122,566)(125,018)(127,518)(130,069)(132,670)(135,323)
Less: Expense on Vacancy 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Commercial Income 1,575,239 1,606,744 1,638,879 1,671,657 1,705,090 1,739,192 1,773,975 1,809,455 1,845,644 1,882,557 1,920,208 1,958,612 1,997,784 2,037,740 2,078,495 2,120,065
Effective Gross income 5,933,131 6,048,940 6,167,065 6,287,553 6,410,450 6,535,805 6,663,667 6,794,087 6,927,115 7,062,803 7,201,205 7,342,376 7,486,369 7,633,243 7,783,054 7,935,861
Expenses Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16
Operating Expenses 842,133 867,397 893,419 920,222 947,829 976,263 1,005,551 1,035,718 1,066,789 1,098,793 1,131,757 1,165,710 1,200,681 1,236,701 1,273,802 1,312,016
Management Fees 177,994 183,334 188,834 194,499 200,334 206,344 212,534 218,910 225,477 232,242 239,209 246,385 253,777 261,390 269,232 277,309
Property Taxes (2% Inflation)1,089,488 1,111,278 1,133,503 1,156,173 1,179,297 1,202,883 1,226,940 1,251,479 1,276,509 1,302,039 1,328,080 1,354,641 1,381,734 1,409,369 1,437,556 1,466,307
Reserves (3% Inflation)55,000 56,650 58,350 60,100 61,903 63,760 65,673 67,643 69,672 71,763 73,915 76,133 78,417 80,769 83,192 85,688
TOTAL EXPENSES 2,164,615 2,218,659 2,274,106 2,330,994 2,389,362 2,449,250 2,510,699 2,573,750 2,638,448 2,704,836 2,772,961 2,842,869 2,914,609 2,988,230 3,063,783 3,141,321
NET OPERATING INCOME 3,768,516 3,830,281 3,892,959 3,956,559 4,021,088 4,086,555 4,152,969 4,220,337 4,288,667 4,357,967 4,428,244 4,499,507 4,571,761 4,645,013 4,719,271 4,794,540
Tax Increment - 678,846 692,423 706,271 720,397 734,805 749,501 764,491 779,781 795,376 811,284 827,510 844,060 860,941 878,160 895,723
ADJUSTED NET OPERATING INCOME 3,768,516 4,509,127 4,585,382 4,662,830 4,741,485 4,821,360 4,902,469 4,984,827 5,068,447 5,153,343 5,239,528 5,327,016 5,415,820 5,505,954 5,597,431 5,690,263
Debt Service - 1st Mortgage 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540 3,014,540
Debt Service - TIF Loan 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542 611,542
Debt Service - Affordable Housing 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 864,500 0
CASH FLOW AFTER FINANCING 135,435 876,046 952,301 1,029,748 1,108,403 1,188,278 1,269,388 1,351,746 1,435,366 1,520,262 1,606,447 1,693,935 1,782,739 1,872,873 1,106,849 2,064,182
PAYMENT OF DEFERRED DEVELOPER NOTE 135,435 564,565 0 0 0 0 0 0 0 0 0 0 0 0 0 0
DEFERRED DEVELOPER NOTE BALANCE 564,565 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
NET CASH TO INVESTORS 0 311,480 952,301 1,029,748 1,108,403 1,188,278 1,269,388 1,351,746 1,435,366 1,520,262 1,606,447 1,693,935 1,782,739 1,872,873 1,106,849 2,064,182
RETURN ON INVES.-ANNUAL 0.00%1.68%5.14%5.55%5.98%6.41%6.85%7.29%7.74%8.20%8.66%9.13%9.61%10.10%5.97%11.13%
RETURN ON INVES.-AVERAGE 0.00%0.84%2.27%3.09%3.67%4.13%4.51%4.86%5.18%5.48%5.77%6.05%6.33%6.60%6.55%6.84%
CASH ON Private Cost - Without Assistance 5.07%5.16%5.24%5.33%5.41%5.50%5.59%5.68%5.77%5.87%5.96%6.06%6.16%6.25%6.35%6.46%
CASH ON Private Cost - With Assistance 5.07%6.07%6.17%6.28%6.38%6.49%6.60%6.71%6.82%6.94%7.05%7.17%7.29%7.41%7.54%7.66%
ANNUAL DEBT COVERAGE 103.73%124.11%126.21%128.34%130.51%132.71%134.94%137.21%139.51%141.84%144.22%146.63%149.07%151.55%124.65%156.93%
ANNUAL DEBT COVERAGE W/O RESERVES 105.32%126.08%128.27%130.50%132.77%135.08%137.42%139.81%142.24%144.70%147.21%149.76%152.36%155.00%127.00%160.72%
Mixed Use - 32,523 sq ft retail and 110-unit Apartment Redevelopment
City of Edina, MN
Market Street Redevelopment
15-year operating Proforma
6/14/2017 Page 6 of 11
YEAR 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
SALE ANALYSIS (End of Year)6 7 8 9 10 11 12 13 14 15
Net Operating Income End of Year 4,821,360 4,902,469 4,984,827 5,068,447 5,153,343 5,239,528 5,327,016 5,415,820 5,505,954 5,597,431
Divided By Cap Rate 5.25%5.25%5.25%5.25%5.25%5.25%5.25%5.25%5.25%5.25%
Gross Sale Price 91,835,425 93,380,371 94,949,094 96,541,856 98,158,917 99,800,537 101,466,974 103,158,483 104,875,317 106,617,729
Minus 1st Mortgage Debt 38,295,742 37,558,903 36,776,616 35,946,080 35,064,319 34,128,172 33,134,286 32,079,099 30,958,830 30,033,524
Minus TIF Debt 7,768,826 7,619,348 7,460,650 7,292,164 7,113,287 6,923,376 6,721,752 6,507,693 6,280,431 6,092,720
Minus Affordable Housing Debt 763,000 773,500 784,000 794,500 805,000 815,500 826,000 836,500 847,000 0
Net Sale Amount 45,007,856 47,428,621 49,927,828 52,509,111 55,176,312 57,933,489 60,784,936 63,735,191 66,789,056 70,491,485
Sales Expense 1.00%(918,354)(933,804)(949,491)(965,419)(981,589)(998,005)(1,014,670)(1,031,585)(1,048,753)(1,066,177)
Final Amount 44,089,502 46,494,817 48,978,337 51,543,693 54,194,723 56,935,484 59,770,266 62,703,606 65,740,303 69,425,308
YEAR 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
6 7 8 9 10 11 12 13 14 15
Sales Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash
Year Proceeds Flow Flow Flow Flow Flow Flow Flow Flow Flow Flow
2018 0 (18,740,192)(18,740,192)(18,740,192)(18,740,192)(18,740,192)(18,740,192)(18,740,192)(18,740,192)(18,740,192)(18,740,192)
2019 0 0 0 0 0 0 0 0 0 0 0
2020 0 311,480 311,480 311,480 311,480 311,480 311,480 311,480 311,480 311,480 311,480
2021 0 952,301 952,301 952,301 952,301 952,301 952,301 952,301 952,301 952,301 952,301
2022 0 1,029,748 1,029,748 1,029,748 1,029,748 1,029,748 1,029,748 1,029,748 1,029,748 1,029,748 1,029,748
2023 0 1,108,403 1,108,403 1,108,403 1,108,403 1,108,403 1,108,403 1,108,403 1,108,403 1,108,403 1,108,403
2024 44,089,502 45,277,780 1,188,278 1,188,278 1,188,278 1,188,278 1,188,278 1,188,278 1,188,278 1,188,278 1,188,278
2025 46,494,817 0 47,764,205 1,269,388 1,269,388 1,269,388 1,269,388 1,269,388 1,269,388 1,269,388 1,269,388
2026 48,978,337 0 0 50,330,083 1,351,746 1,351,746 1,351,746 1,351,746 1,351,746 1,351,746 1,351,746
2027 51,543,693 0 0 0 52,979,059 1,435,366 1,435,366 1,435,366 1,435,366 1,435,366 1,435,366
2028 54,194,723 0 0 0 0 55,714,984 1,520,262 1,520,262 1,520,262 1,520,262 1,520,262
2029 56,935,484 0 0 0 0 0 58,541,931 1,606,447 1,606,447 1,606,447 1,606,447
2030 59,770,266 0 0 0 0 0 0 61,464,200 1,693,935 1,693,935 1,693,935
2031 62,703,606 0 0 0 0 0 0 0 64,486,345 1,782,739 1,782,739
2032 65,740,303 0 0 0 0 0 0 0 0 67,613,176 1,872,873
2033 69,425,308 0 0 0 0 0 0 0 0 0 70,532,157
Total 29,939,521 33,614,224 37,449,489 41,450,211 45,621,503 49,968,711 54,497,427 59,213,506 64,123,076 68,914,930
ANNUALIZED INTERNAL RATE OF RETURN 17.84%16.54%15.57%14.82%14.21%13.72%13.31%12.96%12.65%12.36%
City of Edina, MN
Market Street Redevelopment
Sales and IRR Analysis
IRR ANALYSIS (Monthly Cashflows to End of Year)
Mixed Use - 32,523 sq ft retail and 110-unit Apartment Redevelopment
Prepared By Ehlers Updated Market Street Redevelopment IRR Analysis 6.13.17.xlsx
SOURCES
Amount Pct.
Developer Contribution 621,120 5.80%
Private Subtotal 621,120 5.80%
DEED/TBRA Grant 170,973
Centennial Lakes TIF Contribution 3,808,114 35.59%
City of Edina - Purchase Price Credit 6,100,000 57.01%
Other Subtotal 10,079,087 94.20%
TOTAL SOURCES 10,700,207 100.00%
USES
Amount Pct.
ACQUISITION AND SITE COSTS 149,285 1.40%
Center Ramp Lease Payments 0 0.00%
Site Environmental 149,285 1.40%
CONSTRUCTION COSTS 9,459,409 88.40%
Retail Shell Construction 621,120 5.80%
Builders Risk Insurance 28,826 0.27%
North Ramp Expansion 7,983,188 74.61%
Sidewalks, Landscaping, Screening & Utilities 345,840 3.23%
Hard Cost Contingency (5%)480,435 4.49%
PERMITS/FEES 0 0.00%
SOFT COSTS
PROFESSIONAL SERVICES 699,961 6.54%
Architecture & Engineering 562,600 5.26%
Environmental 45,959 0.43%
Civil/Survey/Plat 55,000 0.51%
Legal 15,000 0.14%
Soft Cost Contingency 21,402 0.20%
FINANCING COSTS 7,204 0.07%
Closing Costs 4,804 0.04%
Draw Fees 2,400 0.02%
PROJECT MANAGEMENT 384,348 3.59%
Construction Management Fee (North)384,348 3.59%
TOTAL USES 10,700,207 100.00%
Note: The construction budget does not include site clearance costs of the vacant properies associated with the North
site.
Edina Collaborative
North Ramp Expansion Budget
The CITY of
EDINA
Proposed Sale and Redevelopment Agreement
Edina Collaborative
3925, 3930-3944 Market (formerly W. 49-1/2) Street
1) Project Description
2) Conditions of Sale
3) HRA Loan and TIF
4) Terms & Conditions
Edina City Council
Edina Housing & Redevelopment Authority
June 20, 2017
www.EdinaMN.gov
The CITY of
EDINA
2
Project Description - History
2012 Parking improvements considered but abandoned due to high cost and low return
2013 Edina HRA acquired two parcels for future parking improvements
2014
Parking-only option set aside; preference to mixed-use option that creates street
vitality and encourage patrons to visit more than one business
General repairs and improvements made to all public infrastructure; funded via
Cent. Lakes TIF monies and Special Assessments to 50/France property owners
2016
C. Marohn visits and inquires whether todays customers consider the aging,
lifeless ramps helpful or hurtful to the appeal of 50th & France
Edina HRA issues Request for Proposal to seek creative approaches to
public/private redevelopment on W. 49-1/2 Street
Three developers interviewed; Buhl/Saturday team selected as preferred partner
The CITY of
EDINA
3
Project Description
Public Private Partnership
Market
Street, LLC
City of Edina
and
Edina H.R.A.
The CITY of
EDINA
4
Project Description
Public-Private Partnership consists of
two distinct and symbiotic elements.
When working together, these
projects:
Increase and improve public parking
conditions,
Create new public realm amenities
Add vitality on W. 49-1/2 Street,
Return properties to tax rolls,
Create new living options and new
business opportunities
#1 Expansion of North Parking Ramp
Add 4th parking level
Add parking on adjacent vacant lots
Add 10,000 Sq. Ft. commercial
$10.7 M cost estimate
#2 Construction of Mixed-Use Structure
Demolish existing structure
Add 25,000 Sq. Ft. commercial
Add 110 apartments
New public & private underground parking
Reconstruct shared public plaza and walkways
$74.3 M cost estimate
The CITY of
EDINA
5
Project Description
Before after
The CITY of
EDINA
6
Project Description
The CITY of
EDINA
7
Project Description - Location
All parcels tax-exempt or vacant
The CITY of
EDINA
8
Project Description
Conditions of Sale
•Real estate transaction AND redevelopment – not a simple property
sale
•Closing in two stages
•- Initial transfer of funds before HRA begins North Ramp Expansion
($5.1 M)
•- Second transfer when commercial shell complete ($1 M)
•3944 parcel razed prior to construction (HRA expense)
•Other HRA contributions AFTER building is completed, occupiable
and actual costs verified
The CITY of
EDINA Project Description –
North Ramp Expansion
www.EdinaMN.gov 10
•1.33 acres
•3 parcels – tax exempt
•1 parcel – vacant
•Formerly occupied by
Class C office and retail
space
•262 existing stalls
2018 Schedule
January to
March
Construction begins; temporary
closure to allow 4th level
construction
April to
September
Expansion on 3930 and 3944
parcels; commercial grey box;
finishes and landscaping
Fall North Ramp complete*
* Occupancy of commercial tenant spaces depends
on leasing
The CITY of
EDINA
North Ramp Renderings
Project Description
www.EdinaMN.gov 11
3944
Retail
3944 expansion 3930 expansion
3930
Retail
The CITY of
EDINA Project Description
Budget – North Ramp Expansion
12
Description Amount Pct.
Environmental remediation $ 149,285 1%
Parking expansion $ 8,012,014 75%
Retail shell construction (paid by developer) $ 621,120 6%
Sidewalks, landscaping, screening $ 345,840 3%
Architecture/engineering $ 562,600 5%
Construction Management $ 384,348 3.5%
Other soft costs $ 115,959 1%
Contingency $ 501,837 5%
Total Estimated Costs $ 10,700,207
Approx $34,000
per stall
(excluding real
estate &
demolition)
The CITY of
EDINA Project Description –
North Ramp Expansion
www.EdinaMN.gov 13
•Expanded from 262 to 573
public stalls
•Creation of approx. 10,000
Sq. Ft. Class A commercial
space
•Commercial space sold to
Developer for $1 M
•$10.7 Million cost estimate
(design and construction)
Revenue Sources
$6,100,000 Land Sales
$621,120 Developer contribution
$3,808,114 Cent. Lakes TIF monies
(CIP 15-224)
$170,973 Enviro. grant (pending)
$10,700,207 TOTAL
The CITY of
EDINA Project Description –
South Side Reconstruction
www.EdinaMN.gov 14
•1.53 acres
•5 parcels
•Tax-exempt since
1977
•310 existing stalls to
be relocated
2018-2019 Schedule
Jan. 2018 Real estate transaction
March –April
2018
Demolition and sitework begins after
North Ramp 4th level expansion
substantially complete
Summer 2018 Below grade and commercial street
level constructed
Fall 2018 –
Summer 2019
Above-grade construction
Early Fall 2019 Apartments & public spaces complete
* Occupancy of commercial tenant spaces depends on leasing
The CITY of
EDINA
Mixed-Use Renderings
Project Description
www.EdinaMN.gov 15
The CITY of
EDINA
Mixed-Use Renderings
Project Description
www.EdinaMN.gov 16
The CITY of
EDINA
Mixed-Use Renderings
Project Description
www.EdinaMN.gov 17
The CITY of
EDINA
Mixed-Use Renderings
Project Description
www.EdinaMN.gov 18
The CITY of
EDINA
Mixed-Use Renderings
Project Description
www.EdinaMN.gov 19
The CITY of
EDINA Project Description
Budget – South Site Redevelopment
20
Description Amount Pct.
Acquisition and Site Costs $ 9,200,859 12.4%
Construction Costs $ 51,404,068 69.2%
Permits & Fees $ 796,509 10.7%
Professional Services $ 3,860,683 5.2%
Financing Costs $ 5,140,282 6.9%
Project Management $ 2,841,888 3.8%
Operations & Marketing $ 1,024,038 1.4%
Total $74,268,328
Construction Costs
Parking levels $8.4 M
Outdoor plaza $1.8 M
Site prep/demo $2.5 M
$12.7 M
The CITY of
EDINA Project Description –
South Site Reconstruction
www.EdinaMN.gov 21
•Land sold for $5.1 million
•Creation of approx. 25,000 Sq. Ft.
Class A commercial space
•Creation of 110 apartments, 11 of
which are affordably-priced
•Creation of underground public
parking and underground private
parking
•Creation of public plaza and public
walkways
•$74.3 Million cost estimate (design
and construction)
Revenue Sources
$18,543,755 Equity (includes $700k
deferred developer fee)
$41,900,000 Primary Financing (Debt)
$2,324,573 Grants (pending)
$700,000 HRA Affordable Housing
Loan
$10,100,00 TIF Note
$74,268,328 TOTAL
The CITY of
EDINA
•City policy requires housing that is
“affordably” priced
•- Developer will commit to 10% of
the units targeted to households
earning no more than 60% of AMI
•- $1.4 to $1.9 Million lost revenue
(depending on unit size)
•- Unable to reach agreeable
finance terms with Edina Housing
Foundation
22
HRA Affordable Housing Loan
Key question to consider:
Without increasing the density or
eliminating other public elements, how
will the affordable units be financed?
gap
The CITY of
EDINA
Recommended Solution
•$700,000 loan from existing HRA monies to
fund lost earnings on 5% of units
•- Issued after affordable units completed
•- 15-year term loan
•Interest only with lump sum at term
•1% annual interest plus “true-up” at term to
match inflation (2.5% max, annually)
•Developer defers fee for 10-years to pay for
remaining 5% units
•- 10-year term of affordability
23
HRA Affordable Housing Loan
Option to consider:
HRA could contribute more $ if
it is desired to keep units
affordable for more than 10
years
gap
The CITY of
EDINA
HRA sale and City zoning approvals
contingent on creation of new public
parking, new public plaza and new public
walkways
•TIF-eligible expenses estimated to be
$12.7 million
•Creates a financing gap that cannot be
funded with traditional debt
•Developer’s equity contribution is higher
than typical projects
•Grant funds sought to reduce gap
•Developers’ anticipated return is lower
than typical projects 24
Incremental Taxes (TIF)
Key conclusion:
“But for” the use of TIF to bridge
the remaining gap, the project
will not move forward
gap
The CITY of
EDINA
Recommended Solution
•$10.1 Million pay-as-you-go TIF Note
•Note issued at closing
•Payments begin approx. 6 months after
verification of actual expenses and project
completion
•- Based on 90% of increment
•26-year repayment
•Note bears 6% interest after completion
•Could be repaid early, if taxes generated
exceed estimate
25
Incremental Taxes (TIF)
gap
Key conclusion:
“But for” the use of TIF to bridge
the remaining gap, the project
will not move forward
The CITY of
EDINA
•Retain affordability of units for
10-15 years
•Provide permanent easement
for public plaza, public
walkways, shared trash rooms
and underground public
parking
•Manage underground public
parking
Responsibilities
Terms & Conditions
26
Responsibilities of Developer
•Bear financial risk of design,
acquisition and construction
•Bear City costs related to TIF
creation & RDA negotiation
•Coordinate construction of
North Ramp expansion and
Mixed-Use
The CITY of
EDINA
Commitments of City / HRA
•Enable TIF public finance tool
•Consent to grant applications
•Transfer ownership of land
•Expand North Parking Ramp
•Provide gap financing for mixed-
use development and affordably-
priced units
Responsibilities
Terms & Conditions
27
•Reimburse for maintenance of
underground public parking and
shared trash rooms
•- expenses distributed via annual
District maintenance
assessments
•Maintain public plaza and
walkways
•- expenses distributed via annual
District maintenance
assessments
The CITY of
EDINA
•Developer to manage and schedule
regular maintenance
•City to determine rates, hours of
operation and public use policy
•City to reimburse Developer for regular
maintenance expenses
•- these expenses to be included in
annual assessments to 50th and France
property owners
Underground Public Parking Easement
Terms & Conditions
28
Responsibilities of Developer
•Construct a two-level underground
parking facility
•Provide a permanent public
easement to allow public parking on
the first underground level
•Approx 128 stalls with stairway and
elevator access to street level
•Developer to retain ownership of
structure
The CITY of
EDINA
•Developer to retain ownership of
below-grade structure
•City to determine hours of operation
and public use policy
•City to manage and schedule regular
maintenance
•- these expenses to be included in
annual assessments to 50th and
France property owners
Public Plaza & Walkway Easement
Terms & Conditions
29
Responsibilities of Developer
•Construct outdoor plaza with seating,
landscaping, water feature and fire pit
•Provide a permanent public easement
to allow public use of this outdoor
space
•Approx. 4,900 Sq. Ft. of plaza and
7,400 Sq. Ft. of shared street/woonerf
•Total pedestrian circulation area is
approx. 34,000 Sq. Ft.
The CITY of
EDINA
•Developer to manage and schedule
regular maintenance
•City to determine public use policy
•City to reimburse Developer for disposal
and hauling fees as well as regular
maintenance expenses
•- these expenses to be included in
annual assessments to 50th and France
property owners
Shared Trash Rooms Easement
Terms & Conditions
30
Responsibilities of Developer
•Construct waste collection rooms for
the shared use of merchants located
on this entire city block
•Provide a permanent public
easement to allow shared use of the
trash rooms
•Developer to retain ownership of
structure
The CITY of
EDINA
•Valet parking service provided at
Developer expense
•- approx. 3 weeks when public parking
is minimal (April/May 2018)
•- three temporary valet locations
anticipated
•- off-site vehicle parking at nearby off-
street parking lots
•- hours and days based on business
input and demand
Interim Public Parking Solutions
Terms & Conditions
31
Responsibilities of Developer
•Most invasive construction work
scheduled during period with lowest
parking demand (Jan through April)
•Construction staggered to reduce or
eliminate parking impact during
highest parking demand (Nov-Dec)
•Contractors and subcontractors
required to park off-site
•Material staging and storage areas
located off-site
The CITY of
EDINA
Risks, Precautions and Remedies
Terms & Conditions
32
Remedies in case of default
•Unable to secure financing – HRA
retains land and delays project
•Unable to complete apartments – No
TIF payments required; No loan
awarded; potential reversion (subject
to mortgage provisions)
•Unable to purchase north
commercial boxes, or unable to
begin south site - HRA retains space
and retains $600k to construct shell
Precautions to minimize City’s
Risk
•Go ahead letter required before
bids awarded
•Most land proceeds secured up
front
•TIF Lookback provisions
•Loan issued after completion
•TIF payments after completion
The CITY of
EDINA Summary & Recommendation
33
City staff, legal counsel and financial advisors
have reviewed the financing plans of the
developer and drafted the Redevelopment
Agreement. It is recommended that the
Redevelopment Agreement be approved and
staff be authorized to implement the terms.
The CITY of
EDINA
34
Thank You.
City staff, and advisors from Dorsey,
and Ehlers are available to answer
questions.
North Ramp
262
Center Ramp
& Parking Lot
300
TOTAL = 562
North Ramp
573
Private Ramp
143
Center Ramp
128
North Ramp
337
(262 + 75)
Center Ramp
& Parking Lot
0
North Ramp
0
Center Ramp
& Parking Lot
300
TOTAL = 300* TOTAL = 337* TOTAL = 844
Public = 701**
Private = 143
Existing Conditions
2017 Jan to April 2018 Completion
Sept 2019 April to Oct. 2018
North Ramp
573
(262+75+132+104)
Center Ramp
& Parking Lot
0
Nov. 2018 to Sept 2019
*Additional parking stalls are likely to be temporarily available on
surface lots depending on the construction staging. Valet Parking
and/or Shuttle provided during time period where public parking
is not available (likely a few weeks in April/May 2018)
TOTAL = 573
** Upon Completion, there will be:
• 439 newly constructed parking stalls
• 139 more public stalls than existing
• 45 net surplus stalls
Edina Collaborative
Parking Overview rev 1
June 20, 2017
Step 1 Step 3 Step 2 Step 4
The CITY of
EDINA
Proposed Tax Increment Financing District
50th and France 2
1) Background and Vision
2) What is TIF?
3) Why consider a new TIF?
4) Proposed TIF Plan
Edina City Council
PUBLIC HEARING
June 20, 2017
www.EdinaMN.gov
The CITY of
EDINA
-Streetcar lines
-Two-story buildings
-Undeveloped suburban lots
Background 1930s to 1950s
2
The CITY of
EDINA
Upper Left: 3906 W. 50th(now Steel Fitness), 1959
Lower Left: 5030 France Ave. (now Salut), 1959
Upper Right: Edina Theater, 1941
All images from Edina Historical Society
-A growing retail district
Background 1940s to 1950s
3
The CITY of
EDINA
-New bypass roads
(49-1/2th and 51st)
-South Ramp constructed
Background 1969-70
4
The CITY of
EDINA
-Center Ramp opens
-$3.5 M public investment
-(approx $15 M in 2017 dollars x4.35)
-New “european” style walkways
-TIF was used to finance
Background 1976
5
The CITY of
EDINA
First TIF District
- 1976 to 2009
- 143 parcels
- 18.3 acres
Background 1976
6
The CITY of
EDINA
-2 parking garages
-Many small shops
-Gas stations at
each corner
Shell
Skelly
Standard
Mobil
Background 1980
7
The CITY of
EDINA Background 1980s to 1990s
Edina Theater (multi-screen)
The Henley Condominiums
The Regency Condominiums 8
The CITY of
EDINA
-5000 France condominiums
-Adds new retail and restaurants
-Replaced small shops and restaurant
Background 2000-2007
9
The CITY of
EDINA
-Acquired properties for expansion
-Outdated, in need of redevelopment
-Clarified goal of creating vibrant streetlife
-not just more parking lots
-Began site clearance
-Issued RFP for development partner
3930 parcel, 0.37 acres
$2.6 million
3944 parcel, 0.24 acres
$1.55 million + approx. $250k in clean up
Background 2013-2016
10
The CITY of
EDINA
Partnership sought to achieve public-sector goals with private-sector expertise
Issued Request for Proposal in August 2016
Three teams interviewed in November 2016
Buhl Investors / Saturday Properties selected in December 2016
Weekly meetings to refine concept & redevelopment strategy
Developer held several Open Houses and neighbor meetings to identify and address concerns
Used City’s typical development review process (Planning Commission, etc.)
Background 2016
11
The CITY of
EDINA
12
Community Vision
“Transportation Options - …
develop the sidewalk, trail
and bike networks to improve
accessibility and connectivity
...” (page 8)
Commercial Development… promote the
continued vitality of existing core retail
zones (page 9)
The CITY of
EDINA
•Economic development financing
tool
•Used throughout the U.S.
•Guided by Minnesota Statute
•Enabled by City Council
•Uses growth in tax base to fund
private investment and public
infrastructure
13
What is TIF?
Availability of Property Taxes to
Taxing Agencies
“Incremental Taxes”
Remain in TIF District
Original Taxes Available to All Ne
w
T
a
x
e
s
A
v
a
i
l
a
b
l
e
t
o
A
l
l
Year 1 Year 26
The CITY of
EDINA
14
What is TIF?
Source: State of MN House Research Department – Short Subject June 2014
•To finance public infrastructure (streets,
sewer, water, or parking facilities) that are
related to the development. In some cases, the
developer would be required to pay for this
infrastructure through special assessments or
other charges. In other cases, all taxpayers
would pay through general city taxes.
•To induce or cause a development or
redevelopment that otherwise would not occur –
e.g., to convince a developer to build an office
building, retail, industrial, or housing development
that otherwise would not be constructed. To do so,
the increased property taxes are used to pay for
costs (e.g., land acquisition or site preparation)
that the developer would normally pay.
Tax increment financing (TIF) uses the increased property taxes that a real estate development
generates to finance the costs of the development. In Minnesota, TIF is used for two basic purposes:
The CITY of
EDINA What is TIF?
15
•Boundaries
•Maximum Budget
•Term
•Qualifications
•But-for
1) Create
“District”
•Private developments
•Public improvements
2) Consider Funding
for Specific Projects
•4-year knock down
•5-year construction
•Annual reporting
•De-certification
3) Monitoring &
Compliance
Steps to Establish, Fund and Monitor TIF
(defined in Minnesota TIF Statutes)
Action recommended today
The CITY of
EDINA
Challenges to Redevelopment
1)- demolition costs
2)- environmental remediation
3)- proximity to neighbors
4)- affordable housing
5)- public realm costs
6)- structured parking costs
•Financing strategy to achieve
public goals without
overburdening property owners
•- return tax-exempt parcels to tax rolls
•- existing parking ramps funded 80%
TIF plus 20% assessment to
commercial property owners
•Proactive step to reposition
for continued success
•- lengthened life span of public parking
•- close, clean and safe underground
parking
•- new public plaza and pedestrian
routes
16
Why consider TIF?
The CITY of
EDINA
17
Why consider
TIF?
*Proposed 50th & France 2 TIF District
The CITY of
EDINA
$112,826
$1,635,539
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
1976 2009
50th and France 1 TIF
Growth in Tax Capacity
1976 to 2009
Edina’s First TIF Success Story
•50th & France (1) TIF District
•1974 to 2009
•1,350% growth in tax capacity
•Under-utilized parcels replaced with
•- Market-rate condominiums
•- Public parking structures
•- Public improvements
•- Edina’s highest commercial values
(per SF)
18
Why consider TIF?
1,350% increase
13+% approx. city-
wide increase
The CITY of
EDINA
A second example:
•Grandview (1) TIF District
•1984 to 2010
•832% growth in tax capacity
•Outdated industrial sites replaced with
•- Class A office building
•- Market-rate condominiums
•- Public park
•- Hennepin County Library
•- Edina Senior Center
19
Why consider TIF?
197,781
1,644,655
0
500,000
1,000,000
1,500,000
2,000,000
1984 2010
Grandview 1 TIF District
Growth in Net Tax Capacity
1984 - 2010
832% increase
13% approx. city-
wide increase
The CITY of
EDINA
•Avoid the “Include Everything”
approach
•Include only the parcels
imminently anticipated to change
•16% of 18.3-acre Commercial
Area
20
Proposed District
The CITY of
EDINA
Qualifying TIF Conditions
•9 parcels
•2.9 acres
•8 parcels tax-exempt
•All parcels evaluated per MN
Statute
•2 buildings deemed “sub-
standard”
•Vacant, parking & R-O-W parcels
•Buildings “reasonably distributed”
21
Proposed District
The CITY of
EDINA
Financial Estimates
•Redevelopment District - 26 year
term
•Original Tax Capacity = $72,509*
•Estimated Tax Capacity =
$1,558,128
•- Estimate only
•- Establishes maximum budget
•- No guarantee
* Currently $15,148; Estimate assumes that tax -
exempt parcels become taxable to benefit all taxing
districts
22
Proposed District
The CITY of
EDINA Financial Estimates
•Original Tax Capacity = $72,509*
•Est. Tax Capacity (completion) =
$744,171
•Est. Tax Capacity (year 26) = $1,558,128
23
Proposed District
Taxable Market Value – Estimate
Current Value = $12,760,300
New Value = $60,968,430
Difference = $48,108,130
* Estimated increase due to shift from tax-exempt to taxable
The CITY of
EDINA
Potential Revenue
Collected
•$28.5 million in taxes
•(over 26 year term)
•$31.4 million
•(with interest earnings)
24
Proposed Sources and Uses
Projected Uses of Funds
•Land acquisition $6.1 M
(19%)
•Site preparation $1.6 M (5%)
•Utilities $1.9 M (6%)
•Other Improvements $4.2 M
(13%)
•Administrative $2.9 M (9%)
•Interest $14.7 M
(47%)
•Total $31.4 M
Page 2-6 of TIF Plan
The CITY of
EDINA
Impacted Taxing Agencies
•City of Edina
•Edina School District #273
•Hennepin County
•Other smaller agencies too
•(Water shed, transit, HRA,
mosquito)
25
Comparison of Taxing
Agencies
Pages 2-5 and 2-9 of TIF Plan
Largest Taxing
Agencies
Total
Tax Capacity
OTC as % of
Total Tax
Capacity
Hennepin
County
1.573 billion 0.005 %
City of Edina 116.8 million 0.062 %
Edina School
District 273
97.0 million 0.074 %
Original Tax Capacity is estimated to increase from $15,148 to 72,509. This amount will always
be included in the general tax base. This is an immediate increase to all taxing districts.
MN TIF Statute requires that the OTC be recalculated if tax-exempt land becomes taxable.
The CITY of
EDINA
THEREFORE, It is the opinion of City staff and engaged consultants that it is
reasonable to conclude that significant private investment will not occur
without the use of Tax Increment Financing (TIF) to fund these extra-ordinary
cost.
•There are extensive costs to assemble land,
complete environmental remediation, site
preparation and construct mixed-use , public-private
improvements to benefit the community.
•While some re-use could occur without TIF, the
significant redevelopment anticipated is not likely to
exceed $35.8 million unless public participation is
available.
26
But-For Analysis per MN TIF Statute
From TIF Plan Appendix G, page 100
The CITY of
EDINA
29
Thank You.
City staff and Ehlers & Associates
are pleased to answer any other
questions.
Date: June 20, 2017 Agenda Item #: V.
To:C hair & C ommissioners of the Ed ina HR A Item Type:
R ep o rt / R ecommend atio n
F rom:Debra A. Mangen, C ity C lerk
Item Activity:
Subject:Mo tion to move bac k into O p en S es s ion Ac tio n
Edina Housing and Redevelopment
Authority
Established 1974
C ITY O F E D IN A
HO US I NG & R EDEVELO P ME NT
AUT H O R I T Y
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
A C TI O N R EQ U ES TED :
M otion to move out of closed session.
I N TR O D U C TI O N :
After the discussion has been completed in the closed session there must be a motion to move back into open
session.