HomeMy WebLinkAbout2018-06-28 HRA Regular Meeting Agenda PacketPage 1
MINUTES
OF REGULAR MEETING
OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY
JUNE 14, 2018
7:30 A.M.
I. CALL TO ORDER
Chair Hovland called the HRA meeting to order at 7:34 a.m.
II. ROLLCALL
Answering rollcall were Commissioners Brindle, Fischer, Chair Hovland, Staunton, and Stewart.
III. APPROVAL OF MEETING AGENDA
Motion made by Commissioner Brindle seconded by Commissioner Fischer approving the
Meeting Agenda.
Ayes: Brindle, Fischer, Hovland, Staunton, Stewart
Motion carried.
IV. COMMUNITY COMMENT – None.
V. CONSENT AGENDA ADOPTED
Motion made by Commissioner Fischer seconded by Commissioner Brindle approving the consent
agenda.
V. A. Approve minutes of May 24, 2018 Regular HRA Meeting.
V.B. Approve Temporary Easement and authorize staff to implement the terms of the
mitigation letter to address construction impacts of the North Ramp Expansion: 3945 West 49th
Street
V.C. Approve the Grant of Permanent Easement for the North Parking Ramp at 3930-3944
Market Street.
V.D authorize staff to discontinue the employee shuttle service provided for 50th and France
and to terminate the service contract with Total Transportation LLC.
Ayes: Brindle, Fischer, Hovland, Staunton, Stewart
Motion carried.
VI. REPORTS/RECOMMENDATIONS – (Favorable vote of majority of HRA Board Members
present to approve except where noted).
VI.A. REQUEST FOR PURCHASE: NORTH RAMP EXPANSION AND RETAIL SHELL
CONSTRUCTION, IMPROVEMENT PROJECT PW-18-001
Director Olson explained that an additional $250,000 in contingencies was needed because of unforeseen soil
conditions and incomplete as-built drawings. Mr. Olson explained the amount would complete the project. He
reviewed a summary of Change orders with the HRA.
Motion of Commissioner Fischer seconded by Commissioner Brindle approving Request for
Purchase authorizing an additional $250,000 in contingencies for the North Ramp Expansion and
Retail Shell Construction, Improvement Project PW-18-001.
Ayes: Brindle, Fischer, Hovland, Staunton, Stewart
Motion carried.
VI.B. TAX INCREMENT FINANCING FOR PENTAGON PARK NORTH, 4600-4660 WEST 77TH
STREET
Economic Development Manager Neuendorf gave an overview of the Pentagon Park North project and explained
that based on analysis from the City’s advisor, Ehlers Associates, staff could not recommend approval of the
developer’s full TIF request of $14.37 million because it would deliver a financial return greater than ten percent
which was higher than the market would typically require for this type of project. Mr. Neuendorf said staff’s
recommendation of $9.8 million was based on extraordinary soil conditions, public benefits such as sidewalk,
Minutes/HRA/June 14, 2018
2
park access and parking, a new street, and an eight percent return. Mr. Neuendorf explained the 2014 Master
Agreement included affordable housing, but because the developer was not planning affordable housing in Phase
1, staff would need a guaranty of Phase II affordable housing if the partnership with Dominium was not successful.
Jay Lindgren, consultant attorney, Dorsey & Whitney, added that a written contract with the developer was
needed within the next 30-45 days and TIF monies must be obligated or expended by July 2019.
HRA’s discussion included:
• Staff’s concern with the developer’s rate of return
• Approving the developer’s full request with claw-back provision
• Adding a cap on developer’s return; unknown costs would be risky
• Staff’s recommendation of seven to eight percent rate of return; some Commissioners would consider
ten percent rate of return
• Property value of $5.5 million that could become $160 million
• Lack of affordable housing was a significant concern
Joe McElwain, Chase Real Estate, presented the proposed development schedule, value created, TIF capacity and
use, and extraordinary costs allocated to TIF. Mr. McElwain stated the ten percent rate of return was far into
the future. He agreed with the claw-back provision, being flexible and adjusting as necessary, and explained that
the developer could not have affordable housing for assisted living because residents needing affordable housing
would not be able to afford assisted living. Also in attendance for the developer were Tom Aarestad and Andy
Chase.
Motion of Commissioner Stewart seconded by Fischer to approve the level of TIF assistance
recommended by staff and authorize staff to engage advisors to negotiate Term Sheets and
prepare a full redevelopment agreement with Chase Real Estate. During discussion commissioners
determined a formal motion was not necessary, that direction could be given to staff.
Motion of Commissioner Stewart seconded by Commissioner Fischer to withdraw the motion.
Ayes: Brindle, Fischer, Hovland, Staunton, Stewart
Motion carried.
The HRA directed staff to negotiate Term Sheets and the Redevelopment Agreement with Chase Real Estate.
VI.C. TAX INCREMENT FINANCING FOR PENTAGON PARK SOUTH, 4815-4901 WEST 77TH
STREET
Mr. Neuendorf gave an overview of the Pentagon Park South project and explained that the concerns were
similar as with Pentagon Park North. He said the developer requested $18.1 million and staff’s recommendation
was $14.4 million based on need and public benefit. Mr. Lindgren stated the two major concerns were the City
would be contributing 26 percent TIF if only Phase 1 was completed and, paying for parking that would be used
primarily by the hotel. Mr. Lindgren added the HRA can pay for parking with TIF.
Developer Scott Tankenoff expressed frustration with the process which he said had been going on since 2014.
The HRA expressed concerns with the amount of TIF requested but felt looking broadly at redevelopment in
the area and opportunities for job creation could justify the developer’s request despite minimal public benefit.
The HRA directed staff to negotiate Term Sheets with Solomon Real Estate and Hillcrest Properties.
VI.D. MARKET STREET REDEVELOPMENT CONSTRUCTION MITIGATION UPATE
This item was postponed to the June 18 HRA meeting.
VII. CORRESPONDENCE
VII.A. CORRESPONDENCE – None.
IX. MAYOR AND COUNCIL COMMENTS – None.
Minutes/HRA/June 14, 2018
3
X. EXECUTIVE DIRECTOR’S COMMENTS
XII. ADJOURNMENT
There being no further business on the HRA Agenda, Chair Hovland declared the meeting adjourned at 9:50
a.m.
Respectfully submitted,
___________________________________________
Scott Neal, Executive Director
Page 1
MINUTES
OF REGULAR MEETING
OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY
JUNE 18, 2018
7:30 A.M.
I. CALL TO ORDER
Chair Hovland called the HRA meeting to order at 7:37 a.m.
II. ROLLCALL
Answering rollcall were Chair Hovland, Commissioners Brindle, Fischer, Staunton, and Stewart.
III. APPROVAL OF MEETING AGENDA
Motion made by Commissioner Brindle seconded by Commissioner Stewart approving the
Meeting Agenda.
Ayes: Brindle, Fischer, Hovland, Staunton, Stewart
Motion carried.
IV. COMMUNITY COMMENT – None.
V. REPORTS/RECOMMENDATIONS – (Favorable vote of majority of HRA Board Members
present to approve except where noted).
V.A. 5146 EDEN AVENUE – REDEVELOPMENT UPDATE
Economic Development Manager Bill Neuendorf explained staff was not requesting action of the HRA but was
instead updating them on redevelopment progress and, staff, legal advisors and the developer were available to
answer questions.
Dean Dovolis, DJR Architecture, presented a rendering that included the combined market rate and affordable
housing residential apartments, civic center and green space. Mr. Dovolis stated the affordable units would be
priced at 50 percent of Area Median Income (AMI).
Mr. Neuendorf gave an overview of the public/private arrangement that included sale of the land, ownership
structure, construction responsibility, maintenance responsibility, operations/management responsibility; and a
financial overview that included purchase price and term, anticipated financial uses, anticipated financial sources
for the developer, City/HRA loan for affordable housing to the developer, tax increment financing, and funding
strategy for future civic building.
Mr. Neuendorf stated the City’s portion was $18.6 million for the civic building, green space, parking and the
Woonerf which would use all incremental taxes generated from the two sites in the TIF district and would
create a shortfall for other area public improvements unless other monies were identified. Mr. Neuendorf stated
the TIF district was small and had few tax generating properties. Mr. Anhut added the HRA could modify the
district boundary or pool monies from other districts.
Mr. Neuendorf listed nine concerns that staff had with the current redevelopment concept. The HRA discussion
regarding staff’s concerns included the following:
1. Allocation of space for public/private elements does not need to be a 60/40 split, for example, the green
space should be proportionally sized to make it usable and functional. Concerns were expressed that
the green space did not look like a public space.
2. District parking was not adequate; consider adding a lower level in the parking ramp.
3. HRA and developer agreed that gap created by selling TIF notes at a discount was a risk to be borne by
all parties.
4. Other public improvements were important to get residents to their neighborhoods and visitors to the
area.
Minutes/HRA/June 18, 2018
2
Mr. Neuendorf and Finance Director Uram said the developer and the HRA were making sizable investments.
They added the investment in the pad above the District parking would be at risk if the civic building was not
built and if sold, most likely would be at a loss. Mr. Uram expressed concerns that this project, plus others in
the CIP could negatively impact the City’s credit rating.
The HRA directed staff to proceed with current scope and prepare Sale and Redevelopment Agreement.
V.B. MARKET STREET REDEVELOPMENT CONSTRUCTION MITIGATION UPDATE
Mr. Neuendorf updated the HRA on construction mitigation, closures and openings of several businesses in the
50th & France area, and requests for concessions.
VI. HRA COMMISSIONERS’ COMMENTS – None.
VII. EXECUTIVE DIRECTOR’S COMMENTS
VIII. ADJOURNMENT
There being no further business on the HRA Agenda, Chair Hovland declared the meeting adjourned at 9:02
a.m.
Respectfully submitted,
___________________________________________
Scott Neal, Executive Director
June 28, 2018
Chair and Members of the Housing and Redevelopment Authority
Bill Neuendorf, Economic Development Manager
Resolution 2018-05 - Naming Frauenshuh Inc. as the Preferred Developer for 5146
Eden Avenue
Information / Background:
The City has collected a great deal of input over the past ten years regarding the re-use of Edina’s
former Public Works site at 5146 Eden Avenue in the Grandview District. This site was vacated
after the Public Works Department relocated to a larger facility on Metro Boulevard.
After the district-wide Grandview Development Framework was approved in 2012, the City invited
several development teams to compete for the opportunity to explore the re-use potential of the
site. Frauenshuh Commercial Real Estate was selected as the collaborative planning partner and
successfully completed several rounds of public input and design to shape a potential mixed-use
project that included a combination of public and private uses on the site. The conceptual 70,000
square foot community center was not funded at that time and the site has remained vacant and
unused.
There continues to be strong interest in the redevelopment of this vacant parcel. In December
2017, the partnership with Frauenshuh Inc. was revived to explore a new approach to delivering a
combination of public and private uses on this site.
Based on a review of the past input, the preferred elements on the 3.3 acre site include a
combination of: indoor and outdoor public facilities such as a new Art Center and Marketplace,
market-rate housing, affordably-priced housing and a shared parking facility with the potential to
serve as a park-and-ride.
The final project is envisioned to include a variety of public and private elements including:
Private elements: market rate and affordably-priced apartments with underground parking
Public elements: district parking structure, new public plaza/green space, new shared street
(woonerf) to serve as northern connector between this site and the property to the north,
new pedestrian bridges to span over the rail road tracks and new civic building with a focus on
the arts and active adult programming
STAFF REPORT Page 2
These elements are anticipated to be arranged in a manner similar to that shown on the attached
concept drawings dated June 18, 2018. It is noted that these concepts are subject to the review and
input of the Planning Commission, City Council and general community through the City’s standard
development review process.
The project is anticipated to be delivered in two phases: (1) private construction and the public
infrastructure podium and (2) new civic building with focus on arts and active adults. The public and
private uses would not only be neighbors but would have shared access to some of the outdoor
and parking elements.
To ensure that the City and community receive a well-conceived project that serves the
community for decades, staff recommends that a variety of service providers be engaged so that
the project design can proceed on a predictable and efficient timeline. These third- party services
include:
Description of Service Anticipated Timeframe
Legal – prepare TIF Redevelopment Agreement Summer – Fall 2018
Legal – prepare real estate transaction documents Summer – Fall 2018
Public Finance – estimate TIF cash flow, shape
strategy for debt financing for new civic building
Summer –Fall 2018, and
Prior to civic building
construction
Fundraising – create fundraising plan and secure
philanthropic donations for the new civic building Fall 2018 to 2020
Grants Writer – pursue grants to support
enhancements to the public realm and public facilities Summer 2018 to Fall 2019
Architecture & Engineering – design the new civic
building and outdoor public plaza and work with
private architect to ensure smooth transition
between public and private elements
Summer 2018 to Summer
2019
Operations Consultant – prepare cost recovery and
related studies to determine the most efficient and
useful operations and programming of the new civic
building
Fall 2018 to 2019
Structural & Design review (including Landscape
Design) - represent the City’s interest as the
developer designs the district parking structure and
the green public plaza; provide insight into the
construction challenges anticipated with this tight site
Summer 2018 to Spring
2019
Development Manager – coordinate miscellaneous
aspects of the project including: real estate
transactions, surveying, easements, and general
project coordination
Fall 2018 to 2020
STAFF REPORT Page 3
Description of Service Anticipated Timeframe
Owners Representative – Phase 1 – provide oversight
during the developer construction of the Phase 1
elements
2019-2020
Owners Representative – Phase II – represent the
City/HRA in the bidding and construction of the new
civic building, including construction administration,
job site monitoring and special construction
inspections
TBD
After reviewing a variety of scenarios, staff recommends that the HRA name Frauenshuh Inc. as the
preferred developer for the site and prepare a complete proposal to redevelop the vacant site with
a vibrant combination of public and private uses. The City Attorney has helped to prepare
Resolution 2018-05 which names Frauenshuh as the preferred developer and establishes an
approximate schedule for upcoming actions.
Representatives from Frauenshuh Inc. have requested two additional changes to the Resolution
that have not been included in the recommended document.
a) Payment of City’s third-party costs of preparing TIF Redevelopment Agreement – City
policy requires that the developer who is using tax increment financing (TIF) bear the City’s
and/or HRA’s out of pocket costs related to the use of TIF – typically legal and financial
evaluation services estimated to cost $50,000 to $80,000. The developer requests that the
City’s policy be modified or waived for this project. They request these expenses be
incurred by the HRA or reimbursed to the developer in the future if the real estate
transaction does not close.
The developer’s request is based on the ‘collaborative’ nature of this real estate transaction
which is intended to achieve a combination of public and private uses on the site and the
fact that the City will be able to purchase a “pad” for the future of a new civic building on
top of district parking structure financed with TIF.
Staff has considered this request and recommends that the standard TIF Policy be applied.
This same policy has been successfully applied to all developers who have pursued tax
increment financing since 2011, including most recently the public/private project on Market
Street. Staff also notes the HRA has already borne the costs of establishing the Grandview 2
TIF District at its sole expense so that projects like this public/private proposal could be
considered.
b) Project Schedule - The schedule of anticipated events (see Exhibit B) is based on the HRA’s
typical review and negotiating process. While general business terms of the real estate
transaction have been discussed, the HRA’s Special Counsel will still need to prepare a
Term Sheet that more fully identifies the terms of the transaction. This more complete
STAFF REPORT Page 4
document will be brought to the HRA Board for review and approval. A full Redevelopment
Agreement will then be prepared based on the approved Term Sheet. The Term Sheet is
anticipated to be complete in July with the full Agreement complete in August.
The developer requests that this timeline be expedited so that full Agreements can be
executed in July. They would like a faster timeline to build momentum in the capital markets
and continue collaboration with the City, HRA and community stakeholders.
Staff has considered this request and recommends that the standard two-step process be
followed. This process allows the HRA Board to review and approve the terms before the
full legal Agreement is prepared. This process also allows sufficient time for staff and
advisors to vet a very complex legal contract. Rushing through this process exposes the
City and HRA to greater risk if an important detail is overlooked or not identified.
Staff recommends that Resolution 2018-05 be approved in the format attached.
END
HOUSING AND REDEVELOPMENT AUTHORITY
OF THE
CITY OF EDINA, MINNESOTA
RESOLUTION NO. 2018-05
NAMING FRAUENSHUH INC. AS PREFERRED DEVELOPER
FOR 5146 EDEN AVENUE
WHEREAS, the Edina Housing and Redevelopment Authority (“Authority”) owns property
at 5146 Eden Avenue Edina, Minnesota 55436 which is currently vacant and available for
redevelopment purposes, and
WHEREAS, after discussing the future of the site for several years, in June 2014, the City of
Edina issued a Request for Interest to the real estate development community and considered
proposals from ten different development teams; and
WHEREAS, on November 3, 2014, the City selected a team led by Frauenshuh Inc. to engage
in a Collaborative Development Planning process to identify a potential mixed-use redevelopment
of the site that would incorporate a combination of public and private uses compatible with the
guidance established in the 2012 Grandview Development Framework and 7 Guiding Principles;
and
WHEREAS, no specific action was taken as a result of this two-year Collaborative
Development Planning process but a great deal of public input was collected that is useful in
shaping the next stage of redevelopment planning; and
WHEREAS, on December 11 2017, the Authority entered into a Preliminary Development
Agreement (“Agreement”) with Frauenshuh Inc. to work together to prepare a concept plan that
includes: district parking structure, affordable housing, market-rate housing and a new building
for the Edina Art Center and potentially a unique community-oriented commercial marketplace
such as a food hall; and
WHEREAS, the Authority and Frauenshuh, Inc. executed amendments to the Agreement on
March 15, 2018, April 12, 2018 and May 23, 2018; and
WHEREAS, the Authority and its financial and legal advisors have reviewed a variety of site
plan concepts to evaluate the potential feasibility of the required and preferred mixtures of uses
on the property as well as options for all public use and all private use; and
WHEREAS, an updated concept plan dated June 18, 2018 was provided by the Developer
that depicts a combination of market and affordable housing with structured private parking next
to a district parking structure topped with a 30,000 square foot future civic building and outdoor
public plaza adjoining the two uses; and
WHEREAS, these concept plans were used in the preparation of a summary of potential
business terms, which were reviewed by the Authority on June 18, 2018 and that allow the
Authority and the Developer to achieve their shared goals for the site; and
WHEREAS, in accordance with Paragraph 12 of the Agreement, the Developer has verbally
indicated their intention to enter into a Redevelopment Agreement for acquisition of the
Authority’s property and construction of Phase 1 of the project, provided that mutually agreeable
terms have been identified; and
WHEREAS, with a mutually agreeable concept in place, additional work is necessary to
identify the complete terms of a real estate transaction, operating agreement and tax increment
agreement to be incorporated into a Redevelopment Agreement to be executed by the
Authority, City and Developer; and
WHEREAS, the City’s policy regarding the use of Tax Increment Financing (TIF) will be
followed which requires the Developer to bear the City’s out-of-pocket costs related to the
preparation of a TIF Redevelopment Agreement; and
WHEREAS, the Authority and Developer shall each be responsible for their respective legal
costs related to the sale and purchase of land; and
WHEREAS, it is understood that any required land use approvals required of the Developer
and the Authority, would be subject to review and approval through the City of Edina’s standard
processes, including public meetings and public hearings with the Planning Commission and City
Council.
NOW, THEREFORE, BE IT RESOLVED, the Housing and Redevelopment Authority directs
the following actions:
1. Pursuant to Paragraph 1(e) of the Agreement, as amended, the Authority has determined
that the Required Uses can be accommodated on the Property in a manner that is consistent
with the Grandview 7 Guiding Principles.
2. Pursuant to Paragraph 12 of the Agreement, the Authority has determined that the proposed
Development appears to be feasible, is desirable and the use of public financial assistance is
deemed appropriate.
3. Frauenshuh, Inc. is named as the preferred developer for the redevelopment of the site.
This designation will expire in 90 days if a mutually agreeable Term Sheet has not been completed,
and Developer shall be reimbursed in accordance with Exhibit C of the Agreement.
4. Frauenshuh, Inc. is authorized to prepare and present concept plans consistent with the
June 18, 2018 concept plans, reflecting the Developer’s and Authority’s identified mix of uses for
the redevelopment on the Authority’s property.
5. The Authority authorizes staff to work with Frauenshuh, Inc. on preparation of a Term Sheet
and a Redevelopment Agreement consistent with Paragraph 12 of the Agreement, as amended in
accordance with the attached Exhibit B.
6. Staff is authorized to engage legal and financial professionals and other related services to
prepare a Term Sheet and complete the Redevelopment Agreement.
Dated: June 28, 2018
_______________________________________
James Hovland, Chair
ATTEST:
___________________________________
Robert Stewart, Secretary
STATE OF MINNESOTA )
COUNTY OF HENNEPIN ) SS
CITY OF EDINA )
CERTIFICATE OF EXECUTIVE DIRECTOR
I, the undersigned duly appointed and acting Executive Director for the Edina Housing and
Redevelopment Authority do hereby certify that the attached and foregoing Resolution is a true
and correct copy of the Resolution duly adopted by the Edina Housing and Redevelopment
Authority at its Regular Meeting of June 28, 2018, and as recorded in the Minutes of said Regular
Meeting.
WITNESS my hand and seal of said City this _____ day of _____________, 2018.
Scott Neal, Executive Director
Exhibit B
Grandview – Former Public Works Site - 5146 Eden Avenue
2018/19 Anticipated Schedule and Process
Redevelopment Agreement, Necessary Land Use Approvals and Construction
• July 31, 2018 (on or before): HRA and Developer approval of Term Sheet
• August 2018: Public Open House with Sketch Plan documents
• August 2018: Sketch Plan Review with Planning Commission and City Council
• August 31, 2018: HRA, City and Developer approval of Redevelopment Agreement
• November 1, 2018 (on or before): Developer submittal of land use applications for Planning
Commission and City Council review
• November 2018: Completion of Traffic study for full Redevelopment of the site (Phase I and
Phase II
• Fall 2018 to Spring 2019: City to prepare business plan/funding strategy for Phase II civic building
• December 2018 to January 2019: Planning Commission and City Council land use reviews and
final consideration of approval
• December 31, 2018 (on or before): Housing and Redevelopment Authority to approve
preliminary plan and pre-design for the Civic Building (size, location, program) to be constructed
on Phase II pad site
• January – February, 2019: Prepare construction documents for Phase I (will include provision for
Phase II pad site accommodations based on civic Building pre-design above)
• March 2019: Permitting - Phase I; Transfer of Project Land
• April 1, 2019: Commence Phase I Construction
• Spring 2020: Phase II pad delivered (this date can be accelerated if Civic Building is ready to
proceed)
• April 1, 2022 (on or before): Commencement of Phase II Civic Building Construction (approx. 3
years from commencement of Phase I)
• July 2023: Completion of Phase II (Estimated 12-15 months to complete shell, finish installations
and occupancy)
5146 Eden Avenue - Redevelopment Overview
Revised June 25,2018
Project Description
• Subdivide into two parcels – North (1.16 acres) and South (2.13 acres)
• South Parcel to include
o 2.13 acres
o 143 residential apartments
10 percent priced at 50% AMI affordable rates
o 172 private stalls for residents (1.2 per unit)
o 40,000 Sq Ft public green space
o Pedestrian bridge #1 across RR tracks
o $41.8 million estimated cost
• North Parcel to include
o 1.16 acres
o 160 stalls of District parking
20-30 available to apartment residents
o 30,000 Sq Ft future Civic building
o Shared street/loading drive/woonerf to edge of RR track
o Pedestrian bridge #2 across RR track
o $24.2 million estimated cost (includes City & Developer costs)
• Constructed in two phases
o Phase 1 begins Spring 2019
Completion Summer 2020
Includes residential, private parking, public parking, green space and
buildable “pad” for future civic building
o Phase 2 begins as early as Spring 2021
Completion 12-14 months later
5146 Eden Avenue – Redevelopment Overview –REVISED 6-25-2018 Page 2
Overview of Public / Private Arrangement
1. Sales Transaction
• City to sell 3.3 acres
• Simultaneously, City would buy back North Parcel (1.16 acres)
• Developer to retain right-of-first-refusal on North Parcel
o Can buy North Parcel for pre-established price if City does NOT construct
future civic building within 3-5 years
• Price contingent upon:
o TIF to reimburse for public elements (green roof and District parking)
o HRA loan to support 10% affordable units
2. Ownership Structure
• Developer to own land and Phase 1 infrastructure improvements
• City to own “pad” above District parking and air rights to construct future civic building
• City to hold public easement on 0.92-acre green roof
• City to hold public easement on District parking structure
• Developer to have lease rights to 20-30 stalls in District parking
3. Construction Responsibility
Residential Building
(including private parking) Civic Building District Parking
Structure
Green Roof
(on top of private parking)
Developer City Developer Developer
4. Maintenance Responsibility
Residential Building
(including private parking)
Civic
Building
District Parking
Structure
Green Roof
(on top of private parking)
Developer City
City with potential support
from nearby property
owners who benefit
Shared – City, Developer &
nearby property owners
who benefit
5. Operations/Management Responsibility
Residential Building
(including private parking) Civic Building District Parking
Structure
Green Roof
(on top of private parking)
Developer City Developer to
manage (for fee) City to manage
5146 Eden Avenue – Redevelopment Overview –REVISED 6-25-2018 Page 3
Financial Overview
1. Purchase Price & Term
• City to sell 3.3 acres for $4.589 million
• Simultaneously, City would buy back North Parcel (1.16 acres) for $1.6 million
• $2.989 net proceeds to City
o $1.4 million per acre
o $20,902 per residential unit
• City/HRA would loan $1.2 million toward affordable housing
• City/HRA would pledge $10.47 million in TIF revenue to support public elements
2. Anticipated Financial Uses
Description Residential
Mid-Rise
Civic Green
Roof
District
Parking
Developer
Total* Developer Acquisition & Site 2,989,000 Included Included 2,989,000 (6%)
Construction Costs (base
building with contingency) 30,039,000 3,700,000 4,725,000 38,464,000 (72%)
Soft Costs 3,299,326 Included 669,696 3,969,022 (8%)
Finance Costs 1,745,971 Included 240,482 1,986,453 (4%)
Total 38,073,297 3,700,000 5,635,178 47,408,475 .
Description Future Civic
Building
Woonerf &
Pedestrian
Bridge #2
City Total* City / HRA Acquisition & Site 1,600,000 Included 1,600,000 ( 9%)
Construction Costs (base
building with contingency) 13,502,500 1,250,000 14,752,500 (79%)
Soft Costs 1,627,522 Included 1,627,522 ( 9%)
Finance Costs 663,903 included 663,903 ( 3%)
Total 17,393,925 1,250,000 18,643,925 .
* Preliminary estimate only based on currently available information.
5146 Eden Avenue – Redevelopment Overview –REVISED 6-25-2018 Page 4
3. Anticipated Financial Sources (Developer only)
Description Residential
Mid-Rise
Civic Green
Roof
District
Parking Developer Total
Developer Debt &
Equity 35,742,214 Included Included 35,742,214 (75%)
Tax Increment Notes 0 4,831,083 5,635,178 10,466,261 (22%)
HRA Loan 1,200,000 0 0 1,200,000 ( 3%)
Total 36,942,214 4,831,083 5,635,178 47,408,475 .
See #6 below for summary of City’s Potential Financial Sources
4. City/HRA Loan for Affordable Housing
• $1.2 million loan requested to support land purchase and lost revenue due to affordable
housing in project
o 15-year term
o 1% interest
o Interest only payments with balloon
• Subordinate to primary lender
• Funds would likely come from HRA Affordable Housing Fund (if available)
o Also pursue support from Edina Housing Foundation
5. Tax Increment Financing
• Incremental taxes could be used to fund public elements
o Need to use all incremental taxes generated from two sites – 5146 and 5220 for
full 26-year term
o $4,831,083 Civic green space
o $5,635,179 District parking
o TIF Notes sized to deliver this amount, including financing and interest costs
HRA requested to be responsible for any shortfall in TIF revenue
shortage due to discounted sale of Notes
o Ehlers estimates are slightly conservative
outcome could be better but unlikely to be worse
• Private apartment building would be self-funded
• Future civic building would be funded with public debt
5146 Eden Avenue – Redevelopment Overview –REVISED 6-25-2018 Page 5
• Will need to defer other public improvements unless other monies identified
o Vernon Avenue Intersection Improvements CIP 17-012 $750,000
o Arcadia Avenue Improvements CIP 17-014 $451,000
o New Street from Eden Ave. to Jerrys Foods CIP 17-015 $283,000
6. Funding Strategy for future Civic building
• Cost estimated at $18.6 million
• Strong potential for philanthropic contributions
• Consider Tax Abatement Bond with General Obligation backing
o Sized based on need after other pledges secured
o 20-year term
o Does not require referendum
o May impact current AAA credit rating
• Revenue sources might include:
o Sale of 5146 Eden property $ 2,989,000 (16%)
o Sale of existing Art Center $ 1,341,710 ( 7%)
o Sale of existing Senior Center $ 2,500,000 (13%)
o Philanthropic community support $ 5,000,000 (27%)
o City/HRA debt $ 6,813,212 (37%)
o Total $18,643,925
5146 Eden Avenue – Redevelopment Overview –REVISED 6-25-2018 Page 6
Comparison to Other Alternatives
Over the last several months and years, the City has explored different options for
redeveloping the vacant site that was formerly occupied by Edina’s Public Works Department.
These options have been rooted in the 7 Guiding Principles established in the 2012 Grandview
Development Framework.
The various options include:
• 100% public uses on site
• 100% private uses on site
• Variety of combinations of public and private uses
o Mid-rise residential
o High-rise residential
o Large-scale civic building
o Medium-scale civic building
o Large-scale and medium-scale District parking
o Medium-scale outdoor public green roof
Previously prepared materials are provided in the packet:
• Large-scale civic building, May 2016
• Four options, May 2018
Next Steps
• Decision by the HRA required by June 30, 2018
o Proceed with current scope and prepare Sale and Redevelopment Agreement; or
o Pursue a different alternative and terminate Preliminary Development
Agreement
DJR
ARCHITECTURE INC.
Scenario B - Grandview Site
06.18.2018
Grandview
5146 Eden Avenue S
Edina, MN 55436
The Grandview, EdinaDJRARCHITECTURE INC.
2
Overall Development Image
DJRARCHITECTURE INC.
The Grandview, Edina3
Floor Plans
NLEVEL 1
Scale: NTS
NLEVEL 2
Scale: NTS
Key
Residential
Affordable
Art Center
Common Area
BOH/MEP
Parking
Core
The Grandview, EdinaDJRARCHITECTURE INC.
4
NLEVEL 3/TYPICAL FLOOR
Scale: 1:NTS
Residential
Affordable
Art Center
Key
Common Area
BOH/MEP
Parking
Core
Floor Plans
DJRARCHITECTURE INC.
The Grandview, Edina5
View from Eden Avenue
The Grandview, EdinaDJRARCHITECTURE INC.
6
View from Normandale Road
DJRARCHITECTURE INC.
The Grandview, Edina7
Aerial View from Eden Avenue
Thank you
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Pentagon South Term Sheet
between
Housing and Redevelopment Authority of Edina, Minnesota (the “Authority”)
and
[Solomon/Pentagon JV entity] (“Developer”)
Draft: June 28, 2018
A. Summary of the Project
(1) Purpose and Scope
(a) This term sheet outlines the Authority’s and Developer’s general expectations for the
redevelopment and improvement of the approximately 12.1 acre “South Parcel” of the
existing Pentagon Park Tax Increment Financing redevelopment district (the “TIF
District”), legally described on Exhibit 1 (collectively, the “Redevelopment Site”). The
general terms agreed upon in this Term Sheet will be expanded in a formal
redevelopment agreement or an amendment to the Master Agreement (as defined
herein) among the city of Edina, Minnesota (the “City”), the Authority, and Developer
(“Redevelopment Agreement”).
(b) The redevelopment of the “South Parcel” as described herein is anticipated to be the
first step in the creation of a vibrant, mixed-use destination and southwest gateway to
Edina, and serve as a catalyst to revive and attract additional investment to the rest of
Pentagon Park and the surrounding area. The Project will promote the growth of
property tax base, new business and employment opportunities, new lodging
opportunities, and new services for area residents and employees. The Project will also
include improved public realm, sidewalks, bicycle infrastructure, transit stations, public
art, landscaping and enhanced opportunities for connection to the Fred Richards Park.
(c) The Redevelopment Site is currently owned by Pentagon South LLC and JUD, LLC, each
an affiliate of Pentagon Revival, LLC (“Master Redeveloper”) and is subject to an existing
Master Redevelopment Agreement between the City, the Authority, and Master
Redeveloper, dated May 20, 2014 (“Master Agreement”). Capitalized terms not defined
herein have the meaning ascribed to such terms in the Master Agreement.
(d) The parties acknowledge that the Project is contingent upon (i) the transfer of the
Development Site from the Master Redeveloper to Developer and (ii) the release of the
Redevelopment Site and the Master Redeveloper from the Master Agreement pursuant
to an amendment to the Redevelopment Agreement in a form mutually acceptable to
the City, the Authority, Developer and Master Redeveloper.
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(e) The Authority and Developer intend that certain improvements necessary to support
redevelopment of the Redevelopment Site will be installed by Developer subject to
reimbursement the Qualified Costs (as defined herein) through tax increment financing
(“TIF”) from the TIF District and the requirements of the Minnesota Statutes Section
469.174 to 469.1799, as amended (the “TIF Act”).
(2) Description of the Project
(a) Developer anticipates that the Redevelopment Site will be redeveloped in two phases.
(1) The first phase (“Phase I”) will consist of the following improvements
(collectively, the “Phase I Minimum Improvements”):
- a 4-story, approximately 193-room dual-branded hotel, with associated
surface parking (“Hotel Element 1”);
- a 4-story, approximately 153-room extended stay hotel (“Hotel Element 2”);
- an approximately 390-space parking structure, integrated into Hotel
Element 2 (“Phase I Parking Element”);
- an approximately 7,500 square foot retail/restaurant building and a 4,300
square foot retail/restaurant build, with associated surface parking
(collectively, “Retail Element”); and
- an approximately one (1) acre green space/plaza area (“Plaza Element”);
and
- Site preparation, soil correction costs, demolition, abatement and
environmental remediation for that portion of the Redevelopment Site
which is not otherwise developed as part of the other Phase I Minimum
Improvements (“Phase II Site Work”).
(2) Developer currently anticipates that, based on market conditions, the second
phase of the redevelopment of the Redevelopment Site (collectively, “Phase II”)
will consist of the following improvements:
- an approximately 19,000 square foot retail/office building, with associated
surface parking (“Retail/Office Element”);
- an approximately 5-story office building containing approximately 125,000
square feet (“First Office Element”); and
- an approximately 5-story office buildings containing approximately 100,000
square feet, with an integrated 1,155-space parking structure (“Second
Office Element”).
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Approval by the City Council of a resolution and final PUD ordinance (including the “Final
Development Plan”) for Phase II (“Final Phase II Approval Resolution”) will control the
Phase II improvements constructed by the Developer, including, without limitation, land
use (including a mix of uses, including, without limitation, retail, office, hospitality and
multi-family residential uses), the proposed densities on each parcel, other Phase II
details. The details included herein are merely estimates and not requirements.
Except for the Phase II Site Work and the Phase II Soft Costs (defined below), costs
incurred for Phase II will not be eligible reimbursement under the Redevelopment
Agreement.
Phase I and Phase II are collectively referred to herein as the “Project”. The parties
anticipate that the Phase I Minimum Improvements described herein will replace the
“Phase IA Minimum Improvements” and the “Phase IB Minimum Improvements” under
the Master Agreement.
A preliminary site plan for the Project is attached as Exhibit 2. [Need site plan which
depicts Phase I and Phase II]
(b) The Project will be developed as a planned unit development (PUD). The Preliminary
PUD was approved by the City on June 5, 2018 pursuant to the Resolution (No. 2018-50)
attached hereto as Exhibit 3, including the draft PUD Ordinance 2018-11. The
Redevelopment Agreement is conditioned upon approval by the City Council of a
resolution and final PUD ordinance (including the “Final Development Plan”) for Phase I
(collectively referred to as the “Final Phase I Approval Resolution”) which is consistent in
all material respects with the Phase I Minimum Improvements described herein. (The
Final Phase I Approval Resolution is anticipated to occur at the City Council’s July 17,
2018 meeting.).
(c) The City and Developer will negotiate a separate “Development Contract” containing
the City’s land use and engineering regulations for Phase I, which is currently scheduled
for consideration by the City Council on July 17, 2018.
(d) A more detailed description of the proposed land uses and densities for the Project and
projected Project schedule is included in the Project narrative, which is attached as
Exhibit 4). The development objectives summarized in the Project narrative for Phase I
will be included in the Final Phase I Approval Resolution; including, without limitation,
land use and densities on each parcel. The Final Phase I Approval Resolution will control
the improvements constructed by Developer for Phase I; provided, however, the
Redevelopment Agreement is conditioned upon the Final Phase I Approval Resolution
being consistent in all material respects with the Phase I Minimum Improvements
described herein.
(3) Budget; Financial Assistance
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(a) The total cost for all private development and public infrastructure elements of the
Phase I Minimum Improvements is estimated to be approximately $70,600,000.
Developer’s sources and uses for all such costs are set forth on the attached Exhibit 5
(the “Sources and Uses Budget”).
(b) Developer is requesting $18,019,269 in TIF assistance from the Authority as reflected in
the Sources and Uses Budget.
(c) The total cost for all private development and public infrastructure elements of Phase II
is estimated to be approximately $79,200,000.
B. TIF Assistance
(1) Basic TIF Requirements
(a) As part of the TIF assistance process, and prior to issuance of each TIF Note, Phase I and
the Project as a whole must be evaluated and the “but for” must be demonstrated.
Developer will prepare a current annual revenue and expenditure pro forma for Phase I
and the Project as a whole (each a “Pro Forma”) and a current Sources and Uses Budget
prior to execution of the Redevelopment Agreement, prior the issuance of each TIF Note
(as defined below), and such other times as requested by the Authority in accordance
with Section (B)4 (Look Back Provisions) below. Each Pro Forma must demonstrate the
need for TIF assistance. The Sources and Uses Budget must show an amount of
applicable Qualified Costs equal to or greater than the principal amount of each TIF
Note.
(b) Any TIF assistance and costs eligible for TIF reimbursement must be in accordance with
the Authority’s Tax Increment Finance Policy, dated April 19, 2011 and the TIF Act.
(2) Five-Year Rule
Developer acknowledges that July 15, 2019 is the end of the five-year period following
certification of the TIF District and such date is the deadline for Developer to expend Qualified
Costs, enter into binding contracts for TIF-eligible costs, or otherwise comply with the
requirements of Minn. Stat. section 469.1763, Subd. 3 (the “Five-Year Rule”), in order to be
reimbursed for such costs in accordance with the Redevelopment Agreement and TIF Note. Such
costs which are not expended or otherwise incurred in accordance with the Five-Year Rule by
such date will not be eligible for TIF reimbursement and the Authority will have no obligation to
otherwise reimburse Developer for such costs.
(3) TIF Note; Reimbursement of Qualified Costs; Administrative Costs
(a) The Authority will reimburse Developer on a pay-as-you-go basis through two TIF notes
(each a “TIF Note”, and, collectively the “TIF Notes”) as follows:
(1) one TIF Note in the maximum principal amount of $14,400,000 (“TIF Note A”)
and
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(2) one TIF Note in the maximum principal amount of $3,619,269 (“TIF Note B”).
(b) The Authority will reimburse Developer through the TIF Notes only for costs incurred by
Developer which are authorized under state law and approved by the Authority
pursuant to the Redevelopment Agreement (collectively, “Qualified Costs”), plus simple
interest at a rate of six percent (6%) annually in accordance with each TIF Note.
(c) The Authority will issue TIF Note A for Phase I Qualified Costs (as described in
subsection (f) below) up to the maximum principal amount for TIF Note A stated above.
(d) The Authority will issue TIF Note B for Phase II Qualified Costs (as described in
subsection (f) below) up to the maximum principal amount for TIF Note B stated above.
(e) The terms of the TIF Notes will be included in the Redevelopment Agreement and issued
pursuant to the terms thereof. Accrual of interest and payment on the unpaid principal
balance of each TIF Note will commence upon the satisfaction of the conditions set forth
in Section B(3)(l)(1) with respect to TIF Note A and the conditions set forth in Section
B(3)(l)(2) with respect to TIF Note B. The Authority shall take all reasonable steps to
promptly issue each TIF Note after Developer’s satisfaction of the applicable conditions,
as time is of the essence.
(f) Qualified Costs for the Project are identified in the Sources and Uses Budget and will
include the following (subject to Developer expending such Qualified Costs prior to the
deadline imposed under the Five-Year Rule):
Phase I Qualified Costs
Qualified Costs Amount
Soil correction costs $___
Demolition, abatement and environmental
remediation $___
Storm water management and flood
mitigation $___
Construction of public streets and trails,
City right-of-way and
construction of shared parking
$___
Costs associated with construction of the
Plaza Element
Costs associated with construction of the
Phase I Parking Element
Pre-development planning, engineering,
legal and consulting costs related to TIF
and Developer contracts applicable to
Phase I (collectively, “Phase I Soft Costs”)
$___
$___
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Phase II Qualified Costs
Qualified Costs Amount
Phase II Site Work $___
Pre-development planning, engineering,
legal and consulting costs related to TIF
and Developer contracts applicable to
Phase II (collectively, “Phase II Soft Costs”)
$___
$___
Phase I Soft Costs and Phase II Soft Costs will be allocated between the Phase I Qualified
Costs and the Phase II Qualified Costs based on the area of land contained in Phase I and
Phase II, respectively.
(g) The Authority will make one payment of principal and interest to Developer each six
months on each TIF Note, commencing on the first February 1 or August 1 following the
Developer’s satisfaction of the conditions under Section B(3)(l) with respect to the
applicable TIF Note, for reimbursement of applicable Qualified Costs from 90% of the
tax increment generated from the development of Phase I on the Redevelopment Site
and received by the Authority from Hennepin County in the six months before each
payment date (“Available Tax Increment”). The Authority will not reimburse Developer
from any other revenue source nor guaranty the amount of money which Developer will
receive as a reimbursement, such amount being payable solely from the Available Tax
Increment.
(h) Ten percent of tax increment generated from the development of Phase I on the
Redevelopment Site will be retained by the Authority for administrative costs related to
the planning, management and oversight of the TIF District.
(i) Developer may, without the Authority’s consent, collaterally assign Developer’s rights
and obligations under the TIF Note to the holder of any mortgage on the
Redevelopment Site granted by Developer for the purpose of obtaining funds necessary
for constructing the Project. In all other cases, the TIF Note shall not be assignable nor
transferable without the prior written consent of the Authority [detail of terms of
consent to be inserted]. The Authority is not responsible for calculations or payments
for the TIF Note.
(j) The term of the TIF Note will end no later than December 31, 2043 based on the
required decertification date of the TIF District, regardless of the date of first receipt of
increment.
(k) The TIF Notes will be issued no later than July 15, 2019, provided that the Developer has
satisfied each of the following requirements by May 15, 2019:
(1) final execution of the Redevelopment Agreement and recording of a
memorandum of the Redevelopment Agreement in the applicable land
records;
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(2) adoption of the Final Phase I Approval Resolution;
(3) closing on Developer’s acquisition of the Redevelopment Site;
(4) Issuance of grading permit and commencement of grading of entire
Redevelopment Site; and
(5) Issuance of a foundation permit for at least one element of the Phase I
Minimum Improvements.
(l) Notwithstanding the earlier issuance of the TIF Notes payment of Available Tax
Increment and accrual of interest under each TIF Note will be fully conditioned upon
satisfaction of each of the following requirements:
(1) With respect to TIF Note A:
(i) Developer providing evidence satisfactory to the Authority that
the Developer has incurred Phase I Qualified Costs equal at least
the amount of the requested TIF Note A;
(ii) a “Certificate of Completion” for Phase I has been recorded
against the Phase I property;
(iii) the Authority’s receipt of an updated Pro Forma sufficient to
demonstrate that the “but for” requirement continues to be
satisfied; and
(iv) no Developer event of default exists under the Redevelopment
Agreement (following the passing of any applicable cure periods
and subject to Section C(8)(b) below);
(2) With respect to TIF Note B:
(i) Developer providing evidence satisfactory to the Authority that
the Developer has incurred Phase II Qualified Costs equal at
least the amount of the requested TIF Note B;
(ii) adoption of the Final Phase II Approval Resolution;
(iii) Completion of at least one element of the Phase II
improvements approved as part of the Final Phase II Approval
Resolution;
(iv) the Authority’s receipt of an updated Pro Forma sufficient to
demonstrate that the “but for” requirement continues to be
satisfied; and
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(v) no Developer event of default exists under the Redevelopment
Agreement (following the passing of any applicable cure periods
and subject to Section C(8)(b) below).
(4) Look Back Provisions
The Redevelopment Agreement will include a “look back” provisions to ensure that any TIF
assistance was actually needed in substantially the same form as shown in the attached Exhibit
6.
(5) Fiscal Disparities
Developer acknowledges that any of the Authority’s obligations with respect to “Fiscal
Disparities” under Minnesota law that are applicable to the Project will be considered in
calculating Available Tax Increment.
(6) Timeline and Construction Phasing
The chart below is the Developer’s current anticipated timeline for the construction of the
Project. The commencement and completion dates for the Phase I Minimum Improvements
under the Redevelopment Agreement shall be substantially in accordance with the below
timeline. The actual completion of the Phase II improvements will be driven by market
conditions and failure to meet the below dates for Phase II improvements will not be a default
under the Redevelopment Agreement. Developer will notify the Authority of material changes
to the following estimated construction dates. Developer will periodically provide the Authority
with written notification related to meeting proposed construction benchmarks. A timeline for
completion of all Project improvements will be included in the Redevelopment Agreement.
Description of Work
Estimated
Commencement
Date
Estimated
Completion Date
Hotel Element 1 (Phase I)
Hotel Element 2 and Phase I Parking Element
(Phase I)
Retail Element (Phase I)
Plaza Element (Phase I)
Phase II Site Work (Phase I)
Retail/Office Element (Phase II)
First Office Element (Phase II)
Second Office Element (Phase II)
C. Additional Terms and Conditions
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(1) Public Infrastructure Improvements
Developer will be responsible for the “Phase IA Public Infrastructure Improvements” and “Phase
IB Public Infrastructure Improvements” in accordance with the Master Agreement and
applicable “Public Infrastructure Improvements Plans”.
The chart below is the current anticipated timeline for the required Public Infrastructure
Improvements. Developer will notify the Authority of material changes to the following
estimated construction dates. Developer will periodically provide the Authority with written
notification related to meeting proposed construction benchmarks. A timeline for completion of
the required Public Infrastructure Improvements will be included in the Final Development Plan
approval and the Redevelopment Agreement.
Description of Work
Estimated
Commencement
Date
Estimated
Completion Date
Phase IA Public Infrastructure Improvements
(77th Street, Transit Shelters, Normandale Road
and Viking/Computer Drive)
Phase IB Public Infrastructure Improvements
(77th Street, Transit Shelters, Normandale Road
and Viking/Computer Drive)
(2) Plaza Element; Plaza Easement
The Plaza Element will consist of [a minimum [one acre] green space with fountains, related
hardscaping and other pedestrian amenities consistent with the Final Phase I Approval
Resolution], together with all sidewalks, paths, trails, and roads which provide access to the
primary Plaza Element green space. While the primary purpose of the Plaza Element is to serve
and support the Project and Project tenant, Developer will grant a permanent, public easement
for access and use of the Plaza Element by the public, subject to reasonable, nondiscriminatory
limitations, rules and regulations governing its use adopted by Developer. The Developer will be
responsible for all maintenance of the Plaza Element.
(3) Parking Easement
Developer will grant the City a “Parking Facilities Easement” for the Phase I Parking Element to
be integrated with Hotel Element 2 with the following terms and conditions, which will not
materially interfere with the use of the facility by the hotel guests: [at least __ parking space
available 24/7 to the public, permitted park-and-ride public use, permitted bike-and-ride public
use]. The Developer will be responsible for all maintenance of the Phase I Parking Element.
(4) Public Realm/Pedestrian/Bicycling Enhancements
Developer will construct and install the following public enhancements and features pursuant to
the Final Phase I Approval Resolution, all of which will be deemed part of the Phase I Minimum
Improvements, and Developer will grant the City public easements as applicable:
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- Public artwork in multiple locations throughout the property;
- Walking and biking trails interconnected throughout the property, to the adjacent
neighborhoods and to the Fred Richards Park and Regional Trail System, including
crosswalks across 77th Street;
- Bike parking stations, and other bicycle infrastructure including a dedicated bicycle
repair facility and/or space;
- EV charging stations; and
- Improved transit stops along W. 77th Street.
The Developer will be responsible for all maintenance of the foregoing public enhancements
and features.
(5) Notice of Commencement; Certificate of Completion
Prior to commencing any development activities for Phase I, Developer will demonstrate to the
Authority that Developer has secured adequate financing to complete the Phase I Minimum
Improvements and will issue the Authority a “Go Ahead Letter”. The Authority will issue a
“Certificate of Completion” for the Phase I Minimum Improvements in accordance with terms
and conditions consistent with the Master Agreement.
(6) City Approval of Significant Changes
Changes to the Project scope and design that are inconsistent with the Final Development Plan
will be subject to the review and approval by the City pursuant to applicable City regulations,
and for review by the Authority with regards to Qualified Costs and Phase I Minimum
Improvements.
(7) Performance Bonds
Performance bonds are required for all work in the public way pursuant to applicable City
regulations.
(8) Default by Developer or Authority
(a) Standard default provisions will be applicable. The Redevelopment Agreement will
include remedies to be determined by the Authority and Developer, and will include,
without limitation, the right of the Authority to terminate the Redevelopment
Agreement or the right to deny issuance of any TIF Note.
(b) The Master Redeveloper’s default under the Master Agreement for a failure to
commence “Development Activity” for a period of 24 months (under Section 6.3 of the
Master Agreement), as described in the December 5, 2017 notice of default served by
the Authority, shall be deemed to have been timely cured upon the adoption of the
Final Phase I Approval Resolution.
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(9) Preparation of Redevelopment Agreement
a. The Authority and Developer will work diligently to prepare a Redevelopment
Agreement for City Council consideration for execution on July 17, 2018.
b. The Redevelopment Agreement presented to the City Council must be pre-signed by
Developer.
(10) Authority Out-of-Pocket Costs.
Developer will reimburse the Authority for its direct cost of legal and financial consultants as
well as special consultants for TIF inspections, traffic and utility studies. Reimbursement will be
made within 30 days after invoicing.
(11) Grants
Nothing contained in the Redevelopment Agreement, nor the failure of the parties to enter into
a Redevelopment Agreement with respect to the Redevelopment Site, will modify or abridge the
responsibilities and obligation of the Master Redeveloper and/or the Developer under the sub-grant
agreements entered into by the Master Redeveloper with respect to the below grants. Master
Redeveloper and/or the Developer remain responsible for responsibilities and obligation
Met Council
LCDA Pentagon Revival, South Awarded $448,100 in 2014
$448,100
awarded
$____
reimbursed
Mn DEED
# RDGP-14-0027-o-
FY15
Pentagon Revival
Awarded with term running 9/2014
to 12/2017; work is complete and
developer has been reimbursed;
project must still be delivered to
satisfy outcomes in grant
application
$625,000
awarded
$625,000
reimbursed
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EXHIBIT 1
REDEVELOPMENT SITE LEGAL DESCRIPTION
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EXHIBIT 2
PRELIMINARY PROJECT SITE PLAN
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EXHIBIT 3
Resolution (No. 2018-50)
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EXHIBIT 4
PROJECT NARRATIVE
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EXHIBIT 5
Sources and Uses Budget
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EXHIBIT 6
Lookback Provision
Section [7.4] TIF Lookback.
(a) Generally. The financial assistance to the South Redeveloper under this Agreement is
based on certain assumptions regarding likely costs and expenses associated with constructing the
Phase I Minimum Improvements and Public Infrastructure Improvements, as well as proceeds to
be derived by the South Redeveloper from the sale and/or operation of Elements and/or Element
Property. Specifically, the maximum aggregate principal amount of the TIF Notes (TIF Note A and
TIF Note B) has been determined based on the amount of assistance needed to make the South
Project financially feasible, as shown in the TIF Pro Forma attached as Exhibit ___. The Authority
and the South Redeveloper agree that those assumptions will be reviewed at the times described
in this Section, and that the amount of Tax Increment assistance provided herein may be adjusted
in accordance with this Section. Such review will be based on a TIF Pro Forma. Any fees which are
paid to the South Redeveloper, as reflected in a TIF Pro Forma, will be commercially reasonable
and common in the market place.
(b) South Redeveloper as Developer.
(i) Within thirty (30) days after a Controlling Interest Transfer of any Element or
Element Property, the South Redeveloper shall submit a certified cost and revenue analysis for
the Controlling Interest Transfer of that Element Property to the Authority in the form of the TIF
Pro Forma attached as Exhibit ___ hereto and prepared in accordance with generally accepted
accounting principles. This analysis will include (1) a fair market value determination regarding
the Element or Element Property subject to the Controlling Interest Transfer, and (2) without
limitation, all Acquisition Costs, Stabilization Costs, Land Carrying Costs, Project Redevelopment
Costs, and all other improvement costs allocated to the Element or Element Property subject to
the Controlling Interest Transfer. The South Redeveloper agrees to provide to the Authority any
reasonable and relevant background documentation, prepared in accordance with generally
accepted accounting principles, related to the financial data, upon request. The Authority at its
cost may retain an accountant to audit the submitted Phase TIF Pro Forma.
(ii) The amount by which the actual IRR for a Controlling Interest Transfer shown in
an updated TIF Pro Forma required under Section [7.4(b)(i)] exceeds the percentages shown in
Section [7.4(b)(ii)(2) - (4)] below will be referred to as the “South Developer Excess Percentage.”
The South Redeveloper will be obligated to pay to the Authority, subject to Section [7.4(b)(iii)],
the South Developer Excess Percentage in an amount to be calculated pursuant to Section
[7.4(b)(ii)(2) - (4)] below, plus interest calculated against the adjusted cumulative total of any
amounts the South Redeveloper is obligated to pay to the Authority under this Section
[7.4(b)(ii)] at a rate of 6% compounded annually until the date determined in accordance with
Section [7.4(b)(iii)] (the “South Developer TIF Adjustment”). For the sake of clarity, the South
Developer TIF Adjustment will be recalculated as of each date a TIF Pro Forma identified in
Section [7.4(b)(i)] is submitted to the Authority for the purposes of calculating the applicable
principal amount against which interest will be charged. In determining the South Developer TIF
Adjustment the following shall apply:
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(1) If the IRR realized from the Transfer of an Element or Element
Property is less than 16% then there is no South Developer TIF Adjustment.
(2) If the IRR realized from the Transfer of an Element or Element
Property is 16% or more, but less than 18% then the South Developer TIF Adjustment is
limited to 10% of the Tax Increment, as further limited in this Section [7.4(b)(ii)].
(3) If the IRR realized from the Transfer of an Element or Element
Property is 18% or more, but less than 20% then the South Developer TIF Adjustment is
limited to 15% of the Tax Increment, as further limited in this Section [7.4(b)(ii)].
(4) If the IRR realized from the Transfer of an Element or Element
Property is 20% or more then the South Developer TIF Adjustment is limited to 25% of
the Tax Increment under TIF Note A and 100% of the Tax Increment under TIF Note B, as
further limited in this Section [7.4(b)(ii)].
(iii) Upon the earlier date to occur of (a) three hundred sixty-five (365) days from
the Transfer of the last Element or Element Property or (b) ninety (90) days after the [twentieth
(20th)] anniversary of the Effective Date, the South Redeveloper shall submit an updated TIF Pro
Forma to account for all Controlling Interest Transfers subject this Section [7.4(b)], which will be
subject to the calculation of a cumulative total South Developer TIF Adjustment. To the extent
this amount exceeds the IRR amounts set forth in Section [7.4(b)(ii)], the South Redeveloper
must pay the Authority in accordance with Section [7.4(d)] the amounts at set forth in Section
[7.4(b)], less the South Developer TIF Adjustment, if any.
(c) South Redeveloper as Operator.
(i) For all Elements which are not subject to a Controlling Interest Transfer by the
South Redeveloper, the following shall apply:
(1) On each “Calculation Date”, the amount of the TIF assistance
provided pursuant to this Agreement will be subject to adjustment based on a targeted
annual “Cash-On-Cash Return” of 10.0% for all unsold Elements. On each Calculation
Date, the South Redeveloper shall submit to the Authority a certified cost and revenue
analysis for all unsold Elements in the form of the TIF Pro Forma and prepared in
accordance with generally accepted accounting principles, together with any reasonable
and relevant background documentation, prepared in accordance with generally
accepted accounting principles, related to the financial data, upon request. The Cash-
On-Cash Return shall be calculated by the Authority (or its consultant) based on the
Lookback Data (to be calculated in a manner comparable to the sample attached as
Exhibit ____).
(2) If the demonstrated average annual Cash-On-Cash Return
exceeds 10.0%, then the principal amount of the TIF Notes issued to the South
Redeveloper will first be reduced by 100% of the demonstrated Cash Flow amount in
excess of an average annual Cash-On-Cash Return of 10.0%, and second by an amount
the results in a stabilized Cash-On-Cash Return of 10.0% over the remaining term of the
TIF Notes (the “South Operator TIF Adjustment”).
Dorsey & Whitney
Draft
June 25, 2018
Pentagon South Term Sheet June 28, 2018
DRAFT Page 19
(3) For the purposes of this Section, the following terms have the
following meanings:
“Calculation Date” means within 30 days after each three-year anniversary of
the issuance of by the Authority to the South Redeveloper of the Certificate of
Completion for the Phase I Minimum Improvements, for as long as either TIF
Note is outstanding.
“Cash Flow” means Net Operating Income less debt service with respect to the
first mortgage loan.
“Cash on Cash Return” means Cash Flow divided by the sum of South
Redeveloper’s actual equity, which excludes any grants or City, Authority,
Federal or State funds received by the South Redeveloper, and the principal
amount of the TIF Notes.
“Net Operating Income” means total income and other project-derived revenue,
including payments under the TIF Notes, less Operating Expenses in accordance
with each TIF Pro Forma.
“Operating Expenses” means reasonable and customary expenses incurred in
operating the Elements in accordance with each TIF Pro Forma.
(d) If the Authority determines that either a South Developer TIF Adjustment or a South
Operator TIF Adjustment (each a “TIF Adjustment”) is required, then (i) the Authority may elect
to either require payment from the South Redeveloper to the Authority of the applicable TIF
Adjustment or (ii) the Authority may elect to have the applicable TIF Adjustment applied to
reduce the outstanding principal amount of either TIF Note A or TIF Note B, as determined by
the Authority in its sole discretion (as a deemed prepayment) in accordance with the terms of
applicable TIF Note.
June 28, 2018
Board of the Edina Housing and Redevelopment Authority
Bill Neuendorf, Economic Development Manager
Tax Increment Financing for Pentagon Park South:
4815-4901 West 77th Street and 7710 Computer Avenue
Information / Background:
A joint venture consisting of Hillcrest Development and Solomon Real Estate proposes to build a
two-phase project to serve as a catalyst development on the Pentagon Park South parcel. Phase 1 is
intended to include two retail buildings, two hotels, a public plaza and site improvements for the
entire site. Phase 2 is intended to consist of two office buildings and an office/retail building. The
recent zoning approval allows for a change in the specific uses built on Phase 2. The redevelopment
effort is estimated to cost more than $140 million (approximately $70 million per phase).
At the June 14, 2018 meeting of the Housing and Redevelopment Authority, the Board discussed
several issues that were unresolved after extensive negotiations between the City’s negotiating
team and the Developer.
The developer has requested an $18.1 million TIF Note (payable with the TIF District’s remaining
24 years of incremental property taxes potentially generated by the site). This is approximately 26%
of the Phase 1 cost and approximately 13% of the overall cost of the two-phase proposal. This is a
very high proportion of costs and is expected to offset the Developer’s Phase I equity in the
project.
Based on the discussion at that meeting, the City’s negotiating team has continued with the
discussions based on the principles that were expressed by the majority of the HRA Board:
1) Agreeable to a high level of TIF in order to spark a catalytic project on this vacant site
a. Size of TIF Note(s) as recommended by City’s negotiating team
2) Willing to consider structured parking as a TIF expense that is eligible for reimbursement
STAFF REPORT Page 2
3) Seeking commitment to build both Phases in order to receive the full TIF amount
a. Flexibility will be applied to the specific uses contained in Phase 2
4) Apply typical lookback provisions to ensure that the TIF “but for” is satisfied and to avoid
over subsidizing a very profitable project
The City and Developer have continued discussions over the past two weeks but have not been
able to resolve all issues. Thus, a Term Sheet is not yet ready to be presented for consideration
and approval. Time is of the essence as the Pentagon Park TIF District is nearly four years into the
five year limit to define eligible costs.
There are four major issues that have prevented completion of the TIF Term Sheet. They are
summarized in this report for discussion purposes.
1) What is the maximum size of the TIF Note(s) that is supported by the HRA?
2) What is the degree of improvements that should be delivered in order to qualify for the full
TIF amount? Should there be a commitment to construct both Phase 1 and Phase 2 as a
condition of TIF assistance? How much of Phase 1 should be completed to initiate TIF
payments?
3) Should lookback provisions be enhanced so that the general public has rights to reduce the
TIF contribution if long-term profits yield greater than normal returns to the Developer?
4) Are the public realm improvements required to be installed as a condition of TIF payment?
The City’s negotiating team and the Developer request clear direction so that the
developer can decide whether to continue negotiations or withdraw the proposal.
STAFF REPORT Page 3
Key Issues Requiring HRA Clarification and Direction
1) What is the maximum size and structure of Pay-as-you-Go TIF Note(s)?
Staff Recommendation Developer Request
• Ehlers has projected that the reasonably-anticipated
amount of TIF collected from the fully completed
project totals $14.4 million;
• Two TIF Notes should be issued – the first provides
reimbursement for the $14.4 million (supported by
Ehlers projections); the second provides
reimbursement for the additional $3.7 million but
only accrues interest and is payable if the developer
commences one of the buildings in Phase 2
• The developer requests to capture
higher potential TIF generation-
$18.1 million counting on valuation
assumptions that exceed existing
hotel and office development
valuations in Edina
• requests one TIF Note in the
maximum amount so that they can
recognize any upside in case it is
necessary to offset future risks
• The full TIF Note would begin to
bear interest as soon as possible
Rationale – TIF Notes should be sized 1) to reimburse
qualifying project costs subject to a “But/For” test, and
2)up to the maximum value that is reasonably anticipated;
Inflated notes provide the developer greater ability to
achieve long-term reimbursement and profit, ensures full
deferral of local tax generation for the full term with no
greater benefit to the community;
If the HRA is willing to issue TIF Notes at a higher level,
precautions are recommended so that the higher TIF
amount has conditions that provide accountability for the
Developer to perform or risk losing future payments on
this higher value.
Interest should only be paid on completed projects not
speculative development.
Rationale – the Developer seeks to
maximize potential TIF revenue in
order to offset the up-front risk of the
immediate investment under current
office development market conditions
2) Should there be a commitment to construct both Phase 1 and Phase 2
elements as a condition of TIF assistance? How much of Phase 1 should be
completed to initiate payments?
Staff Recommendation Developer Request
• The Phase 1 and Phase 2 elements should be
constructed as a condition of receiving the
full TIF Note amount
• Monies should be spent by the Developer
as a condition to receiving incremental
taxes.
STAFF REPORT Page 4
Staff Recommendation Developer Request
• Two TIF Notes should be issued to ensure
partial reimbursement but also provide
accountability for each Phase
• TIF Note A would begin to bear interest and
make payments upon completion of the 2
retail strips, the 2 hotels and the outdoor
public plaza
• Only one retail building should be required
to be delivered to qualify for the full TIF
Amount
• Single TIF Note is preferred
• The full amount of the TIF Note would
bear interest and payments begin upon
completion of all sitework and one retail
building with no guarantee that other
buildings will be completed
Rationale – Payments and interest should only
begin after the approved project phases are
constructed to minimize speculative costs.
Increased Phase I reimbursement is intended to
create a new gateway to Edina from the 77th
Street interchange.
Rationale – the Developer is taking on
significant risk by preparing the site ahead of
end users to comply with the TIF District 5-
year rule.
3) Should enhanced lookback/claw back provisions be applied?
Staff Recommendation Developer Request
• Additional look backs are included to protect the public
interest and justify the “But/For” findings in case the project
becomes highly successful and proves capable of operating
without TIF
• Internal Rate of Return (IRR) measures are proposed using
the same limits of the Master TIF Agreement – these apply
only if an Element is sold within a short time frame
• Return on Cost (cash on cost) measures are also proposed
based on the Developer’s stated intent to hold several of
the elements for many years. The cash on cost measure
applies to Elements in which the Developer maintains a
controlling interest for several years. Alternatively, the IRR
provisions in the Master Agreement could be amended to
require more frequent IRR calculations using pre-negotiated
terms and agreed-upon third party appraisers.
• Staff recommends both IRR and Return on Cost measures.
• Fewer lookbacks and
claw backs are
preferred
• The existing IRR
measures are acceptable
but no other lookbacks
are currently acceptable
Rationale – The HRA is willing to issue TIF Notes at a very
high level in order to incentive catalytic investment in the
southern gateway to Edina’s business park mixed-use district.
As such, comprehensive lookbacks and meaningful claw backs
are strongly recommended so that the public’s interest is
maintained and a “But/For” test continues to be demonstrated
Rationale – the Developer is
taking on significant risk by
preparing the site ahead of end
users and is entitled to the
‘upside’ if it happens
STAFF REPORT Page 5
4) Are public realm improvements required to be completed prior to TIF
payments?
Staff Recommendation Developer Request
• The public realm improvements are included
among the items to be reimbursed with TIF,
and are required to be completed as a
condition of TIF payment
• Requests landscaping, bus shelters and
other public realm amenities be allowed
to be installed later, rather than as a
condition to receive TIF payments
Rationale – It is common practice to require such
items to be installed so they can be used by the
public before the costs are reimbursed.
Rationale – the Developer is taking on
significant risk by preparing the site ahead of
end users
# # #
STAFF REPORT Page 6
Background Information for Reference
May 2018 Site Plan (granted Preliminary Approval on 6/5/2018)
The CITY of EDINA
Pentagon Park South – Request for TIF from
Solomon Real Estate and Hillcrest Development
Summary of Staff Report
HRA Discussion
June 28, 2018
The CITY of EDINA
1)What is the maximum size of the TIF Note(s) that is supported by the HRA?
2)What is the degree of improvements that should be delivered in order to qualify for the full TIF
amount? Should there be a commitment to construct both Phase 1 and Phase 2 as a condition of
TIF assistance? How much of Phase 1 should be completed to initiate TIF payments?
3)Should lookback provisions be enhanced so that the general public has rights to reduce the TIF
contribution if long-term profits yield greater than normal returns to the Developer?
4)Are the public realm improvements required to be installed as a condition of TIF payment?
The City’s negotiating team and the Developer request clear direction so that the
developer can decide whether to continue negotiations or withdraw the proposal.
www.EdinaMN.gov 2
Four Unresolved Issues
The CITY of EDINA
Staff Recommendation Developer Request
Ehlers has projected that the reasonably-
anticipated amount of TIF collected from the fully
completed project totals $14.4 million;
Two TIF Notes should be issued – the first provides
reimbursement for the $14.4 million (supported by
Ehlers projections); the second provides
reimbursement for the additional $3.7 million but
only accrues interest and is payable if the developer
commences one of the buildings in Phase 2
The developer requests to capture higher
potential TIF generation- $18.1 million counting
on valuation assumptions that exceed existing
hotel and office development valuations in
Edina
requests one TIF Note in the maximum amount
so that they can recognize any upside in case it
is necessary to offset future risks
The full TIF Note would begin to bear interest as
soon as possible
www.EdinaMN.gov 3
1) What is the maximum size and
structure of Pay-as-you-Go TIF Note(s)?
The CITY of EDINA
Staff Recommendation Developer Request
Rationale – TIF Notes should be sized 1) to reimburse qualifying
project costs subject to a “But/For” test, and 2) up to the maximum
value that is reasonably anticipated; Inflated notes provide the
developer greater ability to achieve long-term reimbursement and
profit, ensures full deferral of local tax generation for the full term with
no greater benefit to the community;
If the HRA is willing to issue TIF Notes at a higher level, precautions
are recommended so that the higher TIF amount has conditions that
provide accountability for the Developer to perform or risk losing
future payments on this higher value.
Interest should only be paid on completed projects not speculative
development.
Rationale – the Developer seeks to
maximize potential TIF revenue in
order to offset the up-front risk of the
immediate investment under current
office development market conditions
www.EdinaMN.gov 4
1) What is the maximum size and
structure of Pay-as-you-Go TIF Note(s)?
The CITY of EDINA
Staff Recommendation Developer Request
The Phase 1 and Phase 2 elements should be
constructed as a condition of receiving the full TIF
Note amount
Two TIF Notes should be issued to ensure partial
reimbursement but also provide accountability for
each Phase
TIF Note A would begin to bear interest and make
payments upon completion of the 2 retail strips, the
2 hotels and the outdoor public plaza
Monies should be spent by the Developer as a
condition to receiving incremental taxes.
Only one retail building should be required to be
delivered to qualify for the full TIF Amount
Single TIF Note is preferred
The full amount of the TIF Note would bear
interest and payments begin upon completion of
all sitework and one retail building with no
guarantee that other buildings will be completed
www.EdinaMN.gov 5
2) Should there be a commitment to construct both
Phase 1 and Phase 2 elements as a condition of TIF
assistance? How much of Phase 1 should be completed
to initiate payments?
The CITY of EDINA
Staff Recommendation Developer Request
Rationale – Payments and interest should only begin
after the approved project phases are constructed to
minimize speculative costs. Increased Phase I
reimbursement is intended to create a new gateway to
Edina from the 77th Street interchange.
Rationale – the Developer is taking on significant
risk by preparing the site ahead of end users to
comply with the TIF District 5-year rule.
www.EdinaMN.gov 6
2) Should there be a commitment to construct both
Phase 1 and Phase 2 elements as a condition of TIF
assistance? How much of Phase 1 should be completed
to initiate payments?
The CITY of EDINA
Staff Recommendation Developer Request
Additional look backs are included to protect the public interest and justify
the “But/For” findings in case the project becomes highly successful and
proves capable of operating without TIF
Internal Rate of Return (IRR) measures are proposed using the same limits
of the Master TIF Agreement – these apply only if an Element is sold within
a short time frame
Return on Cost (cash on cost) measures are also proposed based on the
Developer’s stated intent to hold several of the elements for many years.
The cash on cost measure applies to Elements in which the Developer
maintains a controlling interest for several years. Alternatively, the IRR
provisions in the Master Agreement could be amended to require more
frequent IRR calculations using pre-negotiated terms and agreed-upon
third party appraisers.
Staff recommends both IRR and Return on Cost measures.
Fewer lookbacks and
claw backs are
preferred
The existing IRR
measures are
acceptable but no other
lookbacks are currently
acceptable
www.EdinaMN.gov 7
3) Should enhanced lookback/claw back
provisions be applied?
The CITY of EDINA
Staff Recommendation Developer Request
Rationale – The HRA is willing to issue TIF Notes at a very high level in
order to incentive catalytic investment in the southern gateway to
Edina’s business park mixed-use district. As such, comprehensive
lookbacks and meaningful claw backs are strongly recommended so
that the public’s interest is maintained and a “But/For” test continues to
be demonstrated
Rationale – the Developer is taking
on significant risk by preparing the
site ahead of end users and is
entitled to the ‘upside’ if it happens
www.EdinaMN.gov 8
3) Should enhanced lookback/claw back
provisions be applied?
The CITY of EDINA
Staff Recommendation Developer Request
The public realm improvements are included
among the items to be reimbursed with TIF,
and are required to be completed as a
condition of TIF payment
Requests landscaping, bus shelters
and other public realm amenities be
allowed to be installed later, rather
than as a condition to receive TIF
payments
Rationale – It is common practice to require such
items to be installed so they can be used by the
public before the costs are reimbursed.
Rationale – the Developer is taking on
significant risk by preparing the site ahead
of end users
www.EdinaMN.gov 9
4) Are public realm improvements required
to be completed prior to TIF payments?
June 28, 2018
Board of the Edina Housing and Redevelopment Authority
Bill Neuendorf, Economic Development Manager
Tax Increment Financing for Pentagon Park North:
4600-4660 West 77th Street
Information / Background:
Chase Real Estate proposes to build two multi-family housing developments on 11-acres of the
Pentagon North site. The first building consists of 353 market-rate apartments. The second building
is a senior living building with a total of 225 market-rate apartments. Approximately 32 of the units
will be designated for residents who need special memory care or transitional care services. The
remainder will be independent living or assisted living units. The estimated construction cost of the
overall project is $141 million.
Both buildings would be located along the southern edge of Fred Richards Park. The
redevelopment of this portion of the North Parcel would also include a new access road to the
park, new sidewalks to the park and shared public parking along the edge of the park. This project
was granted preliminary rezoning approvals on June 19, 2018.
The developer has requested two TIF Notes totaling $14.73 million (payable with the Pentagon
Park TIF District’s remaining 24 years of incremental property taxes generated by the site). This is
approximately 11% of the overall cost of the proposal. After review the developer’s pro forma,
staff agrees that TIF is necessary to make the project viable, but not to the degree requested.
At the June 14, 2018 meeting of the Housing and Redevelopment Authority, the Board discussed
several issues that were unresolved after extensive negotiations between the City’s negotiating
team, the developer (Chase) and the property owner (Hillcrest).
Based on the discussion at the June 14th meeting, the City’s negotiating team has continued the
discussion using the direction that was expressed by the majority of the HRA Board:
STAFF REPORT Page 2
1) TIF Notes capped at a maximum return of 8 percent cash on cash and not to exceed the total
cost of extraordinary site costs and cost of public improvements; this was most recently
estimated at $9.89 million but may increase based on the updated operating pro forma.
2) Look backs and claw backs at multiple intervals over life of the TIF Notes to confirm
developer returns (will measure cash on cash returns and IRR, as appropriate using industry
standards evaluated by Ehlers Associate)
3) In lieu of affordable units in the two Chase buildings, $5.46 million in security will be
accepted in accordance with City’s Affordable Housing Policy
4) Approximately 230 shared public parking stalls are required on Pentagon North parcels as a
condition of TIF assistance; Chase has provided about 100 surface parking stalls. Hillcrest is
required to provide the remainder as part of the required amendment to the TIF Master
Redevelopment Agreement.
5) Reasonable cost participation in Fred Richards Park maintenance will be required from Chase.
6) Other terms similar to most recent draft term sheet.
The developer (Chase Real Estate) has responded with a counter proposal regarding the estimated
$9.89 million TIF assistance previously offered. The property owner (Hillcrest) has re-affirmed their
previous offer regarding affordable housing and their position regarding public parking. None of
these responses appear to satisfy the criteria laid out by the HRA Board and do not appear to
satisfy the zoning conditions required in the City Council approval.
There continues to be a large divide between the positions of the HRA, developer and property
owner. There are four major issues that have prevented completion of the TIF Term Sheet. They
are summarized in this report for discussion purposes. Decisions need to be made soon in the
event that the developer chooses to begin site work in Fall 2018.
1) What level of TIF assistance is acceptable for this project?
2) Should TIF proceeds be reserved for future affordably-priced housing?
3) What type of security is acceptable in lieu of affordably-priced housing units in the Pentagon
North site?
4) How should public parking be provided in the remainder of the Pentagon Park North site?
The City’s negotiating team, the developer and the property owner request clear
direction from the HRA Board so that the private parties can decide whether to
continue negotiations or withdraw the proposal.
STAFF REPORT Page 3
Key Issues Requiring HRA Clarification and Direction
1) What level of TIF assistance is acceptable for this project?
Staff Recommendation Developer / Owner
Request
• Two TIF pay-as-you-go Notes sized in the amount to provide
a projected 8% average return to the Developer – currently
estimated at $9.89 million but will be re-calculated based on
final project
• TIF Note A payable upon completion of Market-Rate
Apartments – size TBD
• TIF Note B payable upon completion of Senior Apartments –
size TBD
• Typically lookbacks at key intervals and claw backs on the full
TIF amount if average returns exceed 8%
• Agreeable with the two
Note concept tied to
completion of each building
• TIF Notes sized to provide
$14.37 million total
• Developer suggests a
“lookback” provision
occurring 8-years after
completion with a
clawback if return greater
than 9% is achieved and
with no clawback on the
cost of the public
improvement
Rationale – TIF assistance is recommended to bring the returns
up to an acceptable rate in the marketplace. Returns in the 8%
to 10% range are generally acceptable. Based on the level of
public improvements proposed, staff recommends TIF assistance
sized at an 8% level of return.
It is noted that other projects are advancing with returns in the
6% to 7% range while also delivering public benefits. These
projects recognize the long-term value of holding properties in
Edina.
Rationale – the Developer is
taking on significant risk with a
project of this scale and seeks
a higher return
STAFF REPORT Page 4
2) Should TIF proceeds be reserved for future affordably-priced housing?
Staff Recommendation Developer / Owner
Request
• Each TIF Note is typically paid from 90% of the incremental
taxes generated from the site; in accordance with MN
Statute, 10% is retained by the City for administrative
purposes
• TIF Note repayment is recommended to be limited to 80%
of tax increment collected to allow for an additional 10%
to be pooled to a future affordably-priced housing project
located on an adjacent parcel
• Developer requests 90%
of the incremental taxes
be used to fund the TIF
Notes
Rationale – A separate developer anticipates building affordably-
priced housing on a separate parcel (4820 W. 77th St). While no
formal application or request has been submitted now, it is likely
that the developer will request (and need) several million dollars
of public assistance to make their project viable.
All incremental taxes generated from the South parcel are likely to
remain with that property and very little taxes will be collected
from the 4820 site itself.
The property owner is not willing to provide discounted land to
support the affordable housing project. The developer is not
willing to provide monies to support affordable housing either.
It would be highly unusual for the City to issued general obligation
debt to support the affordable project.
The North Parcel appears to be the most viable source of public
revenue to help fund the revenue gap of the future affordable
housing project. The proposed 80% arrangement provides full
reimbursement to the developer but spread out over a few more
years. This additional 10% pooling is estimated to provide
approximately $1.8 million in funding. The anticipated funding
request from Dominium is likely to be 2 or 3 times this amount.
Rationale – the
Developer’s project is
separate from the future
Dominium project and the
Developer prefers faster
payment on the TIF Notes
STAFF REPORT Page 5
3) What type of security is acceptable in lieu of affordably-priced units in
the Pentagon North site?
Staff Recommendation Developer / Owner
Request
• In lieu of the anticipated Dominium project, security in the
amount of $5.46 million is needed
• Acceptable forms of security include: cash, cash-in-escrow,
letter of credit, land or combination thereof
• Security is not required until Chase is ready for complete
building permits for each building in Summer 2019 and Winter
2019/2020 – this should allow for Dominium to be awarded
tax credits in Fall 2019 for construction in 2020
• If the Dominium project is not under construction within 3-
years of security being issued, the security will be retained by
the City
• Credit will be given for any Dominium units built on the 4820
site in excess of the 55 required; credit will apply to any new
housing built on the remainder of the Pentagon North site for
a period of 3-years after the Dominium project is complete
• No change from June 14th
position
• $3.0 million cash at
closing or combination of
$1.9 million in real estate
(4820 W. 77th Street) if
the Dominium project
does not proceed and
$1.1 million cash
Rationale – Based on the current estimates of independent and
assisted living apartments in the Chase proposal, 55 units of
affordably-priced housing are required. The memory care and
transitional care units are excluded from this calculation.
The first choice is for a minimum of 55 units to be constructed,
possibly at the 4820 W. 77th St. site which is also owned by
Hillcrest Development. While Dominium has executed a purchase
agreement at a market-rate price, there are many contingencies
and hurdles to clear before this project advances beyond the
concept-phase.
Based on current City policy, a ‘buy-in’ fee of $100,000 per unit is
used to calculate the security. The actual amount will be
determined when full construction plans for each Chase building
are submitted for building permit.
The recommended approach delays the issuance of security as late
as possible so as to provide greater time for the Dominium
project to be entitled and solicit financingd. It should be noted that
the Dominium affordable housing will likely require several million
dollars of funding support from the City/HRA and that neither the
developer or property owner intend to provide financial support
to the Dominium project.
Rationale – the property
owner is supportive of
affordable housing and is
willing to sell the 4820 site
to the City or a different
developer who can build
affordable units on the site
STAFF REPORT Page 6
4) How should public parking be provided in the remainder of the
Pentagon North site?
Staff Recommendation Developer / Owner
Request
• Chase to provide public easements on 90-100 surface parking
stalls along the shared property line of Fred Richards Park as a
requirement of their TIF assistance. These shared stalls would be
available to apartment residents, guests and the general public.
• The property owner (Hillcrest) is requested to provide a public
easement for approximately 130 surface parking stalls anywhere
on the remaining property with the flexibility for the owner to
move those parking stalls as needed to support ongoing leasing of
the buildings and future redevelopment.
• No payment is proposed because the request requires no cash
outlay from the property owner.
• No change from June
14th position
• The property owner is
willing to sell approx.
1-acre of land for
public parking to the
City or HRA for $1.75
million
Rationale – Shared public parking has been a goal of this
redevelopment effort for many years. This was an important element
of the 2014 Master Redevelopment Agreement.
With redevelopment of the remaining North Parcel buildings many
years in the future, it is unlikely that the parking structures
anticipated in the 2014 Master Agreement will be built. An alternative
is proposed to satisfy the City’s need without requiring additional
investment from the property owner.
Rationale – the
Developer is not building
new parking at this time
and believes fair
compensation is
appropriate to provide
public parking on private
property
# # #
STAFF REPORT Page 7
Background Information for Reference
2014 Master TIF Redevelopment Agreement (Minimum Improvements)
Proposed Chase
Real Estate Project
STAFF REPORT Page 8
Background Information for Reference
April 2018 Site Plan - Preliminary Approval granted on 6/19/2018
The CITY of EDINA
Pentagon Park North– Request for TIF from
Chase Real Estate and Hillcrest Development
Summary of Staff Report
HRA Discussion
June 28, 2018
The CITY of EDINA
1)What level of TIF assistance is acceptable for this project?
2)Should TIF proceeds be reserved for future affordably-priced housing?
3)What type of security is acceptable in lieu of affordably-priced housing units in the Pentagon
North site?
4)How should public parking be provided in the remainder of the Pentagon Park North site?
The City’s negotiating team, the developer and the property owner request clear
direction from the HRA Board so that the private parties can decide whether to
continue negotiations or withdraw the proposal.
www.EdinaMN.gov 2
Four Unresolved Issues
The CITY of EDINA
www.EdinaMN.gov 3
1a) What level of TIF assistance is
acceptable for this project?
Staff Recommendation Developer / Owner Request
Two TIF pay-as-you-go Notes sized in the amount to provide a
projected 8% average return to the Developer – currently
estimated at $9.89 million but will be re-calculated based on
final project
TIF Note A payable upon completion of Market-Rate
Apartments – size TBD
TIF Note B payable upon completion of Senior Apartments –
size TBD
Typically lookbacks at key intervals and claw backs on the full
TIF amount if average returns exceed 8%
Agreeable with the two Note
concept tied to completion of each
building
TIF Notes sized to provide $14.37
million total
Developer suggests a “lookback”
provision occurring 8-years after
completion with a clawback if return
greater than 9% is achieved and
with no clawback on the cost of the
public improvement
The CITY of EDINA
www.EdinaMN.gov 4
1b) What level of TIF assistance is
acceptable for this project?
Staff Recommendation Developer / Owner Request
Rationale – TIF assistance is recommended to bring the returns up
to an acceptable rate in the marketplace. Returns in the 8% to
10% range are generally acceptable. Based on the level of public
improvements proposed, staff recommends TIF assistance sized
at an 8% level of return.
It is noted that other projects are advancing with returns in the 6%
to 7% range while also delivering public benefits. These projects
recognize the long-term value of holding properties in Edina.
Rationale – the Developer is taking on
significant risk with a project of this scale
and seeks a higher return
The CITY of EDINA
www.EdinaMN.gov 5
2a) Should TIF proceeds be reserved for future
affordably-priced housing?
Staff Recommendation Developer / Owner Request
Each TIF Note is typically paid from 90% of the incremental taxes
generated from the site; in accordance with MN Statute, 10% is
retained by the City for administrative purposes
TIF Note repayment is recommended to be limited to 80% of tax
increment collected to allow for an additional 10% to be pooled to a
future affordably-priced housing project located on an adjacent parcel
Developer requests 90% of
the incremental taxes be
used to fund the TIF Notes
The CITY of EDINA
www.EdinaMN.gov 6
2b) Should TIF proceeds be reserved for future
affordably-priced housing?
Staff Recommendation Developer / Owner Request
Rationale – A separate developer anticipates building affordably-priced housing on a
separate parcel (4820 W. 77th St). While no formal application or request has been
submitted now, it is likely that the developer will request (and need) several million dollars
of public assistance to make their project viable.
All incremental taxes generated from the South parcel are likely to remain with that
property and very little taxes will be collected from the 4820 site itself.
The property owner is not willing to provide discounted land to support the affordable
housing project. The developer is not willing to provide monies to support affordable
housing either.
It would be highly unusual for the City to issued general obligation debt to support the
affordable project.
The North Parcel appears to be the most viable source of public revenue to help fund the
revenue gap of the future affordable housing project. The proposed 80% arrangement
provides full reimbursement to the developer but spread out over a few more years. This
additional 10% pooling is estimated to provide approximately $1.8 million in funding. The
anticipated funding request from Dominium is likely to be 2 or 3 times this amount.
Rationale – the Developer’s project
is separate from the future
Dominium project and the
Developer prefers faster payment
on the TIF Notes
The CITY of EDINA
www.EdinaMN.gov 7
3a) What type of security is acceptable in lieu of
affordably-priced units in the Pentagon North site?
Staff Recommendation Developer / Owner Request
In lieu of the anticipated Dominium project, security in the amount of $5.46 million is
needed
Acceptable forms of security include: cash, cash-in-escrow, letter of credit, land or
combination thereof
Security is not required until Chase is ready for complete building permits for each
building in Summer 2019 and Winter 2019/2020 – this should allow for Dominium to
be awarded tax credits in Fall 2019 for construction in 2020
If the Dominium project is not under construction within 3-years of security being
issued, the security will be retained by the City
Credit will be given for any Dominium units built on the 4820 site in excess of the
55 required; credit will apply to any new housing built on the remainder of the
Pentagon North site for a period of 3-years after the Dominium project is complete
No change from June 14th position
$3.0 million cash at closing or
combination of $1.9 million in real
estate (4820 W. 77th Street) if the
Dominium project does not
proceed and $1.1 million cash
The CITY of EDINA
www.EdinaMN.gov 8
3b) What type of security is acceptable in lieu of
affordably-priced units in the Pentagon North site?
Staff Recommendation Developer / Owner Request
Rationale – Based on the current estimates of independent and assisted living
apartments in the Chase proposal, 55 units of affordably-priced housing are required.
The memory care and transitional care units are excluded from this calculation.
The first choice is for a minimum of 55 units to be constructed, possibly at the 4820 W.
77th St. site which is also owned by Hillcrest Development. While Dominium has
executed a purchase agreement at a market-rate price, there are many contingencies
and hurdles to clear before this project advances beyond the concept-phase.
Based on current City policy, a ‘buy-in’ fee of $100,000 per unit is used to calculate the
security. The actual amount will be determined when full construction plans for each
Chase building are submitted for building permit.
The recommended approach delays the issuance of security as late as possible so as to
provide greater time for the Dominium project to be entitled and solicit financing. It
should be noted that the Dominium affordable housing will likely require several million
dollars of funding support from the City/HRA and that neither the developer or property
owner intend to provide financial support to the Dominium project.
Rationale – the property owner is
supportive of affordable housing and is
willing to sell the 4820 site to the City or
a different developer who can build
affordable units on the site
The CITY of EDINA
www.EdinaMN.gov 9
4) How should public parking be provided in
the remainder of the Pentagon North site?
Staff Recommendation Developer / Owner Request
Chase to provide public easements on 90-100 surface parking stalls along the shared
property line of Fred Richards Park as a requirement of their TIF assistance. These
shared stalls would be available to apartment residents, guests and the general public.
The property owner (Hillcrest) is requested to provide a public easement for
approximately 130 surface parking stalls anywhere on the remaining property with the
flexibility for the owner to move those parking stalls as needed to support ongoing
leasing of the buildings and future redevelopment.
No payment is proposed because the request requires no cash outlay from the property
owner.
No change from June 14th
position
The property owner is willing to
sell approx. 1-acre of land for
public parking to the City or
HRA for $1.75 million
Rationale – Shared public parking has been a goal of this redevelopment effort for many
years. This was an important element of the 2014 Master Redevelopment Agreement.
With redevelopment of the remaining North Parcel buildings many years in the future, it is
unlikely that the parking structures anticipated in the 2014 Master Agreement will be built. An
alternative is proposed to satisfy the City’s need without requiring additional investment from
the property owner.
Rationale – the Developer is not
building new parking at this time and
believes fair compensation is
appropriate to provide public parking
on private property
Dear City Council/HRA board members:
Five years ago, what if somebody had said “You have $62M to spend on parks and
recreation improvements over the next 8-10 years. How do you want to spend it?”
I ask because as some of you have expressed concern about the cost of a new arts
center (underestimated, I believe, at $18M), I would like you to see that the Council has
been very willing to spend money on community facilities — just not on an all-ages,
comprehensive, community-based fitness/wellness/learning/arts & culture center at
Grandview.
The above number includes:
• $16M for Braemar Field/Backyard Rink
• $10,482,500 spent or committed to Braemar golf and clubhouse improvements
• Braemar Master Plan — $8.1M estimated
• Fred Richards Park improvements — estimated $8-10M, plus cost of clubhouse
improvements
• $18M new arts/active adults center
It does not include playgrounds, park shelters, trails, Hornet’s Nest, and various other
projects. This is what it takes to provide for a community.
I do wonder why, as a Council, you have been willing to commit to certain projects, but
have drawn the line at an all-ages, comprehensive, community-based
fitness/wellness/learning/arts & culture center. Yes, it would be a major investment in
our community — but it would be operationally profitable. The smaller investment in an
arts and active adults only center is not likely to be operationally profitable. It is also not
likely to serve a significant percentage of Edinans, or attract signficantly more users
than the current facilities. It is just a reality that the proposed facility does not offer
enough, and it can’t offer enough because of its small size and limited programming
vision.
What do we get from the sale and development of the former public works site? We
don’t get the benefit of an increased tax base. The taxes go into a TIF fund to pay for
“district parking” which is not needed and the infrastructure/substructure to support the
civic outdoor area, which may not be needed (if community facility is not constructed)
and which may not have much benefit to the general public.
We get affordable housing, but at a public cost. Please take a step back and consider
whether this is the best way to spend limited affordable housing dollars.
We get another apartment building, which a majority of residents have stated
unequivocally they do not want.
We don’t get needed improvements on Eden, Arcadia, and Vernon/Interlachen.
We don’t get an all-ages, comprehensive, community-based
fitness/wellness/learning/arts & culture center that would be operationally profitable and
that would enliven the area 7-days a week year around and generate several hundred
thousand visits per year.
We don’t get the prime location on the parcel for a building. We do get the more difficult
to access part of the parcel tucked against a tall corner of dirt.
We lose the future potential of this land. Is this project really exciting enough to give that
up?
Jim, Kevin, and Mike — you never respond to me. I would like to hear from you on this.
Mary and Bob, thank you for often responding to me. I would also like to hear your
thoughts. I want to know why the proposal you have in front of you is better than
another possibility. What makes it better for Edina than an all-ages, comprehensive,
community-based fitness/wellness/learning/arts & culture center? If the issue is money,
the Council always finds a way. It may make you nervous, but the funding can be
worked out.
Edina is a compact community, in terms of area. We need centrally located infill
development devoted to community use. It can’t all be at the edges, as Braemar,
Edinborough, Centennial Lakes, and Fred Richards are.
In this very divided time, we need places that bring us together. Please end the
arrangement with Frauenshuh and pursue a public use for this land (which does not
preclude some private spaces).
Thank you.
Jennifer Janovy
Stephanie Mullaney, Chair
stephaniemullaney@comcast.net
www.GrandviewEdina.com
952-925-1569
PUBLIC GRANDVIEW
PROPOSAL GRANDVIEWCITIZEN TASK FORCE
FOR THE FORMER
PUBLIC WORKS SITE
To: Edina City Council
Scott Neal, City Manager
Cary Teague, City Development Director
Bill Neuendorf, Economic Development Manager
From: Stephanie Mullaney
RE: Proposal for Former Public Works Site Planning
Dear Council Members, Mr. Neal, Mr. Teague, and Mr. Neuendorf,
As a Grandview neighborhood resident and the lead of a community effort to preserve public land,
I kindly ask your serious consideration of this proposal for a community-led effort to plan the future
of the former public works site. Please respond to me before June 27, prior to the HRA meeting.
Before signing off our public land to a private developer, I ask that you seriously consider the
contents of this proposal and correspondence package. There is no risk to the City, and there is
much to be gained through goodwill and community collaboration.
The development plan that you are pursuing with Fraunenshuh has many disadvantages for Edina
residents. Please consider the following:
• The Frauenshuh concept illustrates that the site is not large enough to house mixed-use
development. Green space is small, the community building is small, and does not leave
sufficient room for expansion. By retaining the entire parcel, there is room for less expensive
parking and more green space, which was important element in public opinion.
• The plan does not reflect public input and community needs based on data and studies.
• The development does not conform to the Grandview Framework or the Comp Plan.
• The “give to get” is not sufficient; the public gets very little benefit short-term or long term.
• Livability elements have not been considered such as walk-ability, bike-ability and the
creation of a community space that is inclusive and welcoming.
Thank you for your consideration of this important issue.This plan impacts the future of our
community.
Stephanie Mullaney
Chair, Public Grandview
stephaniemullaney@comcast.net :: 952-925-1569
Cover Letter
22Proposal for Development Planning for the Former Public Works Site
Knowledge
Future-Oriented
Experience
Decisions Based on Data
The leaders have completed hundreds
of hours of research on the Grandview
District, city development, livability
standards, community centers, art
centers, and community programming.
The Citizen Task Force will be forward-
looking when making recommendations
for the site. With a vast amount of City
experience, the task force knows what
elements need to be considered for
innovative growth and development.
The leaders of this effort have intimate
knowledge of Grandview planning
process, experience in Edina planning
processes, City policies, project
management, and people management.
The Citizen Task Force will make
recommendations based on data and
facts. Previously-obtained data will be
processed and additional data gathering
can be performed as requested.
Executive Summary
This proposal is being submitted to retain the public
land at the former public works site and create a more
Who: A dedicated group of residents
Where: The former public works site
What: Community-based planning for the site
Why: To use public land for the highest potential community
33Proposal for Development Planning for the Former Public Works Site
Task Force Objectives
CREATE A LIVABLE SITE COMMUNITY FOCUS MINIMIZE CITY EFFORT
The task force will ensure
that all livability issues are
addressed, including transit,
walkability, vibrancy, and
connection with the District.
The task force goal is to create
a site that is welcoming and
useful to the entire community,
helping create bonds between
generations and residents of all
backgrounds.
The task force will minimize
the effort of City staff and
city council members. The
proposal will not incur cost to
the City.
This citizen-driven effort will enable the completion of a true small
requirements. This proposal brings the Grandview neighborhood to
parity with the other Edina neighborhoods’ planning processes.
VISION • COLLABORATION • EFFICIENCY
4 Proposal for Development Planning for the Former Public Works Site
Endorsements
This proposal is endorsed by the Edina Neighborhood Coalition
(ENC), a group of neighborhood leaders in Edina with the following
mission:
to advocate for the community in the City’s development processes. We will represent the
majority viewpoint of the community and advocate for reasonable development projects that
align with what the majority of Edina residents want.
Individual endorsements to follow.
55Proposal for Development Planning for the Former Public Works Site
The citizen team leadership brings a broad range of knowledge,
expertise, and skills to this effort. The team has the experience and
tools to perform the work and will utilitze the wider community to
enhance our efforts.
City Knowledge
Breadth of Experience
Outreach & Technology
Collaboration for Results
We Know Edina
Wide Breadth of Experience
Strategy, Communications, Marketing, and Technology
Collaboration and Compilation Skills
Our team leadership knows Edina. We know City processes, commissions,
communications, and staff. We are connected with resident leaders from other
neighborhoods. We know what the community is saying, what residents want, and
what they need.
The task force team has experience in art centers, community centers, legal
processes, online technology, personnel management, project management, and
data analysis.
The team knows social media, websites, survey tools, and other means of reaching
the community. The proposal will include professional materials with detailed
recommendations that are based on research and data and have measurable
outcomes.
The task force team has decades of experience working in collaborative groups.
Our leaders have experience in team work, management, and negotiation. The
team has the technical know-how to gather, parse, and consolidate information
from various sources.
66Proposal for Development Planning for the Former Public Works Site
This proposal provides a unique opportunity to allow Edina residents to have a true voice in the future of their neighborhood and community.
The strategies and methodology are applicable to other development projects and will ensure the City’s growth is centered on community,and livability.
Why?
7 Proposal for Development Planning for the Former Public Works Site
1
4
2
5
3
6
FREE.
Minimal City Effort
Professional Results
Small Area Plan is
Completed at No Cost
Provides a Model
for City Development
Avert a Resident Battle
and Increase Goodwill
Non-Binding
There are no costs associated with this
proposal, and a small time commitment
required by Council members. We
propose one or two Council/City staff
members act as liaisons in the process.
The Council receives project collateral
that contains concise information
based on data and facts. Objectives
and recommendations are clear and
understandable.
The March 28, 2018 request for parity
for the Grandview District with respect
to small area plans is answered with
this proposal, at no cost to the City,
and no consultant time.
Using livability standards and other
methodologies will apply to other City
planning.Use of metrics ensures that
City growth is community-centered and
provides a foundation for future needs.
Recent Council meetings have included
hours of confrontation with unhappy
resident groups. This effort will be
a collaboration that will eliminate
resident frustration and save Council time.
Proposal recommendations to the
Council are non-binding. This project
the Council.
Adopting this proposal enables the Edina City Council to engage
the community, show residents they are heard, and to create a
premier community-centered site on the public land.
Why?
88Proposal for Development Planning for the Former Public Works Site
Livability Standards (1of 2)
This proposal will develop and implement a standard of metrics to ensure the
development plan for the land is sustainable and future-friendly. A Livability
Checklist will be implemented that, at the minimum, considers the following
elements:
Fulfills Community Needs
• Provides needed amenities and services to all Edina residents.
• Offers community amenities with indoor and outdoor spaces.
• Enables year-around usage; is adaptable to change of seasons.
Encourages a Sense of Community
• Creates a sense of place.
• Creates a sense of belonging across ages and cultures.
• Encourages community interaction across generations and cultures.
Resident-Friendly
• Pedestrian-friendly and safe.
• Bike-friendly and safe.
• Accessible, welcoming, and usable to entire population.
• Includes considerations of age groups, family makeup, cultural diversity,
special needs, and more.
• Provides a welcoming green space.
Traffic and Parking
• Transit is considered - is mass transit incorporated or is the plan transit-ready?
• Parking convenience and accessibility.
• Traffic and congestion issues for the neighborhood.
• Connectivity to the neighborhood and District.
• Connectivity and integration into the community as a whole.
99Proposal for Development Planning for the Former Public Works Site
Economic Considerations
• Cost and funding.
• Does it keep dollars in the city because community needs are met?
• What is the impact on local businesses?
Environmentally Friendly
• Preservation of natural assets such as trees.
• Use of energy-efficiency technology.
• Site sustainability and maintenance.
General Considerations
• Consideration of housing needs.
• Special requests from community groups.
Livability Standards (2 of 2)
HOW DOES THIS PROJECT SERVE
AND ENHANCE THE COMMUNITY?
10 Proposal for Development Planning for the Former Public Works Site
Summary
The Edina City Council has a unique opportunity examine
a consolidation of the former Grandview process data
close study of community needs and livability elements.
The current development plan with Frauenshuh bears little resembalance to
the Grandview Framework, does not conform with public opinion about how
the site should be used, and does not heed the City’s Comprehensive Plan.
not consider the future needs of the City.
This proposal enables the city council to reestablish a working relationship with
neighborhood and the community as a whole.
The result of this proposal is a development project that builds partnership
with city staff, trust in city government, provides an inspired outcome for the
site, and provides a blueprint for future developments in Edina.
Community-Centered. Collaborative. Creative.
Helping Grow the Grandview District Using Livability Standards
1111Proposal for Development Planning for the Former Public Works Site
A central commons
on the Public Works
site with indoor and
outdoor public
space that connects
the civic cornerstones
of the District and
serves the
neighborhood and
community needs.
Framework, page 3
A MIXED USE PLAN FOR
OUR PUBLIC LAND
HOW DOES IT SERVE THE
NEIGHBORHOOD AND
COMMUNITY NEEDS?
JUNE 2018
EXECUTIVE SUMMARY
WHY DO WE NEED PRIVATE DEVELOPMENT ON PUBLIC LAND?
With the consideration of a development partnership with Frauenshuh for the former public
works site in Edina, the ongoing question surfaces:
“Why is the Council selling this last piece of public land?”
This document poses the questions regarding:
• Why sell the public land?
• What benefits occur from mixed use development?
~ Do the benefits favor the developer or the community?
~ What benefits occur from retaining the land for 100% public use?
2015 PLAN AND 2018 PLAN VERY SIMILAR
The 2015 plan (below) presented to the public did not get a favorable response from
residents.The 2018 plan is very similar to that plan.
At a public meeting on March 11, 2015, attendees were given three development scenarios
and asked to put circle stickers on the scenario board(s) they preferred. The results?
• 14 of the 183 attendees (8%) voted for this type of scenario
• The other 2 scenarios garnered a total of 39 votes (21%)
• The total votes for NONE OF THE SCENARIOS: 130 (71%)
THE MAJORITY of RESIDENTS HAVE REPEATEDLY STATED THEY WANT THE SITE
USED for PUBLIC PURPOSES. PUBLIC OPINION HAS BEEN EXPRESSED in CITY-
PAID SURVEYS, STUDIES, and MEETINGS.
A SWEET DEAL FOR THE DEVELOPER. WHAT ABOUT FOR RESIDENTS?
WHAT DEVELOPERS GET:
• 2.13 acres of the site - 65% of the site
• Acquisition of city-owned land at only $1.4M per acre
• $1.2M loan at 1% interest “toward affordable housing” and for “lost revenue due to affordable
housing.” The loan is compensation for affordable housing required by Edina. Current commercial
SBA interest rates are 5.5% to 7.5%*.
• Tax-increment financing (TIF) funds of $10.47M - using up all TIF money for the district
• Ownership of the “green”
• Ownership of the District parking structure
• Lease rights for 20-30 stalls in District parking
• Ability to buy northern parcel if City does not construct civic building within 3-5 years
WHAT RESIDENTS GET:
• 1.16 acres of the site - 35% of the site
• Loss of 65% of the site for current public use
• Loss of 65% of the site for future public use
• Loss of 1.16 acres if civic building not constructed within time limit
• “Easement” on .92-acre green roof
• “Easement” on District parking structure
• Loss of tax revenue for 26 years due to use of TIF funds
• Other public improvements are deferred (unless other monies identified)
• Vernon Avenue Intersection Improvements
• Arcadia Avenue improvements
• New street from Eden Avenue to Jerry’s Foods (needed for safety of Grandview Square
residents)
• Loss of interest and use of $1.2M over 15 years
• ANOTHER uninspired market rate (luxury) apartment building in Edina
• Heavy mass near the street (like Trammell/Crow development at 5220 Eden Avenue - site of the
former school bus garage)
WHAT ARE THE FINANCIAL BENEFITS OF MIXED USE?
The City touts the following benefits with Frauenshuh’s plan:
• A community center, parking, and green space.
• Revenue from the sale of the privately developed portion of the site.
• Tax revenue from the private development.
• The ability to use the sale revenue and the the future tax revenue to help pay for the community
center, green space, and public parking.
• The private development helps keep the area active 24/7.
LET’S TAKE A LOOK AT EACH OF THESE POINTS
A COMMUNITY CENTER, PARKING AND GREEN SPACE
• A community center has not been officially defined.
• One of the City staff concerns stated is “City readiness to design, build, and operate 30,000 Sq Ft
future civic building.”
• Risk that 100% of the land will become privatized due to lack of a plan, action, or political will by
the City.
• The parking does not belong to the City (but will be maintained by the City.
• The green space is not owned by the City.
• The green space planned is not significant and will not be perceived as being for public use, similar
to the Grandview Square Green.
REVENUE FROM THE SALE OF PROPERTY
• The purchase price being considered would yield $2.989M to the City, not a significant amount.
• This amount is under the current market (i.e. the city is giving the developer a too favorable price
on the sale of public land) and will not make a significant contribution to the construction of the
art center.
TAX REVENUE FROM THE PRIVATE DEVELOPMENT
• Having mixed use development does not “put the land back on the tax rolls.”
• Tax benefits are not seen for 26 years.
PRIVATE DEVELOPMENT KEEPS THE AREA ACTIVE 24/7
• How would the site be more active with private residences than with a publicly used facility that
would be open most of the 24 hour day? A true community center would have use from early
morning through approximately 11:00 PM seven days a week.
WHAT IS WRONG WITH THIS MIXED USE PROPOSAL?
NO TRUE BENEFITS TO RESIDENTS
• The land does not go “back on the tax rolls” for 26 years.
• There is no demonstrated need for district parking; the City-owned Jerry’s ramp is under
utilized.
• We don’t own the green, which is smaller than a football field.
• We don’t own the parking, but will maintain it.
NO SOLID PLANS FOR A CIVIC BUILDING
• Hesitancy of City to commit to civic building.
• Risk losing the 35% of the site the City would own.
• Leaves no room for future civic growth.
NO WALKABILITY IMPROVEMENTS
• This plan does nothing to improve walkability.
• Grandview Framework calls for a “more vibrant, walkable, functional and life-filled place.”
This project meets none of the Franework’s place-making objectives.
• The density and proximity to street are not pedestrian friendly.
DEPLETES GRANDVIEW TIF FUNDS 100%=LOSS OF LOCAL IMPROVEMENTS
• Vernon Avenue intersection
• This intersection is already congested and dangerous.
• The addition of the Caribou/Einstein drive-through will exacebate the safety and
congestion.
• New street from Eden Avenue to Jerry’s Foods
• This is needed for the safety of pedestrians.
• Affects seniors that live in Grandview Square.
• Affects library visitors.
• Acadia Avenue improvements
WHAT IS WRONG WITH THIS MIXED USE PROPOSAL?
IT DOES NOT REFLECT WHAT RESIDENTS WANT OR CITY POLICY
• Apartments were the LEAST favored use of the site in City-paid surveys.
• Majority of residents (61%) believe public land should not be sold.
• Majority of residents believe public land should be used for public purposes only (66%).
• Comprehensive plan states that we should not sell any park or open space currently owned by
the City of Edina.
RISK
• There is currently no market failure for market rate apartments in Edina.
• Future market is more uncertain:
• June Finance and Commerce article forsees the apartment market slowing down, forcing
landlords to reduce rents and make concessions to get new residents.
• Edina and surrounding area apartments have considerable vacancy rate - see
https://bit.ly/2lps6Gd.
• Possible construction crash due to increased cost of building materials from government
tariff policies.
• Potential impact to City credit rating.
WHAT IF? WHAT IF THE FORMER PUBLIC WORKS SITE STAYED 100%
PUBLIC?
HOW RESIDENTS BENEFIT:
• 100% ownership of the site.
• Preservation of a rare resource - Edina has no other centrally-located public land available.
• Land space to use for less-expensive surface parking.
• The ability to build a civic building with the space and opportunity for future expansion.
• Resident voices are heard and heeded. HOW THE CITY COUNCIL BENEFITS:
• Provides a forward-looking plan for the future of public land.
• Conformance with data gathered by City-paid consultants.
• Residents feel heard.
• No battle from residents regarding development.
THE COUNCIL SHOULD CONSIDER WHAT RESIDENTS SAID THEY WANTED
Hello,
I am asking for urgency in your response to this matter.
There are strong indications that you intend to enter a private development partnership with
Frauenshuh for the former public works site.
I am asking you to stop movement on that plan and consider the attached proposal for the site.
>>> I would like to meet with representative Council members before the June 28 meeting to
discuss this proposal.
The Frauenshuh plan clearly illustrates that the site is not large enough for a mixed-use
development plan. The plan clearly does not create:
A central commons on the Public Works site with indoor and outdoor public
space that connects the civic cornerstones of the District and serves the
neighborhood and community needs.
- Grandview Framework
There is nothing in the plan that meets the greater community needs. Similar to the $62M you
have spent on sports facilities that serve a narrow segment of the population, this plan will not
serve the needs of our neighborhood or community. And, the public gets VERY LITTLE in return.
This plan does nothing to provide a solution to services that are sorely missing in the
community: a place to connect residents across generations, connect groups with different
cultural backgrounds (i.e. consider the diversity study), provide teens a safe place to gather, or
integrate seniors into larger community.
I ask that you put aside your personal biases and preferences and consider the long-term future
for the neighborhood and community – there is no need to implement Frauenshuh’s plan just to
get something done.
Let the residents develop and present a proposal for the property. It is public property and
should stay as such.
I look forward to hearing from you.
Thank you for your service and consideration of this matter.
Stephanie Mullaney
952-925-1569
stephaniemullaney@comcast.net
Attachments:
Proposal for a citizen-led task force to complete a plan for the site.
Note: The completed Grandview small area plan consolidation of findings
document is available upon request.
A document that outlines why the Fraunenshuh plan should not move forward
1
Sharon Allison
From:Ryan Browning
Sent:Monday, June 25, 2018 2:32 PM
To:Sharon Allison
Subject:form
From Redevelopment Overview, updated June 25, 2018
June 28, 2018 HRA meeting
My comments and questions in red
NOTE: the document uses the term “City” throughout. Is that accurate, or are some elements
likely to be owned/maintained/operated/executed by the HRA? Please clarify.
Project Description
• Subdivide into two parcels – North (1.16 acres) and South (2.13 acres) 5146 is currently
comprised of three parcels. Which parcel(s) would be subdivided? Or will the boundaries of the
parcels be redrawn? If subdivided, the developer could owe $5,000 per unit in park dedication
fees -- $715,000. Park land may also be dedicated. If I am reading city code right, it requires city
ownership of the dedicated parkland, and also that it be a dedication of land (not a surface on top
of a structure). Please clarify.
• South Parcel to include
o 2.13 acres
o 143 residential apartments
_ 10 percent priced at 50% AMI affordable rates
o 172 private stalls for residents (1.2 per unit)
o 40,000 Sq Ft public green space At the corner of St. John’s and 60th, there is a public green
space that is .94 acres – .2 acres larger than the civic green space being proposed. Please go look.
Does the size match your vision of an outdoor community gathering space at Grandview? Is the
size adequate for the type of programming you envision?
o Pedestrian bridge #1 across RR tracks Has RR been approached about this? If yes, what is the
status of discussions? What are challenges?
o $41.8 million estimated cost
• North Parcel to include
o 1.16 acres
o 160 stalls of District parking
_ 20-30 available to apartment residents
o 30,000 Sq Ft future Civic building
o Shared street/loading drive/woonerf to edge of RR track RR track or RR property line?
o Pedestrian bridge #2 across RR track Same question as above.
o $24.2 million estimated cost (includes City & Developer costs)
• Constructed in two phases
o Phase 1 begins Spring 2019
_ Completion Summer 2020
_ Includes residential, private parking, public parking, green space and
buildable “pad” for future civic building
o Phase 2 begins as early as Spring 2021
_ Completion 12-14 months later
Overview of Public / Private Arrangement
1. Sales Transaction
• City to sell 3.3 acres
• Simultaneously, City would buy back North Parcel (1.16 acres) Is this accurate? Would the city
buy back land? Or would the city be buying an easement or right to build on the parking
structure? Please provide clarity on this.
• Developer to retain right-of-first-refusal on North Parcel
o Can buy North Parcel for pre-established price if City does NOT construct
future civic building within 3-5 years Which is it? Three or five?
• Price contingent upon:
o TIF to reimburse for public elements (green roof and District parking)
o HRA loan to support 10% affordable units
2. Ownership Structure
• Developer to own land and Phase 1 infrastructure improvements
• City to own “pad” above District parking and air rights to construct future civic building Does
owning the “pad” involve owning anything physical – for example, the roof of the parking
structure? Or is it an easement or some other type of legal agreement?
• City to hold public easement on 0.92-acre green roof Terms TBD
• City to hold public easement on District parking structure Terms TBD
• Developer to have lease rights to 20-30 stalls in District parking Plus a fee to operate/manage
the parking facility?
4. Maintenance Responsibility
Residential Building
Although there is a general outline of maintenance responsibilities, details – and any
ongoing/future costs to the City or HRA – appear TBD.
5. Operations/Management Responsibility
Residential Building
The developer will operate/manage the district parking for a fee. What is the fee? What is the
source of revenue to pay the fee?
City will operate/manage the green roof. What is the source of revenue to pay ongoing/future
costs?
It is clear that this deal generates costs to the City/HRA that are not known and the need to enter
into additional agreements, such as shared maintenance agreements, that have not been defined.
Civic Building
District Parking
Financial Overview
1. Purchase Price & Term
• City to sell 3.3 acres for $4.589 million According to Zillow, EPS sold the 1.7-acre former bus
garage site for $4.737,500 last year. The former public works site is almost twice the size but is
being sold for less. Why? What were the city’s appraisals for the property? If higher than the
negotiated sales price, is the HRA writing down the price of the land? If yes, why and shouldn’t
there be transparency on that fact?
• Simultaneously, City would buy back North Parcel (1.16 acres) for $1.6 million What exactly
is the City (or HRA) buying? Actual land, the top of a parking garage? The right to build on top
of the parking garage? If not buying back actual land, please be clear with the public on that fact.
• $2.989 net proceeds to City
o $1.4 million per acre Compared to the school district’s $2.78M per acre.
o $20,902 per residential unit
• City/HRA would loan $1.2 million toward affordable housing Is this the best way to spend
affordable housing funds?
• City/HRA would pledge $10.47 million in TIF revenue to support public elements Public
elements that the public does not own. Be clear that this does not include the civic building,
woonerf, and that it leaves no TIF funding for identified infrastructure improvements in the area.
It buys a roof of one parking garage that can be used as an outdoor civic space (elements of
which cannot be paid for with TIF, so where if that funding coming from). It buys the right to
build on top of another parking garage. Funding for that building TBD. It buys an easement to a
parking garage that may not be needed (depends on whether civic building is constructed,
because there is no demonstrated need for district parking – the public ramp behind Jerry’s is
underutilized), that the developer will manage for a fee. The public has been told that 60% of the
site will remain public. That statement needs an asterisk and paragraph long explanation. As of
now, with current information, it appears that the public will own no land at 5146 Eden Avenue,
and no structure built directly on land. The HRA is selling 100% of the site, seemingly for well
under market value. Since this is an unnecessary deal, it is not a good deal for the public. Edina
does not need to privately develop this site.
Please address the above questions and issues. Thank you.