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ci( v j°'° :: Y f *4 ceaaaek <br />515 Little Canada Road, Little Canada, MN 55117 -1600 <br />(651) 766 -4029 / FAX: (651) 766 -4048 <br />Email: cityhall@ci .little- canada.mn.us <br />MEMORANDUM <br />TO: Mayor Fahey & Members of the City Council <br />FROM: Joel Hanson, City Administrator <br />DATE: March 23, 2001 <br />RE: Rice Street/Little Canada Road Redevelopment Issues <br />MAYOR <br />Michael 1. Fahey <br />COUNCIL, <br />Beverly Sealze <br />Jim LaValte <br />Matt Anderson <br />Rick Montour <br />ADMINISTRATOR <br />Joel R. Hanson <br />Staff has been working with R. A. Morton & Associates regarding the possible construction of a 30,000 <br />square foot office building at the NE corner of Rice Street & Little Canada Road. This exercise has <br />helped me to understand why redevelopment is so difficult to do. Some of the key issues we have learned <br />are as follows: <br />• Low cost land (free) does not guarantee a deal is economically doable. <br />• New office buildings (Class B or better) need to generate rents of at least $15 per square <br />foot. <br />• Our market is a tough office play. Many will say rents can not exceed $12 per square <br />foot. <br />• There is not a lot (virtually none I am told) of similar space available to draw <br />comparisons to. (With low rents, it isn't hard to understand why.) <br />• Being innovative in the market means high risk. <br />• One project by itself does not excite people. They want to know there is the potential for <br />more. <br />• Surrounding properties can have a detrimental effect. <br />We received a revised proforma from the Developer. (I am attaching their transmittal letter, project <br />budget, and expected cash flow projections for your review.) The concept as outlined as a number of <br />issues that are unacceptable to the City. Rather than focus on our concerns with this specific proposal, <br />Rusty Fifield and I would like to use it to illustrate the issues we face in developing this site. Some of the <br />points of discussion will be: <br />1. Explain the economic issues of this property <br />2. The likely need for subsidy or other City financial infusion to make the project work. <br />3. City financing of the project as an option. <br />4. City development of the project as an option. <br />5. Other possibilities. <br />I believe there is still potential with R.A. Morton to achieve a project. There may be some other options <br />that are workable too. We will be prepared to discuss this matter in greater detail at Wednesday's <br />workshop. <br />Cc: Rusty Fifield <br />