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8 <br /> EHLEF% � <br /> & ASSOCIATES INC . <br /> Q To: Mike Momson, City Manaager <br /> From: Jim Prosser <br /> W Subject: Walgreens/TOLD Request for Assistance <br /> Date: November 17, 2000 <br /> Ehlers & Associates has completed a review of the request from TOLD Development Company <br /> for assistance with the development of the Walgreens store at the northwest corner of Silver Lake <br /> Road and 37'Avenue. TOLD has represented that assistance is necessary due to extraordinary <br /> development cost including demolition, environmental clean up and geotechnical corrections. <br /> These expenses are considered qualified redevelopment expenses. <br /> TOLD has provided Ehlers with a project pro forma for this development. The project pro forma <br /> includes estimated extraordinary cost of$640,000 to address these issues. Other project costs <br /> appear to be reasonably estimated. The net rent projections appear to be at the high end of the <br /> market, but comparable to other Walgreens' leases. <br /> The rate of return for this project without assistance would be 8.13% and with assistance of <br /> $200,000 the rate of return would be 10.49%. Atypical rate of return for this type of project <br /> • would be 14%. This information and analysis supports the use of assistance. <br /> It is our understanding that St. Anthony Village is considering the use TIF generated revenue <br /> from an approved budget within an existing pre 1990 district to assist this project. Based on this <br /> information Ehlers recommend the following: <br /> ❑ The Business Subsidy Statutes (116J.993 Subd.3.17)provides that financial assistance is <br /> not a subsidy when the recipients's investment in the purchase of the site and in site <br /> preparation is 70% or more of the assessor's current estimated market value (EMV). The <br /> site includes two parcels. One parcel has an EMV for this site is $304,800,the other part <br /> of the site is a portion of another parcel. The portion of the parcel to be acquired has an <br /> estimated value of$120,000. The investment to purchase and prepare the site clearly <br /> exceed 70% of.this value. Therefore,the assistance provided would not be subject to the <br /> Business Subsidy Statutes: <br /> ❑ The agreement recording the assistance should include a requirement that TOLD <br /> document the expenses demolition, environmental clean up, geotechnical clean up, <br /> pilings, structural floor system,parking area soil convections, retaining walls, non- <br /> reimbursable tank removal and imported fill material (estimated at $640,000). The <br /> amount of assistance would be reduced by the amount of expenses less than$380,000. <br /> (This is the amount that would yield a 14% rate of return if all other project expenses are <br /> fixed.) <br /> • <br /> LEADERS IN PUBLIC FINANCE <br /> 3060 Centre Pointe Drive 651.697.8503 fax 651.697.8555 <br /> Roseville, MN 55113-1105 jim @ehlers-inc.com <br />