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EHLERS <br /> • & ASSOCIATES INC <br /> OTo: Mike Morrison, City Manaager <br /> 2 From: Mark Ruff,Financial Advisor <br /> W Jim Prosser,Financial Advisor <br /> Subject: Culver's Request for Assistance <br /> Date: April 9, 2002 <br /> Ehlers&Associates has completed a review of the request for assistance with the development <br /> of the Culver's restaurant on the site of the former Hardee's restaurant and the Exhaust Pro's <br /> building on Silver Lake Road. Julie Chien and Steve Sparks are the applicants and would own <br /> the restaurant at this location. They have represented that assistance is necessary due to <br /> extraordinary development cost including site acquisition, relocation, site preparation and <br /> demolition. These expenses are considered qualified redevelopment expenses. <br /> The assistance requested is the sale of the City owned Hardee's site, cleared for development by <br /> the City for$5,000. The City has purchased this site for$319,00,000. Culver's has extended an <br /> offer to purchase the Exhaust Pro's site for$335,000. <br /> • The applicants have provided Ehlers with a project pro forma for this development including <br /> estimated land costs. The project pro forma includes estimated land acquisition of$654,000 for <br /> a site of 58,750 square feet. This represents a land cost of$11.13/square foot. Project costs <br /> appear to be reasonably estimated,based on a review of similar projects by other developers. <br /> The applicants report the rate of return for this project without assistance would be 4% and with <br /> assistance of$314,000 land write down the rate of return would be 11.6%. A typical rate of <br /> return for this type of project would be 12%tol4%. This information and analysis supports the <br /> use of assistance. Ehlers did review this information provided by the applicants. However, since <br /> the property will be owned by the applicants a typical rate of return analysis Ehlers did not rely <br /> solely on this rate of return analysis. <br /> As substitute measure on need, Ehlers reviewed the land cost for this type of development with <br /> other similar developments. Generally, it appears that businesses of this nature would support a <br /> land cost of approximately$5.50 - $6.00/square foot for land. The applicants have provided <br /> Ehlers with a project pro forma for this development including estimated land costs. The project <br /> pro forma includes estimated land assembly related cost of$654,500 for a site of 58,750 square <br /> feet. This represents a land cost of$11.13/square foot which is significantly higher that the <br /> typical land cost for this type of development. If assistance is provided the effective cost of land <br /> is estimated at$5.79/square foot. Therefore,the assistance requested will provide for a land <br /> payment within the range developers typically pay for land for this type of use. <br /> • <br /> LEADERS IN PUBLIC FINANCE <br /> 3060 Centre Pointe Drive 651.697.8503 fax 651.697.8555 <br /> Roseville,MN 55113-1105 jimpehiers-inc.com <br />