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<br /> <br />Memo <br /> <br />To: Mark Casey – City Manager <br />From: Stacie Kvilvang - Ehlers <br />Date: September 23,2019 <br />Subject: Doran Redevelopment – Terms of Assistance <br /> <br /> <br />Doran Companies submitted a TIF application for redevelopment of the former Walmart located at <br />3800 Silver Lake Road. They are in the process of obtaining City planning approvals for development <br />of the site into 464 market rate apartments. Total development costs are expected to be approximately <br />$115M. <br /> <br />They have requested various forms of assistance from the existing TIF District (3-5) and any SAC <br />credits that are available to the Site (47 credits totaling approximately $116,000). You have requested <br />Ehlers to review their TIF application and development pro forma to determine how much TIF, if any <br />is warranted. Below is a summary of our findings: <br /> <br />1. Extraordinary costs for redeveloping the site are estimated as follows, which could be TIF eligible <br />(per numbers provided by the developer): <br />Demolition of existing structures: $715,000 <br />Rebuild retaining wall: $512,000 <br />TOTAL $1,227,000 <br /> <br />Note: Land acquisition is not considered an extraordinary cost because the <br />overall price per unit is within market AND the developer negotiated the price <br />before any formal TIF application was submitted to the City. <br /> <br />2. Developer is deferring 100% of their developer fee ($4,250,000). These are at risk dollars <br />that are paid out of cash flow and it is estimated to take 7 years to be repaid. <br /> <br />3. Overall, Developer’s returns are below market (cash-on-cost of 6% - typical is 6.3% to 7% <br />and cash-on-cash of 3.6% - Typical is 10%, but still willing to do the project due to long- <br />standing relationship with the City and the site <br /> <br />Based upon our review of their development proformas, we are of the opinion that the project warrant s <br />$2.5 million in the form of a pay-as-you-go TIF note. This is 25% of the TIF generated (legal pooling <br />amount) from their project over the remaining nine (9) years of the District. In addition, the HRA can <br />provide them up front TIF assistance in the amount of $600,000 to assist with the cost of demolition <br />(current cash balance of approximately $900,000 in the District). Total assistance would equate to <br />$3.1 million. <br /> <br />We are reviewing shortfall payments that may occur for existing General Obligation Commercial Bonds <br />to determine what the potential impact the redevelopment will have (timing of demolition and <br />completion of construction of Phase I). The Developer is open to a minimum assessment agreement <br />(MAA) to assure the value for the property is maintained for a period of 1 to 2 years, as long as it <br />doesn’t significantly further impede the low returns he is already receiving. <br /> <br />Please contact me at 651-697-8506 with any questions.