Blake Road Station Financial Assistance; Elverum
CITY OF HOPKINS
Memorandum
To: Honorable Mayor and Council Members
Mike Mornson, City Manager
From: Kersten Elverum, Director of Planning & Development
Date: July 13, 2021
Subject: Blake Road Station Financial Assistance
_____________________________________________________________________
PURPOSE
The purpose of the discussion at the July 13, 2021, City Council work session is to
consider a financial assistance request from Trilogy for the Blake Road Station
development. Specific considerations include:
• What is the financial assistance request from Trilogy?
• Is the assistance necessary for the project to move forward?
• What is the appropriate level of assistance and what are the recommended
terms?
INFORMATION
The Blake Road Station project is the redevelopment of 7.4 acres of land located at the
intersection of Excelsior Boulevard and Blake Road South. Trilogy Real Estate Group
has proposed to develop the site in a three-phase, multi-modal transit-oriented
development adjacent to the Blake Road Southwest LRT Station. Each phase will build
upon the improvements of the previous phase and will ultimately result in an
increasingly connected, pedestrian friendly, and transit-focused community.
The project will add to the mix of housing choices for area residents, providing a new
opportunity to live immediately adjacent to the light rail transit station. The development
also includes some retail space, with tenants yet to be identified. The development will
substantially increase the taxable market value of the property. The first phase alone
will result in an estimated annual increase in local property taxes from $28,000 per year
to approximately $456,000.
The expectation has been that this development proposal would not rely on a City
financial subsidy and therefor conversations have not focused on what community
goals could be achieved through financial participation by the City. However, over the
time it has taken to put the project together several factors have caused an increase in
project budget to the point the developer has indicated it is not financially feasible
without City assistance.
PLANNING & ECONOMIC
DEVELOPMENT
What is the financial assistance request from Trilogy?
Trilogy Real Estate Group has submitted an application to the City of Hopkins for
financial assistance to support the Blake Road Station development. The request is for
$1.831 million for the first phase; $7.758 million for all three phases. There are several
factors that have contributed to the financial gap in the project including environmental
remediation, escalating lumber costs, design changes and other project changes. The
specific request is as follows:
Environmental and Demolition Grant(s) are requested as the work & costs associated
with abatement of regulated materials, remediation of contaminated soils and the
resulting additional building controls and construction premiums added to the funding
shortfall. Non-City grant opportunities were pursued and a $340,521 Environmental
Grant from DEED was awarded to the project.
Park Dedication Fees:
Currently the intention is not to re-plat, therefore not triggering park dedication fee
collection. Replating may be beneficial at a later time and allow for the conveyance of
the interior site improvements and conformance with established zoning requirements.
The request is to hold park dedication fees at current rates to ensure later development
phases are not further burdened.
Traffic Signal at Pierce Avenue
The applicant wants assurance that they will not be responsible for any aspect of the
installation of a traffic signal at the intersection of Pierce Avenue and Excelsior
Boulevard, if one is warranted in the future.
Rent Subsidy for Retail:
The subsidy will assist the development to sustain the retail component and lower rents
for create community serving retail. At the City’s request, retail has been added into the
program for Building A (previously only Site B had a retail component). Building C is
currently not programmed to have a retail component as, determined by a retail study
conducted for the development, a lone retail use was not viable.
Is the assistance necessary for the project to move forward?
City staff, and our financial consultant, Ehler’s, believe that some additional financial
assistance is necessary for the project to move forward (see attached memo.) It is
staff’s recommendation that the basis for the assistance be tied to the environmental
remediation necessary for development. The City and developer were successful in
obtaining a clean-up grant through DEED totaling $340,521, but were not successful in
applications to Hennepin County and the Met Council. The total costs of remediation,
demolition and related costs for phase I are $1,111,188, leaving a balance of $685,000
after adjustments are made.
Providing assistance to the developer for these costs will bring the site into a level field
as greenfield sites or sites without significant environmental issues, and staff supports
assisting with the environmental clean-up costs.
The developer and the City of Hopkins will pursue environmental clean-up funds for
phase II and phase III, estimated to cost $1.95 million. If they are not successful in
obtaining grant funds for the total cost, less required developer match, the developer
has requested City assistance to bridge those potential future gaps. Staff is supportive
of assistance for future environmental costs, if needed.
Currently Park Dedication Fees are $3,000 per housing unit constructed and 5% of the
value of the commercial space. Staff supports capping the park dedication fee at
today’s rate in order to eliminate the unknown impact of future increases which are
possible given that park dedication fees have not been increased for several years and
are currently being analyzed for an increase.
The Traffic Impact Analysis referenced in the Environmental Assessment Worksheet
notes a traffic signal to be installed to mitigate delays at Excelsior Blvd and Pierce Ave.
It further details that the signal requirements will occur with omitting the proposed
development from the analysis. The signal is recommended to be installed by 2030 and
expected to provide benefit to the transit lines and commuter traffic that will use Pierce
Avenue to access bus stops and the Green Line Extension. The city can give
assurances that the traffic signal and related infrastructure costs are not to be assessed
in part or whole to the Trilogy project.
The retail subsidy was a new concept that has not been previously discussed with the
developer and the benefits to the community are not understood at this time. The first
phase of construction, which is the only phase of the project that is being considered for
site plan approval, only has 2000 square feet of retail space which is anticipated to be
leased at market rates.
As the second and third phases of the development are brought forward for site plan
approval, the developer may revisit the opportunity to work with the City to shape a
development that meets community goals and as a result, revisit a request for
assistance for affordable commercial space, as it is merited.
What is the appropriate level of assistance and what are the recommended
terms?
Based on the information provided, it is staff’s recommendation that the City, through
the Housing and Redevelopment Authority, provide a forgivable loan to the developer of
$685,000 for phase I and a commitment for future phases with conditions that will be
identified in the agreement. Funds for the loan would be provided through excess Tax
Increment Financing (TIF) from the 2-11 TIF District. These funds are eligible
expenditures for redevelopment. It would also be conditioned on the project receiving
its land use approvals (the project will be presented to the Planning Commission and
City Council in July/August) and moving forward.
It is suggested that the loan would be forgiven after 10 years, but would be required to
be paid back if the property was sold or transferred within the 10-year period.
FUTURE ACTION
If the Hopkins City Council is supportive of providing public financial assistance to the
development, staff will work with the developer and City Attorney to draft a development
agreement outlining the terms suggested through the work session discussion and
bring it back for future action.
MEMORANDUM
TO: Kersten Elverum – Director of Planning and Development
FROM: Stacie Kvilvang - Ehlers
DATE: July 13, 2021
SUBJECT: Trilogy Request for Assistance
Trilogy is planning on constructing approximately 770 apartment units and 11,000 sq/ft of retail at corner of Blake
Road, Excelsior Boulevard and Pierce Avenue. They initially requested approximately $13.9 million in TIF
assistance for environmental clean-up, site preparation, commercial lease subsidy and parking for all three
phases of the proposed development. They revised their application and are now requesting $7.758 million.
Staff recommendation is to address the gap in environmental clean-up and demolition costs for the three phases.
The amount of assistance would be net of any current or future grants received for these costs and based upon
review of future proformas to determine if assistance is warranted on those phases. Based upon estimates
provided by the Developer and their environmental/demolition consultants, these costs are approximately $3.1
million as noted in the table below.
Trilogy intends to move forward with Phase I this year, which consists of approximately 220 apartments and
2,000 sq/ft of retail. The costs associated with environmental clean-up and demolition are detailed below:
The City and Trilogy applied for grants from Hennepin County, DEED and Metropolitan Council to cover these
costs. The City only received grant funds from DEED in the amount of $340,521, which is $770,667 less than
the total costs. Staff reviewed the costs not covered by the grants and determined that the City could provide
$685,000 in up front assistance to cover these redevelopment costs. The remaining difference of $85,667 is to
be paid by the Developer as noted in the table below:
Phase Demo Env Pre Dev Env Total
I 360,000$ 642,560$ 108,628$ 1,111,188$
II 375,924$ 835,256$ 26,500$ 1,237,680$
III 647,405$ 91,304$ 11,900$ 750,609$
TOTAL 1,383,329$ 1,569,120$ 147,028$ 3,099,477$
Use Amount
Pre-Development Environmental Work 108,628$
Contaminated Soil Removal 66,600$
Remedial Action Plan Implementation 60,000$
Vapor Mitigation 215,800$
Asbestos Abatement 125,160$
Demolition 360,000$
Stormwater System per MPCA 170,000$
MPCA Fees 5,000$
TOTAL 1,111,188$
The environmental and demolition costs for Phase II and Phase III total approximately $1.95 million ($1.2 million
and $750,000 respectively). The City and Trilogy intend to apply for grants for these
Phases as well, but if unsuccessful, Trilogy is requesting that the City provide up-front assistance for these costs,
just like in Phase I.
The funding source for these costs will come from TIF District 2-11 (Super Valu), which is a redevelopment TIF
District that the City/HRA has cash available for use on qualified redevelopment expenditures like these (these
are restricted funds per State Statute and can only be used for qualified purposes). The District currently has
enough funds in the account to pay the $3.1 million in costs as they arise, without impeding the City from having
dollars available for other qualified redevelopment purposes in the future.
Overall, investment of $3.1 million into the various Phases will net significant returns to the City in the form of
future tax base and taxes. Currently the pay 2021 taxable value of the three parcels is $6.93 million and
generates approximately $252,000 in annual taxes, of which the City’s portion is approximately $63,000. Upon
completion, the value of each Phase and future City portion of taxes is noted in the table below:
As shown, Phase I will provide approximately $456,000 in annual taxes to the City (currently receiving only
$28,000) and all Phases combined will be approximately $1.6 million. This is an overall increase of 2,600% in
valuation growth.
Based upon these factors and preliminary “high level” review of the development proforma, the request is
reasonable and will not unduly enrich the developer.
Please contact me at 651-697-8506 with any questions.
Source Cost
Environment Remediation/Demolition 1,111,188$
DEED Grant (340,521)$
Net Costs Not Funded By Grants 770,667$
Developer Paid (85,667)$
Net City Contribution 685,000$
Total Taxable
P hase Sq Ft/Units Market Value
1 220 53,900,000
2 250 61,250,000
3 300 73,500,000
TOTAL 770 188,650,000
Future Taxable Value
City County School Total Local Mk Value
Portion Portion District Taxes Taxes
Phase I Apt $455,886 $257,440 $178,396 $62,221 $953,942 $77,390 $1,031,332
Phase II Apt $518,053 $292,545 $202,722 $70,705 $1,084,025 $87,943 $1,171,968
Phase III Apt $621,663 $351,054 $243,267 $84,847 $1,300,831 $105,531 $1,406,362
TOTAL $1,595,602 $901,040 $624,384 $217,773 $3,338,798 $270,864 $3,609,662
Tax Calculations
New Use Misc TOTAL
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1010 1st Street South • Hopkins, MN 55343 • Phone (952) 935-8474 • www.hopkinsmn.com
APPLICATION FOR PUBLIC FINANCING
Applicant Information
1. Applicant Name: TF Hopkins, LLC, a Delaware limited liability company
(Name should be the officially registered name of the business entity.)
Address: 520 W. Erie Street, Suite 100, Chicago, IL 60654
Telephone: (312) 750-0900 Email Address: tbiere@triologyreg.com
2. Name of Person Completing the application: Justin P. Weinberg, Taft Stettinius
& Hollister LLP
Address: 2200 IDS Center 80 South 8th Street, Minneapolis MN 55402
Telephone: 612-977-8780 Email Address: jweinberg@taftlaw.com
3. Names and Addresses of Architect, Engineer, and General Contractor for this
project:
Attorney Name: Justin P. Weinberg, Taft Stettinius & Hollister LLP
Address: 2200 IDS Center, 80 S 8th Street, Minneapolis, MN 55402-2157
Telephone: (612) 977-8780 Email Address:jweinberg@taftlaw.com
Architect Name: Elness Swenson Graham Architects, Inc
Address: 500 Washington Ave S, Minneapolis, MN 55415
Telephone: (612) 501-0308 Email Address: heather.whalen@esgarch.com
Engineer Name: Kimberly Horn
Address: 767 N Eustis St #100, St Paul, MN 55114
Telephone: (651) 645-4197 Email Address: trish.sieh@kimberly-horn.com
General Contractor Name: TBD
Address:
Telephone: Email Address:
4. If the applicant is a corporation, please name officers, directors, or stockholders
holding more that 5% of the stock of the corporation. If the corporation is not
formed, provide as much information as possible concerning potential officers,
directors, or stockholders:
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Applicant is a single member Delaware limited liability company.
4a. If the applicant is a general partnership, name of the general partners and if a
limited partnership, state the general partners and limited partners with more than
5% interest in the limited partnership. If the partnership is not formed, provide as
much information as possible concerning potential officers, directors or
stockholders.
N/A
4b. Has the applicant ever been in bankruptcy? If yes, please describe the
circumstances.
Yes (please Explain):
No: X
4c. Has the applicant ever been convicted of a felony? Is yes, please describe the
circumstances.
Yes (please Explain):
No: X
4d. Has the applicant ever defaulted on any bond or mortgage commitment?
Yes (please Explain):
No: X
Project Information
1. PID#’s, legal description, address, and size of project site:
PID#: Parcel 1: 1911721420044, Parcel 2: 1911721420045, Parcel 3: 1911721420046
Address:
· Parcel 1: 1009 Hill St, Hopkins, MN
· Parcel 2: 8594 Excelsior Blvd, Hopkins MN, 55343
· Parcel 3: 8490 Excelsior Blvd, Hopkins MN, 55343
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Legal Description:
· Parcel 1 - Lot 1, Block 1, Hopkins Commerce Center Addition, Hennepin
County, Minnesota. Registered Land -Certificate of Title No. 866673.
· Parcel 2 - Lot 2, Block 1, Hopkins Commerce Center Addition, Hennepin
County, Minnesota. Registered Land -Certificate of Title No. 866674.
· Parcel 3 - Lot 3, Block 1, Hopkins Commerce Center Addition, Hennepin
County, Minnesota. Registered Land -Certificate of Title No. 866675.
Size of Project Size (Acres): 7.4 Acres
2. Current ownership of the site: Hopkins Commerce Center LLP; Michael Launer, 7000
Gleason Rd, Edina, MN 55439
3. Do you have current control of the site:
Yes: X
No:
4. Project description.
The Blake Road Station project is the redevelopment of 7.4 acres of land located at the
intersection of Excelsior Boulevard and Blake Road South in Hopkins, MN. Trilogy Real
Estate Group is working with the City of Hopkins to develop the site in a three-phase,
multi-modal transit-oriented development adjacent to the Blake Road Southwest LRT
Station. Each phase will build upon the improvements of the previous phase and will
ultimately result in an increasingly connected, pedestrian friendly, and transit-focused
community. The project will add to the mix of housing choices for area residents,
providing a new opportunity to live immediately adjacent to the light rail transit station.
5. If property is to be subdivided or replatted, please describe.
Yes, currently planning to replat once phase III of the project is complete.
6. Estimated project costs: (Please enclose detailed sources and uses, unit count with
rents and sq/ft, detailed operating expenses and 15-year operating Pro Forma).
SEE ATTACHED EXHIBIT
7. Source of Financing
SEE ATTACHED EXHIBIT. In addition, to support retail tenants, the City
must provide either a rent subsidy, grants or low-cost financing the bridge a
gap of market rates and the rates needed to sustain the project. That gap is up
to $19.00 per square foot. Such funding can be provided directly to the
landlord; or, to the tenants.
8. Project Construction Schedule:
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Phase 1: August 2021 – April 2023
Phase 2: Spring 2022 – Fall 2023
Phase 3: Depending on current tenants exercising options, 2026-2027 or 2031-
2032.
9. Total Estimated Market Value of Project upon completion
Phase 1: $68,568,744
Phase 2: $82,612,497
Phase 3: $100,221,505
10. Please indicate whether or not the project meets one or more of Hopkins’ Eligible
Uses as identified in section 4.01 of the City’s Tax Increment and Tax Abatement
Policy (identify eligibility and state reason):
Yes, the project will meet the Eligible Uses. Those would include, without
limitation, redevelop blighted or underutilized areas of the community; promote
neighborhood stabilization and revitalization by removal of blight and upgrading
in existing housing stock; removal or blight and encouragement of redevelopment
in a commercial and industrial area of the City to encourage high levels of
property maintenance; increase in local business potential; and, acceleration of the
development process and achieve development on ths site that would not be
developed without this assistance. The last point cannot be emphasized enough –
this development must have assistance in order to meet market viability.
11. Will any public official of the City, either directly or indirectly, benefit from the
issuance of public assistance within the meaning of Minnesota Statutes, Section
412.311 or 471.87? If yes, please explain the circumstances.
Yes (please Explain):
No: X
Public Assistance Request
1. Amount of public assistance.
a. Grants, freeze of park dedication fees and no infrastructure costs for intersection.
2. Form of assistance.
a. Grants for the demolition, environmental and basement for building 1 – all as set
forth in the attachment.
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b. Applicant is requesting an abatement or forbearance of park dedication fees for an
indefinite period of time to allow for the future conveyance of the parcels; and, to provide
some flexibility to address future sites without any additional burden to the development.
c. Applicant will not be responsible for any aspect (e.g. design, permitting,
construction, costs), in whole or in part, for the traffic signal or related work at the
intersection of Excelsior Blvd. and Pierce Ave. Supported by the Traffic Impact Analysis
referenced in Exhibit C of the Environmental Assessment Worksheet prepared by Kimley-
Horn, which is attached hereto.
d. City would provide like-in-kind assistance for subsequent phases of the
development.
3. Describe the purpose for which public assistance (TIF, Tax Abatement, etc.) is
required.
Grants - demolition, environmental and basement in building
Park Dedication Abatement/Forbearance - offset the financial burden on an
otherwise economically unfeasible project.
Traffic Signal - offset the financial burden on an otherwise economically unfeasible
project.
4. Please submit an itemized list of project costs for which public assistance is being
requested.
See attached.
5. State specific reasons why, “but for” the use of public assistance, this project would
not be possible.
The project, which includes all 3 phases, simply is not economically viable without the
assistance. In addition, it should be noted that the Applicant is significantly reducing
its proposed fee in order to make the project viable. It was never the intention of the
Applicant to maximize both the public assistance and a development fee for profit.
Rather, there is a back office of more than 140 people and third parties working on this
project, who are paid from the developer fee. However, in recognition of the City’s
anticipated partnership with the Applicant through public assistance, the Applicant
is demonstrating its partnership and taking a share of the shortfall through this
reduced fee.
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Application Process
1. The following documents must accompany the Application:
A. A detailed sources & uses statement, unit mix with rents and sq/ft, detailed
operating expenses and 15-year project Pro Forma
B. Parcel Map depicting the proposed redevelopment area
C. Site plans and floors plans (as available)
D. Significant additional information may be requested at any time by the
City/HRA and may be in addition to the materials outlined in this application.
The Applicant shall be required to submit any and all information as requested
by the City/HRA.
2. Applicant acknowledges and agrees to pay the $1,000 Public Assistance Application
Fee and is non-refundable.
3. At the time of acceptance by staff of the Public Financing Application, the applicant
shall deposit $10,000 with the City/HRA to cover attorney and consultant costs
incurred as part of conducting any fiscal analysis that may be required to meet the
requirements of utilizing any public financing, drafting and negotiating a
development agreement, and establishing a TIF district or abatement. If additional
expenses are incurred beyond the $10,000, prior to the execution of a development
agreement, the City/HRA shall notify the applicant in writing and the applicant will
be required to deposit additional funds upon notice.
4. The Applicant shall hold the City/HRA, its officers, consultants, attorneys, and agents
harmless from any and all claims arising from or in connection with the Project or
Public Assistance Application, including but not limited to, any legal or actual
violations of any State or Federal securities laws.
5. The Applicant recognizes and agrees that the City/HRA reserves the right to deny
any application for Public Assistance at any stage of the proceedings prior to adopting
the resolution approving the public assistance, that the Applicant is not entitled to rely
on any preliminary actions by the City/HRA prior to the final resolution, and that all
expenditures, obligations, costs, fees, or liabilities incurred by the Applicant in
connection with the Project are incurred by the Applicant at its sole risk and expense
and not in reliance on any actions of the City/HRA.
The undersigned, a duly authorized representative of the Applicant, hereby certifies
that the foregoing information is true, correct, and complete as of the date hereof and
agrees that the Applicant shall be bound by the terms and provisions herein.
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TF Hopkins, LLC, a Delaware limited liability company
By: ________________________________________
K. Shaylan Baldwin, Secretary
Date:__________________________________
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ATTACHMENT 1
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ATTACHMENT 2
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