Memo - Alliant Tech Property
Economic Development
MEMORANDUM
TO: Honorable Mayor and City Council
FROM:~~im Kerrigan
DATE: May 3,2001
SUBJECT: Alliant Tech Property
PURPOSE OF MEMO
For the May 8 work session, staff has scheduled a brief discussion of a possible project
for the Alliant Tech property. This memo can be used as an outline for that discussion.
The desired outcome from the meeting is to provide staff with some direction on how to
proceed.
OVERVIEW
Staff was recently approached by a group that is interested in a redevelopment project
for the Alliant Tech property. The project as discussed would involve the demolition of
the existing 537,000 square feet Alliant Tech building. This building would be replaced
by an approximately 140,000 square feet office/tech structure. They have stated there
would be a future phase (5 years), which could provide an additional 80,000 to 100,000
square feet.
The occupant of the building would be a bU,siness called SurModics, Inc., a fifteen-year-
old biotech firm that manufactures surface modification solutions for the medical device
industry. They are presently located in Eden Prairie and would continue to maintain that
building.
Jim/050201
Memo to Honorable Mayor and City Council, May 3, 2001 - Page 2
It is being suggested that Phase I of the project could be accommodated with surface
parking south of Second Street, with the acquisition of the Jackson Street commercial
properties. This would be to allow the potential development of the parking lots north of
Second for residential use.
Significant public assistance would be required to accommodate the scope of the
project as detailed above.
The timing for construction of this project would probably be 2003.
PRIMARY I.SSUES TO CONSIDER
Positive aspects of the project
Presently Alliant Tech and the Jackson Avenue properties pay approximately
$400,000 in property taxes. With completion of the Phase I proposed project and
construction of approximately 130 housing units on the property north of Second
Street, property taxes would be approximately $1 million (approximately $1.8
million with Phase II construction).
Would provide for upgrading of this area.
Would allow for the potential of increasing the Hopkins housing stock.
The Medica project would be able to gain access directly onto realigned Monroe
if buildings were removed.
Negative aspects of the project
There is a significant financial gap (approximately $5 million) that would need to
be filled to make this project feasible. This would have to be made up with public
financial assistance. Although some other governmental funding source might
be available, there is no guarantee that it would be secured.
· The Alliant Tech building has been well maintained, and although there are some
functional issues, with certain improvements staff feels it would be very leasable
property in today's market.
The City will be undertaking the east Hopkins land use and market study in the
near future. It is somewhat premature to undertake a redevelopment effort of this
type without the results of that study.
Complicates Medica project with vacation of Jackson. This would need to be
addressed in Medica plans immediatelv. This would be difficult because it would
be a fairly lengthy process to work out all of the various aspects related to this
project.
Jim/050201
Memo to Honorable Mayor and City Council, May 3, 2001 - Page 3
CONCLUSION
There are definitely some positive aspects relative to this project; however, various
issues have been identified in moving forward with this project at the present time. The
first issue is whether this is the highest and best use for this area. The upcoming land
use and market study is meant to address the future use of the property in this area and
how smart growth principles can potentially be incorporated. This study will not be
completed until approximately February of next year.
A second issue is the public financial assistance required. Even if other sources of
grant funds were available, a substantial amount of tax increment would be required.
With the Medica project, placing this property in a tax increment district would put well
over 20 percent of the total tax capacity in tax increment districts, which is getting up to
. a level where the City can be open to criticism. Staff feels that there will also be other
demands for TIF assistance in east Hopkins, i.e., commercial property north of Excelsior
Boulevard.
Staff feels that in the future, with the Medica project and the upgrading of Excelsior
Boulevard, the Alliant Tech/Jackson Avenue property will be a very desirable site for a
high quality redevelopment.
Attachment: SurModics Proposal.
Jiml050201
Ir
J
II
I
I,
I""',
~".' .
e.
· THE CASE FOR SURMODICS
'~J'
l. ....
'i
THE CASE
SurModics would respectfully request that the City of Hopkins consider participating in
the redevelopment of the Alliant property into SurModics Corporate Home. Following is
a suggested framework of how the economics could be structured. For. a the project to
be successful it will require participation from the Met Council. DTED. and a significant
reduction in the purchase price on the part of Alliant.
Purchase Price
Alliant Tech Site
Jackson Street Properties (Est. 140% Value)
T alai Price
Square
$ Footage
. $ 10,500,000 770,446
$ 1,350.000 74,096
$ 11,850,000 844.541
$ (1,500,000)
$ (500,000)
$ (1,690,000) (284,403)
$ (2,000,000)
$ (5,690,000) 560,138
$ 6,160,000 560,138
$ 3.080,759 560,138
$ 3,079,241
Credits:
Met Council Grant
DTED Grant
Sale ~esidentialland for Row Houses
Alliant Price Reduction
Total Credits
Adjusted Land Price
Targeted Land Price ($5.50 sf)
Gap P.A.Y.G TfF (For City to Fill)
Following are the amount of additional property
taxes necessary to make the TIF payments
Breakevenincr~asetaxes
15 Years, 7% interest
$ 167,422 semi-ann.
$ 334.845 annual
$ 144,192 semi-ann.
$ 288,385 annual
Breakeven increase taxes
20 Years. 7% interest
The SurModics development would generate $774,938 in new property taxes in Phase I
and $1,456, 696 in new property taxes in Phase II. These are new tax revenues over .
and above what is currently being paid.
I THE CASE
ALLIANT'S CURRENT STATUS
· 537,000 SF Building
Undervalued. The Alliant Land and Building are'valued at $7,167,000 'Or
$13.35 per square foot of building
Alliant property is Non-conforming (sold its parking for Parkside
Development)
o Requires 2,148 stalls (4 stalls/1 ,000 SF of building)
o Has 851 stalls
Alliant has a Purchase Agreement with C.S.M. Corporation
Conditioned upon e.S.M. developing Alliant a smaller headquarters facility
Purchase price is $10.5 million
Alliant appears to be flexible in purchase price due to C.S.M. developing
the new facility
If e.S.M. acquires the Alliant property the building will be reduced in size to
comply with parking requirements from 537,000 SF to 320,000 SF.
If values per square foot remained constant, the reduced building would se-e a
decrease in market value of $3.9 million and an annual decrease in property tax
payments of $131,052.
1
THE CASE
WHO IS SURMODICS?
SurModics is a local Medical-Tech company, with 135 employees whose average salary
is in excess of $50,000 Annually.
SurModics is the leading provider of surface chemistry coating solutions for the medical.
device industry.
SurModics had sales of $20 Million in 2000.
SurModics founder, Dale Olseth is a 40 year resident of Hopkins.
SurModics is traded on the NASDAQ and has a Market Cap Value of $800 Million.
SurModics needs to relocate
. Wants to create corporate campus
. Provide for next 20 years
. Would like to be in Hopkins
o ~Iose to existing facility (currently located in 1-169 and 74th Street)
2
THE CASE
WHY DO SURMODICS DEAL?
1) It is in the City of Hopkins, Hopkins School District, County and
Metropolitan areas' best interest to do so.
. Increases tax base from $8.1 million to $43.5 million (Phase 1)/ $60
million (Phase II)
. Avoids $131,052 annual decrease in property taxes when the
Alliant building is down-sized to conform to parking requirements
. Increases annual property taxes from $395,000 to $1,850,000
. Increases annual property taxes by $775,000 (Phase I) to
$1,456,000 (Phase II)
. Net, Net, Net gain in annual taxes after TIF payment of $440,000
(Phase I) to $1,122,000 (Phase II)
2) Anchor east side redevelopment
. Synergistic with Medica Development
o Coordinate traffic
o Attractive entrance
. Create Corporate Campus unique to Hopkins
3) "Livable Community Project"
. Add 130 units of "Owner Occupied" housing north of 2nd Street (row
houses beginning at $200,000)
3
c
o
tn
-t:
as
c.
E
o
o
G)
>
;;
as
c
a-
S
<C
f/I
.2 N
" CD 0)
OCl)O
:Ecuo
...c:N
::I a..
t()
en
~"""
"aQ)....
0(1)0
::ecao
....c:N
::sa..
o
....
c:
OJ
E
c.
o
(i)
>
OJ
C
....
r::
CD
E
:E g. CW)
0_0
O~~
CD
b
CD
a::
..c
u
CD-
I-i~
~l::g
~:'N
=0
:;(
o
o
o
N"
LO
N
00
('f')<X)
~<X)
ex>
o
('I)
o
o
o
ci
('t)
~
00
("i) <X)
co
o:i
o
("i)
000
000
000
000
vCOV
~~
000
000
000
N"r-:o
('t) v
LO
I.L
o
.!!
;;::
e
0-
~ men
5i ~~LL
Eo.::> en
g- .c CD e in Uj
CD ~ ~ 0. m "m
>l::oC:::3::J
~CI>.c~~~
o~~==;=
emooo
o~~cr::cr::
o
co
co
o
co
ID
o
co
co
a5
C")
~
o
o
o
,0
CD
C")
o
o
o
0;
.....
ID
LL
o
'ii
...
o
I-
CD
::I
'ii
>
o
o
o
c:i
N
o
~
('I)
000
ER-OO
00
00
ON
00
<00
N CD
ER- en-
o
o
o
o
LO
LO
....:
~
ER-
000
ER-OO
00
00
OlD
OlD
<O~
N~
~~
o
o
o
N
l"-
N
~
ER-
o
o
('I)
~
It)
(J)
ER-
o
o
LO
ex>
"l""'"
~
00
f:Ft
o
o
('I)
"l""'"
LO
en
ER-
en
m
1) 1::
~ m
:; a.
:EL:meen
~~a.m
t:OC::J
Q).cg~
o ~ ~ :>
.- to 0 ~
5~~~
o
o
C'?
~
N
N
.0
en-
o
o
CO
0;
et)
o
m
~
CD
::I
'ii
>
'ii
...
o
I-
r--.
(J)
('t)
<6
o
v_
"l""'"
r--."Il:I'
("i) C"')
~ ID
lO~
vlD
oo:;t co
ER- a
~
en-
f:Ft
00
('t)
<0_
"I;t
N
r--.
ER-
r--. CD
('I) .....
~ .....
1.0- 0;
vet)
V~
f:Ft a
~
-
o
o
o
N"
m
~
ffl
LO
<0
N
lO
('I)
f:Ft
('t)
r--.
LO
0)
LO
('I)
fA-
LO
<0
N
lO
('f')
ffl
.!
c
CD
E
~
<G
a..
)( UJ
as CD
..... 1::
w CD
a: g-
_.s=CI>L...en
caoUJa..m
~~5c::J
&:Q)~~~
II(OL..~~
S<<lO~
O~~~
CD
CD
CD
cD
ID
"'t
~
~
co
C'?
CD
~
.....
.....
M-
10
CO
N
...:
N
N
-
co
C"')
CO
~
CD
C"')
~
J!J
c
l>>
E
~
as
0-
)(
<G
t-
7i
...
o
I-
C")
.....
10
...:
CD
"I"'"
W-
I
o
-
f/I
f/I
o
..J
C
";
C)
~
o
-
('f')
LO
~
CO
Cl
......
C
-c
0.
~
u:
~
CO
~
C'?
C"')
W-
N
ID
~
~
N
~-
~
UJ-
~
~
C")
C")
UJ-
~
CD
o
o
1
~
:r-
ID
~
f/I
U
:s
o
E
...
:s
o
.s
~
c
CD
E
~
<G
c:a.
lL
i=
7i
=-
c
c
II(
en
CD
)(
<G
I-
~
CD
c:a.
o
...
a..
.5
c
"ii
C)
1:
z
7i
::I
C
C
II(
C
:J
o
E
CII 4l(
'ii
f/)
...
CD
at
>-
~
C--~o:::~~
o
N
CII
'0
z
c
o
5i5i~~
:;:;~5
~~olJ~
~~e~
olJolJ::IO
~~~~~
.5~~~~
e5i5iii
C1o~i~~
.s... CD CDCDCII
~E~~~~
..g 8 .E; .!: .E; .s
1ii3:~~~~
~z8.~8.8.
ii
o (J)~mvC">O)CIOo
8_"- Nr--C">OCtCO
r-: 0 (0_ _ <'>_ ..-_ o. co. cot ci
~20N(o""lX)ao~
:,;::(J).... C'i
xN ..,
CD
~
wwwwww**
(I)
u
:c
o
:E
..
::s
rn
2
a..
C)
.5
o 000000010
~ 8. at ~ g. ~ 5U~.::!
~'iii~m~~~Sit;..-
~~ <'>M.... ~
Ii
E
S
I~ wwwwww**
~!8 000 0 o~
e'iiio 000 0 0"-
....>,..; O_I'-_o_'~'l'o:.ci
~i~.g~IX)~ C"> !-
== iii~ .cr
4l( ::
fI)
4l(
wwwwww**
~ ooooooo~
;;- 8_~.~~_g_~.~~
r:::~~~~~~S;~
<<1...._ N ..- 1'0:.
.....- -
wutWWww**
~
!.
e
Do
tn
~:gC">.q-.q-v..-m
~",,:mre~~re~
l!:I~ci~ci"-"':.....
en
..-
00 0 0
00'0 0 (Wi
OOCII 0 in
o. .rJ '0 i.
v....::I ~
N.....'O
)(
CII 0
W W w E
Ci.
CION('/) \0 .!!
mOJ(J) (J) u:
~~~ (J)
.....
CII
,tIJS CD
-::I
::I 0 c
-50 :g
en= CD
CII Q.
~O ...
5im ,g
"0
3:g' CD
a51! OJ ell
c ::I
:=o...C "0
~~.!~~= CD
c
">.....o_..!!..!! 2
fi~~=SC;~ ~
c.....:l!:alcc C
~~-:oE~~ Q)
o .2 Cl/J g ?:-?:- 'C
.ii)
""iii:l!:~asas CD
cl,zou~~ ~
m....It)M(J)1X)1O C") 10 .... .
MCO....CONC">UJ t; v....
co....r--eol'-..-N ..... ci
ojr-:ai'.rJN ui tti ..-
C"> 10 (")
C")
~wwwwww- - utW
0
iOoooooo~ 0..... 0(") OM
OOOOOOOClO OCD 00 oeo
o O. 0_ 0_ O. O. C">. e1~ N 10" 10 . 0_ cri
~cn .C">
c::(")NOJOIVV.......... CIO 0 0....
...lOOaoCO(O 10 ..... (0 0
"oNNN.... m ..... CO 10
GJ oQ o.
>
"5
>
,5wutWWWW.,.'" -.,. WW ut0
en
atOOOOO 0 0 0
i 8_ g. g. g)~1_ 0 0 0
. 0 .... 0
a.N 01 (0 01..,. .0 ~ 0
OO(ON"-"- C") .... ~
...N~N"- .... ..-
a.. ui
UJ-wwwww'" .,. flit
OOOOOOOCD 00 o (J)
OOOOOOOCD 0(") 0(0
O_O.O.O.~~"1N ~N v.....:
..-<'>(")00..,.... ~ ;0
lOMMlO1O N
N m ..,.
~
wwwwww_.,. .,.- ww
C">
It)
co MIX) (J)........... CIO cD
CIO
CO....IOCDmMO C")
MNNMMOI'-
ocicicicici~ cri
...
to :iz
1; . Z GI GI Z Z Z zz
e e .. ~~ ~ .. ~ .. GO
en "0 1i ~ c c -< ~ -< ~~
"0 l! fi ! f C; C; c: c: C
4l( Cii '" ::I ::I 't:I 0 0 0 ~~ "
ii GI ID ID :!l i -B~ dI
~ ~~i c:
~ C ID .. ID .. g
N :I > > i .., ."...,.., =
0 CJI .. 1ft cD 0 ~re~8
0"- c::~o ~ c:
fO~ ::I N N '::I ..... ~ ~... ::I
J!C) J!'O i>>J LL LL
m~~~~8~.f :t~~~~~~.f 0- ~ ~~
!::S _S C/)tU
00000.... e 000000 e -0 as 0 00
000000 qooOOO -s~ ~.... g....
c.,!...,!....&-..&-..&-~ CIJ . . . I I CIJ
i ..-.,...-~~... ~
_MMC'\INNN ~~~~~~ I- ~ -
CL I I · · · , c
..- 'or- ~ .... ..- ....- !.! Iii ~
NNNNNN ::::. NNNNNN :s Gl
I . . I . I ~ ~~~~~~ <(
~~~~~~ 0:::
0 S iD
~or-.--.:-or-~ ~ ..- .- ..- ~ ..- T- ~
. . . . . . I . I . . I ii
~~~~~~ ~~~~~~ 0
~ en
Z....NC">'lfIOCO ....CDOI~::~ ~ ~
M
"HffY"I'" !FfQi~"I!:~4~lil
on e.tod.loJ WSJ
-- .
-DC~('llJ
,,d~fBJ~r; ri~ .1Wll
110 lIl;JIlQ13.HI .,.....rs.:' rrt:~1 I
\I.! III" I " 6 . .,
------
-:------~
I ~*~\_\_\_t\i-\-\-\-\ I
\ \m\\1ffiIt\-\\I1 \
\ _-~ I
~ _+ffi1-\-\-\ i . ~\
If - - J _+\1\1-\\-\ : I
, ~-\\t\\-\\-\\I1-\_\\t\\ \ :
I I . \
\ ~-\\\-\\\Ht\\-\\-\- \ ~ :
~ \t\f.\ or '" : ~ \
\ ~ ::._ \l'l
~ ~-\-t.\ it ~ . - ~ \
\JJJ..- . ~
\
I
\
\
~
~
5
lQ
~
i
i
).
~
;
~
aa;
iii
~
~
m
'"
~
~ Ii!
51 ~ 1&
~ ~ i II!
~ i ~ i~
CJ i 9i~ C/)
i: S2 5 ~ ~~
~ a: m ~ ~g
~~
a.:
~m
.o~
CS ~~
~ ::)11I
S
Ell
~"'i:I^"'C1
.. n ,. 1f:1 . .. J
MCl.......J:lt-y,.;'..
.. II "'.. II , (J
",6" 1:1" II '''d
(JOQI:l Jed 1:1 tIS 6l~'89 -8111:I ~)
3::>1:1::10 .
\.
I
L----------,
r - - -- - - -.- --4.
000' 'u: ,,~');CI
. 1 II 0
;U" ,..,'1HntoION
"1"M ,~~ ~ 00f
OoQl....tIo4?~ 1HYrrJrf'
. UJ II N . I" !.. I! n II
w
cni(
5$
J:~
~~
.~
-----------
J.33l:l!S NOS)l:)vr
I - N'<Ild 3lIS Q3S0dO!:ld
S~31SASH03.l1N'Vl1l'V ~ "'if
'0 Ii I' II 14 S
~I~
~.
~
.cn
g
en
It)
~
\___-----------------~ r---
, ' I
1 I I
\ \ \
I I I
I I I
\ \ \
I
\
\
.
~
o
I
~
~
-~
-,
I:
~1Il~
~~ pi~~
Il~i~ f- ~
lLo::o~F~ .
~ r ,
.a:t2 ·
~~
~O-
~J;
~L
+-
\
'"
.
-
0
0
0
~
-l
.4)
t!..
0 0
(f\ 0
~
-J
ll\ <)
\) 0
~ a
""
~ . <.
~!~- ~ ~~
~ 2(!)"Z.:> ~ ~~
~Q~~ <Wm
~-0~.V. u-'
f? ~ Lb(j\~ .(: ~ ~JL
'" '!.. ~ o...r. > \J ~
t ~~~~ Ii Etn-
~ ~.(: ~~. ~ .z::.. cz: ."
tb~- fA ~ 0-
~ 7LVz. i- ~ ~ c(
o \!) . otA z.. u~ i !:!
~ Z. ~ U\21 g () ~-
g Z\ii t~ ~Jl. ~ ~ ~~
T ~z..~\L. ~~ o.d..~
& .A.... () Il> 0 ...:- l/l 0
. ..
tb
ill
-
i
\!.)
z.
-
Q
.:1
-
:>
Iti
IL..
U\
U\
~
<:)"
o *
2... ......
.
..
.
(7
,
(~
~.
Q
<)