Loading...
Memo - Redevelopment of SuperValu North Annex Property, Medica Project6 • • MEMORANDUM TO: Mayor and City Council FROM: Jim Kerrigan, Director Planning & Economic Development DATE: February 22, 2001 SUBJECT: Redevelopment of Supervalu North Annex Property, Medica Project Staff has scheduled a further discussion of this project for the Tuesday, February 27, work session. The specific items to be discussed are as follows: • Traffic study • Revised site plan • Revised public financial assistance request The Zoning & Planning Commission will also be discussing the first two items at their February 27 meeting. The following attachments are being provided for this item: Economic Development • Draft traffic impact study, dated February 7, 2001 • Letter from URS /BRW, Inc., dated February 15, 2001, re: Medica/North Annex Redevelopment Traffic Impact Study • Revised site plan, dated February 12, 2001 • Memo from Sid Inman, Ehlers/Publicorp, Inc., dated February 16, 2001, re: tax increment • Letter from Jim Vos, CRESA Partners, dated February 22, 2001, re: Medica tax increment request MEMORANDUM TO: Jim Kerrigan - City of Hopkins FROM: Sid Inman - Ehlers /Publicorp Inc. DATE: February 16, 2001 RE: Modica Project Update As per your request, I have prepared a comparison of the two cost analyses presented by Jim Voss. 1. WHAT ARE THE CHANGES FROM THE PREVIOUS PROPOSAL? You will note that the land acquisition has gone up by $300,000, the site prep has gone up by $200,000, the environmental has gone down by $900,000, the demolition has gone up by $180,000 and the income from land sales has gone down by $351,600 for a total increase in cost of $351,600. 2. HOW DO THE CHANGES IMPACT THE YEARS TO PAY THE TIF NOTE? No major impact. The note still requires around 13 years of tax increment. • 3. WHAT IS THE ELIGIBILITY OF THE PROPOSED COSTS? The cost listed as needed for assistance are all allowed as qualified costs. 4. AT THIS TIME WHAT IS YOUR OPINION OF THE NEED FOR TAX INCREMENT? While we have not reviewed a formal "But/For" analysis, we believe that requested assistance is within what would be needed to make the project financially feasible. As we stated before, since this project is basically a corporate headquarters for a single user, the request for tax increment is less than for a normal development This is due to the fact that a single development does not have the same objectives as a normal development. A single development is concerned with location and employee concerns, while a normal development is concerned with risk and requires a higher level of tax increment to cover that risk. As soon as we receive a formal "But /For" analysis, we will prepare a review for the HRA. I hope this answers your questions. If you have any other questions or comments, please do not hesitate to call me. from the desk of: Sid Inman Development Consultant/Financial Advisor Ehlers and Associates, Inc. 3060 Centre Pointe Drive Roseville, MN 55113 (651) 697 -8507 FAX: (651) 697 -8555 E -MAIL: sid @ehlers- inc.com N:\MinnsotalHOPKINS \T12 -11 UNEDICA- 2A.wpd • a) w V 0 s:z d I- 0 O r r- 0 0 0 0 t' T; r+ O s.0 Ef3 , N EA E9 6% - 43 0 0 O 0 0 0 0 u 0 t0 n LO 0 N 6�� 4s 0 0 0 0 O O • 0 . 0 0 0 0 0 o CC) N co ,- O o O N u p., 0 et CU 15 y N. g -o - d Z cO u V d v u vs cs Ea Ea 64 6 0 0 0 0 0 0 0 0 0 O O c0 c0 O T 0 c) . 69 49 © 0 0 0 0 0 e3 6, 6, 6, 0 0 00 0 0 N O 0 0) L q 0 0 O 0 O 0 0 0 O p 0 0 0 0 .0 0 O O 0 0 0 0 0 0 0 0 0 0 O O O O O O N O O O O ui O u") R 0 c0 an O 0) 0 O 0 N 0 N N o N 0 h n N 0 0) 0 0) •a N 0) ca. C') O 0 0.. eF 0 d: c 0 O v a 0) - 6 is 4. 69 69 CO 4a g d M u •W g ▪ C E ha r. o ▪ b C to z • v N • o Zo 03 U v z . o 4 g ✓ y 0- U v o i n C' ▪ W 0 Q w 0 vn v v 1 0 u 0 • 63 64 N 0 O v Yr O aD co N N co a 6 N O O O c ▪ N 69 6 a 0 0 0 49 0) Cn • ._ Vn a.� • g o al • 03 Ca Cf) y y a 00 OA 0 0 m m in (0 49 69 0 0 0 O CV 0 0 co ui 0 ui 0 0 c0 c n o m 09 6 d 0 0 0 N O N • Lt)) 0 0 CO 0 n coo c 49 .u9. 49 A v tn go O cu U ti CI a,+ cu cl) v ez O. R o» z ¢ g 0 O MUSA Mzt3 ira't . /Sr. Corporate Rat. Rotate.SexviceAdvieors Date 22 -Feb -01 To Jim Kerrigan — City of Hopkins Sid Inman — Ehlers & Assoc. From Jim Vos — CRESA Partners Michael Boo — Allina Healthsystem Steve Elison — Medica Re Medica Tax Increment Request A. Cost of the Land — The cost of the land represents its current value given the Memorandum Medica has requested Tax Increment Financing assistance from the City of Hopkins to support the development of its headquarters facility at the northeast corner of Highway 169 and Excelsior Boulevard. The location is currently owned by SuperValu and is improved with a 640,000 square foot warehouse facility, commonly known as the Supervalu North Annex site. In order for the project to go forward, a number of extraordinary costs must be incurred — costs which cannot be supported by market rate rents and financing in today's commercial real estate market. Medica is prepared to commit significant funds to the project, however they will not be able to proceed if the extraordinary costs outlined below must be absorbed into the project. The development of the site will depend on a substantial commitment by the City of Hopkins, in the form of Tax Increment Financing. Those extraordinary costs are: improvements on the property. If the property were to continue to be used for warehouse purposes, the value established in the negotiations with SuperValu would be appropriate. However, because the purchase price includes the value of existing improvements which must be removed (at a demolition cost of approx. $1,750,000), the total acquisition price exceeds a supportable land price for an office development in today's market. Medica's purchase offer was based on the assumption that the land has a free and clear value of approximately $5.25 psf. 160 South Fifth Street, Ste. 3200, Minneapolis, MN 65402 -4235 tel 612.337.8498 fax 612.337.8459 • TIF Request Page 2 of 3 22- Feb -01 B. Site Access Improvements — The current roadway system and access into the site is appropriate for a warehouse facility. However, given the planned use by Medica, significant roadway and access improvements are required to avoid over - burdening the local street system and to ensure adequate access into the site for Medica employees, other site users and fire/life safety needs. C. Site Capacity Limitations - The traffic capacity for the area and the configuration of the site restrict the development capacity to well below the level that current zoning would permit. As a result, the site cannot be developed to it's maximum potential and will therefore have less development to carry the special costs. D. Parking Structure — In order to maximize development of the property and provide green space and other amenities which will complement both the site and further development in the area, a parking structure is proposed. In work sessions, city council members have supported the ramp both for site utilization and for creation of a desirable workplace. E. Environmental Abatement — The existing site requires environmental correction. Though a substantial portion of the costs of environmental correction will be absorbed by the current owner, a portion of that environmental correction will be the responsibility of Medica as that environmental correction is only required as a result of the need to demolish the existing structure. As a result of these factors, and others, the market rent for comparable facilities would not justify the pursuit of this project without assistance by the City of Hopkins. Our analysis of the market indicates comparable facilities available in the southwest suburban market at net rental rates of $16- $17.00 psf. Given current debt finance rates, a typical developer would cap their total investment in the project at or near $160 psf. Medica's credit strength will enable them to borrow funds at a lower interest rate, effectively increasing the available funds to over $180 psf (see attached worksheet). The cost of developing the site (as indicated above) would be equal whether the site is developed by Medica or an investor owner. As a result, Medica's pursuit of the property (and their incremental financial commitment) reduces the potential TIF support which might be necessary to redevelop and revitalize the parcel. The current cost figures that have been developed indicate a project deficit of approximately $16,350,000 to be covered by Tax Increment Financing. Based on the analysis by Ehlers & Associates, it appears that the increment generated by the project in • • • TIF Request Page 3 of 3 22- Feb -01 approximately the first 13 years after completion should be sufficient to fully repay the requested increment. As the site development costs are refined (i.e. off site utilities, intersection design/construction, etc), we are prepared to develop methods by which cost reductions can result in TIF reduction as well. In response to a request by a resident at our December open house, we have been in contact with Dr. Michael Kremer, Superintendent of the Hopkins Schools, and his finance director, David Shapely. Both are aware of the project and have indicated their support for the development, including the use of Tax Increment Financing. Medica believes it has negotiated aggressively with SuperValu to structure the best purchase price for the land. The purchase agreement, and Medica's commitment to go forward, is contingent upon negotiating an acceptable Tax Increment Financing development agreement with the City of Hopkins, which we understand will be structured on a "Pay -As- You -Go" note. Without Tax Increment Financing, the project is not economically viable and Medica will be forced to pursue other alternatives. Please evaluate the attached figures in your analysis of the project and it's suitability for Tax Increment Financing. We understand that no final commitment for Tax Increment Financing can be made until (1) proper city council meetings and public hearings have taken place, (2) a detailed analysis of the cost pro -forms has been completed, and (3) a mutually acceptable Development Agreement has been negotiated between Medica and the Cit of Hopkins. We look forward to working with you and your council on these items. • • o Etv w cl4E-4 tt gam dd 000 p O O O O O O O O O O S O O O O O O 0 O O O N S 0 0 N O Tr h O vi N O 4O %O O - QN O O O O 00 N O N N N— 0 v1 N N 0 O\ 00 ' N v1 On et N N O M -"--.C1- to M --� 00N0 O ON N Tr 6A 6A N r+ ..r as N ta6A . 4, - 64 6464694469 64 O O O v. O 41 M N 64 64 — 64 s 11 ° 1 w W W � u 0.0"0 c, . tilt; g gJ 1 Ti •. a43 A • o04W L !16 O y • '.D O. "a 31v O zE rA CA CA 0 • Based on direction from the City Council at a work session in December, staff has been attempting to acquire the properties on this block. (There have been no conversations yet with the Luthers, the owners of Lots 6 and 7.) A discussion of the status of these negotiations is scheduled for the February 27 work session. III As of the date of this memo, there have been no purchase agreements executed; however, there is a possibility that by the time of the work session the owner of the Koss property will have agreed to a sale. Economic Development MEMORANDUM TO: Mayor and City Council FROM: Jim Kerrigan, Director Planning & Economic Development DATE: February 21, 2001 SUBJECT: CBD Redevelopment Project • EAST CBD PROJECT AREA o• 1a' ( 551 1 4 129.4 _a?.- 8 12 • 129.73 41 129 5Z. �. S (o) 39 • e 129. Q9 • -38 Q .t 9r • .. `, .128. 65 X4( • '. Z8. 24 (67) 34 123.02 (a6) 33 , )277 i'ai '•i u.,..177.', . 5 132 (26)5? 132 AU7 4 -9 -71 310 63.63 • 66 166 g Z9) 36 • 25 t ti 32 i3 } ,(3)\ gl 118.61 5 �3 On) 31 j ' I • 129.47 In, 28 A (26) • - L;.4 �� 25 ) 2 129_ CS 128.84_ R (2°) 25 128.53 I a (n) - 123.4 . (?2)Y 23 ) • 2 71 Cv. 2 . .!a. 96 _r EAST CBD PROJECT AREA o• 1a' ( 551 1 4 129.4 _a?.- 8 12 • 129.73 41 129 5Z. �. S (o) 39 • e 129. Q9 • -38 Q .t 9r • .. `, .128. 65 X4( • '. Z8. 24 (67) 34 123.02 (a6) 33 , )277 i'ai '•i u.,..177.', . 5 132 (26)5? 132 AU7 4 -9 -71 310 63.63 • 66 166 g Z9) 36 • 25 t ti 32 i3 } ,(3)\ gl 118.61 5 �3 On) 31 j ' I • 129.47 In, 28 A (26) • - L;.4 �� 25 ) 2 129_ CS 128.84_ R (2°) 25 128.53 I a (n) - 123.4 . (?2)Y 23 ) • 2 71 Cv. 2 . .!a. 96 _r • Memorandum To: Honorable Mayor and Members of the City Council From: Steven J. Stadler, Public Works Director Copy: Steven C. Mielke, City Manager Date: February 22, 2001 Subject: Excelsior Boulevard Reconstruction, Phase II Update Funding Project Design Public Works Department Purpose of this worksession item is to update City Council on the following issues regarding subject project: i • Funding • Project design • Project schedule • Blake School issues • Real Estate actions Hennepin County personnel attend the worksession to discuss the project and answer questions. The estimated city cost including real estate acquisition, landscaping, lighting and road reconstruction remains at $2.9 million. However, staff is waiting for the County consulting engineer's construction cost estimate. To -date staff has been using an estimate of $500,000 as the city share of the road reconstruction cost and $100,000 as our share of the engineering fees. Staff may have more detailed costs from the County in time for the worksession discussion. i The final design drawings are essentially complete and are being assembled. This includes the landscaping elements and the watermain replacement drawings. • • Project Schedule The tentative 2001 project schedule is as follows: Meeting with Henn County staff ................ ..........................March 7 (Purpose of meeting is to discuss feasibility and logistics of 2001 construction start and interface between this project and Medica development road work) Public Open House .. ............................... ..........................March 28 (Assumes 2001 construction start date) Hopkins City Council Final Plan approval .... ..........................April 3 City Council Construction Cooperative Agreement approval .....April 17 Henn County advertise for bids ................ ............................May 1 Henn County Board approval of project budget adjustment........May 22 • Open Bids. M a y 29 Bid acceptance... ... ... ... ...... ... ......... ... ...... ... .................. ....May 31 Award of Contract ............................. ............................... June 22 Construction start ... ............................... ...........................July 16 Construction completion ............................. .......................October, 2002 'F `THE ABOVE PROJECT SCHEDULE ASSUMES THE ACCEPTABLE LOW BID IS WITHIN THE COUNTY BOARD - APPROVED PROJECT BUDGET. IF NOT, THE CONSTRUCTION START DATE WOULD MOVE TO MID - AUGUST. Medica development proiect: Construction of the Medica project roadway improvements including the new Excelsior Boulevard intersection must be completed by October, 2003. • • • Blake School issues City, Hennepin County and Blake school staff met on January 19, 2001. Blake School staff agreed to the elimination of the proposed retaining walls along the south edge of Excelsior Boulevard right of way and opt instead for more extensive sloping onto their property. Hennepin County real estate will begin negotiations on the Blake School partial taking soon but are waiting for the final design plans which will show the temporary and permanent easement lines. Real Estate actions The U -Haul building is the only remaining building to be demolished. Currently, Evergreen Land Services is attempting to locate a suitable relocation site. They are not having much success. The County has not issued the required 120 -day notice to vacate the property or the 90 -day notice to take possession of the property. This would need to be done soon to allow a mid -July or August construction start.