Memo- Developer Selection - 8th Ave RedevelopmentPlanning & Economic
Development
MEMORANDUM
TO: Honorable Mayor land Hopkins City Council Members
FROM: Kersten Elverum, r for of Planning & Development
DATE: December 10, 2010
SUBJECT: Developer Selection — 8t' Avenue Redevelopment
A discussion has been scheduled for the December 14, 2010, work session to
continue the developer selection process for the 8t' Avenue redevelopment
proJect. The two development teams have not been asked to be at the meeting.
Stacie Kvilvang, financial advisor with Ehlers & Associates, will be in
attendance.
Since we last discussed this issue, The Cornerstone Group has been working to
identify financing sources and potential equity partners. Attached is
correspondence from LISC and their affiliate, National Equity Fund, Inc., that
indicates their support for The Cornerstone Group and willingness to syndicate
low-income housing tax credits on the affordable portion of the proposed housing
development. That would provide financing for approximately 20% of the
project. Colleen Carey has also made an offer on the Lutheran Digest property
that would be assignable to the City of Hopkins if she was not selected as the
developer. That offer was rejected, but she continues to talk to the owner to try to
identify his price. She also intends to deliver a letter of intent to Chris Dahl,
owner of the Johnson Building, outlining the terms of a joint venture. Colleen
clearly wants to work on this project and has even reached out to Klodt to see if
there is any desire to partner.
Staff has had limited contact with the representatives of Klodt Development, as
their position is the same — they are willing to work with the City on the design,
and they have the ability to self -finance the construction of the project.
Without further refinement of each group's proposal, which will not happen until
the developer has been selected, the extent to which the projects will require a
public subsidy is not known. It is likely that a project that incorporates elements
such as a public market and greenway connections will require more financial
support than a pure housing project. The tools the City would have to provide
that assistance would be either tax abatement or TIF. Staff has asked LHB to give
a preliminary opinion on the ability to qualify the properties as a redevelopment
TIF District. The results will be discussed at the meeting.
The issues that are central to the discussion are:
Does the proposed project design achieve the goal of transforming Stn
Avenue into a gateway to the downtown?
Are the public market and greenway connections :important elements of
the design?
Is. the project likely to move forward?.
The Council has a few options at this point. They include giving The Cornerstone
Group time to secure financing and partners for their project. A preliminary
development agreement could be entered into that would identify benchmarks and
a timeline. If they failed to achieve the benchmarks, the Council could then move
on to Klodt Development, assuming they are still interested in the project. The
Council can select Klodt Development and begin working with them.on the
project design for construction in 2012. Finally, with SW LRT scheduled to be
operational in 2017, the Council could delay the decision or hold off altogether
while the retail and office markets recover.
\--I
Twin Cities
December 3, 2010
Kersten Elverum
City of Hopkins, Director of Economic Development & Planning
1010 1" Street South
Hopkins, MN 55343
RE: Hopkins Downtown Gateway
Dear Ms. Elverum:
Thank you for the opportunity to learn more about the two proposals currently being
considered for the Hopkins Downtown Gateway. The location is critical for showcasing
the potential for redevelopment along the anticipated Southwest LRT corridor, both for
the City of Hopkins and for the region. Investments today will be in place for the next 50
—100 years, and will set the stage for investments to come.
LISC has been honored to partner with the City of Hopkins through the Blake Road
Corridor Collaborative, and we value the opportunity to assist the City's community
development goals. In the past 20 years Twin Cities LISC has invested more than $380
million in grants, loans and equity, leveraging an additional $1.3 billion in total
development. LISC brings financial expertise and financial tools essential to making
critical revitalization projects happen (especially in the early stages of development) such
as:
• Feasibility and technical assistance grants,
• Predevelopment recoverable grants,
• Loans and loan guarantees, and
• Equity investments.
Acknowledging that the recent market has been extremely challenging for development,
LISC would like to work with the City and developers to identify creative financing
options to integrate community benefits into the final project. We encourage the City to
embrace this opportunity to use public resources to leverage private resources that will
maximize the street level amenities and place -making components.
LISC has been in conversations with The Cornerstone Group, an innovative and forward
thinking developer, to explore ideas for financing options such as 9% Low Income
Housing Tax Credits (LIHTC), predevelopment loans, and syndicator underwriting with
the National Equity Fund (NEF). Given the complexities of these financing options, it
would benefit our efforts to have more time to assess their viability.
LISC strongly supports Hopkins efforts to ensure that the community benefits from major
investments such as transit and real estate, providing residents with better access to
education, housing, employment, arts, culture, recreation, services and safety.
Thank you for your consideration and partnership.
Sincerely,
Andriana Abariotes
Executive Director
Twin Cities Local Initiatives Support Corporation (TC LISC)
CC: Mayor and City Council Members
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an af�iliate of LISC EM
November 23, 2010
Colleen Carey
President
Cornerstone Group
7610 Lyndale Avenue So., Ste. 200
Richfield, MN 55423
RE: Proposed Hopkins Section 42 Project
Dear Ms. Carey
Thank you for discussing with us your preliminary proposal for the development of a 156 unit building in
Hopkins Minnesota. As envisioned, 20% of the project would be tax credit eligible and would be carved
out and owned and financed separately through a condominium or similar structure. While the tax credit
and market rate projects would be separately owned, they would be managed and operated as one
building. You specifically inquired and whether an investor would consider such a tax credit investment
as proposed.
National Equity Fund, Inc. is a leading national syndicator of low-income housing tax credits with one of
the largest portfolios of projects in the marketplace. Since 1987, NEF has invested over $6.9 billion in
low-income housing tax credit properties, and has a portfolio of over 1,600 projects (100,000 units) in 43
states across the country. In both urban and rural communities, we invest tax -credit equity in multifamily
and single-family developments, as well as in supportive housing, public housing revitalization, assisted
living and historic rehabs. Long known as a market innovator, NEF, Inc. has pioneered unique deal
structures and has invested in a number of projects structured as proposed for your Hopkins project.
Based on the information you have provided us and the excellent location of the development, I am
pleased to confirm our support for, and interest in pursuing an equity investment should you obtain an
allocation of 9% tax credits. The commitment of NEF equity would of course be subject to NEF's due
diligence process, including the analysis of the project's final cost estimates, financing terms, market
information, legal structure, satisfaction of all NEF underwriting criteria, and approval of the NEF Board
of Directors.
Sincerely,
Mike Jacobs
Vice President -Regional Manager