2018.04.04 EDC - Laserfiche WebLink

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information contained in this memo is important context for upcoming meetings where the Commission will be asked to make recommendations to the City Council. Gundlach explained staff has conducted 12 developer meetings regarding the Korean Church property. Staff met with Aeon, Sand Companies, Dominium, Schafer Richardson, Sherman Associates, MWF, Northbay Companies (formerly CPM), Timberland Partners, Stuart Companies, Pulte, Inland Development, and Norhart Homes. All seem to have varying levels of interest. Beyond the listed developers staff has met with, staff has also corresponded with United Properties, Village Cooperative and Doran, who have communicated they do not have interest in the property. More recently, staff has been in contact with Alatus, who has also expressed interest, but has been unable to schedule a meeting. A summary of information we’ve heard from the developers noted above regarding the Korean Church redevelopment property: • Retail is not suitable for the site because traffic counts are too low and there is no visibility on a major thoroughfare. Sherman Associates even indicated they are having trouble filling retail space in Minneapolis. • Senior cooperative developers are not interested in the site due to lack of visibility. There are really only two developers who work in this market (United Properties and Village Cooperative) with both declining the site. Doran declined the site for the same reason. • Affordable housing is most viable due to high demand, but a funding gap would exist. The sources to fill the funding could include tax credits, grants, land write-down, TIF, etc. • Under an affordable project, 4% tax credits are most practical being the site likely won’t score well enough to be awarded 9% credits based on the competitiveness of the higher credits. Reasons for lower scores under the 9% credit include the site not meeting the economic integration criteria, adjacent to a railroad, and no access to light rail. Economic integration is where the median family income of the community meets or exceeds the 40th percentile of median family income (earns 7 points) or 80th percentile of median family income (earns 9 points). • Rents under a 4% tax credit project are set as affordable at or below 60% AMI (area median income). Developers believe market rents in our area are comparable to the affordability criteria under the 60% AMI already. • Market rate multi-family may be viable, but the construction costs per square foot exceed market rents in the area. New construction costs are over $2/SF with market rate rents in the area at approximately $1.80/SF. TIF, grants or land write-down could close this gap. • Most developers are not concerned about competing projects in Arden Hills, Roseville, or Shoreview, especially on the affordable projects, due to high demand. • Dominium shared that units priced at 60% AMI are most cost effective for their model of new construction, and for every 10% reduction in AMI (so going from 60% AMI to 50% AMI) comes a needed public subsidy of an additional $35,000/unit. • Demand remains for the townhome product Pulte built in The Enclave at New Brighton Exchange. The average sale price of these units was approximately $300,000. • Land likely could sell between $5,000/unit - $15,000/unit, depending on product-type and other financial details. Gundlach stated learning what we’ve learned thus far, the City will likely need to create a TIF district to realize an affordable project, a market rate project, and even owner-occupied units. However, the length the district would need to be open to repay the City’s investment and/or provide additional subsidy varies greatly across product-types. Following in-person meetings with developers, staff sent emails to the 12 interested developers on March 1, 2018, asking for the following information: