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Home My WebLink About1993/07/06 - ADMIN - Agenda Packets - Economic Development Authority - RegularAGENDA ECONOMIC DEVELOPMENT AUTHORITY ST ST. LOUIS PARK, MINNESOTA Tuesday, July 6, 1993 7 :1 5 p.m. 1. Call to order 2. Roll call 3. Approval of minutes of June 21 meeting I/C# /.o. s9) # 4. Approval of agenda for Tuesday, July 6 meeting CH/#H 5-0 5. Reports ) 6. Unfinished business a. Suburban Plumbing redevelopment: Set public hearing for suy 1s, 18° [4l/h/ -0 7. New business 8. Communications and bills a. Monthly financial statement b. Vendor claims CI4/ L M ., LH/'AU 5 o 5-0 9. Adjournment ? M INU TES EC O N OM I C D EV EL OPM E NT AUTH O R IT Y S T . L O U IS P AR K , M I NN E SO TA J u l y 6 , 1 99 3 MICROFILMED 1. Call to order President Meland called the meeting to order at 7:15 p.m. 2. Roll call The following commissioners were present at roll call: Jeff Jacobs, George Haun, Lyle Hanks, Larry Mitchell, Gail Dorfman and Keith Meland. Also present were the Executive Director (Mr. Attorneys (M s. Pace and Mr. Tietz) and Director Development (Mr. Hagen). 3. Approval of minutes of June 21, 1993 meeting l ) s J Meyer), City of Community It was moved by Commissioner Hanks, seconded by Commissioner Haun , to approve the minutes of the June 21, 1993 meeting. The motion passed 4-0-1 (Commissioner Jacobs abstained). 4. Approval of agenda It was moved by Commissioner Haun, seconded by Commissioner Hanks, to approve the agenda for June 21, 1993. The motion passed 5-0. 5. Reports - None 6. Unfinished business a. Suburban Plumb ing redevelopment: Set public hearing for July 19, 1993 It was moved by Commissioner Hanks, seconded by Commissioner Jacobs, to set the public hearing for July 19, 1993. The motion passed 5-0. 7. New business - None 8. Communications and bills a. Monthly financial statement It was moved by Commissioner Hanks, seconded by Jacobs, to approve the monthly financial statement. passed 5-0. b. Vendor claims Commissioner The motion MICROFILMED It was moved by Commissioner Haun, seconded by Commissioner Mitchell, to approve the vendor claims and authorize payment. The motion passed 5-0. The meeting adjourned at 7:19 p.m. REQUEST FO R EDA ACTION DATE July 6, 1993 AGENDA SECTION;Reports NO. 6 ITEM: NO. Estab ismen' o u ic Hearing to Consider Land Conveyance on July 19, 1993 ORIGINATING DEPARTMENT: Community Development APPROVED: [ David Hagen, Director BACKGROUND At the June 29 study session, the physical and financial aspects of this proposed project were discussed. It was pointed out that SPS can acquire fee interest to the Pacific Investment parcel through a quiet title or registration procedure, that the construction lender will not require that fee interest be secured before closing on the construction loan and that therefore EDA condemnation will not be required. ) Attached are calculations justifying the assistance request and the updated redevelopment project schedule. As noted on the schedule the EDA is to establish a public hearing for July 19 to consider approval of the agreement. In order to meet the requirement that the notice be published at least 10 days before the meeting, staff has prepared and provided a notice to the Sailor for this hearing in advance of the EDA's action. Recommendation: By motion establish a public hearing for July 19, 1993 at 7:00 p.m. to consider conveyance of property to Suburban Plumbing Supply for the project. 4195:GEN40 PUBLIC WORKS APPROVAL INED FINANCE APPROVAL OBTAINED COMM APPROVAL OBTAINED APPROVAL OBTAINED Executive Director APPROVAL OBTAINED ACTION: MOTION BY 2ND BY TO June 24 , 1993 JUSTIFICATION FOR ASSISTAN CE REQUEST (sPS Companies Project) PART A - EDA ECONOMIC RETURN ON INVESTMENT I. Project Costs Assistance Acquistion and Demolition of Pic-A-Pop Site Assessable Road Improvement Costs TOTAL Less Revenue from Sale of Land 600,000 276,397 69,625 946,022 (150,000) ) Equals Net Project Cost II. Return on Investment 796,022 principal/17 years/ +300,000 possible add'l assistance 1,096,022 principal/17 years/ 796,022 $125,000 payment = 14.0% +±33,90Q promised add'l increment 158,900 payment = 12.6% * Additional assistance would be provided by EDA and Developer would promise additional increment if loan could not be secured for "commercially prudent terms." PART B - OWNERS RETURN I. Cash on Cash Return 1. First 10 years A. Annual Income Tax Market Rents Net of Expenses and Reserves Less Annual Debt Service Equals Market Rents Net of Expenses, Reserves and Debt Service Less Depreciation Equals Taxable Income Times Marginal Tax Rate Equals Annual Income Tax B. Annual Cash Flow After Taxes Market Rents Net of Expenses, Reserves and Debt Service Less Income Tax Equals Annual Cash Flow After Tax 430,000 (295,878) 134,121 (101,582) 32,539 .38 12,365 134,121 (12,365) 121,756 ) c. cash on Cash Return Annual Cash Flow After Taxes Divided by owners Equity Equals Cash on Cash Return 2. Second 10 Years A. Annual Income Tax Market Rents Net of Expenses & Reserves Times 1.03° (rent increase) Equals Annual Rent Second 10 Years Less Annual Debt Service Equals Market Rents Net of Expenses, Reserves and Debt Service Less Depreciation Equals Taxable Income Times Marginal Tax Rate Equals Annual Income B. Annual Cash Flow After Taxes Market Rents Net of Expenses, Reserves and Debt Service Less Annual Income Equals Annual Cash Flow After Taxes C. Cash on Cash Return Annual Cash Flow After Taxes Divided by Owners Equity Equals Cash on Cash Return II. 121,756 1,482,850 8.2% 430,000 x 1.03-9 577,884 (295,878) 282,006 (101,582) 180,424 .38 68,561 282,006 (68,561) 213,445 213,445 1,482,850 14.4% Internal Rate of Return (Based on Sale in 20 A. Original Owners Equity B. 1st 10 years Net Cash Flow C. 2nd 10 years Net Cash Flow D. Net Project Value in year 2013 1. Initial Value 4,000,09y 2. Times 3% appreciation rate 1.03 3. Equals Gross Project Value 4. Less Basis Original Value 4,000,000 Annual Depreciation 101,582 Times 20 years x 2Q Equals Total Depreciation (2,031640) Basis at Sale (1.968.360) Equals Capital Gain 5,256,084 • Times Capital Gains Tax Rate .33 Equals Taxes Paid 1,734,508 Net Proceeds of Sale years) 1,482,850 121,756 213,445 7,224,444 5. 6. 7. 8. Gross Proceeds Less Taxes Paid Net Project Value Internal Rate of Return 7,224,444 1,734,508) 5,489,936 13.0% PART C - SU PPLEM EN TAR Y CA L CU LA T IONS I. Value of Project Upon Completion A . Net Market Rents for Project square feet per sq. foot total Existing Warehouse 31,500 2.82 88,919 Office 23,800 7.45 177,466 Warehouse 56,700 3.72 211,393 112,000 total 477,778 B. Less 10% for vacancy and structural reserve x .90 c. Equals Net Rents 430,000 D. Divided by Capitalization Rate $4,000,000 . - 10.75% of 10.75% Yields Value of Property by Income Approach II. Debt Service Calculation A. Maximum Loan Calculations (lower of the two) 1. ) 2. Loan to Value Ratio Value of Property Times Maximum Loan to Value Ratio Maximum Loan Debt Service Coverage 4,000,000 x .70 2,800,000 Annual Market Rents net of Expenses and Reserves Divided by Debt Service Coverage Ratio Equals Annual Maximum Available for Debt Service 344,000 Amortization Calculation: 344,000 payment/8.5%/ 20 years = S 430,000 = 1.25 3,255,388 loan B. Annual Debt Service Calculation based on maximum loan. 2,800,000 present value/8.5% /20 years= 295,878/yr. II I . Ca lcu la t ion of Ow n er s Equ it y Tot a l Fin an c ing R equ ir ed 3,6 50 ,0 0 0 Bank Fin an c in g EDA A ss ist anc e Les s Tota l Fin an c in g 3,4 0 0 ,0 0Q Equ als Ca sh Equ it y Ow ne r s Lan d Ow ner s Bu ild in g Tot al Ow ner s Equ it y 2,8 0 0 ,0 0 0 600 ,0 0 Q 25 0 ,0 00 48 2 ,8 5 0 75 0 ,0 00 1,4 8 2 ,8 5 0 IV . Ca lc u la t ion of Annu a l Dep r ec ia t io n (s t r a ig h t lin e fo r tax pu rp ose s ) Tota l Property V alu e Less Land V alu e Equ als Bu ild in g V alu e Div id ed by 31 .5 y ear s Equ als Ann u al Dep r ec ia t io n 4,0 0 0 ,0 0 0 80 o , i7o 3,1 99 ,8 3 0 31. 5 101,582 4180:GEN41 ) PART D SPS COMPANIES ESTIMA TED TOTAL COST AN ALYSIS 6/24/93 Revision Existing Land @ 2.50 psf Land Acquisition Existing Building New Building Construction Financing Fees (2% const.fees, 2% perm.fees and 3% interest carry on const, $2,100,000) Misc. City Fees (legal, title, plat, etc.) Asbestos & Environmental Costs F,F,&E; Racking System, etc. Temporary Relocation Costs Est. Consulting Fees (Tobin) Legal Fees (Leonard,Street) Contingency Total Less Land and Building Equity ) Total Cash and Financing Required $ 482,850 160,000 750,000 2,863,000 147,000 20,000 40,000 100,000 30,000 150,000 40,000 100,000 $4,882,850 1,232,850 (25%) $3,650,000 4185:GEN41 Jul y6 July 19 July 21 Augu st2 A ugu st 9 Augu st 10 ) August 16 August25 September 1 September 7 September 10 September 13 September 17 September 20 December 1 December 20 Jan. 19, 1994 Feb. 7, 1994 Feb. 10, 1994 Feb.21, 1994 Mar. 17, 1994 Mar. 18, 1994 Mar. 20, 1994 7-1-93 SUBURBAN PLUMBING SUPPLY (SPS) COMPANIES REDEVELOPMENT PROJECT SCHEDULE EDA sets public hearing for July 19 on agreement EDA holds public hearing on agreement and authorizes execution Planning Commission (PC) considers and recommends vacations and conveyance (of land from City to EDA); Final legal descriptions for vacation submitted CC holds public hearing on vacations and approves first reading of vacations (subject to easement on W 36 1/2 Street except Pacific Investment Parcel) and conveyance ordinances SPS secures financial commitment and satisfies other conditions precedent to vacation and conveyance SPS commences registration or quiet title action on Pacific Investments (PI) parcel CC approves second reading of vacations and conveyance ordinances Conveyance ordinance published in Sailor Vacation ordinance published in Sailor SPS commences demolition Conveyance ordinance effective City conveys land to EDA; EDA conveys land to SPS Vacation ordinance effective; Building permit issued SPS commences construction PC approves preliminary plat CC approves preliminary plat PC approves final plat CC approves final plat SPS's registration or quiet title action complete CC approves second reading of vacation ordinance for P .I. parcel Vacation Ordinance for PI parcel effective Plat filed Construction complete 4171:GEN40 V E ND O R C L A I M S E c o n o m i c D e v e l o p m e n t A u t h o r i t y -S t . L o u i s P a r k J u l y 6 , 1 9 9 3 V e n d o r D e s c r i p t i o n Am o u n t A e t n a L i f e I n s u r a n c e C o m p a n y C e n t r a l L a n d s c a p i n g , I n c . H e r b s t & Sons Construction Co. Popham, Haik, Schnobrich City of St. Louis Park Strgar-Roscoe-Fausch, Inc. USPCI Westinghouse Remediation Svcs. Cityscape-land acquisition Services Services Legal services-April Services Services Services Services TO T AL $ 62,400.00 21,219.96 17,314.00 17,999.82 300.00 7,841.29 5,944.53 2,453.78 $135,473.38 Accounting Dept /r 6-foe<g Executive Director pw ~ Dated 7/7/9.3 ----=---'-~-'-------- ) oaeca Z /g3 '.12 P O P H A M , H A IK , S C H N O B R IC H , & KAUFMAN, LTD. ) Client No: 11959 REMIT TO MINNEAPOLIS OFFICE 3300 PIPER JAFFRAY TOWER 222 SOUTH 9TH STREET MINNEAPOLIS, MINNESOTA 55402 TELEPHONE 612--333-4800 DENVER OFFICE 1200 SEVENTEENTH STREET SUITE 2400 DENVER, COLORADO 80202 TELEPHONE 303-893- 1200 WASHINGTON OFFICE 1300 I STREET N.W. SUITE 500 EAST WASHINGTON, D.C. 20005 TELEPHONE 202--962-8700 MIAMI OFFICE 4000 INTERNATIONAL PLACE 100 S.E. SECOND STREET MIAMI, FL 33131 TELEPHONE 305-530-0050 St Louis Park Economic May 27, 1993 Paget 19 PLEASE RETURN THIS PORTION WITH REMITTANCE Client/Matter Ii= 11953 St Louis P=rk fconoic Cavelcpment Authority 4 Meetings 5 Zn the Avenue Project 14 Park Nicollet Project 15 Touuer Site Environmental Matters 15 Water Tower Property Title Registration 17 Park Soulevard Assisted Living \18 Park Nicollet Redevelopment - Reimbursed Fees TOTALS: 3.5 s504.00 £400 11.1 s1,600.50 363.05 20.° $54,226%50 $163.40 4 9.2 $7,600%00 $283.12 25.4 s2,212.50 s232.75 1.0 $210.00 s.00 2.3 $483.00 s.00 113.5 $16,952.50 $1,047.32 Popham, Haik, Schnobrich, & Kaufman, LTD. 3300 Piper Jaffray Tower • 222 So. 9th St. • Minneapolis, MN 55402 FEDERAL I.D. NUMBER 41-0947885