Jumping mid-stream into Sakry's thorough reporting of this "Flaherty & Collins" special deal, there is this excerpt (but, again, for the entire picture, read the original ABC item; which, again, is at this link.
A development agreement also was approved on a 5-1 vote with Councilmember John Dehen voting no.
City assistance
Under the development agreement, The Residence project will receive more than $150,000 in business subsidies.
According to city’s financial consultant Stacie Kvilvang of Ehlers and Associates, the subsidy can be used for anything related to the project, including construction costs.
The HRA will hold a public hearing on the subsidy on Dec. 14.
The city will also be providing the developer with a $1.3 million loan for the project, which will come from the city’s tax increment financing (TIF) District 1.
Although the developer will not be paying interest on the loan, it will have to pay the city a fee of $120,000.
With the fee, the city will receive $1,420,000 back on its 10-year loan.
The loan will be repaid from 20 percent of the annual cash flow generated from the project and/or 20 percent of the proceeds received from a sale or refinancing of the development.
If it is not paid by 2024 (the 10-year mark), simple interest rate of 6.25 percent will accrue on the unpaid balance from April 1, 2024, until the loan is paid in full. If the developer does not commence the construction by June 30, 2011, the loan agreement terminates.
If the City is not guaranteed a first position security interest for all it is at risk on, ahead of any bank lending, that alone should be a deal killer. Security positioning was not discussed in the city council's voting session, nor did the council weigh the question if Flaherty & Collins goes bankrupt in future years with things pending, or interposes some thinly capitalized intermediary LLC as is often done, and it goes bankrupt, is the city left holding an empty or a full bag. Downside risk and security positioning is not a coincidental part of any long-term deal, and to brush it under the rug in public discussion indicates either mendacity or inexperience on the part of decision makers. Bray, the lawyer James Norman had advising on the Feges-Nedegaard contract, is doing the same here. A ton of trust is placed there, without public discussion of downside risk planning and such.
Strangely, All Fool's Day, 2024 was chosen as either a day of reckoning or a non-event, since the future is always uncertain even while some pretend to foresee catalytic circumstances. My years of schooling may have inadequately prepared me to understand linguistic nuance, but I admit I cannot fully make sense out of this reporting, discussing money:
According to the agreement, the city will only pay out proceeds of the loan to the developer after it has actually incurred the costs and submitted proof of payment.
Because the city owns the land, it will be required to pay nearly $2,443,200 in various fees associated with platting the property. The city plans to use funds from its TIF District 2.
When the council questioned the funding, Lazan said the city will only be out-of-pocket for the sewer connection fee to the Metropolitan Council.
The devil must be in the details. Darren-speak appears to have replaced Feges-speak as time passed, but the flavor seems unchanged, the glasses as rose-colored, and overuse of the word "catalyst" could have rolled off John Feges' tongue with equal ease.
Getting to the nub of things, promises of nice shoppes and restaurants and visions of sugar plums dancing in heads, all that good stuff repeated often, we have reporting of catalysis and spurring activity (which are not the same thing). Sakry continues:
Retail space
The city has addressed the life cycle housing and this project addresses the life style issue. He is excited about the project, said Councilmember David Elvig.
But he wishes there was more retail space included, he said.
With the amount of traffic they are expecting with the rail stop, he would have like to see more mixed use, Elvig said.
This is a catalyst project to get more opportunities going in and get people into The COR, said Councilmember Jeff Wise.
“It’s all about spurring activity,” he said.
Mayor Bob Ramsey agreed that the retail space was not as large as he would like to see, but the previous plan for Ramsey Town Center was over zealous for the market, he said.
A lot of residents say it will be nice to have more restaurants in The COR and this project will be the catalyst to bring some of that, Ramsey said.
The city had to work to get Flaherty & Collins to include the retail component, said Councilmember Matt Look.
They are in the business of residential units, not retail, he said.
This will get the boots on the ground and bring more riders for a rail station, Look said.
To boost the retail, the city agreed in the development agreement to rent the retail space that Flaherty & Collins has not rented out after a year.
It agreed to rent the space for $16 square feet annually for up to three years, up to $144,000 maximum.
Get "boots on the ground"? Is this a military analogue, or what? It seems like a city promoted bad market overly subsidized development project to me, not chauvinistic war.
Sakry's reporting as excerpted above has highlighting of the word catalyst added, it appearing to be the word du jour. Anyone viewing the broadcast of the council meeting will recognize that "catalyst" is one of the most favored words of Darren-speak, so it inspired the obvious Google, with this result:
Well, there you have it. I am unfamiliar with the music, but the title stands, Talentless Tragic Kid's Cattle List - From the album Brought to You by Nebraska Fish. Draw whatever parallels you choose. Sakry further reports about this city promoted bad market overly subsidized development project:
To ensure the proposed complex has enough parking, the city has also agreed to fund a 200-stall parking ramp expansion.Eariler in the report, Sakry mentioned:
The parking ramp expansion project, which will cost around $4.3 million, would be funded with a $3.5 million federal Congestion Mitigation and Air Quality (CMAQ) Improvement grant has already received as well as funds from its TIF districts, possible land sales, the landfill trust and a public improvement revolving fund.
Two hundred of the 800 parking spaces would be dedicated to the Flaherty & Collins project as well as the use of 75 additional spaces..
The expansion would need to be completed on or before June 30, 2012.
Opposition
Although the 230-unit complex has the support of the majority of the council, Dehen was the lone dissenter.
If the development could float on its own, he would embrace it but he does not want to subsidize the developer, Dehen said.
This is an expensive apartment complex next to a rail line and Highway 10. The people the developers rent to may not understand they can’t just jump the rail and go downtown for a dinner and play because it’s a commuter train that only makes five round trips a day, he said.
The city already has townhomes that are vacant and Elk River has a large vacancy rate in the housing by its rail station, Dehen said.
Dehen said he is also concerned that the city is subsidizing a complex to compete with existing housing market.
“People are being forced to rent their townhomes because of the economy. It’s not right the city would be in competition,” he said.
While he is supportive of the project in many ways, the city is putting a lot of funding into this project and he wants to see how much Flaherty & Collins is putting into this, Elvig said.
If it can’t hit the margin and get the rentals and Flaherty & Collins say it can’t make ends meet, “how far are we hanging down the cliff,” Elvig said.
The city’s contributions are fairly limited and the Flaherty & Collins financing will have to be in place before the project starts, Lazan said.
The proposal includes a four-story building that will wrap around the west side of an expanded municipal center parking lot, said Darren Lazan of Landform, the city’s consultant, who helped broker the deal and will receive a commission on the project.
Bottom line, as I see it. Whatever Landform efforts catalyze, at least this rental part of its effort is close to Ramsey's police station. Putting the police station down in that development may perhaps prove to be one of the better decisions town officials made.
___________UPDATE___________
Hoping for an upward sloping learning curve, this time I would hope that contract papers not only promise the city a first position security interest, but that recording is policed so that the city's document is recorded first in security-position sequence among the deed and other papers that are recorded per whatever contract is finalized. My recollection is that the Feges-Nedegaard-Community National Bank contract papers said the city had the priority position, but the munchkin tasked with walking things out of escrow to the recording desk at County Hall did not record things in such a sequence, creating an ambiguity because the city's position was not first in record sequence (I believe the city's position was recorded third, with the bank mortgage and the financing agreement the bank held recorded first and second, as well as the financing agreement being entered in Secretary of State records to cover notice as to real and personal property security positions of the bank). Not only the city's security position on real property should have a priority, there should be the same for removable personal property vs. fixtures (Secretary of State filing priority too). And this time police the actual handing over of papers in proper sequence at the respective desks.
We all should have upward sloping learning curves. Unfortunately we all do not.
____________FURTHER UPDATE____________
In correcting a link error to the Sakry story, and checking the correction, it was clear the item had been updated [e.g., an image of a building rendering, with captioning, was added]. If any current ABC Newspaper online text differs from what was quoted, that would be from the ABC Newspaper updating of the story, since I quoted from what I'd opened in the browser this morning, before writing.
_____________FURTHER UPDATE____________
Sakry also wrote, "To move the project forward, the council approved a purchase agreement for Flaherty & Collins to purchase 3.03 acres of land in The COR for $250,000, approximately $2 a square foot, on a 6-0 vote." That drawing the ABC online item features, does not look to be something covering 3.3 acres.
What are these people getting, if anything, beyond the building footprint and say a fifteen foot setback all around? Are they getting land on the rail side of City Center Drive, for example?
Any reader with any info can post a comment, send an email, or if you already have the phone number, call. I am curious and if there's a sketch even in the full agenda in the hundreds of pages, showing the land and the footprint of the building upon it, please send me a page number, screenshot, etc.
It looks like a land grab, otherwise.
I could be wrong, so help me out.
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I did check the numbers, and 3.03 acres is $1.89/sq.ft. Thus, the $2 per sq.ft. is largely correct.
My understanding from the council meeting as broadcast is the claim is that the developer is paying per sq.ft. what the city paid in buying the distressed property out of foreclosure.
I did not check numbers precisely, yet including the eight million of compromised taxes and assessments put into the price along with seven million out of pocket as the hit to city reserve funds, yields, roughly:
$15 million / 175 acre = $85,714/acre x 3.03 acres = $252,000 more or less, so the price honestly fits using the fifteen million figure, and not merely the out of pocket reserves decrement.
Remember that roughly $7 million cash plus $8 million tax "abatement" gives the $15 million figure. The claim that the land is being sold at cost is thus legit.
One can argue it's a "prime site" and the county paid $500,000 per acre for its 1.2 acre of land for the morgue, under about the same distressed current market conditions.
The disparity indicates Jim Deal and county officials price things differently than this Crabgrass developer and the city, so it must be that the morgue site, right on the rails, is existentially worth substantially more per acre than city land dead adjacent to the parking ramp, equally on the rails.
Go figure.
My belief still is Jim Deal got a sweetheart deal on the county's willingness to pay as it did for something that could have been sited anywhere whatsoever in county; and that no other land there at Ramsey Town Center will be going for that kind of per acre price, ever.
Again, go figure. I think Rhonda Sivarajah was the only dissenting vote on the morgue deal, but I could be wrong and it might have been unanimous. And Jim Deal did was not asked to and did not have to profligately give away ramp parking to move land out of his inventory.
Life goes on. With interesting blips, here and there, yes.
___________FURTHER UPDATE___________
As to that pet word of Darren-speak, in a be-careful-what-you-wish-for sense, Hitler's election plurality victory in 1933 was "catalytic." Googling, two interesting threads, "catalyst for disaster" returns hits, as does "catalyst of terror." As noted, it might be fortuitous that the main cop shop got put down in Ramsey Town Center.
History will judge. But folks at the front and side tables, drop that word, please.