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CASE #1 FLAHERTY AND COLLINS RESIDENTIAL PROJECT By: Darren Lazan, Development Manager BACKGROUND: In October of 2009 Flaherty and Collins indicated interest in developing upscale apartments in the Town Center project. Initial design concepts were developed whereby Flaherty would construct apartment adjacent to the existing parking structure, and addition, utilizing the excess parking available and wrapping the new addition. Subsequent to those discussions that location was chosen for the VA CBOC proposal and has since been on hold as an apartment site. On November 20th, 2009 a group from the City traveled to Indianapolis to review several of Flaherty's projects and get a feel for the concept that would be appropriate to Town Center. A range of products from suburban to urban were visited with the product called "The Cosmopolitan", an urban mixed-use redevelopment, being the most appropriate to the Town Center Vision. Since November of last year there have been several meetings and discussions on alternate locations and configurations for this product. In December of 2009 the HRA directed staff to enter into an exclusive agreement to negotiate potential development deals on the subject site. Flaherty and Collins would like to move forward with a Letter of Intent (LOI) for the project; staff feels it is important to address the following items prior to moving forward with negotiating an LOI. Catalyst -Does this project create an energy or excitement that spurs further development of this type? Can an investment in this project "set the bar" higher and ultimately return a higher quality, more dense, and greater return in tax revenues? Can we "push" the market? Parking -Should we consider an additional public investment in structured parking within this project? The project requires approximately 300 parking stalls, and any additional public stalls "wrapped" by this project would be an additional cost to the public sooner than potentially necessary. Financing -Because the project is pressing the market and there are no comparisons for a product of this type in this market, this "upscale" product cannot be underwritten on its own. After the typical subsidies of discounted land, reduced impact fees, and TIF, there is a substantial shortfall in the current pro-forma Flaherty has presented. To overcome this shortfall, the developer has proposed an equity position for the City. In this scenario, a capital contribution would be made by the City to close the gap in underwriting, and an upside only (no further obligations to provide capital) position would be given in return. The projected return on that contribution is projected to exceed the contribution.