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The Residence at the COR 230 Unit Market Rate Apartment Project - Projected Groundbreaking Spring 2012 The Residence at the COR is a 230-unit market rate apartment project that is proposed to be constructed to the north and west of the existing and expanded municipal parking facility. The units will be constructed with a high level of amenity and finish with direct access to the new Ramsey Station on the Northstar Commuter Rail Line, making it a unique housing product in not only Ramsey, but also the north metro. With a Spring 2012 groundbreaking, the first units would be available after the opening of the Ramsey Station in late 2012. The City of Ramsey's Housing and Redevelopment Authority is considering providing financial assistance to the project with the use of Tax Increment Financing dollars as well as providing gap construction financing. The last page of this Frequently Asked Questions document includes a deal summary that describes the project from a financial perspective as well as the financial assistance being considered by the City's Housing and Redevelopment Authority. Frequently Asked Questions 1. What happens if nobody rents the apartments? Two market research studies both concluded that there is a strong market for market -rate apartments in Ramsey, particularly on the Northstar Commuter Rail Line (Flaherty and Collins market study in conjunction with Maxfield Research and appraisal conducted for the bank by CBRE Minneapolis). It must be emphasized that the market area extends far beyond Ramsey to the broader North Metro area, so one cannot only look within the City's boundaries in assessing a market area. If, however, the apartments could not be rented at a number to generate sufficient revenues to make debt service payments, the developer will be in default, and after a cure period, the lender (first the City, then the bank) could step in to take control of the project. 2. If the market for rental housing is so good here, why is the City being asked to provide gap financing for the construction? The bank is providing 50% loan to value (66% loan to cost) financing for the project, which equates to $20 million in private financing. While the original financing sought for the project was at a higher loan to value ratio, there are two primary reasons why this could not be accomplished: • The product proposed is unlike any other product in the north metro. A high amenity, transit oriented product is new to the marketplace, and while this is exactly the product sought for The COR, as well as every station on Northstar, there are no comparable projects to which the appraisers can compare. Without comparable properties the banks are hesitant to participate at a traditional level. • While the HRA's work over the last two years to create a positive marketplace perception has been effective, the banking community suffered considerable losses in the former Town Center project. Most local banks, and many national banks, consider The COR a higher than normal risk for investment. Accordingly, their reactions are to either decline to participate, or participate at a lower level until positive project momentum can be established. Successfully completing this project will open opportunities for more private banking participation on future projects.