Agenda - Council - 10/13/2015 - Laserfiche WebLink

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September 2, 2015 City of Ramsey Council Members and Staff, As you know, earlier this year PSD, LLC purchased approximately 14 acres from the City of Ramsey, of which a portion of this lot would be platted to develop an apartment project. The following is a summary of what has taken place, where we are today, and how the project will advance in the future. Background Information: In 2014 PSD, LLC ("PSD") submitted a Purchase Agreement to the City of Ramsey ("the City") for the purchase of Outlots A & B, RTC 11th Addition. At the time the PA was submitted, there were some zoning issues. The City did not accept the PA and re-evaluated the zoning and FAR in certain areas of the COR. The City worked through these zoning issues and made some policy changes earlier this year. Prior to PSD submitting the original PA, PSD developed assumptions and commissioned a market study for market rate apartments to verify that a new building could justify the need for market rate apartments in this area. Upon building a Proforma, which weighed heavily on the contractors and architects estimated building costs, as well as, the need determined by the market study for the quantity and types of units, we proceeded with the project. At that time we met the minimum threshold return rate of 7.5% which the bank and investors require. WhereWe Are Today: We have had major cost overruns in the project. The single largest overage is the actual bid for the construction of the building. Since we closed on the lot this spring the actual bid numbers are significantly higher. During the bidding process we obtained multiple bids and selected the lowest qualified bid. All bids that were submitted were qualified and complete. As an act of good faith, the GC we selected reduced their bid in order to close the gap of the unexpected costs. Currently the land is titled to PSD, and PSD is prepping the lot for construction. Upon commencement of the construction of this project, PSD will transfer the portion of the lot to the ownership group that will construct the complex. PSD will retain ownership of the balance of the raw land and will develop this raw land when the market can justify additional projects. The entity that will own, construct and operate the building will be Parkview East, LLC, which is comprised of multiple investors. After running a cost analysis, the project was approximately $1M over the anticipated budget. Through cost cutting measures, having some items re -bid, having the GC reduce their overhead cost, and value engineering the shortfall is now slightly over $500,000. 7533 Sunwood Drive, Suite 315 Ramsey, MN 55303 Phone: (763) 427-5955 Fax: (763) 427-4151 www.psdlanddevelopment.com