Agenda - Economic Development Authority - 09/17/2015

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September 2, 2015 City of Ramsey Council Members and Staff, As you knowearlier this year PSD, LLC purchased approximately 14 acres from the City of Ramsey,of whkh a portion of this lot would be platted to develop an apartment poject. The following |sa 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 zoriing issues and made some poicy 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 apartrnents in this area. Upon buiding a Proforrna, which weighed heavily on the contractors and architects estimated building costs, as well as, the need determined by the market study for the quantity ard types af units, we proceeded wfth the project. At that time we met the minimum threshold return rate of 7.5% which the bank ancl investors require. Where We Are Today: We have had major cost overruns in the project. The single Iargest overage is the actual bid for the construction of the building. Since we closed on the ot this spring the actua bid riumbers are significantly higher. During the bidding process we obtained multiple bids and selected the lowest qualified bid. All bids that were submitted were quaUfied and comptete. As an act ofgood faith, the GC we selected reduced their bid in order to close the gap of the unexpected costs. Currently the land is tited to PSD, and PSD 15 prepping the lot for construction. Upori 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 Justity additional projects. The entfty that will own, construct and operate the building will be Parkview East, LLC, which is comprised of muftipie 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 shortfalt is now slightly over S50Q/D0Q. rsasupwoouDrive, Suite 315 Ramsey, Mms5303 Phone: (763) 427-5955 Fax: (763) 427-4151 =ww»,ma"mme"e/upme"tzorn