Receive Request to Reconsider Greenway Terrace 2nd Addition; Case of Aeon
 

Purpose:
AEON is requesting that the City of Ramsey enter into negotiations and to execute a letter of intent / purchase agreement with AEON to sell Outlot A, Greenway Terrace for the development of Greenway Terrace Phase 2 .  A letter of intent / purchase agreement would demonstrate the required site control needed for the July 2020 funding application to Minnesota Housing Finance Agency needed by AEON to proceed.

Background:
Greenway Terrace Phase 1  -  AEON opened Greenway Terrace Phase 1 in 2018.  Greenway Terrace Phase 1 is 54 units and home to approximately 250 residents. Property taxes payable in 2020 are $59,024.82 based on a tax-assessed value of $6,533,400. Estimated annual property taxes for 2021 are $76,113.93 based upon a tax-assessed value of $8,810,400.  This project is was first phase of a two building project in the COR.  While under construction, Phase 1 received over 300 applications for 54 units – demonstrating a strong need for affordable housing in Ramsey and the region as a whole.

Greenway Terrace Phase 2 / Expiration of Purchase Agreement - The City Council adopted Resolution #20-013 issuing a Notice of Default which effectively terminated the purchase agreement between the City and AEON Ramsey 2 LLC. AEON Ramsey 2, LLC was unable to perform to the terms of the Purchase Agreement and the City exercised its remedy per the terms of the Purchase Agreement.  The sales price for the land (1.36 acres) was $123,368 ($2.08/SF). The City received $30,000 of non-refundable earnest money and has retained it.

Greenway Terrace Phase 2 / Offer to to Enter into Negotiations - Aeon has provided a project narrative outlining the performance of Greenway Terrace Phase 1 and the desire to move forward with a New Letter of Intent / Purchase Agreement and to complete Phase 2 of their planned project.  Greenway Terrace Phase 2 would be a 55-unit building with units available to households at or below 50% ($51,700 for a family of 4) and 60% AMI ($62,040 for a family of 4). Some of the units have been designated for high priority homeless families. These units will be affordable at 30% AMI and will be supported by an onsite case manager.  Attached to this case is the design package showing the site plan and elevations.

Letter of intent / purchase agreement 
Aeon is requesting that the City of Ramsey issue a letter of intent to enter into a purchase agreement with Aeon for the Greenway Terrace Phase 2 parcel. A letter of intent would demonstrate the required site control needed for the July 2020 funding application to Minnesota Housing Finance Agency. 

Note, a letter of intent and purchase agreement are two separate actions.  The letter of intent is a preliminary and non-binding action indicating a desire of the parties to (in this case) enter into a purchase agreement.  Even though the letter of intent is non-binding, it is enough of an action to demonstrate control of the site for the purposes of Aeon to make the funding application.  Subsequent approval of a purchase agreement will then legally bind the parties to the provisions outlined in the document.


 

Notification is not required. 

Observations:

Project Considerations

• Market Demand - According to the 2019 Maxfield Housing Study Summary there is demand for 70-80 units of affordable apartment housing from 2019-2030.
• Zoning- The land is zoned for Multifamily housing/Apartments
• Pricing - Offer for land is $125,000 ($2.11/SF). Staff estimates the land is valued at $3.00 to $4.00 / SF
• Tax Impact - Staff estimates a value of $8M (subject to change when completed and fully assessed) $69,000 annual total taxes ($27,000 City). However, this location is located within a Tax Increment Finance (TIF) District. New taxes generated by the new value would be captured within the District until the District expires.
• Construction Jobs / Cash into Community  - 100 jobs over 12 month construction period
• Job Creation - 1-2 onsite jobs
• Public Safety -  Staff will provide public safety call data at the request of the City Council
• Population Growth - Estimated to be 250 residents

Project Timing:

• June 2020 – Site control documentation executed.
• July 2020 – Funding application to Minnesota Housing Finance Agency submitted. Funding application to the Metropolitan Council submitted
• Fall 2020 – Design and entitlement work completed started.
• November 2020 – Metropolitan Council funding awards announced.
• December 2020 – Minnesota Housing Finance Agency funding awards announced.
• January 2021 – Financing partners selected.
• Summer 2021 – Construction closing and groundbreaking.
• Summer 2022 – Construction completion and lease up.

Alternatives:

1. Direct Staff to enter into negotiations with AEON for the sale of Outlot A, Greenway Terrace
2. Notify AEON that the City is not interested in selling Outlot A, Greenway Terrace to AEON
3. Something else.

This item would be covered under normal staff duties.

Acknowledging that the City Council took two previous actions to allow the Purchase Agreement to expire, Staff is seeking policy direction without making a Staff Recommendation at this time. Staff further acknowledges that subsequent discussions pertaining to multifamily housing have occurred at the Council Level.

Finally, Staff is forwarding this request per our appropriate policies. Since a request has been made, Staff cannot simply deny at an administrative level. That being said, it did appear to be some support in moving forward based on a recent Work Session discussion.

Based on discussion.