2.2.
CC Work Session
- Meeting Date:
- 03/28/2017
Information
Title:
Update Case: PSD LLC Business Park Proposal & Business Subsidy Request
Purpose/Background:
↵PURPOSE
The purpose of this case is to provide the Council with an update RE a request staff recently received from PSD LLC to purchase and begin developing a large portion of the City's new business park. Normally, this case would be brought to the EDA first. However, considering the case on worksession agenda tonight, discussing arterial infrastructure along Bunker/ Puma, staff felt it was worth providing the Council an update, for the sake of context.
BACKGROUND
Attached to this case is a proposal letter from PSD LLC. Staff has been working with PSD LLC on a potential business park project for several months. Recently, PSD LLC has been able to finish up their preliminary site investigation due-diligence, preliminary project pro-forma, has executed a Letter-of-Intent (LOI) with Hageman Holdings, and is now ready to proceed forward to the City. In order to make the project "GO," PSD LLC is requesting City assistance.
PROJECT
PSD LLC is proposing to purchase 45 acres of land from Hageman Holdings for roughly $1.75 per square foot (roughly $3.4M) for a new business park. PSD LLC plans to get sites "pad ready" in anticipation of future projects (i.e. mass grading, storm water, utility stubs, etc.). PSD LLC is generally open to the various methods in which projects may take place (meaning, they are willing to sell land directly to a business, and/or construct projects, and/or act as landlord). PSD LLC will prefer to own/lease back buildings.
PSD has developed some concept master plans for the business park, which are attached to this case. It should be noted, these are CONCEPT master plans. It is very likely, what the market actually demands in the future, will be different than exactly what is shown on these concept master plans.
What is more certain, is PSD LLC's first project, which will kick off the new business park. PSD LLC is proposing to construct a 60,000 sf spec industrial building along against US Highway 10 in 2017/2018. This proposed building would be Ramsey's first 24' clear spec industrial project (24' clear buildings are the new industry standard), and will include high-quality glass infused facades along Highway 10. PSD LLC wants to make a big splash, and turn lots of heads with their first building--as it will set a precedence for the remaining business park. Please reference that attached master plan site concepts, page 1, southwest building.
ASSISTANCE REQUEST
As outlined in the attached letter, PSD LLC is requesting two items from the City.
(1) TIF assistance on the first 60,000 sf spec project
This would be a 9-year Economic Development TIF district. It is estimated this district would generate roughly $277K of PV TIF at 4% discount rate ($349K FV). PSD LLC is requesting this assistance to compensate for the high vacancy rates they will experience with this spec project for several years, and the higher costs they will incur to make the first building located against US Highway 10, look very nice (i.e. the proposed glass facades). PSD LLC feels this assistance is needed in order for them to stay competitive with neighboring communities.
(2) Partnership on Mass Site Improvements--Internal Public Road
PSD LLC would like the City to partner in the kick off of this business park by participating in some of the mass site improvements costs. Specifically, PSD LLC is asking the City to pay for a portion of the proposed internal stub road ($200K--$250K estimated cost). Please see attached preliminary engineers estimate (Bolton & Menk), Phase 1 for details. PSD LLC plans to take care of all other mass site improvements to prepare for a long-term business park, including: mass grading, regional ponding, berming (including creating separation from Capstone Homes), removal of the large stockpile of "un-buildable" dirt from the site, platting, and permits. PSD LLC feels this assistance is needed in order for them to stay competitive with neighboring communities.
STAFF COMMENTS
Overall, staff believes this is a great opportunity for the City to kick-off the new business park with a big splash. Based on staff's conversations with other developers, brokers, and real estate professionals, this opportunity may be unique, as it is unlikely a developer/ investor outside of the local region would be willing to make this level of investment in a speculative business park in Ramsey (or any similarly situated community). Additionally, staff would note, PSD LLC brings a good development team to the table, with a proven track record, and the financial backing needed to make a project of this size GO (and to sustain it over time). Lastly, staff has received feedback from several prospects that have considered the City's new business park over the past few years, that they don't want to the the "first-one-in" the new business park--this PSD LLC project may be an opportunity to overcome that hurdle.
A 60,000 sf 24' clear industrial building will generate about $116K in total annual property taxes. The PSD LLC master plan generally shows seven of these buildings. If development occurred according to the concept master plan, at full build-out, all-things-equal, in today's dollars, the PSD LLC portion of the business park would generate roughly $812K in total annual property taxes. NOTE: the PSD LLC portion of the larger business park is roughly 40% (45 acres of 115 total acres).
Moving forward, the next step in the process for this project is to invite PSD LLC to submit a formal business subsidy application. From there, the proposed assistance requests would be underwritten against the project pro-forma, by the City's financial advisor (Ehlers & Associates).
The purpose of this case is to provide the Council with an update RE a request staff recently received from PSD LLC to purchase and begin developing a large portion of the City's new business park. Normally, this case would be brought to the EDA first. However, considering the case on worksession agenda tonight, discussing arterial infrastructure along Bunker/ Puma, staff felt it was worth providing the Council an update, for the sake of context.
BACKGROUND
Attached to this case is a proposal letter from PSD LLC. Staff has been working with PSD LLC on a potential business park project for several months. Recently, PSD LLC has been able to finish up their preliminary site investigation due-diligence, preliminary project pro-forma, has executed a Letter-of-Intent (LOI) with Hageman Holdings, and is now ready to proceed forward to the City. In order to make the project "GO," PSD LLC is requesting City assistance.
PROJECT
PSD LLC is proposing to purchase 45 acres of land from Hageman Holdings for roughly $1.75 per square foot (roughly $3.4M) for a new business park. PSD LLC plans to get sites "pad ready" in anticipation of future projects (i.e. mass grading, storm water, utility stubs, etc.). PSD LLC is generally open to the various methods in which projects may take place (meaning, they are willing to sell land directly to a business, and/or construct projects, and/or act as landlord). PSD LLC will prefer to own/lease back buildings.
PSD has developed some concept master plans for the business park, which are attached to this case. It should be noted, these are CONCEPT master plans. It is very likely, what the market actually demands in the future, will be different than exactly what is shown on these concept master plans.
What is more certain, is PSD LLC's first project, which will kick off the new business park. PSD LLC is proposing to construct a 60,000 sf spec industrial building along against US Highway 10 in 2017/2018. This proposed building would be Ramsey's first 24' clear spec industrial project (24' clear buildings are the new industry standard), and will include high-quality glass infused facades along Highway 10. PSD LLC wants to make a big splash, and turn lots of heads with their first building--as it will set a precedence for the remaining business park. Please reference that attached master plan site concepts, page 1, southwest building.
ASSISTANCE REQUEST
As outlined in the attached letter, PSD LLC is requesting two items from the City.
(1) TIF assistance on the first 60,000 sf spec project
This would be a 9-year Economic Development TIF district. It is estimated this district would generate roughly $277K of PV TIF at 4% discount rate ($349K FV). PSD LLC is requesting this assistance to compensate for the high vacancy rates they will experience with this spec project for several years, and the higher costs they will incur to make the first building located against US Highway 10, look very nice (i.e. the proposed glass facades). PSD LLC feels this assistance is needed in order for them to stay competitive with neighboring communities.
(2) Partnership on Mass Site Improvements--Internal Public Road
PSD LLC would like the City to partner in the kick off of this business park by participating in some of the mass site improvements costs. Specifically, PSD LLC is asking the City to pay for a portion of the proposed internal stub road ($200K--$250K estimated cost). Please see attached preliminary engineers estimate (Bolton & Menk), Phase 1 for details. PSD LLC plans to take care of all other mass site improvements to prepare for a long-term business park, including: mass grading, regional ponding, berming (including creating separation from Capstone Homes), removal of the large stockpile of "un-buildable" dirt from the site, platting, and permits. PSD LLC feels this assistance is needed in order for them to stay competitive with neighboring communities.
STAFF COMMENTS
Overall, staff believes this is a great opportunity for the City to kick-off the new business park with a big splash. Based on staff's conversations with other developers, brokers, and real estate professionals, this opportunity may be unique, as it is unlikely a developer/ investor outside of the local region would be willing to make this level of investment in a speculative business park in Ramsey (or any similarly situated community). Additionally, staff would note, PSD LLC brings a good development team to the table, with a proven track record, and the financial backing needed to make a project of this size GO (and to sustain it over time). Lastly, staff has received feedback from several prospects that have considered the City's new business park over the past few years, that they don't want to the the "first-one-in" the new business park--this PSD LLC project may be an opportunity to overcome that hurdle.
A 60,000 sf 24' clear industrial building will generate about $116K in total annual property taxes. The PSD LLC master plan generally shows seven of these buildings. If development occurred according to the concept master plan, at full build-out, all-things-equal, in today's dollars, the PSD LLC portion of the business park would generate roughly $812K in total annual property taxes. NOTE: the PSD LLC portion of the larger business park is roughly 40% (45 acres of 115 total acres).
Moving forward, the next step in the process for this project is to invite PSD LLC to submit a formal business subsidy application. From there, the proposed assistance requests would be underwritten against the project pro-forma, by the City's financial advisor (Ehlers & Associates).
Timeframe:
10-20 minutes
Funding Source:
New TIF District (#16) for the TIF assistance. For the road assistance, various options exist for further consideration (former TIF 1, former TIF 2, Landfill Trust Fund, EDA Fund, ACHRA Fund, PIR Fund, etc.).
Responsible Party(ies):
Patrick Brama
NOTE: PSD LLC will be in the audience.
NOTE: PSD LLC will be in the audience.
Outcome:
Update case only. Any preliminary feedback is appreciated.
Attachments
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Kurt Ulrich | Kurt Ulrich | 03/23/2017 03:22 PM |
- Form Started By:
- Patrick Brama
- Started On:
- 03/20/2017 04:52 PM
- Final Approval Date:
- 03/23/2017