Other business we will uh recess and move into a Rochester Economic Development Authority meeting for January for July 6, 2026.

Um first up is our consent agenda.

There is uh one item the Raj the EDA minutes of May 4th.

Is there a motion for approval?

For approval.

Second.

Motion made by council member uh keen and seconded by council member Doring.

All in favor say aye.

Aye.

Opposed say nay.

Motion passes.

Uh uh moving on to reports and recommendations.

We have one item on our business this evening, which is amendments to purchase and develop assistance agreements relating to the Civic Center North Apartment Project.

Uh, Mr.

Brent Sven V.

Good evening, EDA President Shooting, members of the EDA and Mayor Norton.

Uh Brent Sunby here with community development.

So back in March of 2022, um, after going through an RFP process, the city selected Sherman and Associates to partner with them for the redevelopment of the Civic Center North site.

At the end of 2024, the city established a tax improvement financing district for the property.

And June of last year, the council approved purchase and development assistance agreement and related to the project at Civic Center North.

Um since that time, city staff has worked closely with Sherman and Associates to maintain the project schedule and meet the existing requirements to close and commence construction by the end of June of this year.

Um significant work has occurred over the past several months to advance the project.

Um the affordable housing component specifically closed on tax exempt bonds.

The market rate tower building has a partial phase permit issued, and the development team has secured commitments for a majority of the required project equity.

In addition, Sherman Associate has invested approximately three and a half million dollars into the pre-development and project cost, demonstrating a financial commitment and continued confidence in the project.

On June 23rd of this year, Sherman Associates formerly requested a 90-day extension to the closing date, citing continuing challenges in the capital markets and the need to finalize remaining equity commitments and permanent financing for the project.

Staff recognizes the significance of the project and the substantial investment already made by Sherman and Associates following the negotiation period between city staff and the Sherman team.

Staff is recommending that a 70-day extension be granted instead of the requested 90 days.

Staff believes that this time rain provides a significant opportunity to complete the financing while maintaining accountability and preserving the city's ability to pursue ultimate redevelopment opportunities if necessary.

While the alternative development scenario is possible, staff does not feel or believe that the city would be in a position to meaningfully advance another proposal within the next 70 days for the site.

Again, given the competitive nature of the low-income housing tax credit and housing bond programs, replacing these financing resources and delivering a comparable mixed income development would be challenging and could delay redevelopment of this important river site even further.

As part of the negotiated of the terms of 70 days instead of the 90 days, um Sherman and Associates has agreed to a 200,000 non-performance fee.

Basically, if um Sherman Associates do not close on the property within the 70 days, they would owe the city 200,000 for not for a non-conformance fee.

Um I do have Chris Sherman here with us this evening that would like to address the EDA in more detail in regards to the request.

Um, but I'm happy to report that Sherman Associates has been a wonderful team to work with these number of number of years on the project, and we feel that we can get a project closed and start construction within 70 days, which would put us at sometime before September 14th of this year, where they would have to close on the on the land and start construction on the project.

So with this, I'll turn it over to Chris Sherman if that's okay with EDA members.

Come forward.

Mr.

Sherman, thanks for being here to this evening.

My pleasure.

Really appreciate your time tonight.

Brent, thank you very much for the remarks.

And it's been a pleasure working with city staff on this project for the last four and a half years.

We recognize we're four and a half years into a process to deliver 349 homes on this site.

Over the last four and a half years, we have gone through a lot of various considerations with the city as we looked at different iterations of the project.

We also have faced some macro conditions that the project has encountered along the way.

Sherman Associates is a developer owner operator that really takes pride in delivering generational housing.

The product we deliver and have been delivering for 48 years.

We want to deliver product that generations from now people are going to look at and say that was done well.

And part of our reason for really being such a uh uh massive um uh focused effort right now on Rochester is we find alignment and all the great things the city of Rochester is doing.

Our mission, building communities enriching neighborhoods really ties into what we want to be doing along the riverfront for decades to come.

I will be here for decades to come.

And the product that we look to deliver here to 349 families is one that we certainly are gonna be able to stand behind long term.

We are at the finish line of this process.

140 million of capital coming to closing here.

Our targeted closing date that we're communicating to all parties is August 15th.

It has been a road uh to move um housing production forward the last few years.

There have been challenges, but we are a group that sees things to the finish line and do not take shortcuts along the way to make a deal work.

We take the right road to deliver the quality product that you, the council, you, the mayor, city staff, and residents of the city can be proud of long term.

And as a developer owner and long-term operator, um, that's key for us.

We want to build product, deliver product that is gonna be well served for the households living there generations from now.

Um, I'll keep my remarks brief because I'm happy to dive into any questions um in detail, but I don't want to go too deep here as I know you've been up here for a couple hours now, and I do really appreciate your time tonight.

Thank you, Mr.

Sherman.

Uh Councilmember, uh, you can you can have a seat.

I have a question for him.

Oh, uh well, I'm gonna go to council member Fredericks first, and then if you do, I'm gonna go in order.

Oh, whatever.

Councilmember Fredericks.

Can you get it done in 70 days?

Yes.

Okay.

That's your question.

Okay.

Uh Councilmember Palmer.

Well, that's good.

Um interesting because in uh June 16th of 2025, your office said that you would be starting early next year, which would have been probably January or February of this year.

Um, so we're sitting here now with an expired agreement that you want to extend it for 70 days.

But you're gonna close it in April, um, you're gonna close on August 15th with all your cash.

Is it my what am I missing here?

Uh, Councilmember Palmer, thank you for the question.

Over the last year, uh, we we did and often have the last five or six years pursued outside equity.

What we've um determined over the last six months, uh, really going back to early this year, late last year, is uh a need to bring forward our own capital.

So we, Sherman Associates are bringing forward a majority of the owner equity, and it has been challenging in the marketplace to bring in third-party equity for ground-up new development over the last couple of years.

Higher interest rates and really the ability to buy existing multifamily at discounts compared to building new have made it more attractive for outside equity to go into acquisitions.

We have made the decision over the last six to nine months to bring in our own equity.

That does take some time.

We are bringing about 13 million of owner equity to the table for this closing.

Uh, we recognize that as we sat here a year ago and laid out our closing timeline for this 140 million dollar project that we were being uh accurate in the moment.

Um, I think as a developer, we always try to put dates out there that are both uh reasonable, but also get all of our trains to the finish line.

We have nine financial partners on these two deals between our banks, our tax credit syndicator, pref equity partner, and ourselves.

Um, and key for us is making sure each of those parties is working towards those aligned dates.

And at times these closings do get delayed.

Um, we are a group that consistently for 48 years has closed our deals.

Sometimes it takes longer than others, and when we can't find the outside source, we find an alternative.

In this case, we're bringing forward our own capital internal capital to get this project closed, and that's what's allowed us to make more of this firm commitment here to get to an August 15th closing.

Is we now are going to be a majority almost all of the equity.

So that's different than where it was at before when we were working to try to find an outside equity group.

Well, first and bank on the old site is a market rate apartment that was built without any assistance.

Um you're getting 25 years of TIFF, so the city's helping out with that.

The city's giving you the land.

And in my where I'm having my difficulty on this is in 2021, we needed apartments.

We really don't need more apartments at this moment.

We were doing pretty good on apartments.

And so you're getting how much in developer um fees, $13 million developer fee?

In developer fee?

Um, no, our developer fee on the market rate deals about three million of paid fee in the affordable deals.

Currently, we're deferring all of our fee on the affordable deal.

So we're eliminating it.

We're deferring it.

The on uh affordable housing, we generate tax credits based on basis.

So our developer fees basis eligible, and that's allowing us to qualify for more federal low-income housing tax credits to build the project, but all of our fees deferred permanently.

So it'll ultimately from a structure standpoint get paid out of cash flow, but we get none of it paid during the develop development period on the affordable.

So our total development fee that we're getting paid during the development period is about three and a half million total for the 140 million dollar project.

And you understand my questions?

I mean I do, absolutely, council member.

I understand the questions.

Um certainly uh on both the affordable and the market rate deal, there are our gaps.

The affordable really is driven by delivering housing at 30 percent AMI and 50 percent AMI for seniors, and that does deliver a gap that the federal loan housing tax credits can't fill on their own.

A majority of the tax increment is going to the affordable.

We are using some of it on the market rate deal.

The market rate deal is a concrete product, 15 stories, and we view that as a product type that certainly has longer useful life than stick frame.

So I think that is a key consideration here for kind of what is allowing that market rate deal to be considered for the tax increment source is the fact that it is a concrete product that is gonna have a longer, long-term useful life for the city of Rochester.

And your permits have been issued in and you've you've you paid for your permits already?

The permits are ready to be picked up by not paid for our permits yet, but we have incurred three and a half million of costs on design and other pre-development expenses.

Over the last four years.

Over the last four years, yes.

Okay.

Thank you for those questions, Councilmember.

Further questions.

Is there a motion on this side?

Uh Councilmember Miller.

I guess I do have a quick question.

Just since this is the other things have advanced since this project was last before us, and I'm just looking at this elevation for looking east on Center Street.

Does this site development plan integrate with the two-way bike network on the north side of the block that we're actively constructing from the brick the river to uh 11th Avenue East?

And we've also seen the site development plans for Mayo buildings along East Center uh West Center Street.

I I guess maybe this is a question for staff, maybe for Miss Woodward.

Uh are we causing a problem here?

Because I'm looking at this rendering and it just shows trees where likely that path would be continuous.

I I'm sorry to disrupt this process with that question, but I just don't necessarily see how this uh integrates with that.

And I just want to make sure that we're not creating a block for no, I think while it's not being shown on the rendering, it is intentioned that the bike lanes are going in.

Okay.

It's also out in front of where the proposed Granger building.

There will be bike lanes in front of there as well.

And I saw that.

I I and I appreciate that.

I just am not seeing it in the renderings here, and I just want to make sure that we're not doing different projects at different times and approvals and creating conflicts and a continuous network.

There shouldn't be a conflict.

I think the rendering might just be a little bit older and that didn't incorporate that, but that design is moving forward and there shouldn't be any conflicts.

And then a question for you, Mr.

Sherman, that you addressed uh before the meeting, but could you just say on the record how this delay to August impacts your overall construction timeline at lease out?

Uh thank you for the council.

Thank you for the question, Councilmember Miller.

Uh we have been working with our general contractor, Franic companies to uh tighten up the construction schedule.

On the multifamily construction front, housing production is down a lot across the state.

Um up in the twin cities, it's down about 75%.

So as we've been working with Frank companies on getting to the same set delivery date of April 30th previously, that was based on a June start.

We're now looking at an August start, and we've asked them to tighten up the construction schedule by two months so we can still get to an April 30th, 2028 delivery date, build it two months faster, and that's driven by more multifamily labor availability that is gonna, in certain cases, be here in the Rochester Metro in other cases be driving down from the Twin Cities.

So we're now looking at the exact same opening date, April 30th, spring of 2028.

Great.

Thank you.

Councilmember Fredericks.

I'll make a motion.

Adopting a resolution approving amendments to the to the purchase and development assistance agreement between the Rochester Economic Development Authority and the Rochester Civic Lot Limited Partnership and the Purchase and Development Assistance Agreement between the I better put these on Rochester Economic Development Authority and Rochester Tower LLC regarding the Civic Center North Apartments project associated with tax increment financing district hashtag 82-1.

Second a motion made by Councilmember Fredericks and seconded by Councilmember Miller.

Any further I'm looking forward to this project.

It's going to add some needed affordable housing in the downtown area as well as market rate and the senior housing.

I like the project.

Your three and a half million dollar investment up front before you even know you're going to get it home is quite substantial.

I'd hate to pull that away from you.

Councilmember Wall.

You know, and this is for Mr.

Sherman uh and Dan.

You know from previous discussions that I'm uncomfortable with uh extensions, of course.

Uh I do like the project.

I am uh proud of the fact uh from the Maxfield studies that we've reduced affordable housing need by 26 percent between 20 and 25, and I think that's something that we can uh continue to lift up as uh city council and city staff and the community that's really trying to make a dent in the needs for the community.

Uh I I would love you to come to the microphone and and uh August 15th is 40 days away on day 41.

You got heavy machinery moving.

Day 42.

Usually I will accept 42.

Thank you.

Okay.

Got to get title out there to take some photos and appreciate that question.

Councilmember.

Thank you, Councilmember.

I want to make a map.

No, not at all.

I just want to say I I even though it's four and a half years and and I have been in several different positions in that four and a half years, both seeing this project from a planning and zoning commission standpoint and here on the council.

I really uh uh respect your tenacity and your stick to itness uh with this project.

I do think that with a rental housing rate, uh uh occupancy rate of more than 95%.

I think this community can use some more rental uh units and affordable units.

Uh I'm uh very excited to hear about this being a real premier project for Sherman going forward, and that you have a commitment to Rochester going beyond this.

I think as I've said on this dais many times, I think it's really important for us in this community to see the diversity of developers coming into Rochester and uh and uh building in and uh being neighbors with us.

So uh I appreciate that.

With that, all in favor say aye.

Aye opposed, say nay.

Motion passes unanimously.

Thank you.

Very much.

Thank you.

Is there a motion to adjourn the EDA?

So moved.

Second.

All in favor say aye.

Aye.

Aye.

Opposed, say nay.

Motion passes.