I'll have what he is having!

March 11, 2014

Memorandum

From: Robert L. Chapman

To: Andy Scott

Re: South Elm Development Group (SEDG) Compensation Model

1. Under the June 12, 2013 Master Development Agreement (MDA) between the

Redevelopment Commission of Greensboro (RCG) and SEDG, SEDG’s only

compensation is whatever SEDG is paid by sub-developers for parcels within the seven

acre South Elm Redevelopment site, less a fixed payment to RCG of $428,694 per acre.

2. In its proposal to RCG, SEDG proposed to invest $1,362,160 in the project. This

includes the fair-market value of services.

3. SEDG originally projected that after its investment of time, effort, expertise and

planning services, it would be able to resell all of the parcels for approximately $11

million within a twelve year period and receive $6.7 million for its services.

4. The financial structure has changed dramatically with the advent of the Union

Square Campus, which we sought aggressively and about which we are most enthusiastic.

However by providing USC with free land and tax-exempt status, making TIF financing

of required parking decks impractical, if all goes well under the new scenario, we might

earn about $1.6 million over the 12 year term of the MDA, a $5.1 million reduction in our

potential incentive compensation. The attached charts provide details of the original and

revised forecasts.

5. We would like for the City and the RCG to restructure developer compensation

from re-sale margin to a percentage developer fee. We believe that a fee of 3% of total

project cost, while significantly below typical development fees, would be appropriate

So, the Master Developer who has yet to create anything already thinks he deserves more money.

If "The Bobs" (Chapman and Isner -Master Developer) had taken possession of the land, as originally agreed upon, the proceeds from the original six acres would have generated about $3,000,000. The city would then have been able to repay the Community Development Section 108 loan made to the city...approximately $3,000,000.  The city would also have received some additional property taxes.

Three years later, the land has yet to be sold but the loan must now be repaid...

According to the preceding email, the Master Developer was going to make $8,000,000 profit from the resell... 

Since the land is still ours, I think the city could use an additional $8,000,000...

Maybe "The Bobs" should have taken possession of the land after all !

The Union Square Campus, (and The Mill's on going evolution) is (are) probably the best thing that could have happened to our community. 

So, if land is to be given and if subsidies are to be granted, then, I contend that Union Square is a better investment. 

Full revised financials here.