The two Garden Terrance Apartment building could be joined by a third building within the next few years. The New Ulm Economic Development Authority (EDA) will reinvest $1.5 million in a new Garden Terrance building project. The EDA recently closed on the sale of the two Garden Terrace Apartments for $7.3 million to Rebound Partners. Part of the sales agreement required the EDA invest in the Rebound Partners new building project.

NEW ULM – Last month, the New Ulm Economic Development Authority (EDA) closed on the sale of the Garden Terrace Apartments. This month the EDA was asked to help fund a new Garden Terrace building.

Last October, the EDA agreed to sell the ownership rights of the two Garden Terrace apartment buildings and a vacant lot near the property to Rebound Partners for $7.3 million. At that time Rebound Partners expressed an interested in developing additional housing on the vacant lot. Part of the sale agreement included the provision the EDA would to invest $1.5 million in a third Garden Terrace building.

City Manager Chris Dalton said the $1.5 million given by the EDA would cover rough 46% of what Rebound Partners need to raise in private funding. This payment would serve as an investment in the project. Rebound Partners is projecting the EDA would receive around $3 million back after seven years.

“Market conditions could vary,” Dalton said “but on their projection, its looking at doubling our money in that seven year period.”

The $1.5 million investment would be paid in two installments. The first $750,000 would be give to Rebound Partners after they have submitted development application and plans for the project next year. The second $750,000 will be paid once building permits are approved and construction can start. Dalton estimated this would occur next year.

EDA board member Andrea Boettger asked what would happen if Rebound Partners was unable to find investors to fund the rest of the project.

Dalton said without other investors, Rebound Partners would need to us private equity to finish the project and the EDA would be a larger share of the investment pool.

Board Member Lindsay Henn asked if any private equity was being used up front.

EDA Director Heather Bregel said Rebound Partners is working with United Prairie Bank on the project.

City Attorney Robert Scott said the initial purchase agreement included restrictive covenants and claw back rights if the project does not raise enough funds to move forward.

“If this project does not get built or work does not start within a specified time after the closing date–which was last week–the EDA would have the right to unwind the real estate transaction and receive the property back,” Scott said.

“We’ve agreed to this in the purchase agreement that we’re going to reinvest $1.5 million back in,” Bregel said. “I feel at this point we need to move forward and keep good on our word.”

Boettger agreed the project needed to move forward. She made the motion to approve the project funding agreement with a second from board member David Christian. Board approved the funding with member Michelle Markgraf abstaining from the discussion and vote.

Markgraf is a member of the Oak Hills Operating Board of Directors and Oak Hill has an interest in this project. The Garden Terrance purchase agreement included Oak Hills receiving rights of first refusal on the new building once the property is sold.

Mayor Kathleen Backer thanked staff would negotiated the agreement. She believed the agreement was written to protect the EDA in the event the project did not go through. At the same time she believed this investment would help New Ulm realize another contribution to housing and longterm healthcare through the partnership with Oak Hills.