The Denargo Market site is a 28 acre redevelopment in Denver’s River North or “RiNo” neighborhood northeast of downtown Denver. The property was named after the farmer’s market that operated on the site during the first half of the 20th century. After the market closed, the property was gradually developed with industrial uses including junkyards. As a result, the property had extensive subsurface contamination that required remediation, estimated at $3.2 million. As part of the project’s entitlements, the developer was required to dedicate land for a park along the Platte River Trail. Cypress applied to the Denver Urban Renewal Authority (DURA) for tax increment financing (TIF) revenue to offset the remediation and park development costs. DURA’s policy is that TIF should only be used to fund the gap needed to make a project attractive to private investment. DURA therefore requires developers requesting TIF to demonstrate that the project could not process without public financing — a “but for” test. The measure of this “but for” test is the anticipated rate of return on the project with and without TIF.
EPS conducted an independent third party market and financial feasibility review of the project. Key issues included the competitive position of the Denargo project compared to other proposed competitive residential projects, the expected revenue from land sales to vertical developers, and Cypress’ expected rate of return on the project with and without TIF. EPS prepared a land development pro-forma that estimated the project’s rate of return, based on expected land values, residential absorption, and development costs. Assumptions in the pro forma were supported by market research on competitive developments and comparable land sales, documented in a memorandum with supporting tables, maps, and charts.
Based on EPS’s evaluation, DURA awarded the project $2.4 million in TIF. Phase I of the project has been constructed and it is now fully leased. Future phases are in the development process at this time.