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7.2. HRSR 07-06-2020 �� Request for Action Elk - River To Item Number Housing and Redevelopment Authority 7.2 Agenda Section Meeting Date Prepared by General Business July 6, 2020 Amanda Othoudt,EDD Item Description Reviewed by Hillside Heights Apartments Cal Portner, City Administrator Reviewed by Action Requested Approve or deny,by motion,a Resolution of Support for the proposed use of Tax Increment Financing for Hillside Heights Apartments. Background/Discussion Community Housing Development Corporation (CHDC) proposes to construct a new, three-story affordable apartment building on the southeast corner of Twin Lakes Road NW and 175"'Avenue NW. The building will consist of approximately 55 units with 13 one-bedroom units,28 two-bedroom units, 14 three-bedroom units and approximately 60 parking spaces. Common amenities proposed include storage, a roof deck, fitness / physical therapy room, library, community room,patio area, ball court,playground, and community garden. On May 26, 2020, the Joint Finance Committee reviewed a Housing TIF application for Hillside Heights. The developer requested$450,000 for land acquisition and$330,000 for site improvements for a total of$780,000, or 4.6% of the total project cost of$16,908,377. The developer is proposing apay-asyougo method for eligible costs as reimbursement. To qualify as a Housing TIF District, at least 20% of the units would be occupied by persons or families with incomes no greater than 50% of county median income or at least 40% of the units would be occupied by persons or families with incomes no greater than 60% of county median income for the duration of the district. Per city policy, the estimated gross increment available is $1,818,810 ($121,254 annually) over 15 years,the maximum term allowed. The developer may be eligible to receive up to 90% of the gross tax increment over 15 years. The estimated total net (90%) amount of tax increment over the 15-year maximum period would be $1,636,935 ($109,129 annually). The estimated present value of the net tax increment is projected to be $1,125,475 assuming 4%interest and would exceed the developer's request. Current estimates indicate it may take only 10 years to meet the developer's full requested amount assuming a 4%interest rate. On May 26, the Joint Finance Committee recommended the HRA consider a letter of support for the project through TIF, subject to the applicant receiving an allocation of tax credits and a continued demonstrated need The Elk River Vision A n elcoming community n ith revolutionary and spirited resourcefulness, exceptional p D W E H E D D Y service, and community engagement that encourages and inspires prosperity /` UR for the additional 55 new affordable housing units in the amount of$780,000 plus interest over a period of up to 15 years. The February 15, 2018,Maxfield Housing Study indicated a need for 93 affordable rental housing units and 40 units of independent senior housing. The study includes the Jackson Hills project,in which eight of the 40- units are affordable. In addition to TIF financing, the applicant has also indicated that they intend to apply for $11,958,804 in Low Income Housing Tax Credits (LIHTC) from the MN Housing Finance Authority which requires a resolution of support from the City Council, and will be considered by the Council later this evening. The resolution of support does not approve the project or the TIF application and the city will not be required to approve future land use applications for the site should the HRA adopt the resolution. However,high density uses are a permitted use on this site. Financial Impact Per city policy, there is more than enough tax increment available to assist with the project well within the maximum timeline. Subject to project eligibility,it is at the city's discretion to capture the remaining 11-16 years of estimated surplus increment from this project to assist in future housing projects. Attachments ■ JFC Meeting Packet ■ Resolution of Support ■ Maxfield Housing Study 1 Dan Tveite Statement and Determination, as President of the The Economic Development Authority for the City of Elk River Minnesota Regarding Conducting Meetings by Telephone or Other Electronic Means As President of the The Economic Development Authority for the City of Elk River Minnesota (the “EDA”), Minnesota, I find as follows: a. The spread of COVID-19 in the United States and Minnesota has raised serious public health concerns and resulted in a great deal of uncertainty. Much remains unknown about the virus and how it spreads. b. On March 11, 2020, the World Health Organization determined that the COVID-19 outbreak constitutes a pandemic. On March 13, 2020, President Trump declared a national state of emergency as a result of the pandemic. c. On March 13, 2020, Governor Tim Walz issued Emergency Executive Order 20-01 declaring a state of peacetime emergency to address the COVID-19 pandemic in Minnesota. The Governor’s Executive Order triggered activation of the County’s emergency management plan and enabled the County to exercise its emergency powers. d. Mayor John Dietz of the City of Elk River, Minnesota declared a local emergency due to the COVID-19 pandemic in Minnesota. e. On March 26, 2020, City Administrator Cal Portner declared that until further notice, or until such time as the State of Minnesota determines to no longer be in a state of emergency, all meetings of the EDA governed by Minnesota Statute, Section 13D shall be conducted by telephone or other electronic means. f. Minnesota Statutes, Section 13D.021 authorizes cities and other public bodies to meet by telephone or other electronic means if the presiding officer, chief legal counsel, or chief administrative officer determines that meeting in person or by interactive television is not practical or prudent because of a health pandemic or an emergency has been declared. I have consulted with the EDA’s chief legal counsel and chief administrative officer. Based on the above findings, I determine as follows: 1. In accordance with the declarations of the Mayor and the City Administrator, until further notice, all meetings of the EDA may be conducted by telephone or other electronic means in a manner satisfying the requirements in Minnesota Statutes, Section 13D.021 and the declarations of the Mayor and the City Administrator. 2. As is practical and feasible, the EDA will provide notice of how the public may listen to or view meetings as they are being conducted, and the EDA will continue to make recordings of its meetings available to the public. 3. All votes occurring at meetings in which all or some of the members are participating by telephone or electronic means will be conducted by roll call. Meeting of the Joint Finance Committee AGENDA Tuesday, May 26, 2020 7:30 a.m. Elk River City Hall Virtual 1. CALL MEETING TO ORDER 2. CONSIDER AGENDA 3. CONSENT AGENDA Considered to be routine and noncontroversial by the Economic Development Finance Committee and will be approved by one motion. There will be no separate discussion of these items unless a Committee member, staff member, or citizen so requests, in which case the item will be removed from the consent agenda and considered under the regular agenda. 3.1 August 27, 2019, Minutes 3.2 Revolving Loan Fund Balance Report 4. GENERAL BUSINESS 4.1 Housing TIF Application for Hillside Heights Apartments 5. ANNOUNCEMENTS 6. ADJOURNMENT Meeting Protocol No sidebar discussions No interruptions State your concern Ensure you understand Don’t take things personally Adhere to time limits Come prepared Ensure all are heard ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY MICRO LOANS Current Current 5/12/20 Loan Loan Interest Term Monthly Principal Borrower Date Amount Rate (Months)Payment Outstanding Current Die Concepts 6/3/2016 $185,200 2.00%60 $936.90 $154,481.48 Y Heritage Millwork 12/22/2016 $100,000 3.00%60 $965.61 $69,219.18 Y Ralphies#1 9/10/2013 $74,999 3.00%120 $724.20 $27,067.98 Y Ralphies#2 8/28/2018 $19,175 3.00%60 $343.65 $13,099.75 Y TOTAL MICRO LOANS $263,868.39 Micro Loan Fund 240 Distinctive Iron 10/1/2019 $126,000 2.03%60 $1,050.07 186,440.15$ Y Scott Morrell LLC 8/6/2015 $200,000 2.00%60 $1,011.77 159,419.31 Y Orluck 7/17/2018 $200,000 3.00%84 $2,642.66 153,861.22 Y $499,720.68 DEED Jobs Incentive Loan Fund 242 Fund Cash Balances 05/12/20: Micro Loan Fund - 240 $893,005.71 State DEED Jobs Incentive - 242 $123,317.72 Meeting of the Elk River Joint Finance Committee Held at Elk River City Hall Tuesday, August 27, 2019 Members Present: Dan Tveite, Larry Toth, Ryan Hardin, Nate Ovall, and Rhonda Magnussen Members Absent: Jim Gromberg, Chad Vitzthum, and Michelle Eder Staff Present: Amanda Othoudt, Economic Development and Colleen Eddy, Economic Development Specialist Others Present: Cindy Hemmer, Distinctive Iron 1. Call Meeting to Order Pursuant to due call and notice thereof, the meeting of the Elk River Joint Finance Committee was called to order by Dan Tveite at 7:43 a.m. 2. Consider Agenda Motion by Ovall and seconded by Hardin to approve the August 27, 2019, Joint Finance Committee agenda. Motion carried 5-0. 3. Consent Agenda Motion by Ovall and seconded by Magnussen to approve the August 27, 2019 Joint Finance Committee consent agenda: 3.1. June 25, 2019 Joint Finance Committee meeting minutes 3.2. Revolving Loan Fund Balance report Motion carried 5-0. 4.1 Microloan Application for Distinctive Iron Ms. Othoudt presented the staff report. Mr. Ovall announced that he is a representative at the Bank of Elk River, but is not the bank representative for Ms. Hemmer and Distinctive Iron. This announcement does not prevent him from voting on this application. The Committee discussed several items on the application; is the applicant rolling their previous microloan into this request, are the jobs proposed new ones, the Initiative Foundation will also be providing gap financing for this project in the amount of $90,000. Ms. Hemmer stated that they will be leasing a portion of their old building and will sell it if the price is right. Motion by Toth to recommend approval of the Jobs Incentive Microloan application for Distinctive Iron to the EDA and seconded by Magnussen. Motion carried 5-0. 5.1 Announcements Ms. Othoudt notified the committee that there is a vacancy on the committee and if members know anyone they should send Ms. Othoudt their names. 6. Adjournment There being no further business, Mr. Tveite adjourned the meeting at 8:08 a.m. Minutes prepared by Colleen Eddy. _____________________ Tina Allard City Clerk ___________________ Amanda Othoudt Economic Development Director The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To Joint Finance Committee Item Number 4.1 Agenda Section General Business Meeting Date May 26, 2020 Prepared by Amanda Othoudt, EDD Item Description Hillside Heights Apartments Housing TIF Application and Financial Review Reviewed by Mikaela Huot, Financial Advisor Reviewed by Cal Portner, City Administrator Action Requested Review application and provide a recommendation to the Housing and Redevelopment Authority to establish Tax Increment Financing District No. 26. Background/Discussion Community Housing Development Corporation (CHDC) proposes to develop a three-story new construction affordable apartment building on the Southeast corner of Twin Lakes Road NW and 175th Ave NW. The building will consist of approximately 55 units with 13 one-bedroom units, 28 two-bedroom units, 14 three- bedroom units and approximately 60 parking spaces. Common amenities proposed include storage, a roof deck, fitness/physical therapy room, library, community room, patio area, ball court, playground, and community garden. Based on an estimated taxable value upon completion of $7,766,300, provided by the Sherburne County Assessor, the Hillside Heights Apartments Housing Project is estimated to generate approximately $3,152,604 in total gross tax increment over 26 years, the maximum term for a Housing TIF District. The net amount projected to be available for the project is 90% or $2,837,354, with the city retaining 10% for administrative and other eligible expenses over the 26-year term of the district. The developer requested $450,000 for land acquisition and $330,000 for site improvements for a total of $780,000. Per city policy, the total estimated gross increment available is $1,818,810 ($121,254 annually) over 15 years, the maximum term allowed. Following policy guidelines, the developer may be eligible to receive up to 90% of the gross tax increment over 15 years. The estimated total net (90%) amount of tax increment over the 15-year maximum period would be $1,636,935 ($109,129 annually). The estimated present value of the net tax increment is projected to be $1,125,475 assuming 4% interest and would exceed the developer’s request. Current estimates indicate it may take 10 years to meet the developer’s full requested amount assuming a 4% interest rate. N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\Joint Finance Committee Agenda Packets\2020\4.1 sr Community Housing Development Corporation TIF Application.docx The developer’s proposed financial package for the Hillside Heights Apartments Housing TIF Project includes the following sources and uses of funds: SOURCES AMOUNT NOTES Minnesota Housing First Mortgage $3,290,000 40 years at 3.3% interest rate TIF Mortgage $780,000 25 years at 3.3% interest rate Sales Tax Rebate $349,509 Energy Rebate $27,500 Deferred Developer Fee $502,564 50% total fee. Max allowable Tax Credit Proceeds $11,958,804 TOTAL $16,908,377 USES AMOUNT NOTES Land Acquisition $450,000 Construction $12,760,000 Contingency $510,400 Professional Fees (Soft Costs) $1,216,775 Developer Fee $1,000,000 Syndication Fees $39,600 Financing Fees $635,070 Reserves $295,533 TOTAL $16,908,377 The developer is proposing a pay-as-you-go method for eligible costs as reimbursement. To qualify as a Housing TIF District, at least 20% of the units would be occupied by persons or families with incomes no greater than 50% of county median income or at least 40% of the units would be occupied by persons or families with incomes no greater than 60% of county median income for the duration of the district. Policy Review Staff completed a review of the application in accordance of the city’s Tax Increment Financing Policy adopted on December 4, 2017. Based on the Estimated Market Value of the project as calculated by Sherburne County, the project’s EMV is approximately $7,766,300 or $141,205 per unit. Taxes generated by this project would be approximately $151,640 or $2,757.09 per unit. Public Purpose The project must achieve one or more of the following public purpose statements: 1. Demonstrate long-term benefits to the community. 2. Retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits through:  Diversification of the local economy  Significant addition of permanent, high-wage, full-time jobs  Addition of jobs attractive to those unemployed or underemployed 3. Significantly increases the city’s commercial and industrial tax base. 4. Demonstrates the ability to encourage unsubsidized private development through “spin off” development. N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\Joint Finance Committee Agenda Packets\2020\4.1 sr Community Housing Development Corporation TIF Application.docx 5. Facilitates the development process and achieves development on sites that would not develop “but for” the use of TIF. 6. Removes blight and/or encourages redevelopment of commercial and industrial areas resulting in high quality redevelopment and private reinvestment. 7. Offsets redevelopment costs (i.e. contaminated site cleanup) over and above the costs normally incurred in development. 8. Aids the implementation of the Mississippi Connections Plan. The proposed project meets public purpose objective #1. TIF District Term City’s policy limits TIF Districts to the minimum term necessary to meet the project needs. Only projects exceeding the objectives identified in the policy will be considered to exceed the maximum term allowed for housing projects of 15 years (26 Max) for Housing Districts.  The developer is requesting a term of 26 years of tax increment, which exceeds the general term allowed by the policy for Housing Districts. Policy Considerations 1. Each Project is required to meet the but for test to determine the need for and level of assistance.  Baker Tilly Municipal Advisors, LLC completed a but for analysis to determine if the project is expected to proceed as proposed without TIF assistance and/or if alternate funding options, structures or sources could be available that would still allow the project to proceed. The developer has indicated in the application that tax increment financing assistance is necessary for the project to be viable and meet the income restrictions of occupants and provide sufficient cash flow to finance annual operating expenses and debt service. 2. Developers receiving TIF assistance shall provide a minimum of 10% cash equity investment in the project. TIF is not to be used to supplement cash equity.  The developer is proposing to finance this project with multiple funding sources that include Minnesota Housing First Mortgage, TIF Mortgage, Sales Tax Rebate, Energy Rebate, Deferred Developer Fee and Tax Credit Proceeds. It is not a traditionally financed project that includes Owner Cash Equity and Private Mortgage. The deferred developer fee included as a funding source is $502,564, equating to 50% of the total upfront developer fee and the maximum allowable for this type of project. 3. TIF will not be used in circumstances where land and property price is of fair market value.  The developer will be required to provide the city with recent appraisals, as required for financing and performed by a third-party to determine the fair market value of the land. 4. The developer shall demonstrate a market demand for the proposed project.  The most recent housing study completed on February 15, 2018, indicates a need for 93 units of affordable rental. Financial Impact Per city policy, the total estimated gross increment available over 15 years for housing projects is $1,818,810. The developer could receive 90% of the gross increment over 15 years of $1,636,935 or a present value of $1,125,475. However, based on the developer’s application and request for assistance, it may only take up to 10 years to meet the full requested amount. N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\Joint Finance Committee Agenda Packets\2020\4.1 sr Community Housing Development Corporation TIF Application.docx Subject to project eligibility, it is at the city’s discretion to capture the remaining 11-16 years of estimated surplus increment from this project to assist in future housing projects. Attachments  Hillside Heights Apartments TIF Application and Supporting Materials  Baker Tilly Municipal Advisors, LLC analysis and supporting documents dated May 22, 2020 Memo To: Members of the Joint Finance Committee Amanda Othoudt, Economic Development Director From: Mikaela Huot, Director Date: May 22, 2020 Subject: Hillside Heights Tax Increment Financing Housing (TIF) District Revenue Projections and Financial Analysis Background The City of Elk River received an application from Community Housing Development Corporation (CHDC), the developer, for financial assistance through Tax Increment Financing (TIF) to assist with financing a portion of the extraordinary development costs related to the construction of a new 55-unit affordable housing building. The developer stated in the application for assistance that the Hillside Heights Apartments would meet part of the remaining demand for affordable and subsidized rental housing and affordable independent living senior rental housing according to Elk River’s 2018 Housing Study. CHDC proposes to develop a three-story new construction affordable apartment building on the South East corner of Twin Lakes Road NW and 175th Ave NW. The apartment building would consist of approximately 55 units with 13 one-bedroom units, 28 two- bedroom units, 14 three-bedroom units and approximately 60 parking spaces. Common amenities will likely include storage, a roof deck, fitness/physical therapy room, library, community room, patio area, ball court, playground and community garden. The purpose of this memorandum is to provide a summary of Baker Tilly’s review of the development project costs and operating pro forma as provided by the developer to assist the City with making a determination if the project as proposed would be unlikely to proceed “but-for” the requested Tax Increment Financing (TIF) assistance, and to determine the appropriate amount, if any, of public assistance. Prior to establishing a tax increment financing district, there are findings that need to be made by the City that include: 1) determination that the project qualifies as a TIF district and 2) determination that the project as proposed would not proceed without public assistance (meeting the “but-for” test. When reviewing requests for financial assistance it is important to understand how the level of financial assistance would impact the ability of the project to proceed as proposed and maximize new value created on the current project site. Developer Request for Assistance The developer’s application includes an approximate $16.9 million project that would be funded by an estimated $11.9 million of tax credits, $3.29 million of debt financing, rebates, deferred developer fee and TIF mortgage. The developer has asked for annual tax increment revenues generated by the new project to finance a gap of approximately $780,000. Financial assistance through pay-as-you-go tax increment financing from the City Elk River has been requested to provide additional annual cash flow necessary to support the cash flow and debt service financing. Those extraordinary development costs that cannot be supported solely by the project alone typically may justify the need for public financial assistance that would allow the project to proceed as proposed to provide appropriate upfront funding and meet the minimum debt coverage requirements. The developer has indicated the receipt of City financial assistance is necessary for the project to proceed. The sources and uses of funds from the developer’s financial materials is illustrated in the table below. Sources Amount Uses Amount First Mortgage $3,290,000 Acquisition $450,000 TIF Mortgage * $780,000 Construction $12,760,000 Syndication Proceeds $11,958,804 Contingency $510,400 Sales Tax Rebate $349,509 Professional Fees (Soft Costs) $1,216,775 Energy Rebates $27,500 Developer Fee $1,000,000 Deferred Developer Fee $502,564 Syndication Fees $39,600 Financing Fees $635,070 Reserves $295,533 Total $16,908,377 Total $16,908,377 * financed as pay as you go for reimbursement of certain costs and included with First Mortgage Qualifications The City of Elk River has been approached by CHDC for the construction of 55 new apartment housing units and would require the establishment of a Tax Increment Financing Housing District. Tax increment financing is a tool the City may consider using to support financial assistance for the project, subject to meeting the but-for test and need for public financial participation. A housing TIF District is a type of tax increment district which consists of a project that is intended for occupancy by persons or families of low and moderate income. Revenue derived from tax increment from a housing district must be used solely to finance the cost of a housing project as defined. For the proposed project to qualify as a tax increment financing housing district, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(d) of the Internal Revenue Code. The requirements of this subdivision apply for the duration of the tax increment financing district. The income requirements are as follows: • at least 20% of units are occupied by individuals whose income is 50% or less of area median income • at least 40% of units are occupied by individuals whose income is 60% or less of area median income. In addition, not more than 20 percent of the square footage of the buildings that receive assistance from tax increments may consist of commercial, retail, or other non-residential uses. The developer has indicated this project would meet the income requirements outlined above with 100% of the units being affordable at levels below 50% of the area median income (AMI). The new units would include a mix of 1, 2 and 3-bedroom units. Revenues from a tax increment financing housing district can be used for all costs related to the qualifying project that may include acquisition, rehabilitation and construction, utilities, parking, streets and sidewalks. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the City may be included in the cost of a housing project. Project Financing There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay- as-you-go basis. With upfront financing, the City would finance a portion of the developer’s initial project costs through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the developer would finance all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for repayment to the developer. If tax increment revenues are less than originally projected, the developer receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues. With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying itself in full if tax increment revenues are not sufficient. The project financing would be pay-as-you-go for reimbursement of eligible costs. Tax Increment Revenue Assumptions The County Assessor provided a taxable value estimate for the project. To estimate the amount of available TIF revenues generated by the proposed project, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms. • Total existing value of $310,300 o Parcel ID: 75-002-4320 o Base value as of Jan. 1, 2019 o Original net tax capacity (ONTC) of $3,879 o Assuming reclassification to rental rates  Rental classification is 1.25% • Estimated total market value upon completion o 55 new units at $141,205/unit  55 rental units  $7,766,300 • Classification for all units as rental o Rental class rate (1.25% per unit) • Incremental value based on difference between existing and new land/building value • Construction commences in 2020 and is completed in 2021 o Project values 100% complete for assess 2022 and taxes payable 2023 • First increment collected in 2023 o Election to delay first increment by up to 4 years • Net present value (discount) rate of 4% • 0% annual market value inflation Tax Increment Revenue Estimates Revenue Estimates Estimated annual available increment (first year) $121,254 Total gross tax increment $3,152,604 City retainage (10%) $315,250 Net amount available for development (90%) $2,837,354 Total estimated present value (4%) $1,617,877 Estimated Maximum Developer Loan $780,000 Estimated Loan Payments $235,221 Total Estimated Payments $1,015,221 Estimated Surplus Funds $1,822,133 Developer Pro forma Analysis including But-For Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The developer has stated that but for the provision of tax increment financing, the project as proposed would not occur due to a reduction in projected revenues causing a gap in supportable permanent financing sources. Because the development would be income and rent restricted housing, the supportable first mortgage would be lower than that of a market rate housing project. Based on the developer’s stated position relative to the need for tax increment financing assistance, the City could make its “but for” finding and provide tax increment assistance. We recommend, however, that the City review the provided assumptions to consider if the project meets the but-for test and, if so, what an appropriate level and type of TIF assistance may be based on the information submitted by the developer. Following thorough evaluation of the project as provided allows the City to be prepared to make an informed “but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of assistance. To complete this analysis, we reviewed the developer’s provided operating proforma and constructed similar ten-year project proformas, showing a result if the developer received the assistance as pay-as-you-go (reimbursement for TIF eligible costs) and showing a result if the developer did not receive assistance. Our analysis of the proformas included a review of the development budget, projected operating revenues and expenditures, and the project’s capacity to support annual debt service on outstanding debt. The purpose of evaluating the operating proformas is to understand the potential cash flow performance through initial development of the project and the annual operations of the project over a 10-year period to assist with determining if the project is financially feasible and would need public participation. Due to the financing structure that incorporates primarily tax credits and debt financing, we are not testing the developer’s projected investment returns like we would for a privately financed for-profit project. Instead we are reviewing the project proforma that includes upfront sources and uses and annual cash flow to assist with making the determination that 1) tax increment assistance is necessary and 2) an appropriate level of assistance. The amount of financing available for the project is based on net operating income. Net operating income is revenues less operating expenses. The annual revenues (rents) as included in the proforma are lower than a market rate project and using current rent and income levels would fall below 50% of AMI. As a result, under the current financing structure, additional annual cash flow would be necessary to obtain a level of debt financing necessary to fund all project costs. The developer has identified tax increment pledged from the City as a method of providing the additional cash flow revenues required to achieve financial feasibility. An additional measure of project feasibility is the Debt Coverage Ratio (DCR), which is a calculation detailing the ratio by which operating income exceeds the debt-service payments for the project. If the DCR is greater than 1.0 it indicates the project has operating income that is greater than the debt-service payment by some margin; conversely if the DCR is less than 1.0 it indicates the project is incapable of meeting its debt-service payment and would need to seek additional revenue sources in order to pay its debt. Typical lending standards will require a DCR of greater than 1.0 as a measure of cushion in the event actual revenues and expenses are different than projected. The developer’s operating proforma with tax increment assistance includes a 1.12x DCR, which is the minimum level generally required for this type of project. Our review of the operating proformas based on with assistance as pay-as-you-go and with no assistance provides the range of financial feasibility for this project and what the estimated gap would be without assistance. It is important to note that certain assumptions were made based on the developer’s provided information and market industry standards for annual lease rates at the targeted income levels, vacancy rates and annual revenue and operating expense inflators in order to analyze the project performance. Adjustments were made to those assumptions to understand the potential impact on the project performance and required need for and level of assistance. To understand viability of the project and need for public assistance, we provided a sensitivity analysis to the proformas with adjustments made to the funding sources and annual operating revenues and expenses. Increases in the projected lease rates or decreases in operating expenses may result in similar returns and DCR calculations as would be through providing tax increment assistance. The developer’s proforma includes 100% of the units at or less than approximately 50% of the AMI. To qualify as a housing TIF District, 20% of the units would need to be at 50% AMI or 40% of the units at 60% AMI. Housing Credit (LIHTC) properties must be rented only to families whose income is at or less than 60 percent of the area median income. Tenants’ rent payments are limited to 30 percent of their income. Without annual tax increment financing revenues and developer-provided assumptions, the project is not projected to be viable at the current rent levels. The annual revenues would not be sufficient to support the level of debt necessary for the project to proceed. However, increasing the rents to meet the 60% AMI threshold is projected to make it a viable project and would reduce the level and/or need for tax increment as the revenues would be increased to a level that could support repayment of the required debt levels. Other factors that may impact project feasibility include review of the City’s current TIF policy and implications to the proforma assumptions. The maximum amount of assistance that could be provided for the project following the policy guidelines is 15 years. Based on current projections of tax increment revenues, the actual term would be less than 10 years to meet the requested level of $780,000, assuming an interest rate component. With these adjusted assumptions regarding term of tax increment, subject to how the debt is structured, there may be potential cash flow concerns once the tax increment revenue stream has ended, unless there is an increase in revenues, alternate revenue source or restructuring of the financial obligation. Also related to policy guidelines is the requirement of owner cash equity of 10%. The financing structure of this project is through tax credits, bonding, rebates and deferred developer fee. Because it is a LIHTC project and not market rate, the capital stack is not a traditional one that comprises private mortgage and owner equity. Conclusion The developer has requested financial assistance related to construction of the new project. Through submission of the tax increment financing application and supporting financial information, the developer has indicated that the project would not occur as proposed without financial assistance from the City due to the reduced rents for all 55 housing units. Using the developer’s assumptions, with assistance, the project would be able to obtain sufficient financing to support total project costs. Using the same assumptions, without assistance, the project is expected to have a financial gap of $780,000. The developer has stated that applying the City’s tax increment revenues to the project would provide the funding levels necessary to close that gap. The projected rental rates are based on approximate 50% AMI affordability levels for 100% of the units. The TIF statute requires at least 20% of the units at 50% AMI or 40% of the units at 60% AMI, putting this project at a higher level of affordability than what is statutorily required for the tax increment financing tool. LIHTC project requirements include 100% of the units at 60% AMI and this project proposal also exceeds those affordability requirements. An increase in annual rental rates up to 60% AMI is projected to have a similar impact of providing additional cash flow as would annual tax increment revenues and would eliminate the need for assistance. Actual performance would be subject to market and developer’s ability to receive the required funding sources and levels. The maximum term of assistance pursuant to the City’s policy is 15 years and based on current revenues, the actual term of assistance is projected to be closer to 10 years. The term of the bonds for the project is based on 40 years and LIHTC requirements for affordability would be 30 years. The term of the tax increment financing would be for a much shorter period than projected debt payments, which may lead to cash flow considerations subject to restructuring. Consistent with development projects, including affordable housing LIHTC projects, a developer fee has been included in the project costs. The developer is deferring just over 50% of those costs to provide additional upfront funding. Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533 or Mikaela.huot@bakertily.com with any questions or comments. Projected Tax Increment Report City of Elk River, Minnesota Tax Increment Financing (Housing ) District Hillside Senior Housing Prelminiary Revenue Projections Less: Retained Times:Less:Less:P.V. Annual Total Total Original Captured Tax Annual State Aud.Subtotal Admin. Annual Annual Period Market Net Tax Net Tax Net Tax Capacity Gross Tax Deduction Net Tax Retainage Net Net Rev. To Ending Value (1)Capacity (2)Capacity (3)Capacity Rate (4)Increment 0.360% Increment 10.00% Revenue 02/01/21 (1)(2)(3)(4)(6)(7)(8)(9)(10)(11)(12)4.00% 12/31/20 310,300 3,879 3,879 0 130.571%0 0 0 0 0 0 12/31/21 310,300 3,879 3,879 0 130.571%0 0 0 0 0 0 12/31/22 310,300 3,879 3,879 0 130.571%0 0 0 0 0 0 12/31/23 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 *97,333 12/31/24 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 93,589 12/31/25 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 89,990 12/31/26 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 86,529 12/31/27 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 83,201 12/31/28 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 80,001 12/31/29 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 76,924 12/31/30 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 73,965 12/31/31 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 71,120 12/31/32 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 68,385 12/31/33 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 65,755 12/31/34 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 63,226 12/31/35 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 60,794 12/31/36 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 58,456 12/31/37 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 56,207 12/31/38 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 54,045 12/31/39 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 51,967 12/31/40 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 49,968 12/31/41 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 48,046 12/31/42 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 46,198 12/31/43 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 44,421 12/31/44 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 42,713 12/31/45 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 41,070 12/31/46 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 39,491 12/31/47 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 37,972 12/31/48 7,766,300 97,079 3,879 93,200 130.571% 121,692 438 121,254 12,125 109,129 36,511 $3,163,992 $11,388 $3,152,604 $315,250 $2,837,354 $1,617,877 * election to delay receipt of first increment until 2023 (up to 4 years from approval date) (1) Total estimated market value based on information provided by County Assessor ($141,205/unit) very preliminary and subject to further review. Includes 0% annual market value inflator (2) Total net tax capacity based on residential rental market rate class rate of 1.25% (3) Original net tax capacity based on existing land & building value (4) Total local combined tax rate available for taxes payable 2020 rates Projected Pay-as-you-Go Loan Report City of Elk River, Minnesota Tax Increment Financing (Housing ) District Hillside Senior Housing Prelminiary Revenue Projections Note Date:02/01/21 Note Rate:4.00% Amount:$780,000 Cumulative Unpaid Semi-Annual Loan Interest Accrued Net Balance Date Principal Interest P & I Due Interest Revenue Outstanding (1)(2)(3)(4)(5)(6)(7)(7) 780,000.00 02/01/21 0.00 0.00 0.00 0.00 0.00 0.00 780,000.00 08/01/21 0.00 0.00 0.00 15,600.00 15,600.00 0.00 780,000.00 02/01/22 0.00 0.00 0.00 31,200.00 31,200.00 0.00 780,000.00 08/01/22 0.00 0.00 0.00 46,800.00 46,800.00 0.00 780,000.00 02/01/23 0.00 0.00 0.00 62,400.00 62,400.00 0.00 780,000.00 08/01/23 0.00 54,564.50 54,564.50 78,000.00 23,435.50 54,564.50 780,000.00 02/01/24 15,529.00 39,035.50 54,564.50 39,035.50 0.00 54,564.50 764,471.00 08/01/24 39,275.08 15,289.42 54,564.50 15,289.42 0.00 54,564.50 725,195.92 02/01/25 40,060.58 14,503.92 54,564.50 14,503.92 0.00 54,564.50 685,135.34 08/01/25 40,861.79 13,702.71 54,564.50 13,702.71 0.00 54,564.50 644,273.55 02/01/26 41,679.03 12,885.47 54,564.50 12,885.47 0.00 54,564.50 602,594.52 08/01/26 42,512.61 12,051.89 54,564.50 12,051.89 0.00 54,564.50 560,081.91 02/01/27 43,362.86 11,201.64 54,564.50 11,201.64 0.00 54,564.50 516,719.05 08/01/27 44,230.12 10,334.38 54,564.50 10,334.38 0.00 54,564.50 472,488.93 02/01/28 45,114.72 9,449.78 54,564.50 9,449.78 0.00 54,564.50 427,374.21 08/01/28 46,017.02 8,547.48 54,564.50 8,547.48 0.00 54,564.50 381,357.19 02/01/29 46,937.36 7,627.14 54,564.50 7,627.14 0.00 54,564.50 334,419.83 08/01/29 47,876.10 6,688.40 54,564.50 6,688.40 0.00 54,564.50 286,543.73 02/01/30 48,833.63 5,730.87 54,564.50 5,730.87 0.00 54,564.50 237,710.10 08/01/30 49,810.30 4,754.20 54,564.50 4,754.20 0.00 54,564.50 187,899.80 02/01/31 50,806.50 3,758.00 54,564.50 3,758.00 0.00 54,564.50 137,093.30 08/01/31 51,822.63 2,741.87 54,564.50 2,741.87 0.00 54,564.50 85,270.67 02/01/32 52,859.09 1,705.41 54,564.50 1,705.41 0.00 54,564.50 32,411.58 08/01/32 32,411.58 648.23 33,059.81 648.23 0.00 33,059.81 0.00 02/01/33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 08/01/33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 02/01/34 0.00 0.00 0.00 0.00 0.00 0.00 0.00 08/01/34 0.00 0.00 0.00 0.00 0.00 0.00 0.00 02/01/35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 08/01/35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 02/01/36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 08/01/36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 02/01/37 0.00 0.00 0.00 0.00 0.00 0.00 0.00 08/01/37 0.00 0.00 0.00 0.00 0.00 0.00 0.00 02/01/38 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $780,000 $235,220.81 $1,015,220.81 $1,015,220.81 Surplus Tax Increment 1,822,133 Total Net Revenue $2,837,354.00 Item 0 Narrative 1 Statement of Public Purpose A Written business plan B Financial Statements for Past Two Years C Current Financial Statements D Two Year Financial Projections E Personal Financial Statements of all Major Shareholders F Letter of Commitment from Applicant Pledging to Complete G Letter of Commitment from the Other Sources of Financing H Application deposit of $10,000 I Construction Plans and Itemized Project Construction Statement J Attach the following documentation as Exhibits Exhibit A Entity Documents Exhibit B Description of Project Exhibit C List of Shareholders/Partners Exhibit D But‐For Analysis Exhibit E List of Prospective Lessees Exhibit F Legal Description and PID Number(s) City of Elk River ‐ TIF Application Hillside Heights Apartments City of Elk River – Tax Increment Financing Application A. APPLICANT INFORMATION Name of Entity: Community Housing Development Corporation Address: 614 North 1st Street, Suite 100, Minneapolis, MN 55401 Primary Contact: Dan Walsh Address: 614 North 1st Street, Suite 100, Minneapolis, MN 55401 Phone: (612) 274-7817 Fax: NA Email: dwalsh@chdcmn.org Brief description of the entity business, including history, principal product or service: Community Housing Development Corporation's (CHDC) mission is to sustain high-quality and affordable homes, to enhance the community over the long term, and to create and maintain healthy living. As the owner of 44 properties and more than 3,600 housing units, CHDC takes a unique, businesslike approach to affordable housing by keeping overhead costs small and structuring its properties and operations to be financially self-sustaining over the long term. For example, at the end of 2019, CHDC’s average expense coverage ratio across its portfolio was 1.34, and it has never defaulted on any of its mortgages. Founded in 1991, CHDC has provided stability to Minnesota residents and communities for more than 25 years as a developer and owner. Brief description of the proposed project: Hillside Heights Apartments will meet part of the remaining demand for affordable and subsidized rental housing and affordable independent living senior rental housing according to Elk River’s 2018 Housing Study. CHDC proposes to develop a three-story new construction affordable apartment building on the South East corner of Twin Lakes Road NW and 175th Ave NW. The apartment building will consist of approximately 55 units with 13 one-bedroom units, 28 two-bedroom units, 14 three-bedroom units and approximately 60 parking spaces. Common amenities will likely include storage, a roof deck, fitness / physical therapy room, library, community room, patio area, ball court, playground and community garden. Attorney Name: John Stern, Winthrop and Weinsteine Address: Capella Tower, 225 South 6th St, Suite 3500, Minneapolis, MN 55402 Phone: (612) 604-6588 Fax: (612) 604-6800 Email: jstern@winthrop.com Accountant Name: Donna Stevermer, Mahoney Ulbrich Christiansen and Russ, P.A. Address: 10 River Park Plaza #800, St Paul, MN 55107 Phone: (651) 227-6695 Fax: (651) 227-9796 Email: dstevermer@mucr.com Contractor Name: Mike Benedict, Frana Companies Inc. Address: 633 2nd Ave S, Hopkins, MN 55343 Phone: (952) 908-2664 Fax: (952) 935-8644 Email: Mike@frana.com Engineer Name (Civil & Structural): BKBM Engineers, John Timm and Keith Matte Address: 5930 Brooklyn Boulevard, Minneapolis, MN 55429 Phone: (763) 843-0474 (John) / (763) 843-0446 (Keith) Fax: (763) 843-041 Email: jtimm@bkbm.com / kmatte@bkbm.com Engineer Name (MEP): Design Tree Engineering, Robert Schuster and Aaron Mueller Address: 21308 John Milless Drive, Suite 104, Rogers, MN 55374 Phone: (763) 270-6316 (Robert) / (763) 270-6313 (Aaron) Fax: (763) 923-8636 Email: rms@dte-ls.com / arm@ate-ls.com Architect Name: Tod Elkins, UrbanWorks Architecture LLC Address: 901 North Third Street Suite 145, Minneapolis, MN 55401 Phone: (612) 455-3104 Fax: (612)455-3199 Email: TElkins@urban-works.com B. PROJECT INFORMATION 1. The project will be: _____ Redevelopment District __X__ Housing District _____ Soils Condition District _____ Renewal and Renovation District _____ Economic Development District 2. The project will be: ___Owner Occupied _x (rental housing) _ Leased Space 3. Project Address: 17451 Twin Lakes Road, Elk River, MN 55330 Legal Description & Parcel Identification Number(s): PID: 75-002-4320 That part of the West 474.61 feet of the Southwest Quarter of the Southeast Quarter of Section 2, Township 32, Range 26, Sherburne County, Minnesota, that lies North of the following described line: Commencing at the Southwest corner of said Southwest Quarter of the Southeast Quarter; thence North along the West line thereof for 755.00 feet to the actual point of beginning of the line to be hereby described; thence East at right angles for 474.61 feet and there terminating. And that lies Easterly and Southerly of the following described centerline: Commencing at the Southwest corner of said Southwest Quarter of the Southeast Quarter; thence South 89 degrees, 37 minutes, 23 seconds West, assumed bearing, along the South line of the Southwest Quarter of said Section 2 for 293.37 feet; thence North 0 degrees, 22 minutes, 37 seconds West for 3.00 feet to a point to be hereafter known as Point "A" for the purposes of this description; thence South 89 degrees, 37 minutes, 23 seconds West parallel with said South line of the Southwest Quarter for 434.95 feet, more or less, to intersect the Northeasterly line of the right-of-way of the Burlington Northern Railroad Company at the actual point of beginning of the centerline to be hereby described; thence return North 89 degrees, 37 minutes, 23 seconds East to said Point "A"; thence Northeasterly and Northerly along a tangential curve to the left, radius 299.87 feet, for a central angle of 88 degrees, 42 minutes, 19 seconds, and a length of 464.26 feet; thence North 0 degrees, 55 minutes, 04 seconds East tangent to said curve for 554.93 feet; thence Northeasterly and Easterly along a tangential curve to the right, radius 317.09 feet, for a central angle of 86 degrees, 49 minutes, 40 seconds, and a length of 80.53 feet; thence North 87 degrees, 44 minutes, 44 seconds East tangent to said curve for 2301.27 feet, more or less, to intersect with and terminate at the East line of said Southeast Quarter of Section 2 at a point thereon a distance of 17.31 feet south of the Northeast corner of the South Half of said Southeast Quarter. (Abstract Property) 4. Site Plan and Preliminary Construction Plans Attached: __X__ Yes ____ No 5. Amount of Tax Increment Requested for: Land Purchase: $450,000 Public Improvement: TBD Site Improvement: $330,000 6. Current Real Estate Taxes on Project Site: $4,480.00 Estimated Real Estate Taxes upon Completion: $40,108.00 7. Construction Start Date: June 2021 Construction Completion Date: June 2022 If Phased Project: Year _NA__ % Completed Year _NA__ % Completed C. PUBLIC PURPOSE It is the policy of the City of Elk River that the use of Tax Increment Financing should result in a benefit to the public. Please indicate how this project will serve a public purpose. See attached statement of public purpose. __X__ Job Creation/Retention: _____ Number of existing jobs __X__ Number of jobs created by project (Property Mgmt: 2 full-time. Construction: 150 jobs) __X__ Average hourly wage of jobs created/retained (Property Mgmt: est. $60,000 annually. Construction: $51.00 per hour) _____ New industrial development, which will result in additional private investment in the area __X___ Enhancement or diversification of the city’s economic base __X__ The project contributes to the fulfillment of the City’s Plan __X___ Removal of blight or the rehabilitation of a high profile or priority site __X__ Significantly increase the City’s tax base __X___ Other: see attached D. SOURCES & USES SOURCES AMOUNT NOTES Minnesota Housing First Mortgage $3,290,000 40 years at 3.3% interest rate TIF Mortgage $780,000 25 years at 3.3% interest rate Sales Tax Rebate $349,509 Energy Rebate $27,500 Deferred Developer Fee $502,564 50% total fee. Max allowable Tax Credit Proceeds $11,958,804 TOTAL $16,908,377 USES AMOUNT NOTES Land Acquisition $450,000 Construction $12,760,000 Contingency $510,400 Professional Fees (Soft Costs) $1,216,775 Developer Fee $1,000,000 Syndication Fees $39,600 Financing Fees $635,070 Reserves $295,533 TOTAL $16,908,377 E. ADDITIONAL DOCUMENTATION AND CHECKLIST Applicants will also be required to provide the following documentation. __X__A) Written business plan, including a description of the business, ownership/management, date established, products and services, and future plans __X__B) Financial Statements for Past Two Years Profit & Loss Statement Balance Sheet __X__C) Current Financial Statements Profit & Loss Statement to Date Balance Sheet to Date __X__D) Two Year Financial Projections __X__E) Personal Financial Statements of all Major Shareholders - Current Tax Return __X__F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Timeline __X__G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project __X__H) Application deposit of $10,000, with any unused portion to be refunded __X__I) Construction Plans and Itemized Project Construction Statement __X__J) Attach the following documentation as Exhibits Exhibit A – Entity Documents Exhibit B – Description of Project Exhibit C – List of Shareholders/Partners Exhibit D – But-For Analysis Exhibit E – List of Prospective Lessees Exhibit F – Legal Description and PID Number(s) Exhibit B – Description of Project Hillside Heights Apartments will meet part of the remaining demand for affordable and subsidized rental housing and affordable independent living senior rental housing according to Elk River’s 2018 Housing Study. CHDC proposes to develop a three-story new construction affordable apartment building on the South East corner of Twin Lakes Road NW and 175th Ave NW. The apartment building will consist of approximately 55 units with 12 one-bedroom units, 15 two-bedroom units, 18 three-bedroom units and approximately 60 parking spaces. Common amenities will likely include storage, a roof deck, fitness / physical therapy room, library, community room, patio area, ball court, playground and community garden. C. Statement of Public Purpose for Hillside Heights Apartments Meets the housing needs identified in the 2018 Housing Study • Assuming CommonBond’s Elk Ridge Lodge is constructed and occupied, Hillside Heights Apartments will meet part of the remaining demand for affordable and subsidized rental housing and affordable independent living senior rental housing. o Hillside Heights Apartments is an alternative development concept containing 55 total units anticipated to serve 12 subsidized households, 27 affordable families and 16 affordable senior active adults. CHDC has had success developing multi-generational housing and has seen positive outcomes including reduced loneliness and increased security and youth enrichment. o The following table summarizes how the development meets the identified needs: Demand Hillside Heights Apts Remaining Demand Study Reference Subsidized 34 12 22 Page 44 and Table CR-2 Affordable 35* 27 8 Page 44 and Table CR-2 Affordable Senior Active Adult 40 16 24 Page 46 and Table CR-2 *Note: 60-unit Elk Ridge Lodge netted out • The 0% vacancy rates for affordable rental housing and senior housing at all levels (pages 30 and 31) indicate a pent-up demand for this type of housing. • Additional demand for Hillside Heights Apartments will also likely come from outside Elk River in the larger submarket area. • Note: This study was completed before the COVID-19 pandemic, and it is reasonable to assume that demand for affordable and senior housing and the jobs it supports will increase through 2025. Good housing is a fundamental piece of the economic recovery. Consistent with the Comprehensive Plan • Provide more housing type choices for the growing number of families in Elk River. “As the percentage of ‘family households’ increased more substantially between 2000 and 2010 than the County and the State.” (page 70) • Diversify the housing types. “As of 2010, 80% perfect of the housing units in Elk River were owner occupied.” and “…it is important for communities to have a mixture of both owner- occupied and renter-occupied units.” (page 71) • Create 55 units of housing for individuals and families at 50% of the area median income. “In 2010, 40.7% of renters paid over 30% of their household income in rent...” meaning that they are rent burdened. (page 73) • Help meet the demand of “the strong need to provide affordable housing for people of all ages.” (page 78) • Provide stable, affordable senior housing for “the notable increase in apartment rental needs in Elk River by members of the baby boom generation.” (page 78) • Provide 55 units of affordable housing within a half mile of the Northstar Commuter Rail Station. “Affordable housing is important to a strong economy and a healthy community.” (page 79) Consistent with the FAST Plan • Accomplishes all the planning and zoning objectives for the 175th Avenue and Twin Lakes Road site in FAST Hillside Heights subarea. (page 55) • Density will be 26 units/acre. (page 38) • Building will be stacked three story residential. (page 38) • Offers a variety of housing options. (page 55) • Attractive streetscape and pedestrian connection along Twin Lakes Parkway. (pages 55-57) • Innovative stormwater practices (considering permeable paving, rain gardens, underground tanks) and energy generation (considering geothermal, solar ready). (page 59) • Open space connections and views. (pages 41, 46, 55) • Landscape buffers. (pages 41, 46) • Paths and crosswalk to the commuter rail station. (page 40) • Site is located in the early Phase 1 project area where FAST concludes TIF will be needed to implement the master plan. (pages 62,67, 71-74) Demonstrates long-term benefits to the community • The development will provide long-term, stable workforce and senior housing to approximately 55 households. • CHDC intends to own the development indefinitely. It will be a good neighbor and ensure the development remains a community asset for decades to come. Increases the number and diversity of jobs that offer stable employment and/or attractive wages and benefits • The building will employee at least two on-site property management staff with salaries estimated to be around $50,000 each. • The project will create 150 temporary construction jobs at an estimated $51.00 per hour. Significantly increases the city’s tax base • Currently, the property pays $4,480 in taxes according to its 2020 property tax statement. By significantly increasing the density on the site, estimated property taxes will increase $35,628, to $40,108. Demonstrates the ability to encourage unsubsidized development • Following the goals and guidance of the FAST, the developer will request a subdivision in order to develop Phase II, which will be another 55 units apartment building. The developer will likely not need city subsidies for Phase II because of the reduced acquisition costs. Facilitates the development process and achieves development on sites that would not develop “but for” the use of TIF • But for the award of tax increment financing, the development will not occur due to a gap in permanent financing. Because the development is income/rent restricted housing, its supportable first mortgage is comparatively smaller than an identical market rate housing project’s mortgage. • Per the FAST Plan, this site is located in the early Phase 1 project area where TIF will be needed to implement the master plan. Exhibit D – But-For Analysis But for the award of tax increment financing, the development will not occur due to a gap in permanent financing sources. Because the development is income/rent restricted housing, its supportable first mortgage is comparatively smaller than an identical market rate housing project’s mortgage. Per the FAST Plan, this site is located in the early Phase 1 project area where TIF will be needed to implement the master plan. See the permanent financing gap in the following summary sources and uses. SOURCES AMOUNT NOTES Minnesota Housing First Mortgage $3,290,000 40 years at 3.3% interest rate GAP $780,000 Requested TIF mortgage Sales Tax Rebate $349,509 Energy Rebate $27,500 Deferred Developer Fee $502,564 50% total fee. Max allowable Tax Credit Proceeds $11,958,804 TOTAL $16,908,377 USES AMOUNT NOTES Land Acquisition $450,000 Construction $12,760,000 Contingency $510,400 Professional Fees (Soft Costs) $1,216,775 Developer Fee $1,000,000 Syndication Fees $39,600 Financing Fees $635,070 Reserves $295,533 TOTAL $16,908,377 A Feasibility Analysis For Hillside Heights Apartments Elk River, MN Sherburne County Date of Report April 24, 2020 Date of Site Visit April 5, 2020 Prepared for: Community Housing Development Corporation Prepared by: Chris Vance Market Analyst Professionals 222 South 9th Street, Suite 1600 Minneapolis, MN 55402 PH: 248-515-0496 cavance@mindspring.com chris.vance@mapyourproject.com Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 1 April 24, 2020 Table of Contents SECTION 1: INTRODUCTION AND SCOPE OF WORK .................................................................... 3 SECTION 2: EXECUTIVE SUMMARY .................................................................................................. 4 SECTION 4: MARKET AREA DELINEATION ..................................................................................... 9 SECTION 5: SITE PROFILE .................................................................................................................. 13 Map: Aerial Map of Site Via Google ................................................................................................................................... 15 Map: Site and Adjacent Features ........................................................................................................................................ 16 Map: Local Area and Amenities .......................................................................................................................................... 17 SECTION 6: DEMOGRAPHIC TRENDS AND CHARACTERISTICS ............................................ 21 DEMOGRAPHIC OVERVIEW ................................................................................................................................... 21 POPULATION CHARACTERISTICS AND TRENDS ................................................................................................... 22 Population Trends and Forecast .......................................................................................................................................... 23 Population by Age Group ..................................................................................................................................................... 24 HOUSEHOLD CHARACTERISTICS AND TRENDS .................................................................................................... 25 Household Trends and Forecast .......................................................................................................................................... 26 Average Household Size and Group Quarters ..................................................................................................................... 27 Renter Households ............................................................................................................................................................... 29 Households by Tenure by Number of Persons in Household ............................................................................................... 30 Tenure by Age by Household................................................................................................................................................ 31 HOUSEHOLD INCOME ............................................................................................................................................ 32 Median Household Income ................................................................................................................................................... 32 Household Income Distribution by Tenure PMA ................................................................................................................. 34 Senior Household (65+) Income Distribution by Tenure PMA ............................................................................................ 35 Non-Senior Household Income by Tenure PMA .................................................................................................................. 36 Household Income Distribution by Tenure PMA ................................................................................................................. 37 SECTION 7: ECONOMIC ANALYSIS .................................................................................................. 38 ECONOMIC CHARACTERISTICS AND TRENDS ...................................................................................................... 39 Employee Commute Times ................................................................................................................................................... 39 Industry Employment Concentrations .................................................................................................................................. 40 Graph: Unemployment Rate Comparison ............................................................................................................................ 42 Annual Labor Force and Employment Statistics .................................................................................................................. 43 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 2 April 24, 2020 Monthly Labor Force and Employment Statistics (Year/Year) ............................................................................................ 44 SECTION 8: SUPPLY ANALYSIS AND CHARACTERISTICS ........................................................ 46 BUILDING PERMITS ................................................................................................................................................ 46 SOURCE: HUD ........................................................................................................................................................ 46 LOCAL RENTAL MARKET ANALYSIS .................................................................................................................... 47 Rental Housing Survey-Competitive Set ............................................................................................................................... 49 Rental Housing Survey-Total Survey.................................................................................................................................... 54 COMPARABLE PROJECT INFORMATION ............................................................................................................... 58 Map: Comparable Projects .................................................................................................................................................. 58 Comparable Project Summary Sheets .................................................................................................................................. 61 SECTION 9: LOCAL PERSPECTIVE ................................................................................................... 67 SECTION 10: DEMAND ANALYSIS ..................................................................................................... 68 DEMAND FOR RENTAL UNITS ............................................................................................................................... 68 Rent Derivation .................................................................................................................................................................... 71 Rent Derivation .................................................................................................................................................................... 72 Future Rental Market and Associated Risks ........................................................................................................................ 74 RECOMMENDATIONS AND CONCLUSIONS ............................................................................................................ 74 SECTION 11: SPECIAL NEEDS ANALYSIS ....................................................................................... 75 SECTION 12: OTHER REQUIREMENTS ............................................................................................ 77 ADDENDUM A ........................................................................................................................................... 80 ADDENDUM B ........................................................................................................................................... 81 ADDENDUM: MARKET STUDY ANALYSIS AND CONSIDERATION: ........................................ 82 DEMAND ANALYSIS ................................................................................................................................................ 83 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 3 April 24, 2020 Section 1: Introduction and Scope of Work Market Analyst Professionals, LLC (MAP) has prepared the following Comprehensive Market Analysis Full Narrative Report to determine the market feasibility of an affordable housing project located in Elk River, Minnesota. The report was prepared for Community Housing Development Corporation. The subject proposal is described in detail in Section 3. The market study was prepared in accordance with Minnesota Housing Finance Agency (MHFA) guidelines and industry accepted practices and is written to meet the requirements of the MHFA market study requirement. The market study includes a site visit and field work by the analyst signing the report conducted on April 5, 2020 with the senior analyst signing the report responsible for conclusions and analysis of the report. Information contained within the report is assumed to be trustworthy and reliable. Recommendations and conclusions in the report are based on professional opinion. MAP does not guarantee the data nor assume any liability for any errors in fact, analysis or judgment resulting from the use of the report. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 4 April 24, 2020 Section 2: Executive Summary AMI Target # of Units # of PBRA Units # of Baths Type Average Sq. Footage Contract Rent Utility Allowance Gross Rent Max Gross Rent Maximum Income Total 55 8 $64,530 Summary 1 BR 13 8 $49,680 1 BR-Apt 30% 4 4 1.0 Apt 680 $722 $62 $784 $582 $24,840 1 BR-Apt 50% 3 1.0 Apt 680 $908 $62 $970 $970 $49,680 1 BR-Apt 50% 4 4 1.0 Apt 680 $722 $62 $784 $970 $49,680 1 BR-Apt 60% 2 1.0 Apt 680 $1,102 $62 $1,164 $1,164 $49,680 Summary 2 BR 28 0 $55,860 2 BR-Apt 50% 14 1.0 Apt 980 $1,083 $80 $1,163 $1,163 $55,860 2 BR-Apt* 60% 14 1.0 Apt 980 $1,316 $80 $1,396 $1,396 $55,860 Summary 3 BR 14 0 $64,530 3 BR-Apt 50% 7 2.0 Apt 1,280 $1,246 $98 $1,344 $1,344 $64,530 3 BR-Apt 60% 7 2.0 Apt 1,280 $1,515 $98 $1,613 $1,613 $64,530  Based on the analysis within this report, the proposal will be successful as is, no changes are deemed necessary. The site is located in a mixed-use area but with LIHTC residential uses located a short distance from the site. Amenities and employment opportunities are located in close proximity with easy access to Minneapolis to the southeast. Household growth in the area is forecasted to increase through 2025 with the rate within the PMA exceeding the overall rate of the state and county. The Minneapolis MSA has outperformed the state average in terms of the unemployment rate in recent years and employment has increased annually each of the past nine years. Derived demand statistics for the subject suggest sufficient demand to absorb the proposal. Finally, supply side data indicates rents for the subject will be competitively positioned in the area and the subject will be well positioned in the market and competitive with comparable projects which have reported very strong occupancy indicative of strong demand in the area. As a result, the development of the proposal to more adequately serve the PMA’s population is appropriate.  The subject is located in the city of Elk River within southeast Sherburne County, Minnesota. Elk River is located approximately 8 miles north of Interstate 94. Both I-94 and US-10 provide linkages to Minneapolis. Additionally, the Northstar commuter rail station is located just south of the site. The site for the project is an occupied lot (with a home to be demolished) located southeast of Twin Lakes Road and 175th Avenue in a mixed-use area. Land to the north of the site is vacant and wooded, a single-family home in good condition is located to the immediate east, Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 5 April 24, 2020 and to the south is a tree line obscuring the site from what appears to be a poor condition residential building. A short distance south of the site is a Northstar Light Rail Station as well as both Coachman Apartments and The Depot at Elk River Apartments (LIHTC projects detailed in a latter section of this report) and newer residential and commercial development.  The proposal is located in the city of Elk River, Minnesota, in Census Tract 305.02 of Sherburne County. The PMA is defined by Census Tracts and encompasses an area northwest of Minneapolis including a portion of Census Tracts located in Wright, Hennepin, Sherburne and Anoka Counties. Major factors in defining the PMA were proximity to the site, socioeconomic conditions and competition with surrounding areas. Specifically, the site is located in the city of Elk River near the recently constructed Northstar commuter rail line. Declining proximity to the site was the major factor in limiting the PMA. Specifically, the PMA extends less than 8 miles from the site in all directions. Given the small geographic area it encompasses the PMA should be considered a conservative estimate of demand.  The most comparable projects to the proposal include general occupancy units operating under income restriction guidelines within the same area as the proposal and offering similar units. Among LIHTC projects those in closest proximity and considered the most comparable to the subject are included—excluding more dated projects. Additionally, two market rate projects are included to gauge hypothetical market rents for the subject. Detailed information on these projects is presented in the following pages. The overall occupancy rate for the most comparable projects is 99.7 percent. The subject will offer one- to three-bedroom general occupancy units with comparable amenities and unit sizes to comparable facilities. The development will be the newest project in the area, commanding a premium relative to more dated competitive set projects. Among competitive set projects Coachman limits rents to 50 percent AMI (for 60 percent AMI income restrictions) and these units are shifted in the rent grid. Considering adjustments and projections to market entry the subject’s rents are consistent with MAP’s estimated achievable LIHTC rents and are appropriately positioned relative to hypothetical market. Competitive rents and strong demand for affordable housing in the area offer support for the success of the proposal.  Reported absorption among competitive set projects has been robust. Maple Village reported one Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 6 April 24, 2020 month absorption of 102 units, the Depot at Elk River Station reported 53 units in one month and Coachmen Elk River reported absorption of 53 units in one month. Considering these rates as well as absorption based on movership ratios and estimated capture rates among income qualified households, it is conservatively estimated the subject would be fully absorbed within 5-6 months of market entry. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 7 April 24, 2020 Section 3: Project Description Name: Address:17451 Twin Lakes Road Elk River, MN 55330 Target Population:Open Total Units:55 Subsidized Units: 8 LIHTC Units: 55 Unrestricted Units: 0 Handicap Units: 4 Utilities Included in Rent Heat: No Electric: No Water: Yes Sewer: Yes Trash: Yes Heat Type: Gas Construction Detail: Construction: New Building Type: Apartments Total Buildings: 1 Stories: 3 Site Acreage: 4.36 Construction Schedule: Beginning: May-21 Ending: May-22 Preleasing: Feb-22 Total Parking Spaces: Surface: 20 Garage (attached): 40 Fee: $0 Plans:NA-Assumed competetive at development Hillside Heights Apartments Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 8 April 24, 2020 Unit Configuration AMI Target # of Units # of PBRA Units # of Baths Type Average Sq. Footage Contract Rent Utility Allowance Gross Rent Max Gross Rent Maximum Income Total 55 8 $64,530 Summary 1 BR 13 8 $49,680 1 BR-Apt 30% 4 4 1.0 Apt 680 $722 $62 $784 $582 $24,840 1 BR-Apt 50% 3 1.0 Apt 680 $908 $62 $970 $970 $49,680 1 BR-Apt 50% 4 4 1.0 Apt 680 $722 $62 $784 $970 $49,680 1 BR-Apt 60% 2 1.0 Apt 680 $1,102 $62 $1,164 $1,164 $49,680 Summary 2 BR 28 0 $55,860 2 BR-Apt 50% 14 1.0 Apt 980 $1,083 $80 $1,163 $1,163 $55,860 2 BR-Apt* 60% 14 1.0 Apt 980 $1,316 $80 $1,396 $1,396 $55,860 Summary 3 BR 14 0 $64,530 3 BR-Apt 50% 7 2.0 Apt 1,280 $1,246 $98 $1,344 $1,344 $64,530 3 BR-Apt 60% 7 2.0 Apt 1,280 $1,515 $98 $1,613 $1,613 $64,530 -All units with 50% AMI targeting above are subject to 50% AMI rent restriction but 60% income restrictions. Unit Amenities Yes A/C - Central Yes Microwave Yes Patio/Balcony A/C - Wall Unit Yes Ceiling Fan Basement A/C - Sleeve Only Walk-In Closet Fireplace Garbage Disposal Yes Window - Mini-Blinds Yes High Speed Internet 0 Extra Fee Yes Dishwasher Window - Draperies Yes Individual Entry Development Amenities Clubhouse (separate building)Swimming Pool Yes Sports Courts (b-ball, tennis, v-ball, etc.) Yes Community Room Yes Playground/Tot Lot Yes On-Site Management Computer Center Yes Gazebo Secured Entry - Access Gate Yes Exercise/Fitness Room Yes Elevator Yes Secured Entry - Intercom or Camera Yes Community Kitchen(ette)Yes Exterior Storage Units Other Laundry Type Parking Type Coin-Operated Laundry Yes Surface Lot 20 Number of Spots Total In-Unit Hook-up Only Carport Extra Fee ? Yes In-Unit Washer/Dryer Yes Garage (attached)Extra Fee ? None Garage (detached)Extra Fee ? Proposed and Recommended Amenities $0 Other Information:  The project will offer 4 supportive housing units. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 9 April 24, 2020 Section 4: Market Area Delineation The Primary Market Area (PMA) is considered to be the area from which households residing near the site would look first for housing. The formulation of the PMA is influenced by the following factors proximity to nearby communities (i.e. the gravity model), natural barriers, political boundaries, employment centers, commuting patterns, proximity, transportation linkages and the availability of competitive housing (e.g. limited senior housing options generally increase the relative size of market areas for senior housing). The following demographic information, comparables, and demand analysis are based on the Primary Market Area (PMA) as defined below and outlined in the following maps. For comparison purposes data pertaining to the city of Elk River, Sherburne County and the state of Minnesota has also been included throughout the analysis. The proposal is located in the city of Elk River, Minnesota, in Census Tract 305.02 of Sherburne County. The PMA is defined by Census Tracts and encompasses an area northwest of Minneapolis including a portion of Census Tracts located in Wright, Hennepin, Sherburne and Anoka Counties. Major factors in defining the PMA were proximity to the site, socioeconomic conditions and competition with surrounding areas. Specifically, the site is located in the city of Elk River near the recently constructed Northstar commuter rail line. Declining proximity to the site was the major factor in limiting the PMA. Specifically, the PMA extends less than 8 miles from the site in all directions. Given the small geographic area it encompasses the PMA should be considered a conservative estimate of demand. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 10 April 24, 2020 Local Area Map Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 11 April 24, 2020 PMA Map Primary Market Area Site Location Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 12 April 24, 2020 Tract Map Primary Market Area Site Location Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 13 April 24, 2020 Section 5: Site Profile Site Characteristics The subject is located in the city of Elk River within southeast Sherburne County, Minnesota. Elk River is located approximately 8 miles north of Interstate 94. Both I-94 and US-10 provide linkages to Minneapolis. Additionally, the Northstar commuter rail station is located just south of the site. The site for the project is an occupied lot (with a home to be demolished) located southeast of Twin Lakes Road and 175th Avenue in a mixed-use area. Land to the north of the site is vacant and wooded, a single-family home in good condition is located to the immediate east, to the south is a tree line obscuring the site from what appears to be a poor condition residential building—given the limited visibility of this building it is not deemed a detriment to the subject. A short distance south of the site is a Northstar Light Rail Station as well as both Coachman Apartments and The Depot at Elk River Apartments (LIHTC projects detailed in a latter section of this report) and newer residential and commercial development. Marketability of Proposal The site is located in area attractive to its targeted tenants. The site is located near new, attractive Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 14 April 24, 2020 residential development with easy access to commercial projects located to the north of the site. Proximity to the commuter rail will likely enhance long-term growth and development in the area as well and is in close proximity to the site. Visibility and accessibility of the site The site is located a short distance north of the rail station, which should provide the site with good exposure and open opportunities for advertisement along the rail line. The site will be easily accessible via Twin Lake Road. Neighborhood Amenities/Retail/Services A commercial concentration anchored by a Walmart and Home Depot is located a short distance north of the site. Additional commercial development is located south of the site including Target. The light rail is located a short distance to the south providing linkages to the northwest and southeast. Health Care The nearest medical service provider is Allina Health Elk River Clinic, offering primary care physicians. The nearest major hospital is Mercy Hospital, located in Coon Rapids approximately 11 miles from the site. Mercy responds to a wide range of health needs with specialty services including behavioral health services, cancer care, heart and vascular services, orthopedics, neurosciences, and women's and children's services. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 15 April 24, 2020 Map: Aerial Map of Site Via Google Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 16 April 24, 2020 Map: Site and Adjacent Features Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 17 April 24, 2020 Map: Local Area and Amenities Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 18 April 24, 2020 Site Photos -Looking east at site -Looking south at site from northern edge of site Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 19 April 24, 2020 -Looking west from site from northern edge of site -Looking north from northern edge of site Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 20 April 24, 2020 -Looking east from site -Single-family home east of site Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 21 April 24, 2020 Section 6: Demographic Trends and Characteristics Demographic Overview Between 2000 and 2010 population increased in all areas. The rate of change in the PMA over this period was faster relative to the state as a whole which increased at a mild annual rate and also faster relative to the county which increased over this period. Between 2020 and 2025 ESRI forecasts that population will increase in all areas. Between 2010 and 2020 ESRI estimates that households increased in all areas. Between 2010 and 2025 ESRI forecasts that households will increase in all areas. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 22 April 24, 2020 Population Characteristics and Trends Population in the PMA represents 81.7 percent of the total population of the county. Between 2000 and 2010 population increased in all areas. Population in the PMA increased at an annual rate of 4.3 percent, representing a robust annual rate in MAP's estimation, while increasing in the county over this period at a rate of 3.2 percent, also considered a robust rate. The highest rate of growth among all submarkets was in the PMA at 4.3 percent relative to an overall increase in the state of 0.8 percent annually. The overall total change over this period was: 6,434, 27,460, 24,082 and 384,446 in the city, PMA, county and state respectively. Between 2010 and 2020 ESRI estimates that population increased in all areas. Over this period population in the PMA increased at an annual rate of 1.6 percent while increasing in the county at a rate of 1.1 percent. The rate of change in the PMA over this period was faster relative to the state as a whole which increased at a mild annual rate and also faster relative to the county which increased over this period. Between 2020 and 2025 ESRI forecasts that population will increase in all areas. Population in the PMA will increase at an annual rate of 1.5 percent, representing a moderate annual rate in MAP's estimation, while increasing in the county over this period at a rate of 1.1 percent, also considered a moderate rate. The highest rate of forecasted growth among all submarkets is in the PMA at 1.5 percent relative to an overall increase in the state of 0.7 percent annually. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 23 April 24, 2020 Population Trends and Forecast City of County of State of Elk River PMA Sherburne MN 2000 Population 16,540 52,649 64,417 4,919,479 2010 Population 22,974 80,109 88,499 5,303,925 Percent Change (2000 to 2010)38.9% 52.2% 37.4% 7.8% Total Change (2000 to 2010)6,434 27,460 24,082 384,446 Annual Change (2000 to 2010)643 2,746 2,408 38,445 Annualized Change (2000 to 2010)3.3% 4.3% 3.2% 0.8% 2020 Population Estimate 25,375 93,437 99,016 5,710,252 Percent Change (2010 to 2020)10.4% 16.6% 11.9% 7.7% Total Change (2010 to 2020)2,401 13,328 10,517 406,327 Annual Change (2010 to 2020)240 1,333 1,052 40,633 Annualized Change (2010 to 2020)1.0%1.6%1.1% 0.7% 2022 Population Forecast 25,855 96,103 101,120 5,791,518 Percent Change (2010 to 2022) 12.5% 20.0% 14.3% 9.2% Total Change (2010 to 2022) 2,881 15,994 12,621 487,593 Annual Change (2010 to 2022) 240 1,333 1,052 40,633 Annualized Change (2010 to 2022) 1.0% 1.5% 1.1% 0.7% 2024 Population Forecast 26,335 98,768 103,223 5,872,783 Percent Change (2010 to 2024) 14.6% 23.3% 16.6% 10.7% Total Change (2010 to 2024) 3,361 18,659 14,724 568,858 Annual Change (2010 to 2024) 240 1,333 1,052 40,633 Annualized Change (2010 to 2024) 1.0% 1.5% 1.1% 0.7% 2025 Population Forecast 26,575 100,101 104,275 5,913,416 Percent Change (2010 to 2025) 15.7% 25.0% 17.8% 11.5% Total Change (2010 to 2025) 3,601 19,992 15,776 609,491 Annual Change (2010 to 2025) 240 1,333 1,052 40,633 Annualized Change (2010 to 2025) 1.0% 1.5% 1.1% 0.7% Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 24 April 24, 2020 Age distribution characteristics are very similar within all three submarkets, with a heavy concentration in the under 24 age segment. The aging of the Baby Boom generation will and has begun to shift the national age distribution toward the 45 and over population segments in the coming years. This national trend is evident within all areas here, with the most rapid growth concentrated in the 65 and over age segments through 2025 on a percentage basis in the PMA, county and state. Population by Age Group City of County of State of Elk River PMA Sherburne MN Age 24 and Under - 2010 8,312 29,509 33,278 1,786,862 Percent of total 2010 population 36.2% 36.8% 37.6% 33.7% Age Between 25 and 44 - 2010 6,788 24,075 26,237 1,396,680 Percent of total 2010 population 29.5% 30.1% 29.6% 26.3% Age Between 45 and 64 - 2010 5,727 20,370 21,677 1,437,262 Percent of total 2010 population 24.9% 25.4% 24.5% 27.1% Age 65 and Over - 2010 2,147 6,155 7,307 683,121 Percent of total 2010 population 9.3% 7.7% 8.3% 12.9% Age 24 and Under - 2025 9,122 34,453 36,025 1,841,743 Percent of total 2025 population 34.3% 34.4% 34.5% 31.1% Percent change (2010 to 2025)9.7% 16.8% 8.3% 3.1% Age Between 25 and 44 - 2025 7,705 28,830 30,269 1,561,141 Percent of total 2025 population 29.0% 28.8% 29.0% 26.4% Percent change (2010 to 2025)13.5% 19.8% 15.4% 11.8% Age Between 45 and 64 - 2025 6,288 24,669 24,665 1,436,055 Percent of total 2025 population 23.7% 24.6% 23.7% 24.3% Percent change (2010 to 2025)9.8% 21.1% 13.8% -0.1% Age 65 and Over - 2025 3,459 12,149 13,317 1,074,477 Percent of total 2025 population 13.0% 12.1% 12.8% 18.2% Percent change (2010 to 2025)61.1% 97.4% 82.2% 57.3% Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 25 April 24, 2020 Household Characteristics and Trends Between 2010 and 2020 ESRI estimates that households increased in all areas. Over this period households in the PMA increased at an annual rate of 1.5 percent while increasing in the county at a rate of 1.1 percent. The rate of change in the PMA over this period was faster relative to the state as a whole which increased at a mild annual rate and also faster relative to the county which increased over this period. Between 2010 and 2025 ESRI forecasts that households will increase in all areas. Households in the PMA will increase at an annual rate of 1.5 percent, representing a moderate annual rate in MAP's estimation, while increasing in the county over this period at a rate of 1.1 percent, also considered a moderate rate. The highest rate of forecasted growth among all submarkets is in the PMA at 1.5 percent relative to an overall increase in the state of 0.7 percent annually. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 26 April 24, 2020 Household Trends and Forecast City of County of State of Elk River PMA Sherburne MN 2000 Household 5,689 17,424 21,581 1,895,127 2010 Household 8,080 27,553 30,212 2,087,227 Percent Change (2000 to 2010)42.0% 58.1% 40.0% 10.1% Total Change (2000 to 2010)2,391 10,129 8,631 192,100 Annual Change (2000 to 2010)239 1,013 863 19,210 Annualized Change (2000 to 2010)3.6% 4.7% 3.4% 1.0% 2020 Household Estimate 8,919 32,107 33,807 2,238,299 Percent Change (2010 to 2020)10.4% 16.5% 11.9% 7.2% Total Change (2010 to 2020)839 4,554 3,595 151,072 Annual Change (2010 to 2020)84 455 359 15,107 Annualized Change (2010 to 2020)1.0% 1.5% 1.1% 0.7% 2022 Household Forecast 9,087 33,018 34,525 2,268,514 Percent Change (2010 to 2022)12.5% 19.8% 14.3% 8.7% Total Change (2010 to 2022)1,007 5,465 4,313 181,287 Annual Change (2010 to 2022)84 455 359 15,107 Annualized Change (2010 to 2022)1.0% 1.5% 1.1% 0.7% 2024 Household Forecast 9,254 33,929 35,244 2,298,728 Percent Change (2010 to 2024)14.5% 23.1% 16.7% 10.1% Total Change (2010 to 2024)1,174 6,376 5,032 211,501 Annual Change (2010 to 2024)84 455 359 15,107 Annualized Change (2010 to 2024)1.0% 1.5% 1.1% 0.7% 2025 Household Forecast 9,338 34,384 35,604 2,313,836 Percent Change (2010 to 2025)15.6% 24.8% 17.8% 10.9% Total Change (2010 to 2025)1,258 6,831 5,392 226,609 Annual Change (2010 to 2025)84 455 359 15,107 Annualized Change (2010 to 2025)1.0% 1.5% 1.1% 0.7% Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 27 April 24, 2020 Average household size is estimated to have increased within all markets between 2010 and 2019 with very marginal changes. ESRI projections indicate ongoing marginal increases in average household size through 2025 within all areas. Average Household Size and Group Quarters City of County of State of Elk River PMA Sherburne MN 2010 Average Household Size 2.76 2.88 2.86 2.48 2020 Average Household Size Estimate 2.77 2.89 2.86 2.49 Percent Change (2010 to 2020)0.3% 0.2% 0.3% 0.6% 2022 Average Household Size Forecast 2.78 2.89 2.87 2.49 Percent Change (2010 to 2022)0.4% 0.3% 0.3% 0.7% 2024 Average Household Size Forecast 2.78 2.89 2.87 2.50 Percent Change (2010 to 2024)0.5% 0.3% 0.4% 0.8% 2025 Average Household Size Forecast 2.78 2.89 2.87 2.50 Percent Change (2010 to 2025)0.5% 0.3% 0.4% 0.9% 2010 Group Quarters 640 793 2,174 135,395 2020 Group Quarters Estimate 637 791 2,165 133,245 Percent Change (2010 to 2020)-0.5% -0.3% -0.4% -1.6% 2022 Group Quarters Forecast 636 790 2,163 132,815 Percent Change (2010 to 2022)-0.6% -0.4% -0.5% -1.9% 2024 Group Quarters Forecast 636 790 2,161 132,385 Percent Change (2010 to 2024)-0.7% -0.4% -0.6% -2.2% 2025 Group Quarters Forecast 635 789 2,160 132,170 Percent Change (2010 to 2025)-0.7% -0.5% -0.6% -2.4% Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 28 April 24, 2020 Between 2000 and 2010 renter penetration rates increased in the PMA relative to an increase in the county and increase in the state over this period. Increases over this period are consistent with the financial crisis of 2008 and lasting impacts on home ownership. Among all submarkets renter penetration is highest within the city at 19.8 percent relative to the lowest rate in the PMA at 12.9 percent and an overall rate of 27 percent in the state. Between 2010 and 2025 ESRI forecasts renter households will increase in the PMA despite with a decrease in the renter penetration rate over this period and relative to an increase in overall households. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 29 April 24, 2020 Renter Households City of County of State of Elk River PMA Sherburne MN 2000 Renter Households 1,228 1,785 3,430 482,262 Percent of Total HHs 21.6% 10.2% 15.9% 25.4% 2010 Renter Households 1,602 3,557 5,018 563,368 Percent of Total HHs 19.8% 12.9% 16.6% 27.0% Percent Change (2000 to 2010)30.5% 99.3% 46.3% 16.8% Total Change (2000 to 2010)374 1,772 1,588 81,106 Annual Change (2000 to 2010)37 177 159 8,111 Annualized Change (2000 to 2010)2.7% 7.1% 3.9% 1.6% 2020 Renter Households Estimate 1,256 3,582 4,106 634,374 Percent of Total HHs 14.1% 11.2% 12.1% 28.3% Percent Change (2010 to 2020)-21.6% 0.7% -18.2% 12.6% Total Change (2010 to 2020)-347 25 -912 71,006 Annual Change (2010 to 2020)-35 3 -91 7,101 Annualized Change (2010 to 2020)-2.4% 0.1% -2.0% 1.2% 2022 Renter Households Forecast 1,297 3,579 4,216 625,853 Percent of Total HHs 14.3% 10.8% 12.2% 27.6% Percent Change (2010 to 2022)-19.0% 0.6% -16.0% 11.1% Total Change (2010 to 2022)-305 22 -802 62,485 Annual Change (2010 to 2022)-25 2 -67 5,207 Annualized Change (2010 to 2022)-1.7% 0.1% -1.4% 0.9% 2024 Renter Households Forecast 1,246 3,583 4,082 636,268 Percent of Total HHs 13.5% 10.6% 11.6% 27.7% Percent Change (2010 to 2024)-22.2% 0.7% -18.7% 12.9% Total Change (2010 to 2024)-356 26 -936 72,900 Annual Change (2010 to 2024)-25 2 -67 5,207 Annualized Change (2010 to 2024)-1.8% 0.1% -1.5% 0.9% 2025 Renter Households Forecast 1,221 3,585 4,015 641,475 Percent of Total HHs 13.1% 10.4% 11.3% 27.7% Percent Change (2010 to 2025)-23.8% 0.8% -20.0% 13.9% Total Change (2010 to 2025)-381 28 -1,003 78,107 Annual Change (2010 to 2025)-25 2 -67 5,207 Annualized Change (2010 to 2025)-1.8% 0.1% -1.5% 0.9% Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 30 April 24, 2020 All submarkets share similar household size distributions, skewing to larger renter household sizes in the county and PMA relative to the city. The subject will offer one- to three-bedroom units appealing to a broad spectrum of ages and household sizes. Households by Tenure by Number of Persons in Household City of County of State of Elk River PMA Sherburne MN Total 2010 Owner Occupied HUs 6,478 23,996 25,194 1,523,859 1-person HH 979 3,378 3,599 329,955 2-person HH 2,206 7,914 8,471 581,481 3-person HH 1,171 4,373 4,492 236,596 4-person HH 1,281 5,041 5,076 224,564 5-person HH 576 2,255 2,344 98,018 6-person HH 180 702 821 33,229 7-person or more HH 85 333 391 20,016 Imputed Avg. Owner HH Size*2.9 2.9 2.9 2.6 Total 2010 Renter Occupied HUs 1,602 3,557 5,018 563,368 1-person HH 602 1,260 1,736 254,053 2-person HH 411 863 1,265 142,905 3-person HH 269 576 848 71,198 4-person HH 195 479 675 50,057 5-person HH 81 237 305 24,984 6-person HH 30 91 119 11,029 7-person or more HH 14 51 70 9,142 Imputed Avg. Renter HH Size*2.3 2.5 2.4 2.1 Percent 2010 Owner Occupied HUs 6,478 23,996 25,194 1,523,859 1-person HH 15.1% 14.1% 14.3% 21.7% 2-person HH 34.1% 33.0% 33.6% 38.2% 3-person HH 18.1% 18.2% 17.8% 15.5% 4-person HH 19.8% 21.0% 20.1% 14.7% 5-person HH 8.9% 9.4% 9.3% 6.4% 6-person HH 2.8% 2.9% 3.3% 2.2% 7-person or more HH 1.3% 1.4% 1.6% 1.3% Percent 2010 Renter Occupied HUs 1,602 3,557 5,018 563,368 1-person HH 37.6% 35.4% 34.6% 45.1% 2-person HH 25.7% 24.3% 25.2% 25.4% 3-person HH 16.8% 16.2% 16.9% 12.6% 4-person HH 12.2% 13.5% 13.5% 8.9% 5-person HH 5.1% 6.7% 6.1% 4.4% 6-person HH 1.9% 2.6% 2.4% 2.0% 7-person or more HH 0.9% 1.4% 1.4% 1.6% Source: Census of Population and Housing, U.S. Census Bureau; ESRI *-MAP estimated based on 7 persons per 7 or more HH size Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 31 April 24, 2020 Tenure by Age by Household City of County of State of Elk River PMA Sherburne MN Total 2010 Owner Occupied HUs 6,478 23,996 25,194 1,523,859 15 to 24 years 106 388 473 19,639 25 to 34 years 1,029 3,985 4,175 192,401 35 to 44 years 1,544 6,075 6,160 276,241 45 to 54 years 1,696 6,395 6,597 374,959 55 to 64 years 1,079 4,029 4,323 317,264 Total Non-senior (64 years and under)5,454 20,872 21,728 1,180,504 65 years and over 1,024 3,124 3,466 343,355 Total 2010 Renter Occupied HUs 1,602 3,557 5,018 563,368 15 to 24 years 155 304 777 79,588 25 to 34 years 396 849 1,218 150,477 35 to 44 years 281 767 958 91,851 45 to 54 years 251 573 767 83,878 55 to 64 years 157 344 384 57,304 Total Non-senior (64 years and under)1,240 2,837 4,104 463,098 65 years and over 362 720 914 100,270 Percent 2010 Owner Occupied HUs 6,478 23,996 25,194 1,523,859 15 to 24 years 1.6% 1.6% 1.9% 1.3% 25 to 34 years 15.9% 16.6% 16.6% 12.6% 35 to 44 years 23.8% 25.3% 24.5% 18.1% 45 to 54 years 26.2% 26.7% 26.2% 24.6% 55 to 64 years 16.7% 16.8% 17.2% 20.8% Total Non-senior (64 years and under)84.2% 87.0% 86.2% 77.5% 65 years and over 15.8% 13.0% 13.8% 22.5% Percent 2010 Renter Occupied HUs 1,602 3,557 5,018 563,368 15 to 24 years 9.7% 8.5% 15.5% 14.1% 25 to 34 years 24.7% 23.9% 24.3% 26.7% 35 to 44 years 17.5% 21.6% 19.1% 16.3% 45 to 54 years 15.7% 16.1% 15.3% 14.9% 55 to 64 years 9.8% 9.7% 7.7% 10.2% Total Non-senior (64 years and under)77.4% 79.8% 81.8% 82.2% 65 years and over 22.6% 20.2% 18.2% 17.8% Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 32 April 24, 2020 Household Income Median household income within all areas increased at a moderate annual rate between 2009 and estimated 2020 incomes—indicating little increase in purchasing power. Income levels within the county increased the most robustly over this period among submarkets. Incomes in the PMA are the highest among all markets. ESRI forecasts a tepid rate of growth for median income for all areas through 2025. Median Household Income City of County of State of Elk River PMA Sherburne MN 2010 Median Household Income $72,944 $81,135 $71,704 $57,243 2020 Median Household Income Estimate $91,570 $97,958 $89,052 $70,723 Percent Change (2010 to 2020)25.5% 20.7% 24.2% 23.5% Annualized Change (2010 to 2020)2.3% 1.9% 2.2% 2.1% 2022 Median Household Income Forecast $95,295 $101,322 $92,522 $73,420 Percent Change (2010 to 2022)30.6% 24.9% 29.0% 28.3% Annualized Change (2010 to 2022)2.3% 1.9% 2.1% 2.1% 2025 Median Household Income Forecast $100,883 $106,369 $97,726 $77,464 Percent Change (2010 to 2025)38.3% 31.1% 36.3% 35.3% Annualized Change (2010 to 2025)2.2% 1.8% 2.1% 2.0% Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 33 April 24, 2020 The tables below present household income by tenure for senior (ages 65 and over) households as well as total and total less senior households. Senior housing by income tenure is not available for the PMA. As a result, estimates below are based on extrapolations considering household income distribution by age, household growth, inflation rates and tenure. In particular, household income distribution based on 2010 Census data is applied to forecasted households for 2020 and 2022. Additionally, these income distributions are inflated to current year dollars based on the Consumer Price Index. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 34 April 24, 2020 Household Income Distribution by Tenure PMA Total Owner Renter Households Households Households Less than $11,399 644 441 203 Percent of 2022 Households 2.0%1.4%5.7% $11,399-$17,099 598 370 229 Percent of 2022 Households 1.8%1.1%6.4% $17,099-$22,799 504 408 96 Percent of 2022 Households 1.5%1.4%2.7% $22,799-$28,499 1,006 553 453 Percent of 2022 Households 3.0%1.6%12.7% $28,499-$39,899 1,909 1,450 460 Percent of 2022 Households 5.8%4.7%12.8% $39,899-$56,999 3,130 2,482 648 Percent of 2022 Households 9.5%8.2%18.1% $56,999-$85,499 5,405 4,803 603 Percent of 2022 Households 16.4%16.3%16.8% $85,500 or More 19,821 18,933 887 Percent of 2022 Households 60.0%65.3%24.8% Source: Census of Population and Housing, U.S. Census Bureau; Bureau of Labor and Statistics Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 35 April 24, 2020 Senior Household (65+) Income Distribution by Tenure PMA Total Senior Senior Owner Senior Renter Households Households Households Less than $11,399 179 146 33 Percent of 2022 Households 2.8%2.5%4.6% $11,399-$17,099 361 250 112 Percent of 2022 SR Households 5.6%4.3%15.4% $17,099-$22,799 303 277 25 Percent of 2022 SR Households 4.7%4.9%3.5% $22,799-$28,499 490 301 190 Percent of 2022 SR Households 7.6%5.1%26.2% $28,499-$39,899 984 831 153 Percent of 2022 SR Households 15.3%14.5%21.1% $39,899-$56,999 713 651 62 Percent of 2022 SR Households 11.1%11.4%8.5% $56,999-$85,499 987 926 61 Percent of 2022 SR Households 15.3%16.3%8.4% $85,500 or More 2,418 2,329 89 Percent of 2022 SR Households 37.6%41.0%12.3% Source: Census of Population and Housing, U.S. Census Bureau; Bureau of Labor and Statistics, MAP Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 36 April 24, 2020 Non-Senior Household Income by Tenure PMA Total Less Owner Less Renter Less SR Households SR Households SR Households Less than $11,399 465 295 170 Percent of Households 1.7%1.2%6.0% $11,399-$17,099 237 120 117 Percent of 2022 Households 0.9%0.5%4.1% $17,099-$22,799 201 130 71 Percent of 2022 Households 0.8%0.5%2.5% $22,799-$28,499 515 252 263 Percent of 2022 Households 1.9%1.1%9.2% $28,499-$39,899 926 619 306 Percent of 2022 Households 3.5%2.6%10.7% $39,899-$56,999 2,418 1,831 586 Percent of 2022 Households 9.1%7.7%20.5% $56,999-$85,499 4,418 3,877 542 Percent of 2022 Households 16.6%16.3%19.0% $85,500 or More 17,403 16,605 798 Percent of 2022 Households 65.5%70.0%28.0% Source: Census of Population and Housing, U.S. Census Bureau; Bureau of Labor and Statistics, MAP Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 37 April 24, 2020 Household Income Distribution by Tenure PMA Total Owner Renter Households Households Households Less than $9,999 537 335 202 Percent of 2010 Households 2.0%1.4%5.7% $10,000 -$14,999 499 272 227 Percent of 2010 Households 1.8%1.1%6.4% $15,000 - $19,999 420 325 96 Percent of 2010 Households 1.5%1.4%2.7% $20,000 - $24,999 839 389 450 Percent of 2010 Households 3.0%1.6%12.7% $25,000 - $34,999 1,593 1,137 457 Percent of 2010 Households 5.8%4.7%12.8% $35,000 - $49,999 2,612 1,968 644 Percent of 2010 Households 9.5%8.2%18.1% $50,000 - $74,999 4,510 3,912 599 Percent of 2010 Households 16.4%16.3%16.8% $75,000 and up 16,540 15,658 882 Percent of 2010 Households 60.0%65.3%24.8% Source: Census of Population and Housing, U.S. Census Bureau; Bureau of Labor and Statistics Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 38 April 24, 2020 Section 7: Economic Analysis Economic Overview The proposal will offer units targeted at low and moderate income households within Elk River, within the Minneapolis MSA. Economic analysis is provided for the Minneapolis MSA, city of Minneapolis and Sherburne County, which are deemed the most insightful for the site’s economic viability. In addition, information for the State of Minnesota and United States are illustrated to put these trends into greater context. Local economics are largely driven by the national economy, particularly for larger, more urban areas with greater economic diversification. This is visually evident in the unemployment rate comparison presented in the following pages (i.e., movements in the unemployment rate for the United States coincide with state and local movements). While generally moving in tandem with national levels, the unemployment rate within Minnesota and submarkets has been lower in comparison to national levels in recent years. The national economy suffered a credit crisis in 2008, which led to worsening economic conditions including declining consumer confidence, continued pressure on an already fragile housing sector, declining consumer spending and a dramatic decline in automotive purchases all contributing to a worsening in economic conditions throughout the nation. Unemployment rates have been declining for the past ten years contributing to a more stable economic environment with low unemployment rates evident in the city and county. At the time of completion of this report, the United States and global economy are experiencing a tumultuous period marked by increasing unemployment claims as a result of shelter in place orders in various states. The impact of this will likely be significant in the near term despite government efforts to mitigate the impact through stimulus and other preventative measures. Analysis throughout this report is based on economic conditions returning to growth and greater stability at the time of market entry for the proposal. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 39 April 24, 2020 Economic Characteristics and Trends The subject is located within Elk River, with a high concentration of employment located a short distance to the southeast in and near Minneapolis. Within the PMA, approximately 20 percent of workers find employment within a less than 15 minute travel time, while an additional 27 percent of workers find employment within a 30 minute radius. Commute times within the city and PMA are higher relative to the county and state as a whole. Employee Commute Times City of County of State of Elk River PMA Sherburne MN 2010 Total Workers via Census 12,460 46,085 47,808 2,812,166 Travel Time: < 15 Minutes 2,828 9,569 9,514 877,396 Percent of Workers 22.7% 20.8% 19.9% 31.2% Travel Time: 15 - 29 Minutes 3,202 12,489 13,673 1,060,187 Percent of Workers 25.7% 27.1% 28.6% 37.7% Travel Time: 30 - 44 Minutes 3,103 13,268 10,900 539,936 Percent of Workers 24.9% 28.8% 22.8% 19.2% Travel Time: 45 - 59 Minutes 1,707 6,300 6,358 185,603 Percent of Workers 13.7% 13.7% 13.3% 6.6% Travel Time: 60+ Minutes 1,620 4,453 7,315 149,045 Percent of Workers 13.0% 9.7% 15.3% 5.3% Avg Travel Time in Minutes for Commuters 31 30 32 23 Source: Census of Population and Housing, U.S. Census Bureau; ESRI Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 40 April 24, 2020 Industry employment concentrations in the city, county and state are illustrated below with national trends presented to put these figures into better context. Within all areas the highest concentration of employment is within the services sector encompassing education and health services as well as professional and business services. Industry Employment Concentrations City of County of State of Elk River Sherburne MN USA Ag, forestry, fishing and hunting, and mining 1.2% 1.4% 2.3% 1.9% Construction 7.1% 8.0% 5.7% 6.8% Manufacturing 14.1% 15.2% 13.5% 10.8% Wholesale trade 4.1% 3.7% 2.9% 2.9% Retail trade 15.4% 13.7% 11.2% 11.5% Transp and warehousing, and util 5.7% 6.3% 4.6% 5.1% Information 0.1% 0.8% 1.8% 2.3% Fin and ins, and r.estate and rent/lease 5.8% 5.6% 7.2% 6.9% Prof, sci, and mngt, and admin and waste 8.3% 8.6% 9.8% 10.5% Ed services, and hlth care and soc assist 23.6% 21.9% 24.8% 22.5% Arts, ent, and rec, and accommod/food 7.8% 7.3% 8.4% 9.0% Other services, except public administration 4.4% 4.4% 4.5% 4.9% Public administration 2.4% 3.0% 3.3% 4.9% Total Occupations Mngmt, bus, sci, and arts 38.3% 34.8% 39.8% 35.7% Service occupations 14.8% 15.4% 16.4% 17.5% Sales and office occupations 28.5% 23.9% 22.9% 25.1% Nat res, construction, and maintenance 7.8% 10.2% 7.9% 9.6% Prod, transp, and material moving 10.7% 15.7% 12.9% 12.2% Source: Census of Population and Housing, U.S. Census Bureau Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 41 April 24, 2020 The largest employers in the Twin Cities metro area are illustrated below. A majority of residents within the PMA find employment within the Twin Cities, where the majority of employment opportunities are concentrated. Major employers in the Twin Cities metro area are detailed below and include government, health care, financial services, retail and manufacturing. The Twin Cities’ diverse employment base makes it somewhat recession-resilient. Top Employers within Twin Cities Metro Employer Employees (rounded to nearest 1,000)Product/Service State of Minnesota 33,000 Government United States Federal Government 25,000 Government Allina Health System 21,000 Health Care Wells Fargo & Co.19,000 Financial Services Target 18,000 Retail Fairview Health Services 17,000 Health Care University of Minnesota 17,000 Education 3M 15,000 Manufacturing Health Partners 9,000 Health Care/Insurance US Bancorp 8,000 Financial Services Sources: Minneapolis St. Paul Business Journal, Star Tribune, Employer Websites Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 42 April 24, 2020 Graph: Unemployment Rate Comparison Graph: Industry Employment Concentrations Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 43 April 24, 2020 Annual Labor Force and Employment Statistics Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 44 April 24, 2020 Monthly Labor Force and Employment Statistics (Year/Year) Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 45 April 24, 2020 Wages by Occupation Wages by occupation within the Minneapolis MSA are illustrated below. Wages are ordered from highest to lowest. Based on the subject's LIHTC income range approximately 3/4ths of occupations would be income qualified for the proposal. Wages by Occupation-Minneapolis MSA Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 46 April 24, 2020 Section 8: Supply Analysis and Characteristics Building Permit Trends Information concerning the issuance of building permits can be used to analyze trends in building; the table below illustrates this data within Elk River, Sherburne County and the state of Minnesota. Construction dropped off markedly in all areas from 2005-6, consistent with the slowing housing market across the nation, but with figures from 2012-13 forward showing a recovery within the city and county generally accelerating through 2019 but remaining below historical horizon highs. Building Permits Source: HUD Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 47 April 24, 2020 Local Rental Market Analysis MAP completed a survey of existing rental projects within the market area in April 2020. Leasing specialists of developments within or near the market area were contacted to identify rental housing trends as well as the most competitive projects within the area. Student, special needs and senior only projects are excluded from the survey. Lanesboro Heights Townhomes could not be reached for updated information, so information from a May 2019 survey is utilized. The area was also surveyed regarding current developments under construction; these pipeline projects are discussed below. A total of 19 projects responded to the survey; of these, 9 reported operating under LIHTC guidelines for all or a portion of units at an average occupancy of 99.8 percent. The survey encompassed 1,175 units with 433 LIHTC units. The overall occupancy rate for the area was 98.9 percent indicative of strong demand for rental housing throughout the area. The average build year for the surveyed facilities was 1994 while the average build year for LIHTC facilities was 2003. For those facilities providing information, the rental stock was weighted toward two-bedroom units which represent 47 percent of the total housing stock. Comparable Project Analysis The most comparable projects to the proposal include general occupancy units operating under income restriction guidelines within the same area as the proposal and offering similar units. Among LIHTC projects those in closest proximity and considered the most comparable to the subject are included—excluding more dated projects. Additionally, two market rate projects are included to gauge hypothetical market rents for the subject. Detailed information on these projects is presented in the following pages. The overall occupancy rate for the most comparable projects is 99.7 percent. The subject will offer one- to three-bedroom general occupancy units with comparable amenities and unit sizes to comparable facilities. The development will be the newest project in the area, commanding a premium relative to more dated competitive set projects. Among competitive set projects Coachman limits rents to 50 percent AMI (for 60 percent AMI income restrictions) and these units are shifted in the rent grid. Considering adjustments and projections to market entry the subject’s rents are consistent with MAP’s estimated achievable LIHTC rents and are appropriately positioned relative to Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 48 April 24, 2020 hypothetical market. Competitive rents and strong demand for affordable housing in the area offer support for the success of the proposal. Competitive Environment Credit restrictions particularly for lower income buyers, as well as initial money cost have made purchasing a home outside the reach of potential buyers who would fall within the qualified income range. Thus, competition between rental and ownership options are limited for the subject within the qualified income range, making rental housing the most viable option for low to moderate income families. Given the high occupancy evident among comparable properties the subject will have no impact on existing housing in the area. Concessions Currently Offered and Trends in Rents No comparable projects reported concessions. Among the comparable projects, rent increases of approximately 5 to 15 percent over the past year were observed based on MAP’s previous contact with these facilities. Pipeline Considerations The Crossing II is under construction and will enter the market in 2020. This project offers 38 general occupancy units and these units are deducted from the demand analysis in the following section. Additionally, Elk River Lodge received an allocation in 2019, this project will offer 60 units and is deducted from the demand analysis. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 49 April 24, 2020 Rental Housing Survey-Competitive Set Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 50 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 51 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 52 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 53 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 54 April 24, 2020 Rental Housing Survey-Total Survey Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 55 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 56 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 57 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 58 April 24, 2020 Comparable Project Information Map: Comparable Projects Comp ID Project Name Program Address City State Phone 3 Dove Terrace LIHTC 1227 School St NW # 110 Elk River MN (763) 241-0020 4 Dove Tree Apartments LIHTC 1105 Lions Park Dr NW Elk River MN (763) 241-0495 5 Jackson Place LIHTC 300 Jackson Place Elk River MN (763) 633-1955 7 The Depot At Elk River Station LIHTC 10653 172nd Ave NW Elk River MN (763) 441-5445 8 The Crossing At Big Lake Station LIHTC 115-A Henry Rd Big Lake MN (763) 263-0449 9 Coachmen Elk River LIHTC 17250 Twin Lake Rd Elk River MN (763) 260-8864 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 59 April 24, 2020 Map: Surveyed Rental Projects Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 60 April 24, 2020 Comp ID Project Name Program Address City State Phone 1 Albertville Meadows Apartments LIHTC 10740 County Road 37 NE # 103Albertville MN (763) 497-5009 2 Albertville Meadows Townhomes LIHTC 10732 County Road 37 Albertville MN (763) 497-5009 3 Dove Terrace LIHTC 1227 School St NW # 110 Elk River MN (763) 241-0020 4 Dove Tree Apartments LIHTC 1105 Lions Park Dr NW Elk River MN (763) 241-0495 5 Jackson Place LIHTC 300 Jackson Place Elk River MN (763) 633-1955 6 Leighton'S Landing LIHTC 210 Maple Lane Big Lake MN (320) 252-6262 7 The Depot At Elk River Station LIHTC 10653 172nd Ave NW Elk River MN (763) 441-5445 8 The Crossing At Big Lake Station LIHTC 115-A Henry Rd Big Lake MN (763) 263-0449 9 Coachmen Elk River LIHTC 17250 Twin Lake Rd Elk River MN (763) 260-8864 10 Evans Meadows Apartments MARKET 355 Evans Ave NW # 206 Elk River MN (763) 441-6299 11 Heartland Pointe Apartments MARKET 13625 Bradley Blvd Becker MN (763) 261-3489 12 Lake Orono Estates MARKET 18594 Gary St NW Elk River MN (763) 441-8356 13 Lions Park MARKET 1001 School St NW Elk River MN (763) 324-0163 14 Monticello Village Apts MARKET 727 Minnesota St Monticello MN (763) 295-2226 15 Preserve At Commerce MARKET 21515 Maple Ave Rogers MN (763) 428-8150 16 Ridgewood Manor Apartments MARKET 11931 191 1/2 Ave NW Elk River MN (763) 441-8510 17 Sugar Maples Apartments MARKET 13600 Commerce Blvd Rogers MN (763) 428-4683 18 Elk Ridge Manor Apartments RD 847 Freeport Ave NW # 101 Elk River MN (763) 274-2700 19 Lanesboro Heights Townhomes BOI-HUD 11798 Highland Rd NW # A Elk River MN (763) 441-2642 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 61 April 24, 2020 Comparable Project Summary Sheets Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 62 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 63 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 64 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 65 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 66 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 67 April 24, 2020 Section 9: Local Perspective MAP surveyed local apartment managers in the course of market study completion and surveyed recent LIHTC allocations within the PMA (summarized in a preceding section). These interviews are included throughout the analysis. Additionally, MAP has reviewed local comparable projects with the results of these projects incorporated throughout the report. MAP was unable to reach the local planning department for information on pipeline projects in the area. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 68 April 24, 2020 Section 10: Demand Analysis Demand for Rental Units Demand estimates for the proposal are outlined in the following pages based on qualified income ranges for the proposal. Income ranges are based on an affordability ratio of 35 percent for family and 40 percent of income to gross rent for seniors and maximum LIHTC rents and income for Sherburne County. Demand is based on age and income qualified renter households within the PMA. Two ratios are used to quantify potential demand for the proposal. These ratios include the capture rate which measures the ratio of units at the proposal to age- size- and income-qualified renter households within the PMA. The second measure is the penetration rate, which measures the number of units in the proposal plus comparable pipeline units relative to annual demand as outlined above. Demand for 30 percent AMI units is not presented as these units are over maximum allowable gross (consistent with the project based subsidy for these units), creating nonsensical results. Based on these estimates, the proposal’s demand estimates are within acceptable thresholds. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 69 April 24, 2020 Absorption Rate Reported absorption among competitive set projects has been robust. Maple Village reported one month absorption of 102 units, the Depot at Elk River Station reported 53 units in one month and Coachmen Elk River reported absorption of 53 units in one month. Considering these rates as well as absorption based on movership ratios and estimated capture rates among income qualified households, it is conservatively estimated the subject would be fully absorbed within 5-6 months of market entry. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 70 April 24, 2020 Demand Estimates Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 71 April 24, 2020 Market and Achievable Rent Market and achievable rents for the subject are illustrated below. These rents were estimated based on competitive positioning of the project in the area. An analysis utilizing both LIHTC and market rents is presented on the following pages to help illustrate the competitive positioning of the subject and its positioning as a hypothetical market rate project and in comparison to similar LIHTC projects. Rents are adjusted based on appeal (including location, amenities and unit design), included utilities, unit size and where applicable by maximum allowable gross and a minimum 10 percent market advantage when evident within the market. Rents are projected to market entry based on 3.5 percent annual appreciation. Site location, condition and appeal scores are relative to the subject (i.e., the subject is always rated as 5). Based on these analyses proposed contract rents are consistent with estimated achievable LIHTC rent and significantly discounted from hypothetical market rents. Estimated LIHTC and hypothetical market rent represent an assessment of what a comparable unit is receiving within the market. It is not an endorsement of rent at that level as the project was analyzed considering contract rent. Changes in contract rent will impact absorption, demand statistics and competitive positioning of the proposal and would necessitate additional analysis. Rent Derivation Proposed AMI Target Proposed Subject Contract Rent # of Units # of Baths Average Sq. Footage Estimated Achievable Contract Rent Max Achievable LIHTC Rent Estimated Achievable Market Rent Market Advantage Summary 1 BR 1 BR-Apt 30% $722 4 1.0 680 $557 $520 $1,351 47% 1 BR-Apt 50% $908 3 1.0 680 $973 $908 $1,351 33% 1 BR-Apt 50% $722 4 1.0 680 $973 $908 $1,351 47% 1 BR-Apt 60% $1,102 2 1.0 680 $1,177 $1,102 $1,351 18% Summary 2 BR 2 BR-Apt 50% $1,083 14 1.0 980 $1,160 $1,083 $1,609 33% 2 BR-Apt 60% $1,316 14 1.0 980 $1,354 $1,316 $1,609 18% Summary 3 BR 3 BR-Apt 50% $1,246 7 2.0 1,280 $1,335 $1,246 $1,917 35% 3 BR-Apt 60% $1,515 7 2.0 1,280 $1,519 $1,515 $1,917 21% Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 72 April 24, 2020 Rent Derivation Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 73 April 24, 2020 Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 74 April 24, 2020 Future Rental Market and Associated Risks The development of affordable housing is appropriate based on demand within the area. Given demographic growth throughout the area as well as obsolescence of existing units and the excess demand evident for affordable housing evident in the market survey, additional rental housing is likely to be in demand in coming years. The development of affordable housing is appropriate based on demand within the area. Since MHFA determines the number of competitive projects that come online, risks from future unsustainable development are limited. Recommendations and Conclusions Based on the analysis within this report, the proposal will be successful as is, no changes are deemed necessary. The site is located in a mixed-use area but with LIHTC residential uses located a short distance from the site. Amenities and employment opportunities are located in close proximity with easy access to Minneapolis to the southeast. Household growth in the area is forecasted to increase through 2025 with the rate within the PMA exceeding the overall rate of the state and county. The Minneapolis MSA has outperformed the state average in terms of the unemployment rate in recent years and employment has increased annually each of the past nine years. Derived demand statistics for the subject suggest sufficient demand to absorb the proposal. Finally, supply side data indicates rents for the subject will be competitively positioned in the area and the subject will be well positioned in the market and competitive with comparable projects which have reported very strong occupancy indicative of strong demand in the area. As a result, the development of the proposal to more adequately serve the PMA’s population is appropriate. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 75 April 24, 2020 Section 11: Special Needs Analysis The subject will offer four special needs units targeted at homeless persons, which will operate with a project subsidy eliminating the issue of affordability for these units. The service provider for the special needs units will be Rise. Sherburne County, Minnesota since the late 1800's. They have extensive experience Market Area Delineation and Demand for Units Service providers for special needs groups generally serve large geographic areas based on city, county boundaries or larger geographic areas. As such, the market area for the special needs units is larger in comparison to the other units offered at the proposal. In this case Continuum of Care has identified Sherburne County as falling within the Central Area. Population and Income Distribution Because of the nature of special needs persons, detailed statistics for this population are difficult to obtain. MAP has reviewed studies focused on Homelessness in Minnesota and Sherburne County in particular from both Wilder Research and The U.S. Department of Housing and Urban Development Continuum of Care Program. Specific references to incomes are not made in either report. Based on a review of recent reports as well as anecdotal evidence presented to MAP in conducting interviews with special needs service providers throughout the Minneapolis metro area generally, special needs populations exhibit very low incomes and are more highly concentrated among the middle age cohorts (i.e., aged 26 to 40) in comparison to the general population and are employed in low paying positions (approximately $20,000 per year income or less) and/or reliant on economic and familial assistance. The Continuum of Care 2012 Heading Home Hennepin report indicates targeting housing at very low income households, considered to be 30 percent AMI or less (approximately $21,720 for a one-person household in 2020), consistent with anecdotal evidence presented to MAP in interviews with various special needs services providers historically. Comparable Special Needs Housing Special needs persons often have difficulty in finding affordable housing. Because of numerous Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 76 April 24, 2020 problems (including low incomes, inconsistent rental histories, and physical and mental disabilities) special needs persons are often not given fair consideration in finding affordable housing. This problem has received increasing recognition in recent years; however, substantial need for additional facilities exists. Demand for Special Needs Units Based on the data presented above, it is estimated the special needs portion of the development will fill quickly, within 4 months of the development entering the market. The subject will offer four special needs units targeted at homeless persons, which will operate with a project subsidy eliminating the issue of affordability for these units. The Continuum of Care's January 2018 point-in-time survey of homelessness identified 2,091 families and 105 households unsheltered within the Central Region. While the Wilder Research Center's 2018 Minnesota Homeless Study found 944 people homeless in the Central Region, with 321 persons not in shelters relative. The proposal’s units will help meet this demand. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 77 April 24, 2020 Section 12: Other Requirements Date of Report: April 24, 2020 Date of Site Visit: April 5, 2020 Field Work, Report and Conclusions Prepared by: Chris Vance Market Analyst Professionals 222 South 9th Street, Suite 1600 Minneapolis, MN 55402 PH: 248-515-0496 cavance@mindspring.com chris.vance@mapyourproject.com Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 78 April 24, 2020 Qualifications of the Market Analyst CHRIS VANCE EDUCATION: Michigan State University Master of Arts, Economics  Concentration in Industrial Organization  Doctorate level curriculum Oakland University Bachelor of Science, Economics  Concentrations in Finance and Computer Science  Graduated with Honors EMPLOYMENT HISTORY: MARKET ANALYST PROFESSIONALS, LLC, a real estate market research company Founder (12/03 to Present)  Founder  Custom report development. COMMUNITY RESEARCH GROUP, LLC, a real estate market research company. Market Analyst/Consultant (2/00 to12/03)  Prepared real estate market feasibility studies considering site characteristics, economic and demographic trends, market forecasts and project guidelines.  Developed analytical tools and improved methodologies.  Provided project recommendations based on analysis of market area.  Gathered information utilizing secondary market research and through personal interviews. J.D. POWER AND ASSOCIATES, an automotive marketing information firm. Analyst-Economic Analysis in Forecasting Group (6/98 to 9/99) Senior Analyst-Economic Analysis in Forecasting Group (9/99 to 2/00)  Wrote detailed analysis of economic, political and automotive market conditions of global economies for monthly, quarterly and annual reports.  Developed forecasting models and analytical tools to enhance forecasting capabilities using computer, data collection and analysis skills.  Analyzed the impact of automotive market dynamics on automotive sales and competition, including pricing and profitability analysis.  Forecasted economic growth and automotive sales for North and South America and Asia.  Traveled to Asia and Europe as needed to participate in the company’s strategic growth and product positioning decisions. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 79 April 24, 2020 Bibliography 1990/2000/2010 U.S. Census of Population and Housing, U.S. Census Bureau 2019/2024 Demographic Forecasts, ESRI American Housing Survey, U.S. Census Bureau and U.S. Department of Housing and Urban Development Economic information – Bureau of Labor and Statistics Local roadway maps—Microsoft Streets and Trips 2010 Interviews with local officials, managers and leasing specialists of local rental developments Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 80 April 24, 2020 Addendum A Market Study Checklist The following components have been addressed in this market study. The page number of each component is noted below. Each component is fully discussed on that page or pages. In cases where the item is not relevant the author had indicated ‘N/A’ or not applicable. Where a conflict with or variation from Minnesota Housing Market Study Guidelines exists, the author has indicated a ‘V” (variation) with a comment explaining the conflict. Component Pages 1 Unit mix and pro forma rents 8 2 Description and justification of Primary Market Area 9 3 Income band for subject property 70 4 Demand projections 70 5 Comparison of subject to comparable market rate and affordable properties 47-66 6 Forecasted achievable market rents for the subject property 84 7 Required capture rate 70 8 Forecasted lease up schedule 69 9 Recommended changes to the project NA Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 81 April 24, 2020 Addendum B Minnesota Housing Market Study Certification The undersigned certify that the following is true and correct: 1 That the Market Analyst is knowledgeable and experienced in the development of affordable rental properties. 2 That the Market Analyst conducted and was the primary author of the attached low income housing tax credit market study report (“Report”) for Hillside Heights Apartments (“Project”) for Community Housing Development Corporation (Developer/owner name). 3 That the Report was completed on April 24, 2020. 4 That to the best of the Market Analyst knowledge, all data contained in the Report is accurate. 5 That the Market Analyst has made a physical inspection of the area in which the Project will be located, reviewed all relevant data, and independently established the conclusions for the Report. 6 That all projections contained in the Report were based on current professionally accepted methodology. 7 That the Market Analyst has no financial interest in the proposed Project. 8 That the Market Analyst ‘s fee for conducting the Report, and the findings and conclusions contained therein , were not contingent upon the proposed Project being selected by the Minnesota Housing Finance Agency. 9 That it is the Market Analyst’s unbiased and professional opinion that there is sufficient demand for the Project as of the completion date of the Report. By: ________________________________ (Authorized Representative-Market Analyst) Title: ___Founder_____________________ Date: ___April 24, 2020________________ Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 82 April 24, 2020 Addendum: Market Study Analysis and Consideration: Derivation of achievable HTC Rents The most comparable projects to the proposal include general occupancy units operating under income restriction guidelines within the same area as the proposal and offering similar units. Among LIHTC projects those in closest proximity and considered the most comparable to the subject are included—excluding more dated projects. Additionally, two market rate projects are included to gauge hypothetical market rents for the subject. Detailed information on these projects is presented in the following pages. The overall occupancy rate for the most comparable projects is 99.7 percent. The subject will offer one- to three-bedroom general occupancy units with comparable amenities and unit sizes to comparable facilities. The development will be the newest project in the area, commanding a premium relative to more dated competitive set projects. Among competitive set projects Coachman limits rents to 50 percent AMI (for 60 percent AMI income restrictions) and these units are shifted in the rent grid. Considering adjustments and projections to market entry the subject’s rents are consistent with MAP’s estimated achievable LIHTC rents and are appropriately positioned relative to hypothetical market. Competitive rents and strong demand for affordable housing in the area offer support for the success of the proposal. Market and Achievable Rent Market and achievable rents for the subject are illustrated below. These rents were estimated based on competitive positioning of the project in the area. An analysis utilizing both LIHTC and market rents is presented on the following pages to help illustrate the competitive positioning of the subject and its positioning as a hypothetical market rate project and in comparison to similar LIHTC projects. Rents are adjusted based on appeal (including location, amenities and unit design), included utilities, unit size and where applicable by maximum allowable gross and a minimum 10 percent market advantage when evident within the market. Rents are projected to market entry based on 3.5 percent annual appreciation. Site location, condition and appeal scores are relative to the subject (i.e., the subject is always rated as 5). Based on these analyses proposed contract rents are consistent with estimated achievable LIHTC rent and significantly discounted from hypothetical market rents. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 83 April 24, 2020 Proposed AMI Target Proposed Subject Contract Rent # of Units # of Baths Average Sq. Footage Estimated Achievable Contract Rent Max Achievable LIHTC Rent Estimated Achievable Market Rent Market Advantage Summary 1 BR 1 BR-Apt 30% $722 4 1.0 680 $557 $520 $1,351 47% 1 BR-Apt 50% $908 3 1.0 680 $973 $908 $1,351 33% 1 BR-Apt 50% $722 4 1.0 680 $973 $908 $1,351 47% 1 BR-Apt 60% $1,102 2 1.0 680 $1,177 $1,102 $1,351 18% Summary 2 BR 2 BR-Apt 50% $1,083 14 1.0 980 $1,160 $1,083 $1,609 33% 2 BR-Apt 60% $1,316 14 1.0 980 $1,354 $1,316 $1,609 18% Summary 3 BR 3 BR-Apt 50% $1,246 7 2.0 1,280 $1,335 $1,246 $1,917 35% 3 BR-Apt 60% $1,515 7 2.0 1,280 $1,519 $1,515 $1,917 21% Demand Analysis Demand estimates for the proposal are based on qualified income ranges for the proposal. Income ranges are based on an affordability ratio of 35 percent for family and 40 percent of income to gross rent for seniors and maximum LIHTC rents and income for Sherburne County. Demand is based on age and income qualified renter households within the PMA. Two ratios are used to quantify potential demand for the proposal. These ratios include the capture rate which measures the ratio of units at the proposal to age- size- and income-qualified renter households within the PMA. The second measure is the penetration rate, which measures the number of units in the proposal plus comparable pipeline units relative to annual demand as outlined above. Demand for 30 percent AMI units is not presented as these units are over maximum allowable gross (consistent with the project based subsidy for these units), creating nonsensical results. Based on these estimates, the proposal’s demand estimates are within acceptable thresholds. Absorption Rate Reported absorption among competitive set projects has been robust. Maple Village reported one month absorption of 102 units, the Depot at Elk River Station reported 53 units in one month and Coachmen Elk River reported absorption of 53 units in one month. Considering these rates as well as absorption based on movership ratios and estimated capture rates among income qualified households, it is conservatively estimated the subject would be fully absorbed within 5-6 months of market entry. Hillside Heights Apartments, Elk River, Minnesota Market Analyst Professionals, LLC 84 April 24, 2020 Demand Estimates ABOUT CHDC Community Housing Development Corporation's (CHDC) mission is to sustain high-quality and affordable homes, to enhance the community over the long term, and to create and maintain healthy living. CHDC takes a unique, businesslike approach to affordable housing by keeping overhead costs small and structuring its properties and operations to be financially self-sustaining over the long term. CHDC, founded in 1991, has provided stability to Minnesota residents and communities for more than 25 years as a nonprofit developer and owner. CHDC owns more than 3,500 affordable housing units. More than half of its units are Section 8 and approximately 2,000 are LIHTC. RECENT CHDC PARTNERSHIP PROJECTS VETERANS EAST CHDC worked with the Department of Veterans Affairs to construct Veterans East on the Minneapolis VA Medical Center campus. Veterans East provides 100 units of permanent, affordable housing to a single adult population of homeless with a priority placement offered for veterans. Veterans East operates successfully with some of the lowest unsubsidized rents anywhere in the metro at $435/month. It serves a population that thrives in an environment that is supportive, but not service-intensive. Veterans East opened in 2017. CORNERSTONE CREEK CHDC and Jewish Housing and Programming (J-HAP) partnered to create 45 units in Golden Valley for developmentally disabled individuals. J-HAP was formed to serve the life-long needs of adults with developmental disabilities, with progressive amenities that allow individuals to live independently, increase self-esteem and thrive within a Jewish community that is open to all. Cornerstone Creek was made possible through J-HAP's vision and CHDC's affordable housing expertise. Cornerstone Creek opened January 2017. SELBY MILTON VICTORIA CHDC is partnering with the Rondo Community Land Trust (Rondo CLT) to develop Selby Milton Victoria, a two- building project in St. Paul. The project will create 34 units of affordable housing for seniors with commercial space in each building. 70% of the units are affordable to seniors at 30% AMI and below, making the project one of the most affordable new developments in the St. Paul. Rondo CLT, founded in 1993, provided insight into the needs of the Rondo community. The commercial space will promote local economic development through small business recruitment. The building will be complete in early 2019. ELIZABETH FLANNERY, PRESIDENT Ms. Flannery has 27 years of increasingly responsible experience in real estate development. This has included positions with The National Equity Fund, CommonBond Communities, Sherman Associates, and Everwood Development LLC. Prior to beginning her real estate career, she worked in Mexico and Central America on humanitarian relief efforts. Ms. Flannery is a graduate of Northwestern University, with a degree in Journalism from the Medill School at Northwestern. HEIDI RATHMANN-SMITH, SENIOR VICE PRESIDENT For the past three years, Ms. Rathmann has provided oversight to projects in the CHDC pipeline by reviewing project feasibility, gaining public and political support, ensuring ongoing communication, and effective problem solving regarding the day-to-day activities of structuring and closing projects. Ms. Rathmann also provides project management for new affordable housing and community development projects in CHDC’s pipeline including general real estate activities, structuring the financing, and raising and closing on the capital funds. Ms. Rathmann began the first 10 years of her career in affordable housing at the Dakota County Community Development Agency, Mercy Housing, and Greater Minnesota Housing Fund. For 10 years, she was an independent development consultant for both for-profit and non- profit developers providing expertise on affordable housing development. Ms. Rathmann has a Bachelor of Science degree in Business Administration and a Master of Arts in Urban Studies. DAN WALSH, VICE PRESIDENT, HOUSING DEVELOPMENT Mr. Walsh works on portfolio recapitalizations and new project development. He focuses on sales and marketing and manages all phases of the development process including site identification and control, partner support, financial structuring, design, entitlements, closing and construction monitoring. Mr. Walsh has more than eight years of experience with different housing programs and multifamily development including positions with the Minnesota Housing Finance Agency; Aeon, a Minneapolis based non-profit affordable housing developer; and Donjek, a local consulting firm focused on urban development. Mr. Walsh has a Master’s Degree in Public Policy from Harvard University with a concentration in Housing and Urban Development. He got his undergraduate degree from the University of Wisconsin - Madison. CHRIS MAIDA, DIRECTOR OF ASSET MANAGEMENT Mr. Maida’s work is focused on preserving and promoting the long-term sustainability of the CHDC housing portfolio. His efforts include monitoring portfolio performance, implementing strategies to add value for residents and properties, risk mitigation, and working with partners to meet goals and commitments. Previously, Mr. Maida worked for five years as an asset manager for CommonBond Communities with a portfolio of over 5,500 affordable apartment units located in Minnesota, Wisconsin, and Iowa. He earned a Master’s Degree in Urban and Regional Planning with a concentration in housing and community development from the University of Minnesota Humphrey School of Public Affairs and an undergraduate degree from the University of Wisconsin-Milwaukee. Before graduate school, Mr. Maida spent four years working with Catholic Charities on an emergency shelter for teens in Minneapolis. SALLY RABBAN, PROJECT COORDINATOR Ms. Rabban has been actively involved in housing and community development since 2009. As project coordinator at CHDC, Ms. Rabban works with partners and funders to construct and rehabilitate affordable rental housing through the coordination of site acquisition, deal structuring and assembling financial applications. Before Ms. Rabban joined CHDC, she worked at Landon Group as housing development specialist for multi-family rental housing in Minnesota, served in AmeriCorps with Twin Cities Habitat for Humanity, and worked at Seward Redesign. Ms. Rabban has a Master’s Degree in Urban and Regional Planning from the Humphrey Institute with a concentration in housing and community development, and a Bachelor of Arts degree in Architecture and Geography from the University of Minnesota. BETSY MICHELS, PROJECT COORDINATOR Ms. Michels assists in development, asset management, and administrative work. Her duties include preparing funding applications, assisting throughout the development process, and daily clerical tasks. Ms. Michels is pursuing a Bachelor of Design in Architecture from the University of Minnesota. CHDC STAFF CHDC PROPERTIES Throughout Minnesota, CHDC owns 44 PROPERTIES 3,517 UNITS 1,793 SECTION 8 UNITS 1,975 LIHTC UNITS CHDC serves some of the lowest incomes and offers the lowest rents in the City of Minneapolis. In Minneapolis, CHDC provides homes for 4,379 people. The average household income is $20,946. In its Minneapolis Section 8 properties, the residents make approximately 20% area median income. In Minneapolis, CHDC owns 24 PROPERTIES 1,904 UNITS 683 SECTION 8 UNITS 974 LIHTC UNITS CITY ANOKA APPLE VALLEY BROOKLYN CENTER BUFFALO BURNSVILLE EDEN PRAIRIE FRIDLEY GOLDEN VALLEY HOPKINS HUTCHINSON LITTLE FALLS MAHTOMEDI MINNEAPOLIS PARK RAPIDS SAINT PAUL VADNAIS HEIGHTS UNITS 66 36 112 48 200 168 16 45 161 101 62 29 48 89 38 66 20 30 88 12 80 85 5 64 57 4 31 92 134 191 248 162 26 120 24 140 100 36 80 151 58 96 54 35 3,517 PROJECT Franklin Lane Haralson Unity Place Buffalo Court Chancellor Manor Prairie Meadows Brandes Place Cornerstone Creek Hopkins Village Raspberry Ridge Evergreen Willow Lincoln Place Albright Blue Goose Diamond Hill Echo Flats Elliot Park Evergreen Exodus Glenwood Higher Ground Jefferson LaSalle Morrison Village New Beginnings Oakland Square Olson Townhomes Park Plaza Riverside Homes Seven Corners Slater Square Talmage Green Trinity Apartments Trinity on Lake Veterans and Community Housing Veterans East Zinsmaster Woodland Court Dale Street Place Hamline Park Hanover Townhomes Ramsey Hill Vadnais Highlands TOTAL CHDC ProjectsProperty Albright Townhomes Diamond Hill Echo Flats Elliot Park Evergreen Exodus Glenwood Higher Ground Jefferson LaSalle Morrison Village Olson Towne Homes Park Plaza Slater Square Talmage Green Trinity Apartments Trinity on Lake Veterans and Community Housing Veterans East Zinsmaster Oakland Square New Beginnings Dale Street Place Hamline Park Hanover Townhomes Ramsey Hill Franklin Lane Haralson Unity Place Buffalo Court Chancellor Manor Prairie Meadows Hopkins Village Raspberry Ridge Evergreen Willow Apartments Lincoln Place Woodland Court Vadnais Heights Brandes Place Cornerstone Creek Androy new State Street Park 7 Selby Milton Selby Ave & N Victoria St East Town CHDC and House of Charity have partnered to develop Park 7 in the Elliot Park neighborhood in downtown Minneapolis. Park 7 will provide 61 units of supportive housing for individuals experiencing long-term homelessness with chemical dependency and/or serious mental illness. House of Charity will provide services to all of the residents, including access to the House of Charity Food Centre. Construction is expected to start in early 2019. PARK 7 61 new units of affordable housing with services State Street Apartments is the adaptive reuse of the New Ulm Middle School, a historic structure built in 1918. State Street will provide 49 units of affordable housing for individuals and families. All units will be reserved for individuals and families with children who meet the Section 42 income restrictions, particularly tenants with household incomes ranging from 50 to 60% of Area Median Income. Rehab is expected to start in December of 2018. STATE STREET APARTMENTS 49 new units of workforce housing in New Ulm SOURCES OF FUNDING: City of Minneapolis AHTF - $1,525,000 Hennepin County AHIF - $400,000 SOURCES OF FUNDING: Syndication proceeds - $8,947,498 Federal historic proceeds - $2,232,167 Housing Infrastructure Bonds - $5,384,499 Sales tax and energy rebates - $253,784 State historic TC GP loan - $2,452,931 Sales tax and energy rebates - $310,323 Met Council TBRA/LHIA - $565,000 National HTF - $2,806,585 First mortgage - $675,000 GMHF deferred loan - $546,000 CREATING NEW AFFORDABLE UNITS IN MINNESOTA CREATING NEW AFFORDABLE UNITS IN MINNESOTA EAST TOWN APARTMENTS 169 units of new workforce housing in Downtown East, Minneapolis CHDC is partnering with First Covenant Church on the creation of 169 workforce housing units next to US Bank Stadium. East Town Apartments is directly adjacent to major downtown employers and within one block of the US Bank Stadium LRT Station and high frequency bus transit. The units will be reserved for those making 60% or less of the area median income, including 24 studios, 92 one-bedrooms, 47 two-bedrooms and 6 three-bedrooms. Construction is expected to start in December of 2018. OTHER 2018-2020 NEW CONSTRUCTION PROJECTS Selby Milton Victoria, Saint Paul - 34 units under construction SINCE 2015, CHDC created 100 units of affordable housing in Minneapolis (145 total) Veterans East - 100 units Cornerstone Creek - 45 units SOURCES OF FUNDING: First Mortgage - $14,300,000 Syndication Proceeds - $12,491,072 Hennepin County TOD - $330,000 Sales tax and energy rebates - $854,877 Parking take out loan - $3,500,000 Pohlad Foundation - $250,000 Brownfields - $250,000 GP loan - $3,681,588 PRESERVING HOUSING AFFORDABILITY IN MINNESOTA ALBRIGHT TOWNHOMES Albright Townhomes, a 100% project-based Section 8 project, is a 89-unit property located in South Minneapolis. In April 2018, Albright began renovation activities with a construction budget of nearly $75,000/unit. In addition to necessary upgrades to finishes and systems, CHDC is adding amenities that will improve residents’ lives and the Albright community. Albright Townhomes holds the first HAP contract issued in Minnesota. In the early 1990s, Albright was at risk of converting to market rate and the City of Minneapolis requested CHDC's help. Since, CHDC has worked to preserve Albright. Rehab is expected to be complete by the end of 2018. RIVERSIDE HOMES CHDC and West Bank Community Development Corporation are partnering to rehabilitate 191 units throughout Minneapolis’ Cedar-Riverside neighborhood. WBCDC's mission is to improve the quality of life in Cedar Riverside through community- based planning processes. CHDC provides insight into the preservation of affordable housing to further WBCDC's mission, while WBCDC gives insight into the community. Riverside Homes consists of 103 project- based Section 8 units. The remaining 88 units are affordable to households earning 60% AMI. Rehab began in November 2018. CHDC is dedicated to preserving its properties for the long term, through rehabilitation and strategic refinancing. Its self-sustaining business model allows CHDC to recapitalize its existing portfolio without the use of scarce gap resources.19THAVESCEDAR AVE S20TH AVE S21ST AVE S19TH AVSHI G H WA Y 5 5 25TH AVE S2NDSTS15TH AVE S27TH AVE S23RD AVE S26TH AVE S2 2 N D A V E S MINNEH16TH AVE S13TH AVE S24TH AVE SSTAVES24TH AVE SHI GHWAY 5 522ND AVE S19TH AVE S23RD AVE S28TH AVE S29TH AVE SE SE SE SE SVE S20TH AVE SE S26T19TH AVE S2700 925 133 255 731 1627 2200 4 1500 507 2414 709801 5 1300 2116 623 630 2015 1 501 1811 1417 616 628 1600 2200 1900 1525 818 717 1601 514 400 1309 2512 2020 101 1807 504 524 1800 606 2406 1406 300 2323 2424 1901 19 16 429 1901 1920 1500 419 1819 1921 1530 147 11 1615 2021 1500 711 6 1 1 2405 1816 701 511 1412 2500 620 815 1507 1825 7031342115 22001813 2601 1819 413 1816 21 1514 599 2024 416 1812 425404 15 707 245 1505608708 29 605181315042517 1905 405 1808 1809 1814 7021927 722 80815071918 427 1920 501 70621281 4 1 3 716 723 309 428 716 50118241506 607 528 811 800 523 5 25 712 3 2 2 6171417151721 1808629715 810 509 625701150721 1 2 519 711 2605 518 5241825 7131811305 71261718101917 721 814 717 1907 211961 9 28132001 2002 2216 19042016211371019222020192 6 614 52515092006 2011408 21065131814427 121141812212820082117142018262012612 602 252619151907271124520181829608 606 2627616 27012719709 7251821 191960221500 1813609 604 521 516 1900 1808191226111916212028071822212319011500 2916720 62418211826 2823191128192602601282970818251813 19162623260118162920180526177241920 26192428260926051924400 247 181818222 50015 1 6 329 23241808261320162315191418142530270718192514181527252831191026182729261426222608260426002717251625181916252221312731251025062112191219111906507 5202619190326302604260826162618180720192617262926152612261320221916242519142603181415271429Cedar-Riverside Riverside Homes buildings are highlighted in red. SINCE 2015, CHDC preserved 1,011 units of affordable housing Diamond Hill - 66 units Trinity Apartments - 120 units Prairie Meadows (Eden Prairie) - 168 units Hanover Townhomes (Saint Paul) - 96 units Hopkins Village (Hopkins) - 161 units Franklin Lane (Anoka) - 66 units Ramsey Hill (Saint Paul) - 54 units Albright (Minneapolis) - 89 units Riverside Homes (Minneapolis) - 191 units OLSON TOWNE HOMES Olson Towne Homes is a 100% project- based Section 8 property located in North Minneapolis, which provides 92 units of housing to families and individuals. In September 2019, CHDC will begin reconstructing the existing, failing units with new buildings with unit sizes suitable for larger families. The new plan, adjacent to the future Bottineau LRT station, increases density and frees up land for future phases of redevelopment. Funding commitments have been received from CPED's Metropolitan Council. OTHER 2018-2020 PRESERVATION PROJECTS Unity Place LaSalle Echo Flats Trinity on Lake Talmage Green New Beginnings Woodland Court Jefferson Zinsmaster Exodus UPCOMING LONG-TERM PRESERVATION OPPORTUNITIES LIMITED PARTNER EXITS 6 in Minneapolis (360 unit) 12 total (609 units) HAP CONTRACT EXPIRATIONS 7 in Minneapolis (493 units) 11 total (610 units) 614 North First Street, Suite 100 Minneapolis, Minnesota 55401 (612) 332-6264 VICINITY PLAN 175TH AVENUE NW TWI N L A K E S R O A D N W NOR TH S T AR M E TRO L IN E SITE TO ELK RIVER NORTHSTAR STATION TO HILLSIDE CITY PARK KLIEVER MARSH PARKCONCEPT PLANELK RIVER, MN / 05.18.2020 / 20-0009 CHDC Elk River 1 SITE PLAN PRELIMINARY CONCEPT 175TH AVENUE NW TWIN LAKES ROAD NWPHASE 1 PHASE 2 EXTERIOR PROGRAM TO INCLUDE: • Play Area • Ball Court • Community Gardens • Outdoor Amenity Patio with Grilling Stations • Pollenator Gardens • Rain Gardens • Walk-up Units CONCEPT PLANELK RIVER, MN / 05.18.2020 / 20-0009 CHDC Elk River 2 CORNER PERSPECTIVE PRELIMINARY CONCEPT PRECEDENT IMAGERYELK RIVER, MN / 05.18.2020 / 20-0009 CHDC Elk River 3 SOUTHERN APPROACH PRELIMINARY CONCEPT PRECEDENT IMAGERYELK RIVER, MN / 05.18.2020 / 20-0009 CHDC Elk River 4 ENTRANCE DRIVE PRELIMINARY CONCEPT PRECEDENT IMAGERYELK RIVER, MN / 05.18.2020 / 20-0009 CHDC Elk River 5 HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER RESOLUTION NO. RESOLUTION EXPRESSING SUPPORT FOR THE PROPOSED USE OF TAX INCREMENT FINANCING FOR A PROJECT BY COMMUNITY HOUSING DEVELOPMENT CORPORATION WHEREAS, the Housing and Redevelopment Authority in and for the City of Elk River (the "HRA") and the City of Elk River, Minnesota (the "City") have received a request to assist an entity to be formed by Community Housing Development Corporation (the "Developer") with certain costs of construction of an approximately 55 unit multifamily rental housing development in the City of Elk River(the"Project"); and WHEREAS, the City engaged Maxfield Research and Consulting, LLC on February 15, 2018, to conduct a comprehensive housing market study update to our original study completed in December of 2015. The study projects housing demand from 2017-2025 and provides recommendations on the amount and type of housing that could be built in the City to satisfy demand from current and future residents through 2025. The study showed a demand for affordable rental housing in the City; and WHEREAS, a need has been identified for additional affordable housing within the City and that the proposed housing fills a need in the local housing market that currently has an unmet need; and WHEREAS, the success of the tax credit application is predicated on local support of the proposal; and WHEREAS, the Developer has requested that the HRA indicate its support of the use of tax increment for the Project; and WHEREAS, the Joint Finance Committee has reviewed the proposal and recommends that the Board of Commissioners support the use of tax increment for the Project. NOW, THEREFORE, BE IT RESOLVED, by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Elk River that: 1. The Board of Commissioners supports the Project and the use of tax increment financing for the Project; provided, however, that authorization of tax increment financing for the Project is solely within the discretion of the Board of Commissioners following all legally required proceedings pursuant to Minnesota Statues 469.174 through 469.1794, as amended, including (i) a public hearing and approval by the City Council of the City; (ii) determining that tax increment financing assistance is necessary for the Project; (iii) verification of development financing need that substantiates that "but for" the use of tax increment financing the Project would be unable to proceed based on an analysis performed by the City's municipal advisor; and (iv) the negotiation of a development agreement including (among other things) the conditions under which the City or the HRA will provide financial assistance. 2. The Board of Commissioners supports the Developer's application to MHFA for tax credits for the Project. 3. The Board of Commissioners recommends that the City Council of the City adopt a resolution supporting the Developer's application to MHFA for tax credits for the Project and expressing support for providing tax increment financing assistance to the Developer for the Proj ect. Adopted by the Housing and Redevelopment Authority in and for the City of Elk River this 1St day of June, 2020. President ATTEST: Executive Director 2 Comprehensive Housing Market Study Updates City of Elk River, Minnesota (main) 612-338-0012 (fax) 612-904-7979 7575 Golden Valley Road, Suite 385, Golden Valley, MN 55427 www.maxfieldresearch.com February 15, 2018 Ms. Amanda Othoudt Economic Development Director City of Elk River 13065 Orono Parkway Elk River, MN 55330 Dear Ms. Othoudt: Attached is the Comprehensive Housing Market Study Updates for Elk River, Minnesota conducted by Maxfield Research and Consulting, LLC. The original study was completed in December 2015, with the following updates completed in February 2018. The study projects housing demand from 2017 through 2025, and provides recommendations on the amount and type of housing that could be built in Elk River to satisfy demand from current and future residents through 2025. The study identifies a potential demand for approximately 864 new housing units through 2025. About 20% of the total demand is for senior housing; while general-occupancy housing accounted for 80% of the demand. Demand is strongest for for-sale housing, representing 395 of the 864 new housing units. There is also strong demand for additional market rate (172 units) and affordable rental housing (93 units) If you have any questions or need additional information, please contact us. We have enjoyed conduct- ing this study for you. Sincerely, MAXFIELD RESEARCH AND CONSULTING, LLC Matt Mullins Brian Smith Vice President Senior Associate Attachment TABLE OF CONTENTS Page PURPOSE AND SCOPE OF STUDY .......................................................................................... 1 DEMOGRAPHIC ANALYSIS ..................................................................................................... 2 Introduction ...................................................................................................................... 2 Market Area Definition ..................................................................................................... 2 Population and Household Growth Trends and Projections from 1990 to 2030 ............. 3 Age Distribution Trends .................................................................................................... 5 Household Income by Age of Householder ...................................................................... 6 Tenure by Age of Household ............................................................................................. 8 Household Type Trends .................................................................................................... 10 Household by Household Income ..................................................................................... 11 Summary of Demographic Trends .................................................................................... 12 EMPLOYMENT ....................................................................................................................... 14 Employment Trends .......................................................................................................... 14 Resident Labor Force......................................................................................................... 14 Covered Employment ........................................................................................................ 16 Inflow/Outflow .................................................................................................................. 17 Major Employers ............................................................................................................... 18 Summary of Demographic Trends .................................................................................... 18 HOUSING CHARACTERISTICS ................................................................................................. 20 Residential Construction Trends 2000 to Present ............................................................ 20 Housing Units by Structure and Tenure ............................................................................ 21 Summary of Demographic Trends .................................................................................... 22 RENTAL MARKET ANALYSIS .................................................................................................. 23 General Occupancy Rental Projects .................................................................................. 23 Senior Housing in Elk River ................................................................................................ 27 Summary of Elk River Competitive Multifamily Properties .............................................. 30 FOR-SALE HOUSING ANALYSIS .............................................................................................. 32 Residential Resales ............................................................................................................ 32 Current Supply of Homes on the Market .......................................................................... 36 Lot Supply .......................................................................................................................... 39 Summary of For Sale Market Conditions .......................................................................... 41 HOUSING DEMAND ANALYSIS .............................................................................................. 43 Estimated Demand for For-Sale Housing ........................................................................... 43 Estimated Demand for General Occupancy Rental Housing ............................................. 44 Estimated Demand for Independent/Few Services Senior Housing ................................. 45 Estimated Demand for Affordable and Subsidized Independent Senior Housing ............ 46 Estimated Demand for Congregate Senior Housing .......................................................... 47 Demand Estimate for Assisted Living Housing .................................................................. 48 Estimated Demand for Memory Care Housing .................................................................. 49 DEMAND SUMMARY AND HOUSING RECOMMENDATIONS ............................................... 50 Demand Summary/Overall Housing Recommendations .................................................. 50 Recommended Housing Product Types ............................................................................ 52 MAPS Page Primary Market Area.............................................................................................................. 2 Elk River General Occupancy Rental Housing Locations ....................................................... 26 Elk River Senior Housing Locations ........................................................................................ 29 LIST OF TABLES Table Number and Title Page D1. Population and Household Growth Trends and Projections, Elk River, 1990 to 2030……………………………………………………………………………………………………………. 3 D2. Population Age Distribution, Elk River, 2000 to 2025 .................................................. 5 D3. Household Income by Age of Householder, Elk River, 2017 and 2022 ........................ 8 D4. Tenure by Age of Householder, Elk River Study Area, 2010 and 2016… ...................... 8 D5. Household Type Trends, Elk River Study Area, 2010 and 2016 .................................... 10 D6. Tenure by Household Income, Elk River, 2010 and 2016 ............................................. 11 E1. Resident Employment, Sherburne County, 2000 to 2017 ............................................ 14 E2. Covered Employment Trends, Elk River, 2000, 2005, 2010, 2016................................ 16 E3. Commuting Inflow/Outflow Characteristics, City of Elk River, 2015 ............................ 17 E4. Major Employers, City of Elk River, 2017 ...................................................................... 28 HC1. Residential Construction, City of Elk River, 2000 to 2017 ............................................ 20 HC2. Housing Stock by Units in Structure, Elk River, 2000 and 2016 .................................... 21 RMA1. General Housing Occupancy Rental Housing, City of Elk River, January 2018 .......... 23 SH1. Senior Housing, City of Elk River, January 2018 ........................................................... 27 FS1. Home Resales, City of Elk River, 2010-2017 ................................................................. 32 FS2. Single Family and Multifamily Residential Sales, City of Elk River, 2000 through 2017 ....................................................................................................... 33 FS3. Home Resales by Sales Price & Product Type, City of Elk River, 2017 .......................... 34 FS4. Housing Sales Per Square Foot (PSF), Elk River, 2005 to 2017 ..................................... 35 FS5. Homes Currently Listed For-Sale, City of Elk River, February 2018 .............................. 36 FS6. Active Listings by Housing Type, Elk River, February 2018 ........................................... 37 FS7. Subdivision & Lot Inventory – Detached Housing Units, City of Elk River, 4th Quarter 2017 ........................................................................................................... 39 FS8. Subdivision & Lot Inventory – Attached Housing Units, City of Elk River, 4th Quarter 2017 ........................................................................................................... 40 HD1. For-Sale Housing Demand, Elk River, 2017 to 2025 ..................................................... 43 HD2. Rental Housing Demand, Elk River, 2017 to 2025 ........................................................ 44 HD3. Market Rate Active Adult/Few Services Housing Demand, Elk River, 2017 and 2022 . 45 HD4. Affordable Independent Senior Housing Demand, Elk River, 2017 and 2022 .............. 46 HD5. Subsidized Independent Senior Housing Demand, Elk River, 2017 and 2022 .............. 46 HD6. Market Rate Congregate Rental Housing Demand, Elk River, 2017 and 2022 ............. 47 HD7. Market Rate Assisted Living Demand, Elk River Market Area, 2017 and 2022 ............ 48 HD8. Memory Care Demand, Elk River Market Area, 2017 and 2022 .................................. 49 CR1. Summary of Housing Demand, City of Elk River, February 2017.................................. 50 CR2. Recommended Housing Development, City of Elk River, 2017 to 2025 ...................... 52 PURPOSE AND SCOPE OF STUDY MAXFIELD RESEARCH AND CONSULTING 1 Purpose and Scope of Study Maxfield Research and Consulting LLC (i.e. “Maxfield Research”) was engaged by the City of Elk River to complete an update of the Comprehensive Housing Market Study for the City of Elk River from 2015. This report includes an update only to select tables and is intended to act as an addendum to the original document. DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 2 Introduction This section of the report examines factors related to the current and future demand for both owner- and renter-occupied housing in Elk River, Minnesota. It includes population and house- hold growth trends and projections, projected age distribution, household income and house- hold types. A review of these characteristics will provide insight into the demand for various types of housing in the Market Area. Elk River Study Area Definition The draw area for determining current and future housing demand in the City of Elk River is based on traffic pattern orientation, proximity to other communities, interviews with local offi- cials and community stakeholders, natural and manmade geographic barriers, and our knowledge of the draw areas for housing. The Study Area is defined as Elk River proper. DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 3 Estimated Projected 1990 2000 2010 2017 2022 2025 2030 No.Pct.No.Pct.No.Pct. Population Elk River 11,143 16,447 22,974 24,484 25,561 26,208 27,286 5,304 47.6 6,527 39.7 3,234 14.1 Sherburne County 41,945 64,417 88,499 93,526 96,190 96,492 98,248 22,472 53.6 24,082 37.4 7,993 9.0 Wright County 68,710 89,986 124,700 134,829 140,528 141,796 145,773 21,276 31.0 34,714 38.6 17,096 13.7 Households Elk River 3,732 5,664 8,080 8,617 9,005 9,298 9,704 1,932 51.8 2,416 42.7 1,218 15.1 Sherburne County 13,643 21,581 30,212 31,918 33,137 33,380 34,436 7,938 58.2 8,631 40.0 3,168 10.5 Wright County 23,013 31,465 44,473 47,992 50,506 51,008 53,186 8,452 36.7 13,008 41.3 6,535 14.7 U.S. Census 2010 to 20251990 to 2000 2000 to 2010Forecast TABLE D-1 POPULATION AND HOUSEHOLD GROWTH TRENDS AND PROJECTIONS ELK RIVER 1990 to 2030 Sources: U.S. Census; Minnesota Planning; ESRI, Inc; Maxfield Research & Consulting, LLC Change DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 4 11,143 16,447 22,974 24,484 25,561 26,208 27,286 0 5,000 10,000 15,000 20,000 25,000 30,000 PopulationElk River Population Trends 1990 -2020 1990 2000 2010 2017 2022 2025 2030 3,732 5,664 8,080 8,617 9,005 9,298 9,704 0 2,000 4,000 6,000 8,000 10,000 12,000 HouseholdsElk River Study Area Household Trends 1990 -2020 1990 2000 2010 2017 2022 2025 2030 DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 5 2000 2010 2017 2022 2025 No.No.No.No.No.No.Pct.No.Pct. 17 & under 5,146 6,555 6,642 6,827 6,919 1,409 27.4 364 5.6 18-24 1,395 1,757 1,999 1,887 1,966 362 25.9 209 11.9 25-34 2,461 3,204 3,412 3,609 3,590 743 30.2 386 12.1 35-44 3,117 3,584 3,470 3,824 3,931 467 15.0 347 9.7 45-54 1,963 3,535 3,489 3,255 3,171 1,572 80.1 -364 -10.3 55-64 1,049 2,192 2,745 2,907 2,830 1,143 109.0 638 29.1 65-74 663 1,188 1,655 1,984 2,306 525 79.2 1,118 94.1 75+653 959 1,071 1,268 1,494 306 46.9 535 55.8 Total 16,447 22,974 24,484 25,561 26,208 6,527 39.7 2,587 11.3 Sources: U.S. Census Bureau; ESRI, Inc.; Maxfield Research & Consulting, LLC TABLE D-2 POPULATION AGE DISTRIBUTION ELK RIVER 2000 - 2025 2000-2010 2010-2025 ChangeNumber of Persons 1,3955,5783,0121,3161,7576,7885,7272,1471,9996,8826,2342,7261,8877,4336,1623,2521,9667,5226,0023,8000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 18-24 25-44 45-64 65+No. of PersonsAge Cohort Adult Population Age Distribution Elk River 2000 to 2025 2000 2010 2017 2022 2025 DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 6 Total <25 25-34 35-44 45-54 55-64 65 -74 75+ Less than $15,000 338 17 37 33 31 56 73 91 $15,000 to $24,999 498 21 52 51 54 64 113 143 $25,000 to $34,999 521 28 92 68 58 89 83 103 $35,000 to $49,999 969 35 187 138 147 174 131 156 $50,000 to $74,999 1,703 70 369 300 321 272 222 148 $75,000 to $99,999 1,535 38 302 363 361 283 158 29 $100,000 or more 3,053 38 448 800 912 577 230 47 Total 8,617 247 1,488 1,754 1,884 1,516 1,011 717 <$25,000 836 38 89 84 85 120 186 234 $35,000+7,259 181 1,307 1,602 1,741 1,307 741 380 Median Income $78,428 $55,477 $75,365 $93,219 $97,202 $82,185 $59,223 $36,403 Twin Cities Med. Income $67,795 $34,820 $58,146 $81,972 $88,167 $80,649 $58,179 $37,464 Total <25 25-34 35-44 45-54 55-64 65 -74 75+ Less than $15,000 363 17 39 36 30 53 83 105 $15,000 to $24,999 502 19 49 48 40 60 120 166 $25,000 to $34,999 497 25 83 66 45 78 86 114 $35,000 to $49,999 906 33 166 123 115 155 139 175 $50,000 to $74,999 1,533 60 331 273 239 234 229 167 $75,000 to $99,999 1,501 39 301 362 305 273 185 36 $100,000 or more 3,702 44 573 993 950 719 342 81 Total 9,005 237 1,542 1,901 1,724 1,572 1,184 844 <$25,000 865 36 88 84 70 113 203 271 $35,000+7,643 176 1,371 1,751 1,609 1,381 895 459 Median Income $84,758 $57,518 $81,690 $101,749 $104,816 $92,345 $65,812 $37,255 Twin Cities Med. Income $78,703 $37,641 $68,180 $92,464 $99,756 $93,254 $69,137 $42,675 Total <25 25-34 35-44 45-54 55-64 65 -74 75+ Less than $15,000 25 -0 2 3 -1 -3 10 14 $15,000 to $24,999 4 -2 -3 -3 -14 -4 7 23 $25,000 to $34,999 -24 -3 -9 -2 -13 -11 3 11 $35,000 to $49,999 -62 -2 -21 -15 -32 -19 8 19 $50,000 to $74,999 -170 -10 -38 -27 -82 -38 7 19 $75,000 to $99,999 -34 1 -1 -1 -56 -10 27 7 $100,000 or more 650 6 125 193 39 142 112 34 Total 388 -10 54 147 -160 56 174 127 <$25,000 29 -2 -1 -0 -15 -7 17 37 $35,000+384 -5 64 149 -132 74 154 79 Median Income $6,330 $2,041 $6,325 $8,530 $7,614 $10,160 $6,589 $852 Twin Cities Med. Income $10,908 $2,821 $10,034 $10,492 $11,589 $12,605 $10,958 $5,211 Sources: ESRI, Inc.; Maxfield Research & Consulting, LLC 2022 Change TABLE D-3 2017 and 2022 (Number of Households) ELK RIVER HOUSEHOLD INCOME BY AGE OF HOUSEHOLDER 2017 DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 7 2471,4881,7541,8841,5161,0117172371,5421,9011,7241,5721,184844$55,477 $75,365 $93,219 $97,202 $82,185 $59,223 $36,403 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 15-24 25-34 35-44 45-54 55-64 65 -74 75+2010 Median IncomeNo. of HouseholdsAge of Householder Growth and Income Trends by Age of Householder Elk River 2017 to 2022 2017 2022 2017 Income DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 8 Own Rent Own Rent Own Rent Own Rent Own Rent Own Rent Own Rent Own Rent City of Elk River 34 72 1,132 533 1,288 275 1,644 411 1,189 337 719 99 401 233 6,407 1,960 Pct. Own City of Elk River 106 155 1,029 396 1,544 281 1,696 251 1,079 157 619 121 405 241 6,478 1,602 Pct. Own -72 -83 103 137 -256 -6 -52 160 110 180 100 -22 -4 -8 -71 358 Sources: U.S. Census; Maxfield Research & Consulting, LLC 45 to 54 55 to 64 65 to 74 75+ TABLE D-4 TENURE BY AGE OF HOUSEHOLDER ELK RIVER STUDY AREA 2010 and 2016 68.0%82.4%77.9%87.9%63.2%80.0% 2010 87.1% Age of Householder 25 to 3415 to 24 35 to 44 32.1% 2016 Total 76.6% Change 2000 to 2010 80.2%87.3%83.6%62.7%40.6%72.2%84.6% Percentage Renters (2016) 67.9%17.6%32.0%20.0%12.1%22.1%23.4%36.8% DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 9 34 1,132 1,288 1,644 1,189 719 40132.1% 68.0% 82.4%80.0%77.9% 87.9% 63.2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Homeownership RateNo. of HomeownersAge of Householder Elk River Homeowners by Age of Householder -2016 No. of Homeowners Homeownership Rate 72 533 275 411 337 99 233 67.9% 32.0% 17.6%20.0%22.1% 12.1% 36.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 100 200 300 400 500 600 Pct. RentersNo. of RentersAge of Householder Elk River Renters by Age of Householder -2016 No. of Renters Pct. Renters DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 10 Total Households 2010 2016 2010 2016 2010 2016 2010 2016 2010 2016 2010 2016 Total Households 8,080 8,367 1,581 1,586 449 382 2,495 2,272 2,440 2,806 1,115 1,321 % of all Households 100.0 100.0 19.6 19.0 5.6 4.6 30.9 27.2 30.2 33.5 13.8 15.8 No.Pct.No.Pct.No.Pct.No.Pct.No.Pct.No.Pct. Change (2000-2010)287 3.6 5 0.3 -67 -14.9 -223 -8.9 366 15.0 206 18.5 Sources: U.S. Census; Maxfield Research & Consulting, LLC Other Family (Single Parents) TABLE D-5 HOUSEHOLD TYPE TRENDS ELK RIVER 2010 and 2016 FamilyNon-Family Persons Living Alone Married W/O Children Other (Roommates) Married With Children 2,4952,4401,1151,5814492,2722,8061,3211,5863820 500 1,000 1,500 2,000 2,500 3,000 Married with child Married w/o child Other family Living alone RoommatesNo. of HouseholdsHousehold Type Household Type Elk River 2010 and 2016 2010 2016 DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 11 No.Pct.No.Pct.No.Pct.No.Pct. Less than $5,000 37 62.7 22 37.3 76 32.8 156 67.2 $5,000 to $9,999 37 41.1 53 58.9 29 46.8 33 53.2 $10,000 to $14,999 162 63.5 93 36.5 74 52.5 67 47.5 $15,000 to $19,999 205 63.3 119 36.7 62 57.9 45 42.1 $20,000 to $24,999 110 45.3 133 54.7 92 31.6 199 68.4 $25,000 to $34,999 248 57.9 180 42.1 393 56.1 308 43.9 $35,000 to $49,999 762 78.7 206 21.3 377 44.0 480 56.0 $50,000 to $74,999 1,395 80.8 331 19.2 1,094 75.9 348 24.1 $75,000 to $99,999 1,338 95.1 69 4.9 1,153 89.5 135 10.5 $100,000 to $149,999 1,686 97.7 39 2.3 2,073 93.4 146 6.6 $150,000 or more 673 91.7 61 8.3 984 95.8 43 4.2 Total 6,653 83.6 1,306 16.4 6,407 76.6 1,960 23.4 * Data is from US Census, American Community Survey (5-Year Estimate) Source: US Census Bureau; Maxfield Research & Consulting, LLC. Rent 2010 and 2016 Own Rent TABLE D-6 TENURE BY HOUSEHOLD INCOME ELK RIVER 2016* Own 2010* 156 33 67 45 199 308 480 348 69 51 61 67%53% 48% 42% 68% 44% 56% 24% 10%7%4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 50 100 150 200 250 300 350 400 450 500 HouseholdsPropensity to Rent by Household Income Elk River, 2016 (5-Year ACS) No. of Renters % Renters DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 12 Summary of Demographic Trends Population and Household Projections • Between 2010 and 2017, the Elk River population and households are estimated to have in- creased by 6.6% (1,510 people and 537 households), while Sherburne County and Wright County’s populations grew by 5.7% and 8.1%, respectively. • Population in the City of Elk River is projected to increase by 4.4% (1,077 people) from 2017 to 2022 and forecast to grow 7.0% (1,724) through 2025. Overall, Elk River’s population is forecast to gain over 3,230 people (14%) from 2010 to 2025. Age Distribution Trends • Between 2010 and 2025, the growth of the older age cohorts will continue in Elk River, those age 65 to 74 will experience the largest growth, growing 94% (1,118 people). All other age cohorts will experience a decline in population or experience nominal growth. • The 65 to 74 and 75 to 84 age cohorts will experience the largest growth (19.9% and 18.4% respectively) in the PMA between 2017 and 2022. The population 18 to 24 and 45 to 54 are projected to decline from 2017 to 2022 by 5.6% and 6.7%, respectively. All other age co- horts are expected to experience moderate growth in population. Household Income by Age of Householder • The Department of Housing and Urban Development defines affordable housing costs as 30% of a household’s adjusted gross income. For example, a household in Elk River with the median income of $78,428 per year would be able to afford a monthly housing cost of about $1,956. • A generally accepted standard for affordable owner-occupied housing is that a typical household can afford to pay 3.0 to 3.5 times their annual income on a single-family home. Thus, a $78,428 income would translate to an affordable single-family home of $235,284 to $273,868. The higher end of this range assumes that the person has adequate funds for down payment and closing costs, but also does not include savings or equity in an existing home which would allow them to purchase a higher priced home. • With a household income of $55,477, a younger household in Elk River (the median house- hold income for the 25 and under cohort) could afford a monthly housing cost of about $1,386 based on an allocation of 30% of income toward housing. A senior household (75+) in Elk River with an income of $36,403 (the median household income of seniors (75+) could afford a monthly housing cost of $1,213, based on an allocation of 40% of income toward housing. DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH AND CONSULTING 13 Tenure by Household Income • A portion of renter households are referred to as lifestyle renters, or those who are finan- cially-able to own but choose to rent, have household incomes above $50,000. These life- style renters account for approximately 34% of the renters in Elk River renters in 2016. • Households with incomes below $15,000 are typically a market for deep subsidy rental housing. In 2016, this was about 13% of renters in Elk River. Households with incomes ranging from roughly $25,000 to $50,000 are candidates for affordable rental properties and account for 40% of the renters in 2016. Tenure by Age of Householder • The number of owner households in Elk River is estimated to have decreased from 80.2% in 2010 to 76.6% in 2016. • As households progress through their life cycle, housing needs change. The proportion of renter households decreases significantly as households’ age out of their young-adult years. However, by the time households reach their senior years, rental housing often be- comes a more viable option than homeownership, reducing the responsibility of mainte- nance and the financial commitment. In the City of Elk River, homeowner households reached a high of 87.9% in the 65-74 age cohort in 2016. Homeownership then begins to fall, dropping to 63.2% for those 75 and older in 2016. Household Type • In Elk River, married without children family households comprise the largest share of households at 33.5% of household. This is followed by married with children at 27.2% and persons living alone at 19%. EMPLOYMENT MAXFIELD RESEARCH AND CONSULTING 14 Employment Trends Total Minnesota U.S. Labor Total Total Unemployment Unemployment Unemployment Year Force Employed Unemployed Rate Rate Rate 2000 37,904 36,748 1,156 3.0%3.2%4.0% 2001 39,496 38,001 1,495 3.8%3.8%4.7% 2002 41,524 39,552 1,972 4.7%4.5%5.8% 2003 43,310 41,090 2,220 5.1%4.9%6.0% 2004 45,025 42,780 2,245 5.0%4.7%5.6% 2005 46,529 44,513 2,016 4.3%4.1%5.1% 2006 48,064 45,991 2,073 4.3%4.0%4.6% 2007 48,738 46,299 2,439 5.0%4.6%4.6% 2008 49,592 46,531 3,061 6.2%5.4%5.8% 2009 49,293 44,821 4,472 9.1%7.8%9.3% 2010 48,990 44,867 4,123 8.4%7.4%9.6% 2011 48,840 45,355 3,485 7.1%6.5%8.9% 2012 48,756 45,754 3,002 6.2%5.6%8.1% 2013 48,909 46,309 2,600 5.3%4.9%7.4% 2014 49,186 47,001 2,185 4.4%4.1%6.2% 2015 49,759 47,646 2,113 4.2%3.9%5.5% 2016 49,647 47,592 2,055 4.1%3.8%4.9% 2017 50,681 48,710 1,971 3.9%3.6%4.4% Change 2000-10 11,086 8,119 2,967 5.4%4.2%5.6% Change 2011-17 1,841 3,355 -1,514 -3.2%-2.9%-3.3% Sources: Minnesota Workforce Center; Maxfield Research & Consulting, LLC 2000 to 2017 TABLE E-1 RESIDENT EMPLOYMENT (ANNUAL AVERAGE) SHERBURNE COUNTY EMPLOYMENT MAXFIELD RESEARCH AND CONSULTING 15 3.0% 5.1% 4.3% 9.1% 3.9%3.2% 4.9% 4.0% 7.8% 3.6% 4.0% 6.0% 4.6% 9.6% 4.4% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%Unemployment RateYear UNEMPLOYMENT RATE SHERBURNE COUNTY 2000 to 2017 Sherburne Minnesota U.S. 37,904 49,592 50,681 36,748 46,531 48,710 35,000 37,500 40,000 42,500 45,000 47,500 50,000 52,500 No. of PersonsYear LABOR FORCE AND EMPLOYED RESIDENTS SHERBURNE COUNTY 2000 to 2017 Total Labor Force Total Employed EMPLOYMENT MAXFIELD RESEARCH AND CONSULTING 16 Industry 2000 2005 2010 2016 No.Pct.2000 2005 2010 2014 Natural Resources & Mining 64 139 91 117 53 82.8 0.7%1.3%0.8%1.0% Construction 544 754 389 664 120 22.1 6.1%7.3%3.6%5.7% Manufacturing 1,202 1,073 1,243 1,500 298 24.8 13.6%10.4%11.4%12.9% Trade, Transportation, and Utilities 2,470 3,004 2,602 2,854 384 15.5 27.9%29.2%23.8%24.6% Information 108 63 55 66 -42 -38.9 1.2%0.6%0.5%0.6% Financial Services 373 476 394 332 -41 -11.0 4.2%4.6%3.6%2.9% Professional and Business Services 900 735 881 1,316 416 46.2 10.1%7.1%8.0%11.3% Education and Health Services 1,367 1,802 3,031 2,318 951 69.6 15.4%17.5%27.7%20.0% Leisure and Hospitality 889 1,102 842 1,055 166 18.7 10.0%10.7%7.7%9.1% Other Services 380 424 543 495 115 30.3 4.3%4.1%5.0%4.3% Public Administration 570 726 875 884 314 55.1 6.4%7.0%8.0%7.6% Totals 8,867 10,298 10,946 11,601 2,734 30.8 100%100%100%100% Source: Minnesota Workforce Center; Maxfield Research & Consulting, LLC TABLE E-2 Change 2000 - 2014 North American Industrial Classification System (NAICS) % of total 2000, 2005, 2010, and 2016 ELK RIVER COVERED EMPLOYMENT TRENDS Average Number of Employees 8,867 10,298 10,946 12,236 11,601 8,000 9,000 10,000 11,000 12,000 13,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016No. of Covered JobsYear Covered Employment Trends Elk River 2000 through 2016 EMPLOYMENT MAXFIELD RESEARCH AND CONSULTING 17 City of Elk River: Inflow/Outflow City Total 10,454 100.0%9,481 100.0%2,299 100.0% By Age Workers Aged 29 or younger 2,324 22.2%2,393 25.2%605 26.3% Workers Aged 30 to 54 6,316 60.4%5,204 54.9%1,151 50.1% Workers Aged 55 or older 1,814 17.4%1,884 19.9%543 23.6% By Monthly Wage Workers Earning $1,250 per month or less 2,088 20.0%2,768 29.2%931 40.5% Workers Earning $1,251 to $3,333 per month 2,623 25.1%2,875 30.3%681 29.6% Workers Earning More than $3,333 per month 5,743 54.9%3,838 40.5%687 29.9% By Industry "Goods Producing"2,312 22.1%1,933 20.4%310 13.5% "Trade, Transportation, and Utilities"2,279 21.8%1,835 19.4%482 21.0% "All Other Services"5,863 56.1%5,713 60.3%1,507 65.6% Sources: US Census Bureau Local Employment Dynamics; Maxfield Research and Consulting, LLC TABLE E-3 COMMUTING INFLOW/OUTFLOW CHARACTERISTICS CITY OF ELK RIVER 2015 Outflow Inflow Interior Flow EMPLOYMENT MAXFIELD RESEARCH AND CONSULTING 18 Summary of Employment Trends Resident Labor Force • Resident employment in Sherburne County increased by approximately 12,780 people be- tween 2000 and 2017 (33.7%). • The unemployment rate was in 2017 was 3.9% in Sherburne County compared to 3.6% in Minnesota and 4.4% in U.S. The unemployment rate in Elk River has been steadily declining since its high in 2009 of 9.1%. Covered Employment by Industry • The average number of employees rose 30.8% (2,734) between 2000 and 2016 in Elk River. • In Elk River, Trade, Transportation, and Utilities accounted for the largest proportion of em- ployment, making up 25% of employment by industry in 2016. Education and Health Ser- vices has the next highest concentration of employees at 20%. Employer Products/Services Employee Count ISD #728 Education 1,125 Sherburne County Government 595 Cretex Companies, Inc.Precast Concrete Products 550 Wal-Mart Retail Store 354 Coborn's Grocery Store 265 Great River Energy Electric Utility 250 Elk River Nursing Home Nursing Care 240 Guardian Angels of Elk River, Inc Nursing Care/Housing 200 The Home Depot Retail Store 200 Sportech, Inc Plastics Thermoforming 185 City of Elk River Government 183 Tescom Corporation Pressure Control Devices 173 Menards Retail Store 150 First National Financial Services Financial Institution 142 Avalon Home Care Home Health Care 110 E & O Tool and Plastics, Inc Injection Molding 110 The Bank of Elk River Financial Institution 107 Metal Craft Machine & Engineering Precision Machining 105 Cub Foods Grocery Store 100 Total 5,144 Sources: Sherburne County; City of Elk River; Maxfield Research & Consulting, LLC TABLE E-4 MAJOR EMPLOYERS CITY OF ELK RIVER 2017 EMPLOYMENT MAXFIELD RESEARCH AND CONSULTING 19 • All but the Information and Financial Services sectors increased the number of employees since 2000. The information sector decreased by 42 employees (39%) and the Financial Ser- vices sector declined by 41 employees (11%). • The Education and Health Services sector experienced the largest gain in employees of 951 (70%) followed by the Professional and Business Services sector growing by 416 employees (46%). Inflow/Outflow • Table E-3 on page 18 provides a summary of the inflow and outflow of workers in the City of Elk River. Outflow reflects the number of workers living in the City of Elk River, or the Mar- ket Area, but working in an area other than where they live, while inflow measures the number of workers that are employed in the City of Elk River, or the Market Area, but live outside those areas. Interior flow reflects the number of workers that both live and work in the City of Elk River and live and work in the Market Area. HOUSING CHARACTERISTICS MAXFIELD RESEARCH AND CONSULTING 20 Housing Characteristics Townhome/ Twinhome 2000 172 26 86 284 2001 162 18 76 256 2002 194 18 32 244 2003 285 37 228 550 2004 300 12 235 547 2005 195 4 145 344 2006 150 2 98 250 2007 104 0 12 116 2008 25 0 0 25 2009 16 0 4 20 2010 15 0 53 68 2011 11 0 0 11 2012 36 0 0 36 2013 82 0 0 82 2014 68 3 68 139 2015 62 0 0 62 2016 73 2 0 75 2017 113 0 0 113 Total '00 to 10 1,618 117 969 2,704 Total 11' to 17 445 5 68 518 Sources: City of Elk River; Maxfield Research & Consulting, LLC Single-Family Homes 2000 to 2017 Total Housing Units Multifamily 3+ Units Permits Issued TABLE HC-1 RESIDENTIAL CONSTRUCTION ANNUAL BUILDING PERMITS ISSUED CITY OF ELK RIVER 172 162 194 285 300 195 150 104 25 16 15 11 36 82 68 62 73 113 86 76 32 228 235 145 98 12 4 53 68 0 50 100 150 200 250 300 350 # of Units from Permits IssuedYear Residential New Construction (Total Units) Elk River 2000-2017 Single-Family Town/Twinhomes Multi-family 3+ Units HOUSING CHARACTERISTICS MAXFIELD RESEARCH AND CONSULTING 21 No Pct.No Pct. Owner occupied:6,653 100.0 6,407 100.0 1, detached 5,445 81.8 5,697 88.9 1, attached 1,115 16.8 546 8.5 2 to 4 units 45 0.7 66 1.0 5- to 9-plex 0 0.0 0 0.0 10 to 19 units 0 0.0 33 0.5 20 to 49 units 0 0.0 0 0.0 50 + units 33 0.5 65 1.0 Mobile home 15 0.2 0 0.0 Renter occupied:1,306 100.0 1,960 100.0 1, detached 242 18.5 497 25.4 1, attached 126 9.6 448 22.9 2 to 4 units 88 6.7 116 5.9 5- to 9-plex 134 10.3 75 3.8 10 to 19 units 247 18.9 357 18.2 20 to 49 units 296 22.7 367 18.7 50 + units 160 12.3 100 5.1 Mobile home 13 1.0 0 0.0 Total occupied:7,959 100.0 8,367 100.0 1, detached 5,687 71.5 6,194 74.0 1, attached 1,241 15.6 994 11.9 2 to 4 units 133 1.7 182 2.2 5- to 9-plex 134 1.7 75 0.9 10 to 19 units 247 3.1 390 4.7 20 to 49 units 296 3.7 367 4.4 50 + units 193 2.4 165 2.0 Mobile home 28 0.4 0 0.0 * Data is from US Census, American Community Survey (5-Year Estimate) Sources: US Census Bureau, Maxfield Research & Consulting, LLC 2010*2016* TABLE HC-2 HOUSING STOCK BY UNITS IN STRUCTURE ELK RIVER 2010 and 2016 5,697546663365497448116753573671000 50 100 150 200 250 300 350 400 450 500 Housing StockHousing Stock By Units In Structure Elk River 2016 Owner Occupied Renter Occupied HOUSING CHARACTERISTICS MAXFIELD RESEARCH AND CONSULTING 22 Summary of Housing Characteristics Residential Construction Trends 2000 to Present Maxfield Research obtained data from the City of Elk River on the number of building permits issued for new housing units in Elk River from 2000 to 2017. Table HC-1 on page 20 displays permits issued for single-family and multifamily dwellings. Multifamily units usually include both for-sale (condominium, twinhomes, and townhomes) and rental projects. The following are key points about housing development since 2000. • In 2017, the City of Elk River permitted 113 residential units, the most residential units per- mitted in a single year since prior to the onset of the Great Recession. • On average, the City of Elk River permits 90 single-family units, 6.5 townhome/twinhome units, and 54 multi-family units per year since 2000. • From 2008 to 2016, Elk River averaged only 43 single-family units, less than 1 town- home/twinhome units, and 14 multifamily units per year. • Since 2013, there has been 398 single family units, five townhome units and 68 multifamily rental units permitted. This is an average of 80 single family units and 94 units overall over the five year period. Housing Units by Structure and Occupancy or (Housing Stock by Structure Type) • The dominant housing type in the Market Area is the single-family detached home, repre- senting an estimated 89% of all owner-occupied housing units and 25% of renter-occupied housing units as of 2016. RENTAL MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 23 General Occupancy Rental Projects in Elk River Year Total Project Name/ Address Built Units Vacant Comments Granite Shores 2008/67 0 13 -1BR 737 -1,301 $1,229 -$1,849 $1.42 -$1.67 633 Main Street 2012 0 50 -1BR+D 817 -1,187 $1,349 -$1,719 $1.45 -$1.65 Conversion 0 4 -2BR 965 -1,304 $1,489 -$1,849 $1.42 -$1.54 Evans Meadows 1990/113 0 47 -1BR 800 -925 $996 -$1,293 $1.25 $1.40 325-385 Evans Avenue 2015 2 64 -2BR 1,034 -1,200 $1,193 -$1,626 $1.15 -$1.36 0 2 -3BR Lion's Park 1988 62 0 1 -EFF 1001 School Street 0 42 -1BR 1,000 -1,025 $850 -$889 $0.85 -$0.87 0 13 -2BR 960 -1,400 $889 -$1,010 $0.72 -$0.93 0 6 -3BR 1,100 2,200 $1,250 -$1,650 $0.75 $1.14 Oak Crest Apartments 1987/54 0 3 -1BR 300-380 3rd Street 1988 3 51 -2BR $855 -$895 0.75 -0.79 Ridgewood Manor 1987 80 0 29 -1BR 11931 191 1/2 Avenue 0 51 -2BR Tara Hills Estates 1986 26 0 5 -1BR 151 5th Street 0 13 -2BR 0 8 -3BR Elk Park Estates 1985-87 72 4 n/a -1BR Three, Three-story apartment building. 1109-1115 School Street 7 n/a -1BR/D 9 n/a -2BR $825 -$875 7 n/a -2BR/D Elk Ridge Estates 1985 18 11755 191 1/2 Ave Balmoral Apartments 1979 24 0 1 -1BR 379 Baldwin 2 23 -2BR $725 -$775 $0.89 -$0.95$ Elk Crossings 1972 21 1 3 -1BR 814 Proctor Ave 2 18 -2BR School Place Apartments 1965 16 1 2 -1BR Two, two-story buildings. 1179 School St. NW 0 14 -2BR New owner took over ownership with new caretaker back in 2015 and immediately had 15 evictions. Current manager states many apartments without aplliances and carpet that needs to be replaced. Thus they cannot rent out apartments and have high vacancy rates. $755 Three two-story buildings. 1,139 $950 $695 $850 U-shaped three story apartment building. Renovated just before 2015 housing study. $600 855 n/a $750 $925 Continued $675 700 625 950 1,050 Three, three story buidlings.$850 $700 Market Rate 625 900 Unit Size 800 815 750 Condominum conversion. Began leasing in May 2012. Mixture of residents. The majority moved in from the area. Three story apartments. Five total buildings. Rents were quoted by management as an average rent. $860 Three story building with balconies for the upper two floors. TABLE RMA-1 GENERAL OCCUPANCY RENTAL HOUSING CITY OF ELK RIVER January 2018 Monthly Rent Three story apartments. Six total buildings along with a clubhouse. One building burned down in 2013 and was rebuilt. n/a Unit Mix Three-story apatment building. - - - NOT AVAILABLE - - - n/a n/a 1,500 $1,700 $720 $745 n/a n/a n/a $700 $825 Price Per Sq. Ft. n/a n/a n/a n/a n/a n/a n/a $0.93 $1.13 $0.88 $0.96 $1.08 $0.99 $0.81 $1.36 $1.00 $0.92 RENTAL MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 24 Year Total Project Name/ Address Built Units Vacant Comments River Garden Apartments 1973 30 0 15 -1BR 337 Baldwin Ave 1 14 -2BR 0 1 -3BR Pineview Estates 1972 30 0 1 -EFF 7/23 3rd Street 0 7 -1BR 0 22 -2BR Lake Orono Estates 1967 36 0 36 -2BR $875 -$895 $1.00 -$1.02 18594 Gary Street Market Rate Total 633 39 6.2%Vacancy Rate Coachman Ridge 2015 52 0 9 -1BR 17250 Twin Lake 0 26 -2BR (Affordable)0 17 -3BR 1,309 -1,332 $0.74 -$0.76 The Depot of Elk River Station 2011 53 0 11 -1BR 10653 172nd Avenue NW 0 26 -2BR 1,097 -1,134 $0.73 -$0.76 (Affordable)0 16 -3BR 1,309 -1,332 $0.71 -$0.72 Jackson Place 2007 32 0 16 -1BR 300 Jackson Ave 0 16 -2BR (Affordable) Dove Tree Apartments 1995 68 0 1 -EFF 1105 Lions Park Dr 0 16 -1BR (Affordable)0 34 -2BR 0 17 -3BR Unit Size Monthly Rent Market Rate (continued) $735 $875 $990 796 Four-story development. LIHTC affordable at 60% of AMI. Wide mixture of residents 750 875 January 2018 (Continued) Unit Mix 950 $845 Four-story development. LIHTC affordable at 60% of AMI. Mixture of Residents. n.a.n.a. 912 Continued 891 $975 Three story facilitiy. LIHTC affordable at 60% of AMI. Wide mix of resident types. TABLE RMA-1 GENERAL OCCUPANCY RENTAL HOUSING CITY OF ELK RIVER 1,134 $1,100 675 $885 712 $770 Three story building Downtown. LIHTC affordable at 60% of AMI. Majority of tenants live alone. $905 $850 Three story building 1,000 1,097 $710 $940 $830 796 Affordable/Subsidized $0.89 $745 950 Three story building. Over 80% are families. $850 $750 $590 Three story building.450 750 $1.00 $0.89 $0.85 Price Per Sq. Ft. $1.31 $1.09 $0.97 $1.08 $0.99 $1.31 $0.99 $0.89 $0.92 $0.80 RENTAL MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 25 Year Total Project Name/ Address Built Units Vacant Comments Lanesboro Heights Townhomes 1992 30 0 21 -2BR 11798 Highland Road 0 8 -3BR (Section 8) Dove Terrace Apartments 1990 51 0 3 -1BR 1127 School Street 0 23 -2BR 871 -1,113 $0.89 -$1.14 (Affordable)0 24 -3BR 995 -1,066 $1.06 -$1.13 Auburn Place 1989 24 0 17 -2BR $540 -$748 $0.72 -$1.00 631 Auburn Place 0 7 -3BR $575 -$783 $0.68 -$0.92 (Rural Development 515)Base -Market Elk Ridge Manor 1986 40 0 n.a.-1BR 847 Freeport Ave 0 n.a.-2BR $830 -$880 $1.04 $1.11 (Affordable)0 n.a.-3BR Affordable/subsidized Total 350 0 0.0%Vacancy Rate Rental Housing Total 983 39 4.0%Vacancy Rate * Market rents that building would charge if not subsidized. Source: Maxfield Research & Consulting, LLC Affordable/Subsidized (continued) CITY OF ELK RIVER January 2018 (Continued) Unit Mix Unit Size Monthly Rent $935 850 Two-story rowhomes. 30% of income. 5 year waiting list. Unit mix is mostly families and empty nesters whos kids have moved out of development. Three story building. Section 515 Rural Development. 850 595 750 Two story apartments and townhomes. LIHTC affordable at 60% of AMI. Community is primarily families with children. 1,025 683 $1,125 $995 Three story building. LIHTC affordable at 60% of AMI. Wide mix of resident types. $885 TABLE RMA-1 GENERAL OCCUPANCY RENTAL HOUSING 795 $780 950 $914 Market Rents* $1,004 Price Per Sq. Ft. $1.08 $1.06 $1.31 $0.91 $1.30 RENTAL MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 26 Elk River General Occupancy Rental Housing Locations Maxfield Research & Consulting, LLC 60 + Units 40-59 Units 21-39 Units Less than 20 Units Key: Market Rate Affordable 1. Granite Shores 14. The Depot at Elk River Station 2. Evans Meadows 15. Jackson Place 3. Lion’s Park 16. Dove Tree Apartments 4. Ridgewood Manor 17. Dove Terrace Apartments 5. Tara Hills Estates 18. Elk Ridge Manor 6. Elk Park Estates 19. Coachman Ridge 7. Elk Ridge Estates 8. Balmoral Apartments Section 8 9. Elk Crossings/School Street 20. Lanesboro Heights Townhomes 10. River Garden Apartments 21. Auburn Place 11. Pineview Estates 12. Lake Orono Estates 13. Oak Crest Apartments SENIOR HOUSING ANALYSIS MAXFIELD RESEARCH AND CONSULTING 27 Senior Housing in Elk River Year No. of No. Project Name/City Built Units Vacant No.Type Sizes Comments Pullman Place 2005 65 0 14 -1BR 798 -920 $693 -$950 17155 Quincey St $52,174 -$72,123 (Cooperative)0 9 -1BR+D 0 39 -2BR 1,110 -1,272 $1,143 -$1,315 $87,015 -$99,718 0 1 -2BR+D 0 2 -3BR Elk Run Village 1997/52 0 52 -2BR $160,000 -$190,000 19200 Freeport Court NW 1999 Ownership Subtotal 117 0 0% Market Rate Elk Terrace 1993 23 0 20 -1BR $575 -$688 385 Holt Avenue 0 3 -2BR $625 -$724 Evans Park 1985 36 1 24 -1BR 330 Evans Avenue 0 12 -2BR Riverview Apts. 1973 24 0 20 -EFF $600 -$650 925 Angel Avenue 0 4 -1BR $700 -$725 (Market Rate & Subsidized) Market Rate Rental Subtotal 83 1 1.2% Market Rate Total 200 1 0.5% Adult/Few-Services Ownership 1,440 55+. Guardian Angels . In 2012, units were selling at 35% to 55% less than scheduled share price. By the 2015 study units were selling quicker and for full share prices. Residents typically sell due to health issues and need for higher level of care, with some relocating near family. In 2012, units took longer to sell and could be up to 2+ years market time for some units. Now units sell immediatly and there is a lengthy waiting list. Avg. Age = 80, 23 couples. 1,440 Sale Price $1,495 Monthly Rent/ TABLE SH-1 SENIOR HOUSING CITY OF ELK RIVER January 2018 Unit Mix/Sizes/Rents $1,099 $82,931 $1,495 $112,888 55+. Guardian Angels . Grocery store and gift shop located within property. $112,888 Recent Sales Price 2016 and 2017 62+. Metroplains. All utilities covered except for electric, cable/phone; Vacancy Rate Vacancy Rate For sale one-level age restricted townhome community for active adults. Five sold over last two years. 320 380 1,400 688 826 734 Continued 55+. Changed ownership from Guardian Angels from previous study in 2015. Electric and heat are included in rent. 2 units occuupied with Section 8 voucher. No longer accept Section 8. When those tenants move out, no new Section 8 allowed. Units come with assigned parking. 1,058 Vacancy Rate Adult/Few-Services Rental $950 $1,180 638 SENIOR HOUSING ANALYSIS MAXFIELD RESEARCH AND CONSULTING 28 Year No. of No. Project Name/City Built Units Vacant No.Type Sizes Comments Angel Ridge 1992 53 0 52 -1BR 280 Evans 0 1 -2BR (Subsidized) Guardian Oaks 1980 62 0 60 -1BR 350 Evans Avenue 0 2 -2BR (Subsidized) Affordable/Subsidized Subtotal 115 0 0% Adult/Few Service Total 315 1 0% Guardian Angels by the Lake 1998/60 0 58 -1BR 440 -520 $2,720 -$3,095 13439 185th Lane 2012 0 2 -2BR Guardian Angels by the Lake 1998/30 0 22 -Studio 324 -354 $3,450 -$3,550 13439 185th Lane 2012 0 6 1BR 0 2 2BR Overall Senior Housing Total 405 1 0.2% Source: Maxfield Research & Consulting, LLC 540 $4,600 55+. Guardian Angels . Personal Care a-la-carte and can run from $350 to roughly $3,000. Avg= 85. Wait list. 30% of AMI 800 456 $3,330 745 $3,825 30% of AMi 30% of AMI Vacancy Rate Assisted Living 55+. Guardian Angels . Three-levels of care from Level 1 - $2,000 to Level 3 - $3,420. Avg Age = 85. Wait List Memory Care 650 Affordable/Subsidized Vacancy Rate TABLE SH-1 CITY OF ELK RIVER January 2018 62+. Guardian Angels . HUD 202 - Section 8 subsidised. The rent per unit varies on case by case basis per the tenants needs. Disabled/medical demands, modified units. Unit Mix/Sizes/Rents 540 Sale Price Monthly Rent/ 800 30% of AMI 62+. Guardian Angels . HUD 202 - Section 8. Provides noon meals. (Continued) SENIOR HOUSING SENIOR HOUSING ANALYSIS MAXFIELD RESEARCH AND CONSULTING 29 Elk River Senior Housing Locations Maxfield Research & Consulting LLC 60 + Units 40-59 Units 21-39 Units Less than 20 Units Key: Adult/Few-Services Ownership 1. Pullman Place 2. Elk Run Village Adult/Few-Services Rental Market Rate 3. Elk Terrace 4. Evans Park 5. Riverview Apartments Subsidized 5. Riverview Apartments 6. Angel Ridge 7. Guardian Oaks Assisted Living 8. Guardian Angels by the Lake Memory Care 8. Guardian Angels by the Lake Under Construction 9. Elk River Senior Housing 10. Guardian Angels - Otsego SENIOR HOUSING ANALYSIS MAXFIELD RESEARCH AND CONSULTING 30 Summary of Elk River Competitive Multifamily Properties Among 983 general occupancy units, 64% were market rates units, 30% were affordable units and only 6% were subsidized units. There has been no new multifamily developments con- structed since the previous study in 2015. Market Rate Rentals in Elk River • In total there were 14 market rate apartments with 16 units or more in Elk River. Our sur- vey indicated that the overall vacancy rate among all property types was nearly 6.2%, with 39 vacant units among 633 total units. This however includes the Elk Park Estates apart- ments that account for 27 of the vacant units. Excluding this property, the vacancy rate falls to 2.1%. This is well below the recommended 5.0% equilibrium to account for sufficient turnover in the market. Thus, pent-up demand exists for more market rate rental units. • Elk Park Estates is an anomaly in the market as in the prior 2015 study had 25 vacancies. This property is the lone poorly performing larger rental development in the city. Subsidized and Affordable Rentals in Elk River • The overall vacancy rate among all property types was 0.0% among 350 total units. No available units in the market indicates that there is additional need for affordable and/or subsidized units in Elk River. 1 phh 2 phh 3 phh 4 phh 5phh 6phh 7phh 8phh 30% of median $18,990 $21,720 $24,420 $27,120 $29,310 $31,470 $33,630 $35,820 50% of median $31,650 $36,200 $40,700 $45,200 $48,850 $52,450 $56,050 $59,700 60% of median $37,980 $43,440 $48,840 $54,240 $58,620 $62,940 $67,260 $71,640 0 BR 1BR 2BR 3BR 30% of median $474 $508 $610 $705 50% of median $791 $848 $1,017 $1,175 60% of median $949 $1,017 $1,221 $1,410 Sources: MHFA; Maxfield Research & Consulting, LLC FIGURE 1 2017 MHFA/HUD Income Limits Sherburne County Income Limits by Household Size Maximum Gross Rents by Bedroom Size SENIOR HOUSING ANALYSIS MAXFIELD RESEARCH AND CONSULTING 31 Senior Housing in Elk River • Maxfield Research surveyed the 405 senior housing units in Elk River. We identified one va- cant unit, resulting in an overall vacancy rate of 0.2%. Generally, the equilibrium for senior housing ranges from a 5% to 7% vacancy rate. Thus, the current rate indicates pent up de- mand for additional senior housing at all levels. Planned or Pending G.O. and Senior Housing Developments Elk River • Hearth Development is currently building the 100-unit Elk River Senior Living senior housing project in Elk River. The project is located at the intersection of 181st Avenue NW and Line Avenue NW. The project will include 36 congregate units (independent living with light ser- vices), 40 assisted living units, and 24 memory care units. The project is set to be com- pleted late summer 2018. • Guardian Angels is developing Riverview Landing in Otsego located just across the river from Elk River off of Highway 101 in the Waterfront East planned unit development area. The project which is currently under construction will include 126 assisted living units and 16 memory care units. While this development is not located in Elk River, it is located just across the border in Otsego and would be directly competitive with Elk River senior housing projects. • There is one proposed general occupancy development in Elk River. Patrick Briggs has sub- mitted a proposal for a 40-unit mixed income apartment building. The project would be lo- cated at 6th Street and Jackson Avenue. The current proposal shows at least eight units that would be affordable and 32 market rate units. The project would be developed under Tax Increment Financing. Because the project is recently proposed it is unclear when and if the building would be developed. FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 32 For-Sale Housing Resales No.Avg. Sales Avg. %Med. Sales Median %% Lender Year Sold Price Change Price Change Avg.Median Avg.Median Mediated2 2000 353 $172,769 -$159,000 -49 25 --- 2005 519 $254,038 6.5%$234,900 4.7%88 61 --- 2010 313 $173,153 4.2%$160,000 1.3%70 49 134 77 69.9% 2011 382 $145,781 -15.8%$132,000 -17.5%88 59 147 106 70.2% 2012 390 $162,862 11.7%$157,000 18.9%81 50 114 68 56.7% 2013 445 $184,650 13.4%$172,000 9.6%56 35 82 47 33.8% 2014 466 $207,424 12.3%$195,000 13.4%60 42 78 49 17.6% 2015 532 $220,638 6.4%$214,450 10.0%51 33 74 41 10.7% 2016 496 $234,248 6.2%$230,500 7.5%42 23 61 29 7.4% 2017 583 $258,287 10.3%$245,000 6.3%41 25 51 30 4.0% Total 00'-17'7,268 Summary 00' to 10' Change 0.2%0.6% Average 428 $210,270 $193,977 70 48 170 124 Summary 11' to 17' Change 77.2%85.6% Average 471 $201,984 $192,279 60 38 87 53 Sources: Regional Multiple Listing Service of Minnesota, Maxfield Research & Consulting, LLC 1 Cumulative Days on Market initiated in 2006. Cumulative days equals the number of days on market over the course of the past year (i.e. covers number of days if the property was relisted) 2 Lender Mediated Properties include foreclosures and short sales. MLS data for this property type began in July 2008. TABLE FS-1 HOME RESALES CITY OF ELK RIVER 2000 to 2017 Days on Market Cumul. DOM1 3533244354666115194393603403973133823904454665324965830 100 200 300 400 500 600 700 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 ResalesSales PriceYear Elk River For-Sale Resales -2000 to 2017 Resales Median Sold Price Average Sold Price FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 33 TABLE FS-2 SINGLE-FAMILY AND MULTIFAMILY RESIDENTIAL SALES CITY OF ELK RIVER 2000 through 2017 Median Average Number Selling %Selling % Year of Sales Price Chg.Price Chg. 2000 318 $162,400 --$175,779 -- 2005 411 $251,900 5.3%$272,383 6.3% 2010 235 $181,000 4.7%$193,931 5.8% 2011 273 $160,000 -11.6%$166,955 -13.9% 2012 293 $175,000 9.4%$181,439 8.7% 2013 350 $189,450 8.3%$202,385 11.5% 2014 353 $214,900 13.4%$225,623 11.5% 2015 404 $237,536 10.5%$228,000 1.1% 2016 367 $256,356 7.9%$242,396 6.3% 2017 437 $282,550 10.2%$269,900 11.3% Pct. Change 00' - 17'37.4%74.0%53.5% 2000 35 $142,580 --$145,163 -- 2005 108 $172,775 3.4%$184,227 2.8% 2010 78 $107,442 7.4%$110,555 3.3% 2011 109 $90,000 -16.2%$92,842 -16.0% 2012 97 $105,000 16.7%$106,746 15.0% 2013 95 $117,500 11.9%$119,313 11.8% 2014 113 $135,000 14.9%$150,570 26.2% 2015 128 $167,304 23.9%$152,450 1.2% 2016 129 $172,353 3.0%$155,000 1.7% 2017 146 $185,665 7.7%$167,500 8.1% Pct. Change 00' - 17'317.1%30.2%15.4% Source: Regional Multiple Listing Service of MN; Maxfield Research & Consulting, LLC Single-Family Multifamily* * Multifamily includes twinhomes, townhomes, and condominiums (cooperatives are typically not listed in the MLS) FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 34 Price Range No.Pct.No.Pct.No.Pct. Under $100,000 2 0.5%1 0.7%3 0.5% $100,000 to $149,999 6 1.4%20 13.7%26 4.5% $150,000 to $199,999 53 12.1%86 58.9%139 23.8% $200,000 to $249,999 116 26.5%20 13.7%136 23.3% $250,000 to $299,999 111 25.4%16 11.0%127 21.8% $300,000 to $349,999 77 17.6%2 1.4%79 13.6% $350,000 to $399,999 42 9.6%1 0.7%43 7.4% $400,000 to 499,999 28 6.4%0 0.0%28 4.8% $500,000+2 0.5%0 0.0%2 0.3% Total 437 100.0%146 100.0%583 100.0% Sources: Regional Multiple Listing Service of Minnesota, Maxfield Research & Consulting, LLC Single-family Multifamily Combined TABLE FS-3 HOME RESALES BY SALES PRICE & PRODUCT TYPE CITY OF ELK RIVER 2017 0.5% 13.5% 51.9% 27.2% 6.4% 0.5%0.7% 72.6% 24.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% <$100k $100k-$200k $200k-$300k $300k-$400k $400k-$500k $500k+Pct. of SalesSales Price Resales by Price Point & Type: 2017 SF MF FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 35 Median Avg.Existing Home New Const. PSF PSF Median PSF Median PSF 2005 $122 $131 $116 $140 2006 $117 $126 $114 $127 2007 $113 $121 $113 $113 2008 $92 $98 $90 $118 2009 $79 $82 $76 $103 2010 $82 $85 $79 $107 2011 $69 $72 $68 $111 2012 $76 $80 $76 $130 2013 $86 $92 $84 $130 2014 $94 $98 $91 $136 2015 $100 $105 $99 $148 2016 $106 $114 $104 $174 2017 $114 $122 $112 $171 TABLE FS-4 HOUSING SALES PER SQUARE FOOT (PSF) ELK RIVER 2005 to 2017 Source: Regional Multiple Listing Service of MN, Maxfield Research & Consulting, LLC Year $122$117$113$92$79$82$69$76$86$94$100$106$114$131$126$121$98$82$85$72$80$92$98$105$114$122$0 $20 $40 $60 $80 $100 $120 $140 2005200620072008200920102011201220132014201520162017PSFYear Elk River Sales per Square Foot (PSF) Median PSF Avg. PSF FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 36 Price Range No.Pct.No.Pct. < $99,999 0 0.0%0 0.0% $100,000 to $149,999 1 2.3%1 10.0% $150,000 to $174,999 1 2.3%1 10.0% $175,000 to $199,999 3 7.0%1 10.0% $200,000 to $249,999 3 7.0%3 30.0% $250,000 to $299,999 13 30.2%1 10.0% $300,000 to $349,999 8 18.6%3 30.0% $350,000 to $399,999 6 14.0%0 0.0% $400,000 and Over 8 18.6%0 0.0% 43 100%10 100% Minimum Maximum Median Average Sources: Regional Multiple Listing Service of MN Maxfield Research & Consulting, LLC TABLE FS-5 HOMES CURRENTLY LISTED FOR-SALE CITY OF ELK RIVER February 2018 Single-Family Multifamily1 $322,646 $237,245 1 Includes townhomes (attached & detached), twinhomes, and condominiums $109,900 $148,000 $674,000 $349,150 $305,990 $217,950 0 2 4 6 8 10 12 14 16 Under $100k $100k to $149.9k $150k to $199.9k $200k to $249.9k $250k to $299.9k $300k to $399.9k $400k+# of ListingsList Price Elk River Active Listings -February 2018 Single-Family Multifamily FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 37 New Avg. List Avg. Home Size Avg. List Price Avg. Age Property Type Listings Pct.Construction Price Sq. Ft.Per Sq. Ft.of Home One story 12 27.9%7 $322,564 2,043 $165 2003 1.5-story 1 2.3%0 $109,900 785 $140 1928 2-story 16 37.2%9 $396,977 2,943 $143 2009 Split entry/Bi-level 6 14.0%3 $252,483 1,483 $184 2000 3-level split 5 11.6%3 $260,120 1,910 $143 2008 4 or more level split 3 7.0%1 $278,267 1,784 $167 2002 Total 43 100.0%23 $325,177 2,237 $156 2003 Detached Townhomes 4 40.0%4 $312,163 1,572 $198 2018 Side-by-side 5 50.0%0 $185,160 1,713 $112 2003 Quad 1 10.0%0 $200,000 1,408 $142 1999 Total 10 100.0%4 $237,445 1,626 $149 2008 Total 53 27 $307,305 2,112 $155 2005 Source: Regional Multiple Listing Service of MN; Maxfield Research & Consulting, LLC TABLE FS-6 ACTIVE LISTINGS BY HOUSING TYPE February 2018 Single-Family Townhomes/Twinhomes ELK RIVER FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 38 22.6% 1.9% 30.2% 11.3% 15.1% 18.9% 0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0% 1 story 1.5-story 2 story+ Split entry 3-level split+ Townhomes Pct.Hsg. TypeListings by Housing Type -Elk River $322,564$109,900$396,977$252,483$142,360$237,445$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 1 story 1.5-story 2 story+Split entry 3-level split+Townhomes PSFAvg. List PriceHousing Type Average List Price by Type Avg. List Price PSF FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 39 Lot Range Annual Annual Currently Vacant Developed Future Total (Ft.)Min Max Starts Closings Occupied Lot Inventory (VDL)Units (Fut)Units (Tot) Detached Housing Subdivisions Elk River Detached Aspen Hills in Elk River Active 1Q03 Single Family 115'$225 $360 2 4 71 6 0 78 Elk River Detached Birchview Active 1Q08 Single Family 170'$220 $250 0 0 2 2 0 4 Elk River Detached Elk River Rapids Active 1Q06 Single Family 100'$412 $586 0 0 7 4 0 11 Elk River Detached Hillside, The Woods at Active 2Q00 Single Family 115'$212 $373 3 3 57 4 0 62 Elk River Detached Kingdom Estates Active 1Q06 Single Family 180'-275'$400 $800 0 0 18 2 0 20 Elk River Detached Miske Meadows Active 2Q17 Single Family 65"$250 $400 16 1 1 51 116 183 Elk River Detached Miske Meadows/(DTH)Active 2Q17 Detached TH 45'$255 $265 7 0 0 30 0 37 Elk River Detached Mississippi Oaks Active 1Q97 Single Family 85'$200 $425 8 5 132 7 0 144 Elk River Detached Park Pointe Active 3Q02 Single Family 85'$183 $290 0 0 94 1 0 95 Elk River Detached River Park/Active 2Q06 Single Family 75'$225 $400 23 24 57 14 55 132 Elk River Detached Trout Brook/Crossing (DTH)Active 4Q04 Detached TH 37'$280 $360 1 2 25 2 0 28 Elk River Detached Twin Lakes/(DTH)Active 2Q05 Detached TH 40'$180 $220 1 0 31 0 0 32 Elk River Detached Twin Lakes/Estates Active 4Q04 Single Family 80'$160 $255 2 2 144 2 0 146 Elk River Detached West Oaks of Elk River/Active 4Q04 Single Family 80'$180 $240 8 4 26 6 0 38 Elk River Detached West Oaks of Elk River/(DTH)Active 4Q14 Detached TH 35'$180 $215 20 10 17 0 0 28 Elk River Detached Windsor Meadows Active 3Q05 Single Family 110'$299 $500 9 5 27 3 0 34 Elk River Detached Windsor Oaks of Elk River Active 4Q04 Single Family 100'$260 $350 0 0 29 1 0 30 Elk River Detached Windsor Park Active 2Q00 Single Family 75'$253 $348 0 1 120 1 0 121 Elk River Detached Woodland Hills Active 4Q04 Single Family 85'-200'$271 $600 7 9 46 25 51 127 Subtotal 107 70 904 161 222 1,350 Elk River Detached Concept - Anborn Future Single Family 0 0 0 0 5 5 Elk River Detached Eagles Marsh Future Single Family 90'$163 $393 0 0 17 0 21 38 Elk River Detached Hillside Estates in Elk River Future Single Family 85'$200 $365 0 2 157 0 36 193 Elk River Detached Trace Heights Future Single Family 325'$450 $550 0 0 0 0 18 18 Elk River Detached Cranberry Ridge Future Single Family 0 0 0 0 16 16 Subtotal 0 0 174 0 96 270 Source: Metrostudy, Maxfield Research & Consulting, LLC CITY OF ELK RIVER TABLE FS-7 SUBDIVISION & LOT INVENTORY - DETACHED HOUSING UNITS 4th QUARTER 2017 TMA Subdivision Name Status Product Type Pricing ($1,000) FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 40 Lot Range Annual Annual Currently Vacant Developed Future Total (Ft.)Min Max Starts Closings Occupied Lot Inventory (VDL)Units (Fut)Units (Tot) Attached Housing Subdivisions Elk River Attached Boulder Point (TH)Active 1Q05 Townhouse 28'$120 $180 0 0 5 4 0 9 Subtotal 0 0 5 4 0 9 Elk River Attached Tall Pines (TH)Future Townhome 0 0 0 0 26 26 Subtotal 0 0 0 0 26 26 Source: Metrostudy, Maxfield Research & Consulting, LLC TABLE FS-8 SUBDIVISION & LOT INVENTORY - ATTACHED HOUSING UNITS CITY OF ELK RIVER 4th QUARTER 2017 TMA Subdivision Name Status Product Type Pricing ($1,000) FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 41 Summary of For Sale Market Conditions Residential Resales • The number of home sales reached 583 in 2017 which is the highest figure since 2004. The average days on market continues to decline and remains low in 2017 at 51 days and a me- dian of 30 days. • Since 2015, the median sales price of residential properties has risen 18%, from $214,450 in 2013 to $245,000 in 2017. Single-family homes during this time increased 19% from $237,536 to $282,550 while multifamily homes increased 11% from $167,304 to $185,665. Home resale prices have been rising steadily since the lowest point in 2011. • In 2017, 69% of home sales range from $150,000 to $299,999 with the largest proportion of residential resales occurred in the $150,000 to $199,999 bracket with 24% of the sales oc- curring. The majority of sales (62%) in this price point were multifamily units. Homes that sold from $200,000 to $249,999 accounted for 23% of total sales in 2017 and consisted of 85% single-family units. Another 22% of homes were sold between $250,000 and $299,999 with 87% consisting of single-family units. Active Listings • The median list price for single family homes in Elk River was $305,990 in February 2018 compared to $279,900 back in August 2015. Multifamily homes listed in February 2018 had a median list price of $217,950 which is relatively similar to that back in August 2015 at $215,725. • There was a total of 53 homes listed for sale in February 2018 compared to 150 homes back in August 2015. The difference can be attributed to the time of year with less homes typi- cally listed during winter months. Single family listings accounted for 81% of the listings. • On average, multi-family listings were slightly newer, with an average year built of 2005, compared to an average year built of 2003 for single-family homes. This indicates that a number of active listings are newly constructed homes Lot Supply • There are 161 lots available in active subdivisions with 81 lots available in newer subdivision active since 2017. The largest proportion of lots are in Miske Meadows subdivision with 51 vacant developable lots with homes marketing from $250,000 to $400,000. FOR SALE MARKET ANALYSIS MAXFIELD RESEARCH AND CONSULTING 42 • There is a total of 318 future single family lots planned in Elk River. 222 of lots are located in currently active subdivisions (Miske Meadows, River Park, and Woodland Hills). Another 57 lots are located in recently absorbed subdivisions (Eagles Marsh and Hillside Estates). The remaining 39 future lots are in recently platted subdivisions (Anborn, Trace Heights, and Cranberry Ridge). • Only one multifamily townhome development is currently active (Boulder Point) with 4 va- cant developable lots. Tall Pines has plans for 26 future townhome units. HOUSING DEMAND ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 43 Estimated Demand for For-Sale Housing Based on land available, building trends, and demographic shifts (increasing older adult popula- tion), we project 85% of the for-sale owners will prefer traditional single-family product types while the remaining 15% will prefer a maintenance-free multi-family product (i.e. twin homes, townhomes, or condominiums). We then subtract the current identified platted lots that are under construction or approved. After subtracting the current lot supply in subdivisions (161 total single-family and four multifamily lots) we find total demand through 2025 resulting in 315 single-family lots and 80 multifamily lots. Projected HH growth under age 65 in the Market Area 2017 to 2025¹ (times) % propensity to own2 x (equals) Projected demand from new HH growth = Number of owner households (age 64 and younger) in Market Area (2017)3 (times) Estimated percent of owner turnover4 x (equals) Total existing households projected to turnover = (times) Estimated percent desiring new housing x (equals) Total demand from HH growth and existing HHs 2017 to 2025 = (times) Demand from outside Elk River Market Area (equals) Total demand potential for ownership housing, 2017 to 2025 (times) Percent desiring for-sale single-family vs. multifamily5 x 85%15% (equals) Total demand potential for new single-family & multifamily for-sale housing =476 84 (minus) Units marketing or approved platted lots (undeveloped and developed lots)6 -161 4 (equals) Excess demand for new general occupancy for-sale housing =315 80 3 Estimate based on 2016 owner households under age 65 (US Census American Community Survey) 4 Based on on turnover from 2010 American Community Survey for households moving over 10-year period. 5 Based on preference for housing type and land availability * Multi-family demand includes demand for townhomes, detached townhomes, twinhomes, and condominium units. Source: Maxfield Research & Consulting, LLC TABLE HD-1 FOR-SALE HOUSING DEMAND ELK RIVER 2017 to 2025 Demand from Projected Household Growth 415 76.5% 317 Demand from Existing Owner Households 5,287 30% 1,586 1 Estimated household growth based on data from Table D-1 as adjusted by Maxfield Research & Consulting, LLC 2 Pct. of owner households under the age of 65 (U.S. Census American Community Survey - 2016) 6 Approved platted lot data does not account for the scattered lot supply which includes individual lots and lots in older non-marketing subdivisions. 10.0% 159 476 15% 560 Single Family Multi- family* HOUSING DEMAND ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 44 Estimated Demand for General-Occupancy Rental Housing Demand From Household Growth Projected Growth in Household Base by 2025 (times) Proportion Estimated to Be Renting Their Housing1 x (equals) Projected Demand for Rental Housing Units =0 40 42 11 69 Demand From Existing Households Number of renter households in 2017 (times) Estimated % of renter turnover between 2017 & 20252 x (equals) Total Existing Renter Households Projected to Turnover =134 291 326 518 146 (times) Estimated % Desiring New Rental Housing4 x 15%10%8%5%4% (equals) Demand From Existing Households =20 29 26 26 6 Total Demand From Household Growth and Existing Households 20 69 68 37 75 (equals) Total Demand for Rental Housing (times) Demand from outside Elk River Market Area (equals) Total demand potential for rental housing, 2017 to 2025 (times) Percent of rental demand by product type3 (equals) Total demand for new general occupancy rental housing units (minus) Units under construction or pending* (equals) Excess demand for new general occupancy rental housing ¹ Based on 2016 American Community Survey. ² Based on Turnover from 2016 American Community Survey for households moving after 2010. 3 Based on the combination of current rental product and household incomes of area renters. 4 Based on US Census: Desire to Move and Residential Mobility 2000-2010 from 2010 American Community Survey. * Pending/proposed competitive units at 95% occupancy. Source: Maxfield Research & Consulting, LLC 337 Subsidized 34 Affordable 30% 101 8 10% 34 239 51 370 604 254 85.7%57.5% 287 93 Under 25 Age 25 to 34 Age 35 to 44 Age 45 to 64 Age 65 & Over 67.9%32.0% 3000125 172 Market Rate 60% 202 30 TABLE HD-2 RENTAL HOUSING DEMAND ELK RIVER 2017 to 2025 -------- Number of Households -------- 17.6%20.9%22.9% 0 145 330 15% 92.6%88.1%88.2% HOUSING DEMAND ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 45 We find demand for 34 subsidized units, 101 affordable units and 210 market rate units. After subtracting the proposed rental development (40 unit mixed income development) results in demand for 34 subsidized units, 93 affordable units and 172 market rate units in Elk River through 2025. Estimated Demand for Independent/Few Service Senior Housing Total demand for 14 renter occupied units in 2017 while demand for owner-occupied housing is being absorbed by the current supply. Adjusting for inflation, we have estimated that households with incomes of $40,000 or more and homeowners with incomes of $30,000 to $39,999 would income qualify for market rate independent senior housing in 2022. It is pro- jected demand for adult owner-occupied will continue to absorbed by existing units while de- mand exists for 22 adult rental units in the City of Elk River through 2022. 55-64 65-74 75+55-64 65-74 75+ # of Households w/ Incomes of >$35,0001 1,307 741 380 1,329 849 401 # of Households w/ Incomes of $24,999 to $34,9991 +89 83 103 +91 89 115 (times ) Homeownership Rate x 78%88%63%x 78%88%63% (equals) Total Potential Market Base =1,376 814 445 =1,400 927 473 (times) Potential Capture Rate x 0.5%5.0%15.0%x 0.5%5.0%15.0% (equals) Demand Potential =7 41 67 =7 46 71 Potential Demand from Market Area Residents =114 =124 (plus Demand from Outside Market Area (25%)2 +38 +41 (equals) Total Demand Potential =152 =166 Owner-Renter-Owner-Renter- Occupied Occupied Occupied Occupied (times) % by Product Type x 40%x 60%x 40%x 60% (equals) Demand Potential by Product Type =61 =91 =66 =99 (minus) Existing and Pending MR Active Adult Units3 -111 -77 -111 -77 (equals) Excess Demand for MR Active Adult Units =0 =14 =0 =22 Source: Maxfield Research & Consulting, LLC TABLE HD-3 MARKET RATE ADULT/FEW SERVICES HOUSING DEMAND ELK RIVER 2017 & 2022 1 2020 calculations define income-qualified households as all households with incomes greater than $40,000 and homeowner households with incomes between $30,000 and $39,999. 3 Existing and pending projects are deducted at market equilibrium (95% occupancy). 2022 includes the Elk River Senior Living development currently under construction. 2017 2022 Age of Householder Age of Householder 2 Based on project manager interviews and historical trends. We estimate that roughly 40% of demand will come from outside the markt area. HOUSING DEMAND ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 46 Estimated Demand for Affordable and Subsidized Independent Senior Housing We estimate that the total demand potential for affordable and subsidized rentals will equal 37 and 32 units respectively in 2017. By 2022, the demand potential will increase to 41 af- fordable units and 52 subsidized units. 55-64 65-74 75+55-64 65-74 75+ # of Households w/ Incomes of $30,000 to $54,400 284 212 254 251 222 284 (times ) Percent Renter Households x 22%12%37%x 22%12%37% (equals) Total Potential Market Base =63 26 93 55 27 105 (times) Potential Capture Rate x 1.5%10.0%20.0%x 1.5%10.0%20.0% (equals) Demand Potential =1 3 19 =1 3 21 Total Market Rate Demand Potential =22 =24 (plus) Demand from Outside Market Area (40%)+15 +16 (equals) Total Demand Potential =37 =41 (minus) Existing and Pending Aff. Independent Units1 -0 -0 (equals) Total Demand Potential in Market Area =37 =41 Source: Maxfield Research & Consulting, LLC 1 Includes existing and pending units at 95% occupancy, or market equilibrium. No additional units are planned through 2022. 2017 Age of Householder 2022 Age of Householder TABLE HD-4 AFFORDABLE INDEPENDENT SENIOR HOUSING DEMAND ELK RIVER 2017 & 2022 2017 2022 Age 65+ Households w/Incomes < $20,000 292 331 (times) Percent of Income Qualified Seniors Needing/Desiring Subsidized Senior Housing x 30%30% (equals) Demand Potenital from Market Area residents =88 99 (plus) Demand From Ouside the Market Area (40%)+58 66 (equals) Total Demand Potential for Subsidized Senior Housing in Market Area 146 166 (minus) Existing & Pending Subsidized Senior Units in Market Area*-114 114 (equals) Total Market Area Subsidized Senior Housing Demand Potential =32 52 Source: Maxfield Research & Consulting, LLC * Competitive subsidized units, minus a 7% vacancy rate. TABLE HD-5 SUBSIDIZED INDEPENDENT SENIOR HOUSING DEMAND ELK RIVER 2017 & 2022 HOUSING DEMAND ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 47 Estimated Demand for Congregate Senior Housing We estimate a total demand calculated for 93 congregate units in Elk River in 2017. Adjusting for inflation, we estimate that households with incomes of $40,000 or more and senior home- owners with incomes between $35,000 and $39,999 would qualify for congregate housing in 2025. Following the same methodology and accounting for the units under construction at the Elk River Senior Living development, demand is calculated to decline to 67 units through 2025 in Elk River. # of Households w/ Incomes of >$35,000¹ # of Households w/ Incomes of $25,000 to $34,999¹++ (times) Homeownership Rate x x (equals) Potential Market == (equals) Total Potential Market Base == (times) Potential Capture Rate²x x (equals) Demand Potential =+=+ Potential Demand from Market Area Residents == (plus) Demand from Outside Market Area (25%)++ (equals) Total Demand Potential == (minus) Existing and Pending Congregate Units3 -- (equals) Excess Demand for Congregate Units == 3 Existing and pending are deducted at market equilibrium (95% occupancy). Source: Maxfield Research & Consulting, LLC 2017 2022 TABLE HD-6 MARKET RATE CONGREGATE HOUSING DEMAND ELK RIVER 2017 & 2022 Age of Householder Age of Householder 65-74 75+65-74 75+ 83 103 89 115 741 380 849 401 73 65 78 72 88%63%88%63% 814 445 927 473 1.5%13.0%1.5%13.0% 12 58 14 62 70 75 93 67 23 25 93 101 0 34 ¹ 2020 calculations define income-qualified households as all households with incomes greater than $40,000 and homeowner households with incomes between $30,000 and $49,999. ² The potential capture rate is derived from data from the Summary Health Statistics for the U.S. Population: National Health Interview Survey, 2007 by the U.S. Department of Health and Human Services. The capture rate used is the percentage of seniors needing assistance with IADLs, but not ADLs (seniors needing assistance with ADLs typcially need assistance with multiple IADLs and are primary candidates for assisted living.). HOUSING DEMAND ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 48 Demand Estimate for Assisted Living Housing We estimate an excess demand for 15 assisted living units in Elk River in 2017. By 2022, total excess demand for market rate assisted living units in Elk River is projected to be absorbed by the units at the Elk River Senior Living development under construction. Percent Percent Needing Needing Age group People Assistance¹People Assistance¹ 75 - 79 432 25.5%597 25.5% 80 - 84 296 33.6%326 33.6% 85+343 51.6%345 51.6% Total 1,071 1,268 Percent Income-Qualified2 Total potential market (times) Percent living alone x (equals) Age/income-qualified singles needing assistance = (plus) Proportion of demand from couples (12%)³+ (equals) Total age/income-qualified market needing assistance = (times) Potential penetration rate4 x (equals) Potential demand from PMA residents = (plus) Proportion from outside the PMA (30%)+ (equals) Total potential assisted living demand = (minus) Existing market rate assisted living units5 (equals) Total excess market rate assisted living demand = Source: Maxfield Research and Consulting, LLC. TABLE HD-7 MARKET RATE ASSISTED LIVING DEMAND ELK RIVER 2017 & 2022 2017 2022 Number Number Needing Needing Assistance1 Assistance1 110 152 99 110 177 178 387 440 53%53% 205 233 53%53% 109 124 15 17 123 140 40%40% 49 56 0 21 24 71 80 2 Includes households with incomes of $40,000 or more (who could afford monthly rents of $4,000+ per month) plus 40% of the estimated owner households with incomes below $50,000 (who will spend down assets, including home-equity, in order to live in assisted living housing). 3 The 2009 Overview of Assisted Living (a collaborative project of AAHSA, ASHA, ALFA, NCAL & NIC) found that 12% of assisted living residents are couples. 4 We estimate that 60% of the qualified market needing assistance with ADLs could either remain in their homes or reside at less advanced senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility. 5 Existing and pending units at 93% occupancy. 1 The percentage of seniors needing assistance with ADLs, based on the 2005 panels of the Survey of Income and Program Participation (SIPP) files, conducted by the U.S. Census Bureau. 56 93 15 HOUSING DEMAND ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 49 Estimated Demand for Memory Care Housing We estimate the excess demand for memory care units in Elk River to be 23 units in 2017. Fol- lowing the same methodology, demand is calculated to decrease to 8 memory care units through 2022 after accounting for the units under construction at the Elk River Senior Living de- velopment. 65 to 74 Population 1,655 1,984 (times) Dementia Incidence Rate¹x 2%x 2% (equals) Estimated Age 65 to 74 Pop. with Dementia =33 =40 75 to 84 Population 728 923 (times) Dementia Incidence Rate¹x 19%x 19% (equals) Estimated Age 75 to 84 Pop. with Dementia =138 =175 85+ Population 343 345 (times) Dementia Incidence Rate¹x 42%x 42% (equals) Estimated Age 85+ Pop. with Dementia =144 =145 (equals) Total Senior Population with Dementia =315 =360 (times) Percent Income/Asset-Qualified²x 45%x 45% (equals) Total Income-Qualified Market Base =142 =162 (times) Percent Needing Specialized Memory Care Assistance x 25%x 25% (equals) Total Need for Dementia Care =35 =40 (plus) Demand from Outside Market Area (30%)+15 +17 Total Demand Potential =51 58 (minus) Existing and Pending Memory Care Units³-28 -50 (equals) Excess Demand for Memory Care Units =23 =8 Source: Maxfield Research & Consulting, LLC TABLE HD-8 MEMORY CARE DEMAND ELK RIVER 2017 & 2022 2022 ¹ Alzheimer's Association: Alzheimer's Disease Facts & Figures (2009) ² Income-qualified households consider 3/4 of those with incomes greater than $60,000 plus 15% of homeowners with incomes below this threshold. 2017 ³ Existing memory care units less units occupied by public pay residents and a 7% vacancy rate. DEMAND SUMARY AND HOUSING RECOMMENDATIONS MAXFIELD RESEARCH & CONSULTING, LLC 50 Demand Summary/Overall Housing Recommendations Type of Use 2017-2025 2015 General-Occupancy Rental Units - Market Rate 172 Rental Units - Affordable 93 Rental Units - Subsidized 34 For-Sale Units - Single-family 315 For-Sale Units - Multifamily 80 Total General Occupancy Supportable 694 2017 2022 Age-Restricted (Senior) Market Rate Adult Few Services (Active Adult)14 22 Ownership 0 0 Rental 14 22 Congregate 93 67 Assisted Living 15 0 Memory Care 23 8 Total Market Rate Senior Supportable 145 97 Affordable/Subsidized Active Adult - Subsidized 32 32 Active Adult - Affordable 37 41 Total Affordable Senior Supportable 69 73 Source: Maxfield Research & Consulting, LLC TABLE CR-1 SUMMARY OF HOUSING DEMAND CITY OF ELK RIVER February 2017 DEMAND SUMARY AND HOUSING RECOMMENDATIONS MAXFIELD RESEARCH & CONSULTING, LLC 51 172 93 34 315 80 0 50 100 150 200 250 300 350 Rental Units - Market Rate Rental Units - Affordable Rental Units - Subsidized For-Sale Units - Single-family For-Sale Units - Multifamily Units General-Occupancy Demand by Type 2017 to 2025 41 8 0 67 22 37 23 20 93 14 0 10 20 30 40 50 60 70 80 90 100 110 Subsidized Affordable Memory Care Assisted Living Congregate Adult - Rental Adult - Owner Units Senior Housing Demand by Type 2017 & 2022 2017 2022 DEMAND SUMARY AND HOUSING RECOMMENDATIONS MAXFIELD RESEARCH & CONSULTING, LLC 52 There are over 300 future single family lots planned/proposed based on Table FS-7. If all of these lots were platted, the above recommended single family lots would be absorbed. The industry recommends a three- to five-year lot supply. Based on the average lot absorbtion of 83 lots per year from the past three years (2015-2017), the City of Elk River currently falling short of a three-year lot supply and would need to add nearly 90 lots to the market. A portion of the planned future lots would be able to bring the commuity to the recommend supply. Purchase Price/Pct.Development Monthly Rent Range¹of Total Timing Owner-Occupied Homes Single Family 2 Entry-level >$225,000 65 -70 24%2018+ Move-up $250,000 - $350,000 155 -165 56%2018+ Executive $350,000+55 -60 20%2018+ Total 275 -295 100% Townhomes/Detached Townhomes/Twinhomes 2 Entry-level >$200,000 30 -35 46%2018+ Move-up $200,000+35 -40 54%2018+ Total 65 -75 100% Total Owner-Occupied 340 -370 General Occupancy Rental Housing Market Rate Rental Housing Apartment-style $1,000/1BR - $1,500/3BR 100 -120 67%2018+ Townhomes $1,250/2BR - $1,600/3BR 50 -60 33%2018+ Total 150 -180 100% Affordable Rental Housing Apartment-style Moderate Income3 60 -60 67%2018+ Townhomes Moderate Income3 25 -35 33%2018+ Total 85 -95 100% Total Renter-Occupied 235 -275 Senior Housing (i.e. Age Restricted) Active Adult Affordable Rental Moderate Income3 35 -40 29%2018+ Active Adult Market Rate Rental4 $950/1BR - $1,200/2BR+50 -60 43%2019+ Independent Living (Congregate)$1,750/1BR - $1,950/2BR 30 -40 27%2020+ Total 115 -140 100% Total - All Units 690 -785 Source: Maxfield Research & Consulting, LLC 2 Recommendations include the absorption of some existing previously platted lots. 3 Affordablity subject to income guidelines per MHFA. See Table HA-1 for Sherburne County Income limits. Note - Recommended development does not coincide with total demand. Elk River may not be able to accommodate all recommended housing types based on a variety of factors (i.e. development constraints, land availability, etc.) 4 Alternative development concept is to combine active adult affordable and market rate active adult into mixed-income senior community ¹ Pricing in 2015 dollars. Pricing can be adjusted to account for inflation. TABLE CR-2 RECOMMENDED HOUSING DEVELOPMENT CITY OF ELK RIVER 2017 to 2025 No. of Units DEMAND SUMARY AND HOUSING RECOMMENDATIONS MAXFIELD RESEARCH & CONSULTING, LLC 53 With the development of Elk River Senior Living and Guardian Angels Riverview Landing which are both under construction and set to be completed later in 2018, demand for assited living and memory care senior housing will be absorbed. These newly developed and existing units will be adequate into the foreseeable future.