7.4. HRSR 01-03-2022 City of
Elk �-- Request for Action
River
To Item Number
Housing and Redevelopment Authority 7.4
Agenda Section Meeting Date Prepared by
General Business January 3, 2022 Brent O'Neil, Economic Development Director
Item Description Reviewed by
Main and Gates Update Cal Portner, City Administrator
Reviewed by
Action Requested
Item presented for information and discussion purposes.
Background/Discussion
Following the initial presentation of the development concept for Main and Gates at the December 6 HRA
meeting, staff has met with the development team on zoning,land acquisition, and potential city incentives.
The team has also made updates to its concept.
The team will be present to share those updates, solicit additional feedback, and coordinate next steps. It is
anticipated that there will be action items presented for HRA consideration in February which may include a
preliminary development agreement.
Financial Impact
N/A
Mission/Policy/Goal
The goal of the HRA is to promote certain housing and redevelopment projects.
Attachments
■ Developer's Presentation
The Elk River Vision
A Y�elcoming community nvith revolutionary and spirited resourcefulness, exceptional P U W E H E o s r
service, and community engagement that encourages and inspires prosperity ,g /` UR
Main & Gates Redevelopment Project
Presented to: City of Elk River HRA
January 3, 2022
Presented by:4125 Sub S. Corp Team
4125 Sub S.
Review Concept Changes
Progress Report
Project Feedback/Discussion
Next Steps
Agenda
4125 Sub S.
Updates Since Last HRA Meeting (12-06-2021)
Meeting w/City & Planning; City staff provided feedback on:
Project Concept
Zoning Code (i.e.Density, Rezoning, Setbacks, Parking, etc.)
City submittal process
Due Dilligence:
•Refined Concept
•Market Analysis
•Pro -Forma estimates
•Communication w/Elk River EDA
4125 Sub S.
Review Concept Changes
Project Feedback/Discussion
Next Steps
Agenda
Progress Report
4125 Sub S.
Project Concept Highlights
Lot Area (Acreage)1.73 Zoning C2 (office)
Proposed Units 55 Proposed Zoning PUD
Units/Acre 32
Gross Sq. Ft.112,536 Commerical Sq. Ft.3,967
Unit Mix (subject to change)
1BR 9 Bldg. Height 4 story
1BR + Den 4
2BR 20 Est. Project Cost $14,300,000
3 BR 22
3BR Townhomes*8 Est. Ann. Property Taxes $137,500
Amenity Space 2nd Floor
Parking 91 total
Underground 51
Surface 41
Stalls/unit 1.65
* Future 2nd Phase
4125 Sub S.
Project Concept Highlights
•Mixed-use vertical redevelopment compatible w/surrounding land uses
•Rental housing concept: 4-story building (future townhomes in 2nd phase)
•Main-floor commercial space | jobs creation | neighborhood-oriented
•Streetscape design fronting both Main & Gates
•Connectivity to Hwy. 169, Hwy. 10, & Downtown Elk River | Walkable to Downtown
•Catalyst project for other redevelopment opportunities
•Provides much-needed rental housing in Elk River| Larger unit sizes proposed
4125 Sub S.
Proposed Site Layout
1st Floor 2nd to 4th Floor
4125 Sub S.
Aerial View
4125 Sub S.
Street Views
4125 Sub S.
Elevations
4125 Sub S.
Elevations
4125 Sub S.
Elevations
4125 Sub S.
Review Concept Changes
Project Feedback/Discussion
Next Steps
Agenda
Progress Report
4125 Sub S.
Review Concept Changes
Next Steps
Project Feedback/Discussion
Agenda
Progress Report
4125 Sub S.
Next Steps
Discussions with City:
•Development agreement
•Land acquisition
•TIF
•Fees (park dedication, etc.)
•Application discussions
Upcoming Meetings:
•Planning Commission –Concept Review
•HRA: 02/07/2022
Development Team:
•Survey (mid-January)
•Title Commitment (mid-January)
•Refine Concept/plans
•Estimate development costs/financials
•TIF estimates/scenarios
•Refine timeline
•Start application process
4125 Sub S.
Matt Mullins
The Mullins Group, Inc.
612.281.6729
mmullins@mullinsgroupinc.com
www.mullinsgroupinc.com
http://twitter.com/mullinsgroup
https://www.facebook.com/themullinsgroupinc
https://www.linkedin.com/in/mattlmullins/
Contact Information:
Questions & Comments
City of Elk River
City Council Public Hearing
Proposed Tax Increment
Financing (Housing) District No.
28
Jackson Hills Phase II
January 3, 2022
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MUNICIPAL ADVISORS -"-- --
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Introduction
44-unit rental apartment housing project
Creation of proposed 'Housing' TIF District
• Assist with financing of extraordinary costs
• Soils correction and site development
• Maximum 26-year term
• City policy limits term to 75 years of collection
• Pay-as-you-go financing
• Project financed entirely upfront by developer
• Eligible costs are reimbursed over term of district
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Project Summary
Housing TIF District Requirements
• at least 20% of the rental units will be occupied by persons or
families with incomes no greater than 50% of county median
income
• No more than 20 percent of the square footage of buildings that
receive assistance from tax increments may consist of
commercial, retail, or other nonresidential uses
• income limitations for the rental units in the housing project will
apply for the duration of the TIF District
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Financial Review
Prior to establishing a TIF district, the following findings are to be
made by the City that include:
1 ) determination that the project qualifies as a TIF district,
2) determination that the project as proposed would not proceed
without public assistance (meeting the "but-for" test), and
3) increased market value of the property to be developed is
greater with TIF than if no public assistance is provided.
Important to understand how the level of financial assistance would
impact the ability of the proj*ect to proceed as proposed and
maximize new value created on the current proj*ect site
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Financial Review
• Request for financial assistance
• Assist with extraordinary soils correction costs
• Estimated to be in the range of $850,000 - $1 ,062,800
• Increase from original with additional due diligence
• Annual tax increment revenues provides additional cash flow to
support debt repayment
• Letter provided by lender
• Up to maximum term of 15 years to meet request
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Financial Review
First Mortgage (70%) $6,000,000 Acquisition $400,000
Equity (30%) $2,588,174 Construction $6,828,174
Site Development $850,000
Arch. & Eng. Fees $75,000
Legal Fees $10,000
Contingencies $250,000
Total $8,588,174 Total $8,588,174
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Tax Increment Revenue Estimates
Existing Base Value $233,700
Estimated Total Taxable Value $6,300,000
Estimated Annual Available Increment $94,995
Total Gross Tax Increment (over 15 years) $1 ,588,062
Less City Retained (10%) $ 158,806
Net Amount Available for Development (90%) $1 ,429,256
Estimated Present Value at 4% $968,000
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Financial Needs Analysis
Purpose of financial review is to assist the City with making a
determination:
1 . if the project as proposed would be unlikely to proceed "but-for" the
requested Tax Increment Financing (TIF) assistance and
2. if assistance is necessary, to determine the appropriate amount
and terms of public assistance.
Determination of extraordinary costs not supported by project
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Financial Needs Analysis 7pevelloper -M so
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Cash on Cash Return (stabilized) -0.91 % 2.32% 1 . 51 %
Debt coverage (net operating income / .94x 1 .07x 1 .04x
annual debt service payment)
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Conclusion
Without financial assistance, the project does not appear to be feasible
• rate of returns and debt coverage ratios are below industry standards
With financial assistance, the project performance is projected to improve
• returns and coverage ratios increase — to moderate level
The financial analysis indicates that the project is not expected to be viable without one or
more of the following:
1 ) reduction in project costs
2) additional annual cash flow, and/or
3) additional upfront funding sources.
Assistance through TIF provides additional annual cash flow to the project
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New Proposed Housing TIF District:
Jackson Hill Phase 11 Project
Conclusion
Parameters for an appropriate level of public assistance that were considered
when identifying the extraordinary costs:
• Return on Investment
• Purchase price and other development costs
• Public to private investment
• Public assistance (TIF) and private equity
• Extraordinary costs
• Financial gap
• Term of collection (district)
• Other necessary public improvements
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New Proposed Housing TIF District:
Jackson Hill Phase II Project
Action Item: Consideration of Approval of TIF Plan
and TIF District
• Provides City with authority to use tax increments
• Proposed purpose
• Proposed boundaries (1 parcel)
• Proposed budget
• Estimated public costs and sources of revenue
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Questions
Mikaela Huot, Director
Baker Tilly
380 Jackson Street, Suite 300
St Paul, MN 55101
Phone: 651 -223-3036 (office)
651 -368-2533 (cell)
Email: Mikaela. Huot@bakertilly.com