HomeMy WebLinkAboutFebruary 12, 2001
,..
City Council Work Session
Creekside 54 multifamily unit low to moderate
income rental facility Tax Increment Financing request.
Please note: The City Council reserves the right to add or
delete items from the agenda based upon time availability.
February 12, 2001
6:00 pm
Fire Station 1
1. Ownership and ongoing operations responsibility for 54 unit building.
2. Review 54 unit building project.
3. Public assistance requested:
· Conduit Bonds
· Tax Increment Financing
4. Question and Answer period.
5. Other business.
16200 aJ.~~/,IW€I. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
';1'UJ#t t&e 1)~ 0& FRANK BOYLES
January 26, 2001
TO:
FROM:
The Mayor and City Councilmembers
Frank Boyles, City Manager
SUBJECT:
Creekside Estates Materials
The City Council has agreed to conduct a workshop on Monnay, Fehrllary 12) '001 (:It 6pm to discuss
the Creekside financial assistance request. Attached is an agenda for the workshop.
Following final plat approval of Creekside Estates, the City was approached by Dave Bell and Mssrs.
Gensmer Messenbrink with a request that the proposed 54 unit low to moderate income senior rental
facility receive public assistance. The requested assistance was to take two forms. The first is conduit
bonds, which do not obligate city taxpayers but do afford the developer a lower interest rate. The
second form of assistance is pay as you go Tax Increment Financing. The developer indicates that the
Tax Increment Financing allows them to write down the rent for the units so they are affordable to low
to moderate income senior citizens.
Since the proposed developer and operator of the 54 unit senior rental facility was not involved in the
platting of the property, the City Council directed that letters be received from Mr. Bell and Mssrs.
Gensmer and Messenbrink, clarifying ownership and project operation. Attached are two letters, one
from David Bell and the other from John Messenbrink. My reading of the two letters leaves room for
interpretation regarding property ownership.
Also attached are materials submitted by Podawiltz Development. A memorandum, Financial
Assistance Request, Project History Sheet, Proforma Summary and Proforma are attached.
Mike Podawiltz will be present at 6:00 pm on Monday, February 12, 2001 to discuss the 54 unit project,
its ownership, operation and need for public assistance. Council members may wish to ask a few of
the following questions
1. Building was approved for 3 stories; proforma says 4 - why?
2. The developer fee at $405,275 seems large. What does it include?
3. Why is no profit shown for contractor?
4. What is the developers' equity in the project?
5. The proforma shows $498,000 in TIF bonds. That is not the City's
understanding of pay as you go.
I am hopeful that the information provided at the workshop, will help the City Council to determine how
to address the public assistance request so we can advise the interested parties.
cc: Don Rye
Suesan Lea Pace
Rusty Fifield
16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
December 28, 2000
i:':'_,
"l~tJetopment
Ii
. s~/tin9
City Administrator
Planning Staff
City Attorney
Honorable Mayor
16200 Eagle Creek Ave. SE
Prior Lake MN 55372-1714
Re: Response to staff request from meeting of December 26,2000.
Dear City of Prior Lake Staff, Honorable Mayor, and City Council:
First of all I would like to begin to wish all, the very best greetings of the Day!
Hopefully this response will help shed a better understanding of the relationship of all
parties within this development. Please let this letter serve to all that Freedom
Development & Consulting LLC at no time intended to deceive the integrity of this
Development or the Community by withholding information that could jeopardize the
approval process of Creekside Estates. Freedom Development's mission was to gather
reputable alliances with firms that have a history of successful projects within the scope of
this development.
Freedom's relationship with the sponsor's of the Congregate Senior Housing portion of
the development has been with PodawiItz Development Corporation. Freedom's role was
and has been to acquire land acquisitions, develop community infrastructure, and
community approval for their developments as other successful projects in the past. The
procurement of the needed financing was and has been the responsibility ofPodawiItz
Development Corporation. We were aware of the needed City endorsement to sell tax
exempt housing revenue bonds which doesn't expose the good faith and credit of the City.
As you already know by early on staff reports, Freedom expressed this need and concern
for the Congregate portion of the development between concerned parties. The use of TIF
Financing was brought up as the interest rates bobbed and weaved throughout the City
approval process, but being Freedom isn't directly involved with the financial aspect of the
proformas, I didn't know the use ofTIF was a make or break for the Congregate Senior
Housing.
EO. Box 1643 · St. Cloud, MN 56302 · Phone: 320-251-2048 · Fax: 320-656-9144
The makeup of the Congregate Senior Housing portion of Creekside Estates is as
follows:
· Freedom Development LLC and Podawiltz Development Corporation have a
Purchase Agreement with the Land Owners, Eagle Creek Villas LLC, with
transferable rights which will be transferred to Housing Initiatives of Minnesota
(HIM).
· Housing Initiatives of Minnesota (HIM) a Minnesota LLC is the project
support financially and sponsor. HIM is comprised of individually, J Michael
Podawiltz, Terry Schmid, Barb Brandes, and Ted Schmid.
· The General Contractor will be Lumber One Avon Inc. who are members of
the HIM.
· The Sole End Owner is the 50l-C3 Non Profit, Wendum Foundation. Wendum
has been owning and operating housing complexes since 1959.
· The financing of the project mortgage will be the tax exempt housing revenue
bonds thur Briggs and Morgan.
The make up of the 2-24 plex Condominium buildings within Creek side Estates is as
follows:
· Freedom Development is teaming up with Eagle Creek Villas LLC in
developing this portion of the project.
· Freedom and Eagle Creek will privately finance the construction phase of the
project. The end mortgages will be comprised by the individual buyers of the
condominiums.
· It is not known at this time what portion Lumber One Avon will play within
the construction phase of the 2 buildings, at present we are under building and
contract negotiations with subcontractors.
Unfortunately without the 54 plex being developed, it isn't financially feasible to start the
condominiums without knowing the outlook of the Congregate Senior Building, being it
represents, a little over 50% of the total value of the project.
If Freedom Development can not continue to finalize and develop Creekside Estates,
unfortunately my Purchase Agreements with the Land Fee Owners are injeopordy and my
control of the destiny of Creekside Estates as proposed mayor could be lost. If this was to
happen the Land Owners, I would assume would pursue other avenues to develop their
property.
In closing Mayor, Council, and Staff I hope we can still ban together and see our way
through this last unplanned bump in the road to develop a great long standing complex in
Prior Lake. Over fifteen months of planning, developing, and expending a vast outlay of
moneys to get to this point has up to this last pr~blem, finally brought the neighborhoods
and citizens, the school board, the City powers to be, and the park open lands issues
together. Without the Congregate Senior Housing the entire Plat and PUD may fail. I
know the City in their hearts and mission is dedicated to their Seniors. To look at what the
City is giving rather than not getting is the value of the TIP reimbursement back to the
project. Because of the TIP the rents for the Seniors can be reduced over 80+ dollars per
month compared to without TIP. Isn't this a good investment into the community rather
than not having these rental units, which we have a shortage of, the local Senior may have
to move out of our and their community and take their expendable dollars they spent on
medical, household, groceries, and dollars invested in our banks to another community.
As the projects developer, you all have been working with, I hope you can accept my
apology for the missed communications blunder between the development team of the
Congregate Senior Facility. Freedom Development's intentions in working with you have
been always honorable and up to now was extremely proud of the project approval and
upcoming construction starts.
One again, I look for your support and acceptance to the most recent re'iuest.
as.incerelY~
.."t\.~~~~
David Bell
Freedom Development and Consulting, LLC.
CC: Eagle Creek Villas, LLC.
FRQM ': MESENBRINK CONSTRUCTION
PHONE NO. 9524475036
Dec. 29 2000 12:48PM P2
'lag[t:. C7.t:.t:.k
- (l!iffo-~ ~
December 29,2000
City of Prior Lake
Attn: Frank Boyles, City Manager
16200 Eagle Crjaek Ave. SE
Prior Lake, MN ~5372
Dear Mr. Boyles:
Questions hav~ been brought to our attention concerning the plat of Creekside
Estates, which ~as approved by the city council on December 18, 2000. To clarify a
few of these isSues Eagle Creek Villas would offer the following information: property
known as Creekside Estates is owned solely by Eagle Creek Villas, LLC and has no
current optionsiwith anyone to purchase it. We had previously entered into a .
purchase agre~ment with Freedom Development to purchase the land. As of this
date the purchase agreement has expired and has not bEt~ein.?tated_ It is our
. - ~------
- contention to try to secure a buyer or to develop the property ourselves. As you
know, the ground is wearing out and it is time to move to a productive mode with this
development. We currently have two parties interested in the 54-unit senior rental
building. They: both have the same concerns of the financial structuring of the project.
Both parties w(1I be contacting the City of Prior Lake to express these concerns. We
expect you will! be hearing from these parties in the near future.
I
Eagle Creek '1l1a5 will be more than happy to negotiate with any and all parties
concerned to expedite this project We have all spent a great deal of time and money
. getting to this point and hopefully we will see this project as a reality in the near future.
If we can be of any further assistance to you or if you have any additional concerns,
please contact me at 447-5058.
I
I
I
!
,
Dohn Mesenbrink
Chief Mangerl Eagle Creek Villasj LLC
!
I
I
I
77~1; "7~th st..~et ~ast Prior Lake, MN 55372 . Phone (612) 447-5058 Fax (612) 447-5036
PODAWILTZ
DEVELOPMENT
CORPORATION
3::J...05 ::J.....~ S~:ree~ So"'U.~
S"'U.i..~e ::J...07
<320) 255-::J... 7::J...9
S~_ Clo........d1VIN 5630::J...
<320) 255-5::J...28
Phon..e:
Fax:.:
MEMO
From:
The Honorable Mayor, City Council, and City Manager of the City ofthe
City of Prior Lake
J. Michael Podawiltz
12/28/00
To:
Date:
Subject:
Apology:
Please allow me to express my sincere apology and that of my business associates for the
communication error. I can not understand nor justify why the need based request for Pay-as-you-
go Tax Increment Financing was not shared with you early in the process.
The communication error occurred by and between Mr. Dave Bell of Freedom Development and
myself
It has always been our request and that of the Development to seek you assistance in tax exempt
financing and in tax increment financing.
I arn sorry for any inconvenience that this may have caused you and the citizens of Prior Lake.
Podawiltz Development Corporation prides itself in being a good corporate citizen in any city that
we have had the pleasure of working. A reflection of this can be garnered from your cohorts
throughout the State of Minnesota. To that end, I have attached a listing of our developments and
their respective cities.
Let me assure you that it is our intent to develop quality housing and quality relationships that
endure the test oftime for all parties.
Please review the attached "Financial Assistance Request". I would appreciate the opportunity to
meet with you and to provide you with any additional information that you may need about
Creekside Estates or us.
Communication Error, Creekside Estates, Prior Lake, MN
CREEKSIDE ESTATES
PRIOR LAKE, MN
Financial Assistance Request
Tax Exempt Bonding
Pay-as-you-go Tax Increment Financing
1. Qualified Housing District / Project Only
2. Fifteen Year Duration
3. Rents on 40% of the units at or below 30% of 60% AMI
4. Project is not economically feasible without TIF assistance
a. Cash requirement would increase by $493,000 and/or rents
would have to increase by $82 per unit.
b. The rental increase would raise rents above the threshold level
for low and moderate-income senior households.
The ownership entity would be a Limited Liability Company whose sole
member is the Wedum Foundation. The Wedum Foundation is a 501-(c) (3) Non
Profit Corporation. The Foundation was incorporated in 1959. The Foundation
utilizes its non profit status to assist in meeting the severe housing shortage and
to generate scholarship dollars for students. Annual rental income from the
project will be donated to local Dollars for Scholars Chapters.
Project Sponsor is Housing Initiatives of Minnesota (H.LM). H.I.M is a
Minnesota Limited Liability Company comprised of J. Michael Podawiltz, Terry
Schmid, Ted Schmid and Barb Brandes. H.LM. through its members have
developed or been involved with over 4,000 rental units in the State of
Minnesota. H.LM. and the Wedum Foundation have a similar senior residential
facility in Coon Rapids.
Creekside Estates
Prior Lake, MN
Proforma Summary
One Bedroom Moderate I $709 Rent as proposed
$791 Rent without TIF
$903 Rent without tax exempt financing
$985 Rent without tax exempt financing
Two Bedroom Moderate I $849 Rent as proposed
$931 Rent without TIF
$1,081 Rent without tax exempt financing
$1,163 Rent without tax exempt financing
Assumptions:
Tax exempt, 480 month amortization
Non tax exempt, 360 month amortization
Tax exempt rate 221 (d)(3) = 6.75
Non tax exempt interest rate = 8.5
40% Moderate income, 60% market rate
Maximum rents: Section 42 Basis
One Bedroom $739
Less utilities: -$27
$712
Proposed rents: $709
Two Bedroom $886
Less utilities: -$34
$852
Proposed rents: $849
PROPERTY DESCRIPTION
PAGE 1
DATE:
REVISED:
FILE NAME:
12/18/00
12/18/00
F easibilityPL
Development:!Creekside Estates
Location: Prior Lake, MN
As Of: FeasibilityPL
----------------------------- --------- ---------------------- ------------- ----------
----------------------------- --------- ---------------------- ------------- ----------
Legal Description:
221 D 3
Davis Bacon
--------------------------------------------- ---------------- ------------------ _..----------~----- ----------------------- ---------------~'"
54
1
4
TOTAL NUMBER OF UNITS
Number of BUildings
Number of Stories
UNIT TYPE:
Elevator
Walk-Up
Townhouse
TOTAL SITE AREA
Proposed Density
PARKING PROVIDED:
Surface
Covered
FLOOR SYSTEMS
ROOF TYPE
HEATING SYSTEM
A/C SYSTEM
APPLIANCES:
Range
Refrigerator
Dishwasher
Disposal
Washer & Dryer
xxxx
AMENITIES:
Community Laundry 0
Recreation/Community Rooms X
Underground garages in base rent: X
Storage Areas X
Play Area 0
Underground garages in base rent: X
ENERGY CONSERVATION FEATURES:
Individual Electric Meters X
Individual Gas Meters 0
Thermopane Windows/Doors X
Low E Glazing X
xxxx
X
Acres:
o
o
1.47
36.73
.------.,
q{'
Square Feet:
Units I Acre
64,347
28
59
o
Poured, precast, wood
Gas hotwater bb
Thru wall
X
X
X
X
X
UNIT DESCRIPTION TYPE
One Bdr/Moderate
Two Bdr/Moderate
Two Bdr
One Bdr
Two Bdr
Two Bdr
One Bdr/Den/1.5 Bath
Two Bdr/Den/1.5 Bath
A
B,B1,B2
B2
C
D
D1,D2
E,E1
F,F1
FoasPL 01/0412001
PROJECTED
# OF UNITS NET AREA RENT
--------------- ------------ ----------------
11 760 $709
11 935 849
9 935 999
3 760 799
6 960 999
6 1,000 1,019
4 950 949
4 1,200 1,199
INCOME & EXPENSE PROFORMA
PAGE 2
Development:/Creekside Estates
Location: Prior Lake, MN
As Of: FeasibilityPL
DATE:
REVISED:
FILE NAME:
12/18/00
12/18/00
FeasibilityPL
----------------------------- --------- ---------------------- ------------- ----------
----------------------------- --------- ---------------------- -----------------------
UNIT RESULTING
UNIT DESCRIPTION TYPE # OF UNITS RENT RENTALS FHA
--------------------------- ----------------- ----------..--
One Bdr/Moderate A 11 $709 $7,799
Two Bdr/Moderate B,B1,B2 11 849 9,339
Two Bdr B2 9 999 8,991
One Bdr C 3 799 2,397
Two Bd r D 6 999 5,994
Two Bdr D1,D2 6 1,019 6,114
One Bdr/Den/1.5 Bath E,E1 4 949 3,796
Two Bdr/Den/1.5 Bath F,F1 4 1,199 4,796
--------------------- ---------------------
Monthly Rental Income 54 49,226
Other Income:
Laundry & Miscellaneous 54 $5 270
Garages 0 0 0
--------------------
Gross Monthly Revenues 49,496 .
X 12 Months X 12
--..-------------------
Gross Annual Revenues 593,952
Less: Vacancy Percentage Percent (%) 5.00% (29,698)
-----------------------
Effective Gross Revenues 564,254
Tax Increment Financing (See Page 6) 0 53,363
-------------...------- -----------
564,254 53,363
Less: Expenses (Schedule Attached) Percent (%) 35.63% (201,040) 0
---------------...._---- -----------
Net Before Debt Service 363,214 53,363
Less: Debt Service DS Coverage 1.05 (345,053) 53,363
Mortgage $4,765,740 498,000
Int. Rate 6.750% 6.750%
Amortization 480 15 Years /
Term 480 ------------------- 15 Years
CASH FLOW $18,161 $0
------------- --------
------------- --------
...****.**************************************************** ****************** **************** ******************** ****************
ASSUMPTIONS:
60% Market Rate & 40% Moderate Rate
Tax Exempt A, B, & C Bonds
FeasPL 01/04/2001
OPERATING EXPENSES
PAGE 3
Development:!Creekside Estates
Location: Prior Lake, MN
As Of: FeasibilityPL
DATE:
REVISED:
FILE NAME:
12/18/00
12/18/00
FeasibilityPL
ADMINISTRATIVE
----------------------------- --------- ---------------------- ------------- ----------
----------------------------- --------- ---------------------- ------------- ----------
FHA
Advertising & Marketing
Management
Legal/Accounting
Audit
Telephone
On-Site Payroll
xxxx
xxxx
Total Administrative
MAINTENANCE
Elevator/Maintenance
Rubbish Removal
Ground Maintenance
Janitor Supplies
Maintenance Supplies
Maintenance Contract
Snow Removal
Heat & Air Repairs
General Repairs
Painting/Decorating
Payroll & Fringes
Experiential Basis
xxx
xxx
xxx
Total Maintenance
Total Administrative & Maintenance
REPLACEMENT RESERVE:
REAL ESTATE TAXES:
PROPERTY INSURANCE:
SEWER & WATER:
UTILITIES - Electric
UTILITIES - Heat
TOTAL EXPENSES
FeasPL 01/04/2001
o
o
o
o
o
o
o
o
o
o
o
120,432
o
o
o
$0
o
o
o
o
o
o
o
120,432
120,432
19,185
61 ,423
o
o
o
o
$201,040
$0
$120,432
19,185
61 ,423
---------- -------------
---------- -------------
$201,040
CONSTRUCTION/DEVELOPMENT COSTS
PAGE 4
DATE:
REVISED:
FILE NAME:
Development:! Creekside Estates
Location: Prior Lake, MN
As Of: FeasibilityPL
12/18/00
12/18/00
FeasibilityPL
CONSTRUCTION COSTS Costs
----------------------------- --------- ---------------------- ------------- ----------
----------------------------- --------- ---------------------- ------------- ----------
Construction
Contractor Profit, Burden & Overhead
Additional Construction
$3,925,131
~
Est'd Construction Contract
3,925,131
FEES
SAC/WAC/PAC
Soils, Suvey & Environ (FHA=Prof Rpts)
Architect Review Costs (FHA=Prof Rpts)
Architect / Engineer
Bond Premium (15% of Constr. K LlC)
Project Administration
Legal & Accounting (Excl's Glaser's)
Glaser Application Fee
Developer Fee (FHA Mortgageable)
Non-Profit Fee
Tax Credit Fees
Letter of Credit Fees
Market Study (FHA=Prof Rpts)
Appraisal (FHA=Prof Rpts)
Marketing Exp's (Non - Furnishings)
Marketing Furnishings
Working Cap. Reserve ($130,600)
Op's Deficit Reserve ($80,000)
Contingency
185,336
9,700
6,000
14,800
8,385
121,500
45,000
2,500
~
40,00
o
2,600
3,500
6,500
35,000
10,800
o
o
90,000
Total Fees
986,896
FINANCING & CARRYING CHARGES
Construction Interest
Real Estate Taxes
Insurance
FHA Mortgage Insurance
FHA Exam Fee
FHA Inspection Fee
Financing Fee (Glaser)
Mortgagee Legal Fee (Glaser's)
Bond Costs (Cost of Issuance)
Title & Recording
190,365 Fourteen Months
5,000
500
51,800
15,540
25,900
o
8,500
154,665
In COI Above
Total Financing & Carrying Costs
452,270
LAND:
Land
Assessments
325,000
95,487
FeasA.. 01/0412001
TOTAL DEVELOPMENT COSTS
$5,784,784
------------
------------
FeasPl. 01/0412001
SOURCES AND USES OF CASH
PAGE 5
Development:!Creekside Estates
Location: Prior Lake, MN
As Of: FeasibilityPL
DATE:
REVISED:
FILE NAME:
12/18/00
12/18/00
FeasibilityPL
====================================== ====================== =============~.- :~
SOURCES AND USES OF FUNDS:
SOURCES:
General Partner - Contributed Capital
C Bonds (Housing Initiative of MN) As Issued
405~
Tax Exempt A Bonds (Via TIF)
Tax Exempt A Bonds (Via Op's CF's)
$498,000
4,765,740
Subtotal- A Bonds (Tax Exempt) $5,263,740
5,263,740
---------
---------
Taxable B Bonds (Via Op's CF's)
o
Total Sources of Funds
5,669,015
USES:
Total Development Costs
XXXX
(5,784,784)
o
SOURCES EXCEED USES
($115,769)
------------
------------
CASH REQUIREMENT TO CLOSE
WORKING CAPITAL RESERVE
OP'S DEFICIT RESERVE
115,769
130,600
80,000
TOTAL CASH REQUIREMENT
$326,369
-----------
-----------
FoasPL 01/0412001
..
INCOME, RENT AND UTILITY ALOWANCES:
PAGE 6
DATE:
REVISED:
FILE NAME:
Development: ICreekside Estates
Location: Prior Lake, MN
As Of: FeasibilityPL
Source: Metro Effective 03/10/00
----------------------------- ---------
----------------------------- ---------
12/18/00
12/18/00
FeasibilityPL
---------------------- ------------- ----------
---------------------- ------------- ----------
INCOME, RENT AND UTILITY ALOWANCES:
Income Limitations
One Person
Two Person
Three Person
Four Person
Five Person
Six Person
@2.Q
$27,600
31,560
35,460
39,420
42,600
45,720
Gross Stated Stated
Rents @ 30% of 60% (L1HTC) Rent Less Utilities Net Rents Net Rent Gross Rent
Zero Sdr 690 N/A N/A N/A N/A
One Sdr 739 (27) 712 709 736
Two Sdr 886 (34) 852 849 883
Three Sdr 1,025 N/A N/A N/A N/A
Sased On Proiect Specific Utility Configuration
(Source: Metro HRA - July, 2000)
Allowances:
Heat & Hot Water
Cooking (Electric)
Electricity
One Sdr Two Sdr Three Sdr
0 0 0
5 6 7
22 28 35
27 34 42
Totals:
Tax Increment Financing:
Uses of Tax Increment:
[Excavation, site utilities, paving
curbing, landscaping, irrigation]
Real Estate Taxes Pd.
Less: Orig. Value RET
$61,423
(810)
Site Improvements
Additional Fill
Land
Assessments
Capitalized Interest 1 Org.
Less City Admin. Fee
60,613
(6,600)
Net Tax Increment
$54,013
Total (Exceeds PV below)
---------
---------
$54,013
Per Glaser (+1- 90% of Increment) 53,363
Estimated TIF Life
Total Development Costs
Local Financial Assistance 15 Years
$5,784,784 Present Value ofTlF Payment
$800,445 @ 9%, 15 years, Pmts of $
FeasPL 01/0412001
$378,000
o
325,000
95,487
108,000
$906,487
----------
----------
15.00
Years
$434,612
53,363