3. ProformaS P R I N GSTED
120 South Sixth Street
Suite 2507
PUBLIC FINANCE ADVISORS
Minneapolis, MN 55402 - 1800
(612) 333 -9177
Fax: (612) 349 -5230
Home Office
85 East Seventh Place
Suite 100
16655 West Bluemound Road
Saint Paul, MN 55101 -2143
Suite 290
Brookfield, WI 53005 -5935
(612) 223 -3000
Fax: (612) 223 -3002
(414) 782 -8222
Fax: (414) 782 -2904
6800 College Boulevard
Suite 600
Overland Park, KS 66211 -1533
(913) 345 -8062
Fax: (913) 345 -1770
1850 K Street NW
Suite 215
September 1, 1994
Washington, DC 20006 -2200
(2 02) 466.3344
Fax: (202) 223 -1362
Mr. Frank Dunbar, President
Dunbar Development Corporation
15 North 12th Street
Minneapolis, MN 55403
Re: Chanhassen Seniors Housing Project
Dear Mr. Dunbar:
We have reviewed your projected development cost and operating statement for the proposed
Chanhassen seniors housing project. We have enclosed a revised statement that includes the
changes we discussed on the phone. The changes in the project costs are highlighted by a
box. In the process of this analysis, a few key issues have emerged.
1. General Obligation Debt Capacity
The state statutes regarding the use of the City's general obligation pledge limit the use of a
city's pledge to the greater of $3,000,000 or 0.5% of the city's taxable market value. We
currently estimate this limit to be $3,680,000 in Chanhassen. Our structure maximizes the use
of G.O. Bonds, with the balance of the project financed by Revenue Bonds. Due to the high
debt coverage for the Revenue Bonds (assuming they have a senior pledge of the project
revenues), we assumed they are ratable and might have an interest rate that is a 60 -basis
points increase over the G.O. Bonds. If an HRA levy is pledged as additional backup security,
a lower rate might be achieved. We have assumed a 6.19% rate for the G.O. Bonds and
6.79% rate for the Revenue Bonds. Both series cant' a 30 -year term.
2. Project Construction Costs
3
Per our discussion, I have reduced the estimated costs from $53,000 per unit in the original
proposal to $49,000 per unit. This amount is appropriate for a project that includes amenities
similar to Lake Shore Place in Grand Rapids, adjusted for inflation and includes an addition RE
s;. � 1994
CITY OF CHANHASSEIN
September 1, 1994
Page 2
$1,000 per unit for the brick exterior. An additional $100,000 has been included for kitchen
facilities.
3. Project Debt Capacity
State legislation regarding General Obligation Bonds for senior housing requires a minimum of
110% , or 1.10 debt coverage at the time of stabilized occupancy. The attached projection
shows that the project achieves a minimum debt coverage of 1.12 in year 2. This does not
allow much room for fluctuations in interest rates or project costs.
4. Additional Amenities
I understand that the local senior's organization has requested additional amenities for the
project. With the modest debt coverage currently projected, I can suggest the following
strategies for meeting some or all of their request:
A. Substituting amenities for the $100,000 of kitchen expenses.
B. Purchasing the land ($110,000) with other city funds and using that budget for
additional amenities,
C. Reducing the parking spaces, if practical, and using that budget for other amenities.
We projected a 33% vacancy rate for parking spaces based on other senior housing
projects.
D. Seeking other sources for funds for additional amenities. At current interest rates,
there may be room for as much as $75,000 of additional amenities. However, I am
reluctant to suggest that any additional amenities are provided, as an increase in
interest rates might then put the project below the financing thresholds described
above.
Please let me know if you would like to discuss these issues in further detail.
Sincerely,
�7 �>
Gary C. Fields
Vice President
cc: -llr. Don Ashworth, City Manager, Chanhassen
Mr. David N. MacGillivray, Principal, Springsted, Inc.
Enclosures
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Chanhassen, Minnesota
Senior Housing Project
Drawdown Schedule
Draw #
Date
Construction
Draw
Bonds Interest
Capitalized Capitalized
Interest Interest Reserves
Total
Draw
Interest
4.50%
Ending
Balance
1st Interest
07/01/95
103,232
86,296
189,528
189,528
5,210,000
Closing
01/01/95
532,867
35,277
532,867
162,453
4,677,133
2
02/01/95
222,287
13,604
222,287
17,155
4,472,001
3
03/01/95
290,887
0
290,887
16,255
4,197,369
4
04/01/95
308,037
135,178
308,037
15,191
3,904,523
5
05/01/95
342,337
342,337
14,026
3,576,213
6
06/01/95
376,637
376,637
12,728
3,212,304
7
07/01/95
410,936
103,232 86,296
600,464
10,941
2,622,780
8
08/01/95
423,303
423,303
9,059
2,208,536
9
09/01/95
380,179
380,179
7,583
1,835,940
10
10/01/95
358,829
358,829
6,224
1,483,335
11
11/01/95
251,473
251,473
5,101
1,236,963
12
12/01/95
236,323
236,323
4,203
1,004,843
13
01/01/96
193,039
127,175 35,277
355,491
3,107
652,460
14
02/01/96
0
2,451
654,911
15
03/01/96
0
2,461
657,372
16
04/01/96
0
2,470
659,842
17
05/01/96
0
2,479
662,321
18
06/01/96
0
2,488
664,809
19
07/01/96
94,698 13,604 553,232
661,534
1,255
4,530
20
08/01/96
0
17
4,548
21
09/01/96
0
17
4,565
22
10/01/96
0
17
4,582
23
11/01/96
0
17
4,599
24
12/01/96
0
17
4,616
25
01/01/97
0
17
4,634
26
02/01/97
0
17
4,651
27
03/01/97
0
17
4,668
28
04/01/97
0
18
4,686
4,327,133 325,105 135,178 553,232 5,340,647 135,333
Bonds
Interest
Total
Actual D/S
Difference
1st Interest
07/01/95
103,232
86,296
189,528
189,528
0
2nd Interes
01/01/96
127,175
35,277
162,452
162,453
(0)
3rd Interesl
07/01/96
94,698
13,604
108,302
108,302
0
4th Interest
01/01/97
0
0
0
0
0
325,105
135,178
460,283
460,282
1
M
ASSUMPTIONS:
NUMBER OF UNITS
NUMBER OF MODERATE INCOME UNITS
TOTAL NET RENTABLE AREA
GROSS BUILDING S.F.
AVERAGE NET RENTABLE AREA/UNIT
GROSS S.F. PER UNIT
BUILDING EFFICIENCY
DEVELOPMENT BUDGET:
LAND
CONSTRUCTION
DESIGN $ RELATED
DEVELOPMENT COSTS
DEVELOPER FEES
FINANCING COSTS
REQUIRED RESERVES
CONTINGENCY
TOTAL PROJECT COST:
SOURCES OF FUNDS:
TAX EXEMPT BONDS
CITY OF CHANHASSEN
INTEREST EARNED DURING CONSTRUCTION
TOTAL SOURCES OF FUNDS:
70
70
59,570
59,570
851
851
100%
$110,000
$3,582,100
$186,000
$182,740
$52,100
$653,932
$553,232
$20,538
$5,340,642
$5,210,000
$0
$135,178
$5,345,178
Prepared by: SPRINGSTED Inc. (01— Sep -94) CAA 23R23 \HOUSING \CHANHAS%DEVBUDG.WK1
LAND COST:
Acquisition
$110,000
$1.85
$1,571
Special Assessments /Charges - (Street)
$0
$0.00
$0
Closing Costs
$0
$0.00
$0
Other /Contingency
$0
$0.00
$0
IMPROVEMENTS COST:
A. Purchase Price of Building
$0
$0.00
$0
B. Construction costs - Estimate
$3,430,000
$57.58
$49,000
-OR -
$0
$0.00
$0
C. Construction Hard Costs
$0
$0.00
$0
1 General Requirements
$0
$0.00
$0
2 Site Improvements
$0
$0.00
$0
3 Concrete
$0
$0.00
$0
4 Masonry
$0
$0.00
$0
5 Metals
$0
$0.00
$0
6 Wood & Plastics
$0
$0.00
$0
7 Moisture/Thermal Control
$0
$0.00
$0
8 Doors, Windows & Glass
$0
$0.00
$0
9 Finishes
$0
$0.00
$0
10 Specialties
$0
$0.00
$0
11 Equipment - Kitchen
$100.000
$1.68
$1,429
12 Furnishings
$0
$0.00
$0
13 Special Construction
$0
$0.00
$0
14 Conveying Systems
$0
$0.00
$0
15 Mechanical
$0
$0.00
$0
16 Electrical
$0
$0.00
$0
Subtotal Hard Costs :
$3,530,000
$59.26
$50,429
Construction Related Costs
Builder's Overhead
$0
$0.00
$0
Builder's Profit
$0
$0.00
$0
Fees & Permits
$0
$0.00
$0
Water, Sewer, S.A.C.
$0
$0.00
$0
Builder's Risk
$0
$0.00
$0
Bond Premium
$0
$0.00
$0
Construction Management
$52,1001
$0.87
$744
Furnishings & Fixtures
$0
$0.00
$0
Contingency
$0
$0.00
$0
Subtotal Related Costs:
$52,100 $0.87
$744
Design Costs:
Architectural Design
$0
$0.00
$0
Architectural Supervision
$0
$0.00
$0
Architectual & Engineering
$105,000
$1.76
$1,500
Interior Design
$70.000
$1.18
$1,000
Surveys & Staking
$4,000
$0.07
$57
Soil Borings & Perc. Tests
$4,000
$0.07
$57
Environmental Review
$3,000
$0.05
$43
Contingency
$0
$0.00
$0
Subtotal Design Costs:
$186,000
$3.12
$2,657
Prepared by: SPRINGSTED Inc. (01- Sep -94) CAI23R23 \HOUSING \CHANHASS \DEVSUDG.WKt
DEVELOPMENT COSTS :
Appraisals
$0
$0.00
$0
Title and Recording:
$0
$0.00
$0
Title Insurance
$27,140
$0.46
$388
Mortgage Registration
$0
$0.00
$0
State Deed Tax
$0
$0.00
$0
Recording Fees
$0
$0.00
$0
Closing Fees
$0
$0.00
$0
Disbursement Fees
$0
$0.00
$0
Abstract Fee
$0
$0.00
$0
Name Search
$0
$0.00
$0
Assessment Search
$0
$0.00
$0
Zoning Endorsement
$0
$0.00
$0
Environmental Fee
$0
$0.00
$0
Other
$0
$0.00
$0
R. E. Taxes - During Construction
$5,000
$0.08
$71
Utilities - During Construction
$0
$0.00
$0
Insurance - During Construction
$10,500
$0.18
$150
Developer's Legal
$10,000
$0.17
$143
Developer's Accounting
$0
$0.00
$0
Developer's Fees - Project Coordinator
$52,100
$0.87
$744
Market Feasibility Study
$8,000
$0.13
$114
Economic Feasibility Study
$0
$0.00
$0
Development Consultant(s)
$0
$0.00
$0
Relocation Expenses
$0
$0.00
$0
Historic Designation
$0
$0.00
$0
Marketing ($1,000 /unit):
$70,000
$1.18
$1,000
Advertising
$0
$0.00
$0
Collateral Materials
$0
$0.00
$0
Model Apartment
$0
$0.00
$0
Marketing Office
$0
$0.00
$0
Salaries
$0
$0.00
$0
Commissions
$0
$0.00
$0
Marketing Fees
$0
$0.00
$0
Special Events
$0
$0.00
$0
Rent Concession
$0
$0.00
$0
Signage
$0
$0.00
$0
Contingency
$0
$0.00
$0
Startup Expenses:
$0
$0.00
$0
Initial Equipment - Personal Property
$0
$0.00
$0
R.E. Taxes
$0
$0.00
$0
Insurance
$0
$0.00
$0
Working Capital
$0
$0.00
$0
Rental Attainment Gap
$0
$0.00
$0
DCR Gap
$0
$0.00
$0
InitalO erating Deficit
$0
$0.00
$0
Other Organizational
$52,1001
$0.87
$744
Other Organizational
$0
$0.00
$0
Prepared by: SPRINGSTED Inc. (01 - Sep -94) CAl23R23 \HOUSING \CHANHASS \DEVBUDG.WK1
FINANCING COSTS:
Bridge Loan Financing
Lender's Fees
$0
Lender's Counsel
$0
Miscellaneous /Fees
$0
Subtotal Bridge Financing:
Construction Loan Financing
Lender's Fees
$0
Lender's Counsel
$0
Lender's Inspections
$0
Miscellaneous /Fees
$0
Subtotal Construction Financing
Permanent Loan Financing:
Lender's Fees
$0
Lender's Counsel
$0
Miscellaneous /Fees
$0
Subtotal Permanent Financing
Program Speck Fees
HUD /FHA
MHFA
City — Impact Fee
Other
Subtotal Specific Program Fees:
Letter of Credit Costs
Development
Construction
Financing
Lease —up
Subtotal Letter of Credit Costs
$0
$0
$20,000
$0
$0
$0
$0
$0
J
m
re
$173,650
t
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.42
$0.08
$1.31
$0.00
$0.25
$0.00
$0.03
$0.00
$0.13
$0.12
$0.50
$0.07
$2.92
.s m
�r
I�I
1
r
$357
$71
$1,116
$0
$214
$0
$29
$0
$107
$100'
$429
$57
$2,481
$0
$0
$286
$0
$286
Prepared by: SPRINGSTED Inc. (01— Sep -94) C: \123R23 \HOUSING \CHANHASS\DEVBUDG.WK1
Development & Construction Period Interest :
Bridge Equity Financing
$0
$0.00
Bridge Loan Financing
$0
$0.00
Construction Loan Financing
$0
$0.00
Capitalized Interest — Gross
$460,282
$7.73
Bonds — Gross Interest
$0
$0.00
Subtotal Interest Costs :
$460,282
$7.73
Syndication Costs:
Syndication Commissions
$0
$0.00
Due Diligence
$0
$0.00
Equity Marketing Expenses
$0
$0.00
Legal
$0
$0.00
Special Tax Counsel — City
$0
$0.00
Accounting
$0
$0.00
Fee — Tax Credit Application
$0
$0.00
Fee — Acquisition
$0
$0.00
Fee — Financing
$0
$0.00
Fee — Syndication
$0
$0.00
Fee — Construction Management
$0
$0.00
Fee — Tax Credit Reservation
$0
$0.00
Fee — Reimbursed Tax Credit Res.
$0
$0.00
Fee — Performance
$0
$0.00
Fee — Guaranty
$0
$0.00
Other
$0
$0.00
Subtotal Syndication Costs:
$0
$0.00
$1.18
$1.31
$0.00
$6.80
$0
$0
$6,575
$0
$6,575
$1,000
$1,113
$0
$5,791
Prepared by: SPRINGSTED Inc. (01— Sep -94) C: \123823 \HOUSING \CHANHASS \DEVBUDG.WK1