HomeMy WebLinkAbout1998 03-30 CCP Work Session MEMORANDUM
TO: Mayor Kragness, Councilmembers Carmody, Hilstrom, Lasman, and Peppe
FROM: Michael J. McCauley, City Manager
DATE: March 26, 1998
SUBJECT: March 30 Work Session
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Attached please find some materials as background for the March 30th meeting. The situation
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occurring at the Shingle Creek Towers is similar to that occurring throughout the country. Roughly
25 years ago, the federal government made monies available through reduced cost financing for the
construction of low and moderate income housing. This is the 236 Program. As the program has
matured, the properties are being released from the requirements that in effect controlled rent. Given
the current rental climate, there is an obvious pressure for these properties to now become full
market rate rental units. The State Legislature and others have been wrestling with the problem of
a large number of units that have in effect been rent controlled now having the potential to become
market rate units. The current owners of the Shingle Creek Tower are apparently looking into selling
the property. Among the options for the current or new owners would be to reposition the P roperty
as market rate or to avail themselves of other programs that would provide tax incentives or reduce
costs of borrowing. As outlined in the pro forma from the Boisclair Corporation, one proposal for
the Shingle Creek Tower would have housing revenue bonds issued and tax credits provided to the
new developer. As part of receiving tax exempt financing for the acquisition and renovation, as well
as tax credits, roughly 40 percent of the units would be made available at rates for low income
persons, and the balance of the units would be made available at rates pegged to low and moderate
incomes.
To further amplify one of the terms mentioned in Mr. Boisclair's letter, sticky vouchers would have
HUD paying the difference between the new market rate rent and the existing rents for those tenants.
It is my understanding from the discussion preceding the scheduling of the March 30th work session,
that the general format will be one in which the City Council will simply receive input from those
persons who are interested in the subject matter generally and with respect to Shingle Creek Tower
in particular.
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DEVELOPING QUALITY INVESTMENTS IN REAL ESTATE
March 24, 1998
Mr. Brad Hoffman
City of Brooklyn Center
6301 Shingle Creek Parkway
Brooklyn Center, Minnesota 55430
RE: Shingle Creek Tower
Tax Exempt Bond Inducement Request
Dear Brad:
Thank you for the opportunity to meet with Mr. Mike McCauley and yourself last week
discussing our bond inducement request from the City of Brooklyn Center in behalf of our
planned acquisition and rehab of Shingle Creek Tower.
Hopefully the following responds satisfactorily to your questions and concerns allowing us
therefore to timely proceed with staff support for our tax exempt bond inducement
proposal.
1. EXISTING RESIDENTS AFFORDABLE HOUSING PRESERVATION - Although we
have not yet conducted a tenant survey, my expectation is virtually all the existing tenants
will income qualify for what is called "sticky vouchers" commencing 60 days after the pre-
payment by the seller of its FHA insured mortgage. Sticky vouchers is a direct tenant
subsidy of the differential between the new market rent and the tenant paid rent portion
which is provided by the federal government and administered by the local or county
• housing authority. The housing authority shall receive a fee for administering the
vouchers. Sticky vouchers are expected to be annually renewed permitting the existing
3005 OTTAWA AVE. • ST. LOUIS PARK, MN 55416 -2206 • PHONE: (612) 922 -3881 • FAX: (612) 922 -3071
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resident to remain in place until he /she voluntarily decides to move.
After the purchase closing the initial 60 day gap without sticky voucher subsidies, the
tenant rent will not change with the buyer covering the gap cost.
With respect to future affordable rents our bond application intends to qualify 40% of the
units for IRC Section 42 tax credits. Thirty one (31) one bedroom and eighteen (18) two
bedroom rents will be $63 and $137 respectively per month lower than our market rents
for similar units.
2. RATIONALE FOR THE OSTENSIBLE SELLER/BUYER VALUE CONTRADICTION -
The seller built'the project in 1973 under the FHA 236 interest rate reduction subsidy
program when the primary investment incentive was accelerated depreciation deductions
from income unrelated from the project that was permitted prior to the 1986 Tax Reform
Act. There is no remaining economic incentive for the seller to continue owning the
property, the tax benefits have been long gone and the Section 236 regulations permit
minimal, if any, cash distributions. Enclosed is the seller's 1996 independent financial
audit which validates the foregoing. Please note no distribution (see page 13) was
authorized in 1996. Capitalizing the $21,000 cash flow by say 8% which is optimistic,
results in an insignificant $262,500 equity when added to the existing debt of $1.4 million
® ($1,662,500 total FHA 236 restricted value) the seller is justified in seeking a real estate
tax reduction as long as the existing severely regulated FHA 236 program remains in
place. The seller must make efforts to minimize project expenses (i.e. real estate taxes,
etc.) in order to squeak out the minimal authorizable $2 0 1,000 annual distribution.
Alternatively, the buyer sees an opportunity to purchase the property at a price definitely
not supportable under the existing FHA 236 regulatory constraints however, is clearly
justified if the property is converted to market comparable rents. You will recall at our
initial meeting we provided you an Economic Rental Analysis prepared by Kraemer Geisler
& Strand, Appraisers that was conducted in behalf of a similar building we own located
in your neighboring community, Brooklyn Park. This study's market rents give us the
confidence they can also be attained in Brooklyn Center's Shingle Creek Tower especially
after the contemplated rehab is finished. Obviously, our preliminary market rent
assumptions will be further scrutinized for validity by not only us but also by the intended
first mortgage bond financed credit enhancer, FNMA. It is also noteworthy our purchase
price ($35,4571d.u.) is substantially below replacement cost (approximately $75,000 /d.u.),
which provides assurance new construction competition is remotely in the distant future.
Meanwhile, our aging seniors population continues to expand faster than the general
market percentage wise which is demonstrated by the acute low 1 % vacancy in senior
designed facilities, compared to the general market's 2% vacancy. Apartment Search 4th
quarter 1997 reported 1.9% general occupancy vacancy for Brooklyn Center.
3. REHABILITATION WORK PLANNED - Preliminarily, subject to subsequent in depth
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study with respect to need and cost, the following improvements are contemplated:
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' 1 Common Area Expansion - 5,500
p square ft. ($100 /s.f.) $550,000
2) Window Replacement 120,000
3) Boiler Replacement/HVAC Upgrade 95,000
4) Elevator Repair & Upgrade 30,000
5) Corridor Carpet, Lighting & Painting 60,000
6) Roof Replacement 60,000
7) Cabinet Replacement 110,000
8) Carpet Replacement 120,000
9) Electrical Upgrade 30,000
10) Appliances 55,000
11) Parking Lot Resurface 40,000
12) Landscaping 20,000
13) Contingency 40.000
Total Rehabilitation ($10,902/d.u.) $1,330,000
60 Stall Heated Garage 600,000
Total Construction ($15,820/d.u.) $1,930,000
You will note we increased the rehab budget by $330,000 since our original submission based on
subsequent need discovery.
Relative to residents quiet use of their apartments and facilities during construction be assured all proper
0 easures (temporary walls, vinyl taped enclosures, etc.) will be taken to isolate construction areas from
1 . 1pacting as close to normal functioning of the building as possible. Temporary relocation if needed will
be provided at our cost within the building in purposely held vacant units to accommodate the time when
workers need full and unimpeded access to the apartment under renovation. You will note we have an
operating deficit reserve set aside in our pro forma expressly for this purpose.
With respect to time to complete the construction work we estimate 12 months.
4. ASSISTED LIVING SERVICES - It is our intent to initiate assisted living services gradually as
demand warrants for the listed services detailed in the questionnaire attached. Initially we would begin
with an outside health care provider and integrate additional services as they are required by the existing
residents who are assumed to afford only what Medicare, Medicaid and County Assistance will cover.
Future residents presumably with more disposable income will require additional services not covered
by Medicare and the physical facilities will be in place to provide them. Meanwhile, the on -site manager
shall also function as services coordinator of community based outreach, social, recreational programs
(i.e. meals on wheels, etc.) to raise the living enjoyment for the existing tenants who otherwise could not
afford it. Our mission for providing assisted living services is to enhance our senior residents lives and
extend their stay and perhaps avoid altogether their need to go to substantially more expensive nursing
home.
Consisting of fully equipped commercial kitchen, library, social activities and exercise room, green house, nurses station, billiard room and beauty shop including
furniture and fbdums for the foregoing. A feasibility study will determine whether to delete t st floor residential units to create the expansion space or build the expansion as a free
standing budding (perhaps one level atop the above grade 60 stall garage) internally linked to the apartment building.
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5 - DEFAULTED MORTGAGES DESCRIPTION -
Galtier Plaza. 175 East Fifth Street. St. Paul. Minnesota. is a mixed use project consisting
of approximately 320 apartment units, 110 condominiums, 130,000 square feet retail, 100,000
square feet office and an 800 stall underground parking ramp.
Development work began in 1981 when urged by the City of St. Paul to undertake the project
to preserve a $5 million UDAG grant that was about to be lost. This was a time of extremely
high inflation (12% - 15% in the building trades) and high interest rates (prime at 21% in 1982).
In addition to the UDAG, the St. Paul Port Authority provided approximately $40 million of tax
exempt bonds (14.5% rate) to build the parking ramp, retail and office. Subsequently, Chemical
Bank provided approximately $55 million for the apartments and condominiums. An initial equity
of $14 million was secured from limited partners structured under the 15 year accelerated tax
write off available to commercial properties.
Chemical Bank in 1984 -85 refinanced the Port Authority bonds resulting in lowering the rate
from 14.5% to low floating rates of 4% to 5 %.
During the spring of 1985, just one month prior to our going back to the equity markets to place
the final $16 million tax advantaged equity offer, Senator Robert Packwood (Oregon) announced
his plans to author legislation repealing the 15 year write off capability which ultimately led to
• the 1986 Tax Reform Act. Packwood's announcement irrevocably eliminated the tax
advantaged equity markets and thus became the principal cause of our eventual default, lacking
sufficient funds to complete the project.
In 1987, we entered into a deed -in -lieu of foreclosure with Chemical Bank.
The City of Saint Paul lost the UDAG and $2 million Lowertown Redevelopment grant as a result
of the larger and prior secured debts however, the project contributes approximately $2 Million
annually in property taxes. Despite this adversity and losses experienced, the city has
nevertheless deemed our relationship favorably, recognized by the fact it provided a $2.9 million
bond allocation in 1997 for our acquisition and rehabilitation plans of Hampden Square
Apartments. We invite you to call Mr. Thomas Sanchez, Development Director for St. Paul -
266 -6617.
The Glen. located in Minnetonka, is a 110 unit, $12 million condominium built in 1982 and
financed by First National Bank of Minneapolis that experienced extremely slow sales in a
hostile condominium market over seven years. We entered into a work -out arrangement with
the bank that required the sponsors to pay $1 million of a $3 million deficit which represented
our capacity to pay at that time.
Our relationship with First Bank (now U.S. Bank) has been re- instated recently after a six year
• hiatus. It was stated to us notwithstanding the bank's losses it recognized our earnest efforts
to stay with the project thru the seven years it took to finally sell the condominiums out when
most other sponsors they experienced would have long ago simply turn over the keys to the
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failing project. U.S. Bank is currently considering a $13.5 million bond related tax credit
transaction with us. We invite you to call Mr. Paul Bauer, Vice President - 647 -3509.
Riverolace Phase II. 6.5 acres_ Fast Henneoin. Minneaoolis. MN. In 1984, we borrowed
$2 million from the International Brotherhood of Electrical Workers, Local 292 {IBEW} to
purchase land in anticipation of building a Riverplace Phase If mixed use project. The project
never proceeded due to the same negative market conditions precipitated by the 1986 Tax
Reform Act. Not able to perform pursuant to our development contract, we entered into a
settlement agreement with the City of Minneapolis that required us to deed over the property to
the city in exchange for relinquishment of performance letters of credit it held. The city
agreement precipitated the need for a work -out agreement with IBEW that has been timely paid
resulting in total pay off on September 30, 1997. For a reference, please call Mr. Glen Wehr,
IBEW 292, Financial Advisor - 841 -3950.
We have enclosed also for your review the revised Pro Forma reflecting the additional $330,000
rehab work.
Hopefully, the foregoing is responsive to your questions and concerns expressed at our meeting
permitting the City of Brooklyn Center to support our bond inducement proposal, however; If
there are any other questions please do not hesitate to call.
• Sincerely,
Robe J. Boisclair _
President
RJB:lh
cc: Mike McCauley, City Manager
Encl: 1996 Audit
Questionnaire
Pro Forma
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Total Monthly of Median
Number of Average Unit Rent/ Contract Monthly Utility Income
Unit Tvne So. Ft. Tvnes Baths Sq. Ft. Rent/Nlonth Rent .allowance Gross Rents
31 575..' 1 BR 1.00 .. 0.99... ;<: .::. 5567 $17,464 S16 52._3 0 0
18 300 2BR' -. 1.00 0.83 5666 $11,988 $23 50.73 ° .0
46 575 1 BR 1.00 1.10 5630 S29.106 S16 56.67 ° o
27 300 2 BR 1.00 0.93 S740 519.980 S23 55.77
1 ' - -= 578,538
1998 Area ?Median Gross Income Rents
Type 50.00°'0 60.00 0 o
I BR 570 683
Utility allowances: source - Minneapolis PHA 2BR 684 820
Parking - 60 stalls S40 90% occupancy= 52,160
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RE Taxes 593,273 5765 R E. Taxes: ,
(;alas pnca - 5A00 p:DC
Insurance & Misc Taxes 525,000 5205 local ta.N capac:ry•) —
utilities 592,000 S 7 54 (sales pnce • ;,000 pIDt' ^_ ' t
Operating & Maintenace Expenses 570,000 5574 local tax capacity' 1_0 °tl
Management Fee - °,° 547,123 5386 Locai tax capacity u 13_251
Administrative 550,000 5410
',eplacement Reserve 524,400 5200
otal Expenses 5401,796 53,293
Total Operating Expenses Less RE Taxes Per D/U S2.529
Expense Ratio 4263°'0
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ProForma
Total Potential Rent Revenue 5942,451 Mortgage Amount 55.225.573
Less: Vacancy g1 5.00% ($47,123) Value per dwelling unit 542.833
Add: Other Income 58,600
Parldny 525,920 Interest Rate 3.50000 0 o
Net Effective Income: 5929,849 FNNLa Facility fees 1.23750 0 0
Less: CAP rate 2.00000 0 o
Operating Expenses (5308,523) 6.73M
Real Estate Taxes (593.273) Term (years) 30
Total Expenses (5401,796) Debt Service Constant 7.77321 ° o
NOI - Net Operating Income: 5528,053
Max. avail. Debt Service 5406,195 Per Unit
Purchase Price S4.325.000 535.451
Debt Service Coverage 1.3 Repairs 51,930,000 515.820
Eligible Cosu'a7 5108.125 2_50
Net Operating Income - -_ S 523.053 I Total Eligible Costs S6. 36 3.1 25 552.157
Cap. Rate - Based on DUS Underwriting 9.00 01 0 Eligible Loan -to -Cost Ratio 85.00 ° 0
Estimated Value (Income -approach) 55,867,256 Maximum Supportable Loan 55.408.656
.actual Loan -to -Cost Ratio 85.00 ° o
Maximum Valuation Mortzaee .amount aR) 85.00 ° 0
Value Per Dwelling Unit S44.3??
Value Per Dwelling Unit 530.8'8
Rate 6.73750o •<i
ertn vents) .
30 ��a1>u� 8�' �. �s' �:` �• v��: :fyk���"`�����s:::��i��`�x"%` ?a 41 "� "
Ybt Service Constant 7.77321''0 X75 - < ". ,. .• .
Debt Service 5387,663 tf3t#'js{;Ar?ctaQ'
Cash Flow 5140,390 - � c >,` " ?:_' > : <.;>. >.•<
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1st Mtg Other
SOURCE OF FUNDS (Cash): (UnRated) Sources Total
First Mortgage Loan Proceeds $4,987,168 $0 $4.987.168
B Bond Proceeds - Junior Debt SO 51,121.436 $1.121.436
Equity 50 $527.131 $627.131
TOTAL SOURCES: $4,987,168 51,748.867 56,736.035
APPLICATION OF FUNDS:
uV�t�2u \��n�:?11\"A.
Acquisition Cost $4,325,000
Initial Deposit to Reserves $750 $91.500
Garages - 10,000 per stall $600,000
Rehab Requirement/Rehab Escrow $1,330.000
Operating Deficit Reserve 51,000 $122.000
Mortgage Broker Fee 1.50 °% $74.808
DUS Application Fee (_appraisal & Eng.) $20.000
FNMA Fees 545.000
FNMA Interest Reserve Escrow 524.594
Lender Legal Fee 520,000
Marketing Fee - A Bond (Incl. Park Bond Fee) 1.50 0 ,'D $74.808
Marketing Fee - B Bond 5.00 $56.0,'2
"ap Fee 2.00 S99,743
T itle
sue Servicing fee 0.50°0 524,936
51.75 51,000 58.7_8
Survey 52.500
Issuer Application Fee 55.000
Bond Counsel (55,000 initially) $20,000
Underwriter Counsel _ $20.000
Trustee $6,500
Printing 56.000
Piper Jaffrav Interest & Misc $5,000
Partner Legal (Tax Credits) 515,000
Tax Credit fees ( application /carryover /allocation) $9.000
Tax Advice 57.500
Total Financing Costs: 57.013.688
Cash Required at Closing:
$277.653
Developer's Fee paid at Closing: $0
Cash Flow Analysis (first year):
Net Operating Income u 95% Occupancy 5528,053
Debt Service - First Mortgage 5284.936
, Cap Fee Reserve 51-1.930
Debt Service - B Bond 594.095
Developer's fee 5114,790
Cash Flow Slg 302
Page
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1999 2000 2001 :002 2003 2004 2005
Year I Year 2 Year 3 year 4 Year 5 Year 6 Year 7
6 0&% RENTS: Annual Growth) 3 00' 5942,451 5970.7^) S999,346 si.329,842 51.060.737 51,09:,559 S1, 125.3 36
1: vacancy 5 GO`. (547,123) (548,536) '5 151,49:) (553,037) (S54.6-1S) "S i
, -6,267)
d: Other I—int 58,600 58,853 S9,1:4 59,397 S9,i79 59,970 510-
add: Parking 5:5,9:0 526,698 527.499 528,3:3 5:9,173 5321)•48 530.950
Scheduled Rental Revenue S929,8-49 5957.744 59196176 51 016,071 51,046,-;53 S 1.0 77 9.19 S1, I I
GROSS RENTAL COLLECTION 5929,849 5957,744 5996.476 51,016.071 51,046J53 51,077949 S1.110. -88
EXPENSES: (3-. Annual crown) 3.00 °L 1
RE Taxes 593,273 596,071 598.953 $101.9:2 5104,980 Siols, 1- 5111,373
Insurance & Nlhc Tun 525,000 5Z5,750 526,523 527,318 528,138 SZS.982 S29,s i I
❑tmu's S92.000 594,760 597,603 5100,331 5103,547 5106.653 S 10 9 , S i ",
Operating & Mm040.ce expenses 570,000 572J00 574- 576, 578,786 591,149 583.
Nianagernew Fee . :.3 °. 547,123 S48,536 S19,99: 551,492 553,037 S51.6:s 556,267
Adminisirsiuve 550,000 551,500 S53.0-45 554,636 516.275 557964 559.703 5 9,703
Rrpl2cernent Reserve 524,400 S25.132 S25.386 $26,663 527,462 S28.2S6 S29.13
TOTAL OPERATING EXPENSES 5401.796 5413.849 51 $139 S452.::-, S465.791 5179.76?
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NET OPERATING :NCOME 55:3.053 S 5 »3.895 S 5577.018 5594.3-'3 5611153 5636,5 -3
DEBT SERVICE
Priority I: La. Floater 4.7375% (5284,930) (SZS6,:21) (S:S7,597) (5289,()69) (5290.645) (3:9:,33 1) (S294,137)
Priority:: Cap Fee Escrow Reserve - , . GO% (514,930) (514,930) (SI4930) (SI•1,930) (513,930) ($14,930) (514,930)
Priority 3: B Bond (594,095) (S94,095) (594,095) (594,095) (594.095) (594.099) (594,095)
Priority 4: Developer's Fee (S11 »,790) (SI 14.790) iS111,7 I (S 114.790) (5114,7 (SI 14.790) (SI 14.790)
PROJECTED CASH FLOW 519,302 533,858 S48.800 564.131 S79. M9 596,012 51 12.571
' .Add: Principal Senn A & 8 558,657 56 567,305 57 577,229 S82.7:7 588,617
(5229.i79) (S:29, 179) 6) (S:?0,8Z6) S:ql)•826) (5178.993)
Deduct: Deprecation K 12903
Currew Year Unused Deprecation (513 (S 174,',:2) (SD4,596) (SI 33,7:9) (511:,083) SO
Carry Forward lin—d Depr,ciauan so (S (5 (5613,027) (5746.756) (Slig.S14)
Current Year Offset s( Carry Forward Depreciation so so 1 10 so so $o S: 2 _,19>
T- Liability 39 30% so so so so SO so SO
otter Tax Cash Flaw 519302 S33.S58 548.800 S64.134 579.36? S96.012 S1 1 2 -571
9 ,112-R
2006 2007 2008 2009 2010 2011 2012 2013
Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 1;
GROSS RENTS: (3•v Annual Growth) 3.00• 31, 51,193.869 31,229,685 51,266,576 S1,3C1,573 S13 43.710 51.384. 51.
Less; V.c..cv 500% (557,955) ( (56 (563,329) (565,229) (S67,186) ($69- (S71-
Add: Other income 510.577 510,894 S1 i.2_! 51 1,558 S1 i.904 512 ,26 2 _ 512,629 S I 3,CO-N'
S34,334 S35,S S36.956 S'
Add: ?2rian-, 531,878 S3:335 S33,81-0 38,064 S39-
Scheduled Rental Revenue 51,143.597 51.177,904 51,213.'-42 51.2I9,639 51365.514 51.406.479 -
GROSS RENTAL COLLECTION 51.11I $1,177.904 si.- 1 49.639 S1._97, 129 S1.32:5,7- 51,36 51.406.47
EXPENSES: M. Atin-I Growth) 3 00%
RE Taxes 3114,714 311 1j5 5121,700 S125,351 S1Z9.1 S13- 5136.97 S I . 1, 0 91
Insurance &.%lhc Tun 530,747 531,669 532.619 533, 531,606 53 536,713 S3 7, S 15
Utilities 5 5116,543 51 5123.6- S1:7350 5 S 5139.158
Operaung & %1..t ... cc Expenses 586,091 SS8,674 591,33 S94,074 596,396 599,303 S10- S1 Oi,ssi
NI .... enn-t Fee- 56 557,955 559,693 361,484 563,329 365- 567,186 569,201 S71.:77
Administrative 561, 563339 S65. 567. 369.Z 2 S", 1-M 573, 57
Rept."—"t Reserve 532009 530,909 531.836 531792 533, 53-1.799 535.53 536.907
TOTAL OPERATING M-ENSES 5494,158 5508,993 5539980 5556A?9 3 S59o.05O 5607.75- -,
NET OPERATING INCOME 5649.439 5668,922 S6839S9 5709 .654 S730.9 S752377 5775.46 _ S799,72,
DEBT SER%ICF.
Priority 1: L— Floater 4 7 375'5 (5296,069) (5298,138) (5300.35:) 53017:2) ( 5305,:59) (530797 (5310.88Z) (S313,993)
Priority:: Cap Fee Escrow Reserve 10 ( 59,514) (59,514) (sg, (59.514) (,-9 .1)
i (S95
Pri.ri,v 3: 3 Bond (594,095) (S94,095) (594,C95) 594,095) (S94.095) (394.09 ( 59 4 .095)
i'
Pnoruy 4: Developer's Fee 1114,790) (511 »,790) (5111,7901 I SI',4,790) (S1 ;5111.790) (511 S I 7Q 77
PROJEC CASH FLOW 5134970 51 5 2.385 3 17C 238 5188-;38 S:0 S::5.5f)1 S'--6.: S
ASTIM CAMt FLOW
Add: Principal Senes A& 3 S94,9:6 5101,585 S108.9: 3116,683 S1 S133.S93 51 53.643
Deduct: Depreciation (5178,993) 1178,993) ($175.9 5 (5178,393) (5178,993) (5178.993) 5178.993)
0 ,real Year L;n.i,d D,pr,—Udn so so so so SO so SO So
!7 Forward Unused Depreciation (5836,649) (5785,745) ($710.668) -S610,4 5384,259) (S330.979) (51 49, 6) So
, urr-rit Year Offset of Carry Forward Depreciation 550,904 575,077 5100 5126. S ;3,-'S9 S181,03 S! .9. 576 So
Tax Lability 39 50` $o so so so so so 521.:1 569.519
After Tax C ash Flow 3134,970 51 S1",).:33 S S SZ26.504 S:2 I S i 1 1 1. 9:
rlu-
Revision Date: 03/20/98
A
;First Mortgage $4,987,168 Credit Enhancement Fee 0.5040%
:Interest Rate 4.7375% Servicinc Fee 0. ) 960%
In
'Term 30.00 !Remarketing Fee 0.1500%
Trustee Fee 0.0375%
'Liquidity Fee 0.1500 % '
�Est. Weekly PSA 3 3.5000%
" Scheduled Principal Reserve (based on ".040% amortization schedule) Anitial Interest Rate 4.7375%
MORTGAGE FACILITY YEAR END
YEAR A M 0 UN T INTEREST FEES PRLN-CIPAL BALANCE
I $4,987,168 $174,551 $61,716 $48,669 $=1,938,499
8,499
2 $4,938,499 $172,847 $61,278 $52,096 $4,886,403
3 $4,886,403 $171,024 $60,809 $55,763 $4,830,640
4 $4,830,640 $169,072 $60,307 559,689 54,770,951
5 $4,770,951 5166,98- $59,770 563,891 $4,707,059
6 $4,707,059 5164,747 $59,195 $68,389 54,638,670
7 $4,638,670 5162,353 $58,580 $73,20 S4,565,467
8 54,565,467 $159,79 $57,921 $78,357 $4,487,110
9 54,487,110 5157,049 $57,216 583,874 $4,403,236
i $4,403,236 $154,113 $56,461 589,778 54,3
1 3,45 8
11 S4, 13,458 $150,971 355,653 596,099 $4,217,359
12 54,217,359 $147,608 $54,788 $102,864 54,114,495
13 54,114,495 $144,007 $53,862 5110,106 $4,004,390
14 $4,004,390 $140,154 $52,871 5117,857 $3,886
15 53,886,533 $136,029 $51,810 5126,154 $3,760,379
Paae
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,'�:.° ;'.r c'.. ,. \.': ie\ Ova =• >: \S. ?��33`��v.: l:�Caw..i ., x. ,.. ��• . ...»• „ yis,.v..:a
• cro \.a, �•�'�,:�F \ <: � �... . ,�, ,�ou,.�. ...:- r c �* \a , 'k..' ' gin:° r::
.,y �. \\ . � a�oc:' �� mow. � � a Yaw . . ' \�. «3 .•°`•�, . � b3;�S,, "• ~\`• `��a,.,.. ;,:. ,.. <,:•
Z ^, ::a� ii,: �. •, �. �'.`. ���av :� <;S��:�'� \�.��4xu��.: ,`v\`4a:1 ,.� <��.�\\ \.. ...��t�:. �'H �e.� �� .*,R:'•``v •`^:_
-.< v,: uw:.; v..,. a,. ��w.., ..,.���a...v:S��o,..•,w.ay.'..: :. ,•:. ., .:,m��t:yS.� i..�., lal,S.���c [a - ...
Revision Date: 03%20'98
I
-mount S 1,121,136
Interest 7.50
Term 301
Debt Service Constant 8.39057%
:annual Principal & Interest S94.095!
Year End
Year B Bond Interest Principal Balance
I S1,121,436 584,108 S9.987 S 1.11 1.449
2 51,111,149 583.359 510,736 S1.100.712
3 S 1.100.712 S82,553 $11,541 S 1.089.171
4 S 1.089,17 1 581,688 S12,407 S 1.076.761
5 S1,076,764 S80,757 S13,338 S 1.063.126
5 $1,063,426 579,757 511.338 S1.049.088
7 S1,049,088 578,682 S15,413 S1.033.673
8 51,033,675 577,526 516,569 51.017.106
9 51,017,106 576,283 517,812 S999.294
10 5999,294 574,947 S19,149 5980,146
11 5980,146 573,511 520,581 S959.562
12 5959,562 571,967 522,128 S937.434
13 5937,434 570,308 523,787 S913,647
14 5913,647 568,524 525,571 S888.075
15 5888.075 566,606 527,489 5860.586
I'he following sets forth expected debt service coverage of the Subordinate Bonds and the Senior Bonds based
on net operating income assumptions, and assuming interest on the Senior Bonds at the Cap Rate of:
3.50 4.30% 5.80 0
0 + \et Operating Income 5552,453 5:52.453 S552.453
ss: Deposits to Reserves (524.400) (524.400) (524.400)
et Income after Deposits to Capital Reserves 5528.053 5528,053 5528.053
Plus: Property Management Fee 547,123 34 7.123 S- 47.123
Cash Flow available for Debt Service 5575,176 5575,176 5575.176
First Mortgage Debt Senice (Year 1) 518,669 548,669 S -
Mortgage interest 5174.551 5214,448 5289.256
Fannie Mae Credit/Servicing Fees 544,885 544,885 514.885
Fannie Mae Liquidity Fees 57,181 57,481 57.481
Interest Rate Cap Escrow S14,249 S14.249 S14.249
Remarketing 57,181 57,481 57.181
Trustee S1.870 S i.870 S1.870
Total First Mortgage Debt Service 5299,186 5339,083 5413.890
Cash Flow available for Subordinate Debt Service 5275,990 5236,093 S161.285
,average Attttual Subordinate Debt Service 591,095 594,095 591.095
Assuming interest on the Senior Bonds at: 3.50 which is the approximate one year
average of tax- exempt weekly variable rates, coverage is as follows:
Coverage Ratio of Senior Bonds & Subordinate Bonds 1.46
Coverage Ratio of Senior Bonds & Subordinate Bonds
after payment of management fee 1.34
Assuming interest on the Senior Bonds at: 4.30% which is the approximate ten year
average of tax- exempt weekly variable rates, coverage is as follows:
Coverage Ratio of Senior Bonds & Subordinate Bonds 1.33
Coverage Ratio of Senior Bonds & Subordinate Bonds 1.22
after payment of management fee
Ov sliming interest on the Senior Bonds at: - Strike Race/Underwriting Guidelines
erage of tax- exempt weekly variable rates, coverage is as follows:
Coverage Ratio of Senior Bonds & Subordinate Bonds 1.13
Coverage Ratio of Senior Bonds & Subordinate Bonds after payment of mgmt. fee I.04
P"CC
u,.�..:
`.?
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......,` \3:.`...... ,`\�C". 4.. \\J,":a, ,..,,. .. i R47eR•ni�'r.� iJ - I �,.�^.�.:�SC.:Y,z, „:w1lt.�Jo3� z `v`.. a' .ei::> ?aJ�..:;.,.:.v.,,,
File Name: I: der.Iori�98bond\BC4060
Revision Date 0; 20
i
Cash Flow Value Mortgage $140,390
Cap Escrow 2.00% ($14,930)
$125,460
Coverage 75.00%
Debt Service on B Bonds $94,095
Rate 7.50%
Term 30
Loan Constant 8.39057
Maximum B Bond Issuance $1.121,436
•
Pa, ---
�..
•: � .>.a..,. \e ,.,.s ?`.,,�"\�.:. :`L\\fi,�: ..,:., Q ;QG.lE� t?>3.�P.�tTltiClt�i �'.L.: •x'mm'�.'a' µ +,>zs,.,,. �,`�` v -� <4\ `::fin: ���\ `k <: . \_< ":',':
Revision Date: 03/20/98
!:Developer's Fee $943,127
.'Developer's Fee - Paid at Closing $0!
:Deferred Developer's Fee $943,127!
:Interest Rate 9.00%
Term 15
':Debt Service Constant
12.17120%
'Principal & Interest Pavrnent $1 14.7901
Year Interest Principal Balance
I $943,127 $84,881 $29,908 S913,219
$913,219 $82,190 $32,600 $880,619
3 $880,619 $79,256 $35,534 S845,085
4 $845,085 $76,058 $38,732 $806,352
5 $806,352 $72,572 $42,218 $764,134
6 $764,134 $68,772 $46,018 $718,116
7 $718,116 $64,6 S50:1 59 $667,937
8 $667,957 $60,116 $54,674 $613,283
9 $613,283 $55,195 $59,594 $551,688
10 $553,688 $49,83 $6-1,958 $488,730
11 $488,730 $43,986 $70,804 $417,926
I $417,926 $37,613 $77,177 $340,750
13 $340,750 $30,667 S84,122 $256,627
14 $256,627 $2 $91,693 $ 164,934
15 $164,934 $14,844 $164,934 $0
First Mortga
$4,987,168 Acquisition
B Bond
$1,121,436 Transaction/Rehab
Developer's Fee $943,127 Developers Fee
S7,051.731
`Recision Date: \ `03 , 20 98
, EC - ell
ON
. ie LE PRICE 54,325,000
Price: S4.325.000
Sale Reconciliation
Mortgage S4.987.168
B Bond
S1.121.436
Tax Credit Proceeds 5627.431
Cash Required at Closing 5277.653
Financing Costs
(52.688.688)
S4.325.000,
W\�&
MOMORnE - L,
,Acquisition Cost - Series1998A S4.987.168!
, Less. Land, per DX 53,500 (S-127.006
S4.560.168!
!BOND Rehab Requirement - 15% of Acquisition Cost 15.00 3684.025
TAX CREDIT Rehab Requirement — S5,000 per Dwelling Unit 55,000 5610.000
or
'Adjusted Basis 53.898.000 i
,10% of Adjusted Basis 10.00 5389.900
ReliabLhrationaxpcme intistbe die greater of 55.000 per low income unit or 10%of adjusted bass, tri order toqualify for rehabilitation credit
Proposed Rehab 51.930.000
(Purchase Price 54.325.000
Less:
Land 1a) per DIU S3.1 (S427.000)!
53.898.000
Add: Acquisition Costs so
Rehab costs S1.930.000 I
Developer's Fee S672.927
Contracter's Profit 5270
S Less: Ineligible Basis - Garages
(S600.000
!Elizible Basis
S6.171.127:
,Applicable Fraction 40.00
Qualified Basis 52.468.451
Credit(Appliciable Percentage 3.58 588.371
Eauit from Sale of Credit 50.71 10 -Years 5627,431
Sales Price S4,325.000
Rehab Requirement S1,930,000
Financing Costs - Bond/Tax Credits 5667.188
Eligible Basis
56.922.188
Qualified Basis 100.00 S6.922.188
Qualifying Basis S6.922.188 : 1
Step One: Divide Qualifying Basis by'- of units 30 units * 15% S2
Step One: Di-vide Qualifying Basis by#ofunits 92 units - 8% S417,601
Develper's Fee S672.927
Q
2,
Contractor's Profit: 6.00 S1
Contractor's Overhead: 1 .00 01 0 538.600
O neral Requirement: 6.00% S115.800
tal Contractor's Profit/General Requirements/Overhead: S27
Develover/Contractor Total Fee - Not to exceed 20 1 ' .62 t
P
'7'
o
NMI,-
• Lam Den Revved: 20-MM-48
He Name: 1,NdcViw')8boit&BC40b0
Plrutt Date-
Purchase Price $4,325,000
Less:
Land - Per Dwelling Unit $3,500 ($427,000)
FF&E - Per Dwellina Unit $5,500 ($671,000)
Z5
Improvement Basis $3,227,000
Straight Line - 27.3 Years $117,345
Improvement Basis after addition of rehab (yr. 3) $4,922,
Straight Line - 27.5 Years $178,993
FF&E - 6 Years Stl 1,833
Current
Accumulated Depreciation Year Balance Provisions Retirements Balance
, T and Improvements $o so so so
uilding & Fixtures 1 $3,227,000 $117,345 $3,109,655
FF&E 1 $671,000 $111,833 $559,167
2 $3,109,655 $117,345 $2,992,309
2 $559,167 $111,833 $447,333
Rehab Completed Year 3 ) 3 $4,922,309 $178,993 $4,743,316
$447,333 $111,833 $335,500
4 $4,743,316 16 $178,993 $4,564,323
4 $3 35,500 $111,833 $223,667
5 $4,564,323 $1 $4,385,330
5 $223,667 $111,833 $111,833
6 $4,385,330 $178,993 $4,206,337
6 S111,833 $111,833 (SO)
7 54,2 $178,993 54,027,344
8 $4,027,344 5178,993 $3,848,351
51
9 53,848,351 $178,99' ) $3,669,358
10 53,669,358 $178,993 53,490,36
11 53,490,365 $178,993 S3,31 1,372
12 53,311,372 5178,993 $3,132,379
13 S3,132,379 S178,993 $2,953,385
14 S2,953,385 $178,993 $2,774,392
15 $2,774,392 S178,993 $2,595,399
•
Pat-,e
Will v our future needs he mPt with one of these vouchers?
*The vouchers may only be good for one year because there is no
guarantee there will be funding in the future to provide for them.
*The owner DOES NOT have to accept the voucher after one year
and you may have to move.
*If you have to move you will have a difficult time finding housing
because there is a very low vacancy rate right now throughout the
metro area.
*Section 8 has limits on how much your rent can be. You will have a
difficult time finding housing that has rent amounts that fit within your
Section 8 voucher limits.
*The majority of landlords do not accept Section 8. You will have a
difficult time finding a landlord willing to accept you with your Section 8
voucher.
The biaaer picture
*The vouchers will pay the higher rents for one year. This will put a lot
of money toward rents for a limited number of people and quickly
drain funds from the Section 8 budget.
•As the use of enhanced vouchers increases with more and more
prepayments and opt -outs throughout the state it will bring growing
pressure on the overall Section 8 budget, resulting in fewer
households served.
*After one year, the unit will be lost forever as affordable housing.
"Sticky" or "Enhanced" Vouchers
When the mortgage is prenaid and the rents go up to market
rate you mav_ aet whet, is celled e, "sticky" or "enhanced"
voucher.
*Not everyone will get a "sticky" or "enhanced" voucher.
*If the new rents are more than 30% of your income, you will get a
voucher.
If you get one of these vouchers...
•You would pay 30% of your income toward rent.
*If your income goes down you are still responsible for paying the
amount of rent that was set at the time of certification.
*If your medical expenses go up you are still responsible for paying
the amount of rent that was set at the time of certification.
*If your income increases, the amount of rent that you are responsible
for will also increase.
*Because there won't be any vacancies and the owner will be making
more money with the higher rents, there is no interruption of the
owner's cash flow. If the owner chooses to spend this additional
money on upgrading the building in anticipation of the up- market
tenants who will move in after existing residents have been displaced,
you will be subjected to inconveniences and disruptions of life while
renovations are undertaken. (This is what is happening right now at
Oak Grove Tower in Mpls., another building that was built under the
same special mortgage program.).
Background
When Shingle Creek Tower was built, it was financed with a special low interest
rate, 40 -year mortgage through the department of HUD (Housing and Urban
Development.)
In exchange for the low interest rate, the owner agreed to keep the building
affordable for 20 years.
With this special mortgage, after the 20 -year anniversary date, the owner is
eligible to prepay the balance of the mortgage and raise the rents to market rate.
Shingle Creek Tower has passed it's 20 -year anniversary date.
The owner gave everyone notice on February 11 th, 1998 that he is going to
prepay the mortgage.
Once the mortgage is prepaid the owner will no longer be obligated to keep the
rents affordable.
It will be in the owner's best interest to increase the rents to make more money
and to remain competitive with other properties in the area.
To make the rents comparable with other rents in the area the owner would have
to increase the rents by $100 to $200 per month for everyone at Shingle Creek
_Towe
The people who live at Shingle Creek Tower are elderly, disabled,
and low income. Most of us are living on fixed incomes.
We cannot afford higher rents.
Some of us have been members of this community for a long time.
All of us wish to remain here.
We have organized and are working to keep our homes affordable to
us.
We want the owner to sell the building to a non profit because a non
profit will keep our rents low.
We are currently working to set up a meeting with the owner and
research some non profits.
Senator Scheid's and Representative Carruthers's office have agreed
to help us through this process.
We would like to know if you, the Brooklyn Center City Council, will
supoort and help us through this.
i
March 28, 1998
Tom Kouri
Chair, Riverwood Neighborhood Association
6416 Willow Lane North
Brooklyn Center, MN 55430
Ms. Myrna Kragness
Mayor, City of Brooklyn Center
6301 Shingle Creek Parkway
Brooklyn Center, MN 55430
Re: Riverwood Neighborhood Association position regarding Skyline Enterprises' senior
cooperative housing development proposal at 66th and Willow Lane.
Dear Mayor Kragness:
I am writing this letter to you as spokesperson for the Riverwood Neighborhood Association and
ask that this letter be shared with councilmembers at the March 30 council work session. We are
requesting joint meetings with council and staff to ensure that city planning efforts are compatible
with our Association's goal to improve the quality of life of our residents and the city's
Comprehensive Plan.
Upon learning of Skyline Enterprise's desire to construct senior cooperative housing at 66th and
Willow Lane, our leadership worked with city staff to arrange a special informational meeting on
March 19 for residents to hear the plan and ask questions of developer Mr. Stinski and city staff.
Following this meeting, we conducted a telephonic survey of residents attending the meeting and
have identified several issues that require response in order for us to support this proposal.
Our specific issues are:
1. We are concerned that current city development priorities may not favor the strengthening
of our neighborhoods which is essential to the foundation of our city. In particular, we
question the potential use of the city's $2.5 million in development funds for a Brooklyn
Boulevard strip mall instead of residential housing.
2. Level of city commitment to follow through on the city's previously stated desire to
redevelop the area occupied by the Lyn -River apartments. This situation is further
aggravated by Skyline Enterprise's desire for four -year exclusive development rights and
TIF district time limits that are less than four years.
3. Unanswered questions about the proposed developer, Mr. Stinski, who is perceived as a
developer with a rental rather than ownership track record. Controls to minimize the risk
of not selling the units or conversion to non -owner occupied status are of great concern.
4. Forty-year HUD financing for senior cooperative housing.
Riverwood Neighborhood Association Criteria
March 28, 1998
,g Page 2
5. Request by Mr. Stinski to exceed Mississippi River Corridor building height limits of 45
feet, especially immediately adjacent to single family residential housing. These rules are in
place to protect our valuable river resource and promote compatibility with the
surrounding environment.
I believe that we can jointly work together to address these issues. For this reason, I am
requesting ongoing joint meetings with council, city staff, Riverwood leadership, and our city
liaisons. The April 14 council work session is suggested for the first meeting.
I can be reached at 936 -7236 (work) or 560 -0621 (home) to answer any questions. We have
made significant progress working together to improve our resident's quality of life. I look
forward to our continued joint efforts. Thank you.
Sincerely,
Tom Kouri
Chair, Riverwood Neighborhood Association
cc: Ms. Kathleen Carmody, Councilmember
Ms. Debra F ilstrom, Councilmember
Ms. Kay Lasman, Councilmember
Mr. Bob Peppe, Councilmember
Mr. Michael McCauley, City Manager
Mr. Brad Hoffman, Director of Community Development
City of Brooklyn Center
A great place to start. A great place to stay.
To: Mayor Kragness and Council Members Carmody, Hilstrom, Lasman and Peppe
From: Michael J. McCauley ;
City Manager
Date: January 28, 1998
Re: Shingle Creek Towers
To follow -up on the recent discussion of the proposed use of housing revenue bonds, I am enclosing
copies of correspondence between the developer and Brad Hoffman. The letter from Mr. Hoffman
outlines the staff concerns on the proposed structuring of bonds at this time. Mr. Boisclair requested
that the application be withdrawn, rather than present it at this time with a negative staff
recommendation. Mr. Boisclair and Mr. Hoffman will be meeting to further discuss the concerns
about the structure of a deal using housing revenue bonds and the request for tax credit approval.
6301 Shingle Creek Pkwy, Brooklyn Center, MN 55430 -2199 • City Hall & TDD Number (612) 569 -3300
Recreation and Community Center Phone &; TDD Number (612) 569 -3400 • FAX (612) 569 -3494
An Affirmative Action /Equal Opportunities Employer
January 13, 1998
T
F;
Mr. Robert Boisclair
Boisclair Corporation
3005 Ottawa Avenue
St. Louis Park, MN 55416
Dear Mr Boisclair:
This letter is to inform you that I have received your application fee for a housing revenue
bond. In addition, I am also in receipt of the required documents including a resolution giving
preliminary approval, a public hearing notice and a housing program. At this time I have all
of the necessary documents to put this request before the council on January 26, at 7:00 P.M.
Before I process your application, I thought I would provide you with some of my
observations about your request. First, you are asking for $6,880,000 in revenue bonds in
addition to $750,000 in tax credits. Assuming a loan to value ratio of 75 percent, your
request suggests that the implied value of this building is approximately $62,000 per unit. It is
interesting that the current owner has an April court hearing scheduled contesting a per unit
value of $24,570 for payable 1997. Given the recent sales of other apartment (senior)
complexes in Brooklyn Center your request seems to be excessive. Second, it would appear
that you have no equity position in this project. The request for tax credits under these
circumstances seems to be totally unwarranted. Third, over the years Brooklyn Center has
issued a number of industrial revenue bonds and housing revenue bonds that have defaulted.
While the City of Brooklyn Center has no fiscal responsibility for the bonds, they do carry our
name. Past defaults have spurred numerous calls to my office based solely upon the fact that
this City's name was on the bond. Your application reveals three (3) rather high profile
defaults. Given my concern with the bond amount requested, I feel there is a significant risk
of default with this issue also. Again, these are my brief observations about your request.
I am prepared to submit your application for Council consideration. Staff would not be able
to recommend your request. I don't want to prejudge the actions of the Council or suggest to
you that I am speaking for them but short of that recommmendation, approval in my opinion is
unlikely. I would offer to you that if you would like to withdraw your application, I will
return your materials and check (which I am holding). I will hold this option open to you
until 1:00 P.M. Friday the 16th of January. If I have not heard from you by that time I will
proceed with the processing of your application and as I have stated it will be before the
Council on January 26th.
I hope this letter will assist you in your decision making process. Please advise me as to your
desire.
Sincerely,
Brad Hoffman
Community Development Director
CITY OF BROOKLYN CENTER
BH:bb
i
.a
�a
A7o
AV
DEVELOPING QUALITY INVESTMENTS IN REAL ESTATE
January 15, 1998
Brad Hoffman
Community Development Director
City of Brooklyn Center
6301 Shingle Creek Pa,'kway
Brooklyn Center, MN 55430
Re: Shingle Creek
Bond Application
Dear Brad:
Following up on the message I left on your voice mail, please rescind my $6.88 Million Tax
Exempt Bond Inducement request in light of your January 13, 1998 letter stating the
unlikelihood of City Council passage in its present form.
I will call you on Monday, January 19th to establish a time that's suitable to your schedule
to discuss revamping our application in a form more acceptable to the City Council at its
next scheduled hearing on February 9, 1998.
Sincerely,
BOISCLAIR CORPORATION
W Ro . Boisclair
President
RJB /jgo
M. Joe Strauss
3005 OTTAWA AVE. • ST. LOUIS PARK, MN 55416 -2206 • PHONE: (612) 922 -3881 • FAX: (612) 922 -3071