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HomeMy WebLinkAbout01.A Rental Housing Development Project by MWFCity Council Action Request Cottage Grove here Pride and?(05perity Meet Meeting Date Department 1 /18/2023 Administration Agenda Category Agenda Item Title Workshop - Rental Housing Development Project by MWF Staff Recommendation Budget Implication N/A Attachments TIF Memo - Ehlers.tif 566.81 KB Ehlers Overview Memo.tif 861.96KB TIF Run 1-5-23.tif 1.55MB Zywiec Property - Project Narrative.tif 1.49MB Zywiec Property - Site Plan.tif 553.58KB Zywiec Poperty - Example Elevations.tif 3.2MB Zywiec Propoert - Council Workshop.tif 3.27MB Cottage Grove here Pride a,,a P,,Sperity Meet TO: Honorable Mayor and City Council Jennifer Levitt, City Administrator FROM: Gretchen Larson, Economic Development Director DATE: January 12, 2023 RE: Workshop — Rental Housing Development Project by MWF Background MWF is proposing to develop a 120-unit rental housing project on the north side of the Zywiec 40 property. The team at MWF will present their proposed development at the workshop which will provide rental units that are at 50 and 80 percent of the area median income (AMI). Housing at these income levels provides an opportunity for affordable workforce housing, which currently is very limited in Cottage Grove. Some of the units will also be at market rate. Attached is the TIF analysis run by the City's financial advisors at Ehlers and provides a range for TIF assistance of $1.35M to $1.8M. The reason for the range is because it may be necessary to provide flexibility to MWF based upon the underwriting terms that they get from their bank. Because MWF is not applying for any housing grants, they may require additional assistance to get the project funded. Also attached is the project overview from MWF and the proposed site plan. Recommendation Provide feedback on any preferred community direction for the proposed project by MWF and if TIF assistance is supported. Attachments TIF Memo — Ehlers Power Point - MWF Site Plan/Images =\ E H L E RS PUBLIC FINANCE ADVISORS MEMORANDUM TO: Gretchen Larson - Economic Development Director FROM: Stacie Kvilvang and Schane Rudlang - Ehlers DATE: January 10, 2023 SUBJECT: MWF Development - Analysis of Financial Request The City of Cottage Grove received a public financial assistance request from MWF Properties (the "Developer") to construct a 120-unit mixed-inc studio, 1-bedroom, 2-bedroom, and 3-bedroorr respective proposed affordability relative to area )me workforce apartment project consisting of units. The breakdown of the units and their median income (AMI) is in the table below. 24 Studio 600 50% AMI 33 1 BR 735 80% AMI 33 2 BR 1100 80% AMI 18 2 BR 1100 Market Rate 12 3 BR 1215 Market Rate 120 The Developer requested TIF assistance over a 26-year term with a proposed construction start in 2023 and estimated cost of development at approximately $31.4 million, or $261,400 per unit. They intend to submit funding applications through Washington County's GROW program ($600,000) and Greater Minnesota Housing Fund's deferred loan program ($6,800,000). Preliminary Proforma Analysis: Ehlers conducted a preliminary review of the Developer's proforma including the following: total development costs, per unit development costs, relative equity contribution to loan amounts (loan to value and cost), development fee, rent and fees charged to lessees, operating fees, management expenses, operating cost ratios, and investment returns (return on investment or ROI, Yield on Cost, and equity returns). Based this preliminary review, the requested 26 years of TIF assistance is more than what is necessary for this project to become financially feasible, based on the financial information we received at this stage of the project. We recommend TIF assistance in an amount between $1,350,000 and $1,800,000 (present value) over an anticipated term of 10 to 16 years. This provides a range that would be appropriate to bridge the gap between the affordable and market - rate rents and meet necessary debt parameters to finance the project. We have provided the range since the developer does not yet have their term sheet from the bank to determine Loan to Cost or Loan to Value parameters for financing as well as debt service coverage. If the City is amenable to providing assistance we will review the development proforma again taking into consideration the financing constraints to determine the appropriate amount of assistance. From there, final terms would be agreed upon in a Contract for Private Redevelopment between the Developer and the City/EDA and the process would begin to establish a housing TIF district. Please contact Stacie Kvilvang or Schane Rudlang at 651-697-8500 with any questions. BUILDING COMMUNITIES. IT'S WHAT WE DO. E info@ehlers-inc.com '�, 1 (800) 552-1171 ® www.ehiers-inc.com 1/9/2023 City of Cottage Grove 12800 Ravine Pwky South Cottage Grove, MN 55016 RE: Workforce Rental Housing — Zywiec Property Mayor Bailey and Council: MWF Properties 7645 Lyndale Avenue South Minneapolis, MN 55423 TEL 612.314.7652 FAX 612.243.4660 MWFPROPERTIES.COM MWF properties We are pleased to present for your review a concept proposal for a 120-unit rental housing project on the north side of the Zywiec property that will be tailored towards serving the expanding workforce in the City. After several discussions with City planning, engineering, and the landowner we have arrived at a preliminary site plan that we are presenting today for your review and comment. Below is a bit of additional information on our Proposal. Project Team: Since 2001 MWF Properties has developed or consulted on the development of over 2,900 units of multifamily housing, with approximately 2,700 of those units being affordable or workforce housing. Having completed housing developments in 6 of the 7 counties throughout the metro area, including 4 projects within Washington County, we have a deep understanding of the market; and are committed to long-term ownership in the communities where we develop. Property management services will be provided by Velair Property Management, our related -entity management company with a corporate staff that has a combined 40+ years of experience in the industry. The proposed architect for the project is Kaas Wilson Architects, a local design group that specializes in multifamily housing. Project Site: As noted above, the proposed project would be located on the north side of the to-be-replatted Zywiec property. For the project to proceed there would be a PUD Application submitted for the City's review. The site is located within a growing area of the community that will soon be home to one of the largest employment bases in the County with the development of the Cottage Grove Logistics Center. We believe these units will serve a vital role in providing quality housing options at a workforce -oriented price point to these additional employees, while also supporting the business community and their planned growth by providing a housing option that doesn't currently exist in the market. Proposed Project: 120 units of workforce -oriented market rate housing Studio, one- two-, and three -bedroom units 20% of units affordable at 50% AMI MWF Properties • 7645 Lyndale Avenue South • Minneapolis, MN 55423 • TEL 612.314.7652 • FAX 612.243.4660 55% of units affordable at 80% AMI - 25% of units at market rate rents One level of underground parking below three stories of residential Approximately 128 stalls of underground parking and 54 stalls of surface parking (total of 182 spaces, about 1.5 stalls/unit) Community amenities including a community room, fitness center, dog run, secure package room, walkable/bikeable connections to local amenities, indoor bike storage and fix -it station Access to the project site would be provided off 100th Street South. Fire truck access and turnaround in this preliminary plan is provided via the surface parking lot. Adequate sizing of this turnaround will be confirmed by our civil engineer prior to a formal application being submitted. As part of this proposal we plan on submitting a Tax Increment Financing application to the City for your review and consideration. The TIF funding will support the income restricted housing units, along with the reconstruction and improvement of 100th Street South. Public Benefit: We understand that as part of the PUD process the project will need to provide evidence of the public benefit offered by the proposal. A few of the benefits we believe this proposal provides include: 1. Meets a Local Housing Need The Housing Chapter of the City's 2040 Comprehensive Plan establishes a goal to create an additional 221 housing units affordable to households earning between 31% and 50% of AMI. The proposed project would add 24 units to help the City work towards that goal. More generally, the Plan encourages `a mix of residential housing options near pedestrian, bicycle routes... and employment to ensure that the benefits of public investment in those facilities are available to as many households as possible.' By adding a quality workforce rental housing option to a housing mix in this area that includes existing single family and townhome ownership opportunities the City will diversify the housing stock and allow for continued support for the employment growth anticipated in the community. 2. Reconstruction and Improvement of 100th Street South As part of this development we will be improving 100th Street South to support the proposed project. These improvements will include adding trail and roadway improvements that will benefit the surrounding neighborhoods by providing efficient connections to local sidewalks, bike paths, and other community amenities. We thank you for your consideration of our preliminary concept plan and look forward to discussing in more detail at the workshop on January 18th. SgIrop rties, LLC Matt Yetze Development Manager mattyetzer@mwfproperties.com 612.314.7652 o "' Ze r z o W z Y � w Z � 3 w o z Z Z a g W m ° o V5 0 © © o CoCO co J Q Q J 0 0 H z H H Cl) co ~ o M M o 0 .4 00 N� CD h N 0 N N le L) � cj W W m m m Y Q0� 0 N Cl) LL Q m a Z a 0 :) CO d CO 0 H m g— INTO .7) PM. 41 M T� rs i s y t— �QrQ S (D m �a) z(D CL �X C o� * LA z� m �n3 �< zm T_ Ol 'f H ■ CD ■ N Q ■ < O :3 �' - cn 3 3 o rD n n O O O rD o 0) u rD °� 3r �orD r_+ 3 c_n 0 O� �•m wp �QL o3 rD 0 � CD � � -0 oc� 3� 0 0 �� �; 30 00 C7_0 �rDrD —� rD 0 X IV 1 1 V O O n\ n [�<I:l\J � r D U-1 r-r O �_ O r-h r • • rD CD ;s T . D ( V rD N rD r--, N N -0 W � Er. 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