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City of Elk River, Minnesota
<br />Preliminary Financial Analysis of Blackhawk Woods TIF Application
<br />10/03/2013
<br />Page 6
<br />of the clubhouse activity building as well as remaining site improvements, The construction cost line -item appears
<br />reasonable.
<br />The Development Fee /Overhead cost equates to approximately 6% of the total development cost. The Soft Cost
<br />category is for expenses related to the professional service costs incurred in the planning and development of the
<br />site. The Financing Cost line -item is for expenses related to the Tax Credit process as well as costs associated with
<br />the permanent financing, and construction loan interest cost. The Contingency line -item is based on approximately
<br />4% of project costs, and the Reserves line -item represents 6 months of debt - service.
<br />Sources of Funds
<br />The Developer's submittal includes a preliminary total project budget of $10,074,657 as illustrated in the table below,
<br />The Developer has indicated they are expecting to receive long term financing through HUD in an amount of
<br />$5,869,554 and the loan is anticipated to have a 40 -year term with an effective interest rate of 4.70 %. Additionally,
<br />the Developer has indicated they will be able to seek a second mortgage based on the TIF revenue stream, which
<br />will provide $996,871 of funding. The term of the second year is 25 -years to coincide with the District, and the
<br />effective interest rate is 4,70 %.
<br />In addition to the traditional mortgage financing the Developer has projected they will receive additional equity from
<br />the sale of the Tax Credits of $2,375,000. The Tax Credits allows the Developer to reduce both their private
<br />borrowing amount and their private equity investment in the project. Their total private equity investment in the
<br />Development, not including Tax Credit Proceeds, is $558,575. The return on this private equity investment is
<br />measured in the return analysis section,
<br />Developer Proforma But -For Analysis
<br />In approving a TIF district and project, the City must make several findings, including the "but for" test; that the
<br />proposed development would not reasonably be expected to occur solely through private investment within the
<br />reasonably foreseeable future. The developer has provided a "but -for" argument stating that the developer's lender
<br />has indicated that financial assistance from the City is necessary to provide sufficient project cash flow and market
<br />returns to investors that will achieve project feasibility. The developer states the assistance is necessary to construct
<br />the project as proposed based on current financial indicators, Based on the developer's stated position relative to the
<br />Private Equity
<br />$558,575
<br />Equity (Tax Credit Proceeds)
<br />2,375,000
<br />Permanent Financing
<br />6,866,425
<br />Developer Working Capital
<br />274,657
<br />Total Sources of Funds
<br />$10,074,657
<br />The Developer has indicated they are expecting to receive long term financing through HUD in an amount of
<br />$5,869,554 and the loan is anticipated to have a 40 -year term with an effective interest rate of 4.70 %. Additionally,
<br />the Developer has indicated they will be able to seek a second mortgage based on the TIF revenue stream, which
<br />will provide $996,871 of funding. The term of the second year is 25 -years to coincide with the District, and the
<br />effective interest rate is 4,70 %.
<br />In addition to the traditional mortgage financing the Developer has projected they will receive additional equity from
<br />the sale of the Tax Credits of $2,375,000. The Tax Credits allows the Developer to reduce both their private
<br />borrowing amount and their private equity investment in the project. Their total private equity investment in the
<br />Development, not including Tax Credit Proceeds, is $558,575. The return on this private equity investment is
<br />measured in the return analysis section,
<br />Developer Proforma But -For Analysis
<br />In approving a TIF district and project, the City must make several findings, including the "but for" test; that the
<br />proposed development would not reasonably be expected to occur solely through private investment within the
<br />reasonably foreseeable future. The developer has provided a "but -for" argument stating that the developer's lender
<br />has indicated that financial assistance from the City is necessary to provide sufficient project cash flow and market
<br />returns to investors that will achieve project feasibility. The developer states the assistance is necessary to construct
<br />the project as proposed based on current financial indicators, Based on the developer's stated position relative to the
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