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commence construction in 2021. The applicant intends to commence construction of the second building
<br />(Phase 2) shortly thereafter, but has indicated construction could start 2-3 years after phase 1.
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<br />Applicant Request for Assistance
<br />Stonewood Development, LLC has requested assistance that includes 90% of incremental revenues for up to
<br />26 years related to redevelopment of the project site. Consistent with the original application submitted by Sun
<br />Rae Apartments, LLC, the application includes an approximate $31.556 million project funded through a
<br />combination of debt and equity. The applicant’s supporting financial information includes updated sources and
<br />uses of funds with a revised total development cost of $34.7 million with 80% as debt financing and 20% as
<br />private equity. Financial assistance through pay-as-you-go tax increment financing from the City of Elk River
<br />has been requested to provide additional revenues to support the required level of debt and project cash flow to
<br />repay annual debt service payments. Typical extraordinary redevelopment costs that cannot be supported
<br />solely by the project alone could justify the need for public financial assistance and allow the project to proceed
<br />as proposed to provide appropriate upfront funding and meet the minimum debt coverage requirements. The
<br />applicant has indicated the receipt of City financial assistance is necessary for the project to proceed.
<br />
<br />The updated sources and uses of funds from the applicant’s financial materials is illustrated in the table below.
<br />
<br />Sources Amount Uses Amount
<br />First Mortgage $27,762,071 80% Acquisition $2,225,000 6%
<br />Equity $6,940,518 20% Professional $1,368,591 4%
<br /> General $2,842,024 8%
<br /> Site Development $1,671,415 5%
<br /> Construction $17,537,997 51%
<br /> Concrete $4,347,650 13%
<br /> Development Fee $1,499,634 4%
<br /> Construction Management Fee $1,499,634 4%
<br /> Contingency $1,710,645 5%
<br />Total $34,702,589 Total $34,702,589
<br />
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<br />Tax increment financing has been requested as pay-as-you-go and would not be an upfront funding source and
<br />instead be used to support repayment of first mortgage debt service
<br />
<br />Estimated Total Development Costs by Phase
<br />
<br />Phase 1 Amount Phase 2 Amount
<br />Acquisition $2,225,000 Acquisition $0
<br />Professional $789,572 Professional $581,247
<br />General $1,485,601 General $1,356,423
<br />Site Development $1,026,010 Site Development 647,990
<br />Construction $8,768,998 Construction $8,768,998
<br />Concrete $2,173,825 Concrete $2,173,825
<br />Development Fee $822,197 Development Fee $822,197
<br />Construction Management Fee $822,197 Construction Management Fee $822,197
<br />Contingency $855,323 Contingency $855,323
<br />Total $18,968,652 Total $15,733,938
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<br />Qualifications
<br />The City of Elk River has been approached by Stonewood Development LLC for redevelopment of the project
<br />site and would require the establishment of a Tax Increment Financing Redevelopment District. Tax increment
<br />financing is a tool the City may consider using to support financial assistance for the project, subject to meeting
<br />the but-for test and need for public financial participation. A blight inspection confirming qualification of the
<br />building as substandard for inclusion in a Tax Increment Financing District was completed in 2015 and would
<br />provide the basis for which a Redevelopment TIF District could be established.
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