HomeMy WebLinkAboutPeach Street Condos Staff Report 042920191
Staff Report
To: Midtown Urban Renewal Board
From: David Fine, Urban Renewal Program Manager
Date: April 26, 2019
Subject: West Peach Condos project
305, 315 & 321 West Peach Street
TIF Assistance Program Overview
The Bozeman City Commission created the Midtown TIF Assistance Program in 2017 to support
redevelopment activity and advance the goals of the 2015 Midtown Urban Renewal Plan. The
Midtown TIF Assistance Program supports projects that create significant new taxable value as
well as meeting the five goals of the Midtown Urban Renewal Plan. These goals, as required by
statute, focus on mitigating blighting conditions in the urban renewal area. Each of these five
goals is further refined with particular criteria for a total of sixteen categories that can receive
points. Point awards demonstrate specific compliance with the criteria, but are not the only
factors the board may consider in recommending an incentive award. For example, the board
may also consider new taxable value created by the project, or whether the project would be
feasible without a public incentive. In addition to tax generation, the goals of the Urban Renewal
Plan and the need for assistance, the Board must also make affirmative findings as required by
State Law.
Staff Recommendation
The Midtown Action Plan (2017) suggests that housing is a vital component of
redeveloping commercial nodes. Increased urban housing density is necessary to support
neighborhood commercial activity that promotes walkability and multi-modal transportation.
While there is a strong preference for supporting projects with higher densities and a vertical
mix of uses, the Action Plan calls for attracting more housing investment and the need for all
types of housing. The West Peach Condos project adds housing to the Midtown Urban Renewal
District (the “District”). To date, no projects have been completed that add housing in any
configuration to the District. A previous project proposed for West Peach St., the “Midtown
Apartments,” recently requested to withdraw from their award of TIF assistance due to the
2
infeasibility of the project even with incentives. The lack of completed projects suggests the
market for Midtown product is untested, which increases the degree of risk for developers, and
makes incentives important for early projects. Incentives may create the potential for higher
returns to mitigate higher risk, which may attract investment that would not occur without
these incentives. Once developers complete more projects and test market conditions, the
Board may be able to better define what kinds of projects need incentives and at what level.
The Midtown TIF Assistance Program allows the payment of eligible costs of
development to incentivize development that meets the goals of the Midtown Urban Renewal
Plan. The applicant is applying for several eligible cost areas totaling $548,208.51. Staff finds
that the proposed costs are eligible for TIF assistance. Staff scored the application based on the
program criteria. Based on our review and the application materials presented, the project
received 25 of 44 available points. The application scored points toward four of five goals of the
Midtown Urban Renewal Plan. The project eliminates blight and advances the District goal of
providing increased housing stock within the District to drive further commercial development.
Leland Consulting Group (LCG) completed a financial analysis of the project to help staff
evaluate the application for creation of new taxable value. Their report analyzed return on
investment (ROI), estimated payback period for the public assistance and proposed target
metrics for the ratio of private investment to public assistance. LGC bases their analysis on
awarding the applicant’s full assistance request. LCG recommends a ratio of private investment
to public assistance of 10:1 or greater for multifamily projects; the ratio for this project is
11.05:1.
LCG also created a tax generation model for the Midtown URD. According to their
model, the project would produce net new annual taxes of $63,411, which would allow TIF
assistance to be paid back in 12 years (assumes a 5% interest rate on the advanced amount) for
new increment-based payback if assistance is provided at the applicant’s requested amount.
In order to ensure that the level of assistance makes the project feasible, but does not
provide unreasonable returns to the developer, staff hired Economic and Planning Systems, Inc.
(EPS) to provide a third-party assessment of the development pro forma. This component of the
review process is obtained to assess the reasonableness of each applicant’s incentive request.
EPS performed their analysis using a target discount rate and capitalization rate based on
Bozeman market conditions. Their analysis projects that the project would require incentives
between $30,000 and $222,900 to meet the reasonable target rates of return. The consultants
note, however, that the applicant’s estimate for offsite costs related to infrastructure is
approximately $224,300. While the project does not meet all the goals of the District, investing
in regional infrastructure clearly aligns with the intent of the URD Plan. Due to untested market
for new for-sale townhome/condo development in Midtown and the catalytic nature of the
project, staff recommends that the Midtown Urban Renewal Board consider an incentive award
of $222,900. An incentive award at this level would pay back in approximately 4 years.
3
Criteria for TIF Assistance
Overall District Relevance
1. Relevance to the Midtown Urban Renewal Plan: Documentation of the project’s impact in
relation to the goals and objectives of the Midtown Urban Renewal Plan, particularly mixed-
use development. Urban design elements are also considered, including pedestrian
emphasis and quality of design.
The project eliminates blight by improving a vacant property with a new condominium
development project, which increases the taxable value of the property use. A new access will
provide for driveways and garages to be located on the interior of the project. Eight of the units
will have front doors facing E. Peach Street, which will enhance the pedestrian environment of
the area. This project does not receive the full five points because lacks mixed-use development,
a key component of the Urban Renewal Plan.
[3 of 5]
Goal Number 1: Promote Economic Development
2. Tax Generation: The project will increase the taxable value within the District. The increase
in taxable value due to new construction & rehabilitation is estimated by the County
Assessor’s office or State Department of Revenue to determine tax increment generation.
Submit documentation of estimated tax projections to receive points for these criteria.
Leland Consulting Group (LCG) created a tax revenue generation model for the Midtown URD.
Using data provided by the property owner, LCG estimates that the property will provide an
estimated annual net tax revenue increase of $63,411 for the District. The projected net
increase in value of the property is $6,607,039. For the assumptions related to these
projections, please see the LGC report. [3 of 4]
3. Elimination of Blight: The project’s direct and indirect impact on the physical and fiscal
deterioration within the Tax Increment Financing District and the community. Submit
information showing current conditions of property.
The project eliminates blight by replacing a recently vacant lot with a 17-unit condominium
development that increases the density of within the District.
[4 of 4]
4. Employment Generation: Total employment generated by the project assessed in terms of
new permanent and part-time jobs, and construction jobs. Submit documentation of
estimated new jobs to receive points for this criterion.
4
The project will generate temporary construction jobs. [1 of 3]
Goal Number 2: Improve Multi-Modal Transportation
5. Facilitates Public Health and Mobility: Project will construct or improve sidewalks, including
ADA access to buildings. Provide detailed information demonstrating that the current
condition inhibits public health and mobility.
The project adds new sidewalk to N. 3rd Avenue, which currently does not have sidewalks on
either side of the street. An existing sidewalk on E. Peach Street will replaced with a new 6-foot
wide sidewalk to enhance pedestrian mobility. [1 of 1]
6. Reduces Resource Demand: Project promotes the use of transit, ride sharing, or car sharing.
Provide plans, agreements or other methods to demonstrate reduction of resource demand.
While locating housing and commercial development in Midtown places it in a centrally located
location, this project does not take particularly exceptional or innovative measures to promote
transit use, ride sharing, or car sharing. [0 of 1]
7. Promotes Active Transportation: Project promotes bicycling as an active transportation
option by constructing or improving bike lanes, providing covered bike parking, and/or
participating in a bike share program. Provide plans, agreements or other methods to
demonstrate reduction of resource demand.
The project is located along E. Peach Street, which has a bike lane. No additional bike facilities
within the right-of-way are proposed. One shared bike rack is proposed, but the plans do not
indicate that it is covered. [1 of 2]
Goal Number 3: Improve, Maintain, and Support Innovation in Infrastructure
8. Infrastructure Improvements: Project promotes innovation in infrastructure and/or reduces
long- term costs of maintenance. Provide plans and descriptions of innovations proposed.
While the project improves the right-of-way for N. 3rd Avenue by adding sidewalk, curb, gutter
and a streetlight, no specific innovations to reduce long-term maintenance costs are proposed
within the application. [0 of 2]
Goal Number 4: Promote Unified Human Scale Urban Design
5
9. Street Frontage: The project improves the street frontage by eliminating parking between
the right-of-way and the building. Provide plans to demonstrate improvement in street
frontage.
The project is designed with one new access from E. Peach Street and one from North 3rd
Avenue. This enable eight of the new townhomes to face E. Peach Street, thereby improving the
street frontage. [2 of 2]
10. Vehicular Access Points: The project reduces the number of vehicular access points to the
property and improves the pedestrian experience. Provide plans, agreements or other
methods to demonstrate reduction.
The project proposes removes one existing a drive approach from E. Peach Street. [2 of 2]
11. Street Orientation: The project enhances the North 7th Ave. entryway corridor by having
buildings oriented toward the street and designed to provide interest and activity.
The project is not located along North 7th Avenue, and therefore does not directly enhance the
entryway corridor. However, E. Peach Street is a City Collector Street, with high visibility, and
therefore this project enhances a corridor within the District.
[1 of 3]
12. Pedestrian Experience: The project enhances the pedestrian experience with elements such
as façade transparency, building articulation, street furniture and/or landscaping. Submit
plans and details that address this criterion.
The project provides enhanced façade transparency with new residential buildings that face E.
Peach Street. While the facades for each unit are repetitive, the new residences will enhance
the pedestrian experience more so than the current vacant lot. [2 of 3]
13. Quality of the Development Exceeds Minimum Requirements. The quality of development
and overall aesthetics (architectural, site design, landscaping, etc.) are beyond that which is
minimally required by the UDC. Submit documentation to demonstrate compliance with this
criterion.
Based on preliminary renderings, the project as proposed appears to meet the requirements of
the UDC for architecture, site design, and landscaping. [1 of 2]
Goal Number 5: Support Compatible Urban Density Mixed Land Uses
14. Increases Housing Units: The project increases housing units within the District. Submit
plans demonstrating an increase in the number of housing units.
6
The project includes 17 for sale residential units. [4 of 4]
15. Mix of Uses Including Residential: The project has a mix of uses, including residential.
Submit plans detailing the proposed mix of uses within the project.
The project only includes residential units. While the application indicates that each unit has a
home office, because the office is integrated into the unit, it cannot be considered a mixed-use
project. [0 of 4]
16. Shared Parking: The project shares parking among compatible uses. Provide details
demonstrating compliance with the UDC and as well as total number of parking spaces
reduced because of a shared arrangement.
The project does not indicate any shared parking. Each 2-bedroom unit will have a 2-car garage.
[0 of 2]
Total Points (25/44)
Criteria for Approval of Urban Renewal Project, 7-15-4217 MCA
1) a workable and feasible plan exists for making available adequate housing for the
persons who may be displaced by the project;
The project does not displace any persons or housing.
2) the urban renewal plan conforms to the comprehensive plan or parts thereof for the
municipality as a whole;
The project is a residential project located in an area designated for residential use
in the Bozeman Community Plan.
3) the urban renewal plan will afford maximum opportunity, consistent with the sound
needs of the municipality as a whole, for the rehabilitation or redevelopment of the
urban renewal area by private enterprise; and
The project includes a request for tax increment financing assistance that makes the
proposed redevelopment project feasible to be undertaken by private enterprise.
4) a sound and adequate financial program exists for the financing of said project.
7
The Midtown Urban Renewal District currently has adequate revenue to support the
issuance of tax increment bonds to finance the tax increment finance assistance for
this project.
West Peach Condos
Tax Increment Analysis
April 8, 2019
Prepared by:
Andy Parks, CPA
Leland Consulting/GEL Oregon, Inc.
on behalf of the City of Bozeman Economic Development Department
Summary
Applicant plans to build a 17-unit condominum residential building located in the heart of Bozeman's Midtown District.
Applicant plans to invest approximately $6.6 million and is requesting $548,209 from the Agency.
* Return on Investment (ROI)
* Estimated payback period, and
The following schedule summarizes analysis findings:
Estimated costs to complete project 6,472,039$
Estimated capitalized interest 135,000
Less: 2018 market value per assessor
(improvements only)-
Net estimated increase in value 6,607,039
Estimated net increase in taxable value 89,195
TIF tax rate - estimated - FY 2021 710.93
Estimated incremental taxes (TIF) - annual 63,411
TIF investment 548,209
ROI - estimated 11.6%
Estimated payback period (years)12.07 assumes 5.0% interest rate on advanced amount
Private investment to public investment 11.05 Metric:
Greater than 8 to 1 - commercial
Greater than 5 to 1 - family wage jobs
Assumptions
Cost and timing information provided in application - except construction financing which is estimated
Estimated start date Mar-19
Estimated completion phases I and II Jan-20
Estimated completion phases III and IV Spring 2020
Increase in property taxes applicable fiscal year 2022
Construction Interest - estimated 135,000 Per applicant
Analysis has been performed to determine:
http://gis.gallatin.mt.gov/common/parcel_informati
on.aspx?tab=taxcode&taxID=RGG3097&geocodeid=0
6079801405070000
Greater than 10 to 1 - desired for multi-
family
Property valuation is limited to the cost approach, i.e., cost to complete project and real market value will likely differ.
Different valuation methods include but are not limited to; income approach, sales comparisons, and Capital Asset Pricing
Model.
* Private investment to public investment
M E M O R A N D U M
To: David Fine, City of Bozeman
From: Brian Duffany and Tim Morzel, Economic & Planning
Systems
Subject: Bozeman URA TIF Request Review: West Peach Condos
Date: April 26, 2019
This memorandum provides a summary of the analysis Economic &
Planning Systems (EPS) has completed relating to the request for tax
increment financing (TIF) for the West Peach Condo development. EPS
has been contracted by the City of Bozeman to complete an evaluation
of developer requests for TIF and specifically evaluate key project
assumptions, such as construction costs, sales revenues, and operating
revenues and expenditures, as well as overall developer return. The
purpose of this analysis is to ensure that the assumptions presented by
a developer align with current market conditions and industry standards.
This memorandum provides an overview of the evaluation criteria, an
overview of the key inputs, and a summary of the key findings. The
detailed analysis and supporting tables are provided in the appendix of
this memorandum.
Approach
As part of the TIF application process, each developer is required to
submit a formal proposal that includes a project overview and key
project assumptions. These materials include a summary of the
development program, construction costs, eligible costs, sales revenues,
and ongoing revenue and expenditure assumptions. Using this
information as a starting point, EPS has structured a static and time
series pro forma that summarizes this information as well as a number
of other key project metrics such as project return. This analysis
evaluates the performance of each project on an unleveraged pre-tax
basis in order to evaluate the project fundamentals exclusive of the
unique equity and debt structure of each project.
Memorandum April 26, 2019
Bozeman TIF Review: West Peach Condos Page 2
183115-MEMO-TIF Review-West Peach-04-25-2019
Project Assumptions
This section provides a summary of the development assumptions submitted by the development
team and a comparison to current market conditions or industry standards.
Development Program
Location: NW Corner of West Peach Street and N 3rd Avenue
Parcel Area: 0.90 acres (39,204 square feet)
Stories: 2-stories
Total Building Area: 37,000 square feet
Commercial Program: The current proposal does not contemplate any commercial space on
this site.
For-Sale Residential Condos: The proposal contemplates 17 for-sale condos for this site. Each
condo is anticipated to have 2-bedrooms, 3-bathrooms, and an office. Each unit is estimated to
have roughly 1,650 square feet of living space and a 530 square foot garage. Total unit size is
estimated at roughly 2,180 square feet.
Project Costs
Land Costs
Total: $1,050,000
Cost per Land SF: $27 per square foot
Percent of Total Costs: 14 percent of total
Comments: Land costs typically range from 10 to 20 percent of total project costs depending on
the development type and local market. At 14 percent of total, this project is within that range.
In addition, land costs at roughly $27 per square foot appear to align with other recent
transactions in this area.
Hard Costs
Total: $4,479,840
Cost per GBA: $160 per square foot
Comments: Average construction costs in the larger market area are estimated to range from
$100 to $150 per square foot. At $160 per square foot, this project falls just above that range.
Estimated hard costs for the recently reviewed Aspen Crossing project, which included a 3-story
multiuse building, were also estimated at $160 per square foot. A project of that density would
typically have construction costs higher than 2-story townhome/condo construction. It is
important to note that this project contemplates high quality design and finishes and
construction costs reflect that.
Soft Costs
Total: $1,090,537
% of Hard Costs: 22.97 percent
Comments: Generally, soft costs for comparable projects typically range from 20 to 30 percent
of hard construction costs (vertical construction costs). At 23.97 percent of hard costs this
project is within that range.
Memorandum April 26, 2019
Bozeman TIF Review: West Peach Condos Page 3
183115-MEMO-TIF Review-West Peach-04-25-2019
For-Sale Revenues
Gross Revenue: $9,095,000
Comments: Sales values are currently estimated at an overall average of $535,000 per unit or
roughly $325 per square foot. While this price point is at the higher end of the market for
Bozeman as a whole, it is below the asking price of recently completed townhomes within the
same proximity of Main Street. It is also important to note that due to the untested nature of the
surrounding location there are no true comps that exist to date, which adds to the overall project
risk. Due to the unproven nature of the surrounding area and the other recently completed
projects that were evaluated as part of this analysis, the estimated sales price of $535,000 per
unit appears to be reasonable.
Project Return
The performance of the project with and without a public investment is estimated by using two
primary criteria. The first is an evaluation of the overall project returns on an annual basis. This
approach relies on an evaluation of the projects Net Present Value (NPV) and Internal Rate of
Return (IRR). The second approach is based on a static (single point in time) evaluation of the
project’s total value and compares that to total construction costs. Although this approach is
generally less precise than the times series evaluation, it provides an additional test of overall
project feasibility. The purpose of this analysis is to provide an evaluation of the feasibility of the
project with and without a potential public investment.
Overall Project Return
The first method used to evaluate project return is an evaluation of the project’s internal rate of
return (IRR). Generally, the IRR is the percentage rate earned on each dollar invested for each
period it is invested. The IRR is typically used by investors to compared alternative investments
based on their potential rate of return. Mathematically, the IRR is an iterative calculation that
determines the discount rate that results in a net present value (NPV) equal to zero. The NPV is
the estimated value of all future cash flows of an investment discounted to the present. The NPV
of a given series of cash flows is heavily dependent on an investor’s discount rate, which reflects
an individual investor’s opportunity cost of capital. In other words, an investor’s discount rate
reflects their expected rate of return for investments with a comparable level of risk.
For the purpose of this analysis, the discount rate is used as a hurdle rate in determining an
appropriate rate of return for a given project. When determining appropriate discount it is
important to consider the following rates when building up to a project discount rate.
Inflation rate and the riskless rate of return (U.S. 10-Year Treasury Note rate of return)
General real estate risk (timing and market cycle risk)
Product type risk (i.e., multifamily, retail, office, etc.)
Market risk (geographic specific)
In addition to an evaluation of these rates, EPS referenced published data documenting discount
rates in the western United States. Finally, in determining an appropriate discount rate for this
specific property EPS, considered the following project specific factors:
Project Location – While this site is only a short drive from downtown Bozeman, the
surrounding area is still a relatively untested market for new for-sale townhome/condo
development. Due to the untested nature of the surrounding area there are added risks that
Memorandum April 26, 2019
Bozeman TIF Review: West Peach Condos Page 4
183115-MEMO-TIF Review-West Peach-04-25-2019
warrant a slightly higher discount rate compared to projects being developed in more
established locations.
Market Cycle – The nation and generally the local real estate market has experienced nearly
10 straight years of year-over-year growth. In most real estate markets there is a natural
cycle of expansion and contraction that typically ranges from seven to 10 years. Given the
fact that Bozeman may be at the tail end of this cycle or nearing a phase of oversupply, there
is additional risk associated with the timing of the market.
Project Financing – The anticipated project financing has an impact on the unleveraged
hurdle rate due to the fact that debt typically has a lower required rate of return (i.e. interest
rate) than equity. For the purposes of this analysis, EPS has assumed that 75 percent of the
project is financed with debt and the remaining 25 percent is financed by equity.
Without public investment the project achieves an internal rate of return of 8.68 percent. The
factors outlined above and the risks associated with this type of project, at this location, and in
this phase of the real estate cycle warrant a discount rate of approximately 9.00 percent. While
this estimate is somewhat subjective, it reflects a variety of current market conditions and risk
factors. In order to achieve an internal rate of return of 9.00 percent the project requires
approximately $30,000 in public investment.
Static Project Feasibility
Evaluating the project from a static (i.e., single point in time) perspective provides an evaluation
of a given project’s feasibility. This method relies on a comparison of the total project costs to a
given project’s total estimated revenues. For this project, total value is calculated by netting the
value (after sales commissions) of the revenues generated by condo sales against total project
costs.
For this project a return on cost hurdle rate of 15.0 percent is estimated to be reasonable.
Netting total condo sale revenues of $8.50 million against estimated construction costs of
$7.66 million results in a return on cost of 11.65 percent. In order to achieve a 15.0 percent
return on cost, the project requires roughly $222,900 in public investment.
Project Request
The developers of the West Peach Condos are requesting $546,483 in public investment in order
to fund project-specific eligible costs. Based on the two methodologies outlined above, EPS
estimates that the project funding gap ranges from $30,000 to $222,900.
The developer has identified a variety of eligible project costs that include residential impact
fees, cash in lieu payments, utility costs, demolition, and offsite improvements. The developer’s
list of eligible improvements is estimated at $546,483, which is the request for funding. Within
the identified eligible costs the developer has estimated offsite costs associated with the
improvement of 3rd Avenue at approximately $224,300. While this project in its entirety may not
meet all of the goals of URA, investing in regional infrastructure clearly aligns with the intent of
the URA Plan. Funding all or a portion of the 3rd Avenue costs both addresses blight in the plan
area and further removes barriers to additional development through a strategic investment in
local infrastructure.
Prepared for:
City of Bozeman
Prepared by:
Economic & Planning Systems, Inc.
Date:
April 25, 2019
EPS #183115
Draft Financial Model
TIF Request Review:
West Peach Condos
TIF Request Review: City of Bozeman
4/25/2019
Table 1
Project Summary and Key Assumption Sensitivity
TIF Request Review: West Peach Condos
Description Amount Developer
Low High
KEY ASSUMPTIONS
Revenue Assumptions
Commercial Rental Rate N/A NNN $18.00 $22.00 N/A N/A
Multifamily Rental Rate N/A per square foot $1.25 $1.55 N/A N/A
Condo Sales Value $535,000 per unit $450,000 $600,000 $529k-$539k Inside
per sf $324.83 per sf
Cost Assumptions
Land Cost 13.71%% of total cost 10% 20%13.71%Inside
Hard Construction Costs $160 per GBA $100 $150 $160 Higher
Soft Construction Costs 22.97%% of HC 20% 30%22.97%Inside
Total Construction Cost $207 per GBA $200 $235 $207 Inside
Return Assumptions
Internal Rate of Return Hurdle 9.00%IRR
Static Return Hurdle 15.00%return on cost = net revenues / total cost
PROJECT SUMMARY
Total Cost land, infrastructure, hard, and soft Duration
Total Condo Sale Revenue net condo sale revenue Construction Period 12 months
Net Project Revenue $892,261 net project revenue Condo Absorption Period 18 months
Return on Cost 11.65%ROC
Internal Rate of Return 8.68%IRR
PROJECT GAP
Developer Request as stated in application
Static Estimate total revenues/value less cost
Time Series Estimate discount rate hurdle
Average average
Sensitivity Analysis
Time Series Estimate: Residential Sales Price Time Series Estimate: Construction Hard Cost
-29,518 8.50% 8.75% 9.00% 9.25% 9.50%-29,518 8.50% 8.75% 9.00% 9.25% 9.50%
$525,000 -$126,698 -$149,458 -$172,088 -$194,590 -$216,965 $140 $610,316 $587,123 $564,061 $541,131 $518,330
$530,000 -$54,981 -$77,957 -$100,803 -$123,519 -$146,107 $150 $313,526 $290,333 $267,272 $244,341 $221,541
$535,000 $16,737 -$6,456 -$29,518 -$52,448 -$75,249 $160 $16,737 -$6,456 -$29,518 -$52,448 -$75,249
$540,000 $88,454 $65,044 $41,768 $18,623 -$4,391 $170 -$280,053 -$303,246 -$326,307 -$349,237 -$372,038
$545,000 $160,172 $136,545 $113,053 $89,694 $66,467 $180 -$576,842 -$600,035 -$623,096 -$646,027 -$668,828
Time Series Estimate: Absorption Period
-29,518 8.50% 8.75% 9.00% 9.25% 9.50%
14 months $134,316 $114,025 $93,839 $73,755 $53,774
16 months $68,178 $46,254 $24,451 $2,766 -$18,801
18 months $16,737 -$6,456 -$29,518 -$52,448 -$75,249
20 months -$24,416 -$48,625 -$72,692 -$96,619 -$120,407
22 months -$58,086 -$83,126 -$108,017 -$132,759 -$157,354
Static Estimate: Residential Sales Price Static Estimate: Construction Hard Cost
-222,865 14.50% 14.75% 15.00% 15.25% 15.50%-222,865 14.50% 14.75% 15.00% 15.25% 15.50%
$525,000 -$329,965 -$345,928 -$361,821 -$377,646 -$393,402 $140 $403,178 $386,910 $370,714 $354,588 $338,531
$530,000 -$260,183 -$276,298 -$292,343 -$308,319 -$324,225 $150 $106,388 $90,121 $73,925 $57,798 $41,742
$535,000 -$190,401 -$206,668 -$222,865 -$238,991 -$255,047 $160 -$190,401 -$206,668 -$222,865 -$238,991 -$255,047
$540,000 -$120,620 -$137,039 -$153,387 -$169,663 -$185,870 $170 -$487,191 -$503,458 -$519,654 -$535,780 -$551,837
$545,000 -$50,838 -$67,409 -$83,908 -$100,336 -$116,692 $180 -$783,980 -$800,247 -$816,444 -$832,570 -$848,626
Source: Economic & Planning Systems
Y:\Projects\DEN\183115-Bozeman MT P3 Development Feasibility\Models\[183115-MODEL-West Peach Condo-04-22-2019.xlsm]T-Summary
Return on Cost
Cost per sfProject Discount Rate
Abs PeriodReturn on Cost
NNNProject Discount Rate
Cost per sfSale PriceProject Discount Rate
Market Range
-$7,657,039
$8,549,300
-$222,865
-$29,518
$546,483
-$126,191
Economic & Planning Systems 2 of 7
TIF Request Review: City of Bozeman
4/25/2019
Table 2
Eligible Costs Summary
TIF Request Review: West Peach Condos
Description Amount % of Total
City of Bozeman - Residential Impact Fees $144,118 26%
City of Bozeman - Cash In Lieu of Water Rights $12,648 2%
City of Bozeman - Cash In Lieu of Park Land $17,199 3%
Northwestern Energy - Utilities $13,215 2%
Madison Engineering / C&H Engineering - Engineering Services $15,000 3%
EST - Street Light, Installation, Service $9,000 2%
Spectrum - Communications $5,000 1%
H & H Earthworks - Demo $32,331 6%
High Country Paving - Offsite Improvements, Fire Suppression - 4” Water Line $217,789 40%
Morrison Design - Boulevard Landscaping $7,000 1%
EST - Fiber/Conduit $10,000 2%
High Country Paving - Sidewalks $6,500 1%
Ironwood Development - General Contractor At 12% $56,682 10%
TOTAL $546,483 100%
% of Total Project Cost 7.1%
Source: Development Team; Economic & Planning Systems
Y:\Projects\DEN\183115-Bozeman MT P3 Development Feasibility\Models\[183115-MODEL-West Peach Condo-04-22-2019.xlsm]T-Elig Costs
Economic & Planning Systems 3 of 7
TIF Request Review: City of Bozeman
4/25/2019
Table 3
Development Program
TIF Request Review: West Peach Condos
Description Units Square Feet % of Total Revenue Assumptions
COMMERCIAL NNN ($/sf)
Office N/A N/A N/A N/A
Retail N/A N/A N/A N/A
Flex N/A N/A N/A N/A
Other N/A N/A N/A N/A
Subtotal N/A N/A N/A N/A
RESIDENTIAL
Ownership (Condos)Sale Price ($/unit)
1-Bed N/A N/A N/A N/A
2-Bed 17 37,060 100% N/A
3-Bed N/A N/A N/A N/A
4-Bed N/A N/A N/A N/A
Total 17 37,060 100% $535,000
Rental (Apts.)Rental Revenue ($/sf)
1-Bed N/A N/A N/A N/A
2-Bed N/A N/A N/A N/A
3-Bed N/A N/A N/A N/A
4-Bed N/A N/A N/A N/A
Total N/A N/A N/A N/A
TOTAL 17 37,060 100%
Source: Development Team; Economic & Planning Systems
Y:\Projects\DEN\183115-Bozeman MT P3 Development Feasibility\Models\[183115-MODEL-West Peach Condo-04-22-2019.xlsm]T-Program
Economic & Planning Systems 4 of 7
TIF Request Review: City of Bozeman
4/25/2019
Table 4
Development Costs
TIF Request Review: West Peach Condos
Description Quantity Cost Total % of Total
LAND COSTS
Land 1,050,000$ 13.7%
Land Costs 1,050,000$ 13.7%
TOTAL LAND COST 1,050,000$ 13.7%
Horizontal Development Costs
Land Development 767,871.27$ 10.0%
Waste Management 1.0 unit $10,000.00 total 10,000.00$ 0.1%
Onsite improvements 1.0 unit $381,117.82 total 381,117.82$ 5.0%
Offsite improvements 1.0 unit $217,789.04 total 217,789.04$ 2.8%
Lighting improvements 1.0 unit $9,000.00 total 9,000.00$ 0.1%
Tree Removal 1.0 unit $1,500.00 total 1,500.00$ 0.0%
Landscaping 17.0 unit $5,000.00 total 85,000.00$ 1.1%
Miscellaneous 1.0 unit $20,000.00 total 20,000.00$ 0.3%
General Contractor Overhead 6.00%% of total $724,406.86 total 43,464.41$ 0.6%
TOTAL HORIZONTAL CONSTRUCTION COSTS 767,871$ 10.0%
Vertical Development Costs
Hard Costs 4,748,630$ 62.0%
Renovation Costs 0.0 per sf 0 sf -$ 0.0%
New Construction $160.0 per sf 27,999 sf 4,479,840.00$ 58.5%
General Contractor Overhead 6.00%% of total $4,479,840.00 total 268,790.40$ 3.5%
TOTAL VERTICAL CONSTRUCTION COSTS 4,748,630$ 62.0%
Soft Costs
General Soft 318,493$ 4.2%
Impact Fees 17.0 unit $8,477.54 total 144,118.18$ 1.9%
Cash in Liey of Water Rights 1.0 unit $12,648.00 total 12,648.00$ 0.2%
Cash in Liey of Park Land 1.0 unit $17,199.00 total 17,199.00$ 0.2%
Power (to the meter)1.0 unit $15,000.00 total 15,000.00$ 0.2%
Communications (cable, internet, phone)1.0 unit $5,000.00 total 5,000.00$ 0.1%
Planning and Zoning App 1.0 unit $2,000.00 total 2,000.00$ 0.0%
Engineering 1.0 unit $30,000.00 total 30,000.00$ 0.4%
Architecture 1.0 unit $40,000.00 total 40,000.00$ 0.5%
Mailboxes 2.0 unit $4,000.00 total 8,000.00$ 0.1%
Geotechical 1.0 unit $1,500.00 total 1,500.00$ 0.0%
Marketing 1.0 unit $14,000.00 total 14,000.00$ 0.2%
Interior Design 1.0 unit $10,000.00 total 10,000.00$ 0.1%
Inspections and Testing 1.0 unit $1,000.00 total 1,000.00$ 0.0%
General Contractor Overhead 6.00%% of total $300,465.18 total 18,027.91$ 0.2%
Sales and Professional Fees 539,544$ 7.0%
Architecture & Engineering 1.0 unit $1,500.00 total 1,500.00$ 0.0%
Phase 1 Environmental Consultant 0.0 unit $0.00 total -$ 0.0%
Phase 2 Environmental Consultant 0.0 unit $0.00 total -$ 0.0%
Geotechnical Exploration 1.0 unit $1,200.00 total 1,200.00$ 0.0%
Testing and Inspection Services 0.0 unit $0.00 total -$ 0.0%
Legal Gees 1.0 unit $6,000.00 total 6,000.00$ 0.1%
Real Estate Fees 1.0 unit $503,965.00 total 503,965.00$ 6.6%
Insurance 1.0 unit $26,879.00 total 26,879.00$ 0.4%
Other 0.0 unit $0.00 total -$ 0.0%
Financing Fees and Costs 232,500$ 3.0%
Land Financing Cost 5.00%rate $1,050,000.00 land 52,500.00$ 0.7%
Financing Fees 1.00%rate $4,500,000.00 loan 45,000.00$ 0.6%
Construction Interest 3.00%rate $4,500,000.00 loan 135,000.00$ 1.8%
Lender Inspecting Archtect 1.0 unit $0.00 total -$ 0.0%
Lender Legal Fees 1.0 unit $0.00 total -$ 0.0%
Other 1.0 unit $0.00 total -$ 0.0%
TOTAL SOFT COSTS 1,090,537$ 14.2%
TOTAL PROJECT COST 7,657,039$ 100.0%
Source: Development Team; Economic & Planning Systems
Y:\Projects\DEN\183115-Bozeman MT P3 Development Feasibility\Models\[183115-MODEL-West Peach Condo-04-22-2019.xlsm]T-Cost
Economic & Planning Systems 5 of 7
TIF Request Review: City of Bozeman
4/25/2019
Table 5
Condo Revenue Estimate
TIF Request Review: West Peach Condos
Description Amount
Gross Revenue
Total Units 17
Revenue per Unit $535,000
Total Revenue $9,095,000
Taxes
Tax Rate [1] 0.00%
Total Taxes $0
Sales Commissions
Commissions Rate 6.0%
Total Commissions -$545,700
NET CONDO REVENUE $8,549,300
Source: Development Team; Economic & Planning Systems
[1] This analysis is an evaluation of returns before taxes and
debt and as a result does not account for the estimated
taxes that the developer will have to pay.
Y:\Projects\DEN\183115-Bozeman MT P3 Development
Feasibility\Models\[183115-MODEL-West Peach Condo-04-22-
2019.xlsm]T-Condos
Economic & Planning Systems 6 of 7
TIF Request Review: City of Bozeman4/25/2019Table 6Development Revenues and Expenditures TIF Request Review: West Peach CondosKEY ASSUMPTIONSProject Timing Start Year DurationConstruction PeriodYear 012 monthsCondo Absorption PeriodYear 118 monthsDescriptionFactor EscalationTotal Year 0 Year 1 Year 2 Year 3 Year 4 Year 5DEVELOPMENT COSTSConstruction Completion100% 0% 0% 0% 0% 0%Construction Cost -$7,657,039 -$7,657,039 $0 $0 $0 $0 $0Land$1,050,0002.0%-$1,050,000 -$1,050,000 $0 $0 $0 $0 $0Horizontal Development Costs$767,8712.0%-$767,871 -$767,871 $0 $0 $0 $0 $0Vertical Development Costs$4,748,6302.0%-$4,748,630 -$4,748,630 $0 $0 $0 $0 $0Soft Costs$1,090,5372.0%-$1,090,537 -$1,090,537 $0 $0 $0 $0 $0Total Commercial Costs -$7,657,039 -$7,657,039 $0 $0 $0 $0 $0REVENUECondo Sales Schedule0% 67% 33% 0% 0% 0%Condo Sales $8,549,300 $0 $5,699,533 $2,849,767 $0 $0 $0Gross Revenue$9,095,0000.0%$9,095,000 $0 $6,063,333 $3,031,667 $0 $0 $0Taxes Condo Sales0.0% N/A$0 $0 $0 $0 $0 $0 $0Sales Commissions6.0% N/A-$545,700 $0 -$363,800 -$181,900 $0 $0 $0PROJECT CASH FLOWSNet Project Cash Flows $892,261 -$7,657,039 $5,699,533 $2,849,767 $0 $0 $0Construction Costs -$7,657,039 -$7,657,039 $0 $0 $0 $0 $0Condo Sales $8,549,300 $0 $5,699,533 $2,849,767 $0 $0 $0Net Present Value9.00%-$29,518 -$7,657,039 $5,228,930 $2,398,592 $0 $0 $0Internal Rate of Return 8.68%Source: Economic & Planning SystemsY:\Projects\DEN\183115-Bozeman MT P3 Development Feasibility\Models\[183115-MODEL-West Peach Condo-04-22-2019.xlsm]T-Time SeriesEconomic & Planning Systems7 of 7