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HomeMy WebLinkAboutRuh Building Staff Report and Application Materials as revised for 20191206 Staff Report    To:    Midtown Urban Renewal Board    From:  David Fine, Urban Renewal Program Manager    Date:  December 4, 2018 (revised 12/6/2018)    Subject: Ruh Building mixed‐use project    605 N. 7th Ave. (N. 7th Ave and Durston Rd.)      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.     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 demolishing a vacant and aging structure and replacing it with a  vertical mixed‐use building with retail and 16 housing units, which increases the taxable value of  the property use. This 34,066 gross square foot vertical mixed‐use project locates a new building  closer to the street adding interest and activity. The proposed 3 story project features a brewery  and additional commercial space on the ground floor, 2 floors of apartments, as well as roof  deck space for brewery patrons, as well as residents.    [5 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 $76,679 for the District. The projected net  increase in value of the property is $5,638,827. For the assumptions related to these  projections, please see the LGC report.  [4 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 small low‐value vacant shop building with a 34,066  gross square foot vertical mixed‐use building that adds storefront retail commercial space and  16 housing units and substantially increases the density of development on the property.   [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.    The project will generate temporary construction jobs. The inclusion of commercial and retail  space in the project provides new space for employment. The brewery is expected to add 10‐15  full time employees and 5‐10 part time employees. Employment in the remainder of the  commercial space is tenant dependent. [2 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 12 foot storefront block frontage standard sidewalks on the N. 7th Ave.  and Durston Rd. frontages. The new building will be ADA accessible. [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.    No qualifying covered bike parking is proposed. [0 of 1]    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.    The project, with TIF Assistance, plans to extend and utilize the City of Bozeman fiber conduit  system. The project eliminates midblock vehicular access and improves the public alley as the  primary means of vehicular ingress and egress. The alley will be improved next to the  redeveloping parcel and an adjacent parcel to facilitate required fire access. Northwestern  Energy facilities must also be moved to accommodate this project.   [2 of 2]    Goal Number 4: Promote Unified Human Scale Urban Design    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 provides all parking behind the building, which is consistent with the vision of the  Midtown Urban Renewal Plan. [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 removing a drive approach from N. 7th Ave. All vehicular access is  provided through improvement and paving of the public alley. [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 proposed structure would orient the structure toward the street and provide new interest  and activity. The building double fronts the arterials of N. 7th Ave and Durson Rd. with  storefront block frontage.    [3 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 a store front design and double  building frontage. The project includes street trees and tree grates as well as 12 foot sidewalks.  No landscaping plan was submitted with this application. [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 exceed the minimal  requirements of the UDC for architecture, site design, and landscaping. [2 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.    The project includes 16 rental 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 includes a mix of uses and includes 16 residential units. [4 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 appears to share parking between its commercial and residential uses. Future more  detailed plans for parking could show a shared parking arrangement to receive points for this  category. [0 of 2]    Total Points (38/44)      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 Midtown Urban Renewal Plan adopted in 2015 made findings that mixed‐use  projects that included commercial and residential uses were in conformance with  the comprehensive 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.     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.     Staff Recommendation    The Midtown Urban Renewal District needs catalyst projects to drive growth in taxable  value and create demand for market‐driven redevelopment. The City Commission created the  District in 2006 with the vision of a walkable pedestrian centric area with compact urban  density. Redevelopment projects have focused on reuse of existing buildings, which provide less  potential new tax revenue. Vertical mixed‐use buildings add residents to support neighborhood  commercial uses and typically share parking among compatible uses, which allows developers to  produce building forms with more value per acre. These projects, however, are typically more  difficult to finance and develop. The City Commission structured the Midtown Urban Renewal  Plan and the Midtown TIF Assistance Program to focus on vertical mixed‐use buildings. To date,  there have been no significant vertical mixed‐use projects in the Midtown Urban Renewal  District. The lack of these projects suggests the market for these projects is untested, which  increases the degree of risk for developers, and makes incentives important for early catalyst  projects. Incentives may create the potential for higher returns to mitigate higher risk, which  may attract investment that would not occur without these incentives.     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 $726,666.90. 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 38 of 44 available points. The application scored points toward all five goals of the  Midtown Urban Renewal Plan. The project eliminates blight and advances the District goal of  creating urban density land uses and 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 8:1 or greater for commercial projects; the ratio for this project is 6.77:1.    Several factors related to public infrastructure mitigate the lower than expected  investment ratio. The public infrastructure burden for redeveloping this small corner parcel is  significant. The Transportation Plan’s designation of Durston Rd. as a minor arterial required an  additional 20 feet of right of way dedication along the Durston Rd. frontage. Since the project  faces two arterials and elected a storefront block frontage, the project requires 12‐foot  sidewalks, street trees and tree grates on two frontages. Finally, the alley needed to be paved  and widened to facilitate vehicle and fire access, while eliminating a drive approach on N. 7th  Ave. These features of the project, which are all encouraged by the Midtown Urban Renewal  Plan create significant infrastructure costs on a small lot that can only accommodate a small  building while still proving parking. The project is also in an ideal location, at the corner of  Durston Rd and N. 7th Ave., for catalyzing the larger vision for the Midtown corridor. For these  reasons, staff supports this project despite its lower than anticipate return on investment (ROI).     LCG also created a tax generation model for the Midtown URD. According to their  model, the project would produce net new annual taxes of $76,679106,574, which would allow  TIF assistance to be paid back in 10 years (assumes a 5% interest rate on the advanced amount)  for new increment‐based payback if assistance is provided at the staff recommended amount.      The proposed incentive request is larger than past requests, but is consistent with the  goals of the Midtown Urban Renewal Plan. 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 new and was primarily  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 $409,000  and $635,600 to meet the reasonable target rates of return. The consultants note, however,  that the applicant’s commercial and residential rent assumptions “are at the high end of what is  likely achievable at this location.” If net operating income (NOI) is lower than expected, the  applicant’s incentive request of $726,666.90 would likely be necessary to meet the reasonable  target return rate. Due to untested nature of the market for Midtown mixed‐use and the  catalytic nature of the project, staff recommends that the Midtown Urban Renewal Board  consider an incentive award between $635,600 and $726,666.90.     Recommended Motion:    “Having reviewed the contents of the Staff Report, Public Comment, and Board Deliberation and  Discussion, I move to direct staff to negotiate a development agreement with the Applicant for  Midtown TIF Assistance not to exceed $726,667 and to draft a Resolution to designating the Ruh  Building as an Urban Renewal Project.”                   Lifestyle Solutions Real‐estate            Bozeman Midtown TIF Assistance Request        605 NORTH 7TH BOZEMAN MONTANA  Page 1 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      PART 1                        PROPERTY INFORMATION             APPLICANT INFORMATION             COMPANY PROFILE             PROJECT DETAIL  Page 2 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 MIDTOWN TAX INCREMENT FINANCING (TIF) ASSISTANCE PROGRAM    INTRODUCTION   The Midtown Urban Renewal Plan (“Plan”), adopted by the Bozeman City Commission on  November 16, 2015, authorized the Midtown Urban Renewal Board (“Board”) to establish  monetary incentives in the Midtown Urban Renewal District (“District”) in support of the Plan’s  goal to promote economic development.  The Board established and administers this Tax  Increment Financing (“TIF”) assistance program for the redevelopment and rehabilitation of  properties within the District.     TIF assistance applications are subject to program eligibility criteria and project guidelines listed  below. Applications will be accepted and processed in the order in which they are received and  approved based on the availability of funds for the program.     PURPOSE  The purpose of the TIF assistance program is to encourage desirable  development/redevelopment projects, as well as assist projects that would not otherwise occur  “but for” the assistance provided through tax increment financing. The purpose of this  document is to provide guidelines for the Board to offer monetary incentives for development  activities in the District in the form of TIF assistance funds.      This policy shall be used as a guide in processing and reviewing applications requesting TIF  assistance. The Board shall have the option of amending or waiving sections of this policy when  it determines, in its sole discretion, such an amendment or waiver is necessary or appropriate.  In amending or waiving any sections of this policy, the Board shall document the reason for the  deviation.     The provision of financial assistance is at the sole discretion of the Board. The Board reserves  the right to reject or approve applications on a case‐by‐case basis, taking into account  established policies, specific project criteria and the demand on District services in relation to  the potential benefits to be received from the proposed project. Meeting policy guidelines or  other criteria does not guarantee the award of TIF assistance. Furthermore, the approval or  denial of one application is not intended to set precedent for approval or denial of another  application.     Page 3 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 PROGRAM OBJECTIVES   The primary objective of the TIF assistance program is to encourage investment in development  and redevelopment of commercial and mixed use property within the District in accordance  with the provisions of the Montana Urban Renewal Law (7‐15‐4209, 7‐15‐4233, and 7‐15‐4288,  M.C.A.). Additional District objectives are to:     • Encourage private investment in commercial property in the District through the use of  public incentives;   • Expand the property tax base in the District through private investment in income  producing properties;   • Stimulate economic and business development within the District; and   • Reduce blighting influences in the District     The grants are awarded at the discretion of the Board as authorized by the Bozeman City  Commission, based upon review of the Applicant's compliance with program objectives,  eligibility requirements, and eligible construction activities.     GENERAL POLICIES   1. TIF assistance priority will be given to projects that do not have the financial feasibility to  proceed without the benefit of the assistance.     2. The applicant shall provide any market and financial feasibility studies, appraisals or other  information provided to private lenders for the project as well as any other information or  data which the Board, or its financial consultants, may require in order to review the need  for TIF assistance.    3. TIF assistance will not be used for projects that place extraordinary demands on District  infrastructure or services.    4. The applicant must be able to demonstrate, to the Board’s satisfaction, an ability to  construct, operate and maintain the proposed project based upon past experience, general  reputation and credit history.    5. The applicant shall provide sufficient market, financial, environmental and other data  relative to the successful operation of the project.    6. The Applicant must retain ownership of the project long enough to complete it, to stabilize  its occupancy, to establish the project management, and to initiate payment of taxes based  on the increased project value. This application must be signed by both the applicant(s) and  the property owner(s) (if different).    7. Project plans and construction must comply with all applicable code and permit  requirements.  Applicant is advised to consult with the City of Bozeman planning and  Page 4 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 building departments, licensed architects, engineers, or building contractors before  proceeding with final plans or construction.    8. The Applicant must demonstrate significant leverage of private investment through the use  of public dollars.      ELIGIBLE COSTS  TIF eligible expenses are defined by Montana Code Annotated, 7‐15‐4288 and further limited  by the Plan. The project seeking TIF assistance must be located within the boundary of the  District.    Costs related to the following are eligible for financial assistance:  1. Demolition and removal of structures  2. Construction and improvement of public improvements or infrastructure, including  streets, curbs, gutters, sidewalks, alleys, parking lots and off‐street parking facilities,  sewer lines, storm sewers, waterlines, and impact fees    Requests for funding above $50,000 will require the ratification of the Bozeman City  Commission.      DISBURSEMENT OF ASSISTANCE FUNDS    The TIF assistance program is a reimbursement program.  No funds will be disbursed until all  completion criteria have been satisfactorily met as determined by the Board in its sole  discretion.  At the end of the project, the recipient will submit a Certificate of Completion and  required supporting documentation to the Board including itemized invoices and other  documentation as the Board may reasonably request.      USE OF ASSISTANCE FUNDS    The award of TIF assistance funds is subject to the Applicant entering into a grant agreement  with the District.  The grant agreement will include requirements that the grantee comply with  (i) applicable City of Bozeman procurement regulations related to bidding, hiring, and prevailing  wages; (ii) the City’s nondiscrimination policy; and (iii) State of Montana public records laws.  The grant agreement will include such additional terms as the District in its sole discretion  determines are prudent or necessary to fulfill the goals of the TIF assistance program.    TIF assistance funds must be used within two years of the date of the Letter of Award.  Any  funds not disbursed to the Applicant within that time will remain in the District fund. The  Board, in its sole discretion, may provide an extension of up to one year to the original two year  timeframe.    Use of TIF assistance funds must be in compliance with the terms of the grant agreement  Page 5 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 between the Applicant and the District.    REVOCATION OF AWARD    The grant agreement will include terms providing that an award of TIF assistance may be  revoked by the Board if the Board finds, in its sole discretion, that Applicant has failed to  comply with any of the terms of the assistance program or grant agreement, or has failed to  provide information or provided inaccurate information on the application.  Upon such a  finding, the Board will provide Applicant with notice of the default and a 30‐day opportunity to  cure before the award is revoked.  The grantee will be required to return TIF assistance funds  already disbursed pursuant to the terms of the grant agreement.     DISCLAIMER: Neither the Board nor the City of Bozeman will be responsible for the planning,  design, or construction proposed by any work conducted as part of the TIF assistance  program.  No warrantees or guarantees are expressed or implied by the description of,  application for, award of or participation in the TIF assistance program.    APPLICATION PROCESS AND PROCEDURE  Application for TIF assistance shall be made on the forms provided by the Board and submitted  to the Economic Development Department for review and comment. Deadlines for submittals  shall be as published and posted by the Board. Incomplete forms will be returned to the  applicant with an explanation on additional information as may be required.    For projects seeking TIF assistance for demolition or payment of impact fees, the City of  Bozeman Economic Development Department will review the application and provide a  recommendation to the Board and, if applicable, the Bozeman City Commission.    If approved by the Board, or City Commission, a “letter of intent” outlining the specific terms  and conditions of the TIF assistance will be provided to the applicant.    SUBMITTAL INFORMATION  There are two parts to the attached application. All applicants must complete Part 1. Applicants  requesting TIF assistance above $50,000 must complete and include information identified in  Part 2.      Part 1 – All Applications   Part 2 – Applications requesting funding over $50,000     ●      Midtown Urban Renewal District  TAX INCREMENT FINANCING APPLICATION  PART 1    Property Information    Property Address: _________605 N 7th St Bozeman MT, 59718________________________  Property Owner: __________Lifestyle Solutions Real‐estate LLC_______________________  Legal Description: DURSTON 2ND SUB, S01, T02 S, R05 E, BLOCK 1, LOT 1 – 2, ACRES .653, PLAT E‐ 33_  Property Geo‐Code: _____06‐0798‐01‐3‐08‐01‐0000________________________________  County Tax ID #: __________RGG5543___________________________________________    Applicant Information     Property Owner   Tenant   Developer   Other  Property Manager  Applicant’s primary contact:   Name: ________Colin Ruh‐Kirk___________________________________________   Business Name: ____Lifestyle Solutions Real‐estate LLC________________________________   Business Phone: _____(406) 595‐7959___________Cell Phone: _______(406) 595‐7959___   Email: ______Colin.Ruh@LSSRE.com_____________________     Project Representative (if not applicant):  Name: ______Jesse Sobrepena__________________________________________________   Business Name: ______JDS Architects inc__________________________________________   Business Phone: ______(406)556‐8080____________Cell Phone: _____(406)581‐3939_______   Email: ______Jesse@JDSarchitectsbozeman.com____    Property Owner (if not applicant):  Name: _______Karen Ruh____________________________________________   Business Name: ______________ Lifestyle Solutions Real‐estate LLC___________________   Business Phone: ______(925) 804‐6279____________Cell Phone: ______(703) 919‐9608__   Email: ______Karen.Ruh@LSSRE.com_______________           Page 7 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 Property Owner (if not applicant):  Name: _______William Ruh____________________________________________   Business Name: ______________ Lifestyle Solutions Real‐estate LLC___________________   Business Phone: ______(925) 804‐6279____________Cell Phone: ______(703) 850‐8985__   Email: ______William.Ruh@LSSRE.com_______________        Please attach a list of all other property owners, business partners, developers and/or investors  associated with this project, with the above information provided for each.    This application must be signed by both the applicant(s) and the property owner(s) (if  different).     I (we), by signature below, certify that the information supplied in this application is, to the best  of my (our) knowledge, true, accurate, and complete, and is provided for the purpose of  obtaining approval to participate in the Midtown Urban Renewal District TIF assistance  program.  I (we) understand that failure to comply with the terms of the TIF assistance program  may result in revocation of an award.    I (we) understand the work to be undertaken must be in accordance with all  applicable  requirements of the Bozeman Municipal Code and any special conditions established by the  approval authority, and must receive all required approvals prior to commencing the work. I  (we) understand if approved for TIF assistance, the work to be performed must also be in  accordance with TIF assistance program procedures and the general design guidelines for the  District, as well as the specific plans approved for the project. I (we) acknowledge that the City  has an Impact Fee Program and impact fees may be assessed for my project.  Further, I (we)  agree to grant City personnel and other review agency representative’s access to the subject  site during the course of the review process (Section 38.34.050, BMC).     Applicant (s) (Print Name)               Signature of Applicant       Date      Property Owner(s) (Print Name)                                  Signature of Property Owner        Date  Page 8 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 ●  ●  Company Profile    Business Location     New business establishing itself in Bozeman   Existing business   Expanding/remodeling at same location    Expanding to an additional location    Existing business relocating from (identify location):  Street Address:    605 N 7th St                                                                            City:  Bozeman, 59718  State:  MT     Zip: 59718      Other:                  Year Business Established:       2018           Type of Business (Describe):  Mixed‐Use Commercial and Residential                                       Has a business plan been developed in relation to the proposed project?   No (Development of a business plan may be required as part of the application process.)   Yes (Include a copy with the application.)       Page 9 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 ●  ●  ●  ●  Project Detail    Property Status:   Vacant land   Building on leased land – Describe:                                Land and building(s) – Describe:   Existing structure on .653‐acre corner lot     Type of TIF Assistance Sought:     Requesting assistance for public infrastructure costs    Building demolition    Value of TIF Assistance Sought:      $ 726,666.90        Will this project proceed if TIF assistance is not granted?      No    In a limited fashion (explain):  Without the TIF assistance there will be less or  cheaper exterior finishes and landscaping, little to no off‐site improvement and a  reduction in parking.            Yes, but at a later date (explain):                           Yes, as scheduled    Other:                   1. Project Narrative   Provide an overview of the project in narrative format. The narrative must include a  description of the following aspects of the project:    Proposed use(s) or project (e.g. industrial, commercial, retail, office, mixed use,  residential for sale or for rental, etc.)      Construction information about the project including size of any existing structure to be  demolished or rehabbed; sized of any new construction; types of construction materials  (structural and finish); delineation of square foot allocation by use;      Total number and individual square footage of residential units; type of residential units  (e.g. for‐sale, rental, condominium, single‐family, etc.); number and type of parking  spaces provided; and construction phasing.     2. Site Maps and Building Plans  Page 10 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 ●  ●  ●  ●  ●  The Applicant must submit a completed Conceptual Review Application to the Board and  concurrently to the Community Development Department. The Conceptual Review  application must include, at minimum:      Photographs of project site and/or building   Map showing the location of the site and its immediate surroundings   Proposed development plans including site plans, floor plans indicating square  footage and layout, building elevations   Description of parking accommodations for residential units and commercial uses   Estimated date of occupancy      Prior to Board action on the grant application, the Applicant must have obtained and provide  to the Board the Community Development Director’s written comments on the proposed  development from the Conceptual Review Application.      Page 11 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 CRITERIA FOR TIF ASSISTANCE    In reviewing the TIF assistance application the Board will evaluate each project utilizing the  following criteria and point system. Points can range from 0 to the maximum shown below in  each category. Please rate your project according to the following criteria. To receive points for  any given item, documentation demonstrating adherence to the criteria must be submitted  with the application. The Board will use this information to evaluate the project.    Overall District Relevance Points  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  will also be considered, including pedestrian emphasis and quality of design.  5 /5  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 this criteria  4 /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.   4 /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.   3 /3  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.  1 /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.  1 /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.  2 /2  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.    2 /2  Page 12 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 Promote Unified Human Scale Urban Design    9.  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.  2 /2    10.  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.  2 /2    11.  The project enhances the North 7th Ave. entryway corridor by having  buildings oriented toward the street and designed to provide interest and  activity.   3 /3    12.  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.  3 /3  13. 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.  2 /2  Support Compatible Urban Density Mixed Land Uses    14. The project increases housing units within the District. Submit plans  demonstrating an increase in the number of housing units.  4 /4  15. The project has a mix of uses, including residential. Submit plans detailing the  proposed mix of uses within the project.   4 /4  16. 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.   2 /2   Total Points 44 /44       APPROVAL (For Official Use Only)    Approval Status:    Date Approved:    Date Letter of Award Sent:    Date Certificate of Completion:    Date of Payment Request:         Page 13 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 Criteria for TIF Assistance Explained    1.) We feel that the entire Ruh Building Project hits every point that is desired in the  Midtown District.  We are increasing tax generation, housing, commercial space,  availability to walk, bike, ride share and car share, eliminating a current blight in the  Midtown area and increasing employment.    2.) We do expect the total value of the building and land to be 5,741,406.25.  we also  expect to the square footage of the building to total roughly 34,066 Sq ft. and in turn  we expect the taxes for the building to be increased for this property, we also expect  that with the construction of this building it will increase the taxes of the property’s  around us.  Finally, with new commercial areas opening up we also expect a tax  generation for the city from those businesses.    3.) Elimination of Blight – The current building that is on the lot is an old building that has  no character, is not in good condition and has no added value to the midtown area.    As you can see from photos on page 18 the current building once torn down and  rebuilt will eliminate a blight and replace it with a beautiful cornerstone to the  midtown district.  The new Ruh building can be seen on page 20 and is a massive  improvement from the current building.      4.) Employment Generation – There will be an increase in jobs by the construction of this  building.  Depending on what goes into the other half of the commercial area on the  North side we estimate that anywhere from 25‐35 job can be created from this  project.  15‐20 is estimated to be full time and the rest being part time.  The South  side of the building will hold a brewery which in Bozeman average about 20  employees 10‐15 being full time. The management of the building is also another 2 full  time jobs.  The construction of this building will help sustain or increase the amount of  construction jobs in the area.      5.) Facilitates Public Health and Mobility: The new project will include many ADA  compliant amenities as well as better access for pedestrians in general, including new  sidewalks, ADA compliant access to the sidewalk and building.  ADA compliant parking  spaces and an elevator in the building.  The current project has crumbling sidewalks  and parking areas and has no ADA compliant access to the sidewalks or building.    6.) Reduces Resource Demand: There is a bus stop for the Streamline by Tamarack which  is only about .1 mile away.  There is also the easy access to use a ride share in  Bozeman in a prominent easy to access point such as our project.  Finally, we hope to  find a way to incentivize the commercial space leasers to promote both carpooling  and ride sharing.    7.) Promotes Active Transportation: The project has included a covered bike rack on the  Page 14 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 South West Corner of the Building.      8.) Infrastructure Improvements: We would improve the sidewalks in the public right of  way, we would introduce trees to add greenery, and also include benches and trash  cans so people can relax while keeping our public area clean.     9.) By placing the building as close to the road as possible, we are eliminating the parking  in front of the building and moving it to the back of the new building (West side).   There will now be a sidewalk, trees, benches, trashcans and lighting that will now line  the street instead of parking. You can now see what it will look like on page 21 and 23     10.) We have removed the entrance on 7th to the property while moving the  entrance on Durston from the property to the alley way.  This allows for sidewalks to  be placed with trees, benches and trashcans for a more pleasurable experience for  pedestrians.  See page 22 labeled parking for example.    11.) Our project follows the guidelines for having the building oriented toward the  street on 7th (about 12ft from the curb) and as close as we could get on Durston  without interfering with Public right of way. The first floor will be commercial space  drawing pedestrians to the area. See page 22 labeled parking for example.    12.) We plan on having large windows on the East and South side of the building  allowing people to investigate the building.  We also plan on having benches on the  east and south side of the building by the side walk and trash cans, so litter is not  placed on the ground. Finally, we plan on adding trees to line the sidewalk and bushes  on the North side of the building to add to the landscaping of the grass spaces in  between other areas.     13.) We have met or gone above and beyond the architectural, site design,  landscaping, ADA, and quality of the entire project.  You can see this in the site plan  designs.    14.) There was originally zero housing on the corner of 7th and Durston. There will  now be a total of 16 apartments and 28 rooms available in those apartments in total.   See page 19 for the drawings. This fulfils the requirements for the increase in  residential areas.    15.) As you can see from page 19 we have one floor of commercial use on the base  floor and two floors of Residential use.  This meets the requirements for a mixed‐use  building.    16.) We plan on having as much parking as possible and are working to work with  our neighbors to share their parking in their off hours.  We also plan to have  businesses that have separate high times than each other as well as the high times for  Page 15 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 the residential areas.   PROJECT INFO    PROJECT NAME    LSSRE Commercial and Residential mixed‐use building    PROJECT DESCRIPTION    The Ruh building is a mixed‐use commercial and residential structure located on a prominent  corner of Bozeman’s Midtown District.  The ground level of the building will comprise two  commercial units with shared restrooms and a shared entrance as well as their own separate  entrances.  There will be a total of 16 residential units between the second and third floors of,  with 12 units having two bedrooms and 4 being single‐bedroom units.  The roof will be split into  two outdoor patio areas, providing seating for the commercial spaces as well as a separate  space for the residential units.       PROPERTY INFO    Physical Address:  605 North 7th St.  Bozeman, MT 59715    Legal Description:  DURSTON 2ND SUB, S01, T02 S, R05 E, BLOCK 1,  LOT 1 – 2, ACRES .653, PLAT E‐ 33  Property Geo‐Code:  06‐0798‐01‐3‐08‐01‐0000  County Tax ID:  RGG5543  Property Owner:  Lifestyle solution Real‐estate, LLC        PROJECT MANAGER    Colin Ruh‐Kirk  Colin.ruh@lssre.com  406‐595‐7959    PROJECT ARCHITECT    Jesse Sobrepena  JDS Architects  (406) 556‐8080  Jesse@JDSarchitectsbozeman.com      ESTIMATED DATE OF OCCUPANCY    Fall 2019      Page 16 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017   PROJECT NARRATIVE    The 0.653 acre B‐2M zoned property sits on the corner of 7th and Durston, it resides on the  North side of Durston, and the West side of 7th.  The site currently has the old Intensive  car/Sinclair gas station building on the lot and a crumbling parking lot which will be demolished  with the approval of The Ruh building.  The current building is 1008 Square feet and there is a  shed that is 78 Square feet.    The Ruh Building is a mixed‐use commercial/residential building located in one of the most  prominent sections of 7th street and the Bozeman Midtown District.  This building will provide  2‐3 commercial units with shared restrooms, one containing a ground floor patio and there  being access for one the commercial units to use a rooftop patio. The building will also contain  12 two‐bedroom residential rental units and 4 one‐bedroom residential rental unit.    The 30,538± gross square foot building will face 7th street and be accessed by pedestrians in the  front as well as in the back of the building.  The building parking will be behind the building on  the west side of the lot which may be accessed by an alley way off Durston Rd.       The timeless and contemporary design will provide much needed value to the area.  The  structure is a steel and wood structure, the design shows large windows on the first floor for  view of the inside businesses.  The rooftop patio accessed by all residents of the building allows  for the internal community to grow.  The location and the amenities that could be in the  commercial area give the ability for tenants to use those as well as the public become a social  aspect to the whole Bozeman community.  The whole design of the building allows for visual  interest while being functional with quality that is long lasting.    The materials that have been chosen are durable to ensure a long‐lasting life to the building  while also having an aesthetical appeal.  We want the building to be a valuable addition to the  Bozeman area for decades to come.  We will use brick, stressed metal siding, stone, concrete  large windows, recessed entrances and metal coverings.  Trees and brick sidewalk accents will  add pleasant finishing additions to the project.    We expect to dispose of the solid waste in a trash enclosure on the East side of the building  past the parking lot.  Water and sewer services will be extended from Durston.  The project will  be built with no interruptions until complete.  The project is expected to be complete by fall  2019.   Page 17 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017         First Floor    The first floor will be  commercial space with two  units and shared restroom  space.  One unit has a patio  space and both units will have  large street‐view windows,  high‐speed internet and  separate main exterior  entrances as well as a shared  interior entrance.    Commercial unit 1   4,636 Gross Sq. Ft   ~1,000 Sq. Ft patio   Shared Restrooms   Private Worker  Restroom   High‐Speed Internet    Commercial unit 2   3,113 Gross Sq. Ft   Shared Restrooms   High‐Speed Internet   Built to suit  Corridor   1,713 Gross Sq. Ft   Elevator and stairs   Shared Restrooms  Second and Third Floor    Both the second and third floor  are of the same design, each  comprising 6 two‐bedroom  units and 2 one‐bedroom units.   The floor plan includes large  windows, air conditioning, high‐ speed internet, elevator use and  small balcony.    Two Bedroom units   982‐1,109 Sq. Ft   On floor storage unit    2 bed + 2 Bath   High‐end appliances   Quartz Countertops   Washer and Dryer   Rooftop patio access   Elevator access    One Bedroom Units   654‐801 Sq. Ft   On floor storage unit   1 bed + 1 Bath   High‐end appliances   Quartz Countertops   Washer and Dryer   Rooftop patio access   Elevator access  Rooftop Level    The building has two separate  rooftop patios; one set aside for  commercial space and the other  that is solely for the residents of  the building.  The residential  patio will have improvements  such as a fireplace and  planter/garden boxes.  The  commercial side will have a  small indoor section leading to  the outdoor patio.    Commercial side   1,008 Sq. ft    Restroom access   Stunning view of  Bridger Mountains    Accessed by elevator    Residential side   2,570 Sq. Ft   Restroom access   Stunning view of  Bridger Mountains   Gas Fire Pit   Planters   Trellis for shade   Elevator access  Page 18 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Photos                                             Page 19 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017                                   Page 20 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017                                                            Page 21 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017   Maps                                                    N.7th AVE  W E S T   P E A C H   DU R S T O N   THE RUH  BUILDING  Page 22 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 Parking              23 Spaces Shown  (SHARED SPACE IN THE PROCESS)      Page 23 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017       PART 2                          PROJECT TIMELINE             PUBLIC BENEFITS             PROJECT FINANCIAL INFORMATION           Page 24 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 ●  ●  ●  PART 2   FOR PROJECTS REQUESTING OVER $50,000 IN ASSISTANCE      1. Detailed Project Information   Submit the following information regarding the project requesting TIF assistance.     Project Timeline   A project timeline is required. Include anticipated dates for site acquisition, project start and  completion, as well as other project milestones. Multi‐phase projects must include details for  each phase. The timeline should also identify any critical or time‐sensitive dates as well as  any time constraints facing the applicant.      Public Benefits   Fully describe the public benefits that can be realized by the completion of this project.  Projects with a high degree of public benefits are typically more likely to receive TIF  assistance. Examples of public benefits include, but are not limited to the following:      Re‐occupancy of a vacant building    Elimination of blight    Creation of new retail choices    Increased tax revenue    Job‐training opportunities     This statement should include qualitative examples of public benefits as well as quantifiable  and measurable outcomes of the short‐term and long‐term benefits to the District. Include  documentation in support of estimates of public benefits.    2. Project Financial Information   In order for the Midtown Urban Renewal District Board to adequately review applications  seeking TIF assistance, the following information must be submitted with the application.     Sources & Uses of Funds   Identify the sources of funds used to finance the project. Typical sources include  equity, lender financing, mezzanine financing, other anticipated types of public  assistance, and any other types or methods of financing. Describe the sources of  equity and include a term sheet for lender financing, if available.     TIF assistance is available as a reimbursement after the project is complete. Thus, the  project budget must identify the up‐front sources intended to finance the  development costs of the project. If determined, specify the specific line items of the  project budget that each source will finance.     Page 25 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 ●  ●  ●  Summarize the uses of funds. General categories to be identified include: acquisition  and related site costs, hard construction costs, and a breakdown of soft costs.      Development Budget   Provide an accurate and detailed development budget for the project that includes a  detailed breakdown of significant line item costs consistent with the sample included  in the application packet. The budget should be arranged to identify acquisition and  site related costs, hard costs, and soft costs. Also, identify all line items that are  performed by the developer, owner, or related entities.      Budget of TIF Eligible Expenses   Identify which of the development budget costs are eligible for reimbursement as  allowed by 7‐15‐4288, MCA.     Financial Commitments   Submit commitment letters and/or term sheets from all lenders for proposed debt  (such as construction, mezzanine, permanent, and government financing) and all  other financial sources of the project (such as grants, and tax credits). Commitment  letters must clearly specify the nature and terms of the obligations.       Page 26 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 TIMELINE    Our project is expected to be complete by Fall 2019.  We expect to complete the project in  one phase.  The only thing that will cause a pause in work is winter.  We are under a time  constraint to complete the project in an appropriate amount of time in the eyes of the bank  as per our bank loan.     JUN/JUL/AUG SEPT/OCT/NOV DEC/JAN/FEB MAR/APR/MAY JUN/JUL/AUG SEPT/OCT/NOV                                                              CONCEPT & DESIGN  PLANNING AND REVIEW  DEMO/UTILITY RELOCATION EXCAVATION/FOUNDATION  CONSTRUCTION  FINISHING WORK  COMPLET WINTER Page 27 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017   PUBLIC BENEFITS     Re‐occupancy of Vacant Land    605 North 7th was the old home to the Sinclair gas station and then became a Subaru  auto body work shop for a few years.  The Ruh Building will be a redevelopment project  that will help beautify the area while drawing the locals and visitors of Bozeman to the  area creating a better more active Bozeman Midtown District       Elimination of Blight    Currently 605 North 7th consists of an old gas station with no color or character with a parking  lot that is crumbling under your feet.  The Ruh Buildings mix of timeless and contemporary  design will provide value and options for the community.  The design shows large windows on  the first floor for view of the inside businesses.  The rooftop patio accessed by all residents of  the building allows for the internal community to grow.  The location and the amenities that  could be in the commercial area give the ability for tenants to use those as well as the public  become a social aspect to the whole Bozeman community.  The whole design of the building  allows for visual interest while being functional with quality that is long lasting.       Creation of New Office/Retail Spaces    The Ruh Building, a mixed‐use building, contains 2‐3 spaces for commercial areas.  The  spaces range in size from 4636‐ 1500 gross Square feet.  Each unit has large windows on  the East and West side of the building.  The unit to the South has a large porch area.   There is also the ability to use a commercial roof top patio for one of the commercial  units.  These units will share a common parking area.  New businesses in the area will  draw activity and provide new jobs.        Urban Living Options    There are Sixteen dwellings available on the second and third floor of the Ruh building.   There are 12 two‐bedroom units and 4 one‐Bedroom units.  Each unit ranges from 654  to 1,109 square feet.  Large windows in each apartment provide stunning views of the  Bridger Mountains, the Tobacco Root Mountains and the cityscape of Bozeman itself.   The proximity of The Ruh Building to much of the town allow you to have walking access  to downtown main, restaurants and school makes this an ideal place for a mixed‐use  residential building.    Page 28 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017     Increased Tax Revenue    The Ruh Building will create new commercial and residential spaces.  These spaces will  bring in new jobs, and employees for expanding job markets, additional sales and  property taxes.  All of these will increase Tax Revenue for the City of Bozeman while also  improving the Bozeman Midtown District.          New Jobs and Local Sales    The construction of The Ruh Building will immediately be using locally sourced jobs to  build the building but once completed will also add several jobs from the commercial  units.  The maintenance of the building and land will help create or sustain jobs in the  area as well.  Supporting local businesses builds strong communities by linking everyone  involved in a web of economic and social relationships that contribute the cities  economic success, enriching the whole community.      Page 29 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 SOURCES & USES OF FUNDS    This project has three primary sources.  First is funding from William and Karen Ruh through their LLC ‐  Lifestyle Solutions Real Estate.  We expect their funding to be 20‐25% of the project. The total funding  will be a minimum of $1.5m through construction.  This funding is for the establishing the LLC, property,  fees and permits as well as architectural and engineering services. It is also for hiring the Project  Manager and any other staff required.  The business plan is attached for this LLC.    The second source is the Bank of a Montana.  Bank of Montana is an investment‐style business bank  in Missoula, Montana. Bank of Montana offers business and personal banking including online, mobile,  and other banking and financial services to clients across the United States. Previously Montana  Business Capital Corporation, Bank of Montana became a chartered bank by the State of Montana in  2007. Bank of Montana offers business banking, multifamily financing, and aviation financing. Originally  formed in 1998 under Montana Business Capital Corporation by Tom Swenson. Montana Business  Capital Corporation provided funding strategies and packages employing funding opportunities from the  likes of Montana Board of Investments and Small Business Association.   We expect 70‐75% if funding to  come from this source.  The funding commitment is for $5m.  This funding is exclusively for building the  project.  These expenses are described in section on development budget.    The third source is through TIF assistance.  One reason we chose this site for this project is the Midtown  Urban Renewal District TIF Assistance.   The funding uses are described in section on Budget of TIF  Eligible Expenses.    USES OF FUNDS    Land (Fair Market Value)          $950,000.00  Soft Costs          $895,260.65  Hard Costs          $4,791,406.25  Extra Costs not in construction Estimate (e.g. alley behind recompute) $40,000.00      Total Uses of Funds         $6,676,666.90  SOURCES OF FUNDS    Land (Lifestyle Solutions Real‐Estate, LLC)      $950,000.00   Free and Clear  Construction Loan         $5,000,000.00  Potential Tif Funds         $726,666.90    Total Sources of Funds        $6,676,666.90    Page 30 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 DEVELOPMENT BUDGET      Document attached view exhibit 1   Page 31 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017   TIF ELIGIBLE EXPENSES            City of Bozeman Impact Fees             $143,319.34  City of Bozeman Cash In Lieu of Park Land             $15,289.56     City of Bozeman Cash In Lieu of Water Rights             $22,058.00    Service lines           $98,000.00  The Service line item include the City of Bozeman Fiber/Conduit installation,  Northwestern Energy relocation of services.  Also included in this is a street  cutting to move the service lines as well as traffic management while moving the  lines.    Northwestern Energy                 $45,000.00  Northwestern Energy relocation of services, Northwestern Energy Primary, new  transformer, and gas and Electric services.        Demo             $48,000.00  This line item includes the demo of the existing building as well as removal of the  materials from the demo.        Street Scape & Public Infrastructure                     $235,000.00  While this line item is large, it includes a lot of things that will allow the buildings  outside to become a beautiful pinnacle of the Midtown district.  This includes the  sidewalks and curbs which is about a third of the cost.  It also includes the  landscaping and trees along the sidewalk and the metal grates that go around  them.  The grass and shrubs in the area that the city owns by right of way as well  as sprinklers to water the plants to keep them alive along the areas that the city  has public right of way.  The second largest section of this portion is the prep for  the alley and sidewalks to ensure the public safety as well as the proper  placement of the alley.  This also includes a small amount for trashcans and  benches on the sidewalk in the public right of way area.         Page 32 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 Alley Behind Recompute           $40,000.00  We will be extending the alley from our property boundary to the northern  boundary of the recompute property.  This was something that the Bozeman Fire  and the City of Bozeman have asked to be done.  This will include continuing the  asphalt of the Alley, adding a storm water reserve tank for run off and curbs.     Engineering fees           $80,000.00  This is for our Electrical, Civil, and Mechanical Engineers.   This includes the  Boundary survey of the property, amended plat, subdivision exemption  application, subdivision exemption city review fee and Civil Engineering and land  surveying, Geotechnical Engineering, and Structural Engineering.        TOTAL                $726,666.90     Page 33 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 Exhibit 1         Page 34 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 35 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 36 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 37 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 38 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017        Page 39 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017        Page 40 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017   Exibit 2   (Document marked proprietary removed)         Page 41 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017            Page 42 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 43 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 44 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017 Exhibit 3           Page 45 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 46 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017       Business Plan      Page 47 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 48 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017      Page 49 of 49    Midtown Urban Renewal District TIF Assistance Revised January 2017   Lifestyle Solutions Real Estate LLC Tax Increment Analysis November 27, 2018 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 mixed-use commercial/residential building located in the heart of Bozeman's Midtown District. Applicant plans to invest approximately $5.0 million and is requesting $726,667 from the Agency. The following schedule summarizes our findings of our analysis. Estimated construction costs to complete project 5,643,334$ Estimated capitalized interest 83,333 Less: 2018 market value per assessor (improvements only)87,840 Net estimated increase in value 5,638,827 Estimated net increase in taxable value 106,574 TIF tax rate - estimated - FY 2021 719.49 Estimated incremental taxes (TIF) - annual 76,679 TIF investment 726,667 ROI - estimated 10.6% Estimated payback period (years)10 assumes 5.0% interest rate on advanced amount Private investment to public investment 6.77 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 per application is approximately 9 months Nov-19 Winter 2019 Increase in property taxes applicable fiscal year 2021 Construction Interest - estimated 83,333 12 month construction loan rate 5.00%Note: estimated commercial rate Current property taxes - Analysis has been performed to determine: Return on Investment (ROI), Estimated payback period and metrics related to private to public sector investment 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 - real market value will likely differ. Different valuation methods include but are not limited to; income approach, sales comparisons, and Capital Asset Pricing Model. Lifestyle Solutions Real Estate LLC Tax Increment Analysis November 27, 2018 Estimated Financing Cost - Construction Borrowing 5,000,000 Construction Financing Project Costs Amount Beg Month Ending Month Months of Interest Estimated Interest Mar 555,556 8 18,519 Apr 555,556 7 16,204 May 555,556 6 13,889 Jun 555,556 5 11,574 Jul 555,556 4 9,259 Aug 555,556 3 6,944 Sep 555,556 2 4,630 Oct 555,556 1 2,315 Nov 555,556 - - Estimated cost to complete 5,000,000 83,333 Note: Financing cost assues 9 month construction period, equal monthly expenditures throughout construction. 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: Ruh Building Date: November 29, 2018 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 Ruh Building 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 development team 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 expenditures 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 November 30, 2018 Bozeman TIF Review: Ruh Building Page 2 183082-MEMO-TIF Review-Ruh Building 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 N 7th Avenue and Durston Road Parcel Area: 0.653 acres (28,445 square feet) Stories: 3-stories Total Building Area: 30,538 square feet Commercial Program: The current proposal contemplates 11,000 square feet of commercial space that is anticipated to occupy the first floor of the building. The commercial space is anticipated to be a mix of office space and general retail space. Rental Multifamily Program: The second and third floors are anticipated to be occupied by 16 rental residential units that are estimated to occupy approximately 16,400 square feet of space. The residential unit mix currently contemplates four 1-bedroom units and 12 2-bedroom units. Unit sizes are expected to range from 650 to 800 square feet for the 1-bedroom units and 980 to 1,100 square feet for the 2-bedroom units. Project Costs Land Costs Total: $950,000 Cost per Land SF: $33 per square foot % 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. At 14 percent of total, this project is within that range. In addition, land costs at approximately $33 per square foot are in align with other recent transactions in this area. Hard Costs Total: $4,861,406 Cost per GBA: $159 per square foot Comments: Average construction costs in the larger market area are estimated to range from $110 to $150 per square foot. At $159 per square foot, this project falls just above that range. However, the development team anticipates using higher quality finishes that include brick, stressed metal siding, stone, concrete and large windows that all contribute to higher construction costs. Soft Costs Total: $817,260 % of Hard Costs: 14 percent Comments: Generally, soft costs for comparable projects typically range from 20 to 30 percent of hard construction costs (vertical construction costs). At 14 percent of hard costs this project falls below that range. Operating Revenue Commercial Rental Rate: The 11,000 square feet of space that is contemplated as a mix of office and retail space is currently estimated to rent for $24 per square foot (NNN). Rental rates for comparable space in downtown Bozeman are roughly $25 per square foot while rental rates Memorandum November 30, 2018 Bozeman TIF Review: Ruh Building Page 3 183082-MEMO-TIF Review-Ruh Building for office space outside of downtown can range from $16 to $18 per square foot. The estimated rental rates for this building are on the higher end of the range in rental rates that are anticipated to be achievable at this location. Residential Rental Rate: The 16 multifamily units that are contemplated for construction on this site are estimated to rent for $1,200 per unit per month for the 1-bedroom units and $1,800 per unit per month for the 2-bedroom units. These rental rates translate to roughly $1.50 to $1.60 per square foot, which is also on the high end of what may be achievable at this location. 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 those 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 the discount rate that makes the net present value (NPV) of a project 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  Riskless rate of return (typically 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 U.S. Finally, in determining an appropriate discount rate for this specific property EPS considered the following project specific factors:  Program – The mix of uses that are contemplated to include retail, office, and multifamily were an important factor in determining an appropriate discount rate. Generally, multifamily development has a lower discount rate and corresponding level of risk than office and retail development. Memorandum November 30, 2018 Bozeman TIF Review: Ruh Building Page 4 183082-MEMO-TIF Review-Ruh Building  Project Location – While this site is only a short drive from downtown Bozeman, the area is still relatively untested for the uses proposed for development and this project would represent an initial test of an unproven market, which results in added risk and warrants a higher discount rate.  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 is likely at the tail end of this cycle or nearing a phase of oversupply, there is additional risk associated with the timing of the market. Without public investment the project achieves an internal rate of return of 6.87 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 8.25 percent (1.5 percent above the income capitalization rate, below). While this estimate is somewhat subjective, it reflects a variety of current market conditions, risk factors, and the mix of development types proposed for this project. In order to achieve an internal rate of return of 8.25 percent the project requires approximately $635,600 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 value. For the Ruh Building project, total value is calculated by summing the value of the condominium units and adding the estimated value of the commercial space. The value of the commercial space is calculated by using an estimated capitalization rate at stabilization. The capitalization rate (cap rate) is relatively straight forward metric that reflects a project’s net operating income (NOI) and perceived value. Mathematically the cap rate is calculated by dividing a project’s stabilized NOI by its actual sales value. For this project a cap rate of 6.75 percent is estimated to be reasonable based on a review of market data in the western U.S. Compared to the Aspen Crossing building, a lower cap rate was used for this building due to the presence of rental residential which is trading at low cap rates in the strong rental market nationally and locally. This cap rate results in a total valuation for the multifamily and commercial space of $6.27 million. For the Subtracting the total construction costs of $6.68 million, results in a total project gap of roughly $409,000. Project Request The developers of the Ruh Building project are requesting $726,667 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 $409,000 to $635,600. The developer request is outside of this range. It is, however, important to note that the commercial rental assumptions at $24 per square foot (NNN) and the multifamily rental assumptions at roughly $1.50 to $1.60 per square foot are at the high end for what is likely achievable at this location. If these rental rates are reduced to more conservative rates (as shown in the sensitivity tables in the appendix of this memo) the estimated project gap increases to an amount that is greater than the developer request of $726,667. Prepared for: City of Bozeman Prepared by: Economic & Planning Systems, Inc. Date: November 27, 2018 EPS #183082 Financial Model TIF Request Review: Ruh Building TIF Request Review: City of Bozeman 12/3/2018 Table 1 Project Summary and Key Assumption Sensitivity TIF Request Review: Ruh Building Description Amount Developer Low High KEY ASSUMPTIONS Revenue Assumptions Commercial Rental Rate $24.00 NNN $18.00 $22.00 $24.00 Higher Multifamily 1-Bed Rental Rate $1.50 per square foot $1.25 $1.50 $1.50 Inside Multifamily 2-Bed Rental Rate $1.64 per square foot $1.15 $1.40 $1.64 Higher Cost Assumptions Land Cost 14.23%% of total cost 10% 20%14.23%Inside Hard Construction Costs $159 per GBA $110 $150 $159 Higher Soft Construction Costs 16.81%% of HC 20% 30%16.81%Lower Total Construction Cost $219 per GBA $200 $250 $219 Inside Return Assumptions Overall Project Discount Rate 8.25%project discount rate Project Cap Rate 6.75%project capitalization rate, used to determine static value PROJECT SUMMARY Total Cost land, infrastructure, hard, and soft Stabilized Project Value Stabilized Building NOI $445,943 at year 4 Building Disposition Revenue at year 10 PROJECT GAP Developer Request -$726,667 as stated in application Static Estimate total revenues/value less cost Time Series Estimate discount rate hurdle Sensitivity Analysis Time Series Estimate: Commercial Rental Rate Static Estimate: Commercial Rental Rate -635,611 7.75% 8.00% 8.25% 8.50% 8.75%-409,052 6.25% 6.50% 6.75% 7.00% 7.25% $19.44 -$1,091,208 -$1,190,906 -$1,288,331 -$1,383,541 -$1,476,594 $19.44 -$654,024 -$885,664 -$1,100,145 -$1,299,307 -$1,484,733 $21.60 -$770,769 -$876,160 -$979,148 -$1,079,794 -$1,178,161 $21.60 -$300,475 -$545,713 -$772,785 -$983,638 -$1,179,950 $24.00 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $24.00 $92,357 -$167,990 -$409,052 -$632,895 -$841,301 $26.40 -$58,682 -$176,724 -$292,074 -$404,802 -$514,977 $26.40 $485,189 $209,733 -$45,319 -$282,153 -$502,653 $29.04 $332,965 $207,966 $85,817 -$33,556 -$150,226 $29.04 $917,304 $625,228 $354,788 $103,665 -$130,140 Time Series Estimate: 1-Bed Rental Rate Static Estimate: 1-Bed Rental Rate -635,611 7.75% 8.00% 8.25% 8.50% 8.75%-409,052 6.25% 6.50% 6.75% 7.00% 7.25% $1.22 -$571,022 -$679,970 -$786,434 -$890,478 -$992,165 $1.22 -$70,490 -$324,573 -$559,836 -$778,294 -$981,686 $1.35 -$496,987 -$607,246 -$714,991 -$820,288 -$923,199 $1.35 $6,648 -$250,402 -$488,412 -$709,421 -$915,188 $1.50 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $1.50 $92,357 -$167,990 -$409,052 -$632,895 -$841,301 $1.65 -$332,464 -$445,637 -$556,230 -$664,309 -$769,940 $1.65 $178,066 -$85,578 -$329,692 -$556,370 -$767,414 $1.82 -$241,976 -$356,752 -$468,911 -$578,521 -$685,647 $1.82 $272,346 $5,076 -$242,396 -$472,191 -$686,139 Time Series Estimate: 2-Bed Rental Rate Static Estimate: 2-Bed Rental Rate -635,611 7.75% 8.00% 8.25% 8.50% 8.75%-409,052 6.25% 6.50% 6.75% 7.00% 7.25% $1.33 -$1,118,061 -$1,217,321 -$1,314,317 -$1,409,107 -$1,501,751 $1.33 -$640,453 -$872,615 -$1,087,580 -$1,287,190 -$1,473,034 $1.47 -$784,902 -$890,062 -$992,824 -$1,093,251 -$1,191,402 $1.47 -$293,332 -$538,845 -$766,172 -$977,261 -$1,173,792 $1.64 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $1.64 $92,357 -$167,990 -$409,052 -$632,895 -$841,301 $1.80 -$44,548 -$162,821 -$278,397 -$391,346 -$501,737 $1.80 $478,047 $202,865 -$51,932 -$288,530 -$508,810 $1.98 $362,646 $237,161 $114,538 -$5,299 -$122,421 $1.98 $902,305 $610,806 $340,900 $90,273 -$143,070 Time Series Estimate: Construction Hard Cost Static Estimate: Construction Hard Cost -635,611 7.75% 8.00% 8.25% 8.50% 8.75%-409,052 6.25% 6.50% 6.75% 7.00% 7.25% $129 $508,942 $397,225 $288,057 $181,369 $77,098 $129 $1,016,024 $755,677 $514,615 $290,772 $82,366 $143 $71,415 -$40,301 -$149,470 -$256,158 -$360,429 $143 $578,498 $318,151 $77,089 -$146,755 -$355,161 $159 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $159 $92,357 -$167,990 -$409,052 -$632,895 -$841,301 $175 -$900,866 -$1,012,582 -$1,121,751 -$1,228,439 -$1,332,710 $175 -$393,784 -$654,131 -$895,193 -$1,119,036 -$1,327,442 $193 -$1,435,621 -$1,547,337 -$1,656,506 -$1,763,194 -$1,867,464 $193 -$928,538 -$1,188,885 -$1,429,947 -$1,653,791 -$1,862,197 Source: Economic & Planning Systems \\EPSDC02\Proj\183082-Bozeman MT P3 Development Analysis\Models\[183082-MODEL-Ruh Building-11-21-2018.xlsm]T-Summary Project Cap Rate Project Discount Rate $6,267,615 $7,079,416 Project Cap Rate NN N Project Cap Rate 6.75% Cap Rate Market Range Co s t p e r s f 2 - B e d R a t e -$635,611 -$409,052 NN N Project Discount Rate Project Discount Rate Project Discount Rate 1- B e d R a t e 2- B e d R a t e Project Cap Rate Co s t p e r s f -$6,676,667 1- B e d R a t e Economic & Planning Systems 2 of 7 TIF Request Review: City of Bozeman 12/3/2018 Table 2 Eligible Costs Summary TIF Request Review: Ruh Building Description Amount % of Total City of Bozeman Impact Fees $143,319 20% City of Bozeman Cash In Lieu of Park Land $15,290 2% City of Bozeman Cash In Lieu of Water Rights $22,058 3% Service lines $98,000 13% Northwestern Energy $45,000 6% Demo $48,000 7% Street Scape & Public Infrastructure $235,000 32% Alley Behind Recompute $40,000 6% Engineering fees $80,000 11% TOTAL $726,667 100% % of Total Project Cost 10.9% Source: Development Team; Economic & Planning Systems \\EPSDC02\Proj\183082-Bozeman MT P3 Development Analysis\Models\[183082-MODEL-Ruh Building-11-21-2018.xlsm]T-Elig Costs Economic & Planning Systems 3 of 7 TIF Request Review: City of Bozeman 12/3/2018 Table 3 Development Program TIF Request Review: Ruh Building 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 11,000 36% $24.00 RESIDENTIAL Ownership (Condos)Sale Price ($/unit) 1-Bed 0 0 0% N/A 2-Bed 0 0 0% N/A 3-Bed 0 0 0% N/A 4-Bed 0 0 0% N/A Common Area 0 0 0%N/A Subtotal 0 0 0% N/A Rental (Apts.)Rental Revenue ($/sf) 1-Bed 4 3,200 (est.) 10%$1.50 2-Bed 12 13,200 (est.) 43%$1.64 3-Bed 0 0 0% N/A 4-Bed 0 0 0% N/A Common Area 0 3,138 10%N/A Subtotal 16 19,538 64% $1.61 TOTAL 16 30,538 100% Source: Development Team; Economic & Planning Systems \\EPSDC02\Proj\183082-Bozeman MT P3 Development Analysis\Models\[183082-MODEL-Ruh Building-11-21-2018.xlsm]T-Program Economic & Planning Systems 4 of 7 TIF Request Review: City of Bozeman 12/3/2018 Table 4 Development Costs TIF Request Review: Ruh Building Description Quantity per GBA Total % of Total LAND COSTS Land 950,000$ 14.2% Land Costs 950,000$ 14.2% TOTAL LAND COST 950,000$ 14.2% Horizontal Development Costs Site Improvement 48,000$ 0.7% Demo, Excavation and Material Removal 48,000$ 0.7% South Site -$ 0.0% City Sidewalk -$ 0.0% City Curb & Gutter -$ 0.0% Street Patch -$ 0.0% Alley Paving -$ 0.0% Total Costs -$ 0.0% TOTAL HORIZONTAL CONSTRUCTION COSTS 48,000$ 0.7% Vertical Development Costs Construction $159.19 per GBA 4,861,406$ 72.8% New Construction direct cost $156.90 per GBA 4,791,406$ 71.8% Extra Construction Costs (e.g. Alley behind recompute) $1.31 per GBA 40,000$ 0.6% Permits $0.98 per GBA 30,000$ 0.4% TOTAL VERTICAL CONSTRUCTION COSTS $159 per GBA 4,861,406$ 72.8% Soft Costs Professional fees $10.69 per GBA 326,594$ 4.9% Architectural Fee $4.15 per GBA 126,594$ 1.9% Property Manager Fee $2.29 per GBA 70,000$ 1.0% Engineering Fees $2.62 per GBA 80,000$ 1.2% Other/Misc.$1.64 per GBA 50,000$ 0.7% Permits and Fees $10.17 per GBA 310,667$ 4.7% CIL Fees $1.22 per GBA 37,348$ 0.6% Impact Fees $4.69 per GBA 143,319$ 2.1% Other Fees and Site improvements $4.26 per GBA 130,000$ 1.9% Soft Costs $1.31 per GBA 40,000$ 0.6% Estimated Property Tax for year 1 $1.31 per GBA 40,000$ 0.6% Permits and Fees $4.58 per GBA 140,000$ 2.1% Operating reserves $3.27 per GBA 100,000$ 1.5% Other Misc.$1.31 per GBA 40,000$ 0.6% TOTAL SOFT COSTS $27 per GBA 817,260.65$ 12.2% TOTAL PROJECT COST $219 per GBA 6,676,667$ 100.0% Source: Development Team; Economic & Planning Systems \\EPSDC02\Proj\183082-Bozeman MT P3 Development Analysis\Models\[183082-MODEL-Ruh Building-11-21-2018.xlsm]T-Cost Economic & Planning Systems 5 of 7 TIF Request Review: City of Bozeman 12/3/2018 Table 5 Operating Revenues and Expenditures TIF Request Review: Ruh Building Building Area Area % of Total Net Rentable Area 27,400 sf 89.7% Common Area 3,138 sf 10.3% Total Building Area 30,538 sf 100.0% Type Rentable SF Lease Rate Total Revenue % of Total per year Annual REVENUE Rental Income 27,400 rentable sf 580,800$ 93.0%of PGI All Retail and Office Space 11,000 rentable sf 24.00$ per sf per year 264,000$ 42.3%of PGI Apartment: 1-Bed 3,200 rentable sf 1.50$ per sf per month 57,600$ 9.2%of PGI Apartment: 2-Bed 13,200 rentable sf 1.64$ per sf per month 259,200$ 41.5%of PGI [Blank]0 rentable sf -$ per year -$ 0.0%of PGI [Blank]0 rentable sf -$ per year -$ 0.0%of PGI [Blank]0 rentable sf -$ per year -$ 0.0%of PGI [Blank]0 rentable sf -$ per year -$ 0.0%of PGI [Blank]0 rentable sf -$ per year -$ 0.0%of PGI [Blank]0 rentable sf -$ per year -$ 0.0%of PGI [Blank]0 rentable sf -$ per year -$ 0.0%of PGI Average N/A N/A Other Income 44,000$ 7.0%of PGI Tenant Contributions NNN 11,000 unit 4.00$ per sf per year 44,000$ 7.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI [Blank]0 unit -$ per sf per year -$ 0.0%of PGI POTENTIAL GROSS INCOME (PGI)624,800$ 100.0%of PGI Less: Vacancy 7.0%per year (43,736)$ -7.0%of PGI EFFECTIVE GROSS INCOME (EGI)581,064$ 93.0%of PGI EXPENDITURES Operating Expenditures 5.17$ per RBA Adjustment (158,000)$ 27.2%of EGI Property Taxes 1.60$ per RBA 100%% of total (49,000)$ 8.4%of EGI Insurance -$ per RBA 100%% of total -$ 0.0%of EGI Utilities -$ per RBA 100%% of total -$ 0.0%of EGI CAM 1.09$ per RBA 100%% of total (30,000)$ 5.2%of EGI Advertise/Market 2,400.00$ per unit 100%% of total (2,400)$ 0.4%of EGI Legal 5,000.00$ per unit 100%% of total (5,000)$ 0.9%of EGI Trash 3,600.00$ per unit 100%% of total (3,600)$ 0.6%of EGI Grounds 5,000.00$ per unit 100%% of total (5,000)$ 0.9%of EGI Other 15,000.00$ per unit 100%% of total (15,000)$ 2.6%of EGI Property Management Fee (% of Gross Rev)8.3%% of EGI 100%% of total (48,000)$ 8.3%of EGI General Operating Expenses -$ per RBA 100%% of total -$ 0.0%of EGI NET OPERATING INCOME (NOI)13.85$ per GSF 423,064$ 72.8%of EGI Asset Management Fee (% of NOI)0.0%% of NOI 100%% of total -$ 0.0%of EGI NET CASH FLOW 13.85$ per GSF 423,064$ 72.8%of EGI PROJECT COST 218.63$ per GSF 6,676,667$ RETURN ON COST (ROC)6.34% Reserves (Annual/ unit)2,500.00$ per unit 100%% of total (40,000)$ 6.9%of EGI PROJECT VALUE ESTIMATED PROJECT VALUE 6.75%cap rate 6,267,615$ PER NSF 228.75$ PER GSF 205.24$ Source: Development Team; Economic & Planning Systems \\EPSDC02\Proj\183082-Bozeman MT P3 Development Analysis\Models\[183082-MODEL-Ruh Building-11-21-2018.xlsm]T-Operating $3,133,807 Economic & Planning Systems 6 of 7 TIF Request Review: City of Bozeman 12/3/2018 Ta b l e 6 De v e l o p m e n t R e v e n u e s a n d E x p e n d i t u r e s TI F R e q u e s t R e v i e w : R u h B u i l d i n g KE Y A S S U M P T I O N S Pr o j e c t T i m i n g P r o j e c t D i s p o s i t i o n Co n s t r u c t i o n P e r i o d 12 m o n t h s Bu i l d i n g Ye a r 1 0 Va c a n c y C o m m e r c i a l R e s i d e n t i a l Ye a r 1 30 . 0 % 2 0 . 0 % Ye a r 2 20 . 0 % 1 5 . 0 % Ye a r 3 10 . 0 % 7 . 0 % St a b i l i z a t i o n 10 . 0 % 5 . 0 % De s c r i p t i o n Fa c t o r E s c a l a t i o n To t a l Y e a r 0 Y e a r 1 Y e a r 2 Y e a r 3 Y e a r 4 Y e a r 5 Y e a r 6 Y e a r 7 Y e a r 8 Y e a r 9 Y e a r 1 0 Y e a r 1 1 Y e a r 1 2 Y e a r 1 3 Y e a r 1 4 Y e a r 1 5 DE V E L O P M E N T C O S T S Co n s t r u c t i o n C o s t - $ 6 , 6 7 6 , 6 6 7 - $ 6 , 6 7 6 , 6 6 7 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 La n d $9 5 0 , 0 0 0 2. 0 % -$ 9 5 0 , 0 0 0 - $ 9 5 0 , 0 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Ho r i z o n t a l D e v e l o p m e n t C o s t s $4 8 , 0 0 0 2. 0 % -$ 4 8 , 0 0 0 - $ 4 8 , 0 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Ve r t i c a l D e v e l o p m e n t C o s t s $4 , 8 6 1 , 4 0 6 2. 0 % -$ 4 , 8 6 1 , 4 0 6 - $ 4 , 8 6 1 , 4 0 6 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 So f t C o s t s $8 1 7 , 2 6 1 2. 0 % -$ 8 1 7 , 2 6 1 - $ 8 1 7 , 2 6 1 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 To t a l C o m m e r c i a l C o s t s - $ 6 , 6 7 6 , 6 6 7 - $ 6 , 6 7 6 , 6 6 7 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 NE T O P E R A T I N G I N C O M E Co n d o S a l e s $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Gr o s s R e v e n u e $0 2. 0 % $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Ta x e s C o n d o S a l e s 0.0 % N / A $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Sa l e s C o m m i s s i o n s 6.0 % N / A $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Co m m e r c i a l R e v e n u e Po t e n t i a l G r o s s I n c o m e $3 0 8 , 0 0 0 1. 5 % $7 , 2 2 8 , 9 2 1 $ 0 $ 3 1 2 , 6 2 0 $ 3 1 7 , 3 0 9 $ 3 2 2 , 0 6 9 $ 3 2 6 , 9 0 0 $ 3 3 1 , 8 0 3 $ 3 3 6 , 7 8 1 $ 3 4 1 , 8 3 2 $ 3 4 6 , 9 6 0 $ 3 5 2 , 1 6 4 $ 3 5 7 , 4 4 7 $ 3 6 2 , 8 0 8 $ 3 6 8 , 2 5 0 $ 3 7 3 , 7 7 4 $ 3 7 9 , 3 8 1 $ 3 8 5,071 Va c a n c y L o s s - $ 8 1 7 , 1 4 7 $ 0 - $ 9 3 , 7 8 6 - $ 6 3 , 4 6 2 - $ 3 2 , 2 0 7 - $ 3 2 , 6 9 0 - $ 3 3 , 1 8 0 - $ 3 3 , 6 7 8 - $ 3 4 , 1 8 3 - $ 3 4 , 6 9 6 - $ 3 5 , 2 1 6 - $ 3 5 , 7 4 5 - $ 3 6 , 2 8 1 - $ 3 6 , 8 2 5 - $ 3 7 , 3 7 7 -$37,938 -$38,507 Ef f e c t i v e G r o s s I n c o m e $ 6 , 4 1 1 , 7 7 4 $ 0 $ 2 1 8 , 8 3 4 $ 2 5 3 , 8 4 7 $ 2 8 9 , 8 6 2 $ 2 9 4 , 2 1 0 $ 2 9 8 , 6 2 3 $ 3 0 3 , 1 0 2 $ 3 0 7 , 6 4 9 $ 3 1 2 , 2 6 4 $ 3 1 6 , 9 4 8 $ 3 2 1 , 7 0 2 $ 3 2 6 , 5 2 7 $ 3 3 1 , 425 $336,397 $341,443 $346,564 Mu l t i f a m i l y R e v e n u e Po t e n t i a l G r o s s I n c o m e $3 1 6 , 8 0 0 1. 5 % $7 , 4 3 5 , 4 6 1 $0 $ 3 2 1 , 5 5 2 $ 3 2 6 , 3 7 5 $ 3 3 1 , 2 7 1 $ 3 3 6 , 2 4 0 $ 3 4 1 , 2 8 4 $ 3 4 6 , 4 0 3 $ 3 5 1 , 5 9 9 $ 3 5 6 , 8 7 3 $ 3 6 2 , 2 2 6 $ 3 6 7 , 6 5 9 $ 3 7 3 , 1 7 4 $ 3 7 8 , 7 7 2 $ 3 8 4 , 4 5 3 $ 3 9 0 , 2 2 0 $ 3 9 6 , 0 7 4 Va c a n c y L o s s - $ 4 5 9 , 2 6 9 $ 0 - $ 6 4 , 3 1 0 - $ 4 8 , 9 5 6 - $ 2 3 , 1 8 9 - $ 1 6 , 8 1 2 - $ 1 7 , 0 6 4 - $ 1 7 , 3 2 0 - $ 1 7 , 5 8 0 - $ 1 7 , 8 4 4 - $ 1 8 , 1 1 1 - $ 1 8 , 3 8 3 - $ 1 8 , 6 5 9 - $ 1 8 , 9 3 9 - $ 1 9 , 2 2 3 -$19,511 -$19,804 Ef f e c t i v e G r o s s I n c o m e $ 6 , 9 7 6 , 1 9 3 $ 0 $ 2 5 7 , 2 4 2 $ 2 7 7 , 4 1 9 $ 3 0 8 , 0 8 2 $ 3 1 9 , 4 2 8 $ 3 2 4 , 2 1 9 $ 3 2 9 , 0 8 3 $ 3 3 4 , 0 1 9 $ 3 3 9 , 0 2 9 $ 3 4 4 , 1 1 5 $ 3 4 9 , 2 7 6 $ 3 5 4 , 5 1 6 $ 3 5 9 , 833 $365,231 $370,709 $376,270 To t a l O p e r a t i n g C o s t s -$ 1 5 8 , 0 0 0 1. 5 % -$ 3 , 7 0 8 , 3 4 2 $0 - $ 1 6 0 , 3 7 0 - $ 1 6 2 , 7 7 6 - $ 1 6 5 , 2 1 7 - $ 1 6 7 , 6 9 5 - $ 1 7 0 , 2 1 1 - $ 1 7 2 , 7 6 4 - $ 1 7 5 , 3 5 5 - $ 1 7 7 , 9 8 6 - $ 1 8 0 , 6 5 6 - $ 1 8 3 , 3 6 5 - $ 1 8 6 , 1 1 6 - $ 1 8 8 , 9 0 8 - $ 1 9 1 , 7 4 1 - $ 1 9 4 , 6 1 7 -$197,537 Ne t O p e r a t i n g I n c o m e $ 9 , 6 7 9 , 6 2 4 $ 0 $ 3 1 5 , 7 0 6 $ 3 6 8 , 4 9 1 $ 4 3 2 , 7 2 7 $ 4 4 5 , 9 4 3 $ 4 5 2 , 6 3 2 $ 4 5 9 , 4 2 1 $ 4 6 6 , 3 1 2 $ 4 7 3 , 3 0 7 $ 4 8 0 , 4 0 7 $ 4 8 7 , 6 1 3 $ 4 9 4 , 9 2 7 $ 5 0 2 , 3 5 1 $509,886 $517,534 $525,298 DI S P O S I T I O N R E V E N U E Gr o s s R e v e n u e $ 7 , 2 2 3 , 8 9 4 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 7 , 2 2 3 , 8 9 4 $ 0 $ 0 $ 0 $ 0 $ 0 Bu i l d i n g ( C o m m e r c i a l a n d A p t s . ) 6.8 % c a p r a t e $7 , 2 2 3 , 8 9 4 $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 7 , 2 2 3 , 8 9 4 $ 0 $ 0 $ 0 $ 0 $ 0 Co s t o f S a l e - $ 1 4 4 , 4 7 8 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 - $ 1 4 4 , 4 7 8 $ 0 $ 0 $ 0 $ 0 $ 0 Bu i l d i n g ( C o m m e r c i a l a n d A p t s . ) 2.0 % -$ 1 4 4 , 4 7 8 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 - $ 1 4 4 , 4 7 8 $ 0 $ 0 $ 0 $ 0 $ 0 Bu i l d i n g N e t S a l e R e v e n u e $ 7 , 0 7 9 , 4 1 6 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 7 , 0 7 9 , 4 1 6 $ 0 $ 0 $ 0 $ 0 $ 0 PR O J E C T C A S H F L O W S Ne t P r o j e c t C a s h F l o w s $ 4 , 7 8 5 , 3 0 7 - $ 6 , 6 7 6 , 6 6 7 $ 3 1 5 , 7 0 6 $ 3 6 8 , 4 9 1 $ 4 3 2 , 7 2 7 $ 4 4 5 , 9 4 3 $ 4 5 2 , 6 3 2 $ 4 5 9 , 4 2 1 $ 4 6 6 , 3 1 2 $ 4 7 3 , 3 0 7 $ 4 8 0 , 4 0 7 $ 7 , 5 6 7 , 0 2 9 $ 0 $0 $0 $0 $0 Co n s t r u c t i o n C o s t s - $ 6 , 6 7 6 , 6 6 7 - $ 6 , 6 7 6 , 6 6 7 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Co n d o S a l e s $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Bu i l d i n g N e t O p e r a t i n g I n c o m e $ 4 , 3 8 2 , 5 5 8 $ 0 $ 3 1 5 , 7 0 6 $ 3 6 8 , 4 9 1 $ 4 3 2 , 7 2 7 $ 4 4 5 , 9 4 3 $ 4 5 2 , 6 3 2 $ 4 5 9 , 4 2 1 $ 4 6 6 , 3 1 2 $ 4 7 3 , 3 0 7 $ 4 8 0 , 4 0 7 $ 4 8 7 , 6 1 3 $ 0 $ 0 $ 0 $0 $0 Bu i l d i n g D i s p o s i t i o n I n c o m e $ 7 , 0 7 9 , 4 1 6 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 7 , 0 7 9 , 4 1 6 $ 0 $ 0 $ 0 $ 0 $ 0 Ne t P r e s e n t V a l u e 8. 2 5 % -$ 6 3 5 , 6 1 1 - $ 6 , 6 7 6 , 6 6 7 $ 2 9 1 , 6 4 5 $ 3 1 4 , 4 6 4 $ 3 4 1 , 1 3 8 $ 3 2 4 , 7 6 4 $ 3 0 4 , 5 1 3 $ 2 8 5 , 5 2 5 $ 2 6 7 , 7 2 1 $ 2 5 1 , 0 2 7 $ 2 3 5 , 3 7 4 $ 3 , 4 2 4 , 8 8 8 $ 0 $ 0 $ 0 $ 0 $ 0 In t e r n a l R a t e o f R e t u r n 6 . 8 7 % So u r c e : E c o n o m i c & P l a n n i n g S y s t e m s \\E P S D C 0 2 \ P r o j \ 1 8 3 0 8 2 - B o z e m a n M T P 3 D e v e l o p m e n t A n a l y s i s \ M o d e l s \ [ 1 8 3 0 8 2 - M O D E L - R u h B u i l d i n g - 1 1 - 2 1 - 2 0 1 8 . x l s m ] T - T i m e S e r i e s Ec o n o m i c & P l a n n i n g S y s t e m s 7 of 7