by Eric Hagen
A planner, builder, managing company and other investors would like to build a 70-unit senior housing facility in Andover, but need the city’s financial help to make the project possible.
Roger Fink of Trident Development, LLC out of St. Cloud gave the Andover Economic Development Authority (EDA) an overview of the project during a Feb. 6 meeting. He said the three companies involved secured a bank loan to cover 73 percent of the construction costs. Private investors are paying 19 percent. That leaves an 8 percent financing gap that the group hopes the Andover EDA can fill.
Tax increment financing (TIF) is a funding mechanism communities can use for new development or redevelopment areas. The 70-unit senior facility at the southeast corner of Hummingbird Street N.W. and 155th Lane N.W. within the Grey Oaks neighborhood would be entirely new construction.
The way TIF works is additional property taxes that come due to development are used to pay for the TIF investment. Andover utilized TIF for The Farmstead senior housing facility. The Andover Station and Andover Station North commercial areas on Bunker Lake Boulevard west of Hanson Boulevard and well as the Downtown Center at the northeast corner of Bunker Lake and Round Lake boulevards also needed TIF to get projects off the ground.
Although the EDA has yet to vote for or against providing $800,000 of TIF assistance to the senior facility development group, nobody objected to the concept. The TIF district could last 25 years, according to Trident’s estimate.
“I think TIF is perfect for this type of structure,” Mayor Mike Gamache said.
City Administrator Jim Dickinson said city staff will review the TIF request as will the city’s bond counsel and financial adviser Ehlers and Associates to make sure it meshes with industry standards. The developer will pay the review expenses, Dickinson said, so they wanted to make sure the EDA was not completely opposed to the TIF financing concept before spending any more time on it.
If the project receives TIF assistance from the EDA and the developer receives approval on a site plan, Fink said construction could start in July and the facility could open in August 2013.
Trident Development is a real estate development company that has developed plans for senior housing facilities in numerous Minnesota communities such as Albertville, Eagan, Fridley, Princeton, Ramsey and St. Michael. Lyon Contracting and Development, Inc. has worked with Trident on a number of projects as has Tealwood Management, LLC, which would operate the facility. Tealwood manages over 40 properties in a five-state area in the Upper Midwest including assisted living facilities and nursing homes that are both privately and publicly owned, according to Fink.
Trident, Tealwood and the private investors are forming Arbour Oaks, LLC. This company would own and operate the facility, so they are not passing the responsibilities onto someone else after the facility is constructed, Fink said.
“In that regard, it’s important to us that we pay attention to quality construction, quality furnishings, a high level of resident care and to also make lasting and permanent connections within the community,” he said.
Fink said TIF would help close the financing gap. The lending environment has become tighter in recent years.
Fink said they used to be able to secure a loan to cover 80 to 85 percent of construction costs. Now they get 70 to 75 percent. Some costs are not eligible for financing such as developer or marketing fees and working capital.
“We’re dealing with a very different lending market than you have historically seen,” Dickinson said. “This project five to six years ago probably wouldn’t be requesting TIF, but with the current marketplace and what the banks are asking for that’s why you’re seeing these type of requests come forward.”
According to Councilmember Julie Trude, this would be a pay-as-you-go TIF district meaning the TIF investment is only distributed to the developer if the building actually goes up.
What would be in this facility
The three-story, 70-unit facility would include 42 one-bedroom assisted living units, seven two-bedroom assisted living care units, 14 studio memory care units, six one-bedroom independent care units and two two-bedroom independent care units.
Besides the residential units, other amenities would include a community room and wellness facility, a coffee shop, private dining room, salon, a spa, laundry room, media center and library, a facility owned van for transportation and social programming options.
Fink did not talk about what the rental rates could be, but said that 14 of the 70 units would be set aside for renters whose income is 50 percent or less than the area’s median income. The area would include all of Anoka County and not just Andover, Fink said.
These affordable units would actually be a requirement under federal housing TIF district laws, according to Fink. They would need to set aside 20 percent of the units for affordable housing while the TIF district is in place.
Residents would be 70 years of age or older. The average age is estimated to be 85, according to Fink.
Between 30 and 35 people would work at the facility, but Fink clarified that most staff would be part-time.
Arbour Oaks, LLC paid for a market study and found there is an unmet need in 2010 of 124 units after subtracting units already available in the market area, which this study says extends partially into Coon Rapids, Ham Lake and Oak Grove. The need is expected to rise to 199 units by 2015, according to the market assessment these companies had done.
About half of the 199 housing unit needs will require assisted living facilities, which is the main focus for Arbour Oaks, LLC in this project. Ninety percent of the proposed Andover facility is for assisted living or memory care. Only eight units are being set aside for those who can function independently.
In addition to having this study done, Fink said they contacted competitors such as The Farmstead to determine how long their waiting lists more in order to better gauge what the true market demand for senior housing is. They found there is a market.
Trude questioned if the market analysis factored in that Andover has a young population. Just over 30,000 people live in Andover and only about 6.7 percent are over the age of 65, according to the 2010 U.S. Census data.
Fink said the market researchers are aware of Andover’s census data. Some people will be coming in from outside the community so they can be closer to family living in or near Andover. Councilmember Tony Howard worked with his parents to find an assisted senior living facility for his father. They eventually found an open unit in Elk River. Howard would love for his father to be closer so his 80-year-old mother does not have to drive way to Elk River to visit him.
Howard does want to see more brick in the building design and he wants screening adequately addressed so that neighbors are not adversely affected by this project. Fink said he will hold a neighborhood meeting to listen to resident’s concerns. Community Development Director Dave Carlberg said there will be a public hearing during a regular city council meeting on this project because the land use for this property must change from commercial to high-density residential.
Eric Hagen is at [email protected]