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tid-28-project-plan-final
TAX INCREMENT DISTRICT #28 BEACH BUILDING REDEVELOPMENT PROJECT PLAN v.4 I Planning Services Division May, 2016 Table of Contents Plan Summary............................................................................................................................................1 Introduction................................................................................................................................................2 Purpose............................................... Project Plan Activity ......................... Boundaries/Legal Description ......... Name of District ................................ Creation Date .................................... Project Costs and Improvements .... Method of Financing ......................... Master Plan, Zoning, Building and Other Code Considerations..........................................................4 Economic Feasibility/Expectation for Development...............................................................................4 Promotion of Orderly Development.........................................................................................................6 ProposedUses and Existing Conditions...................................................................................................6 Non -Project Costs......................................................................................................................................7 Relocation...................................................................................................................................................7 Findings and Report to the Joint Review Board.....................................................................................8 .................2 .................2 ........................................................................................................2 .................3 .................3 ........................................................................................................3 .....................................................3 .....................................................3 ...............................................4 Tables TableI Project Costs -Sources and Uses..................................................................................................4 Table 2 Estimated Annual Increment (Investa-Analytics).....................................................................9 Table 3 Tax Increment by Taxing Jurisdiction.....................................................................................10 Appendix A —Exhibits # I Boundary Map...........................................................................................................11 #2 Parcel Identification Map and Table.......................................................................12 #3 Existing Land Use Map.............................................................................................14 #4 Proposed Land Use Map...........................................................................................15 #5 Existing & Proposed Zoning Map............................................................................16 #6 Proposed Improvement Plans...................................................................................17 Appendix B — Tax Increment Financing Application...........................................................................24 Appendix C — Market Study and Investment Analysis Report (Investa-Analytics) ..........................36 Appendix D — Notice of Public Hearing.................................................................................................49 AppendixE — Attorney's Opinion..........................................................................................................50 Appendix F — Plan Commission Public Hearing/Minutes of May 3, 2016 .........................................51 Appendix G — Common Council Creation Resolution June 14, 2016 .................................................55 Appendix H — Joint Review Board Resolution June 21, 2016.............................................................58 TAX INCREMENT DISTRICT #28 PROJECT PLAN CITY OF PLAN COMMISSION May 3, 2016 COMMON COUNCIL June 14, 2016 JOINT REVIEW BOARD June 21, 2016 PREPARED BY: Department of Community Development May, 2016 Plan Summary City of Oshkosh Tax Increment District #28 Project Plan District Name: City of Oshkosh Tax Increment District #28 Beach Building Redevelopment TID Type: Blighted Area Purpose: Redevelop and renovate the 36,000 square foot Orville Beach building at 240 Algoma Blvd. Specifically this building will be renovated into 3 commercial office spaces on the first floor, and 22 residential units split amongst the second and third floors. Max. Life of TID: Location: Size: Parcels: Estimated District Base Value: Estimated District Value at Closure: Estimated Future Increment Value Proposed Costs: Project Financing: Economic Feasibility: 27 Years, but developer projections show that district could be closed after 20 years. 240 Algoma Boulevard, Oshkosh, Wisconsin. Approximately 1.69 acres $575,000 $1,519,137 $944,137 $3.3 million total in private project costs. $292,831 in paygo financing projected over 20 years. Private equity and loans. Economic feasibility is based on rehabilitation and redevelopment of the vacant office space into higher -end apartments and modern commercial business space. 'I'ID # 28 Introduction Wisconsin's Tax Incremental Financing law provides a mechanism that enables cities and villages to rehabilitate blighted areas, improve business areas, create mixed -use development, and/or develop industrial sites. The intent is to defray the cost of improvements in a designated Tax Incremental District (TID) by using tax revenues or increments generated from new development to pay for project improvements in the district. The value increment is the difference between the certified base value of the TID at the time of creation and the increased value of the property in subsequent years until the TID is dissolved. It is the value increment generated from new development that is used to retire the debt incurred by the City in implementation of project activities. Under Tax Incremental Financing, the tax increment generated from private investment in a TID is applied entirely to the retirement of debt incurred by the municipality in order to make the area attractive to investment or reinvestment. When the cost of improvements has been recovered and the debt service attributable to the district has been retired, the TID is dissolved and all taxing jurisdictions benefit on the same shared basis as before the creation of the TID. If the TID has been successful, each of the taxing jurisdictions should receive a much larger share of property taxes generated from the new development that came about as a direct result of the creation of the TID. Tax incremental financing laws provide benefits to all taxing entities, City, County, Public Schools, and Technical College, by promoting development of new taxable value which otherwise would not occur. It provides a tool for municipalities to make reasonable levels of investment using local financing sources to meet identified needs and fill legitimate public purpose roles. The law also recognizes that since municipalities do not share the investment risk with other tax entities, they are entitled within a prescribed period of time, to receive all new tax revenues of the TID as the source of paying off all public investment costs. All other taxing entities receive benefits in the future from the increased tax base generated as a result of the City's investment in the TID. Purpose The primary purpose of this TID is to facilitate redevelopment and rehabilitation of the vacant Orville Beach Memorial Manual Training School office building at 240 Algoma Boulevard into a mixed -use modem commercialiresidential apartment complex and retail/service business center including three commercial units on the first floor and 22 higher end apartments on the second and third floors complete with modern finishes, technology and amenities. The overall goal of the redevelopment project is to provide a new active life and full- time residents within the Oshkosh center city, furthering downtown redevelopment efforts. The anticipated project cost is estimated at $3.3 million with renovations being the most significant cost due to many years of vacancy and deferred maintenance that essentially require a complete gut and remodel of the interior to bring the facility back to a competitive use. In this case, TIF is intended to be used to offset the negative cash flow outcome from year 1 to year 5 thereby facilitating a rate of return on the investment to redevelopment and rehabilitate the Beach Building at 4.91% as opposed to the rate of return of 0.48% that would be realized without TIP paygo assistance. Project Plan Activities Project Overview The developers intend to rehabilitate the Beach Building located at 240 Algoma Blvd in Oshkosh, Wisconsin. Specifically, this building will be renovated into 3 commercial office spaces on the first floor, and 22 residential TID#28 28 units split amongst the second and third floors. Renovation is required due to many years of deferred maintenance with little to no funds invested back into the facility in previous years. Boundaries/Leal Description ALL OF BEACH BUILDING CONDOMINIUM, A PART OF LOTS 13, 15, 17 AND 23 OF BLOCK G OF LEACH'S MAP OF 1894, LOCATED IN THE SOUTHWEST V4 OF THE NORTHWEST V, OF SECTION 24, TOWNSHIP 18 NORTH, RANGE 16 EAST, SEVENTH WARD, CITY OF OSHKOSH, WINNEBAGO COUNTY, WISCONSIN BOUNDED AND DESCRIBED AS FOLLOWS: COMMENCING FROM THE WEST V4 CORNER OF SAID SECTION 24; THENCE N0l°17'08"W, 1,010.65 FEET ALONG THE WEST LINE OF THE NORTHWEST''/a OF SAID SECTION, THENCE N88°42'32"E, 34.00 FEET TO THE INTERSECTION OF THE EAST RIGHT-OF-WAY LINE OF JACKSON STREET AND NORTH RIGHT-OF-WAY LINE OF ALGOMA BOULEVARD; THENCE 554°36'37"E, 417.74 FEET ALONG THE NORTH RIGHT-OF-WAY LINE OF ALGOMA BOULEVARD TO THE SOUTHWESTERLY CORNERS OF BEACH BUILDING CONDOMINIUM AND LOT 15 OF BLOCK G OF LEACH'S MAP OF 1894 AND POINT OF BEGINNING; THENCE N27°08'56"E, 222.48 FEET; THENCE S61 °48'46"E, 77.56 FEET; THENCE N28°41'02"E, 28.29 FEET; THENCE S6l°44'56"E, 8.00 FEET; THENCE N28°15'04"E, 64.30 FEET TO THE SOUTHWESTERLY CORNER OF LOT 19 OF SAID BLOCK G; THENCE S59°36'37"E, 98.50 FEET ALONG THE SOUTHERLY LINE OF SAID LOT 19 TO THE SOUTHEASTERLY CORNER OF SAID LOT 19; THENCE 534°24'38"W, 15.83 FEET ALONG THE WESTERLY LINE OF LOT 13 OF SAID BLOCK G; THENCE S58°07'30"E, 55.59 FEET; THENCE S47°12' 10"E, 9.91 FEET TO A POINT ON THE NORTHERLY LINE OF LOT 17 OF SAID BLOCK G; THENCE S59°34'46"E, 5.62 FEET ALONG THE NORTHERLY LINE OF SAID LOT 17; THENCE S31°18'33"W, 88.20 FEET; THENCE N58°41'27"W, 4.98 FEET; THENCE Sal°18'33"W, 10.30 FEET; THENCE S58°4127"E, 4.99 FEET; THENCE 31°18'33"W, 38.85 FEET; THENCE 558°36'28"E, 14.99 FEET; THENCE S32° 12' 15"W, 182.49 FEET TO THE SOUTHEASTERLY CORNER OF SAID LOT 17, ALSO BEING THE NORTHERLY RIGHT- OF-WAY LINE OF ALGOMA BOULEVARD; THENCE N54°36'37"W, 245.88 FEET ALONG SAID NORTHERLY RIGHT-OF- WAY LINE OF ALGOMA BOULEVARD TO THE POINT OF BEGINNING. SAID AREA CONTAINS 73,455 SQUARE FEET OR 1.686 ACRES, MORE OR LESS. The proposed boundaries of the TID are shown in Exhibit # 1 in Appendix A. Exhibit #2 in Appendix A identifies the parcel information for the TID. Name of District The district is identified as City of Oshkosh Tax Increment District #28 (TID #28) — Beach Building Redevelopment. Creation Date The date of creation for the capture of all new taxable value created within TID # 28 shall be January 1, 2016. The value established as of this date shall be used as the base for computing any increments that will accrue in the tax base for the district. Project Costs and Inmrovements Overall costs to implement this project plan are estimated at $3,294,714 with TIF contributing $292,831 of the project costs as pay -go based on improvement value. The development group is proposing to bring in approximately $1.5 million or 45% equity into the project and finance the remaining 55%. Table 1 below identifies the total project costs and sources of funding to implement this plan. Exhibit # 6 in Appendix A shows the proposed improvements. TID 8 28 Administrative Expenses Administration related expenses include an estimate for administrative, planning, professional, organizational and legal costs. Components of these costs include cost of salaries and employee benefits for City employees engaged in the planning, engineering, implementing and administration activities in connection with this Tax Increment District. The cost of supplies and materials, contract and outside consultant services, and those costs of city departments such as the City Attorney, Public Works, Finance, Community Development, and Transportation. The Department of Revenue also charges a set tip fee and annual certification fee that will be paid from the tax increment. Method of Financing Implementation of improvements in this project plan will be financed through a "Pay -As -You -Go TIP Note." With an initial base value of $575,000 and assuming the assessed value will increase at a rate of 1% per year, over 20 years, the total increment will be $944,137. Applying the 75% rule, the total note from the city due to the developer would be in the amount of $292,831. Additionally, $1,800,000 has been secured through Verve Mortgage and another $1,494,714 in finding will be contributed from the project developers. The cost for the entire project will total $3,294,714. Master Plan. Zoning, Building, and Other Code Considerations With the exception of a Conditional Use Permit (CUP) for mixed residential/commercial use, no changes are necessary to implement this Project Plan. Economic Feasibility/Expectations for Development In March 2016, a Market Study and Investment Analysis Report for the redevelopment of the Beach Building was prepared by Invista Analytics, LLC (IA) to provide a market study of the present rental availability in the near downtown neighborhood that might likely serve both the University of Wisconsin - Oshkosh and the young professional segment in downtown Oshkosh. This information was then utilized to create an operational proforma and investment analysis for the operation of a mixed -use renovation and re -use of the Orville Beach Memorial Training School building located at 240 Algoma Blvd in Oshkosh, Wisconsin. To evaluate the rental potential of the residential units, IA acquired the Apartment Data - 4 or more Units excel databasel from the city of Oshkosh Assessor's File Downloads webpage. This data set was then limited to those properties that fell within a I mile driving distance of 240 Algoma Blvd and that had been constructed since the year 2000, including the 100 N Main Apartments and the Anthem Apartments. The data was then submitted to an econometric quantile regression model2 that used all of the covariates to predict the rents. The resultant model TID#28 parameters were then used along with the covariate data for the subject property units to arrive at an expected rent for the macro, one -bedroom, and two -bedroom units to be rented. The model resulted in estimates of $569, $704, and $802 per month respectively for the macro, one and two bedroom units. These estimates then represent the predicted monthly rent one night expect to pay given the particulars of the units that would be available assuming they are of roughly similar quality as the comparable properties. The developers plan, however, calls for much higher finish levels than many of the comparable units. Because of this the developers have chosen to start with monthly rents of $550, $700, and $900 respectively. To determine the base valuation of the property, the developers purchased the property 011 12/22/2015 from an unrelated seller that was not under pressure to sell with normal financing conditions for the purchase price of $575,000. Thus it is concluded that the transaction was an arm's -length sale and by definition the base market value should then be the purchase price of $575,000. Completed project valuation, a modified income approach was employed and the year I figures suggest a valuation of $1,245,000 upon completion of the project. Potential income was determined by documenting the expected maximum revenue assuming the building is at frill occupancy equating to rent of the commercial space at $9 per square foot annually and rent of the residential space at $550, $700 and $900 for the macro, 1 bedroom and 2 bedroom units respectively. From this we find that the first floor commercial space would bring in $68,850 at full occupancy while the second and third floor residential units will bring in $193,200 annually at full occupancy fora total annual income of $262,050. Total expenses for the project reach a little under $3.3 million. Of those, approximately $2,63 million are allowable expenses for historic tax credits and $2.59 million are allowable TIF expenses. On the funding side, the developers have secured a funding commitment from Verve credit union in the amount of $1.8 million. The remaining $ 1.49 million will be contributed as cash from the developers. With the assumption that the project being completed by November or December 2016 and that the assessor will apply the new assessed value before the first of the year, 2017. Thus the full value of the project will be on the 2017 tax year assessment and the increment can be paid out in the fall of 2018. We assume the assessed value will increase at a rate of 1% per year and that the base value will be $575,000. Thus over 20 years of payout, the total increment will be $390,444. Applying the 75% rule the total note from the city due to the developer would be in the amount of $292,831. With a 2.5% interest rate, this note can be paid down over 20 years. The operational profonna with TIF assistance starts with a negative cash flow in the first year of $(22,53 1) in part due to the ramping up of occupancy in the first year and the lack of increment payment. The next several years still also show a negative cash flow up until the fifth year but by the tenth year, we see a positive cash flow of $27,239. The "without" TIF picture is much more bleak. Under this scenario the developers do not see any positive cash flow until the ninth year, and even then the returns are modest at best being only approximately $3,225. To calculate the return on investment in the form of an internal rate of return (IRR), we first must arrive at an effective amount of cash the developers are putting into the transaction. The developers are bringing $1,494,714 into this project. However, the developers will also be receiving 20% federal and 20% state historical tax credits on the estimated $2.6 million of allowable expenses. This results in roughly $1.05 million worth of credits however it is anticipated that the developers will be forced to spread out their use of these credits over many years reducing the value of these credits given the principal of the future time -value of money. To estimate a value of these credits, it is assumed that if the developers will need to bring in an equity partner they would provide 93 cents on the dollar for the federal credits and 60 cents on the dollar for the state credits equating to an estimate of the tax credits to be worth $805,753. Thus the effective net cash is the difference, or $688,960. 110 N 28 Before the IRR can be calculated, an assumed reversion at the end of year ten must be calculated. To do this the NOI from year eleven is used and divided by a terminal cap rate. An 11% loaded cap rate is used and then subtract off the presumed mill rate of 2.45%, then rounding down (which provides more presumed value) we arrive at a non -loaded cap rate of 8%. This results in a valuation of $2,175 million in the TIF scenario, However after 10 years there would still be $1,088,099 left to pay off on the mortgage debt. Thus a net reversion of $1,087,155 is used in addition to the year 10 net cash flow. This leads to a 10 year Internal Rate of Return of 4.91%. A similar calculation without TIF leads to an IRR of 0.48%, which from a development prospective is not financially feasible and a disincentive to move forward with redevelopment without any outside financial incentives, which in this case is both the Historic Tax Credit and TIF assistance. The City Assessor has reviewed the Market Study, Investment Analysis Report, data provided and estimates that the redevelopment project will assess at approximately $1,500,000 with a tax increment of $940,000, assuming $575,000 base value. Table 3 illustrates the tax increment projection based on this anticipated value and values the future increment at $390,440 over the 20 year duration of the paygo agreement for the project. Promotion of Orderly Development Implementation of this Project Plan promotes orderly development through the renovation and preservation of a prominent, historical, building located near the downtown region of the City of Oshkosh. Redevelopment will reduce depreciation of the property while increasing revenue generated through property taxes. This project will provide new commercial space, employment opportunities, and address the public demand for more available housing in between the University of Wisconsin -Oshkosh campus and the downtown region of the city. Implementation of this project plan accurately reflects the opinion of the general public. According to public survey data collected in 2014 and 2015, over 75% of respondents listed "assisting businesses with economic development" and "increasing efforts to improve the quality of housing" as top priorities for the city to promote. Additionally, this project is supported in the Downtown Action plan, specifically, item 6.8 which outlined both long and short-term goals to increase residential and housing development opportunities in the downtown area. Proposed Uses and Existing Conditions The proposed use of the property will change from an office use to a mixed -use commercial/residential apartment complex and retail/service business center including commercial units on the first floor and high -end apartments on the second and third floors after establishment of the TID. The existing and proposed land uses within the TID are identified on Exhibits #3 and 4 in Appendix A. Under Wisconsin Statutes certain findings must be made relative to proposed areas being included in a TID. Not less than 50% of the area must either be found to be "blighted" or "is in need of rehabilitation or conservation work" within the meaning of 66.1337 (2m)(a). The proposed area within this TID appears to meet the above criteria. The area exhibits signs of blight (both physical and economic) through obsolescence and deterioration of the existing interior and exterior of the structure potentially resulting from deferred maintenance and lack of investment by multiple property owners (structure is currently a 9 -unit condominium) that requires significant coordinated investment to modernize the facility and bring it up to market standards relative to a high end apartment complex and competitive commercial space. Economically, the property has been a blighting through its underutilization and vacancy, as evidenced by an ongoing declining trend in fair market values that hit a high of $3,061,300 in 2008 to a fair market value of TID H 28 only $575,000 in 2016. It can be assumed that this trend would continue to drop as the structure retains less value over time and further deteriorates requiring costly improvements. Proposed land use and zoning in the area is consistent with the goals and objectives of the City's Comprehensive Plan and in that regard the existing C-3 zoning will be retained. Non -Project Costs It is anticipated there will be no non -project costs related to implementing this Project Plan. Relocation Relocation of individuals or businesses will not be required to implement this Project Plan, TID#28 Findines and Renort to the Joint Review Board More than 50 percent of the property is blighted within the definition of Section 66.1105(2)(a) of Wisconsin Statues. Declining property value trends have negatively impacted return on investment projections to the extent solo development of the property is no longer economically feasible without both TIF assistance and the State and Historic Tax Credit. The project plan, with TIF assistance, is feasible and in conformity with the City's Comprehensive Plan and the equalized value of taxable property within the proposed district and all current City Tax Increment Districts does not exceed 12% of the total equalized value of taxable property within the city. The project is not financially feasible without the use of TIF assistance, or the Historic Tax Credit as demonstrated by the low internal rate of return of less than 1% whereas stabilized development projects are typically in the 6%-12% range depending on risk and complexity. The project will provide more economic benefits as measured by increases in property tax values and property tax increment through redevelopment of a functionally obsolete and underutilized structure within the district which should adequately compensate the residents of the overlying taxing jurisdictions for any costs associated with improvements within the district. The project will expand residential and retail space near the downtown area, create employment opportunities, and increase revenue generated through property and sales taxation. Additionally this project fulfills goals outlined in the City of Oshkosh Downtown Action Plan and draws support from 75% of the general public which indicated in both the 2014 and 2015 public surveys to support economic development and expand housing opportunities near the downtown area while also preserving the historical fa�ade of the building that resides on the property. The appropriate use of public dollars will be ensured through a combination of strict financial tracking of the development process, public hearings, project review, project approval, and the adoption of a resolution by the Oshkosh Common Council before final review which will be conducted by the Joint Review Board to approve the TID creation resolution. TID N 28 t! ��paaaa�y���dya��a�ddddd� {9 _ H a COyI �ypl ivq'1� yyH yqH pryH� y�� 1ry4ry,1 �NHry /yH� qqH 1yHp� yya �yHp yqH yNp q D n M1 n N b ,D N M ut tl b tl M M M N N H ci g$ N N MS Oi Nf N� N N N N N iV iV N H H H tl H H N t0 W V N H N a a a a ri rl FI N H N N lV d d d d N d N �ryry�pp 11yypp /1/1��.�� ��qqpp dpdp yyryry}} uOOu�� ypyp eNNe}} pryryp gyy�pp rNNr{{ (gyp (��i ((pry ryp� W W� V R HJ h� Q M1� M1 H VW a h N f l R4 k 6 N , 1 m m m �i i� mi r 444 Sm S � I iJ � ?' Cry �j �( ✓� [F-t'md� Q� w w N N N N N fl N t4 IY !V 1V fY N N N H • Ii 9 TABLE 3 - Tax Increment by Taxing Jurisdiction TID 28: Beach Building Redevelopment TID Estimated share by taxing jusisdiction of projected tax increments to be paid by owners of taxable property in each of the taxing jurisdictions overlying the Tax Increment District. Revenue Year City County School District Vocational School Total 37.527% 20.817% 36.729% 4.279% 2016 $ 6,169 $ 3,422 $ 6,038 $ 703 $ 16,438 2017 $ 6,284 $ 3,486 $ 6,150 $ 716 $ 16,744 2018 $ 6,399 $ 3,550 $ 6,263 $ 730 $ 17,052 2019 $ 6,516 $ 3,615 $ 6,378 $ 743 $ 17,364 2020 $ 6,634 $ 3,680 $ 6,493 $ 756 $ 17,679 2021 $ 6,754 $ 3,746 $ 6,610 $ 770 $ 17,997 2022 $ 6,874 $ 3,813 $ 6,728 $ 784 $ 18,318 2023 $ 6,996 $ 3,881 $ 6,847 $ 798 $ 18,642 2024 $ 7,118 $ 3,949 $ 6,967 $ 812 $ 18,969 2025 $ 7,243 $ 4,018 $ 7,089 $ 826 $ 19,300 2026 $ 7,368 $ 4,087 $ 7,211 $ 840 $ 19,634 2027 $ 7,495 $ 4,158 $ 7,336 $ 855 $ 19,972 2028 $ 7,622 $ 4,228 $ 7,460 $ 869 $ 20,312 2029 $ 7,752 $ 4,300 $ 7,587 $ 884 $ 20,657 2030 $ 7,882 $ 4,372 $ 7,715 $ 899 $ 21,004 2031 $ 8,014 $ 4,445 $ 7,843 $ 914 $ 21,355 2032 $ 8,147 $ 4,519 $ 7,974 $ 929 $ 21,710 2033 $ 8,281 $ 4,594 $ 8,105 $ 944 $ 22,068 2034 $ 8,417 $ 4,669 $ 8,238 $ 960 $ 22,430 2035 $ 8,554 $ 4,745 $ 8,372 $ 975 $ 22,795 Total $ 146,520 $ 81,278 $ 143,405 $ 16,707 $ 390,440 NOTE: The projection shown above is provided to meet the requirements of the Wisconsin State Statute 66.1105(4)(1)4. 10 Appendix A Exhibits m U m V U m U m U m U m U U UU oL 0 U N N N N U1 N V1 N N Is - 0 O O O o O O O O O O 8 0 ❑ w a a z LL yy z >≥ z z U ❑ 3 z o o o o z y OU, OUP U UUQ t 9 U Waz z N z z 0 z x m a z z z z 4 Ia m m m m m m m m U 8888888888 y I< 0 N N o oo H ' •v1 b m N N N N b N p N N c m} '4.,, i In N N N N II fl o m w o a 0 N O N' O NO NV 1CV1 O b i N N H ✓4 E Vi V N N '4 NN 8 N 0 0 0 00 0 0 0 0 0 0 y a mm n N _ V� , N Vl Vl r°i N r4 N N 0 N' O N 6 O 0 p 0p p 0 0 p 0 0 0 0 00 0 n O V el N ri N 1 N N N N Imll ryO N ryO N Vhf N N N N VI N V� V1 N V� N O N 3 Sei O N O O O N O N O m O O 0 O I a Cl 0000 N N N N N o O yp 9 m m m m m m m m m 4 <<<<<<<4< 000000000 N N N N N N N N N J00000000 ; m m m m m m m m m 522222252 0 0 0 0 0 0 0 0 0 < < < < < < < < < a a a a a a a a pa a Ov ry Oa a a a N N N N N N N N N N O O 8808000 0 0 0 N N N a N N v N a N a N a (V &99999999q cI 0 0 0 0 0 0 0 0 0 0 N N II a N ID N CO Q' 13 S- -rrr- Pi9 w ea 9liii 4t a CD 1 4 "`�� � "�` € Iii i wHsom1so'oAi9Yfioott012 s �1 € ,...,..�w... f}}'(P(4flis NOLLVAON3a ONIOl1f1(3 HOV39 i $ O C tit•$SSi J1i39N9S9M ;1§ }I�at. , ₹ed'sd.:i PG$ f afaii !iii toista1w31T o3sodOa p o 5Ii G5i 1 € i 9 f5I g2 ₹ a 4 g ₹₹€ 4 pi iFE E�ii §it Egag€gp€@i9iei }3�fiEfi $fffs ��� sy o 8 o"₹aes jf9 pi€ei4 ii 19349�f eit :7 ijy}iji p}� @€i$$'d ss33 53lf ggPP F .iii 9G$3€$Y@9i4E`. g Sil at9}E:ia P$€i3t8$�GI d1. iEE₹ tt'3iFFl1€€iii₹9tt9Gi$i931�i? v`a94e9.99:':9.`.`—§949919949494Ge9@@@@ssaaaasa;PaG 4949499€999 t a•a ! its i `i hail? e a%y *f eY R}R} 9 � 3Gi` €[- � e3 � a Iatdi₹:' $314{:. , t€ €� .d @a. i i9 ii P tPd t G€4ji : i t 999F:` klmli31 i se �il aE � J a� V i tt sjt g. :3 (lii � [I ^$ � ilia 3a $� pp II�t g�g>> n §ji3 j`[ Rd dP} £ 3 93H₹:da: 0 a,'90Jt r> 'i' F r—> 4 'f' 3 Mill ' I} id }$ 1 i yY I1 i p j! i 31 $o iE ly 0 .i EG ` 3 3i93id1 S q w # titt33¢ iY 1 iii i1 d ii€ sS 4 tl 3P[ 8 � � ₹� ' i d£ �a 1111 $11�≤<<!as3.�@?ii=fi6y'ii9;$i 3i₹ e££€£t9£.EE????GiE9e,31&Gll Iaa333₹5GP73 a t q a =i ieel`S i i€€ $ 3t S 9 ₹ ?. §�� €@aiag,It i Mliiil€€a9i S!}f�dlillp fi ajUil49i2G4€ii8l ill 3.3:1flf(3i33:.eG£is:£t03Isdd3d4b$ea i g @a yjg>I t" Is 7 7 a 3d€�€33i3Pds€iiii3v�i9af�siiii9133t,����i9��3Bi6Ei tetdashttt9€tied{ ti kltdl5'47.15$9ii9:£iIS€$°ss'si I 3 r E4 Jg s Y97={s'tial44 ye }t"I } Ia1li9 ilsllasWHi- 41Sty a isBa!€llisiYjliI[3iiIPit₹s3₹₹4Yf₹i₹9iia`azadiit` }Ss£EEIe1s0PldaaP3Ps::}₹i903[PsG4f:�3assls3:£tEf3c y $ i £ I p1t3 id4•@;tiG.O iei^ € 3$dg� �a'ea: ti.i ��"�ss # ci§I(11iIldi91i4ss9ti₹3ii59ii4i4ad3i HIIY ...49₹445$Gi:`s94{ nrf$3i9s7es9a, e9199t#d'ett9E Y 3 �I IEf IHHONN®®i N©NE10U 1.L I p3 715 I 93: f is $_9 si dii a i#i1 $ 1 'Ii9 G,I, Hd s€ltHiillI 1V I ^s'�' I •-�`� b �° i! i8 YA'HSOXHSO"MtA nSOOM0K Y i r• _•. ____••_•• [ Q I NOIlVAON37J JNIO1Ina HOV38 ° 9g If I'Q ..ke in, i0 Q e daR� _y i xQ . 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The semi -abandoned Orville Beach Memorial Building, situated at 240 Algoma Boulevard, could be the new location for 22 luxury apartments & 10,000 Sq. Ft of Class -A Commercial space with your help. The property has been secured, the plans are drawn up, financial modeling complete and we are writing you today to request that a TIF be created to make this project viable, and to help us take the next steps. Name of Developer & Owner: Eric Hoopman & Chet Wesenberg (Co -Developers / Co -Owners) Description of Site/Building: The Orville Beach Memorial Manual Training School consists of 30,000 Sq. Ft. of vacant office space and sits on a parcel of roughly 73,000 Sq. Ft. in Downtown Oshkosh. Current & Proposed Uses: Renovation of the Orville Beach Memorial Manual Training School from 30,000 Sq. feet of vacant commercial space to a mixed use commerciat/residential modern apartment complex and office center. Description of End Users: With fiber broadband connections and a modern urban feel, we feel this space will be uniquely positioned to draw young professionals to the residential units. Roughly 6,000 Sq. Ft. of the commercial space will be utilized as business incubator space. A coffee shop will take up another 1,500 Sq. Ft. of space, while the remaining 2,500 Sq. Ft. will envision being utilized by an attorney or another professional that would benefit from close proximity to City Hall or the Courthouse building. Project Start & End Dates: Construction could start as soon as May 2016 and is targeted to be completed by November2016. Description of Public Benefit (Job Creation): With fiber broadband connections and a modern urban feel, we feel this space will be uniquely positioned to draw professionals from many of the downtown businesses and surrounding communities to become residents of our downtown fabric. Full-time professional residents will support downtown business expansion and contribute positively to our Urban Revitalization efforts. The multi- million dollar redevelopment costs will bring immediate impact to construction revenue in Oshkosh providing for dozens of local businesses and families in 2016. Our property management and maintenance teams at BlackTeak will grow by 1 FTE as well as we bring online this project and at other development opportunities in the central city. We also estimate the coffee shop will provide 8 new half-time jobs. Overview of Private Sector Funding and Total Development Costs: Verve Credit Union will be our private financing partner for the project providing a $1,800,000 loan, with Eric Hoopman & Chet Wesenberg making capital investments in the collective amount of $1,494,714 to cover the $3,294,714 total project development costs. Summary of Increment Projections and TIF Assistance Requested: Over the next 20 years, we estimate $390,442 of additional tax increment to be generated by this project. We are requesting the full 75% of the increment, or $292,831, as a PayGo note to be paid over the course of the 20 -year payback period. 24 The 'But For' Provision: The Beach building is listed on the National Park Service's Register of Historical Places. As a historical preservation project, significant additional expenses will be incurred to accommodate additional requirements to maintain as much of the historical content as possible. While we will be obtaining that will help in offsetting these costs, without TIF assistance we estimate that this project would yield a 0.48% 10 -year internal rate of return on the project. Even with the TIF assistance requested, the 10 -year internal rate of return is only 4.91%. To be perfectly frank, many investors would shy away from a 4.91% rate of return, let alone the 0.48% we estimate without TIF. However, both Eric and myself believe in the central city revitalization efforts this project exemplifies and in maintaining historical buildings and thus are willing to move forward with your assistance, Again, we strongly feel this with the City's collaboration, together we can move forward with this project that benefit the entire city. Please feel free to contact me with any questions or clarifications that might be needed. Best regards, Chet Wesenberg, AIA 25 Tax Incremental Financing Policy and Application Please complete and submit the following information to the City of Oshkosh for a more detailed review of the feasibility of your request for Tax Incremental Financing (TIF) assistance. The application is comprised of five parts: 1. Applicant Information 2. Project/Property Information 3. Project Narrative 4. Project Budget/Financial Information 5. Buyer Certification and Acknowledgement. Where there is not enough space for your response or additional information is requested, please use an attachment. Use attachments only when necessary and to provide clarifying or additional information. The Department of Community Development (DCD) reviews all applications for TIF assistance. Failure to provide all required information in a complete and accurate manner could delay processing of your application and DCD reserves the right to rejector halt processing the application for incomplete submittals. For further information please refer to the "City of Oshkosh Tax Incremental Financing Policy" document. Legal Name: 240 Algoma Blvd. LLC Mailing Address: PO Box 1099 Oshkosh, WI 54903 Primary Contact #: Chet Wesenberg E-mail: chet.wesenberg@cwarchitect.net Attorney: Brian Hamill Legal Entity: Individual(s) Joint Tenants_ Tenants in Common_ Corporation— Cell #: (920) 410-6200 FAX. #: LLC X Partnership If not a Wisconsin corporation/partnership/LLC, state where organized: Will a new entity be created for ownership? Yes X No_ Principals of existing or proposed corporation/partnership/LLC and extent of ownership interest. Name: Address: Title: Interest: Eric Hoopman PO Box 211 Oshkosh, WI 54903 Co -Owner 80% Chet Wesenberg 146 Algoma Blvd. Suite E Oshkosh, WI 54901 Co -Owner 20% Is any owner, member, stockholder, partner, officer or director of any previously identified entities, or any member of the immediate family of any such person, an employee of the City of Oshkosh? Yes_ No X If yes, give the name and relationship of the employee: Have any of the applicants (including the principals of the corporation/partnership/LLC) ever been charged or convicted of a misdemeanor or felony? Yes_., No X If yes, please furnish details: 26 Tax Incremental Financing Policy and Application Overall Project Summary and Objectives: Renovation of the Orville Beach Memorial Manual Training School from 36,000 Sq. feet of vacant commercial space to a mixed use commercial residential modern apartment complex and retail center. Current and Proposed Uses: Currently vacant office space with dated finishes last remodeled in the 1980s. We are proposing 22 high end end apartments will provide a new life and full-time residents to further downtown redevelopment efforts complete with modern finishes, technology & amenities on the 2nd and 3rd floor. The first floor will house 3 commercial units. Description of End Users: The apartments will be higher end in finishes and price which will ultimately draw more young professionals as tenants. Benefiting the college community by bringing in more young professional housing and getting away from more "student housing". The commercial space will house a business incubator and a coffee shop. The third space we envision an attorney or other professional service that might benefit from close proximity to City Hall or the courthouse. Property Summary: Parcel/Land Area: 73,454 SF Building Area: 36,000 SF # of Dwelling Units: 22 # of Stories: 3 # of Parking Spaces: 75 Describe any zoning changes that will be needed: Change from Commercial Office to Residential I Commercial Mix Identify any other approvals, permits or licenses (i.e. Liquor License, Health Department, etc): None Describe briefly what the project will do for the property and neighborhood: With fiber broadband connections & a modern urban feel, we feel this space will be uniquely positioned to draw professionals from many of the downtown businesses such as DealerSocket, 4 Imprint and Silver Star brands to become residents of our downtown fabric. Full-time professional residents will support downtown business expansion and contribute positively to our Urban Revitalization efforts. 27 Project Timetable Date Final Plan/Specification Preparation: 5/10/2016 Bidding and Contracting: 4/1/2016 Firm Financing Approval: 3/1/2016 Construction/Rehabilitation: 6/1/2016 -10/15/2016 Landscaping/Site Work: 9/1/2016 Occupancy/Lease Up: 10/15/2016 Development Team Developer: Eric Hoopman & Chet Wesenberg Architect: Chet Wesenberg Surveyor: Contractor: Eric Hoopman & Chet Wesenberg Other Members: Describe Team expertise and experience in developing similar projects: Chet Wesenberg has put his stamp on some of the most progressive pieces of arclutedure In Oshkosh. Flooreuest, Assurance Vito & Deaerflre (531 North Man) Eric Bowman,,,ih 66exTeakProtwres lusbcm responsVef mart/seEe.vaprtzNenals n Oonrtoen Oshkosh 6xb,Tn;IL8A$gnna Sh'd. 5.31 ?knhMah 416N I.ranApM arts, et Other current Team projects in development: Just finished 531 North Main Street and are currently evaluating other Downtown development opportunities. Financial ability of the applicant to complete the project: 100% Full and part-time jobs to be created by the proposed project including estimated salary: We anticipate 1 FTE to manage and perform maintenance. ($36K salary) The coffee shop may employ 8 half-time employees at $22K salary. Professional Studies Market Studies: Applications for commercial and residential projects must include a comprehensive market study. The market study must identify target markets, analysis of competition, demographics, market rents, letters of intent/interest from prospective tenants, or for housing developments, sale prices or rental rates of comparable properties. Appraisal: All projects that involve the transfer of land must include a recent appraisal. Projects that include land as a form of equity or collateral must also submit a recent appraisal. The appraisal must value the property "as is", and the impact on value must be considered for such items as demolition, environmental remediation, relocation of utilities, lease buy-outs, and other work necessary to make the site developable. The property must be valued assuming that the highest and best use is the proposed use. 2g Sources and Uses of Funds Identify the sources of funds used to finance the project. Typical sources include equity, lender financing, mezzanine financing, government financing, other anticipated types of public assistance, and any other types or methods of financing. Uses of Funds Land Acquisition: Demolition: Environmental Remediation: $500 $0.01 / SF Site Clearance and Preparation: $5,000 $0.14 / SF Soft Costs/ Fees: $656,214 $18.23/SF Soft Cost Contingency: $40,000 $1.11 / SF Hard Construction Costs: $1,940,000 $53.89 /SF Total Project Costs: $3,294,714 $91.52 / SF Amount ($) $ per SF of Building Area $575,000 $15.97 / SF 17/SF Sources of Funds Equity Developer Equity: Other Equity:( ) Total Equity: Loans Construction Financing: Permanent Financing: TIF Assistance Other: ( Total Sources of Funds Financing Source Amount Terms: Years/Interest Contact Information Equity: Eric Hoopman & Chet Wesenberg Cash + TIF eric@hoopman.co J (702) 629-8880 Loans 1: Verve Credit Union 4.25% / 20 Year Amortization JohnHill-Jhill@verveacu.com I (p) 920.230.3021 2: 3: 4: $ $1,494,714 Rate Term $ $1,800,000 4.25 % 20 $ 292,831 (paygo) S $ $3,294,714 % of total project costs 45 96 mos. yrs. 55 % 8.9 (paygo) 96 96 100% 29 Detailed Pro Forma (must correspond to line items for Uses of Funds on previous page) Land Acquisition $ 575,000 Demolition $ 78,000 Site Clearance and Preparation Infrastructure $ Utilities/removal $ Utilities/relocation $ 5000 Utilities/installation $ Hazardous Materials Removal $ 500 Total Site Clearance and Preparation $658,500 Soft Costs/Fees Project Management ( 96) $100,000 General Contractor ( %) $132,800 Architect/Engineer ( 96) $ 97,000 Developer Fee (10 °k) $ 235,330 Appraisal $1,500 Soil Testing $ - Market Study $1,000 Legal/Accounting $ 5,000 Insurance $_8,303 Title/Recording/Transfer $1,500 Building Permit $_L000 Mortgage Fees $ 2,000 Construction Interest $ 39,807. - Commissions Marketing $ 5,000 Real Estate Taxes $18,974 Other Taxes $ Other( ) $ Other( ) $ Sub -total Soft Costs/Fees $ 856,214 Soft Cost Contingency $ 40,000 30 Pro Forma Income and Expense Schedule Applicants whose projects involve the rental of commercial, retail, industrial, or living units must submit project pro formas that identify income and expense projections on an annual basis for a minimum five-year to a maximum eleven -year period. If you expect a reversion of the asset after a holding period please include that in your pro forma as well. Please check with city staff to determine the time period needed for the pro forma, Identify all assumptions (such As absorption, vacancies, debt service, operational costs, etc.) that serve as the basis for the pro formas. Two sets of pro formas are to be submitted. The first set should show the project without TIF assistance and the second set with TIP assistance, For owner -occupied industrial and commercial projects, detailed financial information must be presented that supports the need for financial assistance (see below). Analysis of Financial Need Each application must include financial analyses that demonstrate the need for TIP assistance. Two analyses must be submitted: one WITHOUT TIF assistance and one WITH TIF assistance, The applicant must indicate the minimum return or profit the applicant needs to proceed with the project and rationale for this minimum return or profit. The analyses will necessarily differ according to the type of project that is be- ing developed. Rental Property: For projects involving rental of space by the developer to tenants (tenants include offices, retail stores, industrial companies, and households), an internal rate of return on equity must be computed with and without TIF assistance based on the pro forma of income and expense prepared for the Income and Expense Schedule below. The reversion at the end of the ten-year holding period must be based on the capitalized 11th year net operating income. The reversionary value is then added to the 10th year cash flow before discounting to present value. State all assumptions to the analyses. For Sale Residential: Show profit as a percent of project cost (minus developer fee and overhead and minus sales commissions and closing costs, which should be subtracted from gross sales revenue). Other measure of profitability may be submitted, such as profit as a percent of sales revenue, Mixed Use Commercial I For -Sale Residential: Provide either separate analyses for each component of the project or include in the revenue sources for the for -sale portion, the sale value of the commercial component based on the net operating income of the commercial space at stabilization. Indicate how the sale value was derived. Owner -Occupied Commercial: For projects, such as "big -box" retail projects, provide copies of the analyses that the company needs to meet or exceed the company's minimum investment threshold(s) for proceeding with the project. Competitive Projects: In instances where the City is competing with other jurisdictions for the project (e.g., corporate headquarters, new manufacturing plant), present detailed analyses that demonstrate the capital and operating cost differential between the proposed location(s) in Oshkosh and locations that are seriously being considered by the applicant. 31 Revenue Projections - Rental Project Year 1 Year 2 >>Year 11 Income rent per sf (or avg.) $ 9 $ 9.27 $ 12.10 Commercial Rent $ 68,850 $ 70,916 $ 92,529 Commercial Expense Recoveries $ - $ - $ - Residential Rent $193,200 $197,064 $ 235,510 Other Revenue (Laundry ) $ 4,000 $ 4,040 $ 4,418 Gross Potential Income $ 266,050 $ 272,020 $ 332,457 Commercial Vacancy 12then 10% $8,262 $7,092 $9,253 Residential Vacancy 7 °%o $13,524 $13,794 $16,486 Effective Gross Income (EGI) $ 244,264 $ 251,133 $ 306,718 Expenses Maintenance & Repairs $ 34,540 $ 34,885 $ 38,154 Real Estate Taxes $18,882 $ 30,546 $ 33,408 Insurance $ 8,496 $ 8,581 $ 9,385 Management Fee $17,098 $17,269 $18,887 Professional Fees $ 4,248 $ 4,290 $ 4,692 Other Expense (_Utilities ) $ 28,320 $ 28,603 $ 31,283 Other Expense (Advertising ) $14,656 $14,802 $16,189 Total Expenses $ 126,240 $ 138,978 $ 151,998 Net Operating Income (NOI) $118,024 $112,155 $_154,720 Capital Expenses (reserves, tenant improvements, commissions) $ 6,800 $ 6,868 $ 7,511 Debt Service $ 133,755 $133,755 $133,755 Net Cash Flow (before depreciation) Reversion in Year 10 Year 11 NO! before Debt & Capital Expenses $154,720 Capitalization Rate 8 °6 Gross Reversion $1,934,000 $ (22,531) $ (28,467) $13,454 32 Revenue Projects — For -Sale Project Gross Sales Revenue Housing Units Unit Type* Number Price/Unit $ $ $ $ $ $ $ $ $ $ Total Housing Sales: *affordable units if any Housing Unit Upgrades; Commercial Space Unit Type Size-sf Price per sf Total Commercial Sales: Total Gross Sales Revenue Cost of Sales Commissions 96 $ Marketing % $ Closing % $ Other Costs ( ) 96 $ Total Costs of Sales Net Sales Revenue n' S $ 33 Tax Incremental Financing Policy and Application Summary Letter Provide a summary of the project in the form of a letter addressed to the City Manager. The letter should not exceed two (2) pages in length and should include only the following essential information about the project: • Description of site or building • Current and proposed uses • Description of end users • Project start and end dates • Profitability • Description of public benefits, including job creation. • Overview of private -sector financing • Amount of TIF assistance requested • Summary of increment projections • Name of developer and owner • Total development costs • Statement regarding why TIF is essential and why the "but for" provision will be met. Note: Iri the "but for" discussion you must clearly describe why TIF is needed to help this project and why the project will not/cannot proceed without such support. Failure to clearly provide the "but for" explanation will delay action on your application. Project Narrative Provide an in-depth overview of the project in narrative format. The narrative must include a description of the following aspects of the project: • Current condition of the site and historical overview that includes the size and condition of any existing structures, environmental conditions, and past uses of the site. • Proposed use(s) of project (e.g. industrial, commercial, retail, office, residential for sale or for rental, senior housing, etc.) • Construction information about the project including: size of any existing structure to be demolished or rehabbed; size 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 of affordable residential units; number and type of parking spaces; and construction phasing. • If in an existing TID or redevelopment area, confirm that this project is consistent with the goals and objectives in the Project or Redevelopment Plan. • A summary of the proposed "green" features to be included in the project. All projects that receive TIF assistance are encouraged to include environmentally friendly features. 34 Tax Incremental Financing Policy and Application Filing Requirements You must provide all of the following items with your signed application: 1. Fee: An application fee of 1% of the requested TIP assistance or $10,000, whichever is greater. This fee is to cover City costs associated with evaluating the TIP application and does not cover the use of outside consultants, which if required will be paid for by the applicant. Make your check payable to the City of Oshkosh. 2. Site Maps: Provide a map that shows the location of the site. Also provide a map that focuses on the project and its immediate surroundings. Both maps should be no larger than 11x17 inches. Larger maps will be required for projects presented to the Plan Commission, Redevelopment Authority, or Common Council. 3, Project Renderings: Provide preliminary architectural drawings, plans and renderings for the project. These drawings should be no larger than 11x17 inches. Larger maps will be required for projects presented to the Plan Commission, Redevelopment Authority, or Common Council. Notes • The City charges an administrative fee of 5% of the annual tax increment revenue. • If the project requires planning and zoning approvals, you must make these applications concurrent with this request. Agreement I, by signing this application, agree to the following: 1.1 have read and will abide by all the requirements of the City for Tax Incremental Financing. 2. The information submitted is correct. 3. I agree to pay all costs involved in the legal and fiscal review of this project. These costs may include, but not be limited to, bond counsel, outside legal assistance, and outside financial assistance, and all costs involved in the issuance of the bonds or loans to finance the project. 4. I understand that the City reserves the right to deny final approval, regardless of preliminary approval or the degree of construction completed before application for final approval. 5. The undersigned authorizes the City of Oshkosh to check credit references and verify financial and other information. 6. The undersigned also agrees to provide any additional information as may be requested by the City after filing of this application. A Applicant N 3/16/2016 35 Appendix C Market Study and Investment Analysis Report SINVI5TA ANALYTIC 240 ALGOMA BLVD LLC MARKET STUDY and INVESTMENT ANALYSIS REPORT MARCH 15, 2016 Prepared Exclusively For: Mr. Eric Hoopman and Mr. Chet Wesenberg 240 Algoma Blvd, LLC Prepared By: Timothy M Hess, PhD Invista Analytics, LLC member of inf a 36 CONTENTS: Introduction I Objective.........................................................................1 Market Study.........................................................................................1 Property Valuation................................................................................3 Investment Analysis..............................................................................4 Potential Income..............................................................................4 Budgetand Funding .......................................................................5 TIEFunding......................................................................................5 Operational Proforma .....................................................................7 Return On Investment ...................................................................10 37 INTRODUCTION I OBJECTIVE Invista Analytcs, LLC (IA) has been engaged to provide a market study of the present rent- al availability in the near downtown neighborhood that might likely serve both the University of Wisconsin - Oshkosh and the young professional segment in downtown Oshkosh. This information was then utilized to create an operational proforma and investment analysis for the operation of a mixed -use renovation and re -use of the Orville Beach Memorial Training School building located at 240 Algoma Blvd in Oshkosh, Wisconsin. This 36,034 Sq Ft building is listed on the National Park Service Register of Historic Places and as such qualifies this project for Historic Tax Credit incentives. Additionally, the developers of this project are requesting Tax Incremental Financing (TIF) through the City of Oshkosh. Thus Invista Analytics sought to provide reasoning for methods of valuation for both the existing building and the completed project. Two different profommas were generated to evaluate the effect of the potential TIF funding mechanism. Finally, return on investment metrics were calculated on the with TIF and without TIF investment scenarios. Source of Information In many instances in this report IA was required to seek outside sources of information including assessment data from the City of Oshkosh, financing terms, capitalization rates, among other metrics. In all cases we sought to document the sources of information and any assumptions used. While much of the information was provided by the developers, these terms should be reviewed to be sure they align with any potential changes the developer may have in securing potential funding. It is also recommended that any reader also perform his/her own investment analysis. This report should be acceptable for external investing and/or lending purposes. Invista Ana- lytics will be available to answer any questions related to these market findings, operational preforms and investment analyses. MARKET STUDY The developers Intend to renovate the Orville Beach building at 240 Algoma Blvd in Oshkosh, Wisconsin. Specifically this building will be renovated into 3 commercial office spaces on the first floor, and 22 residential units split amongst the second and third floors. The developers own a fair number of similar commercial buildings in and around the downtown area of Osh- kosh that presently command an average of $9 per square foot per annum and feel comfort- able with this rate for the first floor spaces for this project, To evaluate the rental potential of the residential units, IA acquired the Apartment Data -4 or more Units excel database' from the city of Oshkosh Assessor's File Downloads webpage. This data set was then limited to those properties that fell within a I mile driving distance of 240 Algoma Blvd and that had been constructed since the year 2000. After careful Inspection it was noted that both the 100 N Main Apartments and the Anthem Apartments were not included in this file and thus subsequently added to our comparison set. The locations of all potential comparable properties found through this search process are displayed in Figure 1 on the following page. i.9Atp:/Mw•w..d,olosItai.us/assesw1assetsMonrtal/ApNnants_4vp>fs' accessed Mardi 10. 2010 240 ALGOMA BLVD LLC INVESTMENT ANALYSIS I 38 Figure 1: Potential Comparable Apartment Locations 05 - ? ` w Uncoln hre EUncolnAc< -' V ?' o t1(1 Rllo Ave Y! ( 1SL II is V ;3I)-:iY IfVIn4 VC EIIaiD 4 .1.10 A\ QB2 UI}IV@Tau Y or U I'arkwey Arc 4� 1PdrkwAyAse Wisconsin Osflkosh �� fie' )%7 l '`" Hutcon. TO�/1 yV4 �'11t '-{°n 4i z Meter 90 Yfnahmglan Me o- Oennd V A 1 Y Soo Avn e iYer Uvxket.; Yl 41 )prh)] • ,ry - p capeAt, .. _ , .._ \/ hAva \V51h A.e W0,1 Aye P Vl]lh Ave C. 44ih Ave e 4°--,:�5 Vd Rdn Ava 6113/.ve Plc e a ,.....,... : .:. . Dnve P.ark`I! Careful inspection noted that properties 1, 2, and 4 above are townhouse developments. While these might well compete for potential tenants, the overall living experience was determined to be different enough to not consider these in the determination of potential rent. Similarly subject property 6 is a senior living apartment structure which also would not likely serve the demographic targeted by this development. For each of the remaining comparable subject properties an online search was conducted to obtain information on the characteristics of the types of offerings, amenities and rental rates for each of the properties. Most of the properties had their own website that contained all of the `Comparable Apartment Data` Concatdchce 10011hicut Morgan Cro3Ung Anthem roxPolntApls RadfordPlace aeada Bldg 151 Dawes 895 Pead 431 Madm 110 Dawn 500 Maio., 110AIgoma Idapind 8 3 9 5 10 7 31 69 at 695 YA 793 1111 115 931 565 691 695 500 40) 710.6 651.5 Beds 1 2 1 2 1 1 l 1 l 2 0 t 2 Both. 5 3 1 i 1 1 1 3 1 1 ) 1 1 P1411 a.Errd ca -end scared raxred lot b< lot lot lot 4R W lot lot taoMrj M1Re co ote FNit 'TWA e,.rit In Vhf v1 tat Di tie co YIe e,vni oust Pa41e .9e lint no M 1es \ES S,] C]0 M )e3 )E3 \s't lei )vi 509 Welts )es 5e3 m no Ee )r3 yes )es yes le. )Fr 1F5 505 liKt m DO M flO m m m m m )es 90 ru 69 Hith no m yes 501 In 50 WI Do ab rA M M M lives, no to \es yes It3 yen In M rn A M M 60 MM 650 830 155 969 659 659 903 650 730 850 $yvm hrt')/At dert3 1ltpiIurx1O sce InPIADWM apnM M1ttp/Mw'xxe 1ttp9M e,1o.pnn MIP/Mwev arl 1<9<un(rea11n4tl IFinahcterlamt$1 edttcn/xg8am miMgu+mltm tmplccew matsxo,t(o fpdl/twxadph.<eb kip10 o oe0o+Cawrents uywxhmlaVo da ,go-os folb 'adore pff asl,3ndr Ey<xphppq •Vrqunl0j ul/nldlls/ p+Mtrlei j INVISTA-ANALYTICS.COM i Information needed. Two had the information listed on the third party website, apartments.com. For both the 100 N Main and Anthem properties, a range of rents were given for their room types. It was assumed that the higher ends of these ranges represented either rooms with sce- nic views; i.e. either facing the river or being on the top floors. The units In the Beach building would have neither of these amenities. Thus in these situations we recorded the lowest end of the rental ranges provided under the assumption that these rates would represent rooms most similar to the subject property. The data generated from this exercise is displayed in the table at the bottom of the previous page. The data was then submitted to an econometric quantile regression model2 that used all of the covariates to predict the rents. The resultant model parameters were then used along with the covariate data for the subject property units to arrive at an expected rent for the macro, one -bedroom, and two -bedroom units to be rented. The model resulted in estimates of $569, $704, and $802 per month respectively for the macro, one and two bedroom units. These estimates then represent the predicted monthly rent one might expect to pay given the particulars of the units that would be available assuming they are of roughly similar quality as the comparable properties. The developers plan, however, calls for much higher finish levels than many of the comparable units. Because of this the developers have chosen to start with monthly rents of $550, $700, and $900 respectively. These monthly rents will be utilized in all subsequent analyses. PROPERTY VALUATION Any proposed TIE assistance requested from the developers will be subject to the city's 75% rule which states that at most 75% of the net present value of the increment generated by the project shall be made available to the project. To calculate this Increment we need both the present (base) value of the building as it exists now and the value of the project upon comple- tion. Base Valuation According to the City of Oshkosh Assessor's Frequently Asked Questions webpage3 the value of a property is to be determined by determining the price a typical buyer would pay for it in its present condition. In other words, market value is defined as the amount a typical, well-in- formed purchaser would be willing to pay for a property. The seller and buyer must be unrelat- ed, the seller must be willing, but not under pressure to sell, and the buyer must be willing, but not under any obligation to buy. The property must be on the market for a reasonable length of time, the payment must be in cash or its equivalent, and the financing must be typical for that type of property. If all of these conditions were present, this would be a market value, arm's - length sale. The developers purchased the property on 12/22/2015 from an unrelated seller that was not under pressure to sell with normal financing conditions. Thus we conclude the transaction was an arm's -length sale. By definition then the base market value should then be the purchase price of $575,000. Completed Project Valuation To arrive at a valuation for the completed project we employed a modified income approach. With this approach, one simply takes the Net Operating Income (NOI) of a property and divides by the appropriate cap rate to arrive at a valuation. However, when arriving at a valuation for a tax assessment purpose, one needs to factor the property tax out of the NOI calculation or risk running into a circular argument To carry out our calculations we utilized the excel spreadsheet provided by the City of Oshkosh Assessor. However, an error was noted In the formula for the NO1. The original spread 2. Ko&,ker. Rcger (2005). euenua Reeressm CambiO3e urnwsity P!rsz IS&10521-5032]-9 3.htp:IbpatloslWeshwl uslpLrnsRdrtiiramea!Px7m6exmenVra¢hun evsssed U&th 10.2016 240 ALGOMA BLVD LLC INVESTMENT ANALYSIS W sheet took the formula for NOI to be NOI = EXPENSE - TAXES. We Instead employed the formula NOI = EGI - (EXPENSE - TAXES) which factors the taxes out of the calculation. Then the modified NOl is divided by a loaded cap rate. Following the assessor's lead, we employed a loaded cap rate of 11%, Data for the effective gross income (EGI) and other values can be found on the Profit and Loss Proforma with TIE on page 8. TAX VALUE= Calulation of projected property tax expense capitalised at 2.45% effective tax rate The year I figures would suggest a valuation of $1,245,000 upon completion of the project. Subsequent analyses in this report use this figure. INVESTMENT ANALYSIS Potential Income We first document the expected maximum revenue assuming the building is at full occupancy. Again, the developers plan to rent the commercial space at $9 per square foot annually. This will indude utilities and common area maintenance. The residential space will be rented at $550, $700 and $900 for the macro, I bedroom and 2 bedroom units respectively. :.Maximum Rental Income PotentlalC:iIY 1st Floor Sq Ft ann rent/sf Subtotal (monthly) Unit 1 4,000 9 3,000 Unit 2 1,650 9 1,238 Unit 3 2,000 9 1,500 Subtotal 5737.5 2nd Floor No Units Rent Per Subtotal Micro 3 550 1,650 1 Bed/1 Bath 4 700 2,800 2 Bed/1 Bath 4 900 3,600 Subtotal 8,050 3rd Floor No Units Rent Per Subtotal Micro 3 550 1,650 1 Bed/1 Bath 4 700 2,800 2 Bed/1 Bath 4 900 3,600 Subtotal . 8,050 MonthlyTotal $21,837.50 Annual Total $262,050.00 Residential Annual $193,200.00 Commercial Annual $68,850.00 I IN VISTA-ANALYT ICS. COM 41 From this we find that the first floor commercial space would bring in $68,850 at full occupancy while the second and third floor residential units will bring in $193,200 annually at full occupan- cy. Budget and Funding Next we look at the detailed budget and source of income. The table below lists all expect- ed expenses. The columns labeled TIF and HTC represent an indicator as to whether each expense Is allowable for reimbursement for either the TIF funding mechanism or historical tax credits. Total expenses for the project reach a little under $3.3 million. Of those, approximately $2.63 million are allowable expenses for historic tax credits and $2.59 million are allowable TIF expenses. Amount TIF HTC Notes c uisition& Site Prep Land Acquisition 575,000 Demolition 78,000 1 1 Utilities/relocation 5,000 1 1 Hazardous Materials Removal 500 1 1 Subtotal $658,500 Soft Costs Fees General Contractor(17%) 232,800 1 1 tWHEDA allows 14%) Architect/Engineer 97,000 1 1 3.SK per Res Unit + 20K Comm Developer Fee (10%) 235,330 1 1 (WHEOA alloys 12-15%) Appraisal 1,500 Market Study 1,000 Legal/Accounting 5,000 Insurance 8,303 Title/Recording/Transfer 1,500 Building Permit 8,000 Mortgage Fees 2,000 Construction Interest 39,807 1 IBM @ 3.95 for 6 mo Marketing 5,000 RealEstateTaxes 18,974 0.25 13 days in 2015+2016 softscrtCostCentingencv 40,000 Subtotal $696214 Hard Costs Commardat Space Build -cut 400,000 1 1 Residential Units Build -out 1,540000 1 1 Subtotal $1,940,000 Total Project Costs $3,294,714 Hlst Tax Credit Allowable Costs 2,633,180 TIF Allowable Costs 2,588,630, of Funding ---'--- Permanent rinancing 1,800,000 Verve Mortgage Other Cash Funds 1494714 (cash from developers) oral Source oFunds 32 On the funding side, the developers have secured a funding commitment from Verve credit union in the amount of $1.8 million. The remaining $1.49 million will be contributed as cash from the developers. TIF Funding We assume that the project will be completed by November or December 2016 and that the assessor will apply the new assessed value before the first of the year, 2017. Thus the full value of the project will be on the 2017 tax year assessment and the increment can be paid out in the fall of 2018. We assume the assessed value will increase at a rate of 1% per year and that the base value will be $575,000. Thus over 20 years of payout, the total increment will be $390,444. Applying the 75% rule the total note from the city due to the developer would be in the amount of $292,831. Will a 2.5% interest rate, this note can be paid down over 20 years. (See TIF Note payoff schedule on the following page.) 240 ALGOMA BLVD LLC INVESTMENT ANALYSIS 42 • (MO a I0 10 N m'4 Q Ib0 O m N -4i u1 NN `O LA 1/40 b m Om1 N a r o m b m m b 01 m 10 m m m o m n 0 a n .4 00 N n4 N N N Q Y Y u tb4 N I4 . en1 'n'1 .m4 4*4,-INN N N N N - 1 LA CO Vl O m ID a b m O m n N O .4 40 Q W 10 0� M b O r „'4 b O `I N N N 04p1 Cl N b M M 4 9 6 m '40 tO n 010100010 I N'4 N 01 NO V m 01 N 00 Oi 4 O . .II . .44 .44 .4 14i CbnN N 14 14 .i 14 .4 '4 14i 14 • ' O Ito�0 N {p a} Qaa� 01 LA NO V ClO1/ 1 N ~1n 1/1 N N V VI a .1 t0 Ol O 3 m on m m m m b N m O1 o N o .o o m n n n1rim evi vi vide etri lrim NN14.4 CO OJ a CO b a b O O .4 O O CO n 01 O N a O a O .4 U q a O M O'4 M Cl O n'S /ae Nm N Q LA Q 15 .4 b N O Cl LA m N O (0 a Cl N N m V1 b N W 8 a N N N n N Oj b N O N 1-4 n n h n 1O .D b LA N N V e e M M Ili N N .1 2 - pIVY C N N Q b b IO O 04 O. .I ON M 10() m nIt n H r 0101 CO ti N N Cl 10 H r n Q O .bY N .n4 01 OI Ol N n N Vl N .b-1 10 1 COAl N W b N { a 4 X00111 l V N b4 .Mi .b4 .b'i .m'i N m N N N N N N NNN4'414.4'4,4.4 N 1o' . m a N a Cl n CO N m o a N N N Q VI o CO O LA Q R o1°nCl M r mom b (0 01 00 ^L0O mloom no c u 2 mmo m aryn .04� S S E nN N 01 .1 ,4 I .9 4 ,4 .4 .014 CO .01 01 4 4 emNl N N N N N N N N C- 2 o SM1 O N M m m m OJ m m m CO m W W W M [O OJ W OJ W W m m O O O O O O O O O O O O O O O O O O O O O M M H N A '3 (O .4 .4 '14.4 .1 .4 r1 eJ .-I el .4 e4 .4 .-1 .1 .1 .4 m d e e d t4 ti d„ d d dQ e d e % G e4 *414 1-414 e'1 ei .'1 e'1 ........*4 ei N FF % FMR p p yl O N LA Q 1N/1 b n 0 O N V1 N CO Q N N .Q0 .N4 1010 *4 n (0 O N L. V o V Q 1C m m 6 e4 a n 4 Q n O 0.4 m N N CO O 0 4 I I N N N 0) M M a y V ✓ VI N 10 .O .O N .4 m m m m m m m m m m m M 01 m m m M m m m m '-$1 $1 0- '4 Q a a a Q Q Q Q a Q a a a a a Nj m m m N m m Ii '4 h'4 h'4 h h h h N Q a N a a N a a a a N a N N d N N N N N N N N N N N N N N N N N N N N N N N N N N N N L y Op Ii) N m Cl n CO m N n 10 N 10 O OI a 10 n m N N m 0 OI O IAm O O1 N N p m m O 01 O a O n N m m M b N O m t4 O a N 01 E 0 '4 a.�i n W Omi O N M V YIA ml n N O N N V m N OJ T .Q1 04 U1 b b b r n n n n n n m 00 m m 00 OJ m N 01 01 V p p (p m m m N rj O O N N O ClmO N Iml O N N 0 m N O Obl (n/1 400 Q O n m m m 0) .4 b N O m m O a m a N O .4 Q I4 m vin 0 vi CO 'v CO M LAi Cl 44 00 LA Oi '4 Cl e01 'Q 10 a n W 010 IV b n N O Q m n W O .f n N d 4 .i rl r1 r1 m N 00 01 O .4 N N a m 10 r N Cl O t4 N m Q N 0 n 44 .4 . .1 .4 N N N N N N N N m m m M M m M CO N N N N N N N N N 10`1 N N N N N N N N N N N n F (1 10 n m OI o <a tai A tar b N N 01 O .4 N m N IA N .4 N .4 H N N N N N N m m m m m m O O O O O O O O O O O O N O O O O O O O O O N N N N N N N N N N N N N N N N N N N N N .'1 N m Q N O n m o O H H M4 N Li I N V I STA-A N A LYT I C S. C O N1 0 up Operational Pro forma The operational preforms, both with and without TIF assistance can be found on the following two pages. The following assumptions were used to generate these: • Commercial rental Income will Increase on average of 3% per year. • Residential rental income will increase on average of 2% per year. • Laundry facilities income will increase by 1% per year. The first year the commercial vacancy rate will be 12%, then each subsequent year will have a 10% vacancy rate. The residential vacancy rate will hold constant at 7% per year. Expenses including Maintenance and Repairs, Insurance, Manage- ment Fees, Professional Fees, Utilities and Trash, and Advertising will all increase by 1% per year. The first year will be taxed under the present assessment however subsequent years will start at 2.45% of the $1,245,000 value and increase by 1% per year in accordance with the TIF note payout schedule. • Capital reserves will Increase by 1% per year. • Debt service will be fixed over the first 10 years with a 20 year amorti- zation schedule and a 4.25% interest rate offered through Verve credit union. Estimated expenses were arrived by taking averages of over 288 apartment units across 8 different multi -unit complexes the developers are involved with within the Oshkosh / Neenah area. It as anticipated that the proposed development can be run with comparable efficiencies. The preforms with the TIF assistance starts with a negative cash flow In the first year of $-22,531 in part due to the ramping up of occupancy in the first year and the lack of increment payment. The next couple of years still show a negative cash flow up until the fifth year. By the tenth year we see a positive cash flow of $27,239. The °without° TIF picture is much more bleak. Under this scenario the developers do not see any positive cash flow until the ninth year, and even then the returns are modest at best 240 ALGOMA BLVD LLC INVESTMENT ANALYSIS rir 2 8W HN N * S 01 n N Q O 0 q NJJ q P O N b h .-4rNNNm f.MfOO1 lmI$Id?NH lMiINNNNNNN h NN N N M N O q Q b N N O 0 m N ^ M N N m N N y N N t4 M y ebl rl M .4N 44 N N - e1 N y N N •M N N N pl 0r- W N p b N (D M N O O UI O N O M M M N 0 N M N rn b HR nM N 1yy, 1(1 01 P N N b b g 11 T M n N 4, eMi M 44 M y M eb1 '4'4 N N V 10 N (0 Np N N N N N G W p� O b M p� ry,� M S M N O m b ( N ? ONi N _._.. n m ei ` l0 Q -t M m 0 ' Vyl ^ N lm1 `�{ yN M pK� M ✓A DOS N N N a ID tat r1 N� N Nq p N Ci NMry N 0 O O N N h N - OI Y N M N eni Oj �Np N N N INMf� tb0 �l '1 IpOp(1 iN/1 T M M Im/s N O H„ N y N M N N N N N N N N y N N y N y -_ b q � M V N f{ b N N p p� yypq� pNp Qi ��IIlppD� nO �{ nM N Ill Iytt P .Q.i n le�l M E O m Y llDDNttl NNN qO NN M yN N�N1~il NNNN�NNN„ N N N N N N $pgp� 0 Nfl0� 1(101 �� .X on n yay qaq n Y N N N N N N N N N y N N Q N N y N N N N N N N N Q 0. J n N Oe{Y 0 I !$!g! 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CO M 45 aNt 1Y�n :A av o $ff r ^NI NN L:•IN c4VtL u :nm N„ 2b m n '� g 1^n m .ui yp� (nib •:-f'� wm .t -t0 nonn`8 e N ,^ am at 0^to • e"{ } N in T M y N 4, 4, N N N yyak� N N N N N N N N N • P v' N T M N 1� O� tp N N 1/� b t0 k T N N pJ N N 1 NN MP N NNN Z vNib N N N NNNy t iQl 0 N N bor N O~I b M N N N O M lalf 1M0 H N b 0�1 N 0] y p q V Lq b 00gJJ O d r'1 T tnT n °t - ^ b /Y N •4 N `� N N N N M N N N Nm N N N epl N „ N OqV „ N N 0 N N yp nN 6 i4 O N LiO u4 O p�N1 W t--N tpp Q n a � N y O N N N M ti 0 - N N N (O N N N O M N T eNi1 N N N N N N H fM/ y N N N N N O N 0 N q O� d T Pm n ItlTi H N - n, N f" f11 N 4 nqN H I� C Oni aO� n b e1 M eni N N ti„ N n N N M eOf N M N N y '°U N N N N N N N N U N L Y y N N N N n N N N N N- a N Q N N N y N N d' O O A N M N r y y O 4r ypO1pn� N } 1py.�� N NNN mVt N 1b .-1 e1 N ON O NT N N'* fl NNNNNNNN N N N E N y N N gO pqQ O 0 0 q app nl O Yy� t N W M 0 N app M ��pp M q N . N Lb , O -Ni W N t M O N N N N H O ' N M ., N N N N N (n ybb fl N N N NNN N N VM) i Nib'*000 Np 8'"O N V qNfl m b '1 01 O M N% NNmVNNyMbmp° N M y ' mN N 10 40 U N N N 4040 N H N , N M eb „ N IMIr N N N N N :I 00 0000 p OMs 1044 0`1 O N NaG O (N`I N 1NQ y yM al VI W V O N M b N Oil) to N N N y N N .O{ "a a y y N N y e1 N e O O pm u5 CI = '-r4 u` $ N Cr1C `ba"v = `Ogs V LL�r 3 -fl?, gag •2 V S C e g E E' cLLtl rc S E••«G u n-+p o A1X 0 0 u' SI U V F� u'- cc6 t0- Z a Z 240 ALGOMA BLVD LLC INVESTMENT ANALYSIS I Return on Investment To calculate the return on investment in the form of an Internal rate of return (IRR), we fist must arrive at an effective amount of cash the developers are putting into the transaction. As shown in the detailed budget table, the developers are bringing $1,494,714 into this project. However, the developers will also be receiving 20% federal and 20% state historical tax credits on the estimated $2.6 million of allowable expenses. This results in roughly $1.05 million worth of credits. However, there are very few entities with the capability to utilize this much credit in a single year, thus the developers will be forced to spread out their use of these credits over many years reducing the value of these credits given the principal of the future time -value of money. To estimate a value of these credits we spoke with 2 tax credit brokers. Vickie Holland, with Dimension Development, LLC based out of Madison, W, suggested a good estimate if the developers were to bring in an equity partner would be 93 cents on the dollar for the federal credits and 60 cents on the dollar for the state credits. These estimates were confirmed by Donald Bernards, CPA and tax credit broker with Baker Tilly, again based out of Madison. Us- ing this estimate of value, we estimate the tax credits to be worth $805,753. Thus the effective net cash is the difference, or $688,960. Return on Investment Melrks With TIF Without TIF initial Cash Outlay 1,494,714 1,494,714 Historic Tax Credits 1,053,272 1,053,272 HTC Present Value 805,753 805,753 Net Effective Cash 688,960 688,960 Net Cash Flow Reversion Total Net Cash Flow Reversion Total Year 0 -688,960 -688,960 -688,960 '638,961 Year 1 -22,531 -22,531 -22,531 -22,531 Year 2 -12,029 -12,029 -28,467 -28,467 Year 3 -7,561 -7,561 -24,305 -24,305 Year4 -2,974 -2,974 -20,026 -20,02 YearS 1,736 1,736 -15,628 -15,628 Year6 6,571 6,571 -11,107 -11,10 Year 7 11,536 11,536 -6,460 -6,461 Year 8 16,633 16,633 -1,684 -1,684 Year9 21,867 21,867 3,225 3,225 Year 10 27,239 1,087,155 1,114,394 8,270 845,902 854,172 Yr 11 401 174,020 154,720 Terminal Cap Rate 8.00% 8.00% Gross Reversion - 2,175,254 1,934,002 Mortgage Payoff 1,086,099 1,088,099 Net Reversion 1,087,155 845,902 10yr IRR => 4.91% loyr IRR => 0.4836 Before we can calculate the IRR we need to calculate an assumed reversion at the end of year ten. To do this we use the N0I from year eleven and divide by a terminal rap rate. We again follow the lead of the assessor and use the 11% loaded cap rate and subtract off the presumed mill rate of 2.45%, then rounding down (which provides more presumed value) we arrive at a non -loaded cap rate of 8%. This results in a valuation of $2.175 million in the TIF scenario. However after 10 years there would still be $1,088,099 left to pay off on the mortgage. Thus a net reversion of $1,087,155 is used In addition to the year 10 net cash flow. This leads to a 10 year Internal Rate of Return of 4.91%. A similar calculation without TIF leads to an IRR of 0.48%, again, a very bleak prospect for this Investment. INVISTA-ANALYTICS.COM 47 The findings presented herein are based upon the information available and received at the time this report was compiled. Invista Analytics (IA) has taken every possible precau- tion to evaluate this information for its completeness, accuracy and reliability. To the best of its knowledge, IA feels the information and conclusions presented herein are sound and reliable. II should also be understood that normal economic and marketplace conditions change con- stantly. IA assumes no responsibility for Information that becomes outdated once this report is written; nor is it responsible for keeping this information current after March 15, 2016. The results presented in this report are the professional opinion of IA and are based on the information available at this time. These opinions infer proper and professional management of the business operation. The opinions also infer that market conditions do not change the Information received upon which these opinions are based. IA assumes no responsibility for changes in market conditions. Furthermore, it is assumed that the reader of this report completely understands its contents, assumptions and recommendations. If the reader does not fully understand the contents contained herein, clarification should be sought from Invista Analytics. Finally, IA assumes no responsibility should the management of the proposed business ven- ture deviate from any recommendations that may have been provided in this report. Any further questions about this report should be directed to IA. Sincerely, Timothy Hess, PhD INVISTA ANALYTICS 146 Algoma Blvd - Suite H Oshkosh, M 54901 920.203.2177 \wnvinvista-analytics.com 240 ALGOMA BLVD LLC INVESTMENT ANALYSIS Appendix D Notice of Public Hearing Publish as a Legal on April 19 & 25 NOTICE OF PUBLIC HEARING BEFORE THE CITY OF OSHKOSH PLAN COMMISSION Tuesday, May 3, 2016 4:00 pm, Room 404 City Hall, Oshkosh, WI The Plan Commission will hear public comments on the designation of boundaries and Project Plan for proposed Tax Incremental District #28 Beach Building Redevelopment. The primary purpose in creating the district is to facilitate rehabilitation and redevelopment of a vacant office building into a mixed -use commercial/residential apartment complex. The District is generally located at 240 Algoma Blvd., Oshkosh. Interested persons are encouraged to attend. The draft Project Plan will be available for review on or about April 26, 2016. For information, call the City of Oshkosh Planning Services Division at 920-236-5059 between 8:00 am — 4:30 pm, Monday thru Friday. PUBLISHED: April 19 & 25, 2016 W Appendix E Attorney's Opinion CITY HALL 215 Church Avenue P.O. Box 1130 Oshkoshisconsin . 9,02-1130 City of Oshkosh OJHKOJH City Attorney's Office Phone: (920) 236-5115 Fax: (920) 2365106 http:l/www.ci.oshkosh.wl.us May 13, 2016 Darryn Burich Director of Planning Services City of Oshkosh 215 Church Avenue Oshkosh, WI 54903-1130 Dear Mr. Burich: I have reviewed the project plan for City of Oshkosh Tax Increment District # 28 Beach Building Redevelopment, pursuant to Section 66.1105(4)(f) of Wisconsin Statutes. I find that the plan includes a statement listing the kind, number, and location of proposed public improvements. There are no planned public improvements. It also shows an economic feasibility study, a detailed list of estimated project costs, and a description of the method of financing all estimated project costs, and the time when the costs are to be incurred. The plan contains maps of existing and proposed uses and zoning of the real property in the district and additional details showing proposed improvements in the district. The plan further shows that the district will promote the orderly development within the City, which is consistent with the City's Comprehensive Plan (Master Plan), building codes and other city ordinances in relation to project elements. Upon adoption of the project plan by the Plan Commission and their submission to the City Council, all requirements of Section 66.1105(4)(f), Wisconsin Statutes, shall be complete and it is, therefore, my opinion that the project plan attached hereto is complete and complies with Sec. 66.1105, Wis. Stats. Sincerely, CITY OF OSHKOSH _ i A. Lorenson Attorney LL/cm 50 Appendix F Plan Commission/Public Hearing Minutes of May 3, 2016 PLAN COMMISSION MINUTES May 3, 2016 PRESENT: David Borsuk, Ed Bowen, Jeffrey Thorns, Thomas Fojtik, Join Hinz, Steve Cummings, Kathleen Propp, Gary Gray, Donna Lohry, Robert Vajgrt EXCUSED: Karl Nollenberger STAFF: Darryn Bunch, Director of Planning Services; David Buck, Principal Plainer; Jeffrey Nau, Associate Planner; Brian Slusarek, Zoning Code Enforcement Inspector; Elizabeth Williams, Associate Planner; Deborah Poland, Recording Secretary Chairperson Fojtik called the meeting to order at 400 pm. Roll call was taken and a quorum declared present. VII. PUBLIC HEARING ON PROPOSED CREATION OF TAX INCREMENT FINANCING DISTRICT #28 BEACH BUILDING REDEVELOPMENT; DESIGNATION OF BOUNDARIES AND APPROVAL OF PROJECT PLAN TID #28 is being proposed to facilitate the adaptive reuse of the vacant Orville Beach Memorial Manual Training School office building at 240 Algoma Boulevard into a mixed -use modern commercial/residential apartment complex and retail/service business center including three commercial units on the first floor and 22 higher end apartments on the second and third floors complete with modem finishes, technology and amenities. The overall goal of the redevelopment project is to provide new active life and full-time residents within the Oshkosh center city, furthering downtown revitalization efforts. The anticipated project cost is estimated at $3.3 million with renovations being the most significant cost due to many years of vacancy and deferred maintenance that essentially require a complete gut and remodel of the interior to bring the facility back to a competitive new use for the residential component. Mr. Bunch presented the item and discussed the purpose of the proposed TID creation, the rental unit's rates, and the maximum life of the TID, and proposed use. He further discussed the size of the parcel and value of the property and the increment values and project costs as well as the economic feasibility and development costs as far as equity, and financing for this project. He also reviewed the market analysis and project costs with and without the TIF assistance and stated that this project has been reviewed by the City's financial consultants and the project meets all the requirements in the State code for creation of a TID. Mr. Gray discussed the staff and developer's efforts on this project and stated that he felt there were inconsistencies in the financial information in the project plan and he cannot verify the need for additional money for this development. He further stated that he was not sure if TIF assistance is the correct process for a funding source for this project and would not support it due to what he felt was inaccurate financial information. Plan Commission Minutes I May 3, 2016 51 Mr. Bowen questioned some of the wording on page 8 relating to the historic tax credits that he felt was incorrect and questioned if the project would be eligible to receive State Historic Tax Credit assistance as State and Federal tax credits may have been utilized in the mid 1980's when the site was redeveloped, lie felt that this aspect of the plan needed to be looked into as he did not feel that the Historic Tax Credit assistance could be utilized again to his knowledge. This would change the financial figures if they were not applicable. He also questioned if the soft costs of 10% of the developer's fee was counted as part of the developer's equity in the overall proforma or is it excluded from the number in excess of that. Mr. Thorns inquired if the developer made any attempt to approach GO-EDC for funding rather than pursue the TIP assistance as this was economic development. Mr. Bunch responded that they did not pursue that avenue that he was aware of and that the application was submitted and staff research completed to determine if the request met the necessary requirements. Mr. Bowen commented that GO-EDC does not have support for real estate projects and are not focused on redevelopment projects that do not create jobs. Chet Wesenberg stated that they did not approach GO-EDC for financial assistance for this project. Mr. Thorns questioned if they contacted Winnebago County for low interest loan assistance. Mr. Wesenberg responded negatively and stated that the Historic Tax Credits are eligible for this project as they can be re -applied for after five years of receiving assistance and explained their submitted application process. He also discussed the criteria for the program which requires that historic preservation needs to identify what features of the structure which are historic and what can be saved and discussed the process of renovation with this being taken into consideration. He further discussed the approvals received thus far and the entities involved with the approval process. Mr. Bowen inquired where the coffee shop was located within the development. Mr. Wesenberg responded that it would be on the first floor where the existing drive through feature of the structure is located and that they already have an entity committed to fill that commercial use. He also discussed some of the other uses that were planned for the first floor commercial space. Barbara Young stated that the TIF assistance concerns her as taxes are kept at a lower rate for the development which has to be made up by other taxpayers. She also stated that TIF assistance was utilized as an incentive to start projects and this project appears to already be under way as work has already been going on at the site. She felt that favoritism was in play and that developers with deep pockets are the ones that are receiving TIP assistance advantages. She questioned if this project was going to be ceased if the TIF assistance was denied. Mr. Gray commented that she was claiming that the developer will be paying less taxes and that was not how TIP assistance worked. He explained that the developer will pay the same amount of taxes as any other development and that they will pay the current tax rate for the property and the difference is where these tax dollars are applied. He further explained that with TIP assistance that Plan Commission Minutes 2 May 3, 2016 52 the taxes are applied to repay the city for the development rather than going to the school district and other entities that normally receive a portion of the tax payments. Bernard Pitz, 617 W. Irving Avenue, stated that the building was constructed by Ids company and that he does not agree with the developer receiving TIF assistance for this project. He discussed his research on the property and that the property taxes were decreased in 2015 by a considerable amount and that the developers are owners that will be moving into the commercial space created. Ile further discussed the developer's fees and architect's fees that amount to around $300,000 that are included in the project plan and that the school system and Winnebago County will not receive their portion of the tax payment from this property. He questioned how this TIF assistance can be justified when the school system just passed a referendum for additional taxes to be paid by property owners. He felt that the developer's and architect's fees should be removed from the project plan as it is benefiting the parties that will be occupying the building. He also discussed that TIF assistance is typically sought when the area receiving the TIF assistance is determined to be 50% blighted and City Hall is directly adjacent to this parcel and he does not consider it to be a blighted area. He also stated that TIF assistance was meant to initiate development that would bring in new business and create jobs and increase the tax base and that this proposed TIF does not meet these requirements. He continued to discuss how TIF projects are utilized for economic development purposes and that it was meant to provide funding prior to any work being initiated and that the work on this development has already begun prior to the TID plan even being approved. Diane Lamnmers, 131 Church Avenue, stated that she thought that the TID plan should be approved before any construction is started and that work has been underway at this site for some time now. She also commented about the developer receiving a tax break for the next 20 years which she felt was unfair while they are making money from the development and that she disagreed with TIF assistance being granted for this project. Tim Hess, 2645 Templeton Place, stated that lie completed the analysis for this project and discussed its details and stated that from the standpoint of the developers fees, they are applying for allowable fees as things such as the architect's fees are part of the total expense for the development. He discussed the comments relating to the developer's and architect's fees that were claimed to be excessive and their request for $300,000 and explained the allowable fees related to a TIF project and further explained the hard costs involved with this project. He also explained the substantial fees involved with a historic tax credit project and the developer's fees are in the analysis. Mr. Bowen questioned if these costs were included in the proforma of the developer equity of $1,494,714 that the developers are bringing into this project. Mr. Hess responded affirmatively. Mr. Borsuk again asked to clarify if the apartments would be market rate units. Mr. Hess responded affirmatively. Mr. Gray referenced the table on page 32 of the project plan that contained revenue projections relating to the rental projects and stated that from his calculations, the commercial space rental Plan Commission Minutes 3 May 3, 2010 53 amount should be $90,000 not $68,000 based on the square footage of the commercial space available. Mr. Hess responded that 10% is common areas that are not included in this calculation. Mr. Gray felt that the square footage calculations from floor to floor did not add up correctly. Motion by Vajgrt to approve the designated boundaries and Project Plan for TID 1128 -Beach Building Redevelopment. Seconded by Borsuk. Mr. Burich requested that an explanation of what activities are occurring on the site now be provided and what will occur if the TIF financing is not approved. Mr. Wesenberg explained that the project is contingent upon TIF and tax credit assistance and that lie was not sure how the project would proceed if these financial aides were not approved as lie did not feel the project would go forward without this assistance as they were counting on this to help finance the development. Mr. Thorns stated that this project did not meet the criteria for the purpose of the creation of a TID and that the developers did not look at alternative financing and that it was difficult to ascertain that the $300,000 from the TIF assistance would make or break this project at $3,000,000 and that it was justified. Mr. Wesenberg cormnented that lie was not sure if other financial avenues to assist with this project were pursued and that his partner, was not present to answer these questions. Mr. Thorns questioned why work has begun on the project if it was contingent upon receiving the assistance that has not yet been approved. Ms. Wesenberg responded that they cannot determine the fill exposure without starting work on the structure as selective demolition was in process as this work must be completed to determine what historic elements remain within the structure. There is work going on but it was nominal to determine the historic fabric. Mr. Thorns commented that he thought that the developer had to apply for TIF assistance and have it approved prior to any work commencing on the site. Mr. Burich explained that the TIF is not being used to directly fund any construction activity at the site but as a financial incentive to complete the project. Motion by Vajgrt to call the question and end discussion. Seconded by Bowen. Motion carried 7-2. (Ayes Borsak/Bowen/Fojtik/Hinz/Cu;runirtgs/ProppfVajgrt). Nays- (T.homs/Lohny) Plan Commission Minutes May 3, 2016 54 Appendix G Common Council Creation Resolution JUNE 14, 2016 16-305 RESOLUTION (CARRIED 6-0 LOST LAID OVER WITHDRAWN PURPOSE: APPROVE TAX INCREMENT DISTRICT NO. 28 PROJECT PLAN; DESIGNATE TAX INCREMENT DISTRICT NO. 28 BOUNDARIES; CREATE TAX INCREMENT DISTRICT NO. 28 BEACH BUILDING REDEVELOPMENT INITIATED BY: CITY ADMINISTRATION PLAN COMMISSION RECOMMENDATION: Approved WHEREAS, the City of Oshkosh (the "City") has determined that use of Tax Incremental Financing is required to promote development and redevelopment within the City; and WHEREAS, Tax Increment District No. 28 (the "District") is proposed to be created by the City as a blighted area district in accordance with the provisions of Wisconsin Statutes Section 66.1105 (the "Tax Increment Law"); and WHEREAS, a Project Plan for the District has been prepared that includes: a. A statement listing the kind, number and location of all proposed public works or improvements within the District, or to the extent provided in Wisconsin Statutes Sections 66.1105(2)(f)1.k. and 66.1105(2)(f)1.n., outside of the District; b. An economic feasibility study; c. A detailed list of estimated project costs; d. A description of the methods of financing all estimated project costs and the time when the related costs or monetary obligations are to be incurred; e. A map showing existing uses and conditions of real property in the District; f. A map showing proposed improvements and uses in the District; g. Proposed changes of zoning ordinances, master plan, map, building codes and City ordinances; h. A list of estimated non -project costs; i. A statement of the proposed plan for relocation of any persons to be displaced; j. A statement indicating how the District promotes the orderly development of the City; k. An opinion of the City Attorney or of an attorney retained by the City advising that the plan is complete and complies with Wisconsin Statutes Section 66.1105(4)(f); and 55 JUNE 14, 2016 16-305 RESOLUTION CONTD WHEREAS, prior to its publication, a copy of the notice of public hearing was sent to owners of all property in the proposed district, to the chief executive officers of Winnebago County, the Oshkosh Area School District, and the Fox Valley Technical College District, and any other entities having the power to levy taxes on property located within the District, in accordance with the procedures specified in the Tax Increment Law; and WHEREAS, in accordance with the procedures specified in the Tax Increment Law, the Plan Commission, on May 3, 2016 held a public hearing concerning the project plan and boundaries and proposed creation of the District, providing interested parties a reasonable opportunity to express their views thereon; and WHEREAS, after said public hearing, the Plan Commission designated the boundaries of the District, adopted the Project Plan, and recommended to the Common Council that it create such District and approve the Project Plan NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Oshkosh that: The boundaries of the District shall be named "City of Oshkosh Tax Increment District No. 28, Beach Building Redevelopment", are hereby established as specified in Exhibit A of this Resolution. 2. The District is created effective as of January 1, 2016. 3. The Common Council finds and declares that: (a) Not less than 50% by area of the real property within the District is a blighted area within the meaning of Wisconsin Statutes Section 66.1105(2)(a)1. (b) Based upon the findings, as stated in 3(a) above, the District is declared to be a blighted area district based on the identification and classification of the property included within the District. (c) The improvement of such area is likely to enhance significantly the value of substantially all of the other real property in the District. (d) The equalized value of the taxable property in the District plus the value increment of all other existing tax incremental districts within the City, does not exceed 12% of the total equalized value of taxable property within the City. 56 JUNE 14, 2016 16-305 RESOLUTION CONTD (e) The City estimates that less than 35% of the territory within the District will be devoted to retail business at the end of the District's maximum expenditure period, pursuant to Wisconsin Statutes Section 66.1105(5)(b). (f) The project costs relate directly to promoting the elimination of blight of the area consistent with the purpose for which the District is created. (g) All property within TID #28 was within the City boundaries as of January 1, 2004. 4. The Project Plan for "City of Oshkosh Tax Increment District No. 28, Beach Building Redevelopment " (attached as Exhibit 8) is hereby approved, and the City further finds the Plan is feasible and in conformity with the master plan of the City. BE IT FURTHER RESOLVED that the Common Council of the City of Oshkosh hereby approves creation of Tax Incremental Financing District No. 28 Beach Building Redevelopment. 57 Appendix H Joint Review Board Resolution JOINT REVIEW BOARD RESOLUTION APPROVING THE CREATION OF TAX INCREMENTAL DISTRICT NO. 28, CITY OF OSHKOSH WHEREAS, the City of Oshkosh (the "City") seeks to create Tax Incremental District No. 28 (the "District"); and WHEREAS, Wisconsin Statutes Section 66.1105 requires that a Joint Review Board (the "JRB") shall convene to review the proposal; and WHEREAS, the JRB consists of one representative chosen by the School District; one representative chosen by the Technical College District; and one representative chosen by the County, all of whom have the power to levy taxes on property within the District; and one representative chosen by the City and one public member; and WHEREAS, the public member and JRB's chairperson were selected by a majority vote of the other JRB members before the public hearing was held, under Wisconsin Statutes Sections 66.1105 (4)(a) and (e), and WHEREAS, all JRB members were appointed and the first JRB meeting was held within 14 days after the notice was published under Wisconsin Statutes Sections 66.1105 (4)(a) and (e); and WHEREAS, the JRB has reviewed the public record, planning documents, the minutes adopted by the Plan Commission approving the boundaries of the District and adopting the Project Plan, and the resolution passed by the Common Council approving the creation of the District under Wisconsin Statutes Section 66.1105 (4)(gm); and - WHEREAS, the JRB has considered whether, and concluded that, the District meets the following criteria: 1. The development expected in the District would not occur without the use of tax increment financing and the creation of a tax incremental district. 2. The economic benefits of the District, as measured by increased employment, business and personal income and property value, are sufficient to compensate for the cost of the improvements. 3. The benefits of the proposal outweigh the anticipated tax increments to be paid by the owners of property in the overlying taxing districts. City of Oshkosh of Wisconsin, TID No. 28 Joint Review Board Resolution Page 1 of 2 58 NOW, THEREFORE, BE tT RESOLVED that the JRB approves the creation of this District. BE IT FURTHER RESOLVED that in the judgment of the IRE, the development described in the Project Plan, the information provided by the City, and the public record and planning documents relating to the District, would not occur without the creation of the District. Passed and adopted this_ day of �ne ___________,2016. Joint Review Board 774 Mn kZ City of Oshkosh of Wisconsin, TI!) No. 28 Representing Winnebago County Oshkosh Area School District Fox Valley Technical College District City of Oshkosh Public Member Joint Review Board Resolution . Page 2 of 2 59