HomeMy WebLinkAbout10.B.1. Request of Trident for Senior Housing Tax Increment Financing (TIF) EIJ�4 #� 5
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CITY OF SHAKOPEE
Memorandum
TO: EDA
Honorable Mayor and City Council
Mark McNeill, EDA Executive Director/City Administrator
FROM: R. Michael Leek, Community Development Director
SUBJECT: Trident Application for Tax Increment Assistance (TIF) for a Senior
Housing Project
MEETING DATE: February 21, 2012
INTRODUCTION:
Trident has submitted an application to the City requesting tax increment financing in
the amount of $1,000,000.00 to be used principally for site development costs in
connection with a 79 unit senior housing project proposed to be located adjacent to the
SACs school on Independence. A copy of the application is attached for the
EDA's/Council's information). Construction of the facility is planned to begin on or
about June 1, 2012.
The EDA is asked to review and take action on the request for TIF. The last time that the
City of Shakopee considered housing assistance was in connection with the Levee Drive
Apartments in the 1980s.
DISCUSSION:
Description of the Project:
Trident proposes the construction of a 79-unit senior housing project on three (3J acres
adjacent to the SACS school site. The project would include independent living, assisted
care, and memory care units.
The estimated total cost of the project is $10,800,500.00, of which $1.935 million is
proposed to be equity; $8.8 million is proposed to be in the form of a bank loan; and
$1.0 million is proposed to be TIF to be provided over a 20 year term.
C:AUsersltvaliaait\Downloads\Trident Report 022 L2012.docx
Process for Approval of a TIF Plan:
In the event that the City Council/EDA determines that it wishes to proceed with TIF for
the project, the following is the sequence of events/timeline that would occur or be
followed;
1. The City would, with the assistance of its attorneys and financial consultants
would develop a master schedule of notices and resolutions, as well as the TIF
plan and development agreement with the applicant for TIF.
2. 30 days before the public hearing—the TIF Plan must be sent to Scott County
and ISD 720 for review and comment. These bodies cannot per se object.
3. Sometime prior to the public hearing—The Planning Commission must review
the TIF Plan only to determine that the proposal is consistent with the City's
adopted 2030 Comprehensive Plan.
4. At least 10 days, but no more than 30 days before the public hearing— pu6lish
notice of the public hearing.
5. EDA approves the TIF plan.
6. City Council holds the public hearing on the TIF plan, and approves it after the
public hearing. On the same night the City Council may approve the
development agreement.
Generally speaking the public hearing is set for a date at least sixty (60) days from step 1
above. It should be noted that the applicant for assistance must agree to pay the City's
costs in developing and approving the TIF plan and agreement.
The City Council will be required to find that the proposed development is not likely to
occur without tax increment assistance. However, because this is a housing district, the
City Council will not be required to make the alternate finding; i.e. that no other higher
value development is likely to occur without assistance. In other words, housing
without income restrictions might in fact be likely on this site without assistance, but
that would not impair the City's decision to provide assistance if the tax increment is
needed to make this affordab(e housing development feasible. If the City moves
forward with this proposal, staff and financial advisors will be analyzing these points,
and also the amount of tax increment that is reasonably necessary.
City Criteria for Assistance Related to a Housing Project:
The City's current policy includes the current criteria for granting a business subsidy.
However, it does not specifically address the use of TIF for housing project, because
assistance for housing is not considered to be a"business subsidy" for purposes of the
business subsidy statute.
Among the factors that the EDA/City Council should or may want to consider in reaching
a policy decision are;
C:\Users\lvalianllDownloadslTrident Report 02212012.docx ;
• Whether there is a demonstrated need for the housing in the community;
. Whether the proposed project will address the identified need for the proposed
housing;
• Whether the project would not happen '6ut for' the proposed TIF assistance;
The City's 2030 Comprehensive Plan, Housing (the Plan) contains the following goals,
among others;
Goal 3. Increase housing opportunities available to low and moderate
income households.
The Plan goes on to mention as a strategy, partnering with the Scott County CDA in
Development of additional opportunities for low and moderate income households, but
does not specifically make mention of any other partnerships toward this end.
Unlike the economic development projects like SanMar and Trystar, where the focus is
on job creation and tax base increase, the focus for housing TIF projects is on what the
benefits to the community would be of providing additional affordable housing
opportunities. It is worth noting that while affordability is the primary focus for housing
TIF, these projects do often create jobs (particularly assisted living, as in this case), and
long term tax base.
It is most often the case that market rate rental housing, whether senior housing or not,
can be financed without public assistance unless there are impediments at a particular
site. Impediments might be blighted buildings, poor soils or other factors. It does not
appear that such impediments to development exist on the proposed project site. It is
also almost always the case that affordable housing requires assistance, even on a
"clean" site, such as the proposed site.
The question for the EDA and City Council is thus a policy question, i.e. does the
EDA/City Council see a benefit in helping to develop senior housing that includes at least
20% or 40% of the units (depending on which test is used) reserved for low to moderate
income people? If the EDA/City Council concludes there is such a benefit, then it makes
sense to consider the request and analyze how much assistance is needed.
If the EDA/Council conclude that affordability is not a goal for the City, and they expects
the project could be developed anyway as a market rate project, the EDA may
determine not to provide assistance. Of course, there is not a guarantee that the
project will move forward as a market rate project. This might be line of questions for
the developer. If the EDA/Council are simply neutral on whether this site develops at all
(whether market rate or affordable housingJ, then a decision not to provide assistance
would also be reasonable.
C:1Users\tvaliantU�ownloadslTrident Report 02212012.docx
With its application for TIF, the applicant submitted an "Initial Demand Assessment for
Senior Housing," (demand study) prepared by GDCRE, Inc. and dated September 16,
2011. At page 2 of the demand study, the primary market area is identified as Shakopee
and portions of Prior Lake and Jordan, as well as Jackson, Louisville, and Spring Lake
Townships. The demand study identifies the target market for housing with services as
households 70 years and older with incomes of at least $30,000. It estimates that by
2015 there will be ahout 1,660 such households in the primary market area.
At page 8, the demand study indicates that that there are about 225 units in
competitive projects in Shakopee and Prior Lake. The demand study concludes that
there is an excess demand for independent living units of 180 with demand for about 99
being on the subject site. It concludes that there is an excess demand for assisted living
units of about 69, with about 38 of those attributable to demand on the subject site.
Finally, it concludes that there is excess memory care demand of 52 units, with about 29
units of demand attributable to the subject site. In short, the demand study concludes
that a) there is substantial excess demand for the range of housing units proposed, and
b) that absorption of the units proposed for this site is likely to be rapid.
Should the City choose to use TIF for this project, it would be a"housing district." This
would require that the project meet affordability limits, which are as follows;
• Either 20% of the units must be occupied by persons with no more than 50% of
median income; or
• 40% of the units occupied by persons with no more than 60% of inedian income;
A further limit on housing districts is that no more than 20% of the square footage of the
property receiving assistance may consist of any "non-residential use." In other words,
if a residential rental building meets one of the two income tests, that building may still
contain up to 20% of its square footage in some other use. The issue in this project is
that some of the units will be memory cares, which are typically very small with no
kitchens. Most likely, the memory care units would not be considered to be residential
rental housing; they are more like units in a nursing home (which is not eligible for tax
increment assistance). It appears, from looking at the application that the memory care
units will be just under 20% of the square footage of the entire facility. If so, as long as
the rest of the units (both independent and assisted living) meet the income test, the
building may still contain the memory care units and 6e eligible for tax increment
assistance. These details would need to be confirmed with the applicant.
In addition to reviewing this demand data, in the event that the EDA/Council decides it
wishes to provide assistance staff and the City's financial advisors will be reviewing the
development pro forma to determine the amount of increment needed to make the
project feasible. This would be brought forward for final action.
C:\Users\rvalianllDownloads\Trident Report_02212012.docx �
ZONING:
The property proposed for the project is guided in the 2030 Comprehensive Plan for
single-family density development, but is presently zoned Agricultural Preservation.
Based on the land use guiding and surrounding uses, the default zoning category would
likely be Urban Residential (R-1B). However, neither the R-16 nor other residential
zoning districts expressly or implicitly address this type of use, nor do they allow
residential densities greater than 12 units per acre. Were the project to proceed, City
staff, the City Attorney and applicant would have to confer on the potential avenue to
address this. One potential approach would be the planned unit development (PUD)
approach, especially if applied to the entire 10-acre site.
RELATIONSHIP TO CITY GOALS:
The proposed project and City action on the request relate to City Goals;
A. Keep Shakopee a safe and healthy community where residents can pursue active and
quality lifestyles.
B. Positively manage the challenges and opportunities presented by growth,
development and change, and to
D. Maintain, improve and create strong partnerships with other public and private
sector entities.
ALTERNATIVES:
1. Offer and approve a motion directing city staff and the city's financial consultants to
proceed with the development of a TIF plan for the proposed senior housing project.
2. Offer and approve a motion directing that city staff and the city's financial
consultants not proceed with the development of a TIF plan for the proposed senior
housing project.
3. Table the matter with direction to obtain additional, required information.
EDAC RECOMMENDATION:
On January 21 the EDAC reviewed the request, and unanimously recommended that
the EDA/City Council not proceed with development of a TIF plan for the Trident project.
REQUESTED ACTION:
The EDA is asked to make a recommendation to the Shakopee City Council regarding
whether or not to direct staff, the City's financial consultant and attorney to develop a
TIF plan for the proposed senior housing project.
C:\Users\tvaliant\Downloads\'l rident Report_02212012.docx �
The City Council is asked to pass a motion directing whether or not staff, the City's
financial consultant and attorney to develop a TIF plan for the proposed senior housing
project.
Ao _
y%
R. Michael Leek
Community Development Director
C:\Users\tvaliantlDownloadslTrident Rcport_02212012.docx 6
CITY OF SHAKOPEE
Memorandum
TO: Economic DevelopmentAdvisory Committee (EDAC)
FROM: R. Michael Leek, Community Development Director
SUBIECT: Trident Application for Tax Increment Assistance (TIF) for a Senior
Housing Project
MEETING DATE: January 21, 2012
INTRODUCTION:
Trident has submitted an application to the City requesting tax increment financing in
the amount of $1,00,000.00 to be used principally for site development costs in
connection with a proposed 79 unit senior housing project proposed to be located
adjacent to the SACs school on Independence. A copy of the application is attached for
the EDAC's information). Construction of the facility is planned to begin on or about
June 1, 2012.
The EDAC is asked to review, discuss and make a recommendation to the City
Council/EDA regarding the application. The last time that the City of Shakopee
considered housing assistance was in connection with the Levee Drive Apartments in
the 1980s.
DISCUSSION:
Descripfion of ihe Project:
Trident proposes the construction of a 79-unit senior housing project on three (3) acres
adjacent to the SACS school site. The project would include independent living, assisted
care, and memory care units.
The estimated total cost of the project is $10,800,500.00, of which $1.935 million is
proposed to be equity; $8.8 million is proposed to be in the form of a bank loan; and
$1.0 million is proposed to be TIF to be provided over a 20 year term.
Process for Approval of a TIF Plan:
In the event that the City Council/EDA determines that it wishes to proceed with TIF for
the project, the following is the sequence of events/timeline that would occur or be
fallowed;
H:IEDAC\2012\012120121Trident Housing\Trident Report.docx 1
1. The City would, with the assistance of its attorneys and financial consultants
would develop a master schedule of notices and resolutions, as well as the TIF
plan and development agreement with the applicant for TIF.
Z. 30 days before the public hearing —the TIF Plan must be sent to Scott County
and ISD 720 for review and comment. These 6odies cannot per se object.
3. Sometime prior to the public hearing— The Planning Commission must review
the TIF Plan only to determine that the proposal is consistent with the City's
adopted 2030 Comprehensive Plan.
4. At least 10 days, but no more than 30 days before the public hearing— publish
notice of the public hearing.
5. EDA approves the TIF plan.
6. City Council holds the public hearing on the TIF plan, and approves it after the
public hearing. On the same night the City Council may approve the
development agreement.
Generally speaking the public hearing is set for a date at least sixty (60) days from step 1
ahove. It should be noted that the applicant for assistance must agree to pay the City's
costs in developing and approving the TIF plan and agreement.
The City Council will be required to find that the proposed development is not likely to
occur without tax increment assistance. However, because this is a housing district, the
City Council will not be required to make the alternate finding; i.e. that no other higher
value development is likely to occur without assistance. In other words, housing
without income restrictions might in fact be likely on this site without assistance, but
that would not impair the City's decision to provide assistance if the tax increment is
needed to make this affordoble housing development feasihle. If the City moves
forward with this proposal; staff and financial advisors will be analyzing these points,
and also the amount of tax increment that is reasonably necessary.
City Criteria for Assistance Related to a Housing Project:
The City's current policy includes the current criteria for granting a business subsidy.
However, it does not specifically address the use of TIF for housing project, because
assistance for housing is not considered to be a"business subsidy" for purposes of the
business subsidy statute.
Among the factors that the EDA/City Council should or may want to consider in reaching
a policy decision are;
• Whether there is a demonstrated need for the housing in the community;
• Whether the proposed project will address the identified need for the proposed
housing;
H:IEDAC\20121012120121Trident HousinglTrident Report.docx �
• Whether the project would not happen 'but for' the proposed TIF assistance;
With its application for TIF, the applicant submitted an "Initial Demand Assessment for
Senior Housing;' (demand study) prepared by GDCRE, Inc. and dated September 16,
2011. At page 2 ofthe demand study, the primary market area is identified as Shakopee
and portions of Prior Lake and Jordan, as well as Jackson, Louisville, and Spring Lake
Townships. The demand study identifies the target market for housing with services as
households 70 years and older with incomes of at least $30,000. It estimates that by
2015 there will be about 1,660 such households in the primary market area.
At page 8, the demand study indicates that that there are about 225 units in
competitive projects in Shakopee and Prior Lake. The demand study concludes that
there is an excess demand for independent living units of 180 with demand for about 99
being on the subject site. It concludes that there is an excess demand for assisted living
units of about 69, with about 38 of those attributable to demand on the subject site.
Finally, it concludes that there is excess memory care demand of 52 units, with a6out Z9
units of demand attributable to the subject site. In short, the demand study concludes
that a) there is substantial excess demand for the range of housing units proposed, and
b) that absorption of the units proposed for this site is likely to be rapid.
Should the City choose to use TIF for this project, it would be a"housing district." This
would require that the project meet affordability limits, which are as follows;
• Either 20% of the units must be occupied by persons with no more than 50% of
median income; or
• 40% of the units occupied by persons with no more than 60% of inedian income;
A further limit on housing districts is that no more than ZO% of the square footage of the
property receiving assistance may consist of any "non-residential use." In other words,
if a residential rental building meets one of the two income tests, that building may still
contain up to 20% of its square footage in some other use. The issue in this project is
that some of the units will be memory cares, which are typically very small with no
kitchens. Most likely, the memory care units would not be considered to be residential
rental housing; they are more like units in a nursing home (which is not eligible for tax
increment assistance). It appears, from looking at the application that the memory care
units will be just under 20% of the square footage of the entire facility. If so, as long as
the rest of the units (both independent and assisted living) meet the income test, the
building may still contain the memory care units and be eligible for tax increment
assistance. These details would need to 6e confirmed with the applicant.
In addition to reviewing this demand data, staff and financial advisors will be reviewing
the development pro forma to determine the amount of increment needed to make the
project feasible.
H:IEDAC12012\012120121Trident HousinglTrident Report.docx 3
ALTERNATIVES:
1. Offer and approve a motion recommending to the Shakopee City Council and EDA
that they approve the granting business assistance in the form of tax increment
financing for the proposed senior housing project as offered.
�. Offer and approve a motion recommending to the Shakopee City Council and EDA
that they approve the granting business assistance in the form of tax increment
financing forthe proposed senior housing project with revisions.
3. Table the matter with direction to obtain additional, required information.
RELATIONSHIP TO CITY GOALS:
The proposed project and City action on the request relate to City Goals; .
A. Keep Shakopee a safe and healthy community where residents can pursue active and
quality lifestyles.
B. Positively manage the challenges and opportunities presented by growth,
development and change, and to
D. Maintain, improve and create strong partnerships with other public and private
sector entities.
ALTERNATIVES:
1. Offer and approve a motion recommending to the Shakopee City Council and EDA
that they initiate the process for creating a TIF District to provide assistance (in an
amount to be determined to be necessary) for the proposed 79-unit senior housing
project, because (a) there is significant unmet demand for such housing in the
community and (b) the project would not occur without assistance.
2. Offer and approve a motion recommending to the Shakopee City Council and EDA
that they not initiate the process for creating a TIF District to provide assistance for
the proposed 79-unit senior housing project, because (a) there is not demonstrated
significant unmet demand for such housing in the community and (b) the project
would likely occur without assistance.
3. Table the request for additional information
STAFF RECOMMENDATION:
Because the City does not currently have a policy that provides direct guidelines for
evaluation of TIF use for housing projects, and because this is essentially an issue of first
impression for the City (the last TIF used in connection with a housing project occurred
in the 1980's and invoived the construction of Levee Drive Apartments), staff has not
offered a specific recommendation.
H:IEDAC12012\012120121'1'rident HousinglTrident Report.docx 4
REQUESTED ACTION:
Offer a motion consistent with the EDAC's wishes
��������
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R. Michael Leek
Community Development Director
H:AEDAC12012\012120121Trident Housing� I'cident Report.docx 5
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CC� Y PRIDE SINCE 185�
CITY OF SHAKOPEE
Application for Business Subsidies
129 Holmes Street South Shal<opee, MN 55379
Phone (952) 496-9661 Fax (952) 2333801
I1Rogers Files\Shakopee,MNlAssisted Living St MaryslShakopee TIF App
DRAFT(120811).doc
Section I: General Information
** With this opplicotion, please submit a forma! letter requesting the assistance.
1. Business Name: All Saints Senior Living, LLC
2. Address: C/0 Trident Development, LLC
3601— 18 Street South
St. Cloud, MN 56301
3. Contact Person: Roger Fink
4. Telephone: (612) 242-6097 (cell)
(320) 258-4438 (office)
5. Fax: (320) 252-3603
6. E-Mail: rogerf@lyomm�.com
7. Brief Description of the Business / Company: Proposed development and construction of a
new 79-unit elderly/assisted living apartment housing complex, offering independent, assisted
living and enhanced (memory support) services to senior citizens (age SS+J.
8. Parent Corporation, if any:
9. Consultant information, if applicable:
Name:
Address:
Telephone: Fax:
E-Mail:
10. Type of Subsidy Requested: Tax Increment Financing _X_ Tax Abatement
Other _ (Descri6e: )
(Check appropriate item}
11. Amount of Subsidy Requested: 90%TIF over 20-vear term
L•\Rogers Fi]es\Sliakopee,MN�Assisted Living St Marys\Shalmpee TIP Ap�
DRAFT(120811).doc
12. Public Purposes of the Subsidy: Create and maintain safe and affordable rental housing for
seniors and those requiring assisted living services
13. Location of Proposed Project: Three acre parcel at the southeast corner of Independence
Drive and Thrush Street.
14. Legal Description of Project Location: To be platted from the 10+/- acres described as: the
East Half of the South Half of the Southwest Quarter of the Northeast Quarter of Section
17, Township 115, Range 22, Scott County, Minnesota
15. Property Identification Num6er(s}: 27.9170150
16. Present Ownership of the Site: The Church of St. Mary of Shakopee, under conditional
purchase agreement to Trident Development, LLC
17. Name / Description of the proposed project (Attach site plan, if available): ALL SAINTS
SENIOR LIVING COMMUNITY. Seventy-nine (79) unit, three-story senior/assisted living
apartment community, offering independent, assisted and enhanced services rental
apartments.
18. Size of the Property 130,680 sq. ft. approximately
I:\Rogers Files\Sl�akopee,MN�P.ssisted Living St Marys\Shakopee TIF App
DRAFT(120811).doc
19. Estimated Total Building Square Footage 83,000 sq. ft. approximately
20. Estimated size of the Proposed Facility: 83,000 sq. ft. (three-story) building area plus
surface parking and grounds.
Manufacturing/Assembiy/Processing sq. ft. 0
Office sq. ft. 0
Research Laboratory sq.ft. 0
Warehousing sq. ft. _0
Other (Please Specifv) Rental Housin� — 83,000 sq. ft+/-
TOTALsq.ft. 83,OOD
21. Estimated Project Costs (including relocation, constructionj:
Land Acquisition $ 750,000.00
Site Development (grading, landscaping, etc.) $355,000
Building Cost $ 6,126,000
Street/Road Improvements (include your costs only) $ 250,000
Utility Improvements (include your costs only) $ 175,000
Capital (machinery and equipment) $ 900,000
Professional Services (archit., engin.,legal, fiscal) $ 2,158,500
Fees and Permits (same as total from below) $ 1,020,500
Other (Please specify j $ 0
TOTAL $ 11,735,000
22. Estimated Fee and Permit Costs:
1:�Rogers Files\Shakopee,MN�Assisted Living St Marys\Shakopee TIP App
DRAFT(120811).doc
City Permits and Fees $ 796,933
(Grading and 8uilding Permits, Park Dedication Fees, etc.)
Metropolitan Council Fees $ 219,067
(SAC and WAC Charges)
Other fee or permit costs $ 4,SOO.OD
(Please Specify: MPCA for NPDES permit; MDH for water main extension; Scott County Health
for Food Service Permit )
TOTAL $ 1,020,500
23. Indicate the proposed start date for construction and estimated date of completion:
Construction start date: June 1, 2012
Completion date: July 1, 2013
24. Proposed Financing Source(s):
Equity $ 1,935,OOD
Banl<Loan $ 8,800,000
(Check one): Tax Increment Financing : $1,000,000
Industrial Development Revenue Bonds $ D
Other Local Government Assistance $
(Please specify )
State of Minnesota Assistance $ 0
(Pleasespecify )
L'�IZogers Files\Shakopce,MN\Assisted Living St Marys\Shakopee 1'iF App
DRAFT(120811).doc
TOTAL $ 10,80a,500
25. If tax increment financing is requested, please submit a list of eligible project costs
(Refer to Section V of the Business Subsidy Policy}:
On-site and off-site utilities $ 130,000
Grading and earthwork/retaining walls $ 295,000
Footings and foundation $450,000
Storm water drainage facilities $ 45,000
On-site roads, parking, curb/gutter and sidewalks $ 250,000
Survey, geotechnical, environr��er�.al, civil engineering $ 40,000
Landscaping, including irrigation $ 60,000
26. The City reserves the right to request tax returns and/or other financial statements from
the appiicant for the years of operation.
27. The City reserves the right fo request three bank references from the applicant.
L�Rogers Files\Shakopce,MN�Assisted Living St Marys\Shakopce TIF App
DRAPT(120811).doc
Section II:
Employment, Wage and Benefit information
A. EMPLOYMENT
1. Does this project involve the relocation ofjobs within the State of Minnesota?
No
a. If so, provide a statement of why the project cannot be completed at its current
location / facility:
6. Number of full time equivalent (FTE) permanent employee positions at current
Minnesota location / facility to be relocated to Shakopee:
2. If the project is an expansion of an existing Shakopee facility, what is the current number of
FTE permanent employee positions? N/A
3. Estimated Number of FTE permanent employee positions to be created (within 2 years of
issuance of Certificate of Occupancy) as a result of the project: 31
4. TOTAL number of current and estimated new FTE permanent employee positions (No. 2+
No. 3 from above) 31
L•�Rogers Files\Shakopee,MN�Assisted Living St Marys\Shakopee TIF App
DRAFT(120811).doc
B. WAGES
1. What will be the minimum hourly wage (exclusive of 6enefits) of the FTE permanent
employee positions created by the project? 11.00 (preliminary estimate)
2. The hourly wage of each new permanent FTE employee position, with separate bands of
wages, is as follows:
Total Number of
Wa�e Levels Per Hour FTE Permanent Emplovee Positions
Less Than $14.16 �
$14.17 —18.99 21.5
$19.94* — Z3.99 3
$24.00 — 28.99 0
$29.00 — 33.99 0
$34.00 and Over Z
*$19.94 is equal to 275% of the federal minimum wage in 2011
SEE ATTACHED EXHIBIT A FOR EMPLOYM�NT AND WAGE DETAILS
C. HEALTH INSURANCE BENEFITS
The value of health insurance 6enefits provided by the employer for the above referenced
jobs, separated by bands of wages, is as follows: All emplovees who work 32+ hours oer week
(full-time) are eligible for a$225.00 monthiv contribution toward health insurance premiums
Wage Levels Per Hour Value of Health Insurance Benefits (see above)
Less Than $14.16 $ZZ$
$14.17 — 18.99 _
$19.94* — 23.99 -
$24.00 — 28.99 -
$29.00 — 33.99 -
$34.00 and Over -
*$19.94 is equal to 275% ofthe federal minimum wage in 2011
L•�Itogers FileslShakopee,MN\P.ssisted Living St Marys\Shakopee TIF Ap��
DRAFT(1208ll ).doc
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< Initial Demand Assessment for
Senior Housing
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Near 17 Ave E& independence Ave, Shakopee, MN
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Prepared by:
� !ay Thompson, Senior Vice President
612.326.9988
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'�- ----- Date:9�16�2011
Initial Demand Assessment: Shakopee, MN
introduction
This memorandum provides an initial assessment of the demand for market rate senior
housine in Shakonee Minnesota. Included in this initial assessment are demand calculations
for market rate independent, assisted living and memory care housing, and Elderly Waiver
assisted living. Potential demand is calculated based on identifying the income/asset-qualified
target market for senior housing and the supply of competitive senior housing units serving the
primary market area.
The purpose of this initial assessment is to broadly assess the depth of demand for senior
housing in the local area to determine if potential exists to support a new development. The
demand methodology does not take into account the desirability of the subject site or the
appeal and performance of competitive buildings, both of which may impact demand. These
specific factors are examined in greater depth in a full market feasibility study, which could be
conducted at a later date. A full market feasibility study wouid also provide recommendations
on the number of units supporta6le and appropriate market positioning.
Primary Market Area Definition
The subject site for the proposed senior housing development is a parcel located adjacent to
the Shakopee Area Catholic School in Shakopee, Minnesota, or near the intersection of 17�
Avenue and Independence Avenue. Shakopee is a suburban community of 37,076 people (2010
Census) located on the southwestern fringe of the Twin Cities Metro Area.
We estimate that a senior housing development on the subject site in Shakopee would attract
approximately 70% of its residents from a draw area (Primary Market Area, or "PMA") that
includes Shakopee, Jordan, and parts of Savage and Prior Lake. The remaining portion of
demand would come from outside the PMA, particularly parents of adult children living in the
PMA. Census tracts included in the PMA are 802.1, 802.2, gp3.1, 803.2, 804, 805, 806, 807,
808, 809.3, and 809.5.
A map of the PMA is shown on the following page.
GDCRE, Inc.
Page 1
Septemher 16, 2011
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Initial Demand Assessment: Shakopee, MN
Demographic Analysis
Tables 1 through 5 on Pages 5 through 7 show key economic and demographic variables related
to demand for senior housing in the PMA (age distribution of the senior population and
household base, senior household income, senior homeownership rates, and single-family
home resale trends). The demographic data is from ESRI, a national demographics firm, and
adjusted based on the 2010 Census. Home resale data is from the Regional Multiple Listing
Service.
The key demographic and economic findings are summarized on the following pages.
Senior Population and Household Trends
► Overall, the population and household base in the PMA is growing rapidly. The PMA
population was 39,626 in 2000 and grew to 65,402 in 2010. The population is projected to
continue growing rapidly over the next five years. The senior population (age 65+) grew at
a faster rate than the overall population last decade, in�reasing from 2,490 in 2000 to 4,647
seniors in 2010 (+87%).
/ Shakopee's population of 37,076 in 2010 was about 57% of the total PMA population.
Shakopee's age 65 and over population (2,525) accounted for 54% of the total PMA senior
population.
1 Between 2010 and 2015, the PMA population age 65 to 79 will grow rapidly while the age
80+ population grows more slowly. This is a nationwide trend as the first baby boomers will
6egin turning age 65 in 2011, while children born during the depression era (a period of
lower birth rates) are aging into their late 70s and SOs.
Senior Household Incames
► The target market for senior housing with support services is generally senior househoids
age 70 and older with incomes of at least $30,000 (plus senior homeowners with incomes of
at least $20,000). In 2010, an estimated 1,225 households age 70 and older had incomes of
at least $30,000. By 2015, about 1,660 households age 70 and older will have incomes of at
least $35,000 (increased from $30,000 to adjust for inflation). It should be noted that
senior housing with personal care services will primarily serve seniors age 80+. Also, since
assisted living and memory care housing are predominately need driven, seniors with low
incomes are still candidates for private pay housing if they have home equity or other
savings that they can utilize to pay for the costs.
GDCRE, Inc.
Page 3
September 16, 2011
Iniiial Demand Assessment: Shakopee, MN
Senior Household Tenure
► Seniors who own their homes have an additional source of income that can be utilized for
alternative housing. Upon the sale of a home, the proceeds can 6e invested and the income
used dollar for dollar as supplementary income for housing and services. As Table 4 on
Page 6 illustrates, as of 201D, a relatively high percentage of both younger and older seniors
in the PMA are homeowners. The drop in the homeownership rate among the age 85+
population highlights how rental housing becomes much more predominant as seniors' care
needs rise and/or they no longer desire to maintain a single-family home.
Home Value Trends
� Seniors could use the proceeds from the sale of their home to off-set the cost of senior
housing. A senior seliing their home for $176,000 (about the average resale price of single-
family homes built before 199' in the PMA through August 2011) could receive an
investment return of approximately $410 monthly from the sale (sale price minus 7% sales
agent fees, and a 3% annual return on their investment). If a senior uses the full home sale
proceeds towards the cost of alternative housing, the home sale proceeds would cover the
costs at an assisted living facility ($3,500 per month) for approximately 3.5 years. At a
memory care facility ($5,000 per month), the same amount of home sale proceeds would
last roughly 2.5 years.
GDCRE, Inc.
Page 4
September 16, 2011
Initial Demand Assessment: Shakopee, MN
Table 1
Senior Population Growth Trends and Projections
Primary Market Area
2000 to 2015
Change, 2010 to 2015
Age 2000 2010 2015 No.
55 to 59 Pct.
1,612 3,071 3,846 775 25.2%
60to64 1,020 2,338
65 to 69 z 535 zz,g�
769 1,705 2,151
70to74 628 1,100 446 Z6_z�
1,638 538 48.9%
75 to 79 490 731 894
80to84 163 ZZ.3�
345 547 581 34 6.1%
85+ 258 564 60S
44 7.8%
Tota165+ 2,490 4,647 5,g72
Tota175+ 1�Z25 26.4%
1,093 1,842 2,083 241 13.1%
Total Population 39,626 65,4p2 74,g96 y 494 0
14.5�
Sources ESRi; 2010 Census; GDCRE
Table 2
Senior Household Growth Trends and Projections
Primary Market Area
2000 to 2015
Change, 2010 to 2015
Age 2000 2010 2015 No. Pct.
55 to 64 1,587 3,092 3,853
65 to 74 879 1,691 761 24.6%
2,310 619 36.6%
75 to 84 540 821 957
85+ 136 16.5%
146 346 388 42 12.0%
Tota165+ 1,565 2,858 3,654
Tota175+ 796 Z�•$�
6S 6 1,167 1,344 177 15. Z%
Total Households 13,940 22,441 25,730
3,289 14.7%
Sources: ESRI; 201D Census; 6DCRE
GDCRE, In�.
Page 5
September 16, 2011
fnitial Demand Assessment: Snakopee, MN
Table 3
Household Incomes by Age of Householder
Primary Market Area
2010 and 2015
2010 Householdsby Age
Inmme 55 - 64 65-74 75-84
<$15,OOD 85+
134 137 190 gg
$iS,000to$24,99g 69 208 144 65
$25,000 to $34,999 143 145 126 59
$35,OOOto$49,999 245 221 74 31
$50,000 to $74,999 530 336 68 31
$75,OOOto $99,999 519 129 66 19
$100,000 to $149,999 9gZ 3Z3 63 23
$150,000+ q�a 1�2
91 29
Total 3,092 1,691 821 346
Median HH Inmme $98,732 $76,049 $44,D2Z $2g,340
Average HH Income $114,308 $92,7g3 $68,101 $51,174
2015 Househofdsby Age
Income 55 - 64 65-74 75-84
<$15,OOD 109 85+
131 188 91
$15,OOOto$24,999 44 186 117 49
$25,OOOto j34,999 111 136 119 50
$35,000 to $49,999 183 201 66 28
$SO,OOOto$74,999 508 476 86 39
$75,000 ta $99,999 574 19fi 95 34
$100,000 to $149,999 1,509 615 129 54
$150,000+ S17 368
156 43
Total 3,853 z,31p 957
388
Median HH Income $109,906 $92,999 $63,575
Average HH Income $130,677 $38,554
$108,87g $84,756 $66,521
Sourcer. ESRI; 2010 Census; GDCRE
GDCRE, Inc.
Page 6
SepTember 16, 2011
Initial Demand Assessment: Shakopee, MN
Table 4
Tenure by Age of Householder
Primary Market Area
2010
Owners Renters
Households No, p�t No P�t
Age 55 to 64 2,704 87.5% 388 12.5%
Age 65 to 74 1,412 83.5% 279 16.5%
Age 75 to 84 604 73.6% 217 26.4%
Age 85+ 170 49.1% 176 50.9%
Total 4,890 gz.2�
1,060 17.8%
Total Age 65+ 2,186 76.5%
TotalAge 75+ 774 0 6�z z3.5%
66.3/0 393 33.7%
Sources; 2010 Census; GDCRE
Table 5
Single-Family Home Values
Primary Market Area
2007 through August 2011
No. of Average Average Cumulative
Year Sales Sale Price Days on Market
Shakopea - _. _.,
_. 2007 ., _ 131 5238,555 ll4
2008 156 $201,748
2009 138 142
$177,057 1zg
2010 137 $154,199
YTD 2011 113
111 $156,456 157
PrimaryMarke ��_ -" � `"
_..
t Ares
2007 218 � $267,957 :. ..:�. � �:.:..� . . ...�..
2008 121
255 $241,152 156
2009 244 $209,917
2010 153
Z4a $221,46D
YTD 2011 Zpg 135
$175,928 154
Sources: GDCRE; Northstar MLS
GDCRE, Inc.
Page 7
September 16, 2011
initial Demand Assessment: Shakopee, MN
Senior Housing Supply
Senior Housine Defined
Senior housing encompasses a wide variety of product types. The least service-intensive
properties are adult properties, which offer virtually no support services or health care, but
restrict tenancy to those ages 55 and over. Adult properties can be rental or owner-occupied
(attached or detached townhomes, condominiums, and cooperatives). Congregate independent
or independent properties, offer support services such as meals and housekeeping, sometimes
included in rent and sometimes a-la-carte so that residents can choose whether or not to pay
for them. Independent projects attract an older and frailer senior population than adult
projects (generally seniors age 75 and overJ.
The most service-intensive housing types, assisted living, memory care, and care suites offer
ihe highesi level of services short of a nursing home. Typical services provided are meals,
housekeeping, linen changes, personal laundry, 24-hour emergency response, and a wide range
of personal-care and therapeutic servi�es. The meals and services are either built into the
monthly fee, charged through a tiered service package, or charged a-la-carte.
Tnis report provides initial demand calculations for independent, assisted living, and memory
care housing.
Competitive Senior Housine Properties
Table 6 shows the inventory of senior housing properties that would provide competition to a
new development on the subject site in Shakopee. For each competitive property, Table 6
provides information on location, year built, whether or not it is located in the PMA, its distance
from the subject site, its estimated competitiveness and its total competitive units. The
percent competitive is estimated based on a property's distan�e from the subject site, its
location within or near the PMA, and its community orientation (i.e., its estimated primary
draw area). The following are key highlights about the competitive supply.
1 There are three competitive senior housing properties located in the PMA. The closest
competiti�e properties are Gardens of St. Gertrude and Augustana Emerald Crest. 8oth
are located in Shakopee and 6oth would be 100% competitive with the subject
development. Hence, the demand calculations su6tract all of the units in these
properties (40 assisted living and 38 memory care units), minus a 5% vacancy factor.
/ The third competitive property located in the PMA is McKenna Crossing in Prior Lake. It
has 79 independent, 41 assisted living, and 18 memory care units (plus another 47
enhanced care suites). McKenna Crossings draws a signifi�ant portion of its residents
from areas of Prior Lake and beyond that are outside the PMA. To account for market
overlap, we subtract two-thirds of its assisted living and memory care units in the
demand calculations. The market overlap with the independent portion of McKenna
GDCRE, Inc.
Page g
September 16, 2011
Initial Demand Assessment: Shakopee, MN
Crossing (the "Terrace") is less since it requires an entrance fee and meals and services
are optional. Thus, there is only partial target market overlap with independent units at
the subject development, which will draw seniors who are slightly older and less active.
Ta61e 6
Competitive Senior Housing Suppiy
Primary Market Area
September 2011
Miles Percent
Yezr Num6er In Ihe from Comp- Compet-
Property Name Location Built of Unit; pMq
--. Site etitive` itive Units
Independentliving�. . � _ � . . .. .
Ib�ICKenna Crossing Prior Lake 2007 79 Yes � � �
2.;
Key;tone oi Prior Lake Prior Lake 2003 60 No 50/ 40
Subtotal 5 ' 2 � 15
79
55
� ASSisted�Living� � � � � � � �. .
Gardens ofSt.Ger[rude Shakopee 2005 ��
40 Yes <1.0 100%
McKenna Crossing Prior Lzke 40
2007 41 Yes 2.5 67% 27
Keystone of Prior Lake Prior Lake 2D03 27 No
Su6tota� 5 �z 25% 7
108
74
Memory Care � � - . . .
Augustana Emerald Crest Shakope� 20D1 38 Yes �
McKenna Crossin 3 Z 100% 3$
g Frior L'ake 2007 18 Yes 2.5 67%
Keystone of Prior Lake Prior Lake 2003 1z
Subtotal ZO Np S,Z 25 � 5
38 55
1 Percent Competitive is estimated by the researcher based on the competitive property's distance from the
subect Site, location within/near the PMA, and its community orientation.
Source: GDCRE
/ A fourth competitive property is Keystone of Prior Lake. It is located over five miles from
the subject Site and is somewhat separated from the PMA by the lake Prior Lake. We
estimate that about one-quarter of its residents come from the PMA, and thus assign its
competitiveness as 25% when subtracting units from the demand calculations.
GDCRE, Inc.
Page 9
Septem6er 16, 2011
Initial Demand Assessment: Shakopee, MN
► There is a property in Jordan called Valleyview Assisted Living. However, this property is
not competitive with the subject development or market rate senior housing in general.
Valleyview Assisted Living specializes in residents with behavioral issues related to
developmental disabilities, TBI, or mental health conditions. Most residents are younger
than age 60 and most receive some sort of public assistance to pay for their housing and
services.
Competitive Senior Housing Properties
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GDCRE, Inc.
Page 10
September16,2D11
Initial Demand Assessment: Shakopee, MN
Planned and Prouosed Senior Housin� Developments
There is one senior housing development under construction in the PMA that will add to the
future competitive supply and also two planned developments. The development under
construction is Oak Terrace in Jordan and the planned developments are Keystone
Communities of Savage and an affordable adult rental development in Jordan. The following
are highlights on these pending developments.
OakTerrace5eniorHousin ofJordan
• Construction of Oak Terrace Senior Housing of Jordan began this spring and the building
is scheduled to open in February 2012. It is being developed by Montag Development,
who also has developed facilities in North Mankato and Gaylord. Oak Terrace Senior
Housing will have 51 units, including 11 memory care units and 40 units that can be
either independent or assisted living. Our understanding is that nine units are projected
to be independent and the remaining 31 units are projected to be assisted living. We
also understand that residency to lower-income seniors utilizing the Eiderly Waiver
program will be allowed.
Jordan is located on the very edge of the PMA, and we project that while most residents
will come from Jordan, at least one-quarter of the residents will be drawn from areas
outside the PMA south and west of Jordan. Hence, we consider only 75% of the
development's units as competitive when subtracting the demand calculations. Please
note that we project that upwards of 40% of its assisted living and memory care units
will be occupied by Elderly Waiver residents. We do not subtra�t these lower-income
residents from the demand calculations because they are not included in the income-
qualified base for market rate (or "private pay") housing.
Kevstone of Sava�e
• Keystone Communities, which has existing communities in Prior Lake, Eagan, Mankato,
and Faribault, is planning a fifth development in Savage. The proposed development
has received some City approvals but still needs site plan and final plat approval.
According to the City planner, the development would 6e a total of 116 units but the
service-level mix has not been determined yet.
The proposed development would be located near the Savage City Hall, at Dakota
Avenue and McColl Drive, or on the very edge of the PMA. A review of ZO10 Census data
shows that only one-quarter of Savage's senior population (65+) lives in this portion of
the community located in the PMA. Considering that the proposed Keystone
Communities deve(opment would draw from the entire community, as well as portions
of Burnsville and Prior Lake that are not located in the PMA, if built we consider that
only 25% of this development's units would be competitive with the subject
GDCRE, Inc.
Page il
September 16, 2p11
Initial Demand Assessment: Shakopee, MN
development. However, we do not yet subtract its units from our demand calculations
since the development is still in the planning stages, the service level mix has not been
revealed, and the timing is uncertain.
Scott Countv CDA
• The Scott County CDA has five rental apartments for age 55+ residents in Scott County,
and has a sixth under construction in Elko New Market and a seventh in the planning
stages in Jordan. The Jordan apartment would 6e located in the PMA and would contain
50 units in a mixed-use buifding with a pharmacy, clinic, and community library, This
proposed apartment would not offer any services and wouid appeal to younger, more
active seniors. Thus, there would be no competitive market overlap with the subject
development and its units are not considered in our demand calculations.
Senior Housing Demand Calculations
Tables 7 through 9 provide initial demand calculations of the num6er of market rate
independent, assisted living, and memory care units that can be supported on the subject site
in Shakopee in 2010 and 2015.
Independent Senior Livine
As shown in Ta61e 7, unmet demand for independent housing on a site in Shakopee is
calculated for 79 units in 2010 and growing to 99 units in 2015. The following points summarize
the demand methodology.
The target market for independent housing is senior households age 75+with incomes of
$30,000 or more plus households with incomes between $20,000 and $30,000 who would
qualify with the proceeds from a home sale. There would also be some limited demand from
seniors under age 75. These seniors are the "age/income-qualified base". A capture rate— or
"penetration rate" — is applied to the income-qualified base of younger and older seniors. The
penetration rates are based on the current penetration rates of independent senior housing in
the Twin Cities Metro Area.
The PMA is a fast growing area with a sizeahle older adult population. For these reasons, we
estimate that seniors currently residing outside the PMA will generate 30% of the total demand
for independent senior housing. This demand from outside the PMA increases total demand to
195 units in 2010 and 239 units in z015. This demand from outside the PMA will consist
primarily of parents of adult children living in the local area.
Subtracting the number of existing competitive units at McKenna Crossing and Keystone of
Prior Lake (minus a 5% vacan�y factor) from total demand results in excess demand of 143 units
in the PMA in 2010. In ZD15, the only pending competitive senior development offering
independent living to subtract from total demand, in addition to existing properties, is Oak
GDCRE, Inc.
Page 12
Septem6er 16, 2011
Initial Demand qssessment: Shakopee, MN
Terrace Senior Housing oflordan. Excess demand potential is calculated for 180 units in 2015.
We recognize that if the proposed Keystone of Savage is developed, it will capture a portion of
the 2015 demand as well.
No single site can capture all of the demand in a PMA. Based on Shakopee's portion of the PMA
senior base and the subject site's close proximity to St. Francis Regional Medical Center, we
estimate that the subject site in Shakopee can capture 55%of the excess demand potential.
This results in excess demand on the subject site for a6out SO independent units in 2010 and
100 units in 2015.
Table 7
Independent Senior Housing Demand Calculation
Primary Market Area
2D10 and 2015
2010 2015
A 65 to 74 Households in the PMA 1,691
B Percent income-qualified 2,310
84% 85%
C Potential penetration rate of independent living housing z.s� o
D Income-qualified 65-74 households in the PMA (A x B x C) z 5�
36 qg
E 75+ Households in the PMA 1,167
F Percent income-qualified 1,344
62% 63%
G Potentlal penetration rate of independent living housing 14% �
H Income-qualified 75+ households in the PMA (E x F x G) 14/
101 118
I Total demand for independent housing from the PMA (D + H) 136
167
1 Estimated percent of demand from outside the PMA 30% o.
K Total demand for independent living units in the PMA I i- J 30,0
( / � )) 195 239
L Competitive independent living supply
M Excess independent living demand (L - I() 5z 59
143 180
N Estimated percent of demand capturable by subject Site 55% o
O Independent living demand on the subject Site (M x N) 55/
79 99
* Competitive units minus a 5% vacancy factor
Source: GDCRE
GDCRE, Inc.
Page 13
Septemher 16, 2011
Initial Demand Assessment: Shakopee, MN
Assisted Livine
As shown in Ta61e 8, unmet assisted living demand on the subject site in Shakopee is calculated
for 30 units in ZO10, and increasing to 38 units in 2015. This demand is for market rate (or
"private pay") units and does not include additional demand from lower-income seniors who
could utilize the Elderly Waiver program to pay for services. The following points summarize
our demand methodology.
The primary market for assisted living housing in the PMA is seniors ages 75 and over needing
assistance with activities of daily living (ADLs). Based on data from the 1999 Health and Aging
Chartbook, conducted by the Centers for Disease Control and Prevention and the National
Center for Health Statistics, the percentage of seniors unable to perform or having difficulty
wiTh ADLs ranges from Z5.5% of seniors ages 75 to 79 to 33.6% of seniors ages 80 to 84 and
51.6% of seniors ages 85 and over. Applying these percentages to the senior population in the
PMA results in the total age-qualified population needing assistance with ADLs.
To afford market rents, these seniors will generally need incomes of at least $40,000 or have
assets available through the proceeds from the sale of their home. Overali, we calculate that
53% of the senior population in the PMA in �010 was income-qualified for market rate assisted
living housing.
We estimate that 75% of the age/income-qualified market needing assistance will be able to
remain in their homes by receiving home health care services or will live in other less service-
intensive senior housing. This percentage also takes into account that many seniors who are
not living alone will be able to remain in their existing homes with assistance from their
spouse/partner. The remaining 25%will need/choose assisted living housing.
We estimate that seniors currently residing outside the PMA will generate 30% of the demand
for assisted living senior housing — increasing total demand in the PMA to 1Z5 units in 2010 and
153 units in 2015. This demand will consist primarily of parents of adult children living in the
PMA.
The next step in calculating demand is to subtract �ompetitive supplyfrom total PMA demand.
A total of 74 competitive units were identified in Table 6. Subtracting these competitive units
(minus 15% that are estimated to be occupied by Elderly Waiver residents and a 5% vacancy
factor) from total demand results in the excess demand of 65 assisted living units in the PMA in
2010. The competitive supply is projected to increase by 13 units in 2015 with the opening of
Oak Terrace Senior Housing of Jordan. Total excess demand is calculated for 80 units in the
PMA in 2015.
Again, no single site can �apture all of the demand in a PMA. We estimate that the subject site
in Shakopee can capture 55%ofthe excess demand potential in the PMA. This results in excess
demand on the subject site for 36 market rate assisted living units in 2010 and 44 market rate
units in 2015.
GDCRE, Inc.
Page 14
September 16, 2011
Initial Demand Assessment: Shal<opee, MN
Table 8
Market Rate Assisted Living Demand Cafculation
Primary Market Area
2010 and 2015
zoio zois
A 75 to 79 Population in the PMA
B Percent needing ADL assistance 731 $94
25.5% 25.5%
C Estimated population needing A�L assistance (A x B)
186 Zzg
D 80 to 84 Population in the PMA
E PercentneedingA�Lassistance 547 581
33.6% 33.6%
F Estimated population needing ADL assistance (D x E)
184 195
� G o5+population in the PMA
H Percent needing ADL assistance 564 608
i Estimated population needing ADL assistance (6 x H) 51'6� 51.6%
291 314
J Tota1 75+population needing ADL assistance (C - F+ I)
661 737
K Percent of PMA population income-qualified
L Total income-qualified population needing ADL assistance (J x K) 53 D/ 58 �
350 qZg
M Potential penetration rate of assisted living housing
N Total demand for assisted living units (L x M) 25 � 25%
$$ 107
0 Estimated percent of demand from outside the PMA
P Total demand for assisted living units in the PMq N 1-0 30� 30%
( � ( �) 125 153
Q Competitive assisted living supply
R Excess assisted living demand {P - Q) 60 �3
65 gp
5 Estimated percent of demand capturable by subject Site o
T Assisted living demand on the suhject Site (R x S� 55 � 55%
36 qq
Source: GDCRE
Efderlv Waiver Assisted Livine Demand
The calcu�ation of excess demand for Elderly Waiver assisted living units is shown in Table 9.
The methodology to calculate excess demand for Elderly Waiver assisted living is the same as
for market rate assisted living, with two main exceptions being the income-qualified calculation
and the demand from outside the PMA. There is very little supply of Elderly Waiver units
available in the Twin Cities Metro Area and seniors will travel greater distances to find units.
Thus, we conservatively project that half of residents for Elderly Waiver units would be drawn
GDCRE, Inc.
Page 15
September 16, 2011
Initial Demand Assessment: Shal<opee, MN
from outside the PMA. The income-qualified 6ase is seniors with incomes below $24,264, or the
maximum income to qualify for a"Waiver Obligation."
Many oider seniors in the PMA have sufficient incomes to afFord market rate assisted living.
However, there is also a portion that will need to receive supplemental income in order to
afford market rate housing. While some of these seniors will receive income from the sales of
their homes, others will need to rely on other sources of public aid. The Elderly Waiver program
in Minnesota provides public funding for seniors who wish to receive `alternative" care that
allows them to stay in the community as opposed to receiving similar care at a nursing home.
The Elderly Waiver program funds home-and community-based services for people age 65 and
older who are eligible for Medical Assistance (age 65+ with an income for singles below $10,836
and assets below $3,000) and require the level of care provided in a nursing home, but choose
to reslde in the community. The Elderly Waiver cost for an individual cannot be greater than the
estimated nursing home cost for that same individual. Seniors that have incomes above
$10,836 can enroli for a Waiver Obligation and qualify with in�omes at or below $2,022 per
month ($24,264J. A person with a waiver obligation must pay a calculated dollar amount based
on monthly income and cost of assisted living/memory care services.
The following points summarize or demand methodology.
Like market rate, the primary market for Elderiy Waiver assisted living housing is seniors ages
75 and over needing assistance with activities of daily living (ADLs). Applying the percentages of
seniors unable to perform or having difficulty with ADLs to the senior population in the PMA
results in the total age-qualified population needing assistance with ADLs.
To income-qualify for the Elderly Waiver program, seniors need incomes below $24,264. We
calculate that roughly a6out 42% of the senior population in the PMA is income-qualified for
Elderly Waiver assisted living housing in 2010. We project that the per�entage will decrease
siightly by 2015 because senior incomes are likely to rise slightly faster than the income-
qualification for Medicaid Assistance.
For market rate assisted living housing in the Twin Cities Metro Area, a6out 75% of the
age/income-qualified market needing assistance with daily living are able to remain in their
homes by receiving home health care services or by living in other less service-intensive senior
housing. This percentage also takes into account that many seniors who are not living alone
tivill be able to remain in their existing homes with assistance from their spouse/partner. The
remaining 25% are choosing market rate assisted living housing. While it is reasonable that
Elderly Waiver assisted living could achieve a similar penetration rate, we conservatively use a
lower penetration rate of ZO%. This results in demand for 55 Etderly Waiver assisted living units
i� the PMA in 2010.
We estimate that seniors currently residing outside the SMA will generate half of the demand
for Elderly Waiver assisted living senior housing —increasing total demand in the PMA to 110
G�CRE, Inc.
Page 16
. . September 16, 2011
Initial Demand Assessment: Shakopee, MN
units in 2010. This percentage is higherthan the 30% used for market rate housing from outside
the PMA. This is due to the scarcity of Elderly Waiver assisted living housing and the greater
distances seniors will travel to find it.
Table 9
Elderly Waiver Assisted Living Demand Calculation
Primary Market Area
2010 and 2015
2010 2015
A 75 to 79 Popu�ation in the PMA 731 894
B Percent needingADL assistance 25.5% 25S%
C Estimated population needing ADL assistance (A x B) 186 ZZg
D SD to 84 Population in the PMA 547 581
E Percent needing ADL assistance 33.6% 33.6%
F Estimated population needing ADL assistance (D x E) 184 195
G 85+ population in the PMA 564 608
H PercentneedingADLassistance 51.6% 51.6%
I Estimated population needing ADL assistance (G x H} 291 314
J Tota175+populationneedingADLassistance(C+F+�) 661 �3�
K Perwnt of PMA population income-qualified 41J% 33.1%
L Total income-qualified population needing ADL assistance (J x I<) 276 244
M Potentiai penetration rate of assisted living housing Zp� Z�%
N Total demand for assisted living units (L x M) 55 . 49
O Estimated percent of demand from outside the SMA 50% 50%
P Total demand for assisted living units in the SMA (N /(1-O)) 110 gg
Q Competitive assisted living supply 11 20
R Excess assisted living demand (P - Q) 100 7g
5 Estimated percent of demand capturable by subject Site 55% 55%
T Assisted living demand on the subject Site (R x 5J 55 43
Source: G�CRE, Inc.
The next step in cafculating demand is to subtra�t competitive supply from total PMA demand.
The competitive assisted living properties allow existing market rate residents who exhaust
GDCRE, Inc.
Page 17
Septemher 16, 20ll
Initial Demand Assessment: Shakopee, MN
their resources to utilize the Elderiy Waiver program, but they typically limit this to about 10%
to 15% of residents. Estimating that 15% of the 74 competitive assisted living units identified in
Table 6 are occupied by Elderly Waiver residents, we subtract 11 units, resulting in excess
demand for 100 Elderly Waiver units in 2010, declining to 78 units in 2015 (after subtracting
additional competitive units at OakTerrace Senior Housing of Jordan).
No single site can capture all of the demand in a PMA. We estimate that the subject site in
Shakopee can capture 55% of the excess demand potential in the PMA. This results in excess
demand on the subject site in Shakopee for 55 Elderly Waiver assisted living units in 2010 and
43 in 2015.
Memorv Care
Table 10 calculates unmet memory care demand on the subject site in Shakopee for 15 units in
2010 and growing to 29 units in 2015. Like assisted living, this demand is tor market rate units
and does not include additional demand from lower-income seniors who could utilize the
Elderly Waiver program to pay for services. The following points summarize our demand
methodology.
Demand is �alculated by estimating the PMA age 65+ population in 2010 and 2015 and
multiplying hy the incidence rate of Alzheimer's/dementia (based on data from the Alzheimer's
Association: Aizheimer's Disease Facts & Figures — 2007). The majority of seniors with
dementia will still be able to live independently with the assistance of a caregiver while those in
the latter stages of dementia will require intensive medical care that would only be available in
skilled nursing facilities. An estimated one-third of peopie with memory impairments
constitute the market for memory care housing.
Due to the high cost of inemory care housing, the income needed to afford market rate
memory care is much higher than for independent and assisted living housing. The income-
qualified base for memory care housing is defined as 85% of households with incomes of at
least $60,000 plus 25% of homeowners with incomes below $60,000.
An estimated 30% of demand for memory care housing would come from seniors residing
outside the PMA. This additional demand brings total demand in the PMA to 80 units in 2010
and 109 units in 2015.
The competitive supply is then subtracted from total demand to reveal unmet demand. A total
of 55 competitive units were identified at Augustana Emerald Crest, McKenna Crossing, and
Keystone of Prior Lake. Subtracting these �ompetitive units (minus a 5% vacancy factor} results
in the excess demand for 27 memory care units in 2010. The competitive supply will rise 6y
2015 as Oak Terrace Senior Housing of Jordan is scheduled to come on fine next year.
Subtracting existing and pending competitive units from total demand results in excess demand
for 52 units in 2015.
GDCRE, Inc.
Page 18
September 16, 2011
Initial Demand Assessment: Shakopee, MN
No single Site can capture all of the demand in a PMA. We estimate that the subject site in
Shakopee can capture 55%of the ex�ess demand potential in the PMA. This results in excess
demand on the subject site for 15 market rate memory care units in 2010 and 29 units in 2015.
Table 10
Market Rate Memory Care Housing Demand Calculation
Primary Market Area
2010 and 2015
2010 2015
A 65 to 75 Population 2,805 3,789
B �ementia incidence rate Z Q� z �%
C Estimated population with Dementia (A x B) 56 �
D 75 to 84 Population 1,278 1,475
E Dementia incidence rate 19 �� 19 ���
F Estimated population with �ementia (D x E) 243 280
G 85+ Population 564 608
H Dementia incidence rate 42.0% 42.D%
I Estimated population with Dementia (G x H) 237 255
J Total population with Dementia �C+ F+I) � 536 611
K Percent of population income-qualiiied 35� 4Z%
L Total income-qualified population needing assistance (J x K) 186 255
M Potential penetration rate of specialized memory care housing 30% 30%
N Total demand for memory care units (L x M) 56 �
0 Estimated percent of demand from outside the PMA 3�� 3o�
P Total demand for memory care units in the PMA (N /(1- O)) 80 109
Q Competitive memory �are supply 52 57
R Excess memory care demand (P - q) Z� Sz
5 Percent of demand capturable by su6ject Site 55% 55%
T Memory care demand on the subject Site (R x S) 15 Z9
Source: GDCRE
GDCRE, Inc.
Page 19
September16,2011
Initial Gemand Assessment Shakopee, MN
demand Summary
Initial demand for market rate senior housing on the subje�t site in Shakopee is summarized in
Ta61e 11. There is estimated unmet demand for over 300 total marl<et rate senior housing units
in the PMA through 2015. The estimated portion of demand that can be captured 6y the
subject site in 2015 is 55%, which equates to 99 independent units, 44 assisted living units, and
29 memory care units, for a total of 17Z units. If residency is allowed to assisted living residents
utilizing the Elderly Waiver program, we calculate that assisted living demand would increase
by another 43 units on the subject site in Shakopee.
Ta61e 11
Summary of Initial Demand Calculations for Market Rate Senior Housing
Primary Market Area
2010 and 2015
Total
Income- Total Unmet Demand
qualified PMA Competitive PMA on Subject
Market Base Demand Supply Demand Site
2010
Independent Living 2,141 195 52 143
Assisted Living 350 79
125 60 65 36
Memory Care 186 80 5 27
Total 15
164 235 129
2015
Independent Living 2,814 239 59 180
99
Assisted Living 428 153 73 80 44
Memory Care 255 109 57 52 Zg
Total
189 312 172
Source: GDCRE
We recognize that these preliminary estimates of unmet demand may be conservative since the
penetration rates used in the demand calculations are based on current figures, despite the fact
that penetration rates have been steadily climbin; since the 1980s when the modern senior
housing industry essentially began in the Twin Cities. For example, market rate senior housing
units as a percentage of the 65+ senior population in the Twin Cities increased from 1.2% in
1980 to 7.7% in 1990, 11.5% in Z000, and 17.5% in 2010. Memory care housing in particular is
in its infancy—of the roughly 2,50� units in the Twin Cities, 65% have been added since 2000.
Overall, units at new memory care properties in the Twin Cities have absorbed quickly and
GDCRE, Inc.
Page 20
September16,2011
Initial Demand Assessmznt Shakopee, MN
vacancy rates remain low, indicating that the penetration rate for memory care will likely trend
higher.
As for assisted living, while demand on the subject site was calculated for 44 units in 2015, most
of the residents who move into the proposed building as independent will eventually transition
into assisted living services, including some within the first year. Thus, the ratio of independent
to assisted living residents in the proposed building will likely shift toward more assisted living
within a few years after opening, and exceed the calculated demand for 44 units. Also, if
residen�y is allowed to lower-income households utilizing the Elderly Waiver program in the
assisted living and memory care components, then total units supportable would increase.
As noted in the introduction to this assessment, the purpose of this initial assessment is to
broadly assess the depth of demand for senior housing in the local area to determine if
potential exists to support a new development. Thus, the findings are preliminary and should
be viewed in ihat light. A full market feasibility study would more closely examine factors such
as the desirability of the subject site and the performance of competitive buildings, both of
which may impact demand.
GDCRE, InC. Page21
September 16, Z011
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KARE �.COCrI �t�
nu�vow I sr. Pw�.
E d e n P ra i ri e n u rs i n 65 and older will spend time in one of the
g nation's 16,000 nursing homes this year
hOme name„1 and for those 85 and older, the chances
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_.----_.__- Written by
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�FILED Reserved. This material may not be
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�ocal News redistributed. )
EDEN PRAIRIE, Minn. - An Eden Prairie
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