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Home My WebLink About2011-05-03 Board of Selectmen HandoutH,9 ado ,--r James E. Bonazoli, Chairman Camille W. Anthony, Vice Chairman Town of Reading Richard W. Schubert, Secretary Stephen A. Goldy 16 Lowell Street Ben Tafoya Reading, MA 01867 BOARD OF SELECTMEN (781) 942 -9043 FAX: (781) 942 -9071 Website: www.ci.reading.ma.us NOTICE OF JOINT MEETING BOARD OF SELECTMEN and READING HOUSING AUTHORITY DATE: May 3, 2011 CALL TO ORDER: 8:00 p.m. PLACE: Selectmen's Meeting Room 16 Lowell Street, Reading, Massachusetts 1) Reports and Comments a. Selectmen's Liaison Reports and Comments -gyp b. Public Comment C. Town Manager's /Assistant Town Manager's Report 2) Open Session for topics not reasonably anticipated M 48 hours in advance of the meeting 3) Discussion /Action Items -0 a. Request for Allocation from the Affordable 8:00 Housing Trust Fund 4) Executive Session .. a. Labor Negotiations N O -gyp �C:)ti M C7 - - -0 3 rC Duo cn :X .. Cn N ' ch Ck/ 1 . rage i or i Hechenbleikner, Peter From: Hechenbleikner, Peter Sent: Monday, May 02, 2011 1:59 PM To: Zambouras, George Subject: RE: Safe Routes Tell them to go ahead Peter I. Hechenbleikner Town Manager Town of Reading 16 Lowell Street Reading MA 01867 Please note new Town Hall Hours effective June 7, 2010: Monday, Wednesday and Thursday: 7:30 a.m - 5:30 p.m. Tuesday: 7:30 a.m. - 7:00 p.m. Friday: CLOSED phone: 781- 942 -9043 fax 781 -942 -9071 web www,re.ad. r.gma.gov email town manager@ci.reading.ma.us Please let us know how we are doing - fill out our brief customer service survey at h...V: / /readingma- survey.virtualtownhall.net/survev/sid/887434dd9e2l3Ob7/ From: Zambouras, George Sent: Monday, May 02, 2011 1:33 PM To: Hechenbleikner, Peter Subject: Safe Routes Peter, The states consultant just informed me that with MassDOT's ROW section agreeing to a 3 foot minimum easement area (they normally suggest 5 feet minimum) the project can be redesigned keeping the required re- grading within the proposed easement area. Based on this change the project can be re- designed allowing for a 2 foot grass strip without any necessary vote change in the easements we just approved at Town Meeting. While it doesn't widen the roadway as originally requested by the Selectman, it does address the resident's petition without affecting the easements. The state consultant is ready to draft the revision unless they hear from us today. George I Zambouras, P.E. Town Engineer 781 - 942 -6683 781- 942- 5441(fax) Email: gzambouras @ci.reading.ma.us 5/2/2011 v rage 1 of 1 Hechenbleikner, Peter From: Zambouras, George Sent: Monday, May 02, 2011 11:33 AM To: Hechenbleikner, Peter Subject: Safe Routes to Schools Attachments: Washington St Grass Strip Plan 042911.pdf; Washington Grass Strip.pdf Peter, Below is the initial response I have received form MassDOT. Buried in the paragraph the Project Manager is requesting if he can have their consultant proceed with the tree lawn change in developing the 100% plans. They have provided a marked up easement plan indicating the worst case easement scenario and a typical sidewalk cross section based on the tree lawn revision. He has requested a response from District staff regarding reduced sidewalk widths. In my opinion 3 feet is too narrow I would prefer a reduction to 4 feet. I assume we will need a discussion with the BOS before we answer him in the affirmative? George - TEC has indicated if we add a 2' grass strip at the request of the Washington Street residents, the sidewalk shifts 2' west to the existing right -of -way line, the limit of grading shifts 2' (worst case) and the Temporary Easements would require an adjustment to maintain 5' from the easement to the limit of grading. The attached sketch shows the new back of sidewalk at the right -of -way line and the new "approximate" limit of grading. We would simply offset the limit of grading 2' but as we look at this in more detail we could possibly tie back quicker and maintain the original limit in some areas. The sketch shows approximately 3' from the limit of grading to the temporary easement line which should be sufficient for the typical loam and seed work the contractor will need to perform. If we can maintain approximately 3' from the limit of grading to the easement line, would this be acceptable to MassDOT for construction and ROW purposes? If so , TEC can proceed with revising the plans to include a 2' grass strip and the 100% Submission that is scheduled for next week. I have requested our District office and ROW Section to review this request and see if reducing the temp easement depth from 5 to 3 feet would be acceptable to our construction and ROW folks.. George J. Zambouras, P.E. Town Engineer 781- 942 -6683 781- 942- 5441(fax) Email: gzambouras @ci.reading.ma.us 5/2/2011 6 t, DEVAL L. PATRICK, GOVERNOR TIMOTHY P. MURRAY, LT. GOVERNOR a ' JEFFREY B. MULLAN, SECRETARY $ CEO ? LUISA PAIEWONSKY, ADMINISTRATOR c April 27, 2011 James Bonazoli, Chairman Board of Selectmen Town of Reading 16 Lowell Street Reading, MA. 01867 Moving Massachusetts Forward OT :a f SUBJECT: Reading — Parker Middle School: Safe Routes to School Project Project File No. 606222 Dear Mr. Bonazoli: n Highway This is in response to your February 15, 2011 letter requesting that the proposed sidewalk on Washington Street be moved westward to the roadway right of way line and the sidewalk be constructed as narrow as possible to provide minor widening of Washington Street. MassDOT does not believe reducing the proposed 5.5 foot wide sidewalk on Washington Street is appropriate, particularly since this is a school walking route and the main purpose of this project is to facilitate children walking safely to school. MassDOT's standard sidewalk width is 5.5 feet which includes the width of the curbing. This sidewalk width allows two -way pedestrian travel including ADA accessibility, the ability of pedestrians to walk side -by -side, provides space for snow that is plowed from streets onto abutting sidewalks, and allows room to install street signage along the edge of the sidewalk. Washington Street has an existing and proposed pavement width of 20 feet, and is approximately 500 feet in length. The proposed Washington Street curb line and resulting street and sidewalk widths preserves the 14" tree on the Washington Street side of 142 Woburn Street and results in no loss of trees as requested by the Town and residents. Moving the sidewalk further west to the roadway layout line and reducing the sidewalk width along that portion of Washington Street south of the 14" tree would result in only a 2 foot widening of Washington for a distance of only 360 feet. The additional 2 foot widening and resulting 22 foot width of Washington Street would not significantly improve traffic operations and safety, and would not be wide enough to allow on- street parking on both sides of the street. MassDOT is eager to move forward with the proposed design as presented at the Public Hearing. If you have any questions to our response or would like to discuss this matter further, please contact Shawn Holland, Project Manager, at (617) 973 -7242. Sincerely, Marie J. Rose, P.E. Director of Project Management MJR/sh Cc: Patricia Leavenworth, District 4 Highway Director Peter Hechenbleikner, Town Manager George Zambouras, Town Engineer Shawn Holland, Project Manager Kevin Dandrade and Mike] Meyers -TEC Massachusetts Department of Transportation, Highway Division • www.mass.gov /massdot TEN PARK PLAZA • BOSTON, MA 02116-3969 • PHONE: 617.973.7000 • FAx: 617.973.6031 • TDD: 617.973.7306 READING' HIGHWAY GUARD DETAILS TRAFFIC SIGNAL CONDUIT WATER SUPPLY ALTERATIONS DRAINAGE DETAILS PARKER MIDDLE SCHOOL NONE NONE: NONE Nme � rwuRLl vRE rul aoe?a CONSTRUCTION PLANS c<.. .... w w {PNOV »Y' WOBURN STREET a WA, (L a 61E;"� yy L" - -T �Ir y� I _. 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(Trr) �I PELPONnaM� TEUPO'MR !wO' _ . e for Wcur IAN. WARNING PANELS. RAMP SOPES NOT TO EXCEED $T YP.4Y 7,5x MEET EXISTING , +I 4Awr•uT fASETRTIT �z. '' ' SIDFWAIX AND RETAIN .. _ i`xtP'S'41 ADS F' `CRIG 2EWALK FXJSTINC CURBING, 4. WCR AND DRIVEWAY _ _ ::•. *' T, .�, .. i!V ..., IDENTIFICATION NUMBERS ARE </�+' - -!' W ,i •: PROP 1FW(AAPY NR 1RIT,'GN1E'M1Y� SHOWN ON GRADING t TIE r NiOP SAWCJI �- tt �' \.. .. Yf�IP fM111C WAY r' - PROP CORE WNX I IIOX LID: v 4 i L- PLANS (SHEETS > k 8). 5. TRIMMING OF SHRUBS MAY BE or REWIRED OETWIEN STA. 25 +00 - '25 +10 TO CONSTRUCT WGR'S. New Sk-k,* r I U [LIB W� _... .. FIX ._ STREET ? BWNp� L PNOP Oi edlW PUXJ flL R 9 IT +TOSr x �v T —I. N R� Pf � +. (Trr) �I PELPONnaM� TEUPO'MR !wO' _ . e for Wcur IAN. V' , y 4 Nkktt � APRRU% LOG . ... � - - RET UP" $T YP.4Y -.- -- _ - - -.+-.. —._ , +I 4Awr•uT fASETRTIT �z. '' ' IBTTEIIST WRB CN9j QT xET UP PROV SAWLT71 !C+1RR t Y WIT 4 INI ` .'� i£Y EtlOtRMI'T... .. _ i`xtP'S'41 ADS F' `CRIG 2EWALK 04F { ..�PdOVnGXNV PwAP S ,GEM _ HCP RROP G' G]I: . [ CUP9 ITTPF MlI`, RCT TIP ('LINO 90PWNN M]I fMRTPW'T Y SAgRJi -. CONC 90EWA41f" RFEawWiR4er wt NG) J) MDI..f %ST. dJlk Sw RENM W - .. ..•PPOP 5' CEY_ONO.Y[WwAEX Y_'. ;PIIOF> Ai. WALK, l.'.. ... _ _ ::•. *' T, .�, .. i!V ..., , yJ (T)PE W) .' �1 \'Hf!� </�+' - -!' W ,i •: PROP 1FW(AAPY NR 1RIT,'GN1E'M1Y� r NiOP SAWCJI �- tt �' \.. .. Yf�IP fM111C WAY r' - PROP CORE WNX I IIOX LID: v 4 i L- •.. .^ ��g. � 'AEt fIP91E5 � � (Lxtl II .. nSYMLYI -.�' +...J 3AWO:T '.. .. j D..' .... 1RPF PROs) 9UPFNE•-' i '. 1 INET( . x i 'WOP SAWCU LV f F ... HMA ONYFWAY SURFACE \ iEN(E (iW t VRIW 6AWCU1' PROP Nm ffXlf. {..... WA pYFYEWAV 91JNf ALti .. 1- I PROP TEWPoRMY F SENFNT ~` -WETIJ �zqL�.�[ y,N4 T A HNI £I yypjT '/ `. 1 �IK `'3 .. . .. VAM:NS REM k RElAP IFAR'OIIANY �.. 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' PxOP h gtAPY EA ..NT '. £ASEIeNT IT EKl wA/ M�' 4I .H'•S41 12 T�52 :i p ip E 3'el1b29804 ,{ r_ WORK STA 25 +70 i 7674 _ 77:9059 20 ` yd SCALE iN FEET .. •?' ::, i or 3 0 X W 0 PUBLIC - ACCEPTED 1858 & 1871 6' WIDE 20' t EXISTING PAVEMENT CONST 10.00' 0 V) X w 2' GRASS STRIP 1, LEVEL ** 5' A CEMENT MENT V) CONCRETE SIDEWALK VARIES w CL m w PROP GRANITE 6 CURB (TYPE VB) WITH 6" REVEAL SAWCUT - - 'TYPE MEET 1.5�* ----- - - - - -- - -_� __ EXIST... --------------- - - -- EXIST EDGE OF PAVEMENT PROP 4" WASHINGTON STREET LOAM & SEED ORDINARY BORROW SCALE: 1"=4' STA. 20 +25 TO 25 +10 f * = TOLERANCE FOR CONSTRUCTION t0.5% ** = 1' LEVEL AREA TO BE ELIMINATED AT RESIDENTIAL WALKWAYS ragvivii Hechenbleikner, Peter From: Arthur Klipfel [aklipfel @oakdev.com] Sent: Saturday, April 30, 2011 3:10 PM To: Hechenbleikner, Peter Cc: Paul Ognibene; Gwendolen Noyes Subject: Atlantic Hi Peter - I'm going to be out of Town during the final negotiations related to the $400,000 contribution to the affordable aspects of our project; however, I wanted you to be aware of my thoughts on the matter. First, I know it has been mentioned that we might have gotten this sum from a State subsidy. I want you to know that we made a very serious effort in this direction including hiring a consultant, making a preliminary application, and meeting on several occasions with State Officials. We were told that we would require at least two years from application to expect any success, and in the end there could be no assurance of a positive outcome. We faced the following reality. Arnold Rubin was unwilling to extend our P &S sufficiently to allow us to move forward in this extended time frame; and in any case, our investors were unwilling to fund extensions of this type, or to purchase the land, either with no assurance of success on a State level. But as you know they did back us in purchasing the land based on the Town's willingness to provide the minimum amount required to make the project financially viable - $400,000. We were told that this commitment could not be formalized in writing in time for us to meet our obligations under terms of the P &S agreement with Arnold Rubin. However, as you know, our investors moved forward in good faith, again with the understanding that the $400,000 was assured. This project cannot proceed without this commitment from the Town. We now have all required financing in place based on this subsidy being in place. I understand from Paul Ognibene that you have been very helpful in moving the approval process forward, which I greatly appreciate. This can be a great project and a great example of the success of the 40R process. If there is anything I can add to a successful conclusion let me know - I will be connected by email and hopefully cell (617- 921 -9021) Thanks, Art Klipfel (Oaktree) 5/2/2011 05/03/2011 10:01 FAX 6176951314 M IM 001 /001 Questions regarding Oaktree Our equity represents 7.5% of total equity invested. Why do we not get ovinership rights proportional, in some rough sense? What: is iro olved in MHP financing offer? You state better terms with less principal. Why not now? How much :.ess principle? What: security does'the town get if not equity interest? What: protection if project goes under at some point in the future? What: possibility to recover funds if project is r.lore successful? If project converts to condominiums? This is c::�itical as that action ma:kcs the project marginally less attractive to the town. J Affordable Housing Allocation Plan April 26, 2011 Pursuant to Article 24 of the 2011 .Annual Town Meeting, an Affordable Housing Trust Fund Allocation Plan for the Fiscal Year 2012 in accordance with the provisions of Chapter 140 of the Acts of 2001 is as follows: Available Balance — Unrestricted Funds: $458,017.68 Available Balance — Restricted Funds $ 0 a. Unrestricted funds shall be used for the following purposes: 90% for constructing affordable housing; including loan and grant programs 9% for maintaining and improving affordability of existing housing stock 1 % for administration of the Affordable Housing Trust Fund b. Restricted funds received into the AHTF for designated purposes from grants, gifts, donations, or the like, shall be allocated at 100% towards the stated purposes. 2 6 Session Laws: CHAPTER. 140 of the Acts of 2001 Page 1 of 1 Print Act-' 2001 CHAPTER 140 AN ACT AUTHORIZING THE TOWN OF READING TO ESTABLISH AN AFFORDABLE HOUSING TRUST FUND. (see House, No 4235) Approved by the Acting Governor, November 21, 2001 Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows: The town of Reading may establish a separate fund to be known as the Affordable Housing Trust Fund for the purpose of creating or preserving affordable housing by the town of Reading, the Reading Housing Authority or a housing trust, community development corporation or similar entity created under the laws of the commonwealth for the purpose of creating, maintaining or operating affordable housing. All expenditures from the fund shall be used for low or moderate income housing as defined in section 20 of chapter 40B of the General Laws. The funds may specifically be used to: (a) purchase and improve land; (b) purchase dwelling units; (c) develop new or rehabilitate existing dwelling units for purchase or rental by low and moderate income housing purchasers or tenants; and (d) preserve existing subsidized housing inventory as maintained by the department of housing and community development pursuant to said chapter 406. Expenditures shall follow an allocation plan submitted by the board of selectmen annually to town meeting at the annual town meeting, and approved by town meeting. The allocation plan may be amended by town meeting at any special town meeting. The board of selectmen may request the advice of the Reading Housing Authority, the community planning and development commission, and others in developing any allocation plan. The allocation plan shall be a general plan of how funds from the fund will be expended over the next fiscal year, and a report on how funds were spent during the previous fiscal year. All expenditures from the fund, including funds for capital purchases of land or buildings, shall be in accordance with the allocation plan and approved by a majority vote of the full combined memberships of the board of selectmen and the Reading Housing Authority. The fund may also be the repository of any allocation for affordable housing purposes made under chapter 446 of the General Laws, if the town votes to accept sections 3 to 7, Inclusive of said chapter 446. The town treasurer- shall be the custodian of the fund and shall invest the funds in the manner authorized by sections 55, 55A and 55B of chapter 44 of the General Laws. Any income or proceeds received from the investment of funds shall be credited to and become part of the fund. Approved November 21, 2001. http:// www. nialegislature.e ov/La"!slSessionLa\,s/`Acts'2001 /Chapter] 40iPrint 2/2/2011 3 no Memo To: Peter Hechenbleikner cc: jean Delios From: Paul M. Ognibene Date: March 30, 2011 Re: $400,000 Housing Trust Grant Peter: Despite numerous delays to the closing which was previously anticipated to be in December, we finally secured debt financing last Friday and are now ready to formalize our grant request. As a follow -up to our phone conversation from earlier today, I've prepared this memo to address point -by -point the various questions raised by Housing Partners, Inc. 1. What is the project? Our development plans call for demolishing the former Atlantic Supermarket and redeveloping the site into a mixed -use development consisting of 53 residential units, 20,000 square feet of retail space, and a 75 -space underground parking garage. Z. What are the sources of funds to develop the project. The current project pro -forma budget estimates $18.3 million in total development cost (please see attached, `Budget Overview "), up from the $18.0 million estimated in October 2010. The project will be capitalized as follows: $ 4.9 million 27 % Equity (Developer / Partners) $13.0 million 71 % Debt (Enterprise Bank) $ 0.4 million 2 % Grant (Town of Reading) $18.3 million As no additional equity or debt is available to us, the Town's contribution is an essential component to the project's viability. Without it, the project would be unable to proceed. J. Is the residential component rental, condominium, or both? When we initially put the parcel under agreement, we had intended the project to be for -sale condominiums. Subsequently, the market shifted dramatically in favor of rental units. "Today, condominiums are gradually gaining momentum again. We've designed the building with premium finishes with the intention of selling the units as condominiums but will reevaluate where the market is in a year from now. From a pro - forma perspective, we've underwritten the units from both a rental and for -sale condominium perspective. 4 �� 4. What is the breakout of building costs and how were they derived. Hard construction costs are estimated to total $12.9 million and were derived by our general contractor / estimating department. Specifically, costs are estimated as follows: Site $ 0.90 million (actual GC estimate) Parking / Foundation $ 2.25 million (estimated @ $30,000 /space) Retail $ 2.00 million (estimated @ $100 pso Residential $ 7.75 million (approx $120 psf— modular construction) Total $12.90 million 9. What comes under the category of neighborhood improvements? We've allocated $50,000 toward enhancements to the adjacent municipal parking lot. These expenses are now included in the GC budget. 6. What is the K1VO fee? The operating entity, Oak -RJF 30 Haven LLC, has signed a development agreement with KNO LLC. In exchange for the fee, KNO will provide various development services. 7. What are the debt financing terms? We have a $13.0 million construction loan facility with a 24 -month maturity; interest only payments; prime plus 1.00% with a 5.00% floor. We have the option to extend into permanent financing for an additional five years; principal and interest payments based on a 25 -year amortization; FHLB rate plus 2.75% with a 5.75% floor. We have a written commitment from the Massachusetts Housing Partnership (MHP) to provide alternative permanent financing (less principal / better amortization. and lower interest rate). Completion of the project and repayment of all debt has been guaranteed by the three KNO partners, Arthur Klipfel, Gwen Noyes, and Paul Ognibene. Regarding finance- related charges, the bank's commitment fee was $130,000 and commercial mortgage brokerage fees totaled approximately $200,000. 8. What is the Operating Budget. Please see attached pro -forma operating budget from which the bank performed its underwriting. 9. How valid are the rents? Pro -forma rents are based on the bank's appraisal and our own assessment. We believe that the forecasted rents are representative of the market and have backed our convictions by investing nearly $5 million into the project. 10. Will tenants pay their oum utilities? Yes, both market -rate and affordable tenants will pay their own electricity and gas bills. Water will be provided by the Landlord. s (Ilk� 04- 26 -'11 08:37 FROM- Oaktree Development 16174916004 OAK -RJF 30 Haven U.0 Budget Overview T -012 P0003/0004 F -067 'Confidential` ReAding Proforma.03302011.T6wn Sheetl 3/31/20x3 Page 1 W r k3 Roedin0 Budget I IIMI`1ti1 Acqu1800A Broker oA0 Closing Cods Mtat 7,000.00 Legal 12,000.00 Property ,08.000,00 Trust funds 0.00 Aeeulstion - Other 0.00 Total Acqulanon� $ 2,647,000.00 Flmnca Appralsal 10400.00 Sank Coauntlmenl Fsa 130.000.00 Bank lnepteuoA$ 74.000.00 Total Intore91 Expense 663500,00 MHP 7.2,000.00 UNP flolmbu,aamanl •22,000.00 MortgaOo hroker Dom 09400.00 Equity 119,000.00 Mortgage broker - Oth& 0.00 Iola) Motlgago broker 210,00040 Finance • Mar 0.00 Iota) Flnanen S 1,033,500.00 Hard Coll • TOM HaM Cast S 12,872,417,00 Soft Casio Accounting 45,00040 TetWAroe11eclure +MEP(Grtwnllno) SM6,000.00 CIO EnOlnoc4n9 24400,00 Contingency ., �•' � 13"COMMI Fen 609.000.00 Enviropm96191 Enfl111"Thio 9.900.00 Go010chrocal E40111"dou 27.200.00 Inapaeling Ettglnee,(Intl IA GC) 0.00 Insurance (owneh) "0M I.ondacape 064104 amour Lem UP Costs 116,000.00 Total Legal 59,90040 Matkeung 50.000.00 t7lhor consuflants 10,000.00 Pro- Copgfueflan Uflflllm 200040 Prop" Tax 30.20540 $yNoy 19.000.00 Traffic E0101A90660 4.100.00 Sdt Casis • poisr 0.00 Taal Inh Costs $ 1,752,395.00 Total Expense S. 18,305,312.00 'Confidential` ReAding Proforma.03302011.T6wn Sheetl 3/31/20x3 Page 1 W r k3 04- 26 -'11 08:37 FROM- Oaktree Development 16174916004 30 Haven Street Readiog, Massachusetts 56 Units c& Retail Proforma_Operating Statement T -012 P0004/0004 F -067 Gross Residential Income: /Unit Market Residential Income: $1,024,800 $18,300 Affordable Residential Income: $158,088 $2,823 Market Residential Vacancy: S.pU %, ($51.240) (,$91 i) Affordable Residential Vacancy: 2.50% ($3.952) (S71) Total Rental Income: $1,127,096 $20,137 Parking Income: $28,500 $509 Effective Gross Income: $1,156,196 $20,646 Less: Operating Expenses, Management Fee,; 2.50%, $28,905 $516 Administration: $5,288 $94 Repairs cis Maintenance: $34,240 $611 Utilities: $41,440 $740 Water & Sewer: $19,600 $350 Real Estate Taxes: $170,000 $3,036 Insurance: $31,420 $561 Janitorial: $23,100 $413 Landscaping: $5,650 $101 Reserve: $11,200 $200 $370,843 $6,622 Residential Net Operating income: $785,353 $14,024 /Sr Retail Income: $412,000 $20.60 Retail Vacancy: 10.00'%, ($•11?Utl) ($2.06) Retail Net Operating Income: $370,800 $18.54 7 0) HOUSING PARTNERS, INC. 142 Galen Street - Suite B • Watertown, MA 02472 • (617) 924 -7240 ' Fax (617) 924 -7168 Marvin M. Siflinger, Chairman Eleanor G. White, President Charles S. Fisenbcrg, I?isenberg Consulting: Affiliate To: Peter Hechenbleikner and Jean Delios www.hou,,ingpartncrsinc.com m,;ifling@liou,.;ingpartner,;inc.com cwhitc @housing�artncrsinc.com ceisenbergQ housingpartnersine.eom Town of Reading From: Charles Eisenberg, Eleanor White and Marvin Siflinger Housing Partners, Inc. Date: April 11, 2011 Subject: READING HOUSING TRUST GRANT Analysis Prepared by Housing Partners, Inc. INTRODUCTION For many years, the Town of Reading has been attempting to implement strategies which would improve the downtown business district. This culminated in the recent establishment of a Smart Growth Overlay District under the provisions of Chapter 40R. While that process was underway, Oaktree Development, LLC of Cambridge, MA optioned the Atlantic Supermarket site at 30 Haven Street in Reading and began the redevelopment process. Oaktree has now requested that the Town provide a $400,000 grant to assist in the redevelopment of this site. It is their contention that without this grant the project is not feasible. The Town, in turn, has asked Housing Partners, Inc. (HPI) to determine if this request is justified. As will become clear, HPI believes that the pro forma assumptions and projections are reasonable, that the developer has proposed a reasonable amount of profit, and that this project represents the type of development envisioned by the Town when it passed the Chapter 40R District. However, we also feel that the Town should benefit if this project is successfully developed and that any financial contribution should be repaid, if possible, to be available to spur other development projects in the future. PROJECT DESCRIPTION 30 Haven Street is a .78 acre parcel of land at the southern end of Haven St., within a block of the Reading MBTA commuter rail station. It currently houses the ,s 8 Review of Oaktree Development Pro Forma for Reading Site By Housing Partners, Inc. April, 2011 Page 2 vacant Atlantic Supermarket. The parking lot located in the rear is owned by the Town of Reading. Oaktree proposes to demolish the existing structure and build a new, four -story building. An underground parking garage will contain 75 spaces. The first floor will have 20,000 square feet. of retail space as well as the residential entrance and common space. Above the first floor will be three residential floors containing almost 60,000 square feet. While the October, 2010 appraisal anticipated fifty -six one and two bedroom rental units, the current plan 'may be developed either as a rental property or as condominiums. The financial projections provided to HPI by Oaktree were for a rental property. In accordance with the provisions of the Chapter 40R Smart Growth District zoning, eleven of these units (20 %) will be affordable to moderate income families. Moderate income is defined as households earning less than 80% of the Boston SMA (Area Median Income as annually established by the U. S. Department of Housing and Urban Development). The building will be steel -frame construction and will be serviced by several elevators. Finishes will be of a high enough quality to accommodate a plan to sell the units as condominiums either upon completion or at some future date. According to the Bonz appraisal report, the 32 one - bedroom units are planned to be 820 square feet while 24 two- bedroom units will be 1,385 square feet. According to a March 30, 2011 memo from the developers to the Town Manager, they will also allocate $50,000 towards the enhancement of the adjacent municipal parking lot. HOUSING PARTNERS, INC. METHODOLOGY. The following report and its conclusions are based upon the information made available to us by the Town and the Developer. This consists primarily of an appraisal prepared in October, 2010 by Bonz and Company, Inc. as well as information provided by Oaktree in a memorandum (which included a set of financial projections) to the Town Manager dated March 30, 2011. HPI has reviewed the appraisal and the memorandum; and has analyzed both to determine their accuracy. Due to the extremely short timeframe available for this analysis, we have not done any project- specific independent research to verify our conclusions, but have based them solely on prior knowledge of the area and our general knowledge and experience. In order to determine whether or not the feasibility of this development is dependent upon the $400,000_ grant, we first evaluated the assumptions and 0 9 Review of Oaktree Development Pro Forma for Reading Site By Housing Partners, Inc. April, 2011 Page 3 conclusions in four general categories: market; cost, financing and profitability. We then did some additional financial analysis to verify the projections provided to us, test their impact on feasibility over time and to determine how sensitive the results are to variation from the projections and assumptions provided. ANALYSIS Cost Several months ago Oaktree provided the Town with a set of financial projections. In the previously cited current memorandum these were recently revised. As currently proposed, the Total Development Cost of the project will be $18,305,312. The acquisition price of $2,647,000 is appropriate and $1,100,000 less than the "as -is" value stated in the Bonz appraisal. A single number ($12,872,417) is provided for the hard costs (which presumably includes a 5% contingency of approximately $642,000). This equals $161/SF (not including the underground parking), which is quite reasonable for a steel frame building. Soft costs of $1,752,395 also appear to be reasonable. They include an appropriate development fee of 689,000, which equals 4% of TDC. In addition, there are Finance Fees and Mortgage Broker fees for Debt and Equity. The Finance Fees are reasonable for the size of the construction loan. Mortgage broker fees are $98,000 for the Debt and $116,000 for Equity. There is no information identifying who received these fees or the services for which they were paid. While more detail would have been useful, the Total Project Cost and major. line items are reasonable for the planned project. Market According to the Developer, the rents and rent -up assumptions used for their projections were based upon the Bonz appraisal as well as their own assessment. Our analysis of the Bonz appraisal found it to be competent, complete and consistent with other market studies and reports. Rent rates, capture rates and absorption estimates were based upon well - prepared disaggregated demographic forecasts and the analysis of realistic comparables. In addition, while the report is six months old, the market has not changed significantly since it was prepared. An examination of the 30 Haven Street development indicates that the Developer's plans are consistent with the Bonz appraisal and competitive within 10 Review of Oaktree Development Pro Forma for Reading Site By Housing Partners, Inc. April, 2011 Page 4 the Primary market area. This applies to rents, rent per square foot, unit size and amenities. The location in downtown Reading is untested for this product and price point, but the anticipated absorption rate as reflected in the lease -up budget takes this fact into account. Based upon our evaluation, the market assumptions used for this project and its financial projections are reasonable at this time. Financinq Oaktree has proposed that 30 Haven Street be financed with $4,900,000 of equity, $13,000,000 of construction loan, and a $400,000 grant from the Town. The construction loan can be extended into a permanent loan with a five year term, a 25 year amortization period and a rate that today would be 6.75 %. Alternatively, the Developer also has a commitment from the Massachusetts Housing Partnership "...to provide alternative permanent financing (less principal /better amortization and lower interest rate)." From the information available to HPI, there is no clear rationale for the selection of financing source. The debt/equity ratio is normal for the current financial market as is the interest rate. Presumably the permanent financing has not been locked in because either the Developer believes he can get better terms at some time in the future or due to the uncertainty as to whether the units will be rented or sold. Return on Investment Presuming the cost, market and financing projections are reasonable, the need for the $400,000 grant would be justified either because the Developer cannot raise those funds from other sources or because adding it to the equity contribution will render the projected project return on investment unacceptable to the investor. While we understand that the Developer has stated that the last $400,000 cannot be raised from the lenders or investors, no corroboration has been provided. In addition, while 20% of the units will be affordable, the Developer does not appear to have made a serious effort to acquire the $400,000 from State or Federal sources who routinely provide grants for such projects. To determine the impact on profitability, HPI ran some financial models testing sensitivity. For assumptions, we used the Oaktree pro forma: $18,300,000 in project cost, $785,353 residential net operating income; $370,800 commercial net operating income; and a five year, $13,000,000 balloon loan with a 25 year amortization period and a 6.75% interest rate. We then ran cash flow models (for a rental project) with a sale at the end of the fifth year of stabilized operations. 0 11 Review of Oaktree Development Pro Forma for Reading Site By Housing Partners, Inc. April, 2011 Page 5 To determine the sale value, we applied a capitalization rate to the fifth year net operating income (presuming a 2% increase per year) derived by blending the residential and commercial capitalization rates contained in the Bonz report in appropriate proportions, and deducted the outstanding debt. The result was a Return on Equity of 5.85% and an Internal Rate of Return of 30.5 %. The ROI is relatively low for a project of this type while the IRR is relatively high. This reflects the fact that most of the value in this pro forma comes from the sale of the property at the end of the fifth year rather than from the interim cash flows. If instead of receiving a $400,000 grant from the Town, the equity contribution were increased. by $400,000 (something which it is important to note that the Developer insists is not possible), the ROI drops to 5.4% and the IRR to 28.35 %. It is critical to recognize that these projections are only as good as the assumptions on which they are based and the amount of data available. In this case, the available data was minimal and the estimated sales price, which accounts for so much of the Internal Rate of Return, is the most speculative part of the analysis. Risk This analysis must account for two kinds of risk: timing and market. This analysis . is being done based on estimated construction costs, projected rents and absorption periods and estimated operating costs. The construction cost may be higher (or lower) when an actual contract is signed and real rents and operating costs may be quite different when the project is actually completed. The longer the period of time between the projections and stabilized operation, the greater the uncertainty; and thus the risk. The other risk in this project is the market risk. Particularly as regards the residential units, this is the first project to test the downtown Reading market for units of this type in this price range. All the comparables in the Primary market area are in more suburban locations. While projects of this type have been successful in similar locations, 30 Haven is something of a first mover. Thus, in a fluid and uncertain environment, the Town of Reading is being asked to assist the developer in managing the overall risk entailed in developing this site. As shown in the conclusion, HPI believes that this is not an unreasonable request, as long as the Town is positioned to receive some benefit if the project is —as the Town hopes — successful. In that situation, the funding should be able to be revolved to support further priority development in Reading. 12 0 Review of Oaktree Development Pro Forma for Reading Site By Housing Partners, Inc. April, 2011 Page 6 CONCLUSION Based on the information available, HPI cannot conclude decisively that 30 Haven "needs" a $400,000 grant from the Town of Reading. We note that none of the information provided indicates that the Developers or investors will receive an unreasonable profit; it is also difficult to conclude at this time that the $400,000 is critical to project feasibility. At this stage in the project process, a 2% difference is well within the range of uncertainty which must be applied to the projections. However, as the first project proposed under the provisions of the Smart Growth Zoning District and the first residential project to be developed in downtown Reading in several decades, a public contribution would not be inappropriate if, as stated above, the Town will also benefit if the project succeeds. We will be working with Town staff to work out repayment terms that will assure that the Town benefits and that funds will be available if possible to support development in future years. HPI therefore recommends that the Town of Reading provide the project with a $400,000subordinate loan. This loan should be the last funding contributed to the project, and its remaining in the project following completion should be contingent upon an independent cost certification by a recognized expert. Further, in the event of default, the loan would be payable without any accrued interest. In the event of project success,. however, the loan and accrued interest should be required to be repaid upon sale or refinance if a rental project, or from the proceeds of the last two condominiums sold if a for -sale project. Finally, the loan should have a term of ten years, at which time the principal and interest should be due and payable. 13 or� Hechenbleikner, Peter From: Tim Kelley [timothyjkelley @verizon.net] Sent: Tuesday, April 26, 2011 10:46 AM To: James Bonazoli forwarding account; Steve Goldy forwarding account Cc: Reading - Selectmen; rhalynw @verizon.net Subject: Article 24: Affordable Housing Trust Fund Allocation Plan Dear James: I am writing to express my concern with the AHTF Allocation Plan article on the Town Meeting Warrant. Specifically, I am concerned that the Housing Authority was not consulted or informed about the Warrant Article. I found out about the article when I reviewed my Warrant yesterday evening before Town Meeting. The Housing Authority, as an equal voting entity with the Selectmen, needs to be included in the process of establishing whatever Allocation Plan is to be considered. Also, the Housing Authority needs to be included (or at least informed of) negotiations with developers seeking the AHTF funds. We were notified about a joint meeting that was scheduled some months back whose purpose would have been to vote on granting funds to Oaktree. I was unsettled by that, due to the lack of information. The Housing Authority asked for information to be provided and we were told that Oaktree had not then provided the financials. That initial meeting was postponed and not rescheduled. To my knowledge this was the last word the Housing Authority had with regard to Oaktree seeking AHTF funds. My complaint has nothing to do with the merits of Oaktree's proposed development. I have no information either way. My dissatisfaction is with the process. I ask that this matter be indefinitely postponed until a later Town Meeting so that the Housing Authority may be included in the process of discussing the Allocation Plan. I am speaking as an individual Board Member of the Reading Housing Authority and a Town Meeting Member. I am not speaking on behalf of the RHA. This specific matter has not been discussed by the RHA Board. Thank you for your attention and cooperation. Tim Timothy J. Kelley Attorney at Law One Pleasant Street, Suite 5 Reading, MA 01867 (781) 942 -9838 Fax (781) 942 -0904 timothyjkelley@verizon.net 14 9