Bennett Commons at the Railyard

DEVELOPMENT SUMMARY
Marquette University proposes that the three parcels were to be developed in phases as assisted living and
senior living as the first phase, and apartments as the final phase. This development will include a three
story, 60 unit senior living community, a four story, 80 unit assisted living community, and a three story,
40 unit multi-family luxury apartment complex. This diverse makeup will stabilize the demographics in
the Uptown area, as well as provide jobs through the assisted living community.
HIGHEST AND BEST USE
Through research and analysis of the city of Minneapolis and the Uptown market area, the highest and
best use for the three parcel site is a mixture of different uses including senior living, assisted living, and
multi-family residential.
Reasons Include:
• A desire to bring a unique and needed development to the community, stabilizing and
enhancing a comprehensive lifestyle.
• Bringing a project to the market that has realistic expectations and returns, and one that
allocates funds and time accordingly, given the current market.

CONSTRUCTION
This development utilizes a number of green initiatives during both the design and construction phases to
not only better the quality of life for the residents but also decrease future operating costs through energy
and water efficiency.

West Parcel - Senior Living: The total cost of construction will be an estimated $170.06/sf. These
buildings will be constructed using a precast concrete system featuring ample green space throughout the
site as well as surface parking.

Center Parcel - Assisted Living: The total cost of construction will be an estimated $175.13/sf. The
buildings on the Center Parcel will be constructed using a precast concrete system with an underground
parking level. This development will feature many amenities catering to the assisted living needs as well
as a large courtyard.

East Parcel - Apartments: The total cost of construction for the apartment building is estimated to be
$126.07/sf. This building will be built using a wood frame and face brick masonry system to minimize
construction cost. Through energy efficient aspects and high end finishes this building will prove that it is
above all of the local competition.
TARGET MARKET
Our target market is distinct for each parcel. The west parcel, which will be senior living, is targeting
seniors, age 55 and older, who are seeking residence in the vibrant Uptown area. The center parcel is
assisted living, and the target market will be individuals who need help with some activities of daily
living, but who also want to remain close to family and friends who may live in the area. The east parcel,
which is multi-family luxury apartments, will cater to the affluent young professionals in the area.
LEASING
The lease rates for the senior living community will be $1,200 per month, triple net, with assumed
vacancy of 5%. This development is expected to receive government subsidies of some form, which is
common with senior living. The lease rate for the assisted living community will be $4,750 per month,

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gross, and an assumed vacancy of 5%. This increased rental rate is due to the assistance provided, as
well as meals, and is consistent with rates for assisted living nationally. Lastly, the lease rates for the
multi-family luxury apartment complex will be $1,750 per month for a one bedroom, and $2,450 for a
two bedroom apartment, both triple net. Expected vacancy will be 5%, which is consistent with the
vacancy in Minneapolis and specifically the Uptown area.
FINANCING
In financing this project, there are three sources of capital, which the developer is using to cover
development costs. The first is a construction loan, taken out by a permanent loan in year two. This debt
financing will have a LTC ratio of 60%. There will also be cash equity, provided by both investors and
the developer, who will reinvest the 5% developer fee into the project. Finally, as two of the parcels are
eligible for a HUD 232 Credit, this will cover the remaining 20% of the costs. Further explanations and
application processes are provided in the report. Below is a breakdown of the sources and uses of capital
in this project.
Sources & Uses of Capital
Sources Amount % Uses Amount %
Invested Equity: $9,923,896.00 20.0% Land Acquisition $13,500,000 27.21%
HUD 232 Credits $9,923,896.00 20.0% Construction Costs $33,685,219 67.89%
Construction Loan: $29,771,687.00 60% Contractor Fee $1,684,260 3.39%
Interest Reserve $750,000 1.51%
Total Financing $49,619,479 100% Total Costs $49,619,479 100%

INVESTMENT ANALYSIS
Upon analysis and projections of future cash flows, the development offers an estimated IRR of 9.81%.
Equity investors can expect a Return on Equity (ROE) of 5.79%. Taking into consideration of the
cyclical market tendencies for commercial real estate, a reversion analysis has been done with a sale in
year seven (2018). The proceeds from this sale will equal $12.1 million, after a 4% brokerage fee. Below
is a cash flow statement with Debt Service Coverage ratios for the first three years of full production for
all three parcels.
2013 2014 2015
Net Operating Income $3,001,660.80 $3,091,710.62 $3,184,461.94
Debt Service
7.5%, 30 Year Amortization ($2,498,015.46) ($2,498,015.46) ($2,498,015.46)
DCR 1.20 1.24 1.27

CONCLUSION
The unique three parcel proposed development for the site is the highest and best use. With our estimates
we see an internal rate of return of 9.81%. A return for a project of this magnitude in today’s market is
phenomenal. Other strong reasons for the project include its location within a highly affluent area, it
would be unique to a market that shows need for its amenities and services, the great access to the
Greenway, and its environmental awareness. The development also boasts great visibility, and fosters a
welcoming environment for people of all ages.

When the development is considered in the current state of the nation, we can see the need for senior and
assisted living. The Baby Boomer generation is rapidly increasing, and their need for places that have
specific amenities will continue to grow. This project helps the Uptown community be better equipped
for this trend to continue.

This site was an enormous challenge to develop. The high capital requirement would be enough to deter
many developers. Given the unique idea of the proposed development of the Bennett Commons at the

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Railyard, we feel as though we are adequately able to address the capital requirements and give realistic
returns to developers, investors, and the community alike.

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