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HomeMy WebLinkAbout6.i. Approve the Draft RFQ for Senior Housing Development 4 ROSEMOUNT EXECUTIVE SUMMARY CITY COUNCIL City Council Meeting Date: June 21, 2011 AGENDA ITEM: Approve the Draft RFQ for Senior Housing AGENDA SECTION: Development Consent PREPARED BY: Kim Lindquist, Community Development AGENDA NO. Director ATTACHMENTS: Proposed RFQ APPROVED BY: Oki RECOMMENDED ACTION: Motion to Approve the Draft RFQ for Senior Housing Development at the Steeple Center Complex ISSUE Over the last year, the City Council has discussed adding senior housing to the Downtown area. The idea was to introduce the use at the Steeple Center property and remove the existing school building. The 3.16 acre site currently houses the Steeple Center and school building but only the Steeple Center has been renovated to allow public use of the building. After discussion about the desired senior housing for the community, a demand study was commissioned. The Maxfield Study indicates there is a demand for assisted senior housing and also memory care units. That is the type of senior housing desired by the Council as there are no facilities in the community which cater to that clientele. The goal is to also attract a tax paying entity into the Downtown. To attract privately developed senior housing to the community, it had been determined that a Request for Qualification (RFQ) process should be pursued. The RFQ does not specifically state the type of senior housing for the site but will include the Maxfield Study. Additionally, the RFQ requests respondents to include in the concept plan a senior center, ancillary facilities for the Steeple Center, and shared parking in a concept plan. The responses will be evaluated on the concept plan, the type of housing, the abilities and experience of the developer for the project and the management team, and the proposed financing responsibilities of the developer and the City. RECOMMENDATION Staff recommends approval of the draft RFQ. Staff has forwarded the draft to a couple of entities also for review and may receive some comments that would change or clarify some of the wording in the document although the general layout and information would be substantially the same as that found in the packet. REQUEST FOR QUALIFICATIONS FOR SENIOR HOUSING PROJECT IN THE CITY OF ROSEMOUNT Page 1 of 5 Summary of the Request for Qualifications The City of Rosemount is seeking a developer or development team with which to partner for development of a Senior Housing project at the Steeple Center Complex. The property is located on the northern edge of Rosemount's historic Downtown and is currently owned by the City. The 3.16 acre site was originally part of a public purchase that allowed construction of the Robert Trail Dakota County Library, which is south of the senior housing site. Also on the site is the iconic former St. Joe's church that has been renovated for public use and renamed as "The Steeple Center." The Center will remain, and there is also a strong interest in providing a public senior center on the property. The School portion of the existing structures will be removed. With removal of the school building and maintaining some land for the Steeple Center there is approximately 2.56 acres for senior housing, senior center, and shared parking. The City commissioned a Preliminary Estimate of Senior Housing Demand Study by Maxfield Research Inc. that indicated there is a need for senior housing with services and memory care units within the community. The City is a third ring suburb of St. Paul, with a population of approximately 21,000. Much of the 36 square mile City is rural in character. The Downtown has functioned as the activity hub of the community and would supply some commercial services to senior housing residents. The site is within walking distance of the public library, City Hall, and Central Park. The site is adjacent to the Independent School District 196 Rosemount campus, which includes elementary, junior high and high schools. There are numerous trails and walkways in the neighborhood. The development team is expected to possess, at a minimum, the following characteristics: 1. The financial capacity to absorb pre development soft costs associated with final planning for the project, and to fund costs for construction of all proposed buildings. 2. The ability to manage or contract with a management company to operate the senior facility. The outcome of the RFQ is the selection of a developer or development team to work with the City on development of a senior housing and accessory senior center on City -owned land. The decision on which team the City will select will be based primarily on the team qualifications, concept design and financial proposal. The City will also consider the proposed development and its consistency with the goals of the City Council. Page 2 of 5 Project Background The Rosemount City Council purchased the St. Joe's church and school in 2004, primarily to provide acreage for the planned Robert Trail County Library. Since that time the City has implemented renovations to the church structure to permit public use of the facility. In 2007 a Task Force Report was issued about the St. Joseph's Facilities. The 23- member Facilities Task Force recommended that the church structure remain and be used for a public purpose that benefits the community. The existing church, renamed the Steeple Center, is currently used for civic events and private parties and weddings. Consistent with the recommendation of the Task Force report, the long term goal for the building is its use as an arts and cultural center. Approximately 1300 square feet of additional space should be illustrated on the concept plan for storage and restroom facilities for the Steeple Center activities. The Task Force also recommended keeping the school building. However, it was recognized that maintenance of the school structure would be dependent on the future use of the entire complex. Further, the City would need to evaluate the buildings contribution to the future complex use and if it made economical sense. For purposes of this RFQ, it should be assumed that the school building is removed from the site. The Steeple Center will remain. Most recently, the City has been approached by the Rosemount Area Seniors organization with a request for dedicated space for its programming needs. There is interest in providing a dedicated space of 5,000 to 10,000 square feet for public use within the context of this project. The space would be primarily for the community's senior population but could also be used for the general public. The space could be a dedicated space within the senior housing project, a space adjoining the facility, or totally independent. Shared use of facilities should be explored. The concept plan in this RFQ should note a senior center and illustrate the appropriate location and footprint. Goals of the RFQ The City's goal with the RFQ is to find a development team to collaborate on design and implementation of a senior housing project at the St. Joe's complex. The City is looking for assisted living senior housing and memory care units. The owner may be a not for profit organization but it is preferred that the owner is a property tax paying entity. The City is also looking to combine a senior center into the development site. Financial responsibility for the cost of the property, construction of the senior center and ancillary Steeple Center space, demolition of the existing school and the construction of the senior housing project will be negotiated between the City and the chosen developer. As part of the RFQ, the proposer should provide a financial plan which estimates costs and anticipated financial responsibilities of the development team and the City. Page 3 of 5 Goals are further described in the principles below: Site Design: More dense development than typical suburban mixed use to provide a more compact structure and project. High emphasis on pedestrian linkages from the site and within the site. Ensure some green space for residents and to provide necessary stormwater ponding. Site design must recognize the existing residential neighborhood and mitigate any potential impacts. Architecture: Architectural design that meets the design guidelines for Downtown Rosemount. Street presence for building footprint while permitting pedestrian access. Shared parking for senior housing, senior center, and Steeple Center. Some resident parking provided underground and screened from front/public views. Landscape design to enhance development and complement streetscape. Quality exterior materials and timeless building design. Emphasis on more urban, traditional downtown design. Planning Process: Project proposals will require Planning Commission and City Council review and approval. Location The City is anticipating development to occur around and adjacent to the Steeple Center on all City owned property. In total there is 3.16 acres which would include the Steeple Center building. The site is bounded by State Hwy 3 to the east, 143 Street West to the north, Cameo Avenue to the west, and the County Library to the south. An existing residential neighborhood is to the west, and careful design and planning must occur to reduce impacts to the neighborhood. In contrast, however, it is anticipated that the primary access to the site will be from the west, Cameo Avenue. Shared parking for the Steeple Center, senior housing and senior center should also be accommodated on site. There is a public parking lot across (east of) Hwy 3 although there is no designated crosswalk mid block. There is also some ability to have on street parking for special events and some shared parking with the Robert Trail Library on off peak hours. Page 4 of 5 City Background Information The City of Rosemount is a developing suburb in Dakota County. The western 1/3 of the City has urbanized development, generally residential. Rosemount's Downtown was the center of the community from a retail perspective until County Road 42 became increasingly busy, drawing larger commercial establishments. The City is experiencing steady growth with building permits for approximately 80 new residential units for each of the last two years. Earlier in the decade growth was at a more accelerated pace with approximately 1,000 new residents per year. According to the 2010 Census the City population is 21,874. Although the community is younger due to new growth of single family homes, the census notes 790 seniors (people over 75) in 2010 and the Maxfield Study predicts 920 seniors in 2015. Required Components of RFQ Response 1. Description of Developer or Development Team Lead Developer or Development Team. Technical Partners (architects, engineers, etc.). Background and expertise of team lead personnel within each firm. Each firm's experience in senior housing projects; development and management. 2. Description of Two Comparable Projects Minnesota and /or national examples. Local examples are preferred if possible so that the decision makers can visit sites. References from similar project communities including city staff names, titles, and phone numbers. Brief description of developer involvement in the public participation process for each project. 3. Finance Plan Demonstration of financial capability of lead developer and /or development partners. General estimate of costs and financial responsibilities of the development team and the City for the senior housing project, senior center, additional Steeple Center space, land acquisition, and site work. 4. Project Management of Development Familiarity with design issues, construction techniques, and project management skills relative to phased, mixed -use facilities and an overview of a plan to coordinate design elements and phasing of public improvements. Proposed ownership structure of project. Page 5 of 5 5. Proposed General Development Information Preliminary concept site plan. Architectural elevations of project with similar design and materials. Development schedule, including phasing and anticipated date for full build -out based upon expected construction start of spring 2012. RFQ Schedule and City Contact The City requests that all questions related to this RFQ be directed to City Staff. The City contact for all questions, including other documents, or regarding the response of the RFQ, is: Kim Lindquist, Community Development Director City of Rosemount 2875 145 Street Rosemount, MN 55068 Ph. 651 322 -2020 Fax. 651 423 -4424 kim .lindquist @ci.rosemount.mn.us RFQ Schedule July 12, 2011 Request for Qualifications distributed. July 27, 2011 Developer meeting held at City Hall for answers to questions regarding the RFQ. August 11, 2011 15 copies (plus one electronic copy) of responses to RFQ due at 4:30 pm Mid September Interviews of the top two to four firms held at City Hall. October 4, 2011 City Council consideration and discussion of selection of development team. The City reserves the right to alter any of the selection criteria, selection schedule, or to reject any or all proposals without cause. 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WER 147TH ST W w r C I (108 Units) „lilt _W r r— ,,r pi t Hi storic Downtown .1 '�i' r 1111 .ir'n v W 7 1 I .l._ 4 y. fA BRENNtR CT ST IN v m t C' S I r 1 l- in is 0 200 400 Feet June 2011 FILE: /T:GIS /City /MapslDepartmental Maps /CommunityDevelopment /Kim /RFQ -Area Map.mxd a ROSEMOUN'I' Proposed Demolition s: i •11 COI\ 4 7 Ia. 4 3 rd St W '-'101111110, k.. -.9 I 1 141 1 r 1 lk,,, lc t N s' I I iailliii6t. H I "i■ ....or I l'.,i *kr ,.s. .4 I I i 1 :t 4 t: i 11 I ,t i f 7 a 4 .K! a a4 1, 4104 a a 4 Alliallill 7 a" '1 1 .4 t- N ks 1 glIk 3 r 1 0- rt-_, k it, Aciteger I CD 411110 404litie 4• tio.A. t H ak 11111,171... r N t t 1.L1 LI A di 0 100 200 Feet June 2011 z FILE: /T:GIS/City/Maps/Departmental Maps/CommunityDevelopment/Kim/RFQ-Site Ran mxd j lirit i k 1' eld h Inc April 15, 2011 MEMORANDUM TO: Ms. Kim Lindquist Community Development Director FROM: Mr. Matt Mullins Ms. Amanda Janzen Maxfield Research Inc. RE: Preliminary Demand Estimate for Senior Housing in Rosemount, Minnesota Introduction /Purpose and Scope of Research This memorandum provides a preliminary assessment of the potential market support for senior housing in Rosemount, Minnesota. Specifically, adult ownership, adult rental (affordable and market rate), congregate, assisted living and memory care product types are considered in this analysis. The methodology used to calculate demand in this memorandum is proprietary to Maxfield Research but is consistent with methodologies used by analysts throughout the senior housing industry. It is important to note that demand estimates and conclusions contained herein are preliminary and are intended only to broadly assess the depth of demand for senior housing in Rosemount. A more thorough investigation of the characteristics of the primary draw area, outlined in a Full Feasibility Study, would reveal more specific factors that would impact demand and appropriate market positioning. This memorandum delineates a primary draw area, or Primary Market Area "PMA for senior housing in Rosemount and presents an overview of the demographic and economic characteristics of this area. It then defines the various types of senior housing available in today's market and inventories existing and pending senior housing projects in the PMA. Finally, it presents demand calculations for adult ownership, adult rental (affordable and market rate), congregate, assisted living and memory care senior housing based on demographic, economic, and competitive market factors that would impact demand. The preliminary assessment concludes with a calculation of the number of senior housing units that could be supported on a site in Rosemount. 612 338 -0012 (fax) 612 904 -7979 615 First Avenue NE, Suite 500, Minneapolis, MN 55413 www.maxfieldresearch.com April 15, 2011 Ms. Kim Lindquist City of Rosemount Page 2 Market Area Definition Maxfield Research Inc. determined the primary draw area for senior housing in Rosemount based on geographic and man -made barriers, commuting patterns, the location of other competitive senior housing, and our experience in senior housing feasibility. The PMA includes the City of Rosemount, Nininger Township, City of Coates, Empire Township, City of Vermillion and Vermillion Township. We estimate that this PMA will constitute 80% of the market support for senior housing. The remaining portion of demand approximately 20% —will be generated from seniors currently residing outside the defined PMA. Potential residents comprising this second segment of demand would include people currently residing just outside the PMA who have an orientation to the area (i.e. church, doctor, etc.), people who once resided in the area who desire to move back to be near friends and family, and parents of adult children living in the PMA. A map of the PMA is displayed below. Prima Market Area r i t A Fr St Paul P k Ea an JJ Eagan Inver Grove Heigh Cottage Grove Apple Valley Ros tint J 1<Jini awns Ha sh gs Coal' Ve millio T wns a Empir ownship rile V r ill�� 3 Farmington 1 -1 1 /jz I I ani o R Never MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 3 Older Adult (Age 55 Population and Household Trends Table 1 shows the age distribution of people and households age 55 and older in the PMA. Historical information for 2000 is supplied by the U.S. Census Bureau. The 2010 total population and household figures are from the 2010 Census. However, data on the 2010 age distribution has not been released yet. Estimates for the age distribution for 2010 and projections for 2015 were calculated by Maxfield Research Inc. based on demographic information supplied by ESRI, a nationally recognized demographics firm. The following are key points from Table 1: In 2010, the PMA totaled 27,040 people and 9,397 households. The older adult and senior population (age 55 comprised 12.9% of the total population and 26.3% of the total households in the PMA. The PMA's older adult and senior population and household bases experienced strong growth in all older age segments between 2000 and 2010. Between 2000 and 2010, the PMA population age 55+ increased by +1,266 +57 and +1,126 households +83.8 Projected forward, the older adult and senior population is anticipated to grow through 2015. Between 2010 and 2015, the PMA's older adult and senior population is projected to add +1,699 people +48.7 and 782 households +31.7 Typically, seniors ages 70 and older have the highest propensity to move into independent senior housing. However, we currently see a trend in which projects are attracting people in their mid to late 60s, especially in projects with an ownership structure such as townhomes, condominiums and cooperatives. The primary market for service enhanced (congregate, assisted living and memory care) housing is seniors age 75 and older. While individuals in their 50s and 60s typically do not comprise the market base for service enhanced senior housing, they often have elderly parents to whom they provide support when they decide to relocate to senior housing. Since elderly parents typically prefer to be near their adult caregivers, growth in the older adult age cohort (age 55 to 64) generally results in additional demand for senior housing products. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 29 Preliminary Conclusions Our preliminary assessment of the factors impacting demand for senior housing, including demographic, economic, and competitive variables, shows market support for additional units in the PMA. Table 11 provides a summary of demand that could be captured by a development on a high quality site in Rosemount. TABLE 11 DEMAND SUMMARY SITE IN ROSEMOUNT 2010 2015 Service Level Site in Rosemount 2010 2015 Market Rate Active Adult Ownership 0 0 Active Adult Rental 21 28 Congregate 33 43 Assisted Living 34 39 Elderly Waiver 8 8 Memory Care 19 22 Total Units 86 104 Affordable Active Adult Affordable 33 30 Total Units 33 30 Source: Maxfield Research Inc. It should be noted that our conclusions are preliminary and do not consider the quality of a particular site for a senior housing development, price and positioning of the subject project, or other important factors (i.e. architectural, marketing and management issues) that would likely impact the market feasibility of the subject development. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 4 TABLE 1 55+ POPULATION HOUSEHOLD AGE DISTRIBUTION PRIMARY MARKET AREA 2000 -2015 POPULATION Age 2000 2010 2015 2000 -2010 2010 -2015 55 to 64 1,129 1,610 2,748 481 42.6% 1,138 70.7% 65 to 69 402 660 889 258 `z 64.2% 229 a 34.6% 70 to 74 304 430 631 126 41.4% 201 46.8% 75 to 79 190 344 393 154 81.1% 49 14.2% 80 to 84 120 235 274 115 95.4% 39 16.6% 85 "78 ''211 253 133 170.2% 43 20.3% Total 55+ 2,223 3,489 5,188 1,266 57.0% 1,699 48.7% Total 65+ 1,094 2 _1,879 2,440 785 71.8% s 561 298% Total 75+ 388 789 920 401 103.4% 131 16.6% Tot. Pop. 1 18,9651 27,0401 1 31,700F 1 8,075 42.6 %l 1 4,660 17.2% HOUSEHOLDS Age 2000 2010 2015 2000 -2010 2010 -2015 55 to 64 567 1,231 1,608 664 117.1% 377 30.6% 65 to 74 431 686 978 255 59.1% 292 42.6/o 75 345 553 666 208 60.2% 113 20.5% Total 1,343 2,469 3,251 1,126 83.8% 782 31.7% Total 65+ 776 1,238 1,644 462 59.6% 406 32.7% Total 75+ 345 553 666 208 60.2% 113 20.5% Tot. HH 1 6,1561 1 9,3971 1 11,2761 1 3,241 52.6 %I 1 1,879 20.0% Sources: U.S. Census Bureau; ESRI.; Maxfield Research Inc. Older Adult and Senior Household Incomes Table 2 provides data on incomes for older adult and senior households in the PMA in 2010 and 2015 based on information provided by ESRI. It is important to note that the data does not account for the asset base of senior households or supplemental income that a senior household could gain from the proceeds of the sale of a home or from contributions from family members. The data in Table 2 helps determine demand for senior housing based on the size of the market at specific income levels. This data is incorporated into our demand calculations, which are presented in a following section. The frailer the senior, the greater the proportion of their income they will typically spend on housing and services. Studies have shown that seniors are willing to pay increasing proportions of their incomes on housing with services, beginning with an income allocation of 40% to 50% for market rate adult senior housing with little or no services, increasing to 65% for congregate (independent with some services) and to 80% to 90% or more for assisted living and memory care housing. Seniors also often use the proceeds from the sales of their homes, as well as MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 5 financial assistance from their adult children, as supplemental income in order to afford senior housing alternatives. The following are key points from Table 2: In 2010, the median income for all age 65+ households in the PMA was $44,601. Within this age group, the median income for households between the ages of 65 and 74 was $53,409 and for households age 75+ was $35,806. The higher median income for younger senior households (age 65 to 74) compared to older seniors (age 75 is primarily due to the fact that a higher proportion of younger seniors are married and are more likely to have two pensions, along with the fact that many younger seniors continue to have income producing employment. The target market for market rate senior housing is typically senior households age 65+ with incomes of at least $30,000 (plus some senior homeowners with incomes of at least $20,000). As of 2010, there were approximately 800 senior households age 65+ in the PMA with incomes of at least $30,000, or about 65% of all 65+ households. This study also considers the portion of senior households that cannot afford market rate sen- ior housing alternatives. According to information from the Dakota County Community De- velopment Agency (CDA), the following are current income restrictions for their Senior Housing Program: 1 person household $45,100 2 person household $51,500 Based on the income restrictions detailed above, a significant portion of seniors (65 would be income qualified for Dakota County CDA affordable housing. After adjusting for typical household sizes, approximately 625 households in 2010 would qualify for affordable hous- ing. The majority of affordable housing options cater to low income or moderate income seniors who are independent and do not need personal care or other services. For seniors who re- quire additional assistance and would be better served in an assisted living environment, Medicare funds, waivers and other forms of financial assistance are often accepted in order to cover the cost of assisting living care. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 6 TABLE 2 OLDER ADULT INCOME DISTRIBUTION PRIMARY MARKET AREA 2010 2015 2010 55 -64 65 -74 75+ Total 65+ No. Pct. No. Pct. No. Pct. No. Pct. Under $15,000 47 3.8 79 11.5 146 26.3 224 18.1 $15,000-$24,999 17 1.4 94 13.6 66 11.9 159 12.9 $25,000- $34,999 45 3.6 35 5.1 60 10.8 95 7.6 $35,000-$49,99 71 5.8 121 17.7 99 17.9 220 17.8 $50,000- $74,999 175 14.2 105 15.3 47 8.5 152 12.3 223 181 73 10.7 24 4.4 98 rw. 7.9 $100,000 or more 653 53.0 179 26.0 112 20.2 290 23.4 Total 1,231 100.0 686 100.0 553 100.0 1,238 100.0 Median Income $104,166 $53,409 $35,806 $44,601 55 -64 65 -74 75+ Total 65+ No. Pct. No. Pct. No. Pct. No. Pct. Under $15,000 35 2.2 85 8.7 153 22.9 237 14.4 $1$ 10 0.7 78 `8 0 58 8.7 136 8.3 $25,000- $34,999 34 2.1 41 4.2 61 9.1 101 6.2 $35,000-$49,999 49 3.0 121 12.4 100 15.0 221 13.5 $50,000 $74,999 200 12.5 189 19.3 68 10.1 256 15.6 75,600- 999 248 15.4 115 11? 8 43 6.5 158 9.6 $100,000 or more 1,031 64.2 349 35.7 184 27.6 533 32.4 Total 1,608 100.0 978 100.0 :3. 666 100.0 :1,644 100.0 Median Income $122,944 $71,758 °3'$44,244 $62,272 Change 2010 -2015 55 -64 65 -74 75+ Total 65+ No Pct. No Pct No Pct No Pct. Under $15,000 -12 -25.3 6 8.0 7 4.7 13 5.9 $15,000-$24,999 U 7 -38.4 -16 -16 6 8 I1 ^7 23 -14 6 $25,000- $34,999 -11 -24.4 6 16.2 1 1.7 5 5.7 $35,000$49 999 22 -31:3 .0 -0 1 1 1.3 1 0 5 $50,000- $74,999 25 14.2 83 79.2 21 44.4 104 68.5 $75 000 25 11 1 42 $71 19 76`2 61 61:9 $100,000 or more 379 58.0 171 95.6 72 64.8 243 83.7 Total ,'y r 377. '30.6 292 42.6 113 20.5 404 32.6 Median Income $18,779i- 18.0 $18,349 34.4 $8,437. 23;6 $17,671 39.6 Sources: ESRI; Maxfield Research Inc. Senior Household Tenure MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 7 Table 3 shows the number of older adult and senior households that owned and rented their housing in the PMA in 2000 and 2009 according to the U.S. Census and American Community Survey. This information aids in quantifying the number of households that may still have homes to sell and could potentially supplement their incomes from the sales of their homes to support monthly fees for alternative housing. Additionally, the information provides insight into the propensity of seniors to rent instead of own their housing. Typically, homeownership declines as households age. In 2009, homeownership rates remained high in older adult and younger senior household groups, with 91% among households age 54 to 64 and 95% among households age 65 to 74. A significant decrease in homeownership is observed between younger seniors (95 and older seniors (80 This pattern suggests that a high percentage of PMA seniors begin moving into renter occupied housing alternatives after the age of 75. TABLE 3 OLDER ADULT HOUSEHOLD TENURE PRIMARY MARKET AREA 2000 2009* Age of Householder 55 -64 65 -74 75+ Total 65+ Own Rent Own Rent Own Rent Own Rent 2000 No. of Households 600 48 392 48 211 54 603 102 Homeownership Rate 93% 89% 80% 86% 2009* No. of Households 1,216 117 576 31 390 95 966 126 Homeownership Rate 91% 95% 80% 88% Change 2009 2000 No. of Households 616 69 184 -17 179 41 363 24 Homeownership Rate 51% 59% 32% -55% 46% 43% 38% 19% Sources: U.S. Census Bureau, Maxfield Research Inc. The high homeownership rates of PMA older adult and senior households would allow prospective residents to use proceeds from the sales of their homes toward senior housing alternatives. The resale of a single family home would allow a greater proportion of seniors to qualify for market rate housing products, since equity from the home sale could be used as supplemental income for alternative housing. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 8 Home Resale Values Table 4 presents residential sales data for older single family homes (built before 1996) for the City of Rosemount and the Remainder of the PMA from the Regional Multiple Listing Service of Minnesota. The data is presented from 2005 through March 2011. This data is useful in that it represents the amount of equity seniors may be able to derive from the sales of their homes that could be used to cover the cost of senior housing alternatives. We exclude newer homes, since most seniors have lived in their homes for about 15 years or more. The following points summarize key findings: As of the end of March 2011, the average sales price of a single family home built before 1996 in Rosemount was $166,554 and the median price was $163,000. It should be noted that median sales prices are generally a more accurate portrayal of home equity since average figures can be skewed by a few very high- or low priced homes. Sale prices in Rosemount are higher than the Remainder of the PMA. The median sale price in Rosemount in 2010 was $167,500 compared to $101,200 in the Remainder of the PMA. Consistent with the housing conditions across the Nation, home values have depreciated in Rosemount and the Remainder of the PMA due to the slow down in the housing market and economy. From 2005 to 2010, the median sales price in Rosemount decreased -29.3% and the Remainder of the PMA decreased 31.9 Based on the 2010 median resale value in Rosemount ($167,500), a senior household could generate approximately $3,894 of additional income annually (about $325 per month), if they invested in an income producing account (2.5% interest rate) after accounting for marketing costs and /or real estate commissions (7.0% of home sale price). Because of the lengthy time to sell a home in Rosemount, it will be important to begin marketing a development to area seniors at groundbreaking or before. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 9 TABLE 4 SINGLE- FAMILY HOME RESALE VALUES BUILT BEFORE 1996 PRIMARY MARKET AREA 2005 to 2011* No. of Average Median Average Area Sales Price Price CDOM Rosemount 2011* 19 $166,554 $163,000 166 2010 111 $184,596 $167,500 130 2009 131 $194,685 $184,000 126 2008 132 $205,859 $200,000 139 2007 140 $248,913 $230,000 108 2006 159 $258,020 $238,000 87 2005 238 $250,013 $237,000 54 Change 2005 -2010 -26.2% -29.3% Remainder of Market Area 2011* 1 $101,200 $101,200 11 2010 9 $183,725 $153,000 88 2009 14 $186,189 $181,000 69 2008 4 $188,075 $164,950 138 2007 5 $202,859 $207,395 109 2006 6 $190,016 $192,500 113 2005 2 $224,800 $224,800 124 Change 2005 -2010 -18.3% -31.9% January 1, 2011 to March 31, 2011 Sources: Multiple Listing Service; Maxfield Research Inc. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 10 Types of Senior Housing in Today's Market For analytical proposes, Maxfield Research Inc. classifies market rate senior housing into four categories based on the level and type of services offered: 1 Active Adult properties (or independent living without services available) are similar to a general occupancy apartment building, in that they offer virtually no services but have age restrictions (typically 55 or 62 or older). Organized activities and occasionally a transportation program are usually all that are available at these properties. Because of the lack of services, active adult properties typically do not command the rent premiums of more service enriched senior housing. Congregate properties (or independent living with services available) offer support services such as meals and /or housekeeping, either on an optional basis or a limited amount included in the rents. These properties typically dedicate a larger share of the overall building area to common areas, in part, because the units are smaller than in adult housing and in part to encourage socialization among residents. Congregate properties attract a slightly older target market than adult housing, typically seniors age 75 or older. Rents are also above those of the active adult buildings, even excluding the services. Sponsorship by a nursing home, hospital or other health care organization is common. Assisted Living properties come in a variety of forms, but the target market for most is generally the same: very frail seniors, typically age 80 or older (but can be much younger, depending on their particular health situation), who are in need of extensive support services and personal care assistance. Absent an assisted living option, these seniors would otherwise need to move to a nursing facility. At a minimum, assisted living properties include two meals per day and weekly housekeeping in the monthly fee, with the availability of a third meal and personal care (either included in the monthly fee or for an additional cost). Assisted living properties also have either staff on duty 24 hours per day or at least 24 -hour emergency response. Memory Care properties, designed specifically for persons suffering from Alzheimer's disease or other dementias, is one of the newest trends in senior housing. Properties consist mostly of suite -style or studio units or occasionally one bedroom apartment -style units, and large amounts of communal areas for activities and programming. In addition, staff typically undergoes specialized training in the care of this population. Because of the greater amount of individualized personal care required by residents, staffing ratios are much higher than traditional assisted living and thus, the costs of care are also higher. Unlike conventional assisted living, however, which deals almost exclusively with widows or widowers, a higher proportion of persons afflicted with Alzheimer's disease are in two person households. That means the decision to move a spouse into a memory care facility involves the caregiver's concern of incurring the costs of health care at a special facility while continuing to maintain their home. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 11 1 Skilled Nursing Care, or long -term care facilities, provides a living arrangement that integrates shelter and food with medical, nursing, psychosocial and rehabilitation services for persons who require 24 -hour nursing supervision. Residents in skilled nursing homes can be funded under Medicare, Medicaid, Veterans, HMOs, insurance as well as use of private funds. FIGURE 1 CONTINUUM OF HOUSING AND SERVICES FOR SENIORS Single Family Congregate Apartments w/ Optional Home To home or Apatm tent Services Assisted Living Nursing Facilities Age Restricted Independent Single-Family or Townhomes or Apartments or Condominiums or Congregate Apartments w/ Memory Care Cooperatives Intensive Services (Aliheu ees Units) Fully Fully or Highly Independent Dependent on Care n Senior Housing Product Type Source: Maxfield Research Inc. The senior housing products available today, when combined with long -term care facilities form a full continuum of care, extending from virtually a purely residential model to a medically intensive one. Often the services available at these properties overlap with another making these definitions somewhat ambiguous. In general, active adult properties tend to attract younger active seniors, who merely wish to rid themselves of home maintenance; congregate properties serve independent seniors that desire support services (i.e., meals, housekeeping, transportation, etc.) while assisted living properties tend to attract older, frail seniors who need assistance with daily activities, but not the skilled medical care available only in a nursing facility. Supply of Senior Housing in the PMA Table 5 shows an inventory of existing senior housing located in and surrounding the PMA. The following points summarize key findings: The PMA contains the following senior housing options: four adult ownership developments and one affordable adult rental development. All of the developments are located in the City of Rosemount and provides a total of 435 units. The City of Rosemount is surrounded by communities to the west and north that have several senior housing developments. These units provide an additional 2,345 senior housing units. The inventoried developments in neighboring cities are intended to serve as a guide in assessing current trends in the local senior housing industry. We do not, however, consider communities outside the PMA to be directly competitive. As such, only PMA developments are included in our demand calculations. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 12 The majority of the adult ownership developments in Rosemount are newer, with three of them built since 2003. Rosemount Plaza Condos is the oldest adult ownership development built in 1989. All of the affordable adult rental developments in and outside the PMA are managed by the Dakota County Community Development Agency. To qualify for residency in the Dakota County CDA developments, applicants must be age 55+ and have incomes at or below 80% of median area income. Residents of one bedroom units pay 30% of their income for rent (between a minimum of $368 and a maximum of $677). Residents of two bedroom units pay 32% of their income for rent (between a minimum of $541 and a maximum of $857). Several of the senior housing products outside the PMA are located on campuses which incorporate multiple levels of care services. As many seniors age in place, they prefer to live closer to care services as their needs grow. Apple Valley Villa is the oldest property outside the PMA having been built in 1986 and is located on a campus with Apple Valley Health Care Center. Seasons of Apple Valley is the newest development outside the PMA, which just opened up March 1, 2011. Seasons of Apple Valley has "housing with services" units, of which about 40% of the residents are projected to purchase assisted living care packages. Non Competitive Subsidized Senior Housing In addition to the affordable rental properties identified in Table 5, there is also one senior housing property with deep subsidies in Rosemount. Rosemount Plaza is subsidized through Section 8, has 39 units and was built in 1985. The subsidized project primarily differs from the affordable projects by their age limit (62 and income limits. Rosemount Plaza has income limits of $29,400 for one person households and $33,600 for two person households (compared to $45,100 and $51,500 for one person and two person households for the affordable projects). They also differ in that there is no minimum rent. Monthly rents are based solely on 30% of a qualified household's Adjusted Gross Income (AGI). The seniors in these properties would not be able to afford contract rents at affordable senior housing. Thus, there is almost no market overlap between subsidized and affordable properties. Therefore, we do not subtract the 39 units at Rosemount Plaza in our demand calculations presented later in the memo. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 13 TABLE 5 SENIOR HOUSING DEVELOPMENTS IN AND NEAR THE PRIMARY MARKET AREA April 2011 Year Number of Project Location Built Units Adult Ownership Inside PMA Bard's Crossing Rosemount 2004 2006 110 Crosscroft at Evermoor Rosemount 2003 212 Wachter Lake Rosemount 2003 48 Rosemount Plaza Condos Rosemount 1989 21 Outside PMA Summerhill of Apple Valley Coop Apple Valley 2003 70 Gramercy Park Coop Eagan 2001 69 Timberwood Village Eagan 1996 52 Inverness Village Inver Grove Heights 1996 1999 55 Black Hawk Trail Inver Grove Heights 2002 32 Gramercy Park Coop Inver Grove Heights 1997 111 Market Rate Adult Rental Inside PMA None Outside PMA The Timbers at Apple Valley Apple Valley 2004 106 Presbyterian Homes Inver Grove Heights 2002 67 Affordable Adult Rental Inside PMA Cameo Place Rosemount 1997 44 Outside PMA Courtland Square Apple Valley 2001 60 Orchard Square Apple Valley 1995 50 Cobblestone Square Apple Valley 2010 60 Lakeside Pointe Eagan 2004 60 Oak Woods East Eagan 2008 55 Oak Woods of Eagan Eagan 1992 65 Cahill Commons Inver Grove Heights 2002 60 Carmen Court Inver Grove Heights 1994 51 Crossroads Commons Lakeville 2009 87 Main Street Manor Lakeville 2001 51 Winsor Plaza Lakeville 1990 64 Continued MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 14 TABLE 5 Cont. SENIOR HOUSING DEVELOPMENTS IN AND NEAR THE PRIMARY MARKET AREA April 2011 Year Number of Project Location Built Units Congregate Inside PMA None Outside PMA Apple Valley Villa Apple Valley 1986 80 Seasons of Apple Valley' Apple Valley 2011 68 Commons on Marice Eagan 1999 60 Keystone of Eagan Eagan 2004 78 Presbyterian Homes Inver Grove Heights 2002 90 Highview Hills Lakeville 2009 75 Assisted Living Inside PMA None Outside PMA Apple Valley Villa Apple Valley 1986 53 Seasons of Apple Valley' Apple Valley 2011 46 White Pine Inver Grove Heights 2008 63 Centennial House of Apple Valley Apple Valley 1996 45 Commons on Marice Eagan 1999 57 Keystone of Eagan Eagan 2004 34 Presbyterian Homes Inver Grove Heights 2003 66 Sterling House Inver Grove Heights 1999 20 Highview Hills Lakeville 2009 44 Memory Care Inside PMA None Outside PMA Apple Valley Villa Apple Valley 2009 5 Seasons of Apple Valley Apple Valley 2011 20 Clarebridge of Eagan Eagan 1998 52 White Pine Inver Grove Heights 2010 44 Centennial House of Apple Valley Apple Valley 2006 2009 34 Commons on Marice Eagan 1999 28 Keystone of Eagan Eagan 2004 16 Presbyterian Homes Inver Grove Heights 2003 18 Highview Hills Lakeville 2009 24 1 Seasons of Apple Valley has "Housing with Services" units, of which about 40% of the residents are projected to purchase assisted living care packages. Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 15 Pending Senior Housing Developments Maxfield Research interviewed staff members in PMA communities in order to identify and profile any pending senior housing projects that may be competitive with the proposed development. The following points summarize key information from these interviews. Lakeville Southview Senior Living Management received City approval to develop a senior housing facility to be named Kingsley Shores. The facility would be adjacent to the Chart House lo- cated at 11287 Klamath Trail in Lakeville. Kingsley Shores would include 23 independent units, 46 assisted living units, and 32 memory care units on a 35,000 square foot campus. Twenty percent of the units would be income -based which are reserved for lower to moderate income residents. Construction is expected to begin summer 2011 with a completion date of summer or fall of 2012. Kingsley Shores would not be competitive with a development in Rosemount since it is located outside of the PMA. Hosanna Lutheran Church and Ebenezer Management Services, located on 162 Street in Lakeville, received City approval to develop a senior housing campus on its property. The church has a fast growing congregation of over 6,000 members. The proposed Hosanna Ha- ven development would consist of 20 congregate units, 47 assisted living units and 24 mem- ory care units. Construction is expected to start spring 2011 and the facility is projected to open in the summer of 2012. Hosanna Haven would not be competitive with a development in Rosemount; therefore, we do not subtract any units from the demand calculations. Apple Valley Oxford Senior Funds received Planning Commission approval about one year ago for the de- velopment of Cobblestone on the Lake, a 214 -unit senior housing development to be located along the southwestern shoreline of Cobblestone Lake. As proposed, the development is a continuum of care campus with 152 independent living units, 32 assisted living units and 30 memory care units. According to the City, the developer is still planning to move forward with development once financing is secured. We do not subtract any of its units from our demand calculations presented later in this report because the timing is uncertain and it is lo- cated outside the PMA. Apple Valley Villa is repositioning six units of their senior housing into memory care suites. The suites are located on the fifth floor and will consist of two private suites and four shared suites. We do not subtract any of its units from our demand calculations presented later in this report because it is located outside the PMA. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 16 Eagan Christ Lutheran Church is proposing to develop a senior housing facility adjacent to their church at Diffley Road and Beaver Dam Road (between I35E Cedar Avenue). This poten- tial development is still preliminary, and has not formally entered the city approval process. A rezoning would be needed as the parcel is currently zoned for public facilities. The parcel is about five acres and can support between 80 to 100 units, depending on whether a three- or four -story building is developed. Because the proposed development is so preliminary, we do not know what the service -level mix would be, or how many total units would be built or the timing. We do not subtract any of its units from our demand calculations presented later in this report because the timing is uncertain and it is located outside the PMA. Walker Methodist is exploring the potential to develop senior housing in Eagan. Three loca- tions are being considered one in the Cedarvale redevelopment area (east of Cedar Avenue on Highway 13), the Carriage Hills Golf Course (on Yankee Doodle Road east of I -35E), and on the Parkview Golf Course (Cliff Road just east of Pilot Knob Road). The type of devel- opment being considered is about 150+ units with congregate, assisted living, and memory care housing along with skilled care beds. Which site will be chosen, the number of units, and timing are all uncertain since the development is so preliminary and financing has not been secured. We do not subtract any of these proposed units from our demand calculations since it is so preliminary and it is located outside the PMA. Farmington The Dakota County CDA will break ground on Vermillion River Crossing on May 4, 2011. Vermillion River Crossing will be a 66 -unit affordable senior housing development located on Duschane Parkway south of County Road 50. The facility is projected to open in the summer of 2012. Since this development is located outside of the PMA, we do not subtract any units from our demand calculations. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 17 Preliminary Demand Estimate for Market Rate Adult /Few Services Housing Table 6 presents our demand calculations for market rate active adult housing in the PMA in 2010 and 2015. The market for active adult housing is comprised of older adult (age 55 to 64), younger senior (age 65 to 74) and older senior (age 75 households, with market demand weighted most heav- ily toward older seniors. In order to arrive at the potential age income- and asset qualified base for active adult housing, we include all age qualified households with incomes of $30,000 or more plus homeowner households with incomes between $20,000 and $29,999 who would qual- ify with the proceeds from a home sale. The number of qualifying homeowner households is es- timated by applying the appropriate homeownership rate, as identified in Table 3 to each age co- hort. In 2010, we estimate there are 2,091 age income- and asset qualified households in the PMA that comprise the market for active adult housing. Adjusting to include appropriate capture rates for each age cohort (0.5% of households age 55 to 64, 5.5% of households age 65 to 74, and 16.5% of households age 75 and older) results in a de- mand potential for 96 active adult housing units in 2010. We estimate that seniors currently residing outside the PMA will generate 20% of the demand for active adult housing increasing demand to 120 active adult units. Demand for outside the PMA includes parents of adult children living in the PMA, individuals who live just outside the PMA and have an orientation to the area and former residents who desire to return upon retire- ment. Demand for active adult housing in the PMA is apportioned between ownership and rental prod- uct types. Based on the age distribution of the PMA population, homeownership rates and cur- rent trends for senior ownership product in the PMA, we project that 65% of the PMA's demand will be for owner occupied active adult housing (78 units), and the remaining 35% of demand will be for rental active adult housing units (42 units). The existing supply of active adult housing satisfies some of the housing needs in the PMA. Af- ter subtracting the existing units from the demand potential (at market equilibrium, or 95% oc- cupancy), we find excess supply for -293 owner occupied units and demand for 30 rental units in 2010. No single Site can capture all of the excess demand in a PMA. Due to the current excess supply of owner- occupied senior housing, we estimate that a new project in Rosemount could not sup- port any more units. However, we estimate that a high quality site in Rosemount can capture 50% of total demand for rental units. Based on the calculations in Table 6, we find that a pro- ject in Rosemount could capture 21 active adult rental units in 2010. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 18 Table 6 MARKET RATE ADULT /FEW SERVICES HOUSING DEMAND PRIMARY MARKET AREA 2010 2015 2010 2015 Age of Householder Age of Householder 55 -64 65 -74 75+ 55 -64 65 -74 75+ of Households w/ Incomes of >$30,000' 1,145 496 311 1,529 774 395 of Households w/ Incomes of $20,000 to $29,999' 31 64 63 34 41 61 (times Homeownership Rate x 91% 95% 80% x 91% 95% 80% (equals) Total Potential Market Base 1,173 557 361 1,560 813 444 (times) Potential Capture Rate x 0.5% 5.5% 16.5% x 0.5% 5.5% 16.5% (equals) Demand Potential 6 31 60 8 45 73 Potential Demand from Market Area Residents 96 4 126 4 (plus Demand from Outside Market Area (20 24 31 (equals) Total Demand Potential 120 157 Owner- Renter- Owner- Renter Occupied Occupied Occupied Occupied (times) by Product Type x 65% x 35% x 65% x 35% (equals) Demand Potential by Product Type 78 42 102 55 (minus) Existing and Pending Active Adult Units 371 0 371 0 (equals) Pent -up Demand by Type -293 42 -269 55 (times) Percent capturable by a project in Rosemount x 0% x 50% x 0% x 50% (equals) of units supportable by a project in Rosemount 0 21 0 -28 2015 calculations define income qualified households as all households with incomes greater than $35,000 and homeowner households with incomes between $25,000 and $34,999 Existing and pending are deducted at market equilibrium, or 95% occupancy Source: Maxfield Research Inc. Adjusting for inflation, we estimate that households with incomes of $35,000 or more and home- owners with incomes of $25,000 to $34,999 would be candidates for active adult housing in 2015. Following the same methodology, we project that demand for active adult housing on a site in Rosemount will increase to 28 units through 2015. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 19 Preliminary Demand Estimate for Affordable Independent Senior Housing Table 7 presents our demand calculations for affordable independent senior housing in the PMA in 2010 and 2015. While the methodology used to calculate demand for affordable housing closely mirrors the me- thodology used to calculate demand for market rate housing, we make several adjustments to more precisely quantify demand among this market segment. The following points summarize these adjustments: Income Qualifications: The market for affordable independent rental housing is house- holds age 55+ who earn up to 80% of the Area Median Income and can afford the rents at affordable senior properties. Households earning $15,000 would be qualified for income restricted housing products, but still could afford contract monthly rents beginning at $368 (allocating 30% of their income toward housing). The income restriction for Dakota County CDA affordable housing products is currently $45,100 for a one person household and $51,500 for a two person household. We use $45,000 as the upper end of the income range and $15,000 as the lower end of the income range. We also include homeowner households earning incomes between $10,000 and $14,999, as these households would have additional equity that could be converted to monthly income following the sales of their single family homes. To account for inflation, our figures in 2015 are adjusted to include households earning incomes between $20,000 and $50,000; homeowner households with incomes be- tween $15,000 and $19,999 are included with the market potential for financially assisted housing. Capture Rates: Households in a need -based situation (either requiring services or financial assistance) more readily move to housing alternatives than those in non -need based situa- tions. Hence, the capture rate among each age group is higher than for market rate housing. Capture rates are employed at 2.0% for households age 55 to 64, 10.0% for households age 65 to 74 and 20.0% for households age 75 and older. Potential Demand Capture: Seniors in need -based situations are less selective when secur- ing housing than those in non -need based situations. We estimate that a high quality site would capture a greater proportion of total demand for financially- assisted housing than for market rate housing; hence, the potential capture rate increases to 60% for affordable inde- pendent housing. Using the methodology described above results in a demand potential for 72 affordable inde- pendent housing units in 2010. We estimate that seniors currently residing outside the PMA will generate 25% of the demand for affordable independent housing increasing demand to 96 af- fordable units. Demand for outside the PMA includes parents of adult children living in the PMA, individuals who live just outside the PMA and have an orientation to the area and former residents who desire to return upon retirement. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 20 The existing supply of affordable senior housing satisfies some of the housing needs in the PMA. After subtracting the existing units from the demand potential (at market equilibrium, or 95% occupancy), we find demand for 47 affordable units in 2010. TABLE 7 AFFORDABLE INDEPENDENT HOUSING DEMAND PRIMARY MARKET AREA 2010 2015 2010 2015 Age of Householder Age of Householder 55 -64 65 -74 75+ 55 -64 65 -74 75+ of Households w/ Incomes of $15,000 to $45,000 109 210 191 88 201 190 Plus Households w/ Incomes of $10,000 to $14,999 16 26 49 6 39 29 (times) Homeownership Rate x 91% 95% 80% x 91% 95% 80% (equals) Total Potential Market Base 124 235 230 93 238 213 (times) Potential Capture Rate x 2.0% 10.0% 20.0% x 2.0% 10.0% 20.0% (equals) Demand Potential 2 23 46 2 24 43 Total Market Rate Demand Potential 72 68 (plus) Demand from Outside Market Area (25%) 24 23 (equals) Total Demand Potential 96 91 (minus) Existing and Pending Independent Units' 42 42 (equals) Total Demand Potential in Market Area 54 49 (times) Estimated Percent Capturable by a Project in Rosemount x 60% x 60% (equals) Excess Demand Capturable by a Project in Rosemount 33 30 2015 calculations define income- qualified households as all households with incomes between $20,000 and $50,000 plus homeowners with incomes between $15,000 and $20,000. Includes existing and pending units at 95% occupancy, or market equilibrium. No additional units are planned through 2015. Source: Maxfield Research Inc. No single Site can capture all of the excess demand in a PMA. Based on Rosemount's position in the PMA, we estimate that a site in Rosemount can capture 60% of the PMA demand, result- ing in demand for 33 affordable independent senior units in 2010. Adjusting for inflation, we estimate that households with incomes between $20,000 and $50,000 would be candidates for financially- assisted independent housing in 2015. We increase the po- tential market by homeowner households earning between $15,000 and $19,999 that would have additional equity that could be converted to monthly income following the sales of their single family homes. Following the same methodology, we project that excess demand capturable by a site in Rosemount is calculated for 30 affordable independent senior housing units by 2015. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 21 Preliminary Demand Estimate for Congregate Housing Table 8 presents our demand calculations for market rate congregate senior housing in the PMA in 2010 and 2015. In order to arrive at the potential age- income qualified base for congregate senior housing, we include all senior households with incomes of $30,000 or more and homeowners with incomes between $20,000 and $30,000 who would qualify with the proceeds from a home sale (this proportion was estimated based on the homeownership rates for each age cohort). We estimate the number of age /income /asset qualified households in the PMA as of 2010 to be 918 households. Demand for congregate housing is need driven, which reduces the qualified market to only the portion of seniors who need some assistance. Thus, the age /income qualified base is multiplied by the percentage of seniors who need some assistance with Instrumental Activities of Daily Living, or IADLs," (at least three), but not six or more Activities of Daily Living (ADLs) or IADLs, as these frailer seniors would need the level of care found in assisted living. According to the Summary Health Statistics of the U.S. Population: National Health Interview Survey, 2008 (conducted by the U.S. Department of Health and Human Services), the percentage of seniors having limitation in activities of daily living (bathing, dressing, toileting, transferring, eating) and instrumental activities of daily living (using the telephone, shopping, food preparation, housekeeping, laundry, transportation, taking medication, handling finances) are as follows: Limitation in ADLs IADLs Age ADLs IADLs 65 -74 years 3.4% 6.9% 75+ years 10.0% 19.2% It is most likely that seniors who need assistance with ADLs also need assistance with multiple IADLs, and are more likely to be candidates for assisted living. The prime candidates for congregate housing are seniors needing assistance with IADLs, but not ADLs. We derive this percentage by subtracting the percentage of seniors needing assistance with ADLs from those needing assistance with IADLs, which equate to 3.5% of seniors ages 65 to 74 and 9.2% of seniors ages 75 Multiplying the senior household base by these capture rates results in demand potential for 53 units of congregate in the from the PMA. We estimate that seniors currently residing outside the PMA will generate 20% of the demand for congregate senior housing increasing total demand by 13 congregate units. This demand will consist primarily of parents of adult children living in the PMA, individuals who live just outside the PMA and have an orientation to the area, and former residents who desire to return upon retirement. Together, the demand from PMA seniors and demand from seniors who would relocate to the PMA totals 66 congregate units as of 2010. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 22 Next, existing congregate units are subtracted from overall demand. However, there are no congregate units located in the PMA. No single location or development can capture all of the demand in a PMA. Based on Rosemount's position in the PMA, we estimate that a site in Rosemount can capture 50% of the PMA demand, resulting in demand for 33 market rate congregate units in 2010. Adjusting for inflation, we have estimated that households with incomes of $35,000 or more and homeowners with incomes of $25,000 to $35,000 would qualify for market rate congregate housing in 2015. We project the age /income qualified base for congregate housing to increase to 1,257 senior households in 2015. There are no pending congregate units in the PMA. A site in Rosemount is estimated to capture 50% of PMA demand for a total of 43 market rate congregate units in 2015. TABLE 8 MARKET RATE CONGREGATE HOUSING DEMAND PRIMARY MARKET AREA 2010 2015 2010 2015 Age of Householder Age of Householder 65 -74 75+ 65 -74 75+ of Households w/ Incomes of >$30,000' 496 311 774 395 of Households w/ Incomes of $20,000 to $29,999' 64 63 41 61 (times Homeownership Rate x 95% 80% X 95% 80% (equals) Total Potential Market Base 557 361 813 444 (times) Potential Capture Rate x 3.5% 9.2% x 3.5% 9.2% (equals) Demand Potential 19 33 28 41 Potential Demand from Market Area Residents 53 69 (plus Demand from Outside Market Area (20 13 17 (equals) Total Demand Potential 66 87 (minus) Existing and Pending Congregate Units' 0 0 (equals) Total Excess Congregate Demand 66 87 (times) Percent capturable by a project in Rosemount x 50% x 50% (equals) #'of units supportable I it project in Rosemount 2015 calculations define income qualified households as all households with incomes greater than $35,000 and homeowner households with incomes between $25,000 and $34,999. 2 The potential capture rate is derived from data from the Summary Health Statistics for the U.S. Population: National Health Interview Survey, 2008 by the U.S. Department of Health and Human Services. The capture rate used is the percentage of seniors needing assistance with IADLs, but not ADLs (seniors needing assistance with ADLs typcially need assistance with multiple IADLs and are primary candidates for service intensive assisted living.). Existing and pending units are deducted at market equilibrium, or 95% occupancy. Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 23 Preliminary Demand Estimate for Assisted Living Housing Table 9 presents our demand calculations for assisted living senior housing in the PMA in 2010 and 2015. This analysis focuses on the potential private pay /market rate demand for assisted living units. The availability of more intensive support services such as meals, housekeeping and personal care at assisted living facilities usually attracts older, frailer seniors. According to the 2009 Overview of Assisted Living (which is a collaborative research project by the American Association of Homes and Services for the Aging, the American Seniors Housing Association, National Center for Assisted Living, and National Investment Center for the Seniors Housing and Care Industry), the average age of residents in freestanding assisted living facilities was 87 years in 2008. Hence, the age qualified market for assisted living is defined as seniors ages 75 and over, as we estimate that of the half of demand from seniors under age 87, almost all would be from seniors over age 75. In 2010, there were 790 seniors age 75 and older in the PMA. Demand for assisted living housing is need driven, which reduces the qualified market to only the portion of seniors who need assistance. According to a study completed by the U.S. Census Bureau (1990 1991 panels of the Survey of Income and Program Participation (SIPP) files), 30% of seniors needed assistance with everyday activities (from 19.5% of 75- to -79- year -olds, to 31.2% of 80- to- 84- year -olds and 49.5% of 85+ year olds). Applying these percentages to the senior population yields a potential assisted living market of 276 seniors in the PMA. Due to the supportive nature of assisted living housing, most daily essentials are included in monthly rental fees, which allow seniors to spend a higher proportion of their incomes on housing with basic services. Therefore, the second step in determining the potential demand for assisted living housing in the PMA is to identify the income qualified market based on a senior's ability to pay the monthly rent. We consider seniors in households with incomes of $40,000 or greater to be income qualified for assisted living senior housing in the PMA. Households with incomes of $40,000 could afford monthly assisted living fees of $3,000 by allocating 90% of their income toward the fees. According to the 2009 Overview of Assisted Living, the average arrival income of assisted living residents in 2008 was $27,260, while the average annual assisted living fee was $37,281 ($3,107 /month). This data highlights that seniors are spending down assets to live in assisted living and avoid institutional care. Thus, in addition to households with incomes of $30,000 or greater, there is a substantial base of senior households with lower incomes who income qualify based on assets their homes in particular. Eighty percent of the age 75+ households in the PMA are homeowners, and the 2010 median resale price of homes in Rosemount was $167,500. Seniors selling their homes for the median resale price would generate about $155,775 in proceeds after selling costs. With an average monthly fee of $3,000, these proceeds would last about four and a half years in an assisted living facility, which is longer than the average length of stay in assisted living (27 months according MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 24 to the 2009 Overview of Assisted Living). For each age group in Table 9, we estimate the income qualified percentage to be all seniors in households with incomes above $40,000 (who could afford monthly rents of $3,000+ per month) plus 25% of the estimated seniors in homeowner households with incomes below $40,000 (who will spend down assets, including home equity, in order to live in assisted living housing). This results in a total potential market of 170 units from the PMA in 2010. Because the vast majority of assisted living residents are single (88% according to the 2009 Overview of Assisted Living), our demand methodology multiplies the total potential market by the percentage of seniors age 75+ in the PMA living alone. Based on 2000 Census data, 58% of age 75+ households in the PMA lived alone. Applying this percentage results in a total base of 98 age /income qualified singles. The 2009 Overview of Assisted Living found that 12% of residents in assisted living were couples. There are a total of 112 age /income qualified seniors needing assistance in the PMA including both couples and singles. We estimate that roughly 60% of the qualified market needing significant assistance with ADLs would either remain in their homes or less service intensive senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility. The remaining 40% could be served by assisted living housing. Applying this potential market penetration rate of 40% results in demand for 45 assisted living units in 2010. We estimate that a portion of demand for assisted living units in the PMA (20 will come from outside the PMA. Applying this figure results in total potential demand for 56 market rate assisted living units in the PMA. There are no assisted living units located in the PMA. We preliminarily estimate that a site in Rosemount could capture approximately 60% of the PMA excess demand for a total of 34 assisted living units in 2010. The same calculations are applied to the age /income- qualified base in 2015. Due to increase growth in the senior population, total potential demand for assisted living housing on a site in Rosemount is expected to increase to 39 units through 2015. MAXFIELD RESEARCH INC. N p r. x 11 11 x II U 11 X d L o w o e o J.) c 5 o nt a 0) y M C E C O ONi rn N N z z •y M Q C V o 0 0 N v1 b M .-r G -Z N V1 N M Q v p M 7 M O O O, t■ v1 N O M N N aT R. A z d a`) ai a) A E O 5 v 7 O o too T 0 7 v �o M W z v x y x 11 II x 11 II 11 x 11 ..4W 0 d Q an o 0 aT A O E e e wwg4N a) o 0 R ..A v-, FO j Q °a C O, o F d g. N a) Gzl ye V 1:1.1) C g E 'C N o0 0 1 O r E"' cV Z z 00 N r+ C a) m a) M b c. az _N NM`n L CU 0) 0) a O M N N U C A MS cd c o, C i Nn1 i 'p e 7.)--' aQ O N 0.0 L 0 'x R CS y v N E ms O 0 a a) o A R U 5 a o o n E 0 5 ;lc Z Q 0 d a U VS t .4—, -4J N 4_ c a' g 'fl N 7„' 5 a a) u W z sl w v v 0. a' w -a O c O cd 7E O f oA w 0 q a C 5 c C cc y, c E w A N ac h W iC of N R i3 5 a6 N; W a L X ac U r o o' H H a n, v n d z Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 26 The percentage of seniors unable to perform or having difficulting with ADLs, based on the publication Health, United States, 1999 Health and Aging Chartbook, conducted by the Centers for Disease Control and Prevention and the National Center for Health Statistics. 2 Includes households with incomes above $40,000 (who could afford monthly rents of $3,000+ per month) plus 25% of the estimated owner households with incomes below $40,000 (who will spend down assets, including home equity, in order to live in assisted living housing). s The 2009 Overview of Assisted Living (a collaborative project of AAHSA, ASHA, ALFA, NCAL NIC) found that 12% of assisted living residents are couples. 4 We estimate that 65% of the qualified market needing assistance with ADLs could either remain in their homes or reside at less advanced senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility. s Existing assisted living units less units occupied by public pay residents and a 5% vacancy rate. Preliminary Demand Estimate for Memory Care Senior Housing Table 10 presents our demand calculations for market rate memory care senior housing in the PMA in 2010 and 2015. Demand is calculated by starting with the estimated PMA senior (age 65 population in 2010 and multiplying by the incidence rate of Alzheimer's /dementia among this population's age cohorts. According to the Alzheimer's Association (Alzheimer's Disease Facts and Figures, 2007), 2% of seniors ages 65 to 74, 19% of seniors ages 75 to 84, and 42% of seniors ages 85+ are inflicted with Alzheimer's Disease. This yields a potential market of 220 seniors in the PMA. Because of the staff intensive nature of dementia care, typical monthly fees for this type of housing are at least $4,000 and range upwards of $5,000 when including service packages. Based on our review of senior household incomes in the PMA, homeownership rates and home sale data, we estimate that 45% of seniors in the PMA would have incomes and /or assets to sufficiently cover the costs of memory care housing. This figure takes into account married couple households where one spouse may have memory care needs and allows for a sufficient income for the other spouse to live independently. Multiplying the number of seniors with Alzheimer's /dementia (220 seniors) by the income qualified percentage results in a total of 99 age /income qualified seniors in the PMA in 2010. According to data from the National Institute of Aging, about 25% of all individuals with memory care impairments comprise the market for memory care housing units. This figure considers that seniors in the early stages of dementia will be able to live independently with the care of a spouse or other family member, while those in the later stages of dementia will require intensive medical care that would only be available in skilled care facilities. Applying this figure to the estimated population with memory impairments yields a potential market of 25 seniors in the PMA. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 27 TABLE 10 MEMORY CARE DEMAND PRIMARY MARKET AREA 2010 2015 2010 2015 65 to 74 Population 1,090 1,520 (times) Dementia Incidence Rate' x 2% x 2% (equals) Estimated Age 65 to 74 Pop. with Dementia 22 30 75 to 84 Population 579 667 (times) Dementia Incidence Rate' x 19% x 19% (equals) Estimated Age 75 to 84 Pop. with Dementia 110 127 85+ Population 211 253 (times) Dementia Incidence Rate x 42% x 42% (equals) Estimated Age 85+ Pop. with Dementia 89 106 (equals) Total Senior Population with Dementia 1 220 263 (times) Percent Income /Asset- Qualified x 45% x 45% (equals) Total Income Qualified Market Base 99 119 (times) Percent Needing Specialized Memory Care Assistance x 25% x 25% (equals) Total Need for Dementia Care 25 30 (plus) Demand from Outside the PMA (20 6 7 Total Demand for Memory Care Units 31 37 (minus) Existing and Pending Memory Care Units 0 0 (equals) Excess Market Area Demand Potential 31 37 (times) Estimated Percent Capturable by a project in Rosemount x 60% x 60% (equals) Excess Memory: Care Demand Capturable by t project in Rosemount k:19 E 221 Alzheimer's Association: Alzheimer's Disease Facts Figures (2007) 2 Income qualified households considered 85% of seniors with incomes greater than $60,000 in 2010 ($65,000 in 2015) plus 15% of homeowners with incomes below this threshold. 3 Existing memory care units at a 5% vacancy rate. Source: Maxfield Research Inc. We estimate that 20% of the overall demand for memory care housing in Rosemount would come from outside the PMA. This secondary demand will include households currently living just outside the PMA, former residents, parents of adult children who desire supportive housing near their adult children and increasingly frail retirees returning from retirement communities. Together, demand totals 31 memory care units in 2010. Currently, there no existing memory care units in the PMA that would directly compete with the subject development. MAXFIELD RESEARCH INC. Ms. Kim Lindquist April 15, 2011 City of Rosemount Page 28 No one location or building can capture all of the excess demand in the PMA. We preliminarily estimate that a site in Rosemount could capture 60% of the excess PMA memory care demand, or 19 units, in 2010. By 2015, total excess demand for market rate memory care units in the PMA is projected to increase to 37 units. We estimate that a site in Rosemount could capture 60% of PMA demand for a total of 22 memory care units in 2015. Elderly Waiver Program Some seniors in the Market Area will need to receive supplemental income in order to afford congregate /service- intensive, assisted living or memory care housing. While some of these sen- iors 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 has provided 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 reside in the community. The Elderly Waiver cost for an individual cannot be greater than the estimated nursing home cost for that same individual. The State of Minnesota Depart- ment of Human Services operates the Elderly Waiver program under a federal waiver to Minne- sota's Medicaid State Plan and is administered individually by each county in addition to some health plan partners. Based on senior population and income data in Tables 1 and 2, we estimate that about 150 sen- iors in the PMA would income /asset qualify for the Elderly Waiver Program, initially. Estimat- ing that only 10% of these qualified seniors would need nursing home level of care and would also prefer assisted living housing over other services (such as remaining in their homes and re- ceiving home care services), we find demand for 15 units of assisted living from very low in- come seniors, initially. Projecting that a site in Rosemount could capture 60% of this demand equates to 9 units in 2010. Over time, however, some existing assisted living residents would exhaust their assets and become eligible for the program. Thus over the long term, assisted liv- ing demand from low income seniors will likely increase. MAXFIELD RESEARCH INC.