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HomeMy WebLinkAbout11-8-01 EXECUTIVE SUMMARY - BEST/BENSON FROM FAEG$vE.8' t;ENSON (THU) 11. 8' 01 14:53/ST. 14:45/NO. 4862015316 P 1 - -01 FAEGRE & BENSON LLP 2200 WELLS FARGO CENTER, 90 SOUTH SEVENTH STREET MINNEAPOLIS, MINNESOTA 55402-3901 FAX CENTER TELEPHONE 612-766-1650 FACSIMILE 612-7 66-1600 FACSIMILE TRANSMISSION FROM: Steven C. Likes TELEPHONE: 612-766-8057 DATE: November 8, 2001 TIME: 2:35 p.m. (Minneapolis) .—._.._._._—...__..-- NUMBER OF PAGES (including this page): 5 F&B FILE: 234879 REC: 0672 TO: James Christoffel TELEPHONE: (651) 224-0244 Christoffel & Elliot, P.A. FAX— (651) 2240550 James Cooper and Shawn Beus TELEPHONE: (651) 636-5530 Orono Senior Housing, LLC FAX: (651) 633-0312 Ronald Moorse and Michael Gaffron TELEPHONE: (952) 249-4600 City of Orono FAX: (952) 249-4616 David Juran, Ralph McGinley and Byran H. Nelson TELEPHONE: (763) 847-7327 Miller Johnson Steichen Kinnard, Inc. FAX: (763) 847-7328 Craig Siiro TELEPHONE: 952-351-4796 FAX: 952-835-5845 Carolyn Drude —�—� TELEPHONE: 651-697-8506 FAX: 651-697-8555 Catherine Courtney _ T TELEPHONE: (612) 341-9735 Best &Flanagan LLP Y-� FAX: (612) 339_5897 MESSAGE IF YOU DO NOT RECEIVE ALL PAGES. PLEASE CALL THE FAX CENTER AT 612-76G-1650 OR SANDRA NAGEL AT 612-766-8305. N TO WHOM IT IS ADDRESSED, AND MAY THIS TELINFYORMATION IS INTENDEDO ONLY VTHE USE CONFIDENTIAL OAND EXEMPT FROM DISCLOSURE UNDER CONTAIN INFORMATION THAT IS PRIVILEGED, APPLICABLE LAW. IF YOU ARE NOT THE INTENDED RECIPIENT, YOU ARE HEREBY NOTIFIED THAT ANY DISSEMINATION, DISTRIBUTION, OR COPYING OF THIS COMMUNICATION IS STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE IMMEDIATELY NOTIFY US BY TELEPHONE AND RETURN THE ORIGINAL MESSAGE TO US AT THE ABOVE ADDRESS VIA THE U.S. POSTAL SERVICE. THANK YOU. Minneapolis Denver Des Moines London Frankfurt Shanghai FROM FAEG4E '& BZNSON (THU) 11. 8' 01 14:53/ST. 14:45/NO. 4862015316 P 2 F.3.01\11 BEST FLANAGAN (THU) 111. 8' 01 9:44/ST. 8:43/NC. 4863199133 ? 2 . EXECUTIVE SUMMARY Project Description The proposed independent senior housing project on the subject property will contain 62 inde- pendent senior housing units_ • Current plans for the subject property call for 37 one-bedroom units, 22 of which will have a den. The remaining 25 units will consist of 15 two-bedrooms and 10 two-bedrooms with a den. Unit sizes for the one-bedrooms will be 725 square feet, and 925 square feet for one- bedrooms with a den. Two-bedroom units will come in two sizes, 975 and 1,050 square feet, and two-bedrooms with a den will also come in two sizes, 1,150 and 1,250 square feet, • Of the 62 units proposed on the subject property, a total of 48 units will be market rate,with the remaining 14 units priced affordably. The 14 affordable units are restricted to households at or below 50%of the Metro Area median income. Affordable one-bedroom units will rent for$616, or $0.85 per square foot, and one-bedroom units with a den will rent for$738 per month, or 50.80 per square foot. * One-bedroom market rate units will rent for$875 per month,or$1.21 per square foot; one- bedroom units with a den will rent for $1,050 per month, or$1.14 per square foot; small two- bedroom units will rent for $1,100 per month,or$1,13 per square foot; large two-bedrooms will rent for$1,250 per month, or$1.13 per square foot; small two-bedrooms with a den will be $1,435, or$1.25 per square foot; and large two-bedroom units will rent for$1,600 per month, or $1.28 per square foot. Site Analysis Several factors contribute to the Site being suitable for senior housing development: • The access and topography are favorable. The Site is located within three blocks of the main intersection in Downtown Long Lake, and is located along a major thoroughfare, Highway 12. The planned by-pass ofHighway 12 around Long Lake will reduce traffic in front of the Site, but accessibility to Downtown Long Lake will actually improve due to reduced conges- tion. The topography is favorable; it is gently sloping,but not enough to pose grading or other slope-related problems, and is instead an amenity. • Planned upgrades and potential redevelopment to Downtown Long Lake will focus•the City more towards the park and open space along the shore of Long Lake. This enhances the City's overall character and desirability. • The surrounding land uses provide several convenient retail and service options to residents on the Site. MAXFIELD RESEARCH WC. FROM FAEGNE '&'BENSON (THU) 11. 8' 01 14:53/ST. 14:45/NO. 4862015316 P 3 RCM BEST & FLANAGAN ;THU; i 1. 8' 01 8:44/ST. 8:43/NC. 4863199183 ? 3 . EXECUTIVE SUMMARY Demographic Analysis The proposed 62-unit senior housing project is located in the City of Orono,but is more associ- ated with the City of Long Lake, due to its proximity to that City's Downtown, located two blocks to the east. Long Lake is a small city located at the fringe of the Twin Cities western suburbs. Long Lake is located on the western shore of the lake of the same name, and according to the 2000 Census, is home to 1,842 persons. � % � �e CSS , / • A diverse array of large employers is located within th Study The Interstate 394/494/ Highway 12 interchange is a very desirable location for o:•c . oximity to Lake Minne- tonka and its upscale residential areas,combined with freeway links to the entire western Metropolitan Area, give the Study Area an advantage for companies in search of a Twin Cit- ies office location. • The Study Area's largest employer,Prudential,is located in Plymouth, and has 3,500 em- ployees. Cargill. the nation's largest private company,is located in Minnetonka. Carlson Companies' headquarters is at the Interstate 394/494/Highway 12 interchange. • The Study Area is also a short to moderate commute time from the employment centers located farther south in Minnetonka and Eden Prairie. The employment concentrations lo- cated along the I-494 ring in the Southwest Metropolitan Area amount to a significant nurn- ber of the jobs in the Twin Cities. This combined with the concentration of jobs in Down- town Minneapolis, located 15 miles east of the Study Area,make the Study Area a desirable place to reside with regard to employment proximity. • The 0 Study Area experienced substantial employment growth during the 1990s, adding over 22,900 jobs, an increase of 26%. Minnetonka and Plymouth have the largest number of employers, as they arc geographically larger, and are also located along Interstate 494 and bisected by 1-394. • Employment is projected to grow by an additional 11,000 jobs (10%)in the Study Area between 2000 and 2010. Much of the growth is anticipated to occur in Minnetonka and Ply- mouth, but will taper slightly due to these Cities'diminishing supply of vacant land_ Population and Household Growth Trends • The Study Area bad an overall population of 101,045 in 1990. That number grew 19.1%to 120,359 as of 2000. It is anticipated that the Study Area will add at least another 6,100 peo- ple by 2010, a gain of 5%. • As of 2000,there were an estimated 46,700 households in the Study Area, an increase of 8,800 households(23%) from 1990. Over the next decade,household growth will likely ta- per per somewhat, with a projected increase of nearly 6,000 households (13%). QLD RESEARCH INC, 2 FROM FAEGRE•&'ORNSON (THU) 11. 8' 01 14:53/ST. 14:45/NO. 4862015316 P 4 F?OM*BFST & FLANAGAN ;Tru'; 11 8' 01 8 44/ST. 8 4;, :VC. 4863199/83 ? 4 J - EXECUTIVE SUMMARY • In 1990, the Study Area had a total of 14,519 persons and 8,755 households ages 55 and over. The Study Area experienced substantial growth in the older adult base between 1990 and 2000. During this period, the Study Area saw its older adult base grow by 8,217 persons and 4,397 households, growth rates of 57% and 50%,respectively. • Growth in the Study Area's older adult base is forecast to remain fairly constant in the coming years. Between 2000 and 2005, the Study Area is forecast to add 5,861 older adults (+21%) and 3,063 older adult households(+23%)_ Much of the growth will occur in the age 55-64 cohort, due to the baby boomer generation aging into their mid-SOs. While most of the demand for independent senior housing comes from households between the ages of 65 and 80, in recent years,we have seen increasing numbers of households between the ages of 55 to 64 also consider alternative housing. Older Adult Income Distribution and Household Tenure 4E24 • • As of 2000,households age 55 to 64 had a median income of$91,608 versus $46,742 for households age 65 to 79 and 334,241 for households age 80 and older. • In 1990, roughly 80 percent of Study Area older adult households(6.62.5 households)owned their homes. • As seniors age, they may no longer desire, or be able, to maintain their single-family homes. They may prefer to move to housing that offers them greater freedom from maintenance and/or offers them support services. Seniors typically begin to consider moving into rental housing in their early 70s. As of 1990,roughly 88%of households age 55 to 64 owned their housing compared to 82%of households age 65 to 74 and only 60%of older seniors (age 75 and over). Competitive Marker Analysis over-a /I - Se • The ental market in the Cie Study Area has a current vacancy rate of 3.7%. This is a higher vacancy rate than recent times, due in part to less job transfers to the area, a small but moderate number of layoffs, and the desirability for renters to choose locations closer to Downtown Minneapolis, such as Uptown. • Presently, there are four non-subsidized independent senior housing developments with a total of 472 units in the Study Area. Two of the projects,containing 133 units, are located in the City of Plymouth. The remaining two,with 339 units, are located in Minnetonka. • A survey of the • i• • titive develo i ments conducted by our firm revealed only 4 vacant units as •' une 001, a vacancy rate of only 0.8°2)Nearly all buildings surveyed also re- ported they had : bstanhal waiting listsTCurrently, additional 20 units would used to be- come vacant ju t to reach the 5%market equilibrium vacancy rate, /ddYq 1S . _ w MAXFIELD RESEARCH INC. 3 FROM FAEGRE• &' BENSON (THU) 11. 8' 01 14;53/ST. 14:45/NO._ 8 X01516 P 5 (THU) i ' 8' 01 3:44/5'", 8:43/NC. 4�b��y�i�. 7 FROM BEST & FAVAGA�` .� .. EXECUTWE SUMMARY • Four senior developments provide affordable units towmoderate-income holds_ In total, — there are 386 units of affordable senior housing m t. but is coni a �.jeeel. One of the four comparables is actually located outside the Study Area, compa- - Regardless,it is these four developments that will - rabic in amenities and services provided. �' be most comparable to the affordable component of the subject ddevelopment. Overall, af- fordable units account for 37% of the comparable units • No affordable units were reported vacant at the time of our survey, to a vacancy • 9 translating I vacancy y /ne die rate of 0.0%. • WAe,, potential development of 235 additional mark -rate independent senior We are aware of the P years. However,only Inc � o' i- udder con- units in the Study Area over the next few willettend to con- struction. Furthermore, the location of two of these developments,dPlymouth,e, if all three de- velopments a large share of their residents from outside Study velo ents were to come online by 2005,they w uld only satisfy 115 units of demand in the pm Study Area. n�'�/ e ®a //�� va/fr �4 e �G�� Q�d.hoh���to D b 4,;� pose Conclusions and"posed ? • We believe that an independent senior rental development could be very successful on the proposed Site. Our research showed that pent-up demand currently exists for additional in- dependent senior housing in Orono and the Site's location is very desirable,especially after Highway 12 is rerouted and the Site's street frontage receives less traffic. • Based on our demand estimates,we believe the proposed 62-unit devsop how ocu der, wbee successful as proposed. The rents are in line with consumer expectations, would suggest consideriDB slightly larger units (at the deveast elopment. O�research has shoe units) in order wn maximize the current and future marketabilitythe own that developers have been very successful with large floor plans in larger amber ize of units has been steadily increasing. The unit mix is appropriate, plus dere of two-bedroom units could be supported, as could slightly largone-bedroom� ties me units, including one and one-half bathrooms- The unit features and enclosed parking S� competitive,with central air-conditioning,in-unit washers and dryers /y allis ane w, Ci v as the most requested amenities from this target market. &A/Vie.)or-e/,'\ Qs-Aopa� . A god? .t � e believe the market rate units could reac35. Under the recommended development cone a rate of 6 to 8 twits Per month) stabilized occupancy(95%) in 6 to 7 mon •- of opening with a strong marketing effort,with 30% of the units pre-leased. The affordable units could reach stabilized occupancy within 1 to 2 months,and could potentially entirely be pre-leased, due to low vacancy , rates for affordable product of this type. The above absorption.rate as- will lathy yield a slightly �, 7 sume- a • -•_ or summer openut: bile a fall or winter openingsincedthesegarc a , slower raze of abso ,•tion_ 'e recommend a spring or early summer opening, periods. Other competitive developments that would be coming the prime home-se g p on absorptio on- line at the same ' •e as the proposed development would also have an impact rates. -a,,, 1 ? pt9/n MAX/11D RESEARCH INC. FR(?Ni BEST & FLANAGAN (WED) 11, 7' 01 17:01/ST. 16:57/NO. 4863201824 P 1 FACSIMILE TRANSMITTAL SHEET BEST & FLANAGAN LLP 4000 U.S. Bank Place 601 Second Avenue South Minneapolis, MN 55402-4331 (612) 339-7121 Facsimile: (612) 339-5897 Date: November 7, 2001 Facsimile No: Tele hone No: Jim Christoffet 651-224-0550 651-224-0244 Deliver To: Steve Rosholt and 766-1600 766-8729 Steve Likes Jim Cooper and 651-663-0312 651-636-5530 Shawn Beus Ronald Moorse and 952-249-4616 952-249-4600 Michael Gaffron Carolyn Drude 651-697-8555 651-697-8506 David Juran, Ralph 763-847-7328 763-847-7327 McGinley and Bryan Nelson Craig Siiro 952-835-5845 952-351-4796 From: Catherine J. Courtney This facsimile consists of 5 pages, including this cover sheet. Message: Please find attached for your review the market study executive summary from Maxfield, which is intended to be attached to the POS. All documents and/or information contained in nt named' ile above�f y°ala''e not the are confidential and intended ONLY for the p intended recipient, please deliver to the recipient. If you have rec�ry received r facsimile a disposal itothe in error, please notify us immediately by telephone to arrange for infornmation. Thank you. Yes x No Original to follow by mail:Client ##: 15477 Matter #: 202793 Facsimile Operator: IF THERE ISA PROBLEM WITH TRANSMISSION, PLEASE CALL OUR OFFICE AT (612) 339-7121. CJC\8\219\167507WAx FPOM BEST & FLANAGAN (WED) 11. 7' 01 17: 01/ST. 16:57/NO. 4863201824 P 2 EXECUTIVE S UIVIlVIAR'Y - Project Description The proposed independent senior housing project on the subject property will contain 62 inde- pendent senior housing units. • Current plans for the subject property call for 37 one-bedroom units, 22 of which will have a den. The remaining 25 units will consist of 15 two-bedrooms and 10 two-bedrooms with a den. Unit sizes for the one-bedrooms will be 725 square feet, and 925 square feet for one- bedrooms with a den. Two-bedroom units will come in two sizes, 975 and 1,050 square feet, and two-bedrooms with a den will also come in two sizes, 1,150 and 1,250 square feet. • Of the 62 units proposed on the subject property, a total of 48 units will be market rate,with the remaining 14 units priced affordably. The 14 affordable units are restricted to households at or below 50% of the Metro Area median income. Affordable one-bedroom units will rent for $616, or $0.85 per square foot, and one-bedroom units with a den will rent for $738 per month, or $0.80 per square foot. • One-bedroom market rate units will rent for $875 per month, or $1.21 per square foot; one- bedroom units with a den will rent for $1,050per er month or$1.14 per square foot; small two- bedroom units will rent for $1,100 per month, or$1.13 per square foot; large two-bedrooms will rent for S1,250 per month, or$1.13 per square foot; small two-bedrooms with a den will be $1,435, or $1.25 per square foot; and large two-bedroom units will rent for $1,600 per month, or$1.28 per square foot. Site Analysis Several factors contribute to the Site being suitable for senior housing development: • The access and topography are favorable. The Site is located within three blocks of the main intersection in Downtown Long Lake, and is located along a major thoroughfare,Highway 12. The planned by-pass of Highway 12 around Long Lake will reduce traffic in front of the Site, but accessibility to Downtown Long Lake will actually improve due to reduced conges- tion. The topography is favorable; it is gently sloping,but not enough to pose grading or other slope-related problems, and is instead an amenity. • Planned upgrades and potential redevelopment to Downtown Long Lake will focus-the City more towards the park and open space along the shore of Long Lake. This enhances the City's overall character and desirability. • The surrounding land uses provide several convenient retail and service options to residents on the Site. 1 MAXFIELD RESEARCH INC. FROM BE-ST & FLANAGAN (WED) 11. 7' 01 17:01/ST, 16:57/NO. 4863201824 P 3 EXECUTIVE SUMMARY Demographic .Analysis ect is located in the City of Orono,but is more associ- The proposed 62-unit senior housing prof to that City's Downtown, located two ated with the City of Long Lake, due to its proximity blocks to the east. Long Lake is a small city located at the fringe of the Twin Cities western s. Lon Lake is located on the western shore of the lake of the same name, and according suburb S to the 2000 Census, is home to 1,842 persons. large employers is located within the Study Area. The Intersatee 39994/ A• diverse array interchange of i desirable location for offices. Proximity to L Highway 1 Z is a very the western Minne- tonka and its upscale residential areas, combined with freeway links to search entireof a Twin Metropolitan Area, give the Study Area an advantage for comp Cit- iesanies in office location. The Study Area's largest employer,Prudential, is located in Plymouth, and has 3,500 em- ployees.• is located in Minnetonka. Carlson Cargill,the nations largest private company, Companies'headquarters is at the Interstate 394/494/highway 12 interchange. ent • The Study Area is also a short to moderate commute time from he e ploc n entcy ions lo- ters located farther south in Minnetonka and Eden Prairie. Gated along the 1-494 ring in the Southwest Metropolitan wiitth�h�e nce�tmta ion of significant fiu'Down- town ownum- ber of the jobs in the Twin Cities. This combinedArea, make the Study Area a desirable town Minneapolis, located 15 miles east of the Study place to reside with regard to employment proximity- owth during the 1990s, adding The Orono Study Area experienced substantial employment grow over 22,900 jobs, an increase of 26%. Minnetonka and Plymouthhave the largest number of employers, as they are geographically larger, and are also located along Interstate 494 and bisected by 1-394. • Employment is projected to grow by an additional 11,000jobs (10%)ccur in Study Area Ply- mouth, 2000 and 2010. Much of the growth is anticipatedsu 1 of vacant]and• mouth, but will taper slightly due to these Cities' diminishing supply Population and Household Growth Trends w • The Study Area had an overall population of 101,045 in 990. hat,number r grew 619.1 to 120,359 as of 2000. It is anticipated that the Study Area peo- ple by 2010, a gain of 5%. As of 2000, there were an estimated 46,700 households in the Study Area, an increase of 8,800 households (23%) from 1990. Over the next decade, household growth will likely ta- per somewhat,with a projected increase of nearly 6,000 households (13%). 2 M1 ) 1ELD RESEARCH INC. F ..M HST & FLANAGAN (WED) 11, 7' 01 17: 03/ST. 16: 57/NO. 4863201824 P 4 EXECUTIVE SUMMARY • d Area had a total of 14,519 persons and 8,755 households base betweens 55 1990X990 d In 1990,. ThetStudye Study experienced.substantial growth in the persons aoner. Area exp Area saw its older adult base grow by 8,217P and 2000. During this period,the Study ectively. and 4,397 households, growth57%rates of and 50%,resp • Area's older adult base is forecast to remain fairly constant in the Growth in the StudyArea is Forecast to add 5,861 older adults coming years. Between 2000 and 2005, theouch of the growth will occur in the age (±21%) and 3,063 older adult households (+23%).binto them mid-50s. While most of the due to the baby boomer generation aging 55-64 cohort, demand for independent senior housing comes from households between the ages of 65 and t ears,we have seen increasing numbers of households between the ages of 55to SU, in recon y 64 also consider alternative housing. Older Adult Income Distribution and Household Tenure $46,742 for 608 As of 2000,households age 55 to 64 had a median income 80o$9 older versus • households age 65 to 79 and$34,241 for households age gppercent of Study Area older adult households (6,625 households)owned • In 1990,roughly P their homes. homes. longer desire, or be able,to maintain their single-family • As seniors age, they may no freedom from maintenance mayprefer to move to housing that offers them greater They typicallybegin to consider moving into rental and/or offers them support services. Seniors roughlyage 55 to 64 owned their of 1990, 88%of households housing in their early 70s. As60% of older seniors (age 75 housing compared to 82%of households age 65 to 74 and only and over). Competitive Market Analysis • market in the Orono Study Area has a current vacancyb trrate s of t3.7 area, aiis s is abut rentalart to less jo higher vacancy rate than recent times, due in part moderate numberfor renters to choose locations closer to af layoffs, desirability olissuch a [Jp own Downtown Minnea • Presently, there are four non-subsidized independent senior housing developments with a total of 472 units in the Study Area. Two of the projects, containing 133 units, are located in ts, are located in Minnetonka. the City of Plymouth. The remaining two, with 339 uni A survey of the competitive developments conducted by our firer revealed only 4 vacant • units as of June 2001, a vacancy rate of only 0.8%. Nearly all buildings surveyed also re- ported they had substantial waiting lists. Currently, additional 20 units would need to be- come vacant just to reach the 5%market equilibrium vacancy rate. 3 MAXFIELD RESEARCH INC. FROM BEST & FLANAGAN ( 1ED) 11. 7' 01 17:03/ST. 16:57/NO. 4863201824 P 5 EXECUTIVE SUMMARY provide affordable units to moderate-income households. In total, • Four senior developmentsa Qne of Aren but the rthere are 386 units of affordable senior housing a��Ou�i�the ill pro- jects. One of the four comparables is actually loRegardless, it is these four developments that w compa- rable in amenities and services provided. Reg bemostcop comparable to the affordable component of the subjec deVelopment. Overall, af- fordable units account for 37% of the comparable units i en affordable units were reported vacant at the time of our survey, translating to a vacancy No• aff rate of 0.0%. potential• the ofdevelopment of 235 additional market-rate independent senior We are aware years- However, only one project is under con- units in the Study Area over the next few in Doth, will tend to struction. Furthermore,the location of two of outside ourStudy AreaS,Therefore, if all.three�a�,�, a large share of their residents from outs sates 115 units of demand in the de- velopments were to come online by 2005, they would only satisfy Study Area. Conclusions and Recommendations successful on the We believe that an independent senior rental development could be erye exists for additional • proposed Site. Our research showed that pent-up demand currently in- dependent senior housing in Orono and the Site's location is very desirable, especially after Highway 12 is rerouted and the Site's street frontage receives less traffic. estimates,we believe the proposed 62-unit development could be • Based on our demandexpectations, however, we successful as proposed. The rents are in line with consumer exP in suggest considering slightly larger units (at least in the market ratOur e units) has ser to wouldxgg of the develop maximize the current and future marketability number hown have been very successful with large floor plans in recent years and the size that developersThe unit mix is appropriate, although a larger of units has been steadily increasing• den The unit features and building of two-bedroom larger one-bedroom plus den edroom units could be supported, as could slightlyamenities units, including one and one-half bathrooms•in-unit washers and dryers and enclosed parking competitive, with central air-conditioning, et market.the most requested amenities from this targ • rke er the reco mmended development concept,we believe thea a 6 tot Ste units per could rreach stabilized occupancy (95%)in 6 to 7 months of opening(a rat marketing effort,with 30% of the units pre-leased. The aefo da bleb unitspre-leased, could withaa strong mar g reach stabilized occupancy within 1 to 2 months, and could potentially tion rate as- sumesrates for affordable product of this type. The above likely absabsorption a slightly low vacancy ocy while a fall or winter opening yield thesegarc a spring or summer opening, or early summer opening, simmer o would sincebe coming ar slower rate of absorption. We recommend a spring tion n- the prime home-selling periods. Other competitive developments on absorption line at the same time as the proposed development would also have an impact rates. 4 y.AXF1ELD RESEARCH JNC.