Model Study: USDA Community Facilities Direct Loan for a Rural Community Wellness Center, 602 Oak Street, Brainerd, Minnesota

A 56,000 SF nonprofit community wellness center with a six-lane natatorium, gymnasium, fitness floor and school-age child care wing, replacing a 1962 facility on a documented downtown Brainerd site, supports USDA Community Facilities direct debt of $6.0 million at 40 years; the $12.0 million proposed loan does not clear coverage without reliance on annual giving. As restructured, a $6.0 million CF direct loan at 4.750 percent (17.4 percent of the $34.4 million project cost), carried by a $25.1 million gross capital campaign collected at 92 percent, produces a stabilized 2031 DSCR of 1.07 on operations alone and 2.04 with the annual campaign; the proposed $12.0 million loan produces 0.54 and 1.02 and does not meet MMCG's 1.20 campaign-inclusive threshold. Brainerd (population 14,395 in the 2020 Census) passes the CF rural area test, the nonprofit applicant and community-facility tests, and the water-park exclusion by design. Determination: feasible as restructured; not feasible as proposed.

Model study prepared by MMCG Invest | Michal Mohelsky, J.D., FMVA | October 5, 2026

As proposed, with a $12,000,000 CF direct loan and an $18,586,957 gross capital campaign, the Project produces a Year 3 DSCR of 0.54 on operations and 1.02 including the annual campaign. That does not meet MMCG's underwriting thresholds of 1.00 operating-only and 1.20 campaign-inclusive at stabilization, and the proposed structure is not feasible.

As restructured, with a $6,000,000 CF direct loan, a $25,108,696 gross capital campaign collected at 92 percent, $4,500,000 of net New Markets Tax Credit equity, a $150,000 CF grant conditional on the grant tier test and a $650,000 contributed site, the Project produces a Year 3 DSCR of 1.07 on operations and 2.04 including the annual campaign, rising to 1.32 and 2.51 by Year 10. The restructured Project is feasible, subject to the Conditions and Limitations.

The restructuring is a smaller loan funded by a larger campaign. The gross campaign required, $25.1 million, sits inside the $30 million to $35 million range the incumbent YMCA reported its own campaign feasibility study supports (Brainerd City Council presentation, 19 May 2025). Secondary restructuring levers, not required at $6.0 million: a deferred child care wing (saving $1,575,000 of hard cost before contingency), a committed City of Brainerd $4,000,000 pool contribution (requested, uncommitted as of 15 June 2026), and a CF Relending or REDLG pledge bridge replacing commercial interim interest.

This is a model study. It applies the MMCG house format to a real, publicly documented project and site using public data only. The borrower, Brainerd Lakes Community Wellness Center, Inc., is hypothetical. No private client data and no analog from any other engagement is used.

The real project at this site is the Brainerd Family YMCA replacement facility, documented in Brainerd City Council proceedings from 19 May 2025 through 15 June 2026; the incumbent used USDA Rural Development funds on its 703 Oak Street child care center. The Project is therefore modeled as a hypothetical comparable project at the documented site, not as the actual YMCA application. Nothing in this study represents the Brainerd Family YMCA's plans, finances, membership or intentions.

Every figure carries a documentary source or is labeled MMCG assumption. Program areas, cost lines, revenue and expense lines, membership mix and ramp are MMCG assumptions calibrated to the published figure of about $34.4 million (Brainerd Dispatch, 20 January 2026) and the benchmarks named in each section. Regulatory basis: the CF direct loan program is governed by 7 CFR Part 1942, Subpart A, and CF grants by 7 CFR Part 3570, Subpart B (USDA RD program page, modified 6 August 2026); the tests at 7 CFR 5001.103 and 5001.115(b) and the Appendix A feasibility components are applied as the analytical framework. The program context is described on our gym and fitness hub and USDA feasibility page.

The method is set out in full in MMCG's feasibility study methodology.

Six rural communities with a documented YMCA or recreation capital need were screened against the CF population test, documented need and the public record.

Brainerd was selected as the only screened community with a current, multi-meeting public record, a named capital campaign figure, a documented building-condition finding, a documented school aquatic partnership and an identified site.

The Project operates as a full-service nonprofit community wellness center open to the public on a membership, day-pass and program-fee basis, with sliding-scale financial assistance, replacing the 1962 facility at 602 Oak Street on the same parcel at the corner of Sixth and Oak. The physical program is 56,000 SF gross (all MMCG assumption): a 14,000 SF natatorium with a six-lane, 25-yard lap pool and a 2,400 SF warm-water program pool; a 12,000 SF gymnasium with a 3,500 SF elevated walking track; an 8,000 SF fitness floor and two 1,500 SF studios; a 4,500 SF child care and youth wing licensed for 80 school-age children; 4,000 SF of private universal changing rooms; a 2,000 SF community room; and 5,000 SF of lobby, administration and mechanical space. Operating hours are 100 per week. Staffing is 28 full-time and 120 part-time positions, approximately 62 FTE, under five department directors (MMCG assumption). The Borrower owns the improvements on a contributed site valued at $650,000 (MMCG assumption), with a New Markets Tax Credit structure beneath the CF lien for the seven-year compliance period. The Project targets 2,500 membership units by Year 3, 8.5 percent of Crow Wing County's 29,402 households, inside the 9 percent actual and 15 percent potential household penetration reported by a YMCA feasibility study in Hendersonville, North Carolina, and positions as the primary public provider of learn-to-swim, warm-water senior programming and school-age care in the Brainerd area.

Marketing and Sales Strategy. Membership sales open nine months before opening with a founding-member presale; MMCG's underwriting condition is 1,000 signed founding units before CF loan closing. The incumbent membership base is the primary conversion pool; its size is not public. Secondary channels: Brainerd Public Schools, documented by the 8 May 2023 operating agreement for the high school aquatic center and the third-grade water safety program presented to council on 17 February 2026; Medicare Advantage fitness benefits aimed at Crow Wing County's 26.8 percent senior share; and a health-system warm-water therapy partnership modeled on the Morris, Illinois YMCA and Morris Hospital arrangement (USDA RD, 10 February 2025). Financial assistance is marketed openly at 12 percent of gross dues in a city whose median household income is $56,111.

Amenities.

Site. 602 Oak Street, at the corner of Sixth and Oak in downtown Brainerd. The incumbent's first building phase was completed in 1962 (its Mission and History page); a 19 May 2025 Dispatch report states the building has served the organization since 1967, and both dates are carried as reported. A 2002 addition added aquatics, fitness and lockers. A 2021 Widseth site study found the building at the end of its life with over $16 million in repairs required, and a real estate asset optimization study concluded the Oak Street location was best: walkable, near the high school, and on a distressed census tract the incumbent's CEO described as eligible for New Markets Tax Credits (19 May 2025). Parcel area and parcel number were not captured.

Zoning. The zoning district and any conditional use requirement were not captured. Continuous YMCA use since the 1960s and the council's repeated authorizations are consistent with an established use, a judgement rather than a zoning finding.

Utilities. Service is provided by Brainerd Public Utilities, a municipal utility (MMCG understanding; tariffs not captured). Utilities are budgeted at $340,000 in Year 3, of which $185,000 is natatorium energy (MMCG assumption). REDLG would require an RUS-financed utility intermediary; none was identified. REAP is not modeled, since its applicants are agricultural producers and rural small businesses (MMCG understanding, to be verified).

Tax status and PILOT. The incumbent identifies as a 501(c)(3). The Borrower is modeled as exempt from Minnesota property tax as a purely public charity, an assessor determination not verified. No PILOT is documented or modeled. On 6 April 2026 a council member objected that taxable fitness centers would fund the pool through their property taxes, a political fact the file should carry.

The primary service area is Crow Wing County, a proxy for the 20-minute drive time from downtown Brainerd (MMCG assumption; no drive-time polygon was run).

Sources: U.S. Census Bureau QuickFacts (V2025; ACS 2020 to 2024, 2024 dollars); Census Reporter. Counts are MMCG calculations.

Income against CF grant thresholds. The CF grant tiers test service-area median household income against the higher of the poverty line or 60, 70, 80 or 90 percent of the state nonmetropolitan median household income (SNMHI), with population caps of 5,000, 12,000, 20,000 and 20,000. Brainerd exceeds the 12,000 cap, so only the 35 and 15 percent tiers can apply. Brainerd's $56,111 qualifies for the 35 percent tier if Minnesota's SNMHI is at least $70,139 and for the 15 percent tier at $62,346 or more (MMCG calculation). USDA's Minnesota SNMHI was not found in any public document reached; the statewide ACS median of $89,062 is not the SNMHI and is not substituted. Crow Wing County's $72,589 would need an SNMHI of at least $90,736, so the city-level service area governs grant eligibility.

Membership penetration. A YMCA feasibility study presented to Hendersonville, North Carolina City Council found that nine percent of households within a 20-minute drive are members of the existing Y, with 15 percent achievable in a better facility (Hendersonville Times-News). A ForeSquare survey of 600 households for Leander, Texas (November 2024) found 7.3 percent expressing a great deal of interest and set 3,000-plus units as the self-sustaining level. Ballard King reports about 12 percent of the US population belongs to a health club and that public recreation centers attract 20 to 30 percent of a market area (Fairmont study, March 2022). Applied to 29,402 households, 2,500 units equal 8.5 percent penetration, below the Hendersonville actual. Seasonal lake residents are upside and not modeled.

Market size. Ballard King states centers able to cover operating expenses generally need a service population of at least 50,000 (Sherwood study, 30 January 2017); Crow Wing County's 69,132 residents meet that threshold.

Aquatics. Ballard King's 16.9 percent swimming participation rate applied to Crow Wing County yields about 11,700 swimmers (MMCG calculation). The incumbent's CEO told council many local children cannot swim despite the lakes (19 May 2025). The Project models 2,000 lesson enrollments plus a school water safety contract (MMCG assumption).

Child care and youth. The incumbent added 24 infant, 42 toddler and 47 preschool spots in 2024 to address a local shortage; the Project serves 80 school-age children and does not duplicate that center (MMCG assumption).

Senior wellness. Crow Wing County has about 18,527 residents aged 65 and over, and the incumbent publishes an insurance membership options page. The Project models 600 insurance-benefit participants, 3.2 percent of county seniors (MMCG assumption).

Partnerships. The school partnership is documented by the 8 May 2023 high school aquatic agreement, with public lap swim from 5 September 2023. A hospital partnership is not documented; Essentia Health St. Joseph's Medical Center is in the Brainerd area, and the $120,000 partnership line is an MMCG assumption supported by the Morris and Keene precedents. It is removed in sensitivity.

Pricing for Competitors 2 through 4 is primary-verified from operator websites on 5 October 2026; the incumbent's rates are from its own website; Competitors 5 and 6 are carried from directory listings; Competitor 7's pool facts are carried from Brainerd Dispatch reporting.

Competitor Number 1: Brainerd Family YMCA (incumbent facility on the subject site). Full-service YMCA with lap pool, gymnasium and weight room; first phase 1962, aquatic addition 2002; 602 Oak Street. Pricing: monthly dues $28 youth, $43 young adult, $66 adult, $54 senior, $79 adult plus one, $76 one-adult family, $89 family; $70 enrollment fee; day passes $8 to $25.

Competitor Number 2: Planet Fitness Brainerd. Low-price commercial gym in the Westgate Mall, 14136 Baxter Drive, Baxter. Pricing: $15 per month with a 12-month commitment, $20 without, Black Card $24.99; $49 annual fee.

Competitor Number 3: Anytime Fitness Brainerd. 24-hour franchise club, 302 5th Avenue NE. Pricing: day pass $15, week pass $45; monthly rates not published.

Competitor Number 4: Anytime Fitness Baxter. 24-hour franchise club, 14091 Baxter Drive. Pricing: $19.99 biweekly on a 12-month plan; $407.77 for six months paid in full.

Competitor Number 5: Snap Fitness Brainerd. 24-hour franchise club, 1313 South 6th Street. Pricing not published.

Competitor Number 6: Takedown Gym. Martial arts and fitness gym, 17192 State Highway 371, about 12 years in business per directory. Pricing not published.

Competitor Number 7: Brainerd High School Aquatic Center. Eight-lane competition natatorium from the 2018 bonding referendum, dedicated 4 May 2022. Public lap swim 6:00 to 8:00 a.m. weekdays via YMCA-issued passes; price not published. A partner asset for meets; the Project's design is complementary.

Competitor Number 8: Hotel and resort water features. Commercial lodging water parks and indoor pools in Baxter and the Gull Lake area. Pricing not published; these commercial products confirm the Project avoids the water-park niche.

Supply finding. The market holds $15 to $25 per month commercial fitness, 24-hour franchise clubs and one public competition pool with limited public hours. No facility combines learn-to-swim, warm-water therapy, a gymnasium, school-age care and financial assistance; the Project competes on that combination, not on price.

Stabilized-year (2031) rates run about 7 to 8 percent above the incumbent's October 2026 rates (MMCG assumption).

Financial assistance at 12 percent of gross dues yields about $840 net per unit per year (MMCG assumption): gross dues $2,386,000, assistance $286,000, net $2,100,000 in Year 3.

The annual campaign escalates 3 percent a year (MMCG assumption) and is held below operating revenue so the lender reads operating coverage on its own.

Ramp is an MMCG assumption; Ballard King states the first true benchmark year is the third full year of operation.

Location: 602 Oak Street, Brainerd, Crow Wing County, Minnesota 56401 Size in SF (Gross): 56,000

Source: Marshall & Swift CoreLogic, MMCG

Loan Assumptions (restructured): LTC 17.4 percent; a $6,000,000 CF direct loan at 4.750 percent (the CF market rate posted for 1 April to 30 September 2026, the latest available), 40-year level amortization, $335,347 annual debt service; equity of $28,400,000 (campaign net $23,100,000, NMTC $4,500,000, land $650,000, CF grant $150,000). Proposed: LTC 34.9 percent; $12,000,000 at the same rate and term; $670,693 annual debt service; equity $22,400,000.

Cost benchmarks. The $34,400,000 total is anchored to the roughly $34.4 million campaign figure reported 20 January 2026. All-in cost of $614.29 per SF compares with $491 per SF for the Ottawa, Illinois YMCA CF precedent (a $27.5 million, 56,000 SF project built with a $12.8 million CF direct loan plus $1 million of REDLG; USDA RD, 29 November 2024). Hard cost of $483.13 per SF exceeds a 2026 online recreation-center guide range of $180 to $420 per SF, reflecting the 24 percent natatorium share, demolition and the northern climate. For scale, the City of Marshall, Minnesota accepted outdoor aquatic center bids of about $14.87 million against a $19.17 million budget on 26 March 2025.

Interim and relending. CF direct loans customarily take out an interim construction loan; the model carries $800,000 of capitalized interest on about $14 million of interim and pledge-bridge financing at 6.5 percent (MMCG assumption). A REDLG loan of up to $1,000,000, mirroring Ottawa's through Corn Belt Energy, or a CF Relending loan through a CDFI, as CEI's $2.46 million first Relending loan financed the Central Lincoln County YMCA in Maine, could replace part of that bridge; neither is in the base stack.

Campaign test. The restructured stack needs $25.1 million of gross pledges, 72 to 84 percent of the $30 million to $35 million the incumbent reported its campaign study supports (19 May 2025). That study is not public.

City contribution. On 6 April 2026, Baker Tilly told the council a $4,000,000 GO tax abatement bond would carry preliminary true interest costs of roughly 3.4 percent (10-year) to 4.15 percent (20-year), with $495,500 of average annual debt service on the 10-year term and a levy increase of about 4.15 to 6.66 percent. The council voted 5 to 2 to continue and directed referendum language; on 15 June 2026 it received the YMCA's letter that a referendum is not desirable, and the Dispatch reported the YMCA's intent to pause the discussion on city participation, with the council discontinuing funding talks for the time being. If committed, the contribution would cut the CF loan to $2.0 million (MMCG calculation).

Determination under the program. As proposed at $12.0 million, the Project meets eligibility but fails financial feasibility at 0.54 operating DSCR. As restructured at $6.0 million, it meets eligibility and financial feasibility. A deferred child care wing, a phased natatorium and the city contribution are further restructurings not required at $6.0 million.

Ballard King reports nearly 65 percent of recreation-center operating costs are personnel; the Project's 72.4 percent reflects licensed child care. Natatorium energy is 54 percent of utilities.

Cost recovery. Revenue of $3,787,000 against operating expenses of $3,315,000 is 114.2 percent recovery before reserve and 110.5 percent after. Ballard King reports rural recreation centers recover 50 to 75 percent and urban market-priced centers 70 to 100 percent, with the Sherwood YMCA reported at 100 percent. The Project exceeds the range because YMCA-style dues and child care fees replace subsidized municipal pricing, which is why debt is sized to an operating DSCR near 1.07 and coverage is also shown with the campaign.

Restructured case; figures in thousands; 3 percent escalation after Year 3 (MMCG assumption).

The Year 1 shortfall of about $262,000 is funded from the $500,000 working capital reserve. From Year 3 the restructured case covers debt service from operations alone; the proposed case does not reach 1.20 campaign-inclusive coverage until Year 9.

Each unit contributes about $780 per year net of variable cost (MMCG assumption).

Year 3, restructured unless noted.

The restructured case holds campaign-inclusive coverage above 1.00 in every sensitivity except membership 25 percent below forecast. Operating-only coverage falls below 1.00 in every downside, so the annual campaign and the working capital reserve are underwriting requirements, not comforts. Membership volume dominates: a 15 percent shortfall removes $292,500 of NOI, more than six times the energy sensitivity.