HomeMy WebLinkAboutCD New 120-Residential Unit Mixed-Use Building - 703-723 Third Street (PPT 3)City of San Rafael
703 Third Street Financial Analysis
October 7, 2019Seif el
CO NSU LTIN G IN C.
Presentation Outline
1.Overview of 703 Third Street Program
2.Financial Feasibility Framework
3.Development Costs
4.Development Revenues
a.Affordable Mix for Each Scenario
b.Income Levels and Affordable Rents
5.Differences in Potential Value
Among Scenarios
6.Findings from Financial Analysis
1
703 Third Street Apartments
Key Program Assumptions
2
Project Characteristics
Parcel Size .63 acres
Base Case
Proposed Project
61 units
120 units
Parking Ratio 1 space/unit
Typical Average Unit Size 680 NSF
Affordable Housing–
Target Income Levels
VLI at 50%
LI at 70%
Mod at 120% AMI
Percent Below Market Rate 20% of Base Density
Plus Additional Units
Market Rate Rent /Month About $3,200
3
Development Feasibility –
Project Value Compared to Development Costs
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Developer Margin
Government Fees
Other Soft Costs
Construction Financing
Parking Construction
Hard Construction Cost
Demolition and Site
Improvements
Land
Developer Margin
Project
Costs
Supportable
Project Costs
Project Value
Financial Feasibility –
Need to Achieve Sufficient Margin/Profit to Proceed
4
0%
20%
40%
60%
80%
100%
Development Cost
Developer Margin/Profit
Development Value
Must achieve
sufficient margin/profit
to proceed
■
■
■
Overview of Development Scenarios
•Base Case
–61 units under existing zoning
•Proposed Project
–120 units based on revised Applicant submittal
•Alternative 1
–120 units with same building configuration and units
as Proposed Project with additional affordable units
5
Residential Hard Construction Cost
(by Construction Type)
6
Number of Stories Construction Type Cost
2 to 5 stories Wood Frame (Type V )Least Expensive
4 to 6 stories Type V over Podium
5 to 7 stories Type V or Type III over
Podium Parking or
Below Grade Parking
8+stories Type I Over Below
Grade Parking
Most Expensive
Factors Affecting Construction Costs
at 703 Third Street
•Tight urban infill site
•High construction costs
•FEMA flood plain,
requiring higher base elevation and height
•Upgraded design features including balconies,
step back of upper floors, extensive roof deck,
high-quality exterior finishes and materials, plus
high-ceiling height on ground floor.
7
Comparison of Development Cost
(Before Developer Margin)
8
Base Case Proposed Project Alternative 1
Other Soft Costs
Public Fees
Construction Cost
Land Cost
■
■
■
■
Revenue Assumptions
for Each Scenario
•Base Case –61 units
–9 units affordable to very low (VL) and low income (LI)
households
•Proposed Project –120 units
–12 units affordable to VL, LI and moderate income (Mod)
households
•Alternative 1 –120 units
–18 units affordable to VL and LI households
9
Marin County
Household Income Levels
10
2019 INCOME SC HEDULE (pub lished by HUD April 24 , 20 19)
Med ian Very Low Low Low Low Low
Income Income Inc ome Income Income Income
HH Size 100% 50% 60.00% 65.00 ¾ 70 .00 % 80 .00 %
1 95 ,750 47,900 57 ,450 62 ,500 67,050 76 ,600
2 109 ,450 54,750 65 ,650 71 ,150 76,600 87 ,550
3 123,100 61,550 73 ,850 80 ,000 86,150 98 ,500
4 136,800 68,400 82 ,000 88 ,900 95,750 109,450
5 147 ,750 73,900 88,650 96 ,050 103,450 118,200
6 158,700 79,350 95 ,500 103,150 11 1,000 126,950
Monthly Rent Levels (Net of Utilities)
by Household Category and Bedroom Size
11
Percent Bedroom Size (Persons per Household)
Household Category of Areawide 0 Bedroom 1 Bedroom 2 Bedroom
Median Income (1)(2)(3)
Very Low 50%$1,155 $1,318 $1,468
Low 70%$1,633 $1,864 $2,083
Moderate (Median)100%$2,351 $2,685 $3,007
Moderate 120%$2,830 $3,232 $3,623
Market Rate N/A $2,520 $2,975 $3,900
Calculated based on 30% of Areawide Median Income (AMI) less utility allowance.
Source: Marin County Housing Authority, California Department of HCD.
Affordable Monthly Rents for One Bedroom Apartment
Compared to Market Rate
12
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500
Very Low
Low
Moderate (Median)
Moderate
Market Rate
Very Low
Low
Moderate (Median)
Moderate
Market Rate
■
■
■
Base Case
Units by Household Category and Bedroom Type
13
Percent Bedroom Size Total
Household Category AMI 0 Bedroom 1 Bedroom 2 Bedroom
Very Low 50%1 2 2 5
Low 70%1 2 1 4
Moderate (Median)100%0
Moderate 120%0
Market Rate N/A 17 17 18 52
Total Units N/A 19 21 21 61
Proposed Project
Units by Household Category and Bedroom Type
14
Percent Bedroom Size Total
Household Category AMI 0 Bedroom 1 Bedroom 2 Bedroom
Very Low 50%1 2 2 5
Low 70%1 2 1 4
Moderate (Median)100%0
Moderate 120%3 3
Market Rate N/A 30 39 39 108
Total Units N/A 35 43 42 120
Alternative 1
Units by Household Category and Bedroom Type
15
Percent Bedroom Size Total
Household Category AMI 0 Bedroom 1 Bedroom 2 Bedroom
Very Low 50%2 4 4 10
Low 70%2 4 2 8
Moderate (Median)100%0
Moderate 120%0
Market Rate N/A 29 37 36 102
Total Units N/A 33 45 42 120
Differences in Potential Value
Among Development Scenarios
•Base Case –Lower number of units onsite,
along with 9 units affordable to VLI and LI households,
significantly limits revenues and potential value.
•Proposed Project –Higher number of units substantially
improves revenues and potential value
(12 units affordable to VLI, LI and Mod households)
•Alternative 1 –Increase in the number of affordable units
(18 units affordable to VLI and LI households)
significantly reduces revenues and potential value
16
Financial Feasibility Framework
17
0%
20%
40%
60%
80%
100%
Development Cost
Developer Margin/Profit
Development Value
Must achieve
sufficient margin/profit
to proceed
■
■
■
Base Case Proposed Project Alternative 1
Development Value
Development Cost
18
Comparison of Financial Results
Based on Typical Feasibility Assessment
All Scenarios Infeasible –Development Value Less Than Costs
■
■
Base Case Proposed Project Alternative 1
Development Value
Development Cost
19
Comparison of Financial Results
Based on Higher Potential Value
Only Proposed Project Marginally Feasible
■
■
Key Findings from Feasibility Analysis
•Apartment rents are not keeping pace with development
cost increases in Bay Area and San Rafael
•Market rents in downtown San Rafael are improving
but still pioneering market
•Affordability gap is significant between market rents
and affordable rents for lower income households
•Given downtown San Rafael market rents and
construction costs, apartment developments are very
difficult to pencil (often not feasible)
•Proposed Project is marginally feasible as costs for land,
construction and fees are spread across more units
•Alternative 1 is not feasible due to doubling of affordable
units at affordable rents for lower income households 20