1716 Wilson Blvd Quinn Place Apartments

Transcription

1 1716 Wilson Blvd Quinn Place Apartments by Practicum Advisor: Coleman Rector A practicum thesis submitted to Johns Hopkins University in conformity with the requirements for the degree of Master of Science in Real Estate Baltimore, Maryland May, 2010

2 Table of Contents I. Executive Summary 4 II. Development Program 6 Highest and Best Use Analysis.7 Development Vision..7 III. Site Selection 9 IV. Market Analysis 12 Regional Economy 12 Arlington County Overview 14 Rosslyn Submarket..15 Demand Analysis..18 Supply Analysis.21 V. Land Use and Public Policy..29 Purpose, Zoning and Special Considerations..29 Steps Required for Approval of Proposed Use 34 VI. Development and Construction Costs...37 Hard Costs Estimates..37 Soft Costs Estimates...38 Development Timeline.39 VII. Financial Analysis 41 Residential Use Analysis 41 Ground Floor Retail Use Analysis 45 Capital Structure Wilson Blvd Quinn Place Apartments Page 2 of 86

3 Debt Financing 47 Equity Financing.49 VIII. Project Management Plan & Team...51 IX. Conclusions 55 X. Exhibits & References Wilson Blvd Quinn Place Apartments Page 3 of 86

4 I. EXECUTIVE SUMMARY The following Practicum analyzes the feasibility of the proposed use for the site located at 1716 Wilson Blvd in Arlington, VA and incorporates the various course materials covered in the Johns Hopkins MS in Real Estate Development program. For purposes of clarification, Beynon Realty Investment and Development (BRID), has conducted this research for the express purposes of determining the financial feasibility of the highest and best use of the site. BRIDs analysis will focus on the topics below, covered in the written portion to follow and in the attached exhibits. Highest and Best Use Analysis - A back of the envelope analysis was performed upfront to determine the best and most profitable use for the site. BRID determined rental apartments with ground floor retail to be the highest and best use would and will hereafter be referred to as Quinn Place Apartments. The remainder of the study is focused on analyzing that specific use. Market Analysis - Once the use was determined, a detailed study of the market area was use to determine the surrounding uses, demographics, demand and supply for both residential and retail uses. Land Use and Public Policy An outline of the applicable zoning requirements and assumptions, site plan approval and special considerations imposed by the county. Through this section, BRID was able to determine the overall density, number of units allowed and parking requirements Wilson Blvd Quinn Place Apartments Page 4 of 86

5 Development and Construction Costs BRID outlines the hard and soft costs associated with the construction and development of Quinn Place Apartments. It also details the timeframe of the entire project. Financial Analysis BRID outlines the investment and capital structure with a analysis of the debt and equity assumptions and overall returns to BRID and its partners. Project Management Plan and Team An overview of the players BRID has partnered with to complete the construction and development. The analysis has ultimately concluded that the construction and development of Quinn Place Apartments will result in favorable returns to both BRID as the developer, and their equity partners. The overall development is projected to achieve a leveraged IRR of 20.64%, exceeding BRIDs pre-determined hurdle rate of 15%. BRID is expected to move forward with the development of Quinn Place Apartments beginning in June Wilson Blvd Quinn Place Apartments Page 5 of 86

6 II. DEVELOPMENT PROGRAM The first step in determining the property development program is to conduct a Back of the Envelope (BOE) highest and best used analysis for the site. The current zoning on the property allows for office density up to a 2.5 Floor to Area Ratio (FAR), residential density of 115 units per acre and hotel density of 180 rooms per acre. There are two critical requirements and restrictions that must be factored into the analysis to get an accurate assessment of the potential value of each use. First, according to the Retail Action Plan adopted by the county, ground floor retail will be required for any of the above-mentioned uses. Secondly, according to the Rosslyn to Courthouse Urban Design Study 1, the proposed site is located in a Medium density designated area that imposes building height limitations. Per the Director of Real Estate Development in Arlington County 2, BRID was informed that building heights would be limited to four to six stories. BRID has assumed for all highest and best use analyses, a six story building height is allowed. BRID focused it analysis primarily on the combined uses of office/retail and residential/retail. Given the current instability of the hospitality market, and the lack of expertise in the hotel/retail development sector, BRID strategically chose to focus their Highest and Best Use analysis on office and rental apartments with ground floor support retail Wilson Blvd Quinn Place Apartments Page 6 of 86

7 Highest and Best Use Analysis Figure 1 - Back of the Envelope Analysis Office/Retail Residential/Retail A. Stabilized NOI $1,806,014 $2,436,304 B. Development Costs $32,818,155 $40,884,849 C. Yield on Cost (A / B) 5.50% 5.96% D. Market Cap Rate 7.50% 5.75% E. Market Value (A / D) $24,080,188 $42,370,508 After conducting the preliminary Highest and Best Use analysis, BRID has concluded that an apartment rental community with ground floor support retail the best option to maximize returns on investment. According to the zoning restrictions, the use of office/retail simply was not able to achieve the density necessary to make the use feasible. The residential/retail use is allowed density by way of number of units per acre and can thus achieve a greater overall density allowance. This factor alone was the critical determinant in selecting the best use for the site. Through the following practicum report, a detailed market and feasibility study will be performed to test the above conclusion and ultimately make a decision whether or not to proceed with the proposed development. III. SITE AND DEVELOPMENT VISION The following detailed development analysis will be based upon the vision of BRID and the goals and objectives they seek to pursue with this development project. BRID seeks to construct a mid rise multi-family residential community containing approximately 120 high-end luxury rental units. BRID has found its inspiration from a recently constructed comparable property located within walking distance to the Clarendon Metro station. Zosa Flats contains many of the features, characteristics and appeal that BRID envisions for Quinn Place Apartments Wilson Blvd Quinn Place Apartments Page 7 of 86

8 Quinn Place Apartments will be approximately six stories in building height and feature an urban design to compliment the counties goal and vision of an urban village center. The units will be held to the highest standards with features including granite counter tops, stainless steel appliances, recessed lighting, large windows for comfortable natural lighting and so forth. In every case possible, BRID will strive to implement sustainable construction materials, adhering to their overall sustainability goals. The rooftop will have an open-air terrace and an area for the residents to lounge, sunbath, barbeque, or otherwise enjoy the fresh air. It will be fully landscaped to included as much green vegetation as possible and may also be rented out by residents for gatherings and parties. Along with the rooftop terrace, the building will also contain a fitness center and business office only available to residents. The ground floor retail will feature world-class architecture and streetscape design with transparent glass windows allowing pedestrians a comfortable inviting experience. With the proposed North Quinn Street extension, BRID anticipates a charming pedestrian friendly walkway with inviting storefront features. Quinn Place Apartments is located a only five minute walk to the Rosslyn Metro station and a 5-7 minute walk to the Courthouse Metro station. BRID envisions the community as an environmentally friendly and sustainable development meeting at least a LEED Silver Certification by the United States Green Building Council 3. Although condo sales have fallen dramatically over the past two years, BRID is positioning Quinn Place Apartments for a possible conversion if the opportunity presents itself down the road Wilson Blvd Quinn Place Apartments Page 8 of 86

9 The following analysis will give BRID an opportunity to test and stress their goals and visions to see if their project can ultimately sustain the market and financial constraints of urban development. IV. SITE SELECTION General Site Information The proposed site is a 1.05-acre (45,523 sq. ft.) property is located in Arlington, VA within Arlington County a short distance from the Potomac River and Washington, D.C. Figure 2 - Washington DC Metro Area and Arlington County * Wilson Blvd Quinn Place Apartments Page 9 of 86

10 The site is located in the Rosslyn-Ballston Corridor and sits in between Wilson Blvd to the North and Clarendon Blvd to the South. Figure 3 - Metro Access to Site Area Courthouse Metro Station Rosslyn Metro Station * The Rosslyn Metro station is located approximately.5 miles west of the site, whereas, the Courthouse Metro station is a short.4 miles East of the site, both of which operate on the Orange Line. Rosslyn Metro Station is the last stop prior to entering downtown Washington DC providing excellent accessibility to employment within the city. In addition, I-66 is approximately! mile north and Route 50 is about! mile to the south of 1716 Wilson Blvd Quinn Place Apartments Page 10 of 86

11 the site. Both providing convenient access to Washington DC to the East and Fairfax County to the West. The site is currently owned and occupied by a private individual who has a one level medical office building on the North end of the site. There is also an auto repair shop directly East and a restaurant out parcel to the West. The southern end of the property is vacant land with the exception of an uninhabited single-family residence. Each of the existing structures will be demolished and cleared to make way for excavation. Figure 4 - Subject Property Site Area Boundaries * Google Maps 1716 Wilson Blvd Quinn Place Apartments Page 11 of 86

12 Surrounding the property to the North East is Bennett Place Apartments, which is discussed in more detail in the following market section. Bordering the southeastern corner of the property is a low-rise brick constructed office building. Directly to the west of the property is a five-story mid-rise condominium community that recently completed construction in It contains 153 for sale units with the ground level retail along both Wilson and Clarendon Blvds. Directly north of the property is a small strip center featuring mostly restaurant tenants and directly to the south of the site is a vacant field that was demolished in 2007 and is zoned RA6-15 or medium residential. There are no currently site plan submissions for the parcel. Figure 5 - Site Boundaries and Surrounding Uses 1716 Wilson Blvd Quinn Place Apartments Page 12 of 86

13 V. MARKET ANALYSIS Regional Economy According to Delta Associates 4, a respected provider of market data and information, states the Washington metro area economy continued to exhibit recovery, albeit slow, during the 1st quarter of It is expected that the sluggish conditions that we have experienced since the formal emergence from the Great Recession, will continue through the remainder of 2010 and into Slow growth is underway, but Washington remains one of the strongest economic bases in the country. The Washington Metro Area unemployment rate was 6.2% in December 2009, compared to 10.0% nationally. According to Marcus and Millichap 5, the past six months payrolls have increased by 21,000 workers, and they forecast the Washington Metro Area to expand by 35,000 jobs, or 1.2 percent, this year. In contrast, nearly 51,900 positions were eliminated in Figure 6 - Washington DC Metro Area Employment Trends 1716 Wilson Blvd Quinn Place Apartments Page 13 of 86

14 Figure 6 depicts how the Washington Metro Area has been insulated from the steep declines that much of the countries metropolitan cities have experienced. Increased government spending has been instrumental in softening the blow to local companies as well as attracting large corporations to the area for relocation. Arlington County Overview - Arlington County has been a model of urban growth for neighboring counties. With its proximity to Washinton DC, the Rosslyn Ballston Corridor is highly desirable area to live. According to Arlington County, Department of Planning, Housing and Development 6, total estimated population of Arlington County for 2010 is 211,400, a 5.77% increase from Population is expected to increase to 226,800 in 2015, an increase of 6.79% from In the second quarter of 2009, Arlington County estimated a total resident labor force of 137,000, with total resident employment of 134,000, giving Arlington County a 2.5% unemployment rate. Arlington County unemployment has been able to shield itself from the economic downturn to an even greater degree than that of the Washington Metro Area. The median household income, as reported for in quarter two of 2009, was $102,473 and is expected to increase to $116,768 by Of the 104,309 housing units in Arlington County, 63.0% of those are multi-family, while single family detached units account for 27.0% and single family attached units account for the remaining 10.0%. The preferred and most logical form of housing for the residents of the county is rental apartments or condos Wilson Blvd Quinn Place Apartments Page 14 of 86

15 Rosslyn Submarket Arlington County by geographic size is a relatively small county. Consequently, BRID has chosen to focus their submarket demographic data within a one-mile radius of the subject property. When conducting the trade area analysis, BRID has segregated the analyses by the respective asset types. Population and Growth 7 The population of the Rosslyn Submarket in 2009 is 30,436 and is expected to grow by 6.7% to a population of 32,618 by Rosslyn experienced significant growth at a rate of 13.0% from Household Income Levels 7 The median household income in 2009 was $80,944 while the average household income was higher at $101, % of Rosslyn residents had a pre-tax income between $100,000 and $149,000, representing the largest grouping of income levels. Figure 7 - Primary Market Household Income 2009 Households by Household Income 17,050 Income Less than $15,000 1, % Income $15,000 - $24, % Income $25,000 - $34, % Income $35,000 - $49,999 2, % Income $50,000 - $74,999 3, % Income $75,000 - $99,999 2, % Income $100,000 - $149,999 3, % Income $150,000 - $249,999 1, % Income $250,000 - $499, % Income $500,000 or more % *Source CoStar 1716 Wilson Blvd Quinn Place Apartments Page 15 of 86

16 Total number of household in the Rosslyn Submarket in 2009 was 17,050. Of that housing, 73.97% were renter occupied while 26.03% where owner occupied. Age Profiles 7 As of 2009, the median age in Rosslyn was years. The majority of residents fall between the years old age group. Rosslyn is very attractive the younger generation due to the smart growth initiatives, urban lifestyle and convenient accessibility of amenities. Figure 8 - Primary Market Population by Age 2009 Population by Age 30,436 Age 0-4 1, % Age % Age % Age % Age % Age , % Age , % Age , % Age , % Age , % Age , % Age , % Age , % Age % Age 85 and over % *Source CoStar Social Characteristics 7 The Rosslyn Submarket has a diverse population where 64% of the residents are white, 13.82% are Asian, 9.35% are of another race and 6.19% are Black or African American Wilson Blvd Quinn Place Apartments Page 16 of 86

17 English is the predominant language spoken with Spanish as the second most spoken language % of the residents hold white-collar occupations; while 8.81% are Service oriented and 5.34% hold blue-collar occupations. The average household size is 1.74 people. Educational Attainment 7 Rosslyn has a very high level of educational attainment where 42.20% hold an advanced degree and 34.57% hold a bachelors degree. Consumer Expenditures 7 Total consumer spending in the Rosslyn Submarket in 2009 is estimated annually to be $944,881,000, which equates to $31,044 per household. Consumer spending categories include: apparel, entertainment, food at home, food away from home, alcoholic beverages, furniture/appliances, transportation, health care and education Wilson Blvd Quinn Place Apartments Page 17 of 86

18 Fundamental Demand Analysis (Source: CoStar) Figure 9-1 & 3 Mile Radii of Quinn Place Apartments Primary Market for Retail (1-mile radius of site) 2009 Statistics: Households 17,050 Persons per household 1.74 Median Income per household $80,440 Income Growth 2.0% Annually 1716 Wilson Blvd Quinn Place Apartments Page 18 of 86

19 2014 Projections: Estimated Households 18,110 Estimated Annual Median Income $88,812 Estimated Income per Household to be spent on apparel, entertainment, food, beverages & furniture $20,675 Total market demand for apparel, entertainment, food, beverages and furniture $374,417,000 Primary Market Residential (1-Mile Radius of Site) 2009 Statistics: Total Population 30,436 Average Persons per Household 1.74 Occupied Household Units 17,492 (Total Population / Average Persons per HH) Vacancy Allowance 5.0% Total Housing Units Demanded 18,413 (Total Housing Units Demanded / (1-Vacancy Allowance)) Percent of Rentals 74% Rental Units Needed 13,625 (Total Housing Units Demanded x Percent of Rentals) 2014 Projections: Total Population 32,618 Average Person per Household 1.74 Occupied Household Units 18,746 (Total Population / Average Persons per HH) Vacancy Allowance 5.0% 1716 Wilson Blvd Quinn Place Apartments Page 19 of 86

20 Total Housing Units Demanded 19,733 (Total Housing Units Demanded / (1-Vacancy Allowance)) Percent of Rentals 74% Rental Units Needed 14,602 (Total Housing Units Demanded x Percent of Rentals) Primary & Secondary Market Residential (3-Mile Radius of Site) 2009 Statistics: Total Population 246,336 Average Persons per Household 1.83 Occupied Household Units 134,610 (Total Population/Average Persons per HH) Vacancy Allowance 5.0% Total Housing Units Demanded 141,695 Percent of Rentals 62% Rental Units Needed 87, Projections: Total Population 255,594 Average Person per Household 1.83 Occupied Household Units 139,669 Vacancy Allowance 5.0% Total Housing Units Demanded 147,020 Percent of Rentals 62% Rental Units Needed 91, Wilson Blvd Quinn Place Apartments Page 20 of 86

21 The above demand analysis shows a strong continued growth the Washington DC Metro area and in the primary and secondary markets. With the high percentage of population occupying units on a rental basis (74%) as opposed to an owner occupancy basis, shows that there will continually be a very strong need for rental units in the primary market. In addition, the Washington area job growth and unemployment rate are primary demand drivers for residential housing and both are expected to maintain stable levels through the upcoming years. It is BRIDs opinion that there is sufficient demand in the primary and secondary markets to provide the growth necessary to support additional rental units. Supply Analysis According to CoStar 7, Suburban Virginia has a total inventory of apartment units of 157,247. Within the primary market, a one-mile radius of the site, there are 14,156 units existing on the market and within the primary and secondary markets, a three-mile radius of the site, there are 88,675 units existing on the market. Additionally, we have analyzed the expected new construction and proposed construction of new units that are estimated to be completed from 2010 to 2012 and beyond. The tables below illustrate the new construction and estimated completion dates respectively Wilson Blvd Quinn Place Apartments Page 21 of 86

22 Figure 10 - New Construction (2010 and Beyond) Units Under Construction 758 Units Planned 2298 Total New Construction 3056 Figure 11 - Estimated Completion Year and up 2208 Total 3056 With the new construction data that we have retrieved we are able to then calculate the forecasted total supply inventory by taking the total exiting inventory for both the primary and secondary markets and adding the number of new construction units that will be delivered within the next four years. Primary & Secondary Markets Total Existing Inventory 88,675 + Planned Additional Inventory in Forecast Period 3,056 Total Forecasted Supply 91, Wilson Blvd Quinn Place Apartments Page 22 of 86

23 In our demand analysis, we calculated the total rental units needed within the primary and secondary markets to be 91,152 units by the year By our calculation of the Forecasted Supply, there will be an approximate overage of 579 residential units in the market. It is important to note that the above calculation does not take into account any removal of inventory by way of demolitions, condo conversions or otherwise. It appears that supply will closely resemble the demand for rental units in the primary and secondary markets. Absorption As of 12/31/2009, according to REIS 8 the Rosslyn Ballston submarket had a construction/absorption ratio of 1.2 compared to the Suburban Virginia construction/absorption ratio of 1.4. BRID also looked at the three-year history of construction/absorption ratio for the Rosslyn Ballston submarket, which indicated a historical ratio of 1.4. It is projected that over the next five years, the Rosslyn Ballston submarket will benefit from a 0.90 construction/absorption ratio. This is an encouraging statistic for developers of rental apartment communities, leading to greater confidence that new units could be absorbed quickly. Occupancy at Completion and Stabilization 8 The table below depicts the historical trends of occupancy upon completion of the construction of rental apartment communities in Suburban Virginia metro area compared to that of the South Atlantic as well as the national averages Wilson Blvd Quinn Place Apartments Page 23 of 86

24 Figure 12 - Occupancy at Completion Properties Built In: Suburban Virginia 71.7% 60.2% 79.8% 63.5% 43.4% 70.8% 45.5% South Atlantic 58.6% 57.4% 61.6% 60.5% 51.6% 44.2% 41.3% United States 61.3% 64.6% 64.6% 64.1% 53.2% 54.1% 39.0% *Data provided by Reis BRID is observant of the decline in 2009 due to the economic Great Recession, and presumes similar figures, with a slight increase, into The average occupancy at completion over the prior seven years is 62.1%. It is reasonable to assume that development projects completed between 2012 and 2014 will have the ability to reach that occupancy percentage if not exceed it. In addition, new construction quarters to stabilization is charted in the graph below. Figure 13 - New Construction Quarters to Stabilization *Graph provided by Ries In 2009, an average of 18 months was needed to reach occupancy of approximately 90.0% after the completion of construction. This time frame is standard for most construction schedule assumptions Wilson Blvd Quinn Place Apartments Page 24 of 86

25 Market Rate Rental Growth 8 By year-end 2009, the Rosslyn Ballston Submarket realized a slight decrease in asking rental rates by 0.2%. It is anticipated, according to Reis 8, that the submarket will continue to see rates decline by approximately 0.6% in 2010 and begin to see an increase in By 2012, we expect to see asking rents grow by approximately 3.0% through According to Delta Associates 4, average rent growth per annum for the Washington DC Metro Area since 2000 is 4.2% (Delta Associates, p. 37) Comparable Properties The following map and table summarize the comparable date used in the study of competitive properties. Figure 14 - Comparable Properties Location Map Wilson Blvd Quinn Place Apartments Page 25 of 86

26 Figure 15 - Quinn Place Apartments Comparable Properties Summary of Comparable Apartment Rentals Comp # Property Name Property Address Sub Market Occ. # of Units Ave. Unit Size - SF Ave. Rent Year Built Distance to Metro Management Company 1 Bennett Park Zoso Flat Apartments Parc Rosslyn The Prime at Arlington Courthouse 5 The Palatine 1601 Clarendon Blvd 1025 N. Fillmore Street 1531 North Pierce Street 1415 North Taft Street 1301 N. Troy Street Rosslyn 98% $2, mi WRIT Clarendon / Courthouse 98% $2, mi Simpson Housing Rosslyn 97% $2, mi Paradigm Courthouse 98% $2, mi Courthouse 95% $2, mi Equity Residential Cresant Heights Group Subject Quinn Place Apartments 1716 Wilson Blvd *All properties are located in Arlington, VA Rosslyn $2,885 Proj mi Beynon Realty Services It was important to BRID to get a very good feel for these comparable properties, knowing it would give them the greatest sense of what the market expects regarding rental rates, amenities provided and community access. BRID conducted a site visit of the property and spoke 9 with each of the leasing agents on site. On Occasion, they would also speak with the property manager responsible for the property operations. BRID has found that the Zosa Flats Apartments are most closely related to the vision and structure of Quinn Place Apartments. It is anticipated that Quinn Place will closely resemble Zosa Flats Wilson Blvd Quinn Place Apartments Page 26 of 86

27 Comparable Property # Clarendon Blvd Bennett Park Apartments (Existing) Bennett Park Apartments is the closest competitive property approximately 100 yards east of Quinn Place Apartments. It is a 15 story 224 unit complex with ground floor retail and is also located a short five minute walk from Rosslyn Metro station. Bennett Place apartments, at the time of the site visit, was operating at a 98% occupancy and had increased rent by approximately 10% over the prior two months. Comparable Property # N. Fillmore Street Zoso Flat Apartments (Existing) The Zoso Flats Apartments is a 114-unit luxury apartment community that completed construction in June It has about 20,000 square feet of ground floor retail located on high traffic crossroads of North Fillmore and 11 th Street in Arlington, VA. Zoso apartments is also conveniently located approximately a five minute walk from the Clarendon Metro Station. Due to the building height, total number of units and finish 1716 Wilson Blvd Quinn Place Apartments Page 27 of 86

28 work of units, BRID believes Zoso Flats is the closest comparable property to Quinn Place Apartments. Comparable Property # North Pierce Street, Arlington, VA - Parc Rosslyn Apartments Parc Rosslyn Apartments completed construction in 2008 and markets itself as an Earth Friendly environment is pending LEED Silver approval. It is located approximately 250 yards southeast from Quinn Place Apartments and is about a five-minute walk to the Rosslyn Metro station. Parc Rosslyn has 238 total units. Comparable Property # North Taft Street, Arlington, VA The Prime at Arlington Courthouse The Prime at Arlington Courthouse is a twelve-story building with 256 units rental units. Current occupancy was reported at 98% at the time of the site visit. The building is located approximately.4 miles from the Courthouse Metro Station Wilson Blvd Quinn Place Apartments Page 28 of 86

29 Comparable Property # North Troy Street, Arlington, VA The Palatine The Palatine recently finished construction in It has a building height of twelve-stories and housed 261 units. It was reported at 95% occupancy at the time of the site visit. The Palatine is also located a five minute walk from the Courthouse Metro Station. Each of the comparable properties was operating at a high level of occupancy with recent increases in rental rates. This is a testament to the strength of the Rosslyn and Courthouse submarkets. An improving economic market and consistently below average unemployment levels will allow these markets to sustain very competitive rental rates and low vacancy ratios. VI. LAND USE AND PUBLIC POLICY Purpose The Comprehensive Plan of Arlington County was created with the vision that Arlington will be a diverse and inclusive world-class urban community with secure, attractive residential and commercial neighborhoods where people unite to form a caring, learning, participating, sustainable community in which each person is important Wilson Blvd Quinn Place Apartments Page 29 of 86

30 In addition, Arlington County s Comprehensive Plan was established in order that Arlington County may remain a safe, healthy, convenient and prosperous community and an attractive place in which to live, work and play, with stable or expanding values and potentialities for growth and continued economic health. The purpose of Arlington s Comprehensive Plan is to guide the coordinated and harmonious development of the County through the provision of high standards of public services and facilities. 10 It is in BRIDs deepest interest as a developer and community participant to strive to uphold the standards of the county as set forth in the County s Comprehensive Plan. The General Land Use Plan 11 was adopted August 12, 1961 and was most recently amended September 30, The GLUP is the primary policy guide for the future development of the County. It was through the GLUP that we gained our initial understanding of what the county expects, and will allow to be developed on the proposed site. On March 15, 2003, Arlington County Board adopted The Rosslyn to Courthouse Urban Design Study 1 in which the proposed site is located. The composite sketch below (Figure 16) is a general conceptual image of how the county would like to proceed in developing the intermediate section from North Courthouse to North Pierce Street, between Wilson Blvd. and Clarendon Blvd. The concept plan was developed on the basis of medium physical characteristics, density and height Wilson Blvd Quinn Place Apartments Page 30 of 86

31 Figure 16 Rosslyn to Courthouse Urban Design Study Sketch By way of this study and through an in person meeting and discussion with the Director of Arlington County Development, BRID were able to establish clear communication with the county as to what their primary goals are and the general development standards they expect to be adhered to. Both parties concluded that there is a mutual respect for the long-term objectives, commitments and values of the county and it s development process. Current Zoning During 2007, the current property owner, Dr. George Contis, submitted application 12 for a General Land Use Plan Amendment, Rezoning and Site Plan to the Arlington County Planning Division. The GLUP Amendment and Rezoning proposals each were deemed appropriate for adoption as the county feels they meet the redevelopment standards set forth in The Rosslyn to Courthouse Urban Design Study 1. Though the approved re-zoning request, the site is currently zoned C-O-2.5 or Medium Office-Apartment-Hotel. This zoning 13 allows office density up to a 2.5 FAR, up to 115 units per acre for residential apartments, and up to 180 units per acre for hotel density. Each use is required to include ground floor retail as per the The Rosslyn to Courthouse 1716 Wilson Blvd Quinn Place Apartments Page 31 of 86

32 Urban Design Study 1. Additionally, the county requires 1.2 parking spaces per residential apartment unit and 1 space per every 580 square feet of office or retail use. Zoning Assumptions - Quinn Place Apartments After determining that the best use for the site would be to develop a six-story rental apartment community with ground floor support retail, BRID carefully considered the resources provided through Arlington County to further understand the zoning requirement that needed to be met. The resources of most importance, where the official Arlington County Zoning requirements 13, The Rosslyn to Courthouse Urban Design Study 1 issued by the county Planning Department and the staff report 12 of Dr. Contis request for site plan approval. The table below represents the educated assumptions BRID has made for Quinn Place Apartments. Figure 17 - Quinn Place Apartments Zoning Assumptions Lot Size (SF) 45,523 Buildable Lot Size 41,458 Quinn Street Extension Dedication 4,065 Floor Area Ratio (FAR) 3.5 Gross Floor Area (GFA) 145,103 Site Coverage 85.5% Net Buildable Area 124,134 Multi-Family SF 114,134 Average Unit Size 951 Est. # of Units By Rite 120 Ground Floor Retail SF 10,000 Number of Stories 6 Average Floor Plate 20, Wilson Blvd Quinn Place Apartments Page 32 of 86

33 Parking Requirements Figure 18 - Parking Quinn Place Apartments Retail 1 space per 580 Square Feet Retail Parking Required 17 Spaces Residential Parking Required Per Unit 1.2 Residential Parking Required 144 Spaces Total Parking Required Residential / Retail 161 Total Spaces It is also assumed that BRID would be providing twenty-five (25) spaces for bicycle parking to meet the LEED Silver certification designation. Special Considerations BRID is anticipating an agreement between the BRID and Arlington County to dedicate, in fee, approximately 4,065 square feet of right-of-way for a portion of the North Quinn Street Extension. The remainder of the future street will be located on County-owned property. The initial cost estimate of the street extension is approximately $550,000 for the completed improvement. This extension of North Quinn Street is in accordance with the GLUP 11 and The Rosslyn to Courthouse Urban Design Study 1, which is shown below in the map provided from the Master Transportation Plan Amendments Wilson Blvd Quinn Place Apartments Page 33 of 86

34 Figure 19 - Proposed North Quinn Street Extension Proposed North Quinn Street Ext. * Master Transportation Plan Amendments BRID is also anticipating an Affordable Housing Contribution of approximately $354,051 in lieu of affordable housing units included in Quinn Place Apartments. The fee is calculated by taking the Affordable Dwelling Unit (ADU) formula at $8.45 per square foot multiplied by the Gross Floor Area (GFA) over a 2.5 Floor Area Ratio (FAR). Steps Required for Approval of Proposed Use Arlington County Although the previous owner submitted a site plan review to the county, which was ultimately approved, our alternative site use requires a complete submission of a new site plan proposal to the Arlington County Planning Commission. We have systematically reviewed the Administrative Regulation given to us by the county, which details and governs the submission process as specified by Arlington County Wilson Blvd Quinn Place Apartments Page 34 of 86

35 Below we have outlined the required process 16 for submitting a site plan for approval as well as estimated the approximate time frame for completion. A. Preparations of the site plan application. During this initial preparation stage, BRID will complete the county issued application and Site Plan Submittal Checklist. Along with the architecture and engineering firms, BRID will meet in person with a staff member of the Planning Division and Department of Public Works to identify unique problems and constraints to the physical development of the site. Thereafter, BRID will conduct a preliminary engineering report and architectural site plan in accordance with the gathered information. Approximate time frame: 30 days. B. Formal Submission of Site Plan. At this point, the site plan submission to the Zoning Administrator and will be concurrently reviewed by the Department of Community Planning, Housing and Development (CPHD), the Department of Zoning, the Department of Planning, the Department of Public Works and the Fire and Police Departments. During this time, the Department of Planning coordinates departmental reviews as well as issues public notices, mailings and advertising for public interest. We also anticipate meeting with the Planning Commission to discuss results and potential issues. Thereafter, the Planning Commission will hold a public hearing to address any comments, issues or concerns that the community may have regarding the proposed development. BRID expects to participate in any scheduled community meetings Wilson Blvd Quinn Place Apartments Page 35 of 86

36 Site plan approval requires a minimum of 90 days, assuming there are no deferrals, and the County Board meets four times per year (January, April, July and October). Although a 90-day approval process is potentially attainable, through out experience with prior site plan approvals, we have allocated 180 days with anticipation of a County Board hearing April of Approximate time frame: 270 Days C. County Board Hearing Approval. Upon approval from the County Board Hearing, the County Board will have established conditions specific to the site that they would require BRID to comply with. Depending on BRID s comfort level with the proposed conditions, we will move forward with the development process. If BRID has minor changes to the established conditions, BRID will work with the Zoning Administrator to have them implemented into the site plan. BRID doesn t anticipate having major concerns with the conditions established by the County Board, but has granted itself 60 days for contingency timing before the commencement of construction. Approximate time frame: 60 Days BRID ultimately anticipates the site plan approval process to last 360 days from the commencement of the Pre-Approval process beginning June 2010 and lasting through the County Board Hearing Approval on April 2011 with construction beginning in September To further facilitate and streamline the site plan approval process, BRID will engage the law firm of Walsh, Colucci, Lubeley, Emrich and Walsh, LC who specialize in Northern Virginia land use and development. The firm s Zoning & Land Use practice group handles the processes of preparing, submitting, articulating, and 1716 Wilson Blvd Quinn Place Apartments Page 36 of 86

37 defending client s applications before the appropriate local government staff, planning commissioners, local legislative bodies, and concerned community members. BRID will be working with their office located at Courthouse Plaza in Arlington. Their proximity to the proposed site will provide added benefits to the overall Site Plan Submission and approval process. VI. DEVELOPMENT AND CONSTRUCTION COSTS BRID was able to make good faith estimates of the hard and soft construction costs through consultation 17 with project managers from two large notable construction firms in the Washington DC Metro area. Below is a breakdown and description of the costs associated with the construction and development of Quinn Place Apartments. Hardcost Estimates Site Work: Demolition of existing Structures, environmental clean up (below grade and above grade), earthwork/grading and excavation, site improvements (asphalt, curb & Gutter, sidewalks, hardscape), N. Quinn Street Extension and Landscape. Base Building: Vertical Construction and below grade parking. Figure 20 - Quinn Place Apartments Hard Cost Estimates Hard and Soft Cost Analysis Total $ Per Unit $ Per Net SF Land Cost $8,500,000 $70,833 $68.47 Hard Costs Vertical Construction 170 $21,102,695 $175,856 $ Parking (Below Grade) ,500 $5,240,345 $43,670 $42.22 N. Quinn Street Extension $550,000 $4,583 $4.43 Hard Cost Contingecy 5.00% $1,415,423 $11,795 $11.40 Subtotal Hard Costs $28,308,463 $235,904 $ Wilson Blvd Quinn Place Apartments Page 37 of 86

38 Soft Costs Estimates Figure 21 - Quinn Place Apartments Soft Cost Estimates Soft Costs Site Utilities/Connection Fees 4.00% $153,195 $1,277 $1.34 Marketing / Sales Office 4.00% $153,195 $1,277 $1.34 Legal 3.92% $150,000 $1,250 $1.31 Architectural 3.00% $114,896 $957 $1.01 Engineering 3.50% $134,045 $1,117 $1.17 Permits & Fees 4.00% $153,195 $1,277 $1.34 Affordable Housing Contribution 9.24% $354,051 $2,950 $3.10 Environmental 1.50% $57,448 $479 $0.50 Closing Costs 2.00% $76,597 $638 $0.67 Insurance 4.00% $153,195 $1,277 $1.34 Operations, Management & FF&E 22.19% $850,000 $7,083 $7.45 Organization 4.00% $153,195 $1,277 $1.34 Real Estate Taxes 7.00% $268,091 $2,234 $2.35 Subtotal Soft Costs $2,771,103 $23,093 $24.28 Development Fee 2.50% $920,212 $7,668 $8.06 Soft Cost Contingency 5.00% $138,555 $1,155 $1.21 Total Soft Costs $3,829,870 $55,008 $57.84 Total estimated construction cost per unit inclusive of Hard, Soft and Land costs is $361,745 or $354 per net square foot Wilson Blvd Quinn Place Apartments Page 38 of 86

39 Development Timeline BRID anticipates a project start date of June 1, 2010 at which time a Letter of Intent (LOI) will be submitted on the 1716 Wilson Blvd site. A 90-day due diligence period will begin allowing BRID to conduct site tests including soiling testing, water level analysis, Phase I and Phase II environmental tests, site feasibility analysis and so forth. Upon completion of the 90-day feasibility and due diligence period on August 31 st, 2010, a contract for purchase of the site will be executed and title will convey to BRID. Immediately following the conveyance of title, BRID will begin the Entitlements and permitting stage, which they anticipate taking upwards of one year to complete. The anticipated process is outline in the preceding zoning section above. Once the Arlington County Planning Commission grants approval, BRID will subsequently move forward with securing and closing on the construction loan and will therefore commence the construction of the project on September 1, 2011 BRID has allowed a construction period of approximately 18 months from the time of ground breaking to the certificate of occupancy, at which time residents may move in and begin paying rent. There is a possibility of building out and moving retail tenants into the ground floor space, but for underwriting purposes, the collection of apartment and retail rents will begin simultaneously. According to REIS 8, the Months to Stabilization chart illustrated in figure 13 for the Rosslyn submarket is historically an 18-month period. BRID has estimated a timeframe of approximately 18 months to achieve stabilization and 92% occupancy. At the time of stabilization, BRID will immediately proceed to close on the permanent financing on or around the December 31, Additionally, BRID s reversion analysis 1716 Wilson Blvd Quinn Place Apartments Page 39 of 86

40 is forecasted for December 31, The following table illustrates BRID s proposed development timeline for Quinn Place Apartments. Figure 22 - Quinn Place Apartments Development Timeline Start Finish Submit LOI 6/1/10 Feasibility/Due Diligence 6/1/10 8/31/10 Execute Contract 8/31/10 Entitlements/Permitting 9/1/10 8/31/11 Close Development/Construction Loan 8/31/11 Construction - Apartments 9/1/11 1/31/13 Delivery - Apartments 2/1/13 Stabilization - Apartments 2/1/13 7/31/14 Close Permanent Loan 8/1/14 Reversion 12/31/20 BRID estimates and anticipates the pre-development process of Quinn Place apartments to commence on June 1, 2010 with the submission of the LOI and reach delivery of the apartments and retail space on February 1, 2013, a space of 32 months. An additional 18 months is allocated for stabilization of the property at which time the permanent loan financing will be closed. BRID believes this timeframe is realistic and 1716 Wilson Blvd Quinn Place Apartments Page 40 of 86

41 achievable and provides enough flexibility for real time adjustments to be made as needed. VII. FINANCIAL ANALYSIS Project proformas were individually created for the residential use, the retail use and the collective combination of both uses. These proformas are shown in Exhibits L, Q & K respectively. Through the following few sections of this report, BRID will describe the origination of the assumptions made for both the residential and retail uses. The Residential Use Revenue Assumptions The primary use of the property will be residential rental units, and the majority of the property cash flow is derived from the market rents collected on a monthly basis. Through the comparative analysis of the surrounding properties detailed in the Market Analysis above and shown in Exhibit F, BRID has developed sound assumptions for market rental rates by unit. The table below details the units mix and market rental rates in which are expected for Quinn Place Apartments Wilson Blvd Quinn Place Apartments Page 41 of 86

42 Figure 23 - Units Breakdown and Rent Matrix Net Square Footage Monthly Market Rent (2010) Unit Type # of Units % of Units Average Total $ / Unit Total $ $ / SF A Studios % 622 4,976 $2,100 $16,800 $3.38 B 1 Bed/1 Bath % ,910 $2,400 $163,200 $2.97 C 1 Bed/ 1 Bath + Den % 1,050 5,250 $2,650 $13,250 $2.52 D 2 Bed/2Bath % 1,200 24,000 $3,700 $74,000 $3.08 E F 2 Bed/2 Bath + Den % 1,287 19,298 $3,850 $57,750 $ Bed/2.5 Bath + Den % 1,425 5,700 $5,300 $21,200 $3.72 Total/Average % ,134 $2,885 $346,200 $3.11 BRID has assumed a higher market rate than what was concluded in the their market research. As mentioned previously, Quinn Place Apartments is being modeled after the recently developed Zosa Flats rental apartment project located off the Clarendon Metro station. The building height, location to the metro, quality of finish, average unit size, amenities and tenant profile, most equally match the vision that BRID has for Quinn Place Apartments. Therefore, BRID concluded that the market rents currently achieved by Zoso Flats would also be achieved by Quinn Place Apartments, and were thus applied as the market rental rate. The above market rates are of May 2010 rates and BRID has anticipated a 3% average annual growth rate for the hold period of the property Wilson Blvd Quinn Place Apartments Page 42 of 86

43 Vacancy Assumption BRID has assumed a lease of period to stabilization of 18 months as indicated in the preceding market analysis. Upon completion of construction and occupancy, Quinn Place Apartments is anticipated to have a pre-leased occupancy of 62% in In 2014 occupancy is expected to reach 80%, and by 2015 Quinn Place Apartments will reach stabilization with occupancy of 92%. Thereafter, it is assumed the property will effectively operate with a 4% vacancy factor. Other Income Through the comparable property analysis, BRID discovered that each first parking space desired by the tenants would be rented out at a market rate of $75 a month per space. Additional spaces were offered at a rate of $125 months. For purposes of conservative underwriting, BRID has assumed that only one space per tenant would be rented on a monthly basis. It is also important to note that the parking space dedicated to retail uses generate no additional rental income. In addition to the potential parking income, Quinn Place Apartments will also charge a one time non-refundable Move-In fee of $500 at and average rate of three per month. A Miscellaneous fee of $40 per unit is assumed for unexpected tenant needs as well as rental of the roof top terrace area. Other Income items are also expected to grow at an annual rate of 3.0%. Below is an analysis of the Other Income expected for Quinn Place Apartments: Figure 24 - Other Income Type #/Units $/Month Annual Parking - Residential 144 $75 $129,600 Parking - Retail 17 $0 $0 Misc. 120 $40 $57,600 Move in Fee 3 $500 $18, Wilson Blvd Quinn Place Apartments Page 43 of 86

44 Total Other Income $205,200 Expense Assumptions - According to Reis 8, the average multi-family expense ratio for the Rosslyn Metro submarket, is approximately 42% of the Effective Gross Income (EGI). BRID chose the total annual operating expense percentage to follow the submarket average of 42%. Below are the expectations regarding the anticipated operating expense categories factored into the residential proforma. Figure 25 - Operating Expenses Breakdown Operating Expenses % of EGI Utilities 3.00% Administration 8.00% Marketing 8.00% Turnover 5.00% Maintenance 4.00% Insurance 3.00% Real Estate Tax 7.00% Management Fee 4.00% Total Operating Expenses 42.00% Capital Expenditures Reserve BRID will establish an annual Capital Expenditure Reserve for unexpected improvements pertaining the physical building structure in the amount of 1% of the Net Operating Income. This reserve will be held in escrow until a capital need arises and is in addition to the Turnover Expense included in the above mentioned building Operating Expenses Wilson Blvd Quinn Place Apartments Page 44 of 86

45 The Ground Floor Retail Use The secondary, but critically important use of the Quinn Street Development is the 10,000 gross square feet of support retail. Through a comparable property analysis and interviews 18 with leasing representatives in the submarket, BRID was able to gather market data regarding current rental rates, lease structures and duration, growth rates and so forth. Rental Revenue Assumptions BRID anticipates a total of nine tenants to occupy the 10,000 gross square feet of support retail. The average lease rate is $37.11 and the standard lease structure is Triple Net. Most leases are assumed to be five-year terms with annual escalations of 3.0%. Tenants with 1,500 square feet or more are expected to sign ten-year leases. The anticipated gross retail rents for year one total $362,500 in revenue. The following table details the expected rent roll for Quinn Place Development. Rent Roll NSF Figure 26 - Retail Rent Roll Projections Lease Type Rate Base Total Lease Term Annual Esc. Lease Total w/ Annual Esc. Tenant 1 1,500 NNN $36.00 $54, % $691,621 Tenant 2 1,500 NNN $36.00 $54, % $691,621 Tenant 3 1,000 NNN $37.00 $37, % $473,888 Tenant 4 1,000 NNN $37.00 $37, % $473,888 Tenant 5 2,500 NNN $34.00 $85, % $1,088,663 Tenant 6 1,000 NNN $37.00 $37, % $473,888 Tenant NNN $39.00 $19, % $249,752 Tenant NNN $39.00 $19, % $249,752 Tenant NNN $39.00 $19, % $249,752 Total / Average 10,000 $37.11 $362, Wilson Blvd Quinn Place Apartments Page 45 of 86

46 Reimbursements Due to the nature of the triple net leases, each tenant will be responsible for reimbursing the landlord for expenses paid on their behalf. BRID has assumed an expense reimbursement of $6.00 per square foot, collected annually for the prior years expenses. Vacancy, Credit Loss & Management Fee BRID has assumed a vacancy factor that follows its residential counterpart. In the first year of occupancy, the space is expected to be 62% leased, while the second year will rise to 80% occupancy and stabilization will occur in 2015 with 92% occupancy of the retail space. Thereafter, the space is assumed to maintain a vacancy level of 4%. BRID also assumes an annual credit loss of 1% of the Effective Gross Income (EGI) and a management fee equal to 3% of the EGI. Reserves BRID assumes annual reserves to be held in escrow for both Capital Expenditures and Replacement for tenant turnover. Capital Expenditure reserves are allocated at $.15 per square foot, while Replacement reserves are allocated at $.25 per square foot. Both reserves are expected to grow at 3% annually. Tenant Improvements and Leasing Commissions Tenant Improvements and Leasing Commissions are typically a large expenditure for retail space. BRID has anticipated rollover expenditures in year 2017, due to the expiration of the initial five-year leases. BRID has assumed a 75% retention rate of expiring leases. The table below is a summary of the anticipated Tenant Improvement and Leasing Commission expenses assumptions Wilson Blvd Quinn Place Apartments Page 46 of 86

47 Figure 27 - Capital Reserves for TI s and LC s Projected Tenant Retention 75.00% Leasing Commission - New Tenant 6.00% Leasing Commission - Existing Tenant 3.00% Blended LCs 3.75% Tenant Improvements - Initial shell build out $30.00 Tenant Improvements - New Tenant $20.00 Tenant Improvement - Existing Tenant $10.00 Blended TIs $12.50 As noted above, on the expiration of the initial five-year leases, BRID has calculated a Tenant Improvement expense of $63,310 for tenant build out and Leasing Commission Expenses of $11,871 payable to the leasing representatives. There will also be significant rollover in year 2022, although it is projected that a disposition of the property will have occurred in Capital Structure Debt Financing BRID has consulted 19 with the Washington DC branch of HSBC Commercial Lending to accurately estimate both the construction financing as well as the permanent financing. While the capital markets have seen unprecedented times recently and the banks lending capacity has been severely limited, HSBC was confident that Quinn Place Apartments would receive favorable financing. Construction Loan As indicated in the development timeline above, immediately following the site plan approval BRID will close on the construction financing on August 1716 Wilson Blvd Quinn Place Apartments Page 47 of 86

48 31, The Construction Loan Draw Schedule detailed as Exhibit I, breaks down the month-by-month draws covering all hard, soft and land costs. Total estimated construction costs, and therefore the balance of the loan totals $40,361,659. The 90 day LIBOR rate is the index used to set the floor of the interest rate, which as of May 7, 2010 is 0.35%. HSBC has indicated that a spread of 300 to 305 basis points on the top of the LIBOR rate will set the construction loan interest rate. BRID has assumed a basis point spread of 325 for an interest rate of 4.60%. Payments made through the construction loan period will be interest only and funded through the loan proceeds. The table below details the construction loan financing assumptions. Figure 28 - Construction Loan Financing Loan Amount $40,361, Day LIBOR as of: 5/7/ % Basis Points Over LIBOR 325 Interest Rate 3.60% Interest Only $1,453,020 Monthly IO Payment $121,085 Yield on Cost 6.15% By the end of the calendar year 2011, draws will total $15,717,056 inclusive of all development and interest cost. Year one also includes the purchase of the land at a value of $8.5 million or $78,833 per unit. Construction draws during calendar year 2012 will total $21,651,167 and $4,092,244 during calendar year Construction will be completed on January 31, Permanent Loan BRID anticipates stabilization of the project following an 18-month lease up period on July 31, 2014 at which time the permanent take out loan will be closed. The permanent loan is assumed to have a 300 basis point spread over the Wilson Blvd Quinn Place Apartments Page 48 of 86

49 year treasury rate, giving the loan an interest rate of 6.70% over a 30-year amortization period. BRID will raise 35.0% of the construction cost from private investors and finance the remaining 65.0% for a loan amount of $28,030,894. A 1.0% financing fee will be paid upon the closing of loan in the amount $280,309. Additionally, the lender will require at least a Debt Service Coverage Ratio of 1.25 through the term of the loan. Upon property stabilization, each year of cash flows is projected to exceed the required DCR as shown in Exhibit K. The table below summarizes the permanent financing assumptions for the take out of the construction loan. Figure 29 - Financing - Permanent Loan Loan Amount $28,030,894 Investor Equity $15,093, Year Treasury 5/7/ % Basis Points Over 10 Year 3.00% Interest Rate 6.70% Amortization Period 30 Loan to Cost 65.0% Investor Equity 35.0% Monthly Payment $180,877 Annual Payment $2,170,526 Financing Fees 1.00% $280,309 Equity Financing As mentioned above, the equity for the project will account for 35.0% of the construction costs and total $15,093,559. These funds will be raised from private investors through existing relationships developed by Beynon Realty Capital, an affiliate of BRID. The 1716 Wilson Blvd Quinn Place Apartments Page 49 of 86

50 ownership structure will be in the form of a Limited Liability Corporation (LLC) and each equity investor will be a passive member of the LLC. The equity investment will receive a cumulative 8.0% percent non-compounding preferred return paid quarterly from the cash flows of the property. BRID (Investor II) will contribute 10% of the Figure 30 - Investment Structure Partnership Structure Investor II Investor I Share of Equity 10.00% 90.00% Equity $ $1,520,910 $13,688,193 Preferred Return 8.00% 8.00% Residual Split 30.00% 70.00% equity or $1,509,356 while the remaining 90% equity, or $13,584,203 will come from private individual investors (Investor I). Upon disposition of the property, the equity investors will split the net proceeds 70/30 in favor of Investor I. The tables below represent the cash flows from the property through disposition for Investor I and Investor II. Each analysis shows three separate reversion capitalization rates upon sale of the property. Cash Flow YR Figure 31 - Investor I Cash Flow, Reversion and IRR 5.25% 5.75% 6.25% YR 0 ($13,688,193) ($13,688,193) ($13,688,193) YR 1 $803,637 $803,637 $803,637 YR 2 $937,709 $937,709 $937,709 YR 3 $978,731 $978,731 $978,731 YR 4 $1,114,964 $1,114,964 $1,114,964 YR 5 $1,207,600 $1,207,600 $1,207,600 YR 6 $31,161,497 $26,902,416 $23,324,787 IRR 19.4% 16.9% 14.5% 1716 Wilson Blvd Quinn Place Apartments Page 50 of 86

51 As shown above, the investment returns for the equity partners are favorable in each disposition situation. BRID is confident in their ability to achieve these projected investment returns. Figure 32 - Investor II Cash Flow, Reversion and IRR Cash Flow YR 5.25% 5.75% 6.25% YR 0 ($1,520,910) ($1,520,910) ($1,520,910) YR 1 $89,293 $89,293 $89,293 YR 2 $104,190 $104,190 $104,190 YR 3 $108,748 $108,748 $108,748 YR 4 $123,885 $123,885 $123,885 YR 5 $134,178 $134,178 $134,178 YR 6 $12,869,946 $10,899,846 $9,366,577 IRR 46.0% 42.2% 38.9% The projected investment returns of the Quinn Place Apartment development exceed that which was initially anticipated for the project. It is BRIDs full intention of achieving these returns and satisfying all investments objectives. VIII. PROJECT MANAGEMENT PLAN AND TEAM In order to increase the likelihood of BRID achieving the objectives discussed in this report, it is important to assemble a team of professionals capable of performing to the highest standard in each respective area of expertise. The following outlines the critical components and team members necessary to realize BRID s overall goals and vision of Quinn Place Apartments Wilson Blvd Quinn Place Apartments Page 51 of 86

52 Bohler Engineering Davis Drive Suite 200 Sterling, VA (703) Civil Engineering Firm - Bohler Engineering Bohler Engineering will provide the critical services of civil engineering, land surveying, Phase I and Phase II environmental reports and landscape architecture. Their areas of expertise include: Due Diligence / Site Investigations, Zoning and Land Development Site Plan Preparation, Site Design and Construction Documents, Site Grading and Drainage Plans with Utility Systems, Storm Water Management Facility Design, Soil Erosion and Sediment Control Plans, Water and Sewer Systems Design, Roadway Design, Lighting Analysis and Design, Regulatory Permit Approval Coordination, Municipal Approval Coordination, Municipal Consulting Support Services, Land Planning and Public Hearing Testimony. Bohler Engineering will also consult and provide services relating to LEED & Smart Growth Civil Design to help meet BRID obtain the LEED Silver Certification from the United States Green Building Council (USGBC). Their firm has LEED Accredited professionals with experienced trained staff in civil design with LEED implications, Landscape Architecture and Smart Growth planning Wilson Blvd Quinn Place Apartments Page 52 of 86

53 Legal The Land Lawyers Walsh, Colucci, Lubeley, Emrich and Walch, LC Courthouse Plaza 2200 Clarendon Blvd., Thirteenth Floor Arlington, VA Phone Mentioned above in the Zoning and Public Policy sections, BRID has engaged the law firm of Walsh, Colucci, Lubeley, Emrich and Walsh, LC who specializes in Northern Virginia land use and development. The firm s Zoning & Land Use practice group handles the processes of preparing, submitting, articulating, and defending client s applications before the appropriate local government staff, planning commissioners, local legislative bodies, and concerned community members. Construction Management Clark Construction Clark Construction Group, LLC 7500 Old Georgetown Road Bethesda, Maryland Phone (301) Clark provides a full range of general contracting services, beginning to end: from the early planning and design stages through construction, project completion, and closeout. Clark s employees are highly skilled and use proven management systems and procedures to monitor project progress and ensure that project goals are met. Their general contracting services include: Cost monitoring and control Schedule development and control Subcontractor management 1716 Wilson Blvd Quinn Place Apartments Page 53 of 86

54 Field engineering and site management Safety assurance Project accounting Change management Shop drawings and material submittal review Quality control Jonathon Nehmer + Associates, Inc Calhoun Place, Suite 310 Rockville, MD Architect Jonathan Nehmer + Associates, Inc. JN+A's innovative designs provide cutting edge competitiveness for our clients while enabling them to stay within their budgets and on schedule. We provide complete Architectural services to bring your project from inception to completion: Master Planning / Site Analysis, Conceptual Planning and Design, Prototype Design, Code and Zoning Analysis, Design and Construction Documents, Specifications, Permitting Assistance, Shop Drawing Review, Quality Control and Final Punch Out. Retail Leasing Firm The Rapporport Companies The Rappaport Companies 8405 Greensboro Drive, Eighth Floor McLean, Virginia Phone: The Rappaport Companies provides retail leasing, tenant representation, property management, construction management, development, marketing, receivership and 1716 Wilson Blvd Quinn Place Apartments Page 54 of 86

55 asset management services for retail space in shopping center and mixed-use developments and urban and suburban settings. Our services are targeted specifically for retail properties in the Mid-Atlantic region, including Washington, D.C., Virginia, Maryland, Pennsylvania, West Virginia, North Carolina and Delaware. The Rappaport Companies provide landlord representation services for space in a variety of formats, including neighborhood, community and regional shopping centers, as well as urban and mixed use developments. BRID understands the importance of working collectively as a team in order to maximize efficiency and reduce change orders and budgeting. While alterations to design, construction roadblocks and change orders are an inevitable occurrence in project development, BRID will take steps necessary to reduce those complications. BRID will hold bi-monthly meetings with a member of each of the above mentioned project management teams to ensure open communication and to solve any potential issues that may divert the project from its overall delivery timeframe. BRID has chosen this group of team members due their past successes and willingness to collaborate collectively as a team. IX. CONCLUSIONS AND RECOMMENDATIONS Through the preceding analyses performed in conjunction with this practicum, many factors were considered by BRID on whether to proceed with the development of Quinn Place Apartments. BRID chose the site on 1716 Wilson Blvd due to its urban lifestyle in the Rosslyn market, proximity to the Rosslyn and Courthouse metro stations and accessibility to 1716 Wilson Blvd Quinn Place Apartments Page 55 of 86

56 downtown Washington DC. The Rosslyn Ballston Corridor is a thriving metropolitan community that will continue to develop in conjunction with Smart Growth initiatives. BRIDs adherence to Arlington Counties Rosslyn to Courthouse Urban Design Study 1 and working closing with the county to dedicate the portion of the N. Quinn Street Extension, will help in obtaining county approval for permits and entitlements. After conducting the demand and supply analysis for the Rosslyn submarket, BRID felt comfortable in the fact that the growing population and a strong employment workforce, will provided stability through the development and lease up process. BRID continued with a detailed analysis of the residential and retail companion uses, providing a proforma for each individual use and for the uses collectively. Assumptions were made for each of the uses based off of the market research performed previously in the Practicum as well as personal interviews with industry professionals. The concluding result of the collective analyses for the development, will reward the Quinn Place Apartment project with an overall IRR of 20.5% (42.2% for the developer and 16.9% for the Equity Partner). Therefore, BRID is recommended to follow the development schedule outlined in Exhibit H and proceed with the proposed Quinn Place Apartments project Wilson Blvd Quinn Place Apartments Page 56 of 86

57 XI. EXHIBITS AND REFERENCES Exhibit A Reference Maps Exhibit B Employment Trends Graph Exhibit C Existing Condition Photos Exhibit D Rosslyn Market Radii Exhibit E New Construction (RB Corridor) Exhibit F Market Comparables Exhibit G Zoning Special Considerations Exhibit H Quinn Place Apartments Development Schedule Exhibit I Master Development Budget Exhibit J General Assumptions Exhibit K Mixed Use Proforma Exhibit L Residential Only Proforma Exhibit M Retail Assumptions Exhibit N Retail Rent Roll & Income Schedule Exhibit O Retail Tenant Rollover Schedule Exhibit P Retail Tenant Improvement & Leasing Commission Schedule Exhibit Q Retail Only Proforma Exhibit R Permanent Loan Amortization Schedule Exhibit S Partnership Analysis 1716 Wilson Blvd Quinn Place Apartments Page 57 of 86

58 REFERENCES 1 Arlington County Department of Community Planning, Housing and Development, Planning Division and Master Planning Team (March 15, 2003). The Rosslyn to Courthouse Urban Design Study [PDF Document]. Retrieved form 2 McCauley, M. Director of Real Estate Development Group, Arlington Economic Development. Personal Interview (March 31, 2010) 3 United States Green Building Council. 4 Delta Associates (June 30,2009). Mid-Year 2009 Report: Mid-Atlantic Class A Apartment Market [PDF Document]. 5 Delich, D. (n.d.) Marcus and Millichap. Apartment Research Market Update Washington DC Metro Area, 1 st Quarter Arlington County Department of Planning, Housing and Development Costar. Z. Beynon. User Subscription. 8 REIS. Apartment Asset Advisor 1716 Wilson Blvd. Arlington, VA 22209(January 7, 2010). 9 Beynon, Z. Personal Site Visits (April 12, 2010). Zoso Flats, The Prime at Arlington Courthouse, The Palatine, Bennett Park Apartments. 10 Arlington County. The Comprehensive Plan. Retrieved from n.aspx 11 Arlington County. General Land Use Plan. Retrieved from UP.aspx 12 Arlington County. Dr. George Contis Staff Report (October 4, 2007). 13 Arlington County. Ordinance Section 24. C-O-2.5 Commercial Office Building, Hotel and Apartment District (n.d.) Wilson Blvd Quinn Place Apartments Page 58 of 86

59 14 Arlington County. Master Transportation Plan Amendments. Retrieved from tp/mtp_draft.aspx 15 Arlington County Department of Community Planning, Housing and Development. Administrative Regulation 4.1- Governing the Submittal of Site Plans in Arlington County (revised October 2009). 16 Arlington County. Site Plan Review (1998). 17 Knutson, S. Project Manager. Akridge. (April 18, 2010). Fitzpatrick, John. Regency Centers. (May 3, 2010) 18 Perry, K. The Rappaport Companies. Retail Leasing Agent. Personal Interview (April 19, 2010). 19 Marquez, A. Senior Vice President, HSBC Bank USA, N.A. Personal Interview (May 8, 2010) 1716 Wilson Blvd Quinn Place Apartments Page 59 of 86

60 Exhibit A.1 Washington DC Metro Area 1716 Wilson Blvd Quinn Place Apartments Page 60 of 86

61 Exhibit A.2 Rosslyn to Courthouse Metro Stations 1716 Wilson Blvd Quinn Place Apartments Page 61 of 86

62 Exhibit A.3 Ariel Site Boundaries 1716 Wilson Blvd Quinn Place Apartments Page 62 of 86

63 Exhibit A.4 Site Boundaries and Existing Uses 1716 Wilson Blvd Quinn Place Apartments Page 63 of 86

64 Exhibit B Washington DC Area Metro Employment Trends 1716 Wilson Blvd Quinn Place Apartments Page 64 of 86

65 Exhibit C Existing Conditions Photos Photo A - Vacant Site owned by Arlington County intended for the extension of North Quinn Street Photo B Southern end of subject property 1716 Wilson Blvd Quinn Place Apartments Page 65 of 86

66 Exhibit C Existing Conditions Photos Photo C Southern end of the subject property looking east on Clarendon Blvd Photo D Southern end of the subject property looking west on Clarendon Blvd 1716 Wilson Blvd Quinn Place Apartments Page 66 of 86

67 Exhibit C Existing Conditions Photos Photo E Uninhabited home on southeast corner of the subject property Photo F View directly south of the subject property 1716 Wilson Blvd Quinn Place Apartments Page 67 of 86

68 Exhibit D Rosslyn Market Radii One-Mile Radius Primary Market Three-Mile Radius Secondary Market 1716 Wilson Blvd Quinn Place Apartments Page 68 of 86

69 Exhibit E New Construction (RB Corridor) Property Name Clarendon Center South Block Apts The Amelia Gables 12 Twenty-One Crescent Falls Church Property Address 1200 N Garfield Clarendon Blvd 816 N Oakland Wilson Blvd 1221 N Pierce Ft Myer Dr Westmoreland Lee Highway Wilson N Quincy St Wilson N Quincy St 1531 N Pierce RTE 50 Asset Class Units Est. Ground Break Apartments 244 November- 08 Apartments 108 November- 07 Est. Completion September- 10 August-08 Status Under Construction Complete Apartments 132 April-08 September- 09 Complete Apartments 214 August-08 August-10 Under Construction Founders Square PH II Apartments 236 N/A N/A Planned Founders Square Apartments 164 N/A N/A Planned PH I Parc Rosslyn Apartments 238 December- August-08 Complete 06 Garfield Park at th St N Apartments 149 N/A N/A Planned Clarendon Village Waverley at 1200 N Irving St Apartments 185 N/A N/A Planned Clarendon 13th St N Lee Center RTE N Apartments 188 N/A N/A Planned ReDevelopment Pershing Dr The Madison 4319 Pershing Apartments 240 January-08 July-09 Complete N George Mason Dr The Views of 1210 N Apartments 116 October-09 August-11 Under Clarendon Highland St Construction Parkland Gardens Lee N Apartments 228 N/A N/A Planned Glebe Rd Zoso Flats 1025 N Fillmore Apartments 114 N/A May-09 Complete 10th St N Central Place PH N Lynn St/FT Apartments 350 N/A N/A Planned I Myer 19th St/Wilson Blvd Liberty Center 875 N Randolph Apartments 235 June-05 January-08 Complete St 2009 N 14th St 2009 N 14th St Apartments 254 N/A N/A Taft St Jordan Manor 801 Wakefield Apartments 90 June-10 December-11 Planned Wilson Blvd Rosslyn Commons PH I Rosslyn Commons PH II North Tract Lofts 1524 Clarendon 16th Rd Clarendon 16th Rd N th S Clark St Apartments 262 N/A N/A Planned Apartments 192 N/A N/A Planned Apartments 184 N/A November-10 Under Construction 1716 Wilson Blvd Quinn Place Apartments Page 69 of 86

70 Exhibit F Market Comparables Summary of Comparable Apartment Rentals Comp # Property Name Property Address Sub Market Occ. # of Units Ave. Unit Size - SF Ave. Rent Year Built Distance to Metro Management Company 1 Bennett Park Zoso Flat Apartments Parc Rosslyn The Prime at Arlington Courthouse 5 The Palatine 1601 Clarendon Blvd 1025 N. Fillmore Street 1531 North Pierce Street 1415 North Taft Street 1301 N. Troy Street Rosslyn 98% $2, mi WRIT Clarendon / Courthouse 98% $2, mi Simpson Housing Rosslyn 97% $2, mi Paradigm Courthouse 98% $2, mi Courthouse 95% $2, mi Equity Residential Cresant Heights Group Subject Quinn Place Apartments 1716 Wilson Blvd Rosslyn $2,885 Proj mi Beynon Realty Services 1716 Wilson Blvd Quinn Place Apartments Page 70 of 86

71 Exhibit F.1 Market Comparables Map 1716 Wilson Blvd Quinn Place Apartments Page 71 of 86

72 Exhibit G Zoning Special Considerations County Sketch of the Rosslyn to Courthouse Medium Density Plan **Rosslyn to Courthouse Urban Design Study** Proposed North Quinn Street Ext. Proposed North Quinn Street Extension **Master Transportation Plan Amendments** 1716 Wilson Blvd Quinn Place Apartments Page 72 of 86

73 Exhibit H - Quinn Place Apartments Development Schedule Figure 22 - Quinn Place Apartments Development Timeline Start Finish Submit LOI 6/1/10 Feasibility/Due Diligence 6/1/10 8/31/10 Execute Contract 8/31/10 Entitlements/Permitting 9/1/10 8/31/11 Close Development/Construction Loan 8/31/11 Construction - Apartments 9/1/11 1/31/13 Delivery - Apartments 2/1/13 Stabilization - Apartments 2/1/13 7/31/14 Close Permanent Loan 8/1/14 Reversion 12/31/ Wilson Blvd Quinn Place Apartments Page 73 of 86

74 Exhibit I Master Development Budget Construction Loan Draw Schedule Month Land Hard Costs Soft Yr End Dev. Yr End Int. Total Yr End Int. Exp Total Costs Costs Costs Costs Sep-11 $8,500,000 $1,572,692 $106,385 $121,915 $10,300,993 Oct-11 $0 $1,572,692 $106,385 $121,915 $1,800,993 Nov-11 $0 $1,572,692 $106,385 $121,915 $1,800,993 Dec-11 $0 $1,572,692 $106,385 $121,915 $1,800,993 $15,216,311 $487,660 $15,703,971 Jan-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Feb-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Mar-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Apr-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 May-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Jun-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Jul-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Aug-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Sep-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Oct-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Nov-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 Dec-12 $0 $1,572,692 $106,385 $121,915 $1,800,993 $20,148,932 $1,462,980 $21,611,912 Jan-13 $0 $1,572,692 $106,385 $121,915 $1,800,993 Feb-13 $0 $0 $106,385 $121,915 $228,300 Mar-13 $0 $0 $106,385 $121,915 $228,300 Apr-13 $0 $0 $106,385 $121,915 $228,300 May-13 $0 $0 $106,385 $121,915 $228,300 Jun-13 $0 $0 $106,385 $121,915 $228,300 Jul-13 $0 $0 $106,385 $121,915 $228,300 Aug-13 $0 $0 $106,385 $121,915 $228,300 Sep-13 $0 $0 $106,385 $121,915 $228,300 Oct-13 $0 $0 $106,385 $121,915 $228,300 Nov-13 $0 $0 $106,385 $121,915 $228,300 Dec-13 $0 $0 $106,385 $121,915 $228,300 $2,849,316 $1,462,980 $4,312,296 Jan-14 $0 $0 $106,385 $121,915 $228,300 Feb-14 $0 $0 $106,385 $121,915 $228,300 Mar-14 $0 $0 $106,385 $121,915 $228,300 Apr-14 $0 $0 $106,385 $121,915 $228,300 May-14 $0 $0 $106,385 $121,915 $228,300 Jun-14 $0 $0 $106,385 $121,915 $228,300 Jul-14 $0 $0 $106,385 $121,915 $228,300 Aug-14 $0 $0 $106,385 $121,915 $228,300 $851,082 $975,320 $1,826,402 Total $8,500,000 $26,735,771 $3,829,8 70 $4,388,9 40 $43,454,580 $39,065,641 $4,388,940 $43,454, Wilson Blvd Quinn Place Apartments Page 74 of 86

75 Exhibit J General Assumptions 1716 Wilson Blvd Quinn Place Apartments Page 2 of 86

76 General Assumptions - Quinn Place Apartments Multi-Family/Retail Financing Lot Size (sf) 45,523 Construction Loan Buildable Lot Size 41,458 Loan Amount $40,638,333 Quinn Street Extension 4, Day LIBOR as of: 5/7/ % FAR 3.50 Basis Points Over LIBOR 3.25% GFA 145,103 Interest Rate 3.60% Coverage 85.5% Interest Only $1,462,980 Net Buildable Area 124,134 Monthly IO Payment $121,915 Multi-Famly 114,134 Yield on Cost 6.33% Average Unit Size 951 Est. # of Units 120 Permanent Loan Retail 10,000 Loan Amount $28,245,477 Number of Stories 6 Investor Equity $15,209,103 Average Floor Plate 20, Year Treasury 5/7/ % Basis Points Over 10 Year 3.00% Interest Rate 6.70% Parking Amortization Period 30 Retail 1 space per 580 Loan to Cost 65.0% Parking Needed 17 Investor Equity 35.0% Residential Per Unit 1.2 Monthly Payment $182,262 Parking Needed 144 Annual Payment $2,187,142 SF/Parking Space 400 Financing Fees 1.00% $282,455 Cost/Parking Space $32,500 Investment Structure Total Parking Required 161 Partnership Structure Owner Partner Share of Equity 10.00% 90.00% Other Income Equity $ $1,520,910 $13,688,193 Type #/Units $/Month Annual Preferred Return 8.00% 8.00% Parking - Residential 144 $75 $129,600 Residual 30.00% 70.00% Parking - Retail 17 $0 $0 Misc. 120 $40 $57,600 Move in Fee 3 $500 $18,000 Residual Value Calculation Cap Rate 6.00% Total Other Income $205,200 Cost of Sale 3.00% Hurdle Rate 15.00% Growth Assumptions Rental Growth 3.00% Other Income Growth 3.00% Affordable Housing Contribution Expense Growth 3.00% ADU Rate/SF $8.54 GFA Above 3.0 FAR 41,458 Operating Expenses % of EGI Approx. Affordable Housing Contribution $354,051 Utilities 3.00% Administration 8.00% Marketing 8.00% Turnover 5.00% Maintenance 4.00% Insurance 3.00% Real Estate Tax 7.00% Management Fee 4.00% Total OpEx 42.00% 1716 Wilson Blvd Quinn Place Apartments Page 3 of 86

77 Exhibit K Mixed Use Proforma 1716 Wilson Blvd Quinn Place Apartments Page 4 of 86

78 1716 Wilson Blvd Quinn Place Apartments Page 1 of 86

79 Exhibit L Residential Only Proforma 1716 Wilson Blvd Quinn Place Apartments Page 1 of 86