Downtown Area Plan Development Feasibility Study

Transcription

1 Downtown Area Plan Development Feasibility Study NU Council VI July 9, 2008 February 22, 2004

2 Overview of Presentation 1. Introduction of Project Team 2. Purpose of Study 3. Presentation of Building Heights Tested Questions on Building Heights 4. Presentation of Methodology Questions about Methodology 5. Findings Apartments Condominiums Regulatory Requirements Questions about Findings

3 Strategic Economics Strategic Economics is a consulting and research firm specializing in urban and regional economics and planning. 14-person Berkeley-based firm National reputation TOD and urban economics Public-sector clients with policy-oriented research Relevant projects: Isla Vista Redevelopment Study Washington State Ferries Financial Analysis Colma BART Development Feasibility Study Staten Island TOD Feasibility Analysis St. Paul Central Corridor Development Feasibility Study Downtown Ann Arbor Development Strategies Project Downtown Berkeley Association Retail Market Study El Cerrito BART Development Feasibility Study San Mateo County Infill Study SMART Real Estate Advisory Services Livermore Transfer of Development Rights Study

4 Hixson & Associates Development and Project Management Consultants Clients include: real estate developers, investors, corporations, non-profits, educational institutions and lenders Provide comprehensive responsibility for project delivery Assist in transactions and in coordinating entitlements Manage & monitor design and construction activities Licensed architect

5 Purpose of this Study: Analyze key building types and provide information about their financial feasibility and development potential.

6 Building Types NU Council VI February 22, 2004

7 Building Heights Tested - Apartments High-rise Life/Safety Type III Construction b1 b1 b2 b2 b3 b3 b4 b4 Story Underground Parking Story 7-Story 7-Story 9-Story 11-Story 13-Story 17-Story 40 Units 50 Units 50 Units 56 Units 68 Units 80 Units 104 Units

8 Building Heights Tested - Condominiums High-rise Life/Safety b1 b1 b2 b2 b3 b3 b4 b4 Stories Underground Parking Units FAR 55' 75' 85" 100' ' 140' 180' Seventeen Five story Seven story Seven story Nine story Eleven story Thirteen story story 5-Story 40 7-Story 50 7-Story 50 9-Story Story Story Story Units Units Units Units Units Units Units

9 Questions From Commissioners

10 Study Methodology NU Council VI February 22, 2004

11 Starting Point for Analysis: Prototypical 13,000 square foot lot Corner lot DAPAC-recommended FARs DAPAC-recommended Lot Coverage Considered Apartments and Condos separately

12 Method for Determining Feasibility Land Residual Analysis What is a land residual analysis? Estimated value of the land given the income that could be generated from development A basic measure of financial feasibility and the amount of value that could be generated by development What is a land residual analysis?

13 Why Did We Use This Method? Prices for properties in Downtown Berkeley are highly variable and range from $80 - $200 a square foot Downtown buildings conditions vary, which impacts sales prices Many Downtown property owners are unsure if development would be more profitable than current revenues from rents Avoids the pitfall of assuming an incorrect land value What is a land residual analysis?

14 Key Assumptions about Developer Profit Assumed a profit of 15% of costs This number was vetted with multiple developers and is a common rule-of-thumb Determined to be the profit margin that is likely to attract developers to Berkeley

15 Financial Analysis Process Step 1: Step 2: Collect Data on: Construction Costs Land Costs Sales Prices Rents Current Revenue Current Costs Land Residual Value

16 Financial Analysis Process Step 3: Compare Land Residual value with current land costs Step 4: Sensitivity Testing uses a range of assumptions about possible future conditions to understand impact on feasibility Study historic trends in costs & revenues Make projections based on a range of growth rates using past trends

17 Questions From Commissioners

18 Findings NU Council VI February 22, 2004

19 Apartment Analysis

20 Apartments are Most Feasible at the 55-foot Height Now and in the Future b1 b1 b2 b2 b3 b3 b4 b4 Story Underground Parking Story 7-Story 7-Story 9-Story 11-Story 13-Story 17-Story

21 Apartments at the 75-foot height could become feasible if the stars align b1 b1 b2 b2 b3 b3 b b4 Story Underground Parking 5-Story 7-Story 7-Story 9-Story 11-Story 13-Story 17-Story

22 Apartment Key Findings Apartments are most feasible now, and in the future, at the 55-foot level Apartments at the 75-foot level could become feasible if stars align Apartment buildings taller than seven stories are unlikely to become feasible because Berkeley is not a luxury rental market Regulatory requirements are not a considerable factor influencing apartment feasibility

23 Condominium Analysis

24 Average Revenue and Development Costs per Unit $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 Average Revenue per Unit Average Development Cost per Units $200,000 $100,000 $0 55' 75' 85' 100' 120' 140' 180'

25 Condominiums 55-, 75- and 180-feet are likely to be viable in the next market cycle b1 b1 b2 b2 b3 b3 b4 b4 Stories Underground Parking Units FAR 55' 75' 85" 100' ' 140' 180' Seventeen Five story Seven story Seven story Nine story Eleven story Thirteen story story 5-Story 40 7-Story 50 7-Story 50 9-Story Story Story Story

26 Condominiums 140-feet could become feasible in years b1 b1 b2 b2 b3 b3 b4 b4 Stories Underground Parking Units FAR 55' 75' 85" 100' ' 140' 180' Seventeen Five story Seven story Seven story Nine story Eleven story Thirteen story story 5-Story 40 7-Story 50 7-Story 50 9-Story Story Story Story

27 Condominium Key Findings Tall buildings are more likely to be feasible as condominiums than apartments Regulatory requirements for these projects have significant implications for feasibility

28 Findings Regarding Regulatory Requirements (Condos)

29 Regulatory Requirements Considered City of Berkeley Inclusionary Housing Requirements (existing) Green Building Construction (proposed) State Density Bonus program (existing) FARs proposed by DAPAC (proposed) Lot Coverages proposed by DAPAC (proposed)

30 Calculation of Inclusionary Housing Fees $1,200,000 $1,000,000 $800,000 $600,000 Sales Price In-Lieu Fee $400,000 $200,000 $-

31 Inclusionary Housing Fees & Green Building Feasibility in the Current Market 50% Reduction of Current In-Lieu Fee and No Green Building Feasibility Entire In-Lieu Fee and No Green Building Entire In-Lieu Fee and Green Bilding 55' 75' 85' 100' 120' 140' 180' Building Height

32 Inclusionary Housing Fees & Green Building Projected Feasibility in 7-year (Conservative) 50% Reduction of Current In-Lieu Fee and No Green Building Feasibility Entire In-Lieu Fee and No Green Building Entire In-Lieu Fee and Green Bilding 55' 75' 85' 100' 120' 140' 180' Building Height

33 Inclusionary Housing Fees & Green Building Projected Feasibility in 7-year (Optimistic) 50% Reduction of Current In-Lieu Fee and No Green Building Feasibility Entire In-Lieu Fee and No Green Building Entire In-Lieu Fee and Green Bilding 55' 75' 85' 100' 120' 140' 180' Building Height

34 State Density Bonus For Condominium and Apartment projects, the State Density Bonus program allows developers to build in excess of height limits when they provide set levels of affordable housing in a development. Overall: for the building heights tested, it doesn t benefit developers to take advantage of the State Density Bonus. Apartments: the State Density Bonus could have the potential to improve the feasibility of 75-foot buildings. Condominiums: the State Density Bonus on its own fails to improve the financial feasibility of any of the buildings tested.

35 Floor Area Ratios (FAR) DAPAC-recommended FARs make 140- and 180-foot buildings infeasible to build by limiting gross square footage possible Building Height DAPAC Recommended FAR FAR Used in this Analysis 55' ' ' ' ' ' '

36 Lot Coverages DAPAC s recommendation for maximum lot coverage requirements are: Heights 55 feet: 100 percent maximum Heights 65 feet: 90 percent maximum with in-lieu fee option for small lots & historic preservation; Heights 66 to 100 feet: 90 percent maximum with no in-lieu fee option; Heights 101 feet and above: 80 percent maximum with no in-lieu fee option;

37 Lot Coverages Findings The lot coverage requirements necessitate the use of a street-facing setback or a mid-block courtyard. Open space at the perimeter can help meet this requirement but it is unlikely to achieve a satisfying building configuration with the 20 percent setback considering the needs of the developer and good urban design practice. For taller condominium projects, only street-facing setbacks provide the efficient parking arrangement needed for project feasibility (which has urban design implications).

38 Questions From Commissioners

39 Lot Coverages Front Setback Parking Residential Open Space core/lobby core Retail Residential Street Street No Setback First Floor Residential Floor (applied to 55' building)

40 Lot Coverages Parking Residential Open Space core/lobby core Retail Residential Setback Setback Street Street 10% Setback First Floor Residential Floor (applied to 65' - 100' buildings)

41 Lot Coverages Parking Residential Open Space core/lobby core Retail Residential Setback Setback Street Street 20% Setback First Floor Residential Floor (applied to 101' - 180' buildings)

42 Lot Coverages Setback Options 10% Setback 20% Setback Residential open space Residential open space Setback - 13' Setback - 26' Front Setback 9,200 Front Setback 8,600

43 Lot Coverages Residential open space Residential open space Setback - 6' Setback - 12' Two Side Setback 9,200 Two Side Setback 8,500

44 Lot Coverages Setback Residential open space Mid-block Setback not applicable Mid-block Setback 8,400