Economic Impact Analysis. Prepared By: Lambert Advisory 2601 South Bayshore Drive Miami, Florida 33133

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1 WEST BRICKELL CENTRE Major Use Special Permit 290 SW 10 th Street, 245 SW 11 th Street, SW 10 th Street, SW 11 th Street, 255 SW 11 th Street, and 267 SW 11 th Street Prepared By: Lambert Advisory 2601 South Bayshore Drive Miami, Florida 33133

2 ECONOMIC IMPACT ANALYSIS WEST BRICKELL CENTRE - Prepared by - Lambert Advisory, LC - Prepared for - Tiner USA, Inc. DenCity Development, LLC February 23, 2006

3 Lambert Advisory has completed an economic impact analysis for the development of, a condominium and townhome project located at 267 SW 11 th Street in the City of Miami. The analysis estimates the tangible direct and indirect economic impacts that will be derived from the construction and operation of the development. This report identifies and quantifies the benefits created by the West Brickell Centre development, and can supplement the major use special permit application to be submitted to the City of Miami. The property is on SW 11 th Street, between 2 nd and 3 rd Avenues, and is accessible to major thoroughfares, including I-95 and Brickell Avenue. The residential development will have a positive impact on the surrounding community in terms of taxes, jobs, and general investment generated, and will also enhance the area s commercial/retail demand. We have completed this analysis on the basis of development and performance information (i.e., price, absorption, timing, costs) that has been provided by DenCity Development, LLC. We have not independently verified this information or data. A profile of the project follows. Building Features & Profile Site Size (Net) 1.37 acres Building Height 15 stories Number of Residential Units 192 units Parking 323 spaces Residential FAR 173,795 sq.ft. Existing Commercial 0 sq.ft. New Commercial (Retail) 2,780 sq.ft. Gross Building Area (w/circulation and parking) 331,390 sq.ft. Source: DenCity Development, LLC; Lambert Advisory, Construction of is expected to commence in May 2006, with a duration of 21 months. Occupancy is planned for February Based upon the information provided, construction and subsequent operations of West Brickell Centre will generate considerable benefits to the immediate area, the City of Miami, and the metro-miami community. There are four key areas in which the project will provide positive economic impacts: 1. Short-term construction employment and expenditure 2. Long-term residential expenditure 3. Long-term building employment and operating expenditure 2

4 4. Indirect flow-through benefits (real estate and retail) For both short-term and long-term impacts, which are detailed in the following analysis, the economic benefit to the area is the result of projected increases in revenue from primary sources, including employment, wages, and taxes. Accordingly, the impact from these key sources comes from two distinct measures: Direct Expenditures disbursements for site acquisition and development (hard and soft costs) Indirect Expenditures net additional expenditures that flow into the local economy as a result of the new development Estimates of the tangible impacts from direct and indirect expenditures are captured by this analysis. However, potential intangible impacts such as the project s ability to serve as a catalyst for future development in the immediate area are not included, as they are nearly impossible to quantify. Economic impacts from the four key sources are detailed in the following sections. 1. Short-Term Construction Employment and Expenditure The impact from short-term construction employment and expenditure is directly associated with the project s development; the table below shows a summary of estimated development costs, as provided by DenCity Development, LLC. Development Costs Item Cost Hard Costs $35,000,000 Soft Costs 1 $10,000,000 Total $45,000,000 1 Does not include interest costs Source: DenCity Development, LLC, The majority of development-related expenditures will be made in Miami-Dade County, and the City of Miami will capture a significant share of these expenditures. Labor will account for approximately 60 percent ($21 million) of hard costs, and materials will account for 40 percent ($14 million). Over an estimated 21-month construction period, at an average annual construction wage of $44,512 1 in Miami-Dade County, with a benefit/overhead multiplier of 1.4, there will be 193 Full Time Equivalent (FTE) jobs created. 1 State of Florida ES-202, fourth quarter

5 Additionally, $900,000 in professional fees are expected to be paid to Miami area firms (e.g., architecture, engineering, legal). Assuming an average profit margin of 15 percent and overhead of 30 percent, nearly $500,000 in professional wages will be paid out by these firms. Impact and other fees payable to the City and County during the construction period will amount to approximately $1.7 million, which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs. A detailed profile of impact fees and other relevant non-impact fees paid to the City and/or Miami-Dade County as a result of the development of is included in the following table. Impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord ) $166,532 City of Miami Development Impact Admin. Fee $4,996 Miami Dade County Roads $175,078 Miami Dade County Schools $277,048 $623,654 Other/Non-Impact Fees: City of Miami Bonus Fees $644,236 Miami Dade W.A.S.A. Connection Fee $269,388 City of Miami Building Permit Fee $42,042 Energy Installation Fee $31,547 M.U.S.P Application Fee $45,000 Dade County Code Compliance $22,500 Radon Gas Fee $3,155 Fire Plan Review Fee $2,839 Ground Cover Fee $1,190 Land Use/Zoning, Review for Building Permit $2,000 Certificate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $1,064,181 TOTAL PROJECT FEES $1,687,836 Source: City of Miami Planning, Building & Zoning; Miami Dade County; DenCity Development, LLC; Lambert Advisory. Fees included above may be subject to change. 4

6 2. Long-Term (On-Going) Resident Expenditure Based on demographic and rental housing trends in the area, the resident base is expected to consist primarily of younger working professionals. Considering the proposed average sale price of $375,000, it is assumed that the residents will be mostly middle and upper income individuals/households with incomes of at least $90,000. Therefore, with a total of 192 households in the building, total personal income for the building is estimated to be nearly $17 million. Estimating that approximately half of the owners will relocate from outside the City, $8.4 million of marginal personal income will flow into Miami. We have estimated the marginal impact of $8.4 million in household income on retail sales and space demanded, using the Lambert Advisory Retail Trade Model. The following table provides a summary of additional retail expenditure and demand for space as a result of development of the condominiums and townhomes by Area Expenditure Potential (from New-to-Miami Residents) 2008 Estimated Marginal Expenditure Growth 2008 Sales per Square Foot Square Feet Demanded Type of Good General Merchandise $188,392 $ Apparel and Accessories $181,251 $ Furniture and Home Equipment $75,127 $ Electronic and Appliance Stores $71,855 $ Sporting Goods, Books and Music Stores $68,537 $ Miscellaneous Shoppers Goods $104,533 $ Shoppers Goods - Sub-Total $689,695 $258 2,668 Food Stores $962,562 $422 2,281 Eating & Drinking Establishments $595,461 $375 1,588 Health & Personal Care Stores $309,387 $ Liquor $20,650 $ Convenience Goods - Sub-Total $1,888,060 $401 4,703 Building Materials $185,631 $115 1,614 Total $2,763,386 $308 8,985 Source: Lambert Advisory, 2006 In addition to the net new expenditures attributable to residents, the 2,780 square feet of new retail planned will also attract retail expenditure primarily from the area immediately surrounding the property, with limited additional support from visitors from outside of the area. Assuming that 20 percent of the expenditure in retail comes from outside the City, and based upon sales per 5

7 square foot of $308, over $170,000 will be expended within the City per year which is now going to other areas. 3. Long-Term (On-Going) Building Employment and Operating Expenditure There are a number of areas where positive public benefits or economic impacts will result from the on-going operation of the residential development. These include: Additional employment from operation of the condominium community and stores; Property tax revenue to the City of Miami and Miami-Dade County; and Purchase of goods and services. We estimate that seven FTE workers will be needed to operate the building and three FTE workers will be employed in the retail stores. Positions such as building managers, parking garage attendants, maintenance staff, and security personnel will need to be filled. At an average Miami-Dade County wage of $42,692 2 the operation of the building will generate nearly $400,000 in wages each year. Positions at various skill levels will be made available to area residents. Increased sales tax revenue will result from the operation of the 2,780 square feet of new retail space. Assuming the net new retail expenditure in stores totals $170,000, approximately $12,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $130,000 in goods and services related to building maintenance will be purchased annually within Miami-Dade. This includes cleaning services, maintenance supplies, utilities, etc. 2 State of Florida ES-202, fourth quarter

8 Finally, the development of will provide significant benefit to the City and County by way of real property and personal property (ad valorem) taxes. The tax amount is based upon the County Tax Collector s (2005) millage rate of (per thousand dollars of value), broken down as follows. Ad Valorem Tax Breakdown Item Millage Annual Tax City of Miami Operating $325,106 City of Miami Debt $29,261 School Operations $303,973 School Debt $18,781 Environmental Projects $3,825 South Florida Water Management $22,835 FIND $1,473 County Millage $223,189 County Debt $10,901 Children's Trust $16,402 Library $18,590 TOTAL $974,335 Source: Miami Dade County Property Appraiser, Lambert Advisory, Real property is typically assessed at between 80 and 90 percent of Fair Market Value. For the purposes of this analysis, we calculate ad valorem taxes for based on 85 percent of development costs (approximately $40 million). Accordingly, the development should generate approximately $975,000 in real property taxes by This represents an estimated net marginal increase of roughly $860,000 over the ad valorem tax collection the City would receive if the property were valued at current use. 7

9 4. Indirect Flow-Through Benefits There will be a number of long term indirect flow-through benefits beyond construction from the project, particularly from the building operations and retail employment. The 10 FTE jobs created as a result of building and retail operations are assumed to have a 1.2 multiplier impact of 11 additional jobs. This multiplier is derived from the U.S. Department of Commerce s 1999 RIMS II model, and identifies indirect secondary and tertiary impacts created throughout the region due to the ripple effect of the primary employment. Summary, Economic Impacts Impact Short Term Construction Employment & Expenditure Full Time Jobs 193 Direct Wages $15,000,000 Professional Wages (Miami-Dade County) $500,000 Impact Fees Toward Public Expenditure $1,700,000 Total Impact, Short Term Const. Employment & Expenditure $17,200,000 Long-Term (On-Going) Resident Expenditure Marginal Expenditure Growth Residents (2008) $2,800,000 Marginal Impact from On-Going Resident Expenditure $2,800,000 Long-Term (On-Going) Building Employment and Operating Expenditure Full Time Jobs 10 Total Direct Wages Created $400,000 Sales Tax from Additional Retail Sales (2008) $12,000 Goods & Service Purchased in Miami-Dade County $130,000 Ad Valorem Taxes (2008) $1,000,000 Total Impact from On-Going Operations of the Building/Retail $1,500,000 Indirect Flow Through Benefits Full Time Jobs (Indirect) Miami Dade County 11 Total Indirect Wages Created $500,000 Total Flow Through Indirect Benefits $500,000 Source: Lambert Advisory, Based upon the analysis set forth herein, the project will clearly have a positive economic impact on both the City of Miami and Miami-Dade County. Total employment created during the development phase is approximately 193, with ongoing annual employment of 21 FTE jobs. Accordingly, there is an estimated $17.2 million impact from short-term construction employment and expenditures, and a stabilized $4.3 million annual revenue stream from resident expenditures and building operations (including real property taxes). 8