AgdaPkt 2015-03-23 Closed and Joint SA PFA

Browse Search

Memorandum Nov. Redwood City Incentive Zoning/Community Benefits Program 9.A. - Page 19 community benefits. Despite being highly valuable in today's real estate market, the sensitivity analysis finds that market deterioration could eliminate the surplus value and potentially jeopardize feasibility. As shown in Figure 2 the financial analysis finds that this prototype generates benefit capture potential of negative $6 (-$6) to $116 per square foot of development. • Mid-Rise Office Campus development on large sites located in easily accessible, highly visible locations is financially feasible and capable of contributing community benefits in today's economy. Despite the popularity of Transit-Oriented Development and downtown office locations, traditional suburban office campus formats remain highly desired by the market. Similar to other prototypes, however, deterioration of market conditions threatens financial feasibility. As shown in Figure 2 the analysis finds that this prototype generates benefit capture potential of negative $37 (-$37) to $79 per square foot of development. • Low-Rise Residential development, which can occur on relatively small sites in infill environments, is financially feasible and capable of generating value for community benefits under current conditions. These projects are successful in part because high product values are achieved at costs that are low relative to denser residential formats. On a per square foot basis, low-rise residential offers more potential for value capture than other housing types. As shown in Figure 2 the analysis finds that this prototype generates benefit capture potential of negative $4 (-$4) to $82 per square foot of development. • Mid-Rise Multifamily Residential development has been underway in Redwood City in recent years and the pro forma analysis confirms the financial viability of this prototype. The higher densities and structured parking used in this prototype increase development cost and limit surplus value somewhat. However, well-positioned projects have been successful in achieving rents of about $4 per square foot per month, making these projects financially attractive to developers. As shown in Figure 2 the analysis finds that this prototype generates benefit capture potential of negative $14 (-$14) to $81 per square foot of development. • Multifamily Residential Tower development comes with a significant construction cost premium (associated with steel and concrete). However, these additional costs are expected to be offset by the light, air, and views afforded to residents by the height of the building. Accordingly, this prototype enjoys a value premium over less dense product types. Though these projects are rare on the Peninsula, there is one residential (mixed-use) tower under construction in Redwood City. This analysis generally confirms the financial feasibility of this prototype but finds that this product is likely to generate lower value capture potential per square foot than other residential prototypes, and could become infeasible with modest market deterioration. As shown in Figure 2 the analysis finds that this prototype generates benefit capture potential of negative $44 (-$44) to $66 per square foot of development. Key Assumptions Development Program Assumptions The analysis derives development prototypes from current (ongoing) and recently completed development projects in Redwood City. Site size, building size, and parking ratios reflect those observed locally. Though not analyzed by the sensitivity analysis presented above, parking is a key factor affecting development feasibility. Reduced parking requirements, if the market is accepting, can improve the value creation of a project. P:\141000s\141053RedwoodCity\Deliverable\Financial Analysis Memo 11 2614.docx