AgdaPkt 2005-10-24 - Laserfiche WebLink

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CB RICHARD ElLIS CONSULTING Sedway Group Ø1-/? CBRE CB RICHARD ELLIS Mr. Larry Carr September 15, 2005 Page 7 Other Relevant Assumptions. Other assumptions relevant to the traditional office tenant include the following: . a standard office employment density of 250 square feet, used to derive the estimated number of office employees working at the complex; a tenant improvement allowance equivalent to $15.00 per square foot (of which $7.50 per square foot is taxable) in 2005, based on market comparables; an office user annual electricity rate of $3.76 per square foot6, reported by Stanford Hospital and Clinics for equivalent office space; and an office user annual gas rate of $0.40 per square foof, reported by Stanford Hospital and Clinics for equivalent office space. . . . These assumptions are all considered conservative and are documented in Exhibit 3, which contains general assumptions relative to the traditional office tenant as well as Stanford Hospital and Clinics. Key Stanford Hospital and Clinics Assumptions There are several categories of assumptions key to the use and analysis of the property as ambulatory medical clinic space. These assumptions pertain to occupancy of the space and associated construction costs, the generation of on-site retail sales, utility rates, and support of local businesses through local spending. These assumptions are defined below, and documented in Exhibits 3, 4, and 5. Occupancy and Construction. Stanford Hospital and Clinics is assumed to purchase the property at the end of 2005 (effectively the beginning of 2006). Construction is anticipated to begin in 2006, with completion and occupancy by the end of 2007 (effectively the beginning of 2008). Stanford Hospital and Clinics is assumed to occupy 100 percent of the space, with all four of the buildings devoted to medical clinic space. The analysis assumes no sales or use tax associated with construction costs.8 However, the analysis does estimate the use tax collected resulting from purchases occurring prior to full occupancy related to equipment and furnishings and information technology. Equipment and furnishings are estimated to cost $51.0 million with approximately 90 percent, or $45.9 million, spent with out-of-state vendors and subject to use tax. Information technology is estimated to cost $19.0 million with approximately 70 percent, or $13.3 million, spent with out-of-state vendors and subject to use tax. The total amount subject to use tax is $59.2 million (see Exhibit 4). The analysis makes no assumption regarding interim improvements to the buildings. This is a conservative assumption given that interim improvements will undoubtedly occur since the anticipated lifespan of medical improvements is typically 8 to 12 years. On-Site Retail Sales. Stanford Hospital and Clinics anticipates a total of 5,049 square feet of cafeteria space. Based upon data provided by Stanford Hospital and Clinics relevant to existing operations for a similar use, this space is assumed to generate taxable sales of $158 per square foot. This is a conservative estimate, in that most retail operations generate a minimum of $200 per square foot in taxable sales. The lower estimate reflects the patient orientation of the space, rather 6 This figure exceeds the $1 .58 rate in equivalent 2005 dollars reported by PG&E. 7 This figure is comparable to the $0.39 rate in equivalent 2005 dollars reported by PG&E. 8 The analysis conservatively assumes no sales or use tax associated with construction costs. In order to directly allocate the sales and use tax resulting from construction costs to Redwood City, the amount of the contract must equal or exceed $5 million. However, at the time of this analysis it is difficult to accurately estimate the contracts that may exceed this $5 million threshold. "..~.__..~.._..