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Mr. Kelly reported that Redwood City is currently experiencing a very strong job growth resulting in a very high demand for housing in the area driving up both rents and costs of "for sale" housing. Mr. Kelly said, "People who have to pay high rents are beginning to look at 'for sale' units because the rents are getting so high." He said the proximity to Sequoia Station and the downtown were pluses for this type of urban infill housing. Mr. Kelly listed the pros for building rental units: There is a very strong, broad market for rentals at this time, there are more renters for this site than there are buyers; it is a higher density site than 'for sale', 50 units per acre and for sale would be only in the high 20s; these will be high quality apartments and renters will have the money to spend downtown; there is a good financing market, and lAC is well capitalized. Mr. Kelly said the only cons were: Most communities prefer "for sale" units. Mr. Kelly listed the pros for building "for sale" units: The people who buy are "generally perceived as being stable and making more of a commitment to the area because they have a long term economic interest"; there was strong developer interest in "for sale" units with good track records; "for sale" presents an opportunity for renters to buy. He said there is probably a window of opportunity now to develop "for sale" units at this site "driven by the strong market and high rental rates." Mr. Kelly said the cons included: There will be a ceiling on how high the prices can be at this location, notwithstanding the high quality, around $200,000, but it is hard to predict; "for sale" would have to be built out in phases, over years, whereas all the apartments would be built at one time; and there is always an interest rate risk in private home ownership. Mr. Kelly said prevailing wages would be required in this development as in all Redevelopment Projects, high quality design is always a major issue for Agencies, and the market is strong here so the need for Redevelopment subsidies should be minimal, "but it will be a function of what it will cost to put the site together as a land value, and off-site requirements. But the amount of Agency subsidies we are seeing in going into projects in today's market is going down." Debbie Kearns, Keyser Marsten, described the affordability requirements. She said "the Agency has a policy that each project should meet the production requirements for affordability restriction, which means that 15% of the units need to be deed- restricted to very low and low income house holds. It is much less expensive for an Agency to meet those targets with a rental project than it is for a 'for sale' project." Ms. Kearns said a $40,000 to $50,000 subsidy per unit would probably have to be paid by the Agency if the units developed were "for sale" units. Management of deed- restricted "for sale" units is more difficult requiring more staff time to administer than rental units. SPECIAL REDEVELOPMENT AGENCY MEETING MINUTE BOOK NO.1 APRIL 14, 1997 MINUTES Page No. 406 PAGE 4