Fundamentals of the Real Estate Development Process Affordable & Market Rate Perspectives

Transcription

1 Real Estate Development 101 Fundamentals of the Real Estate Development Process Affordable & Market Rate Perspectives

2 DEVELOPMENT LIFE CYCLE SITE IDENTIFICATION FINANCING PLAN ACQUISITION DUE-DILIGENCE ENTITLEMENTS CONSTRUCTION LEASE UP/SALES & OPERATIONS

3 SITE IDENTIFICATION Acquisition Criteria Market-Rate Affordable Market Rent or Sales Price potential Location (jobs, amenities & transportation), Size, Zoning, Total Unit or Leasable Area Yield Competitiveness for Affordable Housing Financing Sources

4 SITE IDENTIFICATION Market Rate Approach

5 SITE IDENTIFICATION Affordable Housing Approach

6 FINANCING PLAN Capital Stack Market Rate Finance Typical Capital Stack Affordable Housing Finance Typical Capital Stack 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 26% 6% 11% 55% 1 Other Funds (deferred fee, GP capital) Local Funds (City/County); 0% - 3%, residual receipts Other Public Funds; 0% - 3%, residual receipts Conventional Perm Loan fully amortizing Tax Credit Equity

7 FINANCING PLAN Affordable Proforma Sources & Uses PERMANENT SOURCES Amortizing Perm Loan, Tranche A $ 5,858,000 77,079 Amortizing Perm Loan, Tranche B $ 6,023,700 79,259 City of Milpitas $ 5,000,000 65,789 Waived Impact Fees $ 2,000,000 26,316 AHP $ 750,000 9,868 Housing Trust Silicon Valley Loan $ - - County of Santa Clara HOME / CDBG $ 2,500,000 32,895 City of Milpitas HOME / CDBG $ 600,000 7,895 Tax Credit Investor Proceeds $ 17,475, ,938 GP Equity $ Deferred Developer Fee $ - - total $ 40,207,069 $ 529,040 Project Description: 70 unit affordable family New construction 4 stories etc.,,, PERMANENT USES ACQUISITION total per unit per SF Land $ 4,356,000 $ 57,316 $ 50 Other Acquisition Costs $ 401,360 $ 5,281 $ 5 Total Acquisition Costs $ 4,757,360 $ 54 HARD COSTS Resid. Site Work and Structures $ 21,791,600 $ 286,732 $ 248 Commercial Costs $ - $ - $ - Escalation Contingency $ - $ - $ - Overhead & Profit/GC/Ins. Bond $ 3,301,410 $ 43,440 $ 38 Owner Contingency $ 1,265,541 $ 16,652 $ 14 Total Hard Costs $ 26,358, ,823 $ 300 SOFT COSTS Architecture and Engineering $ 1,754,500 $ 23,086 $ 20 Construction Loan interest and fees $ 1,380,902 $ 18,170 $ 16 Permanent Financing $ 20,000 $ 263 $ 0 Legal Fees $ 110,500 $ 1,454 $ 1 Reserves $ 325,860 $ 4,288 $ 4 Permits and Fees $ 3,572,000 $ 47,000 $ 41 Other Soft Costs $ 527,397 $ 6,939 $ 6 Relocation $ - Developer Fee $ 1,400,000 $ 18,421 $ 16 Total Soft Costs $ 9,091, ,621 $ 103 TOTAL DEVELOPMENT COSTS $ 40,207,069 $ 529,040 $ 457 SURPLUS / (GAP) $ (0)

8 FINANCING PLAN Market Rate Proforma Sources & Uses ACQUISITION total per unit per SF Land $ 12,198,500 $ 9.31 Other Acquisition Costs $ 383,500 $ 0 Total Acquisition Costs $ 12,582,000 HARD COSTS Resid. Site Work and Structures $ 44,037,000 $ 299,571 $ 270 Commercial Costs $ 238,369,126 $ 208 Escalation Contingency $ 11,918,456 $ 9 Overhead & Profit/GC/Ins. Bond $ 14,716,229 $ 11 Owner-Construction Contingency $ 15,452,041 $ 12 SOFT COSTS Total Hard Costs $ 324,492,852 $ 248 Architecture and Engineering $ 32,449,285 $ 25 Construction Loan interest and fees $ 20,698,346 $ 16 Permanent Financing $ 6,766,722 $ 5 Legal Fees $ 750,000 $ 1 Reserves $ 10,150,084 $ 8 Permits and Fees $ 6,354,138 $ 5 Contingency & Other Soft Costs $ 43,624,676 $ 33 Relocation PERMANENT SOURCES Perm Debt $ 338,336, LP Equity $ 145,001, GP Equity $ 3,770,031 $ 3 total $ 487,107,342 PERMANENT USES Developer Fee $ 29,239,239 $ 22 Total Soft Costs $ 150,032,490 $ 115 TOTAL DEVELOPMENT COSTS $ 487,107,342 $ 372 NA

9 FINANCING PLAN Example of Mixed-Income Development 534 Units Market Rate 90 units affordable

10 DEVELOPMENT PLAN Example of Mixed-Use Development

11 DEVELOPMENT PLAN Office vs residential Example of Mixed-Use Development Mixed use ground floor and tax credits New market tax credits

12 ACQUISITION Site Control & Negotiation Deal Terms Letter of Intent (LOI) VS Request for Qualifications/Proposals (RFQ/P) Purchase & Sale Agreement VS Option Agreement Exclusive Negotiating Agreement (ENA) VS Disposition & Development Agreement (DDA) Long Term Ground Lease VS Fee Title Interest Key Acquisition Deal Terms: Purchase or Lease Price, Amount of Deposits, Length of Due-Diligence Period, Length of Closing, Buyer/Seller Contingencies

13 DUE-DILIGENCE Prior to Close Evaluate Entitlement Risk Community Support / Opposition Political Will Environmental Risk - phase I, lead, asbestos Water & Other utility availability Hazards like fault lines and flood zones Refined Market Study & outlook Concept Design / Yield Study

14 ENTITLEMENTS Design Development, Permitting, Community Engagement Project award, entitlements Community Process / Tradeoffs Market cycles up and down Change of political regime Climate & technology change Time value of money Development Impact Fees Competing Interests Parking & Accessibility

15 CONSTRUCTION Construction Types Prevailing Wage & Union Project Labor Agreements Managing Construction Schedule Modular VS conventional Green Building & Title 24 (state energy code)

16 LEASE UP / SALES & OPERATIONS Lease Up Affordable VS Market Rate Being a good long term neighbor Operating Costs and Services Market-Rate Exist Strategies

17 Questions? Contact Info Novin Development 1990 N California Blvd Ste 800 Walnut Creek, CA p: (925) f: (925) info@novindevelopment.com Alan E. Dones, Managing Partner Strategic Urban Development Alliance 1210 Excelsior Ave Oakland, California (510) Office (510) Fax alan@sudallc.com