real estate development 101 - rail~volution
TRANSCRIPT
Real Estate Development 101
Fundamentals of the Real Estate Development ProcessAffordable & Market Rate Perspectives
DEVELOPMENT LIFE CYCLE
SITE IDENTIFICATION
FINANCING PLAN
ACQUISITION
DUE-DILIGENCE
ENTITLEMENTS
CONSTRUCTION
LEASE UP/SALES & OPERATIONS
Location (jobs, amenities & transportation), Size, Zoning, Total Unit or Leasable Area Yield
Market Rent or Sales Price potential
Competitiveness for Affordable Housing Financing Sources
Market-Rate Affordable
SITE IDENTIFICATIONAcquisition Criteria
SITE IDENTIFICATIONMarket Rate Approach
SITE IDENTIFICATIONAffordable Housing Approach
FINANCING PLANCapital Stack
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
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
26%
55%
6%
26%26%
11%
Affordable Housing Finance Typical Capital Stack
Market Rate Finance Typical Capital Stack
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 17,475,269$ 229,938 GP Equity 100$ 1 Deferred Developer Fee -$ -
total 40,207,069$ 529,040$
PERMANENT SOURCES
, , ,
ACQUISITION total per unit per SFLand 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 26,358,551$ 346,823 300$ 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 9,091,159$ 119,621 103$ TOTAL DEVELOPMENT COSTS 40,207,069$ 529,040$ 457$ SURPLUS / (GAP) (0)$
PERMANENT USES
Affordable Proforma Sources & UsesFINANCING PLAN
Project Description:70 unit affordable family
New construction 4 stories etc.
Market Rate Proforma Sources & UsesFINANCING PLAN
ACQUISITION total per unit per SFLand 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$
Total Hard Costs 324,492,852$ 248$ SOFT COSTS
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 NADeveloper Fee 29,239,239$ 22$
Total Soft Costs 150,032,490$ 115$ TOTAL DEVELOPMENT COSTS 487,107,342$ 372$
PERMANENT USES
Perm Debt 338,336,118$ 258 LP Equity 145,001,193$ 111 GP Equity 3,770,031$ 3$
total 487,107,342$
PERMANENT SOURCES
90 units affordable
534 Units Market Rate
FINANCING PLAN
Example of Mixed-Income Development
Example of Mixed-Use Development
DEVELOPMENT PLAN
Example of Mixed-Use Development
DEVELOPMENT PLAN • Office vs residential• Mixed use ground floor and tax credits• New market tax credits
• 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
Site Control & Negotiation Deal TermsACQUISITION
• 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
DUE-DILIGENCEPrior to Close
• Project award, entitlements• Community Process / Tradeoffs• Market cycles up and down• Change of political regime • Climate & technology change
ENTITLEMENTSDesign Development, Permitting, Community Engagement
• Time value of money • Development Impact Fees• Competing Interests • Parking & Accessibility
CONSTRUCTION
• Construction Types• Prevailing Wage & Union Project Labor Agreements• Managing Construction Schedule• Modular VS conventional• Green Building & Title 24 (state energy code)
LEASE UP / SALES & OPERATIONS
• Lease Up Affordable VS Market Rate• Being a good long term neighbor • Operating Costs and Services• Market-Rate Exist Strategies
Questions?
Contact InfoNovin Development1990 N California Blvd Ste 800Walnut Creek, CA 94596p: (925) 344-6244f: (925) [email protected]
Alan E. Dones, Managing PartnerStrategic Urban Development Alliance1210 Excelsior AveOakland, California 94610(510) 482-7020 - Office(510) 482-7021 – [email protected]