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2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
- 1. winter 2014 development proposalfor GAS WORKS FLATS 1900 N NorthlakeWay
- 2. ACKNOWLEDGMENTS Maria Barrientos, BarrientosLLC Jon Schack, Schack A+D Dugan Earl, Revolve Development TJ Lehman, Mack Urban Matt Orr, Apartment Financial Joe Ferguson, Lake Union Partners HeidiTurner, Blanton Turner Anne Marie Koehler, CBRE Mark Speidel, I.L. Gross Structural Engineers Brian Gibson, MRJ Constructors Gary Beem, Northwest Commercial Mortgage BryceTaylor, GLY Construction Corey Marx, JLL CJ Bowles, CBRE Austin Besse,Weber Thompson Jeff Peterson, CPL Monica Wallace,Wallace Properties A special thanks to: Al Levine Chris Bitter
- 3. EXECUTIVE SUMMARY adaptive reuse 209apar tments + 9 live/work 6,100 SF retail completion: summer 2017
- 4. Yield on Cost- 7.1% Large, well-located mixed-use development Leveraged IRR – 13.9% INTRODUCTION • Leveraged IRR no less than 12% • 6% yield on cost for multifamily, 6.5% for commercial • Develop institutional quality real estate Teutsch’s Objectives:
- 5. INTRODUCTION Key Risk MitigationStrategies: • No excavation for below grade parking is required • Development retains neighborhood character, does not maximize FAR and provides open space • Work with steep slope to create distinct identities
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- 7. • In theheart of the “Knowledge Triangle” • Near both major north- south highways • On the popular Burke- Gilman Trail • Views of Lake Union and Downtown SITE CONTEXT
- 8. • C1-40 zoning: auto-orientedretail • Walk Score® of 80 - “VeryWalkable” • Outside urban village, frequent transit corridor SITE CONTEXT • Single family home neighborhood
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- 10. • Office Inadequate publictransit, unproven location USE ANALYSIS • Retail Low-traffic location, limited local market area • Hotel Lacks characteristics of successful non-CBD hotels • Residential Unrivaled location beside popular park and bike trail, established residential character, close to job centers
- 11. USE ANALYSIS Apartments Condominiums •Historically low vacancy rates city-wide • Strong rent growth • Little supply • Low interest rates • Large amount of supply currently in the pipeline + – • Increased development complexity • Interest rates may rise • Does not mesh with seven- year hold
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- 14. MARKET CONTEXT 100,000+ newjobs & 180,000+ new residents by 2017
- 15. 80% of recentmovers to the Seattle MSA are renters. 56% of those are likely to live in multi-unit apartment buildings. MARKET CONTEXT 2008 2010 2012 Seattle Population Age 25 - 34 97,858 126,233 140,431 25 - 34 Age Group as a % of Total 16.80% 20.70% 22.10% Growth of "Gen Y" Age Group in Seattle Source: 2010 US Census; 2008 - 2012 American Community Survey
- 16. MARKET CONTEXT Submarket Average Rent (2008and Newer) Vacancy Greenlake/Wallingford/Fremont 2.42$ 1.7% Capitol Hill 2.49$ 2.7% Queen Anne 2.51$ 2.7% First Hill 2.81$ 2.9% University District 2.37$ 2.9% Ballard 2.38$ 3.1% West Seattle 2.13$ 3.2% Downtown/Belltown/SLU 2.75$ 3.9% West Bellevue 2.13$ 4.3% Submarket Snapshot: Fall 2013
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- 18. MARKET CONTEXT Built UnitsOccupancy Avg. Rent 1 Rev 2012 49 93% 2.72$ 2 Noble 2012 93 97% 2.79$ 3 Wally 2012 27 95% 2.73$ 4 Collage 2013 52 96% 2.64$ 5 Velo 2014 171 N/A 2.47$ 6 Prescott 2013 154 95% 2.84$ COMP Comparable properties performing very well: No concessions Low vacancies
- 19. MARKET CONTEXT • GasWorksFlats commands a unique location within submarket • Only property able to compete on location is AMLI Wallingford • Submarket expecting focused growth along StoneWay, Ravenna Boulevard
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- 21. DESIGN GOALS • Embracethe site and its surroundings • Match product to market demands • Differentiate by design • Utilized embodied energy of existing structures
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- 32. REUSE – RETAILAND PARKING
- 33. PARKING PARKING TOTALS Auto Parking(in repurposed warehouse) 71,550 gsf 227 stalls 300 sf retail per stall 1.0 stalls per units Bicycle (in new retail structure) 1,324 gsf 200 stalls COSTS: REPURPOSED WAREHOUSE VS CONVENTIONAL Cost per GSF GSF Totals Repurposed Warehouse $85 71,550 $6,081,750 Conventional Below- Grade $150 $71,550 $10,732,500 Total Savings Amount $4,650,750 Percentage 43% P1 P2 Meridian Ave N Entry Burke Ave N Entry
- 34. RETAIL • Community-driven +destination • Curated collection of retailers and restaurateurs • Emphasis on local • High visibility + easy access
- 35. GAS WORKS FLATS- SOUTH 69 apartments industrial, loft-style 10’ floor-to-ceiling height rooftop courtyard
- 36. GAS WORKS FLATS- NORTH 140 apar tments + 9 live/work scandinavian modern styling 9’ floor to ceiling heights rooftop greenhouse
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- 38. HOWWE’RE GOING TOBUILD IT 04
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- 42. CONSTRUCTION COMPONENTS Type I-AConstruction
- 43. CONSTRUCTION COMPONENTS Type V-AConstruction
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- 46. PROJECT COSTS PROJECT COSTSTotals Per NSF Per Unit Total Land Cost $10,000,000 Demolition $47,540 New Construction $29,114,496 Parking $6,516,005 Other $9,286,677 Soft Costs $4,841,320 Financing $2,674,884 Total Project $62,480,945 $408 $286,609
- 47. CAPITAL STRUCTURE DEBT CONSTRUCTION-PERMANENTLOAN Loan to Cost Ratio 65% Interest rate 5.25% Loan Fee 1.00% Term (years from stabilization) 7 Amortization term (years) 30 Basis 40,612,614 Annual Payment (2,691,172) Financing Loan Amount Interest $40,612,614 5.25% $2,268,758 Loan Fee $40,612,614 1.00% $406,126 Total Financing Cost $2,674,884 CAPITAL STRUCTURE Total Project $62,480,945 Debt $40,612,614 Equity $21,868,331 Land $10,000,000 Cash $11,868,331
- 48. STABILIZED PERFORMANCE –YEAR1 PROJECT PERFORMANCE - YEAR 1 STABILIZED 2017 / 2018 Net Operating Income $4,240,214 Total Project Costs $62,480,945 Market Value @ 5.25% Cap Rate $80,765,984 per GSF $444 per NSF $528 per unit $370,486 Profit $18,285,039 Profit Margin 29%
- 49. PROJECTED RETURNS PROJECT PERFORMANCE- HOLDING PERIOD Returns Unleveraged Leveraged Net Operating Income $4,240,214 $4,240,214 Annual Debt service $(2,691,172) Stabilized Cash Flow $4,240,214 $1,549,042 DSCR 1.58 Equity $62,480,945 $21,868,331 Yield on Cost 6.8% 7.1% Sale at Year 7 (2025) Exit Cap Rate 6.00% Market Value $90,845,940 per GSF $499 per NSF $594 per unit $416,724 Net Sale Proceeds $88,120,562 $52,224,530 IRR 10.0% 13.9% Net Present Value @ 12% $(5,557,025) $2,754,758
- 50. SENSITIVITY ANALYSIS SENSITIVITY ANALYSIS BaseScenario Downside scenario Upside Scenario Returns Unleveraged Leveraged Unleveraged Leveraged Unleveraged Leveraged Yield on Cost 6.79% 7.08% 6.10% 5.12% 7.15% 8.11% IRR 10.0% 13.9% 8.5% 11.2% 10.7% 15.2% Net PresentValue @ 12% $(5,557,025) $2,754,758 $(9,308,229) $(996,447) $(3,596,418) $4,715,364
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- 53. PARKING PARKING COSTS Cost perGSF GSF Totals Re-Use Parking Costs Ground Level $50 35,775 $1,788,750 Deck Level $120 35,775 $4,293,000 Total Cost 71,550 $6,081,750 Blended Parking Cost $85 Conventional Below-Grade Parking Costs 1st level $100 $35,775 $3,577,500 2nd level $200 $35,775 $7,155,000 Total Cost $71,550 $10,732,500 Reuse Saving over Conventional Below- Grade Total $4,650,750 Percentage 43%
- 54. DEVELOPMENTTIMELINE Nov-14 Jan-15 Mar-15May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 COMMUNITY ENGAGEMENT (38 months) ENTITLEMENT + DESIGN (18 months) Early Design Guidance (3 months) Design rec. meeting & final review (6 months) 30% SIP (2 months) 90% SIP and final review (3.5 months) Shoring Permit (4 months) Demolition Permit (0.5 month) CONSTRUCTION (18 months) Mobilize (0.7 months) Below Grade Parking (2.2 months) Concrete (3.3 months) Exterior Closure (4 months) Electrical (5 months) Utilities/Street Level (1.3 months)
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- 57. CONSTRUCTION COSTS CONSTRUCTION COSTS2014 Cost Totals Property Acquisition Total Land Cost $10,000,00 0 $10,000,000 Hard Costs Demolition Costs 41,959 $47,540 Apartment Costs $27,959,759 Retail Costs $1,154,737 Structured Parking Costs $6,516,005 Infrastructure & Open Space Costs $1,123,654 WSST 9.5% hc $4,271,648 Contingency - hard costs 5% total hc $2,053,667 Contractor fee 5% $1,837,708 Total Hard Costs $44,964,717 Soft Costs Annual soft cost allocation (%) Permits Fees & Reports 1.2% hc $539,577 A&E 5% hc $44,964,7 17 $2,248,236 Development Fee 3% hc $44,964,7 17 $1,348,942 Consultants $450,000 $450,000 Commercial Leasing Fees $12,500 218 $12,500 Contingency - soft costs 5% sc Total Soft Costs $4,841,320 APARTMENT CONSTRUCTION COST ESTIMATES Apartments per NSF Per Unit Hard Costs $43,011,642 $281 $197,301 Soft Costs $4,631,033 $30 $21,243 Land Basis $9,565,638 $63 $43,879 Financing $2,558,698 $17 $11,737 Total/Average $59,767,011 $391 $274,161 Total cost per GSF $344
- 58. CAPITAL STRUCTURE CONSTRUCTION-PERMANENT LOANCALCULATION Loan to Cost Ratio 65% Debt Service Coverage Ratio 1.25 Interest rate 5.25% Loan Fee 1.00% Term (years from stabilization) 7 Amortization term (years) 30 Basis 40,612,614 Annual Payment (2,691,172) Total Construction Cost $59,806,061 Financing Loan Amount Interest $40,612,614 5.25 % $2,268,75 8 ** Loan Fee $40,612,614 1.00 % $406,126 Total Financing Cost $2,674,884 Total Project Costs $62,480,945 Total Project Cost LCR Loan Amount Loan Amount $62,480,945 65% $40,612,614 CAPITAL STRUCTURE Debt $40,612,614 Equity Required $21,868,331 Land $10,000,000 Cash $11,868,331
- 59. STABILIZED PERFORMANCE PROJECT PERFORMANCE- YEAR 1 STABILIZED 2017/2018 Effective Gross Income (@ 5% vacancy) $5,750,178 Less Operating Expenses (@ 6,500/unit) $(1,509,964) Net Operating Income $4,240,214 Total Project Costs $62,480,945 Cap Rate 5.25% Market Value @ 5.25% Cap Rate $80,765,984 per GSF $444 per NSF $528 per unit $370,486 Profit $18,285,039 Profit Margin 29%
- 60. PROJECTED RETURNS PROJECT PERFORMANCE- HOLDING PERIOD Returns Unleveraged Leveraged Net Operating Income $4,240,214 $4,240,214 Annual Debt service $(2,691,172) Stabilized Cash Flow $4,240,214 $1,549,042 DSCR 1.58 Equity $62,480,945 $21,868,331 Yield on Cost 6.79% 7.08% Sale at Year 7 (2025) Exit Cap Rate 6.00% Market Value $90,845,940 per GSF $499 per NSF $594 per unit $416,724 Net Sale Proceeds $88,120,562 $52,224,530 IRR 9.99% 13.93% Net Present Value @ 12% $(5,557,025) $2,754,758
- 61. SENSITIVITY ANALYSIS SENSITIVITY ANALYSIS- RENT CHANGE 2014 2015 2016 2017 2018 2019 Base Scenario Change (%) 1% 1% 3% 3% 3% Rent/NSF $2.85 $2.88 $2.90 $2.99 $3.08 $3.17 Downside scenario Change (%) -1% -1% -1% 3% 3% Rent/NSF $2.85 $2.82 $2.79 $2.76 $2.85 $2.93 Upside Scenario Change (%) 3% 3% 3% 3% 3% Rent/NSF $2.85 $2.93 $3.02 $3.11 $3.20 $3.30
- 62. SENSITIVITY ANALYSIS SENSITIVITY ANALYSIS BaseScenario Downside scenario Upside Scenario Returns Unleveraged Leveraged Unleveraged Leveraged Unleveraged Leveraged Net Operating Income $4,240,214 $4,240,214 $3,810,045 $3,810,045 $4,465,046 $4,465,046 Annual Debt service $(2,691,172) $(2,691,172) $(2,691,172) Stabilized Cash Flow $4,240,214 $1,549,042 $3,810,045 $1,118,873 $4,465,046 $1,773,874 DSCR 1.58 1.42 1.66 Equity $62,480,945 $21,868,331 $62,480,945 $21,868,331 $62,480,945 $21,868,331 Yield on Cost 6.79% 7.08% 6.10% 5.12% 7.15% 8.11% Sale at Year 7 (2025) Exit Cap Rate 6% 6% 6% Market Value $90,845,940 $81,629,639 $95,662,937 per GSF $499 $449 $526 per NSF $594 $534 $625 per unit $416,724 $374,448 $438,821 Net Sale Proceeds $88,120,562 $52,224,530 $79,180,750 $43,284,719 $92,793,049 $56,897,017 IRR 9.99% 13.93% 8.48% 11.24% 10.72% 15.17% Net Present Value @ 12% $(5,557,025) $2,754,758 $(9,308,229) $(996,447) $(3,596,418) $4,715,364
Editor's Notes
- #3 “Before we describe the details of our proposal, we’d like to thank these members of the Seattle real estate community. These individuals graciously contributed their knowledge and offered key recommendations that guided and focused our proposal at every step of the process.”
- #4 Basic description – 219 apartments (10 live work)6100 Sfreatil, to be delivered 2017Mention three components of site – two northern apt buildings, southern apt building, and southern-facing retail
- #5 Teutsch was looking for a proposal that achieved6% Yield on Cost12% Leveraged IRRInstitutional QualityOur proposal delivers a:7.1% Yield on Cost13.9% Leveraged IRRInstitutional Grade
- #6 Teutsch was looking for a proposal that achieved6% Yield on Cost12% Leveraged IRRInstitutional QualityOur proposal delivers a:7.1% Yield on Cost13.9% Leveraged IRRInstitutional Grade
- #8 Slide objective is to describe site’s relationship with the rest of Seattle (30,000 ft)Proximity – ‘Knowledge Triangle’, DowntownLinkages – Burke-Gilman, I-5, Hwy 99
- #9 Slide objective is to describe neighborhood/micromarket around site (10,000 ft)Proximity – Gas Works Park, single family residential uses to the northLinkages – Burke-Gilman, Northlake Way, 36th StreetOther notable aspects – small parcel sizes away from waterfront
- #10 Call out the three different uses in the site, bring special attention to warehouse to frame re-use concept
- #11 Summarize the uses we studied and concluded weren’t the best uses for the site
- #12 Summarize the uses we studied and concluded weren’t the best uses for the site
- #14 It’s true that new unit deliveries are at unprecedented levels, but the demand fundamentals are strong
- #15 It’s true that new unit deliveries are at unprecedented levels, but the demand fundamentals are strong
- #16 Think about your average Amazon employee - wants the flexibility of renting but has the income for high-amenity apartments.This is the “Ryan Renter” of the post-recession era.
- #17 Think about your average Amazon employee - wants the flexibility of renting but has the income for high-amenity apartments.This is the “Ryan Renter” of the post-recession era.
- #18 Think about your average Amazon employee - wants the flexibility of renting but has the income for high-amenity apartments.This is the “Ryan Renter” of the post-recession era.
- #19 Think about your average Amazon employee - wants the flexibility of renting but has the income for high-amenity apartments.This is the “Ryan Renter” of the post-recession era.
- #20 Think about your average Amazon employee - wants the flexibility of renting but has the income for high-amenity apartments.This is the “Ryan Renter” of the post-recession era.
- #22 The site is uniquely positioned on the Burke-Gilman Trail, across from Gas Works Park (two treasures of Seattle) and at the south end of Wallingford; we wanted to embrace the surrounding amenities and create a design that is appropriate in use and scale for the neighborhoodCapture views- We wanted to respond to the analysis of the market and deliver a product that is sensitive to the needs of our target renter- We looked a competitive set of apartments to gather the best ideas and to ensure Gas Works Flats was differentiated from this set- Our goal of environmental responsibility encouraged us to look at reusing as much of the building as was feasible.We analyzed series of design concepts
- #23 Existing height
- #24 Concept 1 – Maximized FAR based on 44’ height restrictionsOur knowledge of the neighborhood reveals an educated group of stakeholders that are active in the review process. Therefore this proposal would face challenges which could result in costly delays and design changes (as we saw with AMLI and the Brooks Headquarters
- #25 Break buildings apartIntegrate warehouse
- #27 Open up the site Engage the Burke-Gilman by providing open space
- #29 Reduce the massing at upper storiesCreate view corridor through middle of site
- #31 Finally,Enhance the pedestrian experience along 34th, Burke Ave and Meridian Ave by providing setbacks
- #32 Final outcomeThree main componentsNorth buildingsSouth buildingWarehouse (Retail/Parking)
- #33 AdvantagesEliminate risks associated with typical excavation/shoringReduce costsUse of embodied energy responsiblyConnect with industrial heritage of Lake Union and South WallingfordRepurposing: Feasibility, Timing and CostsParkingRetail
- #34 Efficiencies – reworked columns spacing; AdvantagesCost savings – $4.6 MEliminates excavationConnection to industrial heritage
- #36 FinishesUnit MixBuilding AmenitiesDirect access to retailDeck
- #37 FinishesUnit MixBuilding AmenitiesDirect access to retailDeck
- #42 Parking Efficiencies
- #51 Here are the returns
- #52 Where old is new (reuse)Where private meets public (integrating retail and public plaza)Where less is more (lower FAR reduces market and entitlement risks)Where the whole is greater than the parts (retail, higher rents)
- #57 Think about your average Amazon employee - wants the flexibility of renting but has the income for high-amenity apartments.This is the “Ryan Renter” of the post-recession era.
- #62 We looked at changing rents
- #63 Here are the returns