Miami Life Apartments
Bridging People and Potential
Kelvin Xuna/MDesS Candidate/Fall 2008

Miami Low-Income Multi-Family Development Analysis
Based on Exploration of the Broad Implementation Process
By
Kelvin R. Xuna
Master in Design Studies, Harvard University, 2008
Submitted in partial fulfillment of the requirements for the degree of
Master in Design Studies
Urbanization & Housing Studies
At the Harvard University Graduate School of Design
January 2008
Copyright © 2008 by Kelvin R. Xuna
The author hereby grants Harvard University permission to reproduce and distribute copies of this
thesis document, in whole or in part for educational purposes.
Signature of the Author…………………………………………………………………………………………
Kelvin R. Xuna
Harvard University Graduate School of Design
Certified by……………………………………………………………………………………………………………
Bing Wang
Lecturer in Urban Planning and Design
Scholarly Paper Advisor
Accepted by…………………………………………………………………………………………………………..
Daniel Schodek
Master in Design Studies, Program Chair
Kumagai Professor of Architectural Technology

TABLE OF CONTEXT
Introduction
a. Summary………………………………………………………………………………………………………………………1
b. Author’s Short Bio.………………………………………………………………..…………………………….……….2
Executive Summary
a. Goals and objectives………………………………………………………………………………………….…………3
b. Methods of analysis…………………………………………………………………….…………………….…………4
Risk Factors
a. Due Diligence……………………………………………………….……………….…………………………..…………7
b. Partnerships……………………………………………………………………………….……………………..…………7
c. Site Control…………………………………………………………………………………………..………..……………9
d. Construction……………………………………………………………………………………………….…..…………10
e. New Construction…………………………………………………………………………………….……..…………10
f. To‐be‐Developed……………………………………………………………………………………………..…………11
g. Adaptive Reuse………………………………………………………………………………………………..…………12
h. Time…………………………………………………………………………………………………………………..…….…12
i. Lenders…………………………………………………………………………………………………………………….…12
j. Interest Rates………………………………………………………………………………………………..……………13
k. Design…………………………………………………………………………………………………………………………14
l. Manufactured Housing……………………………………………………………………………………….………14
m. Capital……………………………………………………………………………………………………………..…………14
n. Risk & Mitigation Concluded………………………………………………………………………………………15
Market Overview
a. National Overview and Key Demand Areas……………………………………………………………….17
b. Regional Economic Outlook…………………………………………………………………….……………..….23
c. Local Economy………………………………………………………………………….………….……………………30
d. Affordable Development Incentives…………………………………………………….……………………31
e. Public and Private Development…………………………………………………………..…………………..38
f. Assumptions…………………………………………………………………………………..…………………………40
g. Concerns………………………………………………………………………………………………..…………………42
h. Market Delineation and Site Analysis…………………………………………………………..…………..44
Analysis of demand
a. Projected overall demand………………………………………………………………………………………..45
b. Analysis of absorption………………………………………………………………………………………………47
Analysis of supply
a. Existing Stock, Past Trends, And Future Supply………………………………………………………..48
b. Exiting Zoning And Possible Changes………………………………………………………………….…….49
Analysis of capture rate (marketability Study)
a. Competitive Advantages…………………………………………………………………………..……………..50
b. Market Segmentation………………………………………………………………………………………………51
Project Contexts: Site 1
a. Current Use……………………………………………………………………………………………..………………53
b. Geographic Location………………………………………………………………………………..………………53
c. Status Price Seller………………………………………………………………………………....……………54
d. Zoning………………………………………………………………………………………………………………………54

e. Concerns & Mitigation……………………………………………………………….……………………………55
f. Proposed Program & Land use……………………………………………….………………………………56
g. Market Rate Pro‐formas…………………………………………………………………………….……………58
h. Affordable Pro‐formas…………………………………………………………………………………….………60
i. Assumptions……………………………………………………………………………………………………………60
j. Sustainability……………………………………………………………………………………………………..……61
Project Contexts: Site 2
a. Current Use……………………………………………………………………………………………….……..………61
b. Geographic Location………………………………………………………………………………….………………61
c. Status Price Seller……………………………………………………………………………….………..………62
d. Zoning…………………………………………………………………………………………………………….…………63
e. Proposed Program & Land use………………………………………………….………………………………63
f. Concerns & Mitigation………………………………………………………………………………………………64
g. Market Rate Pro‐formas……………………………………………………………………………………………64
Result Comparisons
a. Least Risk……………………………………………………………………………………………………………………66
b. Most Profit……………………………………………………………………………………………………………….…66
c. Most Probable…………………………………………………………………………………………………….………67
d. Chosen Selection…………………………………………………………………………………………………………67
Reevaluation
a. Field Study…………………………………………………………………………………………………………………68
b. Physical Design…………………………………………………………………………….………………………….…69
c. LEED: Sustainable Building Design………………………………………………..……………………………74
d. LEED: Environmental Site Design………………………………………………………….……………………75
e. Environmental Management………………………………………………………………….…………………76
f. 9 Points of Smart Growth………………………………………………………………………………….………77
Project Financing
a. Stage 1 Analysis……………………………………………………………………………………………….…………80
b. Pro‐Forma……………………………………………………………………………………………………….…………81
c. Capital Budget……………………………………………………………………………………………………………82
d. Mortgages……………………………………………………………………………………………………………….…83
e. Projected Setup……………………………………………………………………………………………….…………84
f. Net Cash from Sale………………………………………………………………………………………………..……85
g. DCF, NPV, and IRR………………………………………………………………………………………………………86
h. Cash Flows During Construction…………………………………………………………………………………87
i. Relationship to the Competition……………………………………………………..…………………………88
j. Analysis of Market Segmentation………………………………………………………………………………88
k. Sensitivity Analysis…………………………..…………………………………………………………………………89
l. Assumptions………………………………………………………………………………………………………………89
m. Joint Venture Analysis…………………………………………………………………………..……………………90
n. Sources & Uses……………………………………………………………………………………………..……………91
o. Request for Proposals…………………………………………………………………………………..……………95
p. Concerns……………………………………………………………………………………………………………….……96
q. Timeline………………………………………………………………………………………………………………..……96
r. Marketing………………………………………………………………………………………………………………..…97
s. Exit Strategies…………………………………………………………………………………………………..…………98
t. Future Market Assumptions………………………………………………………………………..………………99
u. Conclusion…………………………………………………………………………………………………………………100
v. Bibliography………………………………………………………………………………………………………………101
w. Acknowledgements & Sources……………………………………………………..……………………………103

1
Introduction
SUMMARY‐
When I was brainstorming with ideas for a thesis, I came up with a couple of interesting
research topics that I began evaluating. But then I realized that if instead of a standard thesis, I
were to work ‐while still a graduate student‐ on a formal business project for a multi‐family
housing development, I could then have a head start for an interesting future business venture.
In addition, I would be able to use the multitude of resources available to us here at Harvard
University. Furthermore, professionals and experts in the field would not mind sharing their
knowledge, techniques and vision with a graduate student. Once I am in the field as a potential
competitor to them, it would be expected that they might not be so forthcoming and candid
with their inputs.
I travel often to South Florida because several family members of mine live there. On one
occasion, I visited a few poor suburbs in South and West Miami. It called my attention the
agglomeration of ‘mostly’ new immigrants in these poor areas, the lack of affordable and
decent housing in those areas, and the pitiful and desperate look that some of those
neighborhoods had. As they are at present, you could say that those decrepit structures are
“tourist eyesores”. I realized that with not much investment, dramatic improvements could be
done to a few dilapidated plots of land. By doing so, not only we could do a positive
metamorphosis of the business appeal of those centrally‐located blocks, but at the same time a
much better quality of life could be offered to those families and individuals who are now living
in conditions more typical of a developing country, rather than American suburbs. I could not
get those images out of my mind, so putting my thoughts together, I decided to embark on this
“urban development study”, choosing that option rather than a more academically oriented
thesis.
On the first pages of this analysis and study, I present the difficulties encountered and solutions
‐whether technical, environmental or financial‐ to some of those hurdles. I am using a large
number of graphs and calculations to support my business study and to give backbone to my

development proposal. Finally, I conclude that this project is doable, but it requires a relatively
moderate investment, part of which can be obtained via grants and subsidies from municipal
departments, as well as from non‐governmental agencies.
From the beginning it has been an extraordinary educational experience, and now that I have
finished this research, I am more committed than ever to move to an implementation phase to
make this dream and hope a reality.
I thank from my heart all those peers and professors for their support and input, without them I
would probably had to reduce the scope of the project. I also found great support from
community activists, and received very candid and unselfish information from many
professionals in several fields related to the housing development industry, for what I am really
thankful. Ultimately, thanks to Harvard University’s Graduate School of Design for this great
opportunity.
AUTHOR’S SHORT BIO‐
I am originally from Puerto Rico, and speak fluent Spanish. I enlisted in
the US Army at 17 and served in the Army Corp of Engineers. Later, I
received a B.A. in Architecture from the University of Colorado, where I
concentrated in sustainable and green design. Before graduation, I began
a design/build company named Internship Designs, and later began
another business in residential property management called ID
Management. I am currently in my final year at the Harvard Graduate
School of Design as a candidate for a Master’s in Design Studies under the Housing and
Urbanization discipline.

3
Executive Summary
GOALS AND OBJECTIVES‐
My goal is to understand the complexity of the development process. Implementation will be
done using a current –for sale‐ vacant lot in Miami, creating set‐ups/pro‐formas for a 12 unit
residential building with ground floor retail stores. I will also try to find a building that I could
also modify for adaptive reuse. I will contrast feasibility studies against different scenarios such
that the site with the least risk and highest appeal will be further analyzed in greater detail.
Comparison will be generated for several scenarios: 1) low‐income units vs. market rate, 2)
adaptive reuse vs. new construction, 3) for rent vs. for sale. The evaluation will also include the
amounts and distribution of types of units and retail spaces. If the chosen method of analysis
and resulting proposal is accurate, feasible, and realistic; then that would be the most
rewarding result of this project.
Developing this proposal while still in school provided me with an educational experience like
no other. Investing some of my own financial resources on this project makes it also a personal
venture, with every additional incentive to absorb information at the highest level possible.
Applying the research into my Scholarly Paper Study requirement allowed me to take
advantage of a broad range of resources that only a university as this one can provide.
For validation, it is my intention to select –next semester‐‐ a team of 5 to 8 individuals to closely
review all the work and focus on a strategic approach for the presentation of the proposal in
order to be submitted to lenders, investors, and the appropriate municipalities by June of 2008.
Since this is my first project of such caliber, my main concern is to gain knowledge and earn
credibility that would be needed for larger projects I foresee in the future of my career. I am
not worried with financial compensation, as long as it covers my basic needs. One of the
golden rules of builders is: Final value of property needs to exceed all construction costs. The
rule of thumb being $1.20 value per $1 cost. (Marchant)
I will be positive to share the developer’s
fee (as well as any other profit in the form of percentage points) with those future team

members who helped me make this vision a reality. Furthermore, I would be interested in
analyzing the possibility of holding one of the twelve uunniittss ffoorr mmyy ppeerrssoonnaall uussee, and as a result
divide my share of the developer’s fee to increase the reward to the partners to continue in
good terms with them for future endeavors. It is very important to try to stay with the same
partners to reduce the amount of time and risk of working with unknown individuals every time
I begin a new project.
METHODS OF ANALYSIS‐
I will first determine the average cost of rent and sale per square foot for residential and retail
space in the area. Then I will contact local brokers to help me determine a realistic cap rate. For
the affordable housing set up I will contact HUD and other NGOs in the area to determine what
subsidies the project could qualify for. Talking to developers, I will organize the hard and soft
costs and other operation costs such as fees, insurance (which at present is really high in
Miami) and will contact lenders to determine the details on types of loans available (with their
interest, payments, and likely terms of the loan). When sufficient data has been collected, then
a 10 year forecast will be generated showing IRR and NPV as to determine if this would be a
good investment in the long run. Those critical parameters will help me determine the
maximum value that can –profitably‐ be invested on that site. Hurdle rate and feasibility studies
will be reviewed several times as we move ahead through the different constructions phases.
Schematic designs of the setups that look most beneficial will be created, and they would be
properly organized within the following research as to continuously document the feasibility
and viability of the project.
Contacting people personally, helps maximize validity of data, such as from bias or favoritism
towards suppliers, middlemen, contractors, etc. This being said, I should add that I apply four
different methods to develop contacts. The first is extensive internet searches; looking up
companies or municipal departments followed by browsing their websites, after locating their
contacts tab, copy and paste of potentially good resources is done on a list on a separate
document. The second method is “word of mouth”, that is, simply asking people for references,

5
suggestions, or advice. Initially began with peers and faculty at Harvard, then I sent emails
requesting such referral from people I was not that acquaintented with. One example is the
Graduate School of Design’s entire school’s forwarding email system (called Student
Announce). The third method, and I would say most valuable for contacting people within the
realm of my study, was actually attending networking events and workshops many of which
were held right here in the university although I also attended a few outside the campus. Of
critical importance is networking, that is, knowing of enough individuals who have the
knowledge, means, or charisma to bring together the different expertise that complement each
other, with a purpose in materializing a vision. With these networking events I was able to
make a small collection of business cards of persons who either where the direct contact or
simply facilitated the creation of a relationship conducive to other third parties who were of
more relevance to my study.
There was no need to call banks; instead I called on mortgage brokers. A good broker knows the
market and has an early insight on when buildings are coming out before they do (Marchant). I
used local real estate brokers to solicit to Investors keen on financially rewarding opportunities.
I found out that a good approach to locate investment is to hire politically‐involved consultants
to audit my study, since they can help deliver it to the market through their connections. The
analyst will measure if that is the best use and can also figure out the as‐is value. Ask lawyers
about titles, and not about real estate. CDC’s help socio‐economically disadvantaged areas.
Performing this first hand analysis, these insights mentioned are all examples of what I have
learned as far as what the roles of these players should be.
The most reliable data could be obtained through the public sector because they are
responsible for the zoning and building codes. Another thing I learned is to be aware that all
data must be looked at with a critical, skeptic eye. Even when the people who volunteer info
were brokers, developers, appraisers, and consultants; I noticed that sometimes they fabricate
it. Therefore, it requires a strategy and methodology to detect the incongruence. I found out

that persistence in questioning is the best antidote to protect myself from bogus information.
A technique I found effective was to get familiar with some of their recent press releases.
Based on those I would ask them about details, using accurate terminology, while trying to
deliver my question of raw data with ease. Often I would call someone only to be referred
somewhere else. Yet, I began to write down everyone’s names. Eventually I would tell them I
had been specifically referred by a person whom they knew.
I found distressed properties through Banks and lenders; they maintain REO (real estate
owned) lists that are usually made available upon request. REO listings are also held by
institutions such as: FHA insurance, VA guarantee, and HUD affordable housing programs whom
I also contacted. If the value of a property is close to the mortgage balance, the bank might also
bid for it, in order to put on the REO list. I even searched other means available to the mass
public like Craigslist, because many individual property owners advertise their sales privately to
not have to foreclose and thus keep their reputation. Of course this is more common with small
developments like 20 units or less.
Auction properties would be nice, but when researching these properties I spent tedious time
investigating the title record to find out that they were not clean and thus will take time and
money to clear the title. Even if I were the winning bidder, the old borrower can reclaim it if
they come up with all the debt they owe, as well as the new fees to the bank associated with
the default.
In order to find the appropriate sites for acquisitions, I searched for the ones with the lowest
yield expectations, an area with high cap‐rate. But it was very complicated because to
determine a cap rate, so many factors need to be compared. Not just the quality, of
construction, size, age, functionality, location, and operating efficiency, but also comparing the
terms of the lease maturities, lease options, rent escalators, and any other major lease
attributes such as easements, title restrictions, and so on. A simple solution I used was to find
the amount of tenants being leased to and if they were in a long‐term or short term contract.

7
This was a basic and generic remedy, but in reality, it is said by many that it’s worth paying for
the expertise where it counts, such as a Market Analysis. In conclusion, assigning the correct
cap rate is difficult and an incorrect one could result in a serious pricing error.
Risk Factors
My research emphasizes the mitigation of risk since this would be my first project, to taint my
reputation at this early stage of my career would derail my future endeavors. The following will
focus on risk factors during every stage in my process, and the possibilities of how the risk could
be remedied. Risks need to be closely evaluated to deconstruct them and determine the
specific issues that pose the threat. The final challenge it to then find a solution to avoid or at
least minimize the probability of that risk occurring. One rule of thumb for me is to always have
a plan B, because even when appropriately planning for risks, there are always uncertainties
that may not have been accounted for and must be prepared for by other means.
DUE DILLIGENCE‐
The most important factor for the reduction of risk is proper due diligence. The more accurate
is the research, market, and feasibility study, the less risk the project will ultimately have. With
more accurate numbers and calculations the initial market risk that would create a snowball
effect of continuously increasing uncertainties will be diminished.
PARTNERSHIPS‐
Partners are necessary when forgoing a large project, or any scale project for my case. In a joint
venture, it is critical for me to have similar goals with similar level of risk take with my team.
When possible, I shall record meetings or agreements with other parties to verify the correct
communications. Repeat relationships are said to always be easier. When looking for a partner I
need someone who has experience, political attachments, reputation and is reasonable. In
emerging markets, it is said not to have an LLP with a local entrepreneur because if there was a
problem, the court would probably favor the local individual instead of the ‘out‐of‐towner’.
There are all sorts of models of joint ventures. It all comes down to how the profits are split. It

should be all done up‐front and very clearly defined. Put maximums on fees, negotiate the exit
strategy, and a mechanism for when things don’t work out. One golden rule is whoever puts up
the most cash, gets the preferred return ‐a threshold return before the other partner gets
anything.
A possible problem is if the majority partner stops paying on the loans for any reason and I have
25% ownership and want to continue on the project. This is a form of embezzlement and it
would result in long and expensive legal battles. The way to minimize the potential dangers in
this matter is by partnering with professionals who have the credentials and reputations. A very
detailed outline of how they conduct their business practice should be requested from them.
I am intrigued by the S Corporation method because equity funds are raised by selling limited
partnership interest. This concept can be beneficial in that I would be consolidating all my
partners into one entity thus reducing the possibility of conflicts associated with working with
several people. Yet at the beginning of this venture, it would be imperative that I hire a tax
expert or consultant to figure out all the details for, what I think, is a complicated form of
partnership that requires professional expertise. In a Limited Liability Partnership all involved
have rights in the management say and can bind the company by contract.
Another joint venture option which I am pursuing is to partner with the land owner as a Silent
Partnership. If I can bring in the land owner as a partner, then that satisfies my down payment
for the loan. I have identified four possible methods of accomplishing this. The first is to create
a Limited Liability Partnership with the land owner such that they will receive a certain
percentage of the profits. The second is a land option or easement, which would allow me to
negotiate with the land owner possible terms and conditions to use the properties documents
for application processing. If I can option the land, great, because it is worth the flexibility to
improve the feasibility study and proceed with caution –yellow light, red light means stop,
green light go. Reds are easy, greens are rare, and yellows are common. (Marchant)

9
A third way, and something I would like to attempt, is to try to do a sort of creative financing
where the seller helps the buyer by paying his points or discount fees it is a common source of
financing for land called a purchase money mortgage‐ a loan taken back by the seller of the
land. As the buyer develops the land, new financing is obtained and the seller is paid off. Still
lenders normally require title insurance in case of problems. The fourth would be for the land
owner to get a second mortgage at a below‐market rate of interest which would reduce the
borrower/buyers monthly payments and ultimately the cost of financing the property.
Land leasing is also an important way to gain income on the land. The closing date would be
made for as long term as possible. Condos may not be allowed to be built on leased land but
apartments certainly can. To induce the land owner I would just mention that if I lease the land
for say, $50,000 a year, and the owner still sells for his asking price of $1million, say a year later,
the relationship of his gain is 5%.
To mitigate some of these involved risk with the sites, I selected sites that are surrounded by
other vacant lots or the same can be said with possible building acquisitions. In other words, if
the subject property is sold by the time I conclude my project or if I encounter a red light, there
will be ‘plan B’ sites that can work with the market research I have conducted.
SITE CONTROL‐
From my research I learned that affordable housing is a great way of minimizing uncertainty
risk. Government subsidies minimize the developer’s soft costs which has significant influence
in the overall total development cost. The subsidies will cover such line‐items as impact fees,
property taxes, and even marketing. As mentioned before, the problem is that I would need site
control to apply for low‐income housing subsidies. This entails higher risk because I would be
buying the property without knowing the probability of being awarded my assumed subsidies.
If I am not awarded on the first round, I would need to wait to reapply which could be 12
months. The site acquisition carrying cost will continue to accumulate increasing the project’s
cost substantially. Site control is not just necessary for affordable housing but also any other

type of development so that property inspections can be done prior. While having the right to
conduct test, I will not only check environmental issues like lead paint, asbestos, prior chemical
storage, but also foundation, drainage, building quality and building code compliance, etc. For a
simple site control, I need to negotiate with the land owner if I can pay the lands taxes or their
financial burdens related to the site, in order to obtain the owner’s documents.
CONSTRUCTION‐
With the development of a building we see the construction risks in a wide array of forms,
especially when comparing new construction to existing or defaulted construction properties.
Either way, performance bonds or completion bonds from the contractor might be requested
to reduce some of the risk. (R. Peiser)
Performance bonds are required for public buildings for the
public entity’s defense, but the same cannot be said for private based construction. On very
large projects, the lender will require it, such as, 2% of the cost in order to buy the necessary
insurance bond. If the contractor doesn’t finish, the bonding company will pay for another
contractor to come in and finish the project, but will not recapture the time delays and other
discrepancies involved with the transaction. Deep pockets can be helpful when the contractors
call a change order. Since I don’t have deep pockets, I just have to fix it affordably or just ignore
the inconvenience and try to adapt and incorporate it into my master plan. If I try to sue the
contractor or architect, it can take months of timely and expensive trouble which I should
always try to avoid. One way to delude the contractor problem is to not pay them upfront. Pay
them as work is being completed such that I can dispense the contractor team if needed.
NEW CONSTRUCTION‐
With new construction, the process for developing raw land requires grading the land where
necessary, obtaining rezoning approval, installing utilities, sewers, streets and sidewalks. Also,
some of the most common unforeseen complications come from the infrastructure risks. As
mentioned earlier, to minimize this risk, it is imperative that when I soil test, I should not just
evaluate to see if the soil is contaminated, but also determine the type of foundation that will
be necessary. The prior due diligence should accordingly include what can and can’t be done on

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to its outstanding loan, lenders are doubtful and thus will have interest rates at one to four
points above the prime. These ‘to‐be‐developed properties’ are complicated to foresee. Unless
I buy after the completion of the project, I would be dealing with the risk of not knowing what I
am paying for. Due diligence of the previous developer’s background is my priority so that I may
rest assured that they do not walk away from the deal or go belly up from another project they
might be involved with. When analyzing a for‐sale building prior to its completion, I can
minimize the leasing risk by attempting to have the seller guarantee at least a 93% occupancy
upon its completion. Lenders can give a “special warranty deed”‐ to warrant the title against
liens and encumbrances that occurred while they held it. (Brueggeman, Fisher and Irwin)
I shall be careful
if the property defaults for little money, especially near the end of its loan period because by
law the owner could easily recover it after they financially recuperate.
ADAPTIVE REUSE‐
Rehabilitating buildings can have less construction uncertainty associated with it because, as
mentioned earlier, a major risk involved with new construction is the creation of the foundation
on unknown soil. The renovation of an existing building may have many unforeseen
complication lying behind its walls, but when I purchase the asset, costly uncertainties will be
more physically apparent then starting from nothing. Construction time is also less, thus reduce
the amount of time that uncertainties could arise in the future.
TIME‐
Time efficiency is crucial and can also decrease the risk involved with financing. Generally, rates
are chosen as measures of the perceived risk at that given point in time. To reduce reoccurring
expenses along with the lender’s monthly yield, my development will be carried out with
strategic coordination to reduce construction time.
LENDERS‐
Major corporations like GE borrow in the billions, and are the criteria for the “preferred
borrower” because they are low risk. The larger a firm the more creditworthy they are to a

13
lender. That entails that my proposal will be the exact opposite, thus lenders will view me as
high‐risk. The prime rate is considered the average interest rate that banks give to their most
credit worthy commercial borrowers. What is left goes to the smaller corporations until the
available financing is filtered all the way to private builders and developers. As a result, almost
anything available for my scale of project will be above prime. Mortgage companies lend, but
they don’t have FDIC or CRA obligations, thus they are not regulated and can lead to predatory
lending. Many of the predatory lenders are in the form of subprime lenders, sometimes there’s
good ones, but most of the time they falsely interpret the interest to the borrower where it can
never be paid off. Yet interest only loans are highly sought after for short term investments,
and are the norm for construction loans.
INTEREST RATES‐
Interest rates vary widely because of supply and demand, yet the Federal Reserve has policies
in place to mitigate swift changes. When the economy is expanding rapidly, it increases the
demand which raises the rates on large commercial loans for developers as well as expanding
businesses.
To come up with an interest rate, lenders look at the particular type of property, its rental and
operating projections, its physical condition, current and projected interest rates, and the
involved investor’s expectations. Other types of lenders might base the interest rate on the
possible returns in light of alternative investment opportunities. (Financial Analysis of Real Property
Investments)
The Interest can also be calculated to assume all the risks associated with it such as
default risk, interest risk (anticipated and unanticipated inflation), prepayment risk, legislative
risk, and liquidity risk. Such that i=r+p+f, where r=opportunity value, p=high premium incase of
default, f=inflation (Brueggeman, Fisher and Irwin)
.

DESIGN‐
When I send preliminary plans to a contractor, they might give me a high quote because of any
possible uncertainties in the blue prints. This is especially true with innovative designs, or any
design that is new or difficult for them. Even with the new technology of Building Information
Modeling, some contractors are still not used to reading the prints and will raise the price on
any irregularity from their usual routine.
MANUFACTURED HOUSING‐
Manufactured housing may reduce the cost of construction as well as the construction risk due
to weather set backs or faulty craftsmanship. Stacking modular sections on top of one another
also helps reduce noise levels for the tenets because of the additional space between floor
joists and marriage walls. The fast growing potential of prefab may even allow the use of
contemporary and abstract design at a competitive price.
Currently the realm of prefab is finding a niche business practice in the high‐speed construction
of the world. By introducing mass production manufacturing with the latest technologies, they
are making it easier and less expensive consequently bringing familiarity of their product types
to the contractor and end users. Many manufacturers are introducing their product with at
LEED certification quality. The companies will provide the structure to the site, but the façade,
landscaping and interior will have to be all tied together by a general contractor. As soon as this
product becomes more widely used, it will be essential for developers who want to reduce their
costs.
CAPITAL‐
The most risk capital is right at the beginning; personal equity and reputations are at stake. A
recourse loan will even recapture assets not related to the venture. Some peers’ advice is to
give everything to the spouse. Being that I don’t have any assets, I don’t see a dilemma, yet the
lending institution might decline me because of that same reason.

15
With uncertainties, the developer should place a high premium on the discount rate. FIRE‐
Financial Insurance for Real Estate can be purchased if I only put down 5% equity for a loan.
Title insurance would work similarly for rehab properties and can even take out the need for an
attorney in some cases.
RISK & MITIGATION CONCLUDED‐
In conclusion, clearly you can see that with proper due diligence and risk mitigation, the project
holds more merit for being successful.
(Joint Center for Housing Studies)

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17

20% of the population needs housing, 8% needs affordable housing, and 28% need low‐income.
(Joint Center for Housing Studies of Harvard University)
State and local governments make it difficult to build
affordable housing by limiting the land available for it, imposing impact fees, and subdivision
requirements all which raise production costs. Restrictive land use regulations and little
increase in income for the people in the lower tier have made it complicated to heal
affordability problems. Housing affordability is the nation’s largest housing challenge. (the US Census
Bureau) Unless local governments ease regulatory constraints, developers can do little to supply
additional affordable units.
(Joint Center for Housing Studies)

19
(Joint Center for Housing Studies)
The nation’s housing stock is divided up by 65% owners 35% renters. (Stockard) Despite record‐
breaking national trends on mortgage foreclosures, the apartment market remains strong.
These people who default on mortgages will ultimately need alternate means of housing, which
the most fitting for their situation is rental. With rents steadily increasing, the net operating
income of apartment properties finally rebounded. Primarily, the new multifamily rentals met
replacement demand. Apartments are currently the 2nd best market while condos are the least
successful of all sectors.
(ULI and PCW)

(ULI and PCW)
For the for‐sale market to have a good recovery, the home starts would need to reduce to 1.55
million and manufactured home placement down to 100,000 annually. Current distressed for‐
sale properties may be made to rental to become successful.
Lenders like to match the maturities of their assets (loans) with their liabilities (deposits):
commercial banks for construction loans and life insurance for long‐term loans. In general, the
life companies are doing well in relation to other types of lending such as commercial banks.
(Miles) Yet in Miami they are having a hard time supplying loans, and are offering 70% LTV.

21

(ULI and PCW)
As you can note above, pension funds maintain the potential to be a huge strength behind the
real estate debt and equity markets. (Miles)
Entertainment retail is a big trend worldwide and especially in Florida. From Disney World to
high grossing dance clubs, the amusement business is doing well and should be further studied
to incorporate similar attributes of smaller scale into my project.

23
REGIONAL ECONOMIC OUTLOOK ‐
The term bubble is used to describe when home buyers and speculators/investors take
advantage of fast appreciation. So much so, that the rates are too high to work and the bubble
bursts. A straightforward calculation of how that happens is the following: too easy to get a
mortgage = appreciation = low interest =bubble pop.

Because of Florida’s oversupplied housing reinforced with its low employment growths it will
take a long time to recover. With 30,190 foreclosures last year, the state lands in third for most
foreclosures in the nation. (the US Census Bureau) Many are acting on this trend and are beginning to
convert condos to apartments in mass numbers. The ability to adapt and take advantage of
short‐term downturns and to be able to hold property long‐term has been said to be the key to
success in real estate. (R. Peiser) Condo developers have had to stop mid‐way on construction
because their funding seized due to lenders wariness of the over‐saturated market. In Miami,
40,000 new condominium units will go online by next year. If we divide that by the ability to
absorb, the result shows six years of oversupply.
(Marksjarvis)
Converting a project to other uses would cost a lot of time and thus money for these developer
who were already consumed by their existing project. As a result, fresh other investors are
taking over the project to condo conversions, consequently others now fear the over saturation
of the apartment market.
The quality of condos are substantially better than those of typical apartments because they
are meant to sell the appeal of the unit using such things as granite counter tops, instead of low
cost materials for renters who are trying to save. In some cases, higher income renters that
could buy homes prefer to rent because of lifestyles that have easy access to work and the

25
amenities of cities. The combination of these two factors will result in large quantities of Class A
apartments to be released into the Miami market in the months to come.
This significance of the oversupplied markets has allowed me to seize further research on the
condominium sector as well as high class apartments. Even though, there is always demand for
for‐sale affordable housing, the onslaught of foreclosure properties and the depreciation of
homes will decrease enough to house some of those financially restrained.
(Marksjarvis)
The current slow trend for the condo market might pick up if interest rates decline and job
growth picks up. The economy/GDP is directly related to unemployment rates. In laymen’s
terms, if everyone has jobs, then the GDP is good.
In the state, the site costs have gone way up and soft cost keep increasing because the
complexity of new and changing laws and codes. Yet the labor cost has not climbed in
comparison, most likely due to the fast growth of immigration. Florida along with Arizona, and
Georgia, are the fastest growing states in the country due to migration of foreign born. In
Miami immigrants contributed to 40% of household formations between 2000 and 2005.

(Urban Land Institute)
In Florida, 20% of recent homebuyers and 25% of renters are foreign born. Two out of three
renters in Miami are minorities. During 1994 to 2004, the number of minority renters rose by 3
million households, offsetting a comparable decline in the number of Caucasian renters. The
number of legal immigrants has reached almost 1 million annually. (the US Census Bureau)
Additional demand for rental units and starter homes will come from the echo boomers as they
move into the peak household formation years. (Miles) The following graphs are provided by
Harvard University’s Joint Center for Housing Studies ‐The State of the Nation Housing report.
They clearly depict the influence of minorities in the housing markets.

27

(Joint Center for Housing Studies)

29
Days On Market –DOM‐ is a good indication of how a market’s doing. Single‐family homes went
from 72 to 110 DOM while in the same time period condominiums went from 72 to 127.
according to the Realtor Association of Greater Fort Myers and The Beach, the value per rental
unit in Jacksonville was $125,436, cap rates for class A were 4.25 to 5.25, class B was 5‐6%, and
class C 6‐7%. In Miami cap rates are show in the graph below.
(Real Estate Research Corporation)
Additionally, in Miami, East Kendall has the least amount of vacancy and Hialeah has the
highest absorption. ((RealQuest))
Construction demand will be weighted toward luxury homes, major remodeling projects, senior
housing, and secondary homes (CB Richard Ellis) thus mainly fulfilling the ‘dream’, not the need
for housing. Major cities like Miami are introducing housing price contracts to sell to
homeowners in order for their home value not to decrease. The way the contract works is that
they are for a fixed amount and guarantee a price per contract, for example you can buy 200
contracts for $250 each guaranteeing a value of $50,000 on your home.

LOCAL ECONOMY‐
An area of more than 5,000 square miles, and a population surpassing 5.5 million full‐time
residents, makes South Florida one of the largest consumer markets in the US. It is the seventh
largest metropolitan area in the US with an average household income of over $72,000.
Many international companies enter the United States by establishing their first operations in
South Florida. The cost of operating a business there is highly competitive compared to other
major metropolitan areas. There is a low tax structure with no state or local income tax, and
corporate income tax at 5.5%. Property taxes are currently among the lowest of major US
metropolitan areas.
The notion of “hybrid” buildings is being introduced in the city, in which I found to be an
intriguing concept. The idea of a big box store being wrapped in residential or smaller
commercial establishments has great potential there. This is useful in places like Miami who
have a strict “MiMo” (Miami Modern) design on all buildings and the sight of a Wal‐Mart or
Costco would take away from that uniqueness.
With the median population being made up of young professional and retired elderly, the
municipality is not concerned about families that have children which require schools and other
expensive legal requirements with no economic gain in return. Units over two bedrooms in size,
usually means kids, which communities like Miami might be trying to avoid. Yet, providing more
rooms in apartments would allow for the target consumer young professionals to share them
with roommates to reduce cost burdens or just create a leisurely office space.
Location is defined by where the jobs, schools, transportation, and health service are. This is
why property values are more expensive in the center core and as a result renters are more
likely to live near the downtown than homeowners are. (Joint Center for Housing Studies)

31
Buying bulk land then selling parcels of it with new zoning is currently a popular trend in the
county. Many are finding small scale building and rezoning profitable from small deteriorated
homes with large lots. Then they build out the plot to the maximum units allowable to resale it.
The city inspector told me to apply for rezoning I only need to meet one of the following
criteria, 40,000 square foot minimum lot size, 200 feet of frontage area, or if the property is
adjacent to sites with other zoning. If I don’t satisfy the conditions above, I can ask the
neighbors to fill out a joint applicant to meet at least one of those requirements.
With the ongoing large scale condo conversions, I see the local economy being oversupplied
with Class A apartments in the near future. This will leave the market demand open for less
expensive apartments. The only imperfection to this may be that developers are building with
such high density that repositioning lower class apartments may be made financially rewarding
by compressed yield over time. I have learned that any class condo conversion that becomes
available is highly sought after. CBRE states that you can get Class A and Class B at 10‐15%
below the replacement cost. The latest market data from CBRE also claims, that new deliveries
will come online in 2008 and 2009 with 25% differential in affective rental rates.
Currently there is an oversupply of distressed properties in the city ‐those for auction and
rehab. These building foreclosures are occurring as borrowers are more commonly unable to
make the mortgage payments, or when the market value is less than the remaining loan
balance –which in the field they call it underwater or upside‐down properties. Construction
lenders have tightened up on their loans due to this economical downturn and are mostly
giving variable rates which are unfavorable in an unstable market like Miami. If rates are
expected to go up, it is beneficial to have a slow moving index like the Treasury bill, yet they are
commonly based on the easily fluctuating LIBOR.
AFFORDABLE DEVELOPMENT INCENTIVES‐
Every project needs a story to help it get funding, and what better story than helping the
unfortunate. To have a strategic approach, when I apply, I will explain what my competitive

edge is, and how I am going to beat out the others. The demand for affordability is always there
as the following image depicts, the problem is the complexities involved with the
implementation.
(Joint Center for
Housing Studies)
Public bonds can be given for a “public purpose” in Miami. The way the bonds work can be
illustrated in layman’s terms:
Investor
↑ ↓ ↑
$+i $ Bonds
↖ ↗
Housing Finance Agency
↑ ↓
$+i $
↑ ↓
Borrower

33
Other subsidies that may be available when applying are described below. From the IRS
Treasury there is income tax assistance, reduced real estate taxes, mortgage interest
alleviation, and of course the largest subsidy of all, the Low Income Housing Tax Credit.
The US department of Housing and Urban Development, more commonly referred to as HUD,
provide resident based Section 8. The money is collected by public housing authorities and then
distributed to applicants by lottery. The approved applicants only have to pay 30% of their
income and the Section 8 subsidy pays the remainder of the rent. They don’t have to tell the
landlord they are Section 8 until they sign the lease. It is illegal to refuse a Section 8 renter.
Insurance will cover the damages that they will most likely make due to letting other families
move in to save even more money. They can only have the eligibility paper 90 days before they
have to return the eligibility to HUD. It’s available to about 25% of eligible applicants. Not
available to full time students, but maybe part time. If income is less than 80% AMI, they can
negotiate with the land lord to raise the rent and HUD pays the difference because they don’t
pay more than 30% their income. Many people may keep from working more so they stay
eligible, but no one can ever know if this is true because they are not going to say; yes I have
been staying home some days because I don’t want to make more. The City of Miami
Department of Community Development states that, “Once Section 8 families find a good place
to live, they tend to stay, which translates to less turnover. As a result, landlords have fewer
operating costs and are able to make more of a profit.” The tenant’s certificate will cover 80%
of the fair market rent. I may want to tell my lender that I will have a guaranteed source of
income from the units that are low income because for every certificate, HUD has 5 applicants.
(Marchant)
Site‐based Section 8 is also provided by HUD. 15% of HUD’s Section 8 stock needs to be given to
landlords for site base use. It is said that some HUD branches give more than allowed to
developers because giving them out arbitrarily to people is not as effective. That HUD branch
can later send a letter to their head quarters claiming they lost or misplaced the additional
certificates. (Stockard)

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35
According to a statement given by the mayor earlier this year, they will encourage joint
ventures between for‐profit developers and non‐profit agencies, taking politicians out of the
contract award process. They will also put a professional loan committee in place and bring in
major private affordable housing developers, as well as, work closely with HUD to ensure
program compliance.
The housing authority is appointed by the mayor, but it is funded and regulated by the federal
government, so the federal government will have the ultimate say in what they do. When
applying to government subsidies, one should be aware that senators have a longer term
objective than congressmen do.
Last year, the mayor’s efforts resulted in the best allocation year on record with 10 projects,
that represented 1,104 new units and over $277 million in additional affordable housing
projects. The city has a goal to develop $1 billion in affordable housing by 2010, and since the
beginning of the decade they have spent $557 million to show their commitment.
The Economic Development Department created a Community Development Entity (CDE) for
purposes of applying and allocating New Markets Tax Credits. The New Markets Tax Credit
(NMTCs) program is recognized for steering low interest, private capital into distressed
communities to acquire capital for commercial and residential projects that are hard to fund.
Similarly, the HRV Hampton Roads Venture is a community development investment firm that
has partnered with the City of Miami to help attract private sector investment capital to apply,
specifically towards innovative real estate projects in lower income neighborhoods. They are
expected to apply for a $75 million allocation exclusively for Miami.
Massachusetts has a very effective affordable housing vehicle called Chapter 40B. It is a state
statute that enables local zoning boards to approve affordable housing developments under
flexible rules. 40B is triggered by having a community with less than 10% of its housing stock
affordable. As of now, the City of Miami requires a minimum of 15% of units to be affordable

within a 10 mile radius. Unfortunately, Miami does not have a 40B requirement which
ultimately speed up and facilitates the implementation. In 2000, Miami assigned an exclusive
“in‐house permit expediter” for affordable housing. However the biggest subsidy with 40B is
the density bonus, because you can reduce the development cost per unit, which the in‐house
permit expediter does not provide. If there was something similar, a developer could seek a
property with low density zoning to capitalize that benefit. Without the 40B as well as no ‘one‐
stop application’ the permit expediter may not be sufficient. Miami has a Universal Application
Cycle for many of their subsidies. For the other subsidies I will have to identify the exact
deadlines of each and assign someone the rigorous task of applying.
Mayor Diaz efforts have also allowed the city to agree to transfer infill lots for just one dollar to
affordable housing developers, but only on an RFP process. In‐fill housing virtually eliminated
the city’s inventory of available vacant lots by designating them for affordable housing. Because
of all the new construction they have compiled a map to keep track of the number of units and
other data. The map on the following page is the City of Miami’s Developments of Regional
Impacts (DRI) which identifies all new developments to make sure the city’s municipalities are
working collaboratively.
Mayor Diaz said in a news paper interview, “We are committed to continue reforming a once
broken system and staying focused on our goal of a $1 billion of affordable housing by 2010.”
When crunching the numbers, affordable housing is all about filling the gap. Sources and uses
are to equal each other, to break‐even. To visualize the idea for me, taxi drivers work for the
concept of breaking even. They call it the nut when they make the amount of money they owe
for lending their vehicle.

37

PUBLIC AND PRIVATE DEVELOPMENT‐
The Miami‐Dade County has allocated regions within their political map as distressed areas.
These areas have been designated as Enterprise or Empowerment Zones. An Empowerment
Zone is a federal designation to create economic opportunities. Businesses locating there will
obtain many governmental benefits such as sales and corporate tax credits and tax exempt
bond financing. It is considered, without a doubt, the most powerful engine for the economic
revitalization of inner city areas.

39
Doing business in Enterprise Zones will qualify for tax exemptions among many other things.
There are several sectors where the two intersect one another. This is beneficial for me as the
developer as well as a lucrative investment for the ground floor retail.

ASSUMPTIONS‐
The Fitch and Moddy Report said that the typical loans in Florida will cover 80% of value, have
high interest, 10 year terms, may be interest only, and a 1.00 debt service coverage factor.
Affordability products such as interest only loans and payment options mortgages have gone
from nothing to being large shares of the market. (Joint Center for Housing Studies)
Leverage risk will decrease in 2008 since this is a highly liquid and stable debt market. Lower
interest rates and the weak dollar will prop up the economy.
It’s a high priority for the new governor to have some insurance alleviation signed in 2008. A
possible $32 billion reinsurance will improve availability, direct competition with other
companies, and will expand Citizens policy offerings. (CB Richard Ellis)
Resources suggest that Citizens
will insure anyone. Private capital entities have to pay $2000 insurance per unit while
institutional buyers are paying $600‐1000.

The belo
other me
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emonstrates
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41
on to

CONCERNS‐
Lenders are becoming more cautious, banks are giving more scrutiny to deals, land costs have
become very expensive, and the Miami 21 are all effects that I should be concerned about. The
Miami 21 is the rewriting of the city’s zoning code to better regulate development. This may, or
may not be beneficial and only time will tell.
Any good plot of land will base the value on its highest and best use. If the residual land value
based on retail is greater than say office, the owner will sell for that maximum price. Because of
this, land prices are high and keep rising. CBRE states, “Stubbornly high development land
prices, construction costs, and impact fees will most likely limit new apartment unit
development for the foreseeable future.”

43
An additional concern is the average 12‐18 months it takes to approve documents and break
ground. From my research I understand that several months may be shaved off by partnering
with local companies and firms that are familiar with the process and have close political ties.
Finally, people have said that holding the asset for a long period of time as I planed is a bad
idea. Cash in pocket now is better in order to reinvest. Another reason is because more
competitive properties may be developed, thereby increasing the supply thus increasing
vacancy. Eventually the place will become older and its function and style may become
obsolete, but that’s the least of my worries at this time. With all these possible predictions, I am
still determined to hold on to the asset as long as possible because the value and rents will keep
appreciating while the taxes and finance will steadily decrease.
The following image depicts the riskiness of a venture in Miami.

MARKET DELINEATION AND SITE ANALYSIS‐
Architects and contractors need specific licenses to practice in the state of Florida. It has been
found to be complicated since the state has many retirees incoming; they have to save the local
businesses from an influx of life insurance establishments, civil attorneys, pharmaceutical
outlets, and other like‐companies chasing them.
Office and industrial space require white and blue collar employment, retail depends on income
generating communities, and residential depends more on household formation. (Peiser and Frej)
Multi‐family housing in the city is good for the economy because the municipality does not
have to spread out their infrastructure and services to distant vacant land which we see
occurring in massive numbers for single family housing in Florida.
Four out of five apartment tenants come from the local area in Miami. (Joint Center for Housing Studies)
This demonstrates the target consumer would be local residents looking to move to higher
quality or less expensive units.

45
Analysis of demand
PROJECTED OVERALL DEMAND –
Downtown areas have the greatest demand for housing, but of course, the land value will be
associated with the location. By introducing retail at $35 per square foot, it may absorb the
extra costs that will be required for the land. The retail rent can also be based on that
merchants monthly income of sales, such that NOI x 5% = rent, then just choose whichever is a
greater sum. Studies show that the demand will always stay strong with waterfront properties,
thus the two sites that I am researching for possible development are both located on the
water’s edge. Demand may strengthen even more if interest rates decline or job growth picks
up.
The greater the public transportation investment by the government, the longer lasting it will
be, and the longer a building located near it will retain its value.
The following images depict the vacancies for different types of units.
(ULI and PCW)

(Joint Center for Housing Studies of Harvard University)
(the US Census Bureau)
Statistics show that 95% of people who apply for apartments previously resided within one mile
of that location, and even more so for low‐income. (Joint Center for Housing Studies) This is possibly due
to those people having close familiarity with the neighborhood.

47
Also, as mentioned earlier, the demand for affordable housing is always there. With the new
construction of thousands of market rate units, the city needs to make it feasible for developers
to provide 10% affordable. If the affordable housing threshold is met, and new construction
seizes, that would be the day that there is no demand. In other words, with a fast growing
population, Florida will continue to build, and the oversupplied market will eventually be
absorbed to generate demand again.
ABSORPTION‐
The two most important factors are the absorption and the influence of future cash flows;
these will be continuously examined throughout my project. Absorption equals the net change
of occupied space, or the total space available less vacated less space coming online. People say
it is typically the most poorly calculated and hard to get accurate.

Analysis of Supply
EXISTING STOCK, PAST TRENDS, AND FUTURE SUPPLY‐
In the late 1980's Miami was overbuilding multi‐family apartments, now it is infamously the
condominiums. This is why I have diverted my study away from the condominium sector early
on in my project. My market research showed that the apartment supply should stay in‐par
with the demand for the near future.
Statistics show that smaller buildings are in higher demand than large scale apartment
complexes, (Joint Center for Housing Studies) which is beneficial for me since my project is considered
undersized.
(Joint Center for Housing Studies)
(Joint Center for Housing Studies)

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Analysis of Capture Rate (Marketability Study)
Scientific studies have shown that what stimulate occupancy in buildings are seaports, minerals,
low‐cost energy, and beaches. Additional studies have also shown that a highly trained and
educated workforce, universities, transportation hubs, high tech research and development, oil
and gas exploration, communication and computer assembly, medical technology/clinics, and
entertainment all foster to the tenant market. (Brueggeman, Fisher and Irwin)
Luckily, Miami and Florida
as a whole often rank highly in the nation for the above stated categories.
COMPETITIVE ADVANTAGES‐
From my research, I found that there are typically no concessions provided, however I will try to
include one free month’s rent or possibly included appliances or furniture if possible to induce
prospective tenants to sign a lease.
The big developers out there are my competition because their experienced and advanced
delivery systems will consume the demand. By avoiding where they build will give my specific
project a competitive advantage. The next maps show the amount of rehabs and new units
coming online which for me translates to more competition.
(Miami Dade)

51
MARKET SEGMENTATION‐
Location quotients can be used to calculate the economic base of a specific geographical area.
The variables from the results demonstrate incomes and how much consumers can afford. This
study will be conducted when I have concluded which of the two following sites I will work
with, and define the best use for that particular site. Nevertheless, the following charts and
graphs show that immigrants are a likely candidate for tenants, and Hispanics dominate the
demand.
(Joint Center for Housing Studies of Harvard University)
(Joint Center for Housing Studies)

(the US Census Bureau)
Project Contexts
My preliminary due diligence was done by using real and current for sale lots. Yet they are just
for establishing the numbers and considered ‘hypothetical’ because the chances of the sites still
being there when the project is complete is minimal. Because of this the sites I located were
either surrounded by other vacant plots where if they were taken by the time I needed it, I
would have other options. They are both waterfront acre plots of land. One located on the
Miami River just north of little Havana, and the other is a site on the Intercontinental Waterway
on an artificial island. The first site is vacant and has recently been rezoned for affordable
housing. The second property is an existing 12 unit condominium with more than half of the
unit’s bank owned. As I concluded earlier, condos are not a viable market and the possibility
can be omitted from my study. I will focus my attention on the rental market for new
construction vs. existing property at the following sites.

53
SITE 1
CURRENT USE‐
The subject property, Rollins Land, is currently 2.11 acres of vacant waterfront land. It has over
385 feet of frontage on the Miami River and has recently been HUD approved for an affordable
housing site. There are certain environmental challenges, which include remediation and
continued monitoring, but this is a developable site, with great visibility. It has recently been
taken off the market but they are still accepting offers. Additionally, it was said that the owner
might have listed the property just to get a free appraisal based on what offers they received.
GEOGRAPHIC LOCATION‐
1950 NW 27 Avenue is located on the Miami River adjacent to the bridge at the North West
intersection of 20th street and the 27th Avenue. It is close to Miami downtown, little Havana,
and the Airport. Being between SR 112 and 836, major commuter routes, the site has great
relation to the city center, transportation, circulation, accessibility, exposure. It also has easy
access to all major highways in one of the most densely populated areas of Miami.

STATUS PRICE SELLER‐
The owner is Rollins Inc. “The leader in pest control” or better known as Orkin. The seller is
Harper Realty, Inc. I have been communicating with Rick Harper via phone and email at (813)
243‐1223 and rick@harperrealty.com. They are asking $3,000,000 for the 2.11 acres, such that
it is $1,421,801 per acre. I was considering offering $1,000,000 for just half an acre.
ZONING‐
The Zoning is considered Liberal Commercial. The city has indicated affordable housing, mixed
use retail/multi‐family and or office/retail would be preferred uses for this site. Many variances
such as height, density, etc. were applied for and put in place by a prior contract holder. The
water on the site could also be used for a boatyard or marina development. There are permits
in place for 25 boat slips. The below land‐use map shows that the site is immediately
surrounded by industrial, a trailer park across the river, and single family housing across the
retail‐busy 27th
avenue.

55
CONCERNS & MITIGATION‐
Site control for me is a financial concern. Also the zoning could get complicated with setbacks
from road and other detailed requirements that are unknown at this point. Preliminary designs
showed that 12 units per acre is a low density for this building type.
Thus attempting to acquire only half of an acre for more than its value per acre is a negotiation
that might run into some trouble because the developer might not want to break up the parcel.

PROPOSED PROGRAM & LAND USE‐
My calculations showed that the apartment
rent is insufficient to cover the cost of
financing the mortgage so I had to introduce
ground floor retail to balance the costs.
Retail is a superior market in Miami and generally a very profitable sector in Real Estate. (CB
Richard Ellis) Yet, I should not build any retail unless I have a preliminary contract with a tenant,
this way I can build it to some specified requirements.
I would be interested in a specialty retailer
like Whole Foods, but since they are a fast
growing company, it is hard to allocate them
as tenants. As I understand, they are in high
demand and would only approve very low
discounted rents, high income environment,
or areas with fast growing economical
potential. These types of ‘anchor’ tenants
only rent instead of own because of their
ability to find extremely low rents.
(ULI and PCW)

57
Below grade parking costs $38,000 per spot, and less than half that when above grade. Yet with
affordable housing, the city allows the reduction of parking requirements. Apartments typically
have only one car but anymore that I can provide over the minimum will be beneficial.
(Joint Center for Housing Studies of Harvard University)
I will attempt to provide only as many that will fit along the west side of the building and rent
them out for an additional fee to tenants.

*The following will be my developed baseline data, projected trend conjecture, and assumed
sources of discontinuity. Set up formulas have been designed for the benefit of the doubt.
MARKET RATE
*In this spreadsheet, the red is just to signify the impact fees if the development was in
Downtown Miami which is just a mile and a half away from the site.
Another method to save on my operations cost would be triplenet leasing. This would lose
some prospective tenants, but it will reduce operating costs substantially long‐term.
Furthermore, to guarantee the NOI from declining I will use an expense stop. This is a
predetermined amount that the developer will not pay in excess of from operations, the tenant
will take on the additional expenses.

59

AFFORDABLE
ASSUMPTIONS‐
The window of affordability is 70% of 80% of the AMI, and then the tenant can pay 30% of that
per month.
(US Department of Housing and Urban Development )

61
My research has shown that smaller units will generate more per square foot which in turn will
have all the big developers providing them, but by having tax exempt financing I may be able to
supply larger units that are not being supplied in the market place.
SUSTAINABILITY‐
A city requirement is that the units need to remain affordable for a minimum of 15 years. The
tax credits will be distributed over a period of 10 years and will not adjust with inflation.
Site 2
CURRENT USE‐
The next site being surveyed is an existing 12 unit condominium on the waterfront of the
intercontinental waterway. It was built in 1953. Because of the housing bubble, the majority of
the condominiums are being foreclosed on. The units are all 2 bedroom 2 bath and range
around 1120 square feet. My research showed that many of the neighboring multi‐family
buildings are at 100% occupancy.
GEOGRAPHIC LOCATION‐
250 S. Shore Drive is within the South Shore Yacht and Golf Club perimeter ‐an exclusive and
high class association. It has access to the intercontinental waterway and is minutes from South
Beach. Its relation to the city center is more distant. It may take longer to get to downtown
than my previous studied location, which is a concern for me because the intended users will
most likely work in downtown. The property is only accessible through the bridge that connects
downtown to South Beach. There is much circulation through this avenue and has great
exposure. It is also very accessible from major tourist destinations and the great beaches.

(MapQuest) (Google)
(Miami Dade) (Google)
STATUS PRICE SELLER‐
The individual units are averaging at $340,000 and the distressed properties are being
mortgaged through mainly one bank, Wells Fargo. The typical sales comparison approach is the
most accurate way to measure the value of this building. There are other methods such as “the
cost approach” ‐putting a value on the assets and the income approach‐ using the gross rent
multiplier; calculating it based on how much the place could rent for monthly and multiplying
that by 116 months.

63
ZONING‐
It is currently zoned for multi‐family, medium density residential.
(Miami Dade)
PROPOSED PROGRAM & LAND USE ‐
The building itself needs some work and there is a pool on‐site that could be capitalized. There
is some possibility of negotiating boat slips, but that is still to be determined.
If I were to buy more than half the units, I would hold the majority vote on building decisions
and thus do the tenant improvements necessary for rehabilitating it. I would have to raise the
condo fee which opposing neighbors would foresee at first thought. For those who do not want
to sell their mortgage to me will generate appreciated value of their homes. Since the
properties are mostly owned by one bank, it might be easy to convince the bank to sell them all
to one entity such as myself, at a reasonable price.
Building efficiency ratio‐ the ratio of the net leasable area to gross leasable area, was studied
when looking at existing buildings for sale. It is possible that once I buy most of the building I
could manipulate the way the square feet where measured, such as including halls, stairs,
elevators. Yet this is purely speculation until the specific building is closely analyzed.

CONCERNS & MITIGATION‐
A slight concern is that to finance or close on this property, it may take about 60 to 90 days. A
major concern is the nimbyism of the existing occupants who will not see the valuable
appreciation of their own units by updating the building and will oppose the lengthy
construction and mostly the increase of the condo association fee.
MARKET RATE
*There are no impact fees because I am not introducing demand that was not prior before.

65
*The red indicates how the financing would make this project unfeasible. Income generated
would be less than the annual mortgage payment.
*Further study of the site concluded that affordable housing subsidies would not be applicable
at this location, thus eliminating the possibility of Low‐income rental.