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winter 2014
development proposal for
GAS WORKS FLATS
1900 N NorthlakeWay
ACKNOWLEDGMENTS
Maria Barrientos, Barrientos LLC
Jon Schack, Schack A+D
Dugan Earl, Revolve Development
TJ Lehman, Mack Ur...
EXECUTIVE SUMMARY
adaptive reuse
209 apar tments + 9 live/work
6,100 SF retail
completion: summer 2017
Yield on Cost - 7.1%
Large, well-located mixed-use development
Leveraged IRR – 13.9%
INTRODUCTION
• Leveraged IRR no less ...
INTRODUCTION
Key Risk Mitigation Strategies:
• No excavation for below grade parking is required
• Development retains nei...
SITE CONTEXT
01
• In the heart of the
“Knowledge Triangle”
• Near both major north-
south highways
• On the popular Burke-
Gilman Trail
• ...
• C1-40 zoning:
auto-oriented retail
• Walk Score® of 80 -
“VeryWalkable”
• Outside urban village,
frequent transit corrid...
Retail Office
Warehouse
SITE IMAGES
• Office
Inadequate public transit, unproven location
USE ANALYSIS
• Retail
Low-traffic location, limited local market are...
USE ANALYSIS
Apartments Condominiums
• Historically low vacancy
rates city-wide
• Strong rent growth
• Little supply
• Low...
MARKET ANALYSIS
02
MARKET CONTEXT
MARKET CONTEXT
100,000+ new jobs & 180,000+ new residents by 2017
80% of recent movers to the Seattle MSA are renters.
56% of those are likely to live in multi-unit apartment buildings.
MA...
MARKET CONTEXT
Submarket
Average Rent
(2008 and Newer) Vacancy
Greenlake/Wallingford/Fremont 2.42$ 1.7%
Capitol Hill 2.49$...
MARKET CONTEXT
MARKET CONTEXT
Built Units Occupancy Avg. Rent
1 Rev 2012 49 93% 2.72$
2 Noble 2012 93 97% 2.79$
3 Wally 2012 27 95% 2.73$...
MARKET CONTEXT
• GasWorks Flats commands a
unique location within submarket
• Only property able to compete
on location is...
WHATWE’RE PROPOSING
03
DESIGN GOALS
• Embrace the site and its surroundings
• Match product to market demands
• Differentiate by design
• Utilize...
DESIGN PROCESS
DESIGN PROCESS
REUSE – RETAIL AND PARKING
PARKING
PARKING TOTALS
Auto Parking (in repurposed
warehouse)
71,550 gsf 227 stalls
300 sf retail per stall
1.0 stalls per...
RETAIL
• Community-driven + destination
• Curated collection of retailers and restaurateurs
• Emphasis on local
• High vis...
GAS WORKS FLATS - SOUTH
69 apartments
industrial, loft-style
10’ floor-to-ceiling height
rooftop courtyard
GAS WORKS FLATS - NORTH
140 apar tments + 9 live/work
scandinavian modern styling
9’ floor to ceiling heights
rooftop gree...
APARTMENT MIX
25%38%12%25% 9 units
HOWWE’RE GOING TO BUILD IT
04
PROJECT TIMELINE
CONSTRUCTION COMPONENTS
Existing Conditions
CONSTRUCTION COMPONENTS
Demolition-Repurposing-Site Work
CONSTRUCTION COMPONENTS
Type I-A Construction
CONSTRUCTION COMPONENTS
Type V-A Construction
CONSTRUCTION COMPONENTS
Streetscape/Trailscape Improvements
HOW IT PERFORMS
05
PROJECT COSTS
PROJECT COSTS Totals Per NSF Per Unit
Total Land Cost $10,000,000
Demolition $47,540
New Construction $29,11...
CAPITAL STRUCTURE
DEBT CONSTRUCTION-PERMANENT LOAN
Loan to Cost Ratio 65%
Interest rate 5.25%
Loan Fee 1.00%
Term (years f...
STABILIZED PERFORMANCE –YEAR 1
PROJECT PERFORMANCE - YEAR 1 STABILIZED
2017 / 2018
Net Operating Income $4,240,214
Total P...
PROJECTED RETURNS
PROJECT PERFORMANCE - HOLDING PERIOD
Returns Unleveraged Leveraged
Net Operating Income $4,240,214 $4,24...
SENSITIVITY ANALYSIS
SENSITIVITY ANALYSIS
Base Scenario Downside scenario Upside Scenario
Returns Unleveraged Leveraged Un...
CONCLUSION
APPENDIX
PARKING
PARKING COSTS
Cost per GSF GSF Totals
Re-Use Parking Costs
Ground Level $50 35,775 $1,788,750
Deck Level $120 35,7...
DEVELOPMENTTIMELINE
Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-...
(FOR APPENDIX)
CONSTRUCTION COSTS
CONSTRUCTION COSTS 2014 Cost Totals
Property Acquisition
Total Land Cost
$10,000,00
0 $10,000,000
Hard ...
CAPITAL STRUCTURE
CONSTRUCTION-PERMANENT LOAN CALCULATION
Loan to Cost Ratio 65%
Debt Service Coverage
Ratio
1.25
Interest...
STABILIZED PERFORMANCE
PROJECT PERFORMANCE - YEAR 1 STABILIZED
2017/2018
Effective Gross Income (@ 5% vacancy) $5,750,178
...
PROJECTED RETURNS
PROJECT PERFORMANCE - HOLDING PERIOD
Returns Unleveraged Leveraged
Net Operating Income $4,240,214 $4,24...
SENSITIVITY ANALYSIS
SENSITIVITY ANALYSIS - RENT CHANGE
2014 2015 2016 2017 2018 2019
Base Scenario
Change (%) 1% 1% 3% 3%...
SENSITIVITY ANALYSIS
SENSITIVITY ANALYSIS
Base Scenario Downside scenario Upside Scenario
Returns Unleveraged Leveraged Un...
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats
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2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats

The University of Washington has organized a team of graduate students to study various development scenarios for 1900 N Northlake Way, Seattle, WA. This proposal represents an opportunity to build on what's existing to transform a key site in Wallingford and create enduring value without a large footprint.

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2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats

  1. 1. winter 2014 development proposal for GAS WORKS FLATS 1900 N NorthlakeWay
  2. 2. ACKNOWLEDGMENTS Maria Barrientos, Barrientos LLC 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. 3. EXECUTIVE SUMMARY adaptive reuse 209 apar tments + 9 live/work 6,100 SF retail completion: summer 2017
  4. 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. 5. INTRODUCTION Key Risk Mitigation Strategies: • 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
  6. 6. SITE CONTEXT 01
  7. 7. • In the heart 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. 8. • C1-40 zoning: auto-oriented retail • Walk Score® of 80 - “VeryWalkable” • Outside urban village, frequent transit corridor SITE CONTEXT • Single family home neighborhood
  9. 9. Retail Office Warehouse SITE IMAGES
  10. 10. • Office Inadequate public transit, 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. 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
  12. 12. MARKET ANALYSIS 02
  13. 13. MARKET CONTEXT
  14. 14. MARKET CONTEXT 100,000+ new jobs & 180,000+ new residents by 2017
  15. 15. 80% of recent movers 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. 16. MARKET CONTEXT Submarket Average Rent (2008 and 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
  17. 17. MARKET CONTEXT
  18. 18. MARKET CONTEXT Built Units Occupancy 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. 19. MARKET CONTEXT • GasWorks Flats commands a unique location within submarket • Only property able to compete on location is AMLI Wallingford • Submarket expecting focused growth along StoneWay, Ravenna Boulevard
  20. 20. WHATWE’RE PROPOSING 03
  21. 21. DESIGN GOALS • Embrace the site and its surroundings • Match product to market demands • Differentiate by design • Utilized embodied energy of existing structures
  22. 22. DESIGN PROCESS
  23. 23. DESIGN PROCESS
  24. 24. REUSE – RETAIL AND PARKING
  25. 25. 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
  26. 26. RETAIL • Community-driven + destination • Curated collection of retailers and restaurateurs • Emphasis on local • High visibility + easy access
  27. 27. GAS WORKS FLATS - SOUTH 69 apartments industrial, loft-style 10’ floor-to-ceiling height rooftop courtyard
  28. 28. GAS WORKS FLATS - NORTH 140 apar tments + 9 live/work scandinavian modern styling 9’ floor to ceiling heights rooftop greenhouse
  29. 29. APARTMENT MIX 25%38%12%25% 9 units
  30. 30. HOWWE’RE GOING TO BUILD IT 04
  31. 31. PROJECT TIMELINE
  32. 32. CONSTRUCTION COMPONENTS Existing Conditions
  33. 33. CONSTRUCTION COMPONENTS Demolition-Repurposing-Site Work
  34. 34. CONSTRUCTION COMPONENTS Type I-A Construction
  35. 35. CONSTRUCTION COMPONENTS Type V-A Construction
  36. 36. CONSTRUCTION COMPONENTS Streetscape/Trailscape Improvements
  37. 37. HOW IT PERFORMS 05
  38. 38. PROJECT COSTS PROJECT COSTS Totals 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
  39. 39. CAPITAL STRUCTURE DEBT CONSTRUCTION-PERMANENT LOAN 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
  40. 40. STABILIZED PERFORMANCE –YEAR 1 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%
  41. 41. 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
  42. 42. SENSITIVITY ANALYSIS SENSITIVITY ANALYSIS Base Scenario 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
  43. 43. CONCLUSION
  44. 44. APPENDIX
  45. 45. PARKING PARKING COSTS Cost per GSF 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%
  46. 46. DEVELOPMENTTIMELINE Nov-14 Jan-15 Mar-15 May-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)
  47. 47. (FOR APPENDIX)
  48. 48. CONSTRUCTION COSTS CONSTRUCTION COSTS 2014 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
  49. 49. CAPITAL STRUCTURE CONSTRUCTION-PERMANENT LOAN CALCULATION 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
  50. 50. 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%
  51. 51. 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
  52. 52. 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
  53. 53. SENSITIVITY ANALYSIS SENSITIVITY ANALYSIS Base Scenario 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

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