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1 of 62
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 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
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 than 12%
• 6% yield on cost for multifamily, 6.5% for commercial
• Develop institutional quality real estate
Teutsch’s Objectives:
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
SITE CONTEXT
01
• 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
• C1-40 zoning:
auto-oriented retail
• Walk Score® of 80 -
“VeryWalkable”
• Outside urban village,
frequent transit corridor
SITE CONTEXT
• Single family home
neighborhood
Retail Office
Warehouse
SITE IMAGES
• 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
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
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.
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
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
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$
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
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
WHATWE’RE PROPOSING
03
DESIGN GOALS
• Embrace the site and its surroundings
• Match product to market demands
• Differentiate by design
• Utilized embodied energy of existing structures
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 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
RETAIL
• Community-driven + destination
• Curated collection of retailers and restaurateurs
• Emphasis on local
• High visibility + easy access
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 greenhouse
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 $29,114,496
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
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
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%
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
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
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 35,775 $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%
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)
(FOR APPENDIX)
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
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
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%
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
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
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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2014 NAIOP Real Estate Challenge Proposal - Gas Works Flats

  • 1. winter 2014 development proposal for GAS WORKS FLATS 1900 N NorthlakeWay
  • 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. EXECUTIVE SUMMARY adaptive reuse 209 apar 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 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
  • 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. • C1-40 zoning: auto-oriented retail • Walk Score® of 80 - “VeryWalkable” • Outside urban village, frequent transit corridor SITE CONTEXT • Single family home neighborhood
  • 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. 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
  • 14. MARKET CONTEXT 100,000+ new jobs & 180,000+ new residents by 2017
  • 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. 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
  • 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. 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
  • 21. DESIGN GOALS • Embrace the site and its surroundings • Match product to market demands • Differentiate by design • Utilized embodied energy of existing structures
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  • 32. REUSE – RETAIL AND 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
  • 38. HOWWE’RE GOING TO BUILD IT 04
  • 46. 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
  • 47. 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
  • 48. 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%
  • 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 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
  • 53. 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%
  • 54. 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)
  • 55.
  • 57. 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
  • 58. 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
  • 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 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

Editor's Notes

  1. “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.”
  2. 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
  3. 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
  4. 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
  5. 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
  6. 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
  7. Call out the three different uses in the site, bring special attention to warehouse to frame re-use concept
  8. Summarize the uses we studied and concluded weren’t the best uses for the site
  9. Summarize the uses we studied and concluded weren’t the best uses for the site
  10. It’s true that new unit deliveries are at unprecedented levels, but the demand fundamentals are strong
  11. It’s true that new unit deliveries are at unprecedented levels, but the demand fundamentals are strong
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  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. 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
  18. Existing height
  19. 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
  20. Break buildings apartIntegrate warehouse
  21. Open up the site Engage the Burke-Gilman by providing open space
  22. Reduce the massing at upper storiesCreate view corridor through middle of site
  23. Finally,Enhance the pedestrian experience along 34th, Burke Ave and Meridian Ave by providing setbacks
  24. Final outcomeThree main componentsNorth buildingsSouth buildingWarehouse (Retail/Parking)
  25. 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
  26. Efficiencies – reworked columns spacing; AdvantagesCost savings – $4.6 MEliminates excavationConnection to industrial heritage
  27. FinishesUnit MixBuilding AmenitiesDirect access to retailDeck
  28. FinishesUnit MixBuilding AmenitiesDirect access to retailDeck
  29. Parking Efficiencies
  30. Here are the returns
  31. 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)
  32. 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.
  33. We looked at changing rents
  34. Here are the returns