Economic Feasibility Analysis - Compass · PDF fileTable of Contents Executive Summary ... Economic Feasibility Analysis ... This document reports on the financial feasibility of a

Economic Feasibility Analysis of Southwest Fillmore Business Park

This project was funded by the Southern California Association of Governments (SCAG) Compass Blueprint Demonstration Project Program. Compass Blueprint provides tools to cities to evaluate planning options and stimulate development consistent with the regions goals. SCAG provides cities with support to help with visioning, infill analysis, policy assistance, economic and marketing assistance and developing communication tools for cities.

November 1, 2007

The preparation of this report was funded in part through grants from the United States Department of Transportation - Federal Highway Administration and the Federal Transit Administration - under provisions of the Transportation Equity Act for the 21st Century (TEA-21). Additional assistance was provided by the State of California State Business, Transportation and Housing Agency through the California Regional Blueprint Planning Grant.

Table of Contents Executive Summary ......................................................................................................... 3 Economic Feasibility Analysis ........................................................................................ 5

Introduction................................................................................................................... 5 Site Context.................................................................................................................... 7 Scenario One: Development Assumptions.................................................................. 8 Scenario Two: Development Assumptions ............................................................... 11 Scenario Three: Development Assumptions............................................................. 16

Open Space for Density Exchange ........................................................................... 16 Distribution of Additional Density ........................................................................... 18 Structured Parking .................................................................................................... 18

Summary Findings ......................................................................................................... 21 Scenario One: Summary Findings ............................................................................ 23 Scenario Two: Summary Findings ............................................................................ 24 Scenario Three: Summary Findings ......................................................................... 25 Acquisition Cost Analysis........................................................................................... 26 Conclusion ................................................................................................................... 28

Jobs-Housing Balance .................................................................................................. 29 Jobs-Housing Balance and Community Vitality ...................................................... 29 Imbalance in Ventura County ................................................................................... 30 Economic Development in Fillmore: An Important Step ....................................... 31

Appendices...................................................................................................................... 34 Appendix A: Development Assumptions .................................................................. 34 Appendix B: Proformas.............................................................................................. 35 Appendix C: “Green Business Park” Case Studies ................................................. 41 Appendix D: Master Site Plan (Scenario One) Development Assumptions Detail Provided by Rincon Consultants ............................................................................... 43

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Executive Summary This document reports on the financial feasibility of a proposed business park in the City of Fillmore. Funding for this report was provided by the Southern California Association of Governments, which provides technical assistance to cities within the region under the Compass Blueprint Strategy. An integral component of the Blueprint is providing consultation for communities to plan and develop balanced employment and housing opportunities. Fillmore is a housing-rich city and the business park is expected to substantially improve the City’s jobs-to-housing balance. The feasibility of any development hinges upon current market and regulatory circumstances that, in this case, will critically shape the Southwest Fillmore Business Park. Over the course of the study, three proforma development scenarios were modeled to include regulations and market conditions. The scenarios were used to determine the economic feasibility of the proposed site plan, or baseline, and two subsequent variations on the development baseline. The variations compared the effects of additional density and parking costs to the baseline feasibility. The results of the economic feasibility analysis were also used to estimate the number jobs produced by the development scenarios and the net effect on Fillmore’s workforce-housing balance. Summary:

Economic Feasibility Analysis

• The Business Park as proposed in the Southwest Fillmore Business Park master site plan is modeled in Scenario One. We report a financial feasibility gap for a speculative business park developer to be $35.6 million.

• Scenario Two models the Business Park to maximize leasable floor area. The

higher average FAR of 0.44 results in a feasibility gap of $5.3 million. This gap equals 1.7% of project costs and could probably be mitigated.

• Scenario Three models the Business Park to promote open space and permit

additional density. This scenario includes 1,735 structured parking spaces and results in a feasibility gap of $45.6 million.

Findings

• The results of the economic analyses reveal a speculative developer would not

acquire the land to develop the Business Park at market price. Under current market conditions, the development would not generate enough revenue and would incur too many costs to be profitable as modeled under Scenarios One and Three. And the density required to make the Business Park pencil for a speculative developer, modeled in Scenario Two, is likely too intense to be met by subsequent demand for commercial space within the City of Fillmore.

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• The Business Park could be profitable for a speculative developer if current land owners were willing to sell the land below the current market value of $22/SF and if demand for commercial space meant that the Business Park could be successful at an average FAR above 0.35.

• The current landowners benefit from low land acquisition costs that are on

average 10 percent of the current market land value. The low acquisition costs, even when adjusted for inflation, result in a large amount of financial flexibility for the current landowners and equate to large profit margins under all of the scenarios analyzed in this report.

• The low acquisition costs indicate Fillmore can hold the Business Park

development to high standards. But the City should also be conscientious not to deter the current developers because they can incur higher costs and provide more amenities than a prospective developer could bear.

Jobs-Housing Balance • The Business Park will provide enough jobs to significantly improve

Fillmore’s jobs-to-housing ratio. The Business Park, as proposed and modeled in Scenario One, will add over 2,000 jobs and improve the City’s ratio by 42 percent, from 0.70 to 1.20 jobs per housing unit. With the Business Park, Fillmore will have a beneficial balance between jobs and housing.

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Economic Feasibility Analysis Introduction The Southwest Fillmore Business Park will be a gateway to the city and an economic cornerstone of the local economy. It will help balance commercial development and job growth with other land uses. The development of the Business Park, framed by economic analyses grounded in real estate finance, is the focus of this analysis. This analysis will examine:

• Land use mixes on the site, planned by the City. • The degree and scale to which the site will be developed, given physical

constraints. • Whether the proposed development is financially feasible from a developer’s

perspective. Would a developer be motivated to acquire and develop the site? • If the project is not feasible, whether alternative land use mixes and/or city

regulations will reduce the feasibility gap and shift the project out of the “red” and into the “black.”

Our main focus is on the economic analysis. The economic analysis of the Southwest Fillmore Business Park is intended to determine the financial feasibility of three development scenarios from the perspective of a speculative developer. In so doing, the financial gap, if any, is quantified. This gap is estimated using a “residual land value” analysis. In short, this method estimates how much a developer is willing to pay for the land given the development constraints and industry expected returns. This residual analysis comprises of a streamlined developer porforma that calculates profit by “feeding back” the 12 percent industry standard profit margin into the development costs. Comparison of the residual land value with estimated land acquisition costs for the Southwest Fillmore Business Park site reveals the project’s financial gap. Significantly reducing or eliminating financial gaps in development scenarios helps to ensure that the true market potential of the site is realized.

We answer the question of financial feasibility using a standard developer proforma methodology; however, a degree of uncertainty exists in any analysis based on the real estate market. It is difficult to predict with certainty the estimated selling prices, lease rates and construction costs of commercial space in a project to be built at some uncertain time in the future, especially in an environment of expected interest-rate increases. The Southwest Fillmore Business Park site is also a large development of 87 acres. A project of this scale would typically be modeled with a discounted cash-flow analysis in which phases of the project are developed and leased or sold to generate revenue for successive phases until completion. However, because the site is under multiple ownerships we have assumed that this project will be developed in one phase.

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With these considerations, we report our analysis results with a margin of 10 percent uncertainty and account for this uncertainty by extrapolating the financial feasibility gap to reflect strong and weak market conditions. The market survey results for various business parks and similar developments within 20 miles of Fillmore are displayed in Table 2.1 below and were geocoded to illustrate their spatial distribution in Figure 2.1. The office average price-per-square-foot lease costs were directly input into the model. Commercial retail lease rates were increased to $2.50 per square foot. Industrial lease rates were rounded up to $1 per square foot and the land selling price was reduced to $22 per square foot after conversations with a local real estate brokers and a developer. The capitalization rates from the market survey were considered to be accurate and were also directly input into the proforma. Table 2.1: Business Park Market Survey Results

Avg. Price/SF

Standard Deviation Frequency

Cap Rate

land selling cost 30 19 12 ―office lease rate 2 0.62 22 6.2%industrial lease rate 0.84 0.29 45 5.9%retail lease rate 2.25 0.85 16 5.7%

Figure 2.1: Geocoded Market Survey Data Points within 20 miles of Fillmore

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Three development scenarios are modeled. A baseline scenario represents the “business as usual” approach to development under the existing master site plan, zoning ordinances, and market conditions. The second and third scenarios manipulate the baseline in a constructive manner to provide insight and determine if baseline density, land use, and parking ratios efficiently utilize the development potential of the site. Site Context The Southwest Fillmore Business Park consists of 11 parcels and eight sites under seven private owners (Figure 2.2). Parcel one, known as the Perry Ranch Property, is the largest totaling 32 acres. It is being developed by KDF Communities, along with site three, into “business park” use. Sespe Creek Properties has proposed office and industrial use developments for the two parcels on site two. There are no development applications pending for sites four and five, owned by the Smith Family. The remaining sites six, seven, and eight are each independently owned. Site six is slated for a mini-storage facility with some industrial condos and parcel seven will be developed into a commercial retail center with some offices. Figure 2.2: Southwest Fillmore Business Park Parcels and Site Numbers by Developer/Owner

The autonomous developer mix and compressed time frame in which the city plans to streamline the development permitting process in early 2008 implies the bulk of the Business Park site will be developed simultaneously. Therefore, this economic proforma analysis modeling all sites in development at the same time is nearly as accurate as modeling each site discretely.

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Scenario One: Development Assumptions Figure 2.3 illustrates the land use mix of the proposed Business Park in the master site plan. The proforma primarily considers the building footprints and the parking required for the development; open space and street areas are estimated based on remaining area calculations. The 25 percent open space assumption, or about 900,000 square feet, will take the form of planting strips in parking areas and small pedestrian plazas nestled amidst common areas. Private street entrances to the park are estimated to consume 13 percent of the site, although the final amount is at the discretion of each property owner and dependent on pending development proposals. Figure 2.3: Scenario One Land Use Mix

Building Footprint***

32%

Open Space**

25%

Surface Streets****

13%

Uncovered Surface Parking

30%

The building footprint covers 1.3 million square feet (30 acres) or 32 percent of the project site. Scenario One models the business park structures as currently proposed in the Southwest Fillmore Business Park master site plan with a few important generalizations -- namely, the categorization of building types into office, retail and light industrial. Building envelopes described in the master site plan as “business park” were divided into 25 percent of gross floor area for office and 75 percent of the gross floor area for Light Industrial.1 Four percent of the gross floor area is planned for banks and restaurants -- these were grouped into retail since restaurant economics can be complicated to model and are beyond the scope of this project. Seven percent of the gross floor area is planned for self-storage and was considered light industrial. The site improvements were modeled based on tilt-up, single story construction with 8 percent of gross floor area as a second floor or mezzanine, mostly for office use. The Scenario One building composition in Figure 2.4 reveals the gross floor area for the Business Park consists of 7 percent retail, 25 percent office and 67 percent light industrial/warehouse floor area. Building common areas and setbacks were modeled to consume 15 percent of the gross floor area resulting in about 1.1 million square feet of net leasable space. 1 According to the Institute of Traffic Engineers business parks typically include a mix of 20-30 percent office and 70-80 percent industrial/warehousing.

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Figure 2.4: Scenario One Building Composition

Office25%

Retail7%

Light Industrial

68%

Since 92 percent of Business Park structures is slated to be one level, the building footprint is only about 103,000 square feet less than the gross floor area. The floor-area ratio (FAR) for the project in entirety is planned to be about 0.35 but there is variability in FAR ratios among sites. Figure 2.5 illustrates that parcel seven, mostly retail and some office, has the average FAR of 0.35. The largest parcel, parcel one, with “business park” development, is characterized by the lowest FAR of 0.33. Parcels 4, 5, 7b, and 8 are expected by the city to host business park development and reach FARs of 0.45, although no development applications are currently pending. Figure 2.5: Southwest Fillmore Business Park Site Numbers by FAR

All parking will be surface parking and some private roads will be developed to facilitate intersite accessibility. Parking is modeled to consume 30 percent of the total project area.

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According to the city Business Park ordinance, the parking ratios are 1 space for every 250 square feet of retail development, 1 space for every 300 square feet of office, and 1 space for every 500 square feet of light industrial/warehouse development. The land use mix and building envelope for Scenario One is summarized in Table 2.2 below. Table 2.2: Scenario One Land Use Mix Parcel SizeTotal Building SF Total Leasable SF*Number of Sites

% of Total Area Size (SF)Land Use MixOpen Space** 25% 942,396Building Footprint*** 32% 1,206,267Uncovered Surface Parking 30% 1,130,876Surface Streets**** 13% 490,046Building CompositionCommercial Mixed Use Component 100% ―

Ground Floor ― 1,206,267Retail 6% 72,376Office 23% 277,441Light Industrial/Warehouse 71% 856,450

Second Floor ― 103, 063Retail 24% 24, 735Office 50% 51,532Light Industrial/Warehouse 26% 26,796

Gross Building Area ― 1,309,330Retail 7% 97,111Office 25% 328,973Light Industrial/Warehouse 67% 883,246

Leasable Building Area ― 1,112,931 Retail 7% 82,544 Office 25% 279,627 Light Industrial/Warehouse 67% 750,759

3,769,585 SF or 86.54 acres1,309,3301,112,9318

* leasable SF is 85% of gross building area to account for common areas** includes courtyards and planting strips*** area assumption excludes sidewalks and setback requirements**** streets within business park - excludes public streets and driveways to parking spaces

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Scenario Two: Development Assumptions Scenario Two examines Southwest Fillmore Business Park at higher built-capacity than proposed in the master site plan with increases in office and industrial space. The building envelope modeled in Scenario One has been augmented with added mezzanines in industrial condos and additional second-story office space. The City of Fillmore has significant existing commercial retail in the Central Business District and is not looking to add retail development beyond the 100,000 square feet proposed, but there is demand for office space and industrial condos. In Scenario One only 6 percent of the building envelope consists of a second floor office or industrial mezzanines. Scenario Two formulates the project at a higher density resulting in more efficient use of the land. The increase in leasable space adds jobs and contributes to the Business Park’s economy. Scenario Two models a level of office wherever there is a single-level of office in Scenario One (Scenario Two also models a level of office above two, single-story retail buildings and a single-story bank on Parcel 72). Under the Business Park master plan development assumptions, all parcels besides 6 and 7 are designated “business park” land use. In Scenario One, the “business park” designations were split into 25 percent office and 75 percent industrial use. In Scenario Two, the 25 percent office is matched with an additional level of office above the ground floor. The remaining 75 percent of the buildings with “business park” designations are considered to be industrial condos. Due to the nature of industrial condos, they are consistently developed with high ceilings that would impede adding an additional floor. Furthermore, instances of office space above industrial condos are uncommon. The high ceiling height and abundant air space typical of industrial and warehousing units can be utilized through the addition of mezzanines. No Scenario One “business park” designated buildings have more than one floor per se, but some do propose mezzanines that are included in the industrial component. Mezzanines are intermediate levels between the floor and ceiling that consume a marginal amount of floor space for structural support (Figure 2.6). Mezzanines are only 2 percent of total project gross floor area in Scenario One and are proposed only on Parcels 1 and 2. Scenario Two asks what if mezzanines were more common in the Business Park, and models mezzanines over 15 percent of the gross floor area of all industrial use buildings.

2 Parcel 7 contains a diverse mix of commercial uses including restaurants, banks, retail and some office. Two buildings, a bank and a retail establishment, contain two stories in Scenario One—these would be the only buildings in the Business Park with retail on the second floor. A single-story restaurant and the bank, also located on Parcel 7, are modeled with an additional level of second-story office. The 92,000 square feet dedicated to mini storage on Parcel 6 remains a single-story development with no mezzanines.

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Figure 2.6: Diagram of Mezzanine Typically Constructed in Industrial Condos

Adding office and industrial space to the Business Park increases the development’s FAR from 0.35 to 0.44 and adds 292,000 square feet of leasable space. The difference in additional space and the building envelope mix from Scenario One to Scenario Two is illustrated in Figures 2.7 and 2.8. Note that the yellow bars representing ground floor area remain the same in both scenarios and that all additional space consists of second floors and mezzanines.

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Figure 2.7: Scenario One Building Envelope

Figure 2.8: Scenario Two Building Envelope

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The additional parking required, while not as extensive as if additional retail was modeled, is significant in that 1,027 additional parking spaces will be added, or an additional 349,000 square feet of surface parking. To accommodate this increase in parking, open space was reduced by 6 percent and surface streets were reduced by 3 percent (Figure 2.9). By increasing the density of the development, the Business Park must surrender about 230,000 square feet of planting strips and courtyards and 115,000 square feet of intra-site, private surface streets. Further intensification of the project would necessitate alternative, more expensive parking solutions such as garages or subterranean parking. The appearance of the Business Park is altered from Scenario One. There is more parking, less open space and street access, and higher density development in the form of more two-story buildings. In Scenario Two what was 4 percent of gross floor area dedicated to second story office increased to nearly 19 percent of the gross floor area. Although more leasable area is included in the industrial component, it will not change the exterior as the additional floor space is located inside the buildings. The land use mix and building envelope for Scenario Two is summarized in Table 2.3 and figures 2.9-2.10 below.

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Table 2.3: Scenario Two Land Use Mix Parcel SizeTotal Building SF Total Leasable SF*Number of Sites

% of Total Area Size (SF)Land Use MixOpen Space** 19% 716,221Building Footprint*** 32% 1,206,267Uncovered Surface Parking 39% 1,458,829Surface Streets**** 10% 376,959Building CompositionCommercial Mixed Use Component 100% ―


Second Floor ― 446,053Retail 6% 24,735Office 69% 307,300Light Industrial/Warehouse 26% 114,018



3,769,585 SF or 86.54 acres1,652,3201,404,4728

* leasable SF is 85% of gross building area to account for common areas** includes courtyards and planting strips*** area assumption excludes sidewalks and setback requirements**** streets within business park - excludes public streets and driveways to parking spaces Figure 2.9: Scenario Two Land Use Mix Figure 2.10: Scenario Two Building Composition


32%

Open Space**

19%

Surface Streets****

10%

Uncovered Surface Parking

39%

Office35%

Retail6%

Light Industrial

68%

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Scenario Three: Development Assumptions The final scenario looks at methods to incentivize developers and property owners to develop the Southwest Fillmore Business Park into a project that integrates with adjacent land use opportunities through open space allocation. Polices that provide density bonuses for affordable housing and open space are commonplace planning tools. For example many cities require developers to pay “Quimby Fees” which create a fund for parkland. A voluntary program can be implemented by Fillmore that gives developers incentives in the form of increased FAR ratios in return for open space dedications within the Business Park. The Business Park, as proposed and modeled in Scenario One, is prototypical in its tilt-up buildings and ample surface parking with a sprinkle of landscaping throughout. But if the project was approached differently, the Business Park could set an example by providing large tracts of open spaces and more-extensive bike trails connecting the development to surrounding land uses that include an active community park and the Santa Clara River ecosystem. A small lake could be feasible considering recycled water will be available from an adjacent treatment plant. All of these improvements would serve to make the Business Park a recreational destination in addition to making it a more attractive business location. The “green design” would generate higher lease rates and increase occupancies. This development scenario would also require some tradeoffs; specifically increased development costs associated with structured parking and decreased accessibility due to open space dedications crowding-out private access streets. It is also unlikely a developer would dedicate land for densities that are already permitted; therefore it would be essential that Fillmore regulate commercial development densities. Open Space for Density Exchange In determining the density bonus to open space dedication ratio appropriate to meet both the needs of the City and the developer the question is “What amount of extra commercial floor area is sufficient to subsidize what percent open space dedication, given extra parking and construction costs, the cost of the land dedicated, and the extra revenue generated by additional leasable floor space.” A cost-benefit analysis revealed, at the scale of the whole 86.5-acre Business Park, the developers would net an extra $0.2-$1.2 million dollars if 5 percent open space was dedicated for every 3.25 percent FAR bonus. On average, this equates to 4.3 acres of open space in exchange for 0.98 acres of additional development. This relationship between costs and revenue is illustrated in Figure 2.11 below.

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Figure 2.11: Quimby Fee Density Bonus Costs and Revenues

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

0.05/0

.04

0.1/0.07

0.15/0

.1

0.2/0.13

0.25/0

.16

0.3/0.19

0.35/0

.23

0.4/0.26

0.45/0

.29

0.5/0.32

0.55/0

.35

Mill

ions

Percent Open Space Dedication/FAR Bonus Ratio

OS Val at $22/sf

Added Parking Costs

Adtl Construction Costs

sum costs (sign)

Added Value of LeasibleSpace

Small parcel sizes and a low proposed FAR of 0.34, it may prove difficult to get all property ownerds to participate in the the density for the open space exchange at the margin of added developer profit; therefore, we model Scenario Three with a 10 percent open space dedication for a 10 percent FAR bonus, highlighted below in Table 2.4. This trade-ratio equates to 8.65 acres of additional open space for 3.01 acres of additional, essentially allocating the Business Park an additional acre of floorspace. Table 2.4: FAR to Open Space Dedication Ratios that are Marginally Profitable for the Developer

OS Dedicate FAR Bonus OS SF OS Acres FAR SF FAR Acres Total Far Developer

Profit Profit as % of Costs

5% 4.00% 188,479 4.33 52,373 1.20 0.3612 1,124,078$ 9.9%10% 7.00% 376,959 8.65 91,653 2.10 0.3717 930,501$ 4.2%15% 10.00% 565,438 12.98 130,933 3.01 0.3821 736,924$ 2.1%20% 13.00% 753,917 17.31 170,213 3.91 0.3925 543,347$ 1.0%25% 16.00% 942,396 21.63 209,493 4.81 0.4029 349,770$ 0.4%30% 19.00% 1,130,876 25.96 248,773 5.71 0.4133 156,193$ 2.6%35% 23.00% 1,319,355 30.29 301,146 6.91 0.4272 1,280,271$ 1.8%40% 26.00% 1,507,834 34.62 340,426 7.82 0.4376 1,086,694$ 1.3%

Avg Difference 5% 3.25% 188,479 4.33 42,553 0.98 0.0122 775,972$ 2.9%

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Distribution of Additional Density There are four reasons the FAR bonus should be developed into additional second-story office space:

1. Office space is more economical than retail on second-levels, 2. Industrial buildings are too tall and noxious to host an additional floor of office

above them, 3. Additonal industrial space in the form of mezzanines could be constructed later

and on a tenant-by-tenant basis, 4. Offices provide more jobs per square foot than industrial and commercial land

uses and generate higher lease rates than industrial developments.

This scenario is similar to Scenario 2 in that it looks at the Business Park development with an additional level of office. The additional 10 percent FAR was calculated for each parcel; then added as additional office space. The added densities are displayed in Figure 2.12. All parcels have the enough office building footprints to accommodate the extra FAR bonus space, except parcel six3. Figure 2.12: 10 Percent Office FAR Bonus Square Footage (130,933 square feet) Distributed Evenly Onto Existing Single-Level Offices

Site 1, 48,093 SF, 38%

Site 2, 30,801 SF , 25%

Site 3, 15,915 SF , 13%

Sites 4 &5, 5,794 SF , 5%

Site 7b, 439 SF , 0%

Site 8, 1,513 SF , 1%Site 7, 12,632 SF ,

10%Site 6, 9,622 SF ,

8%

Structured Parking The additional development and open space comes at the expense of surface parking and surface streets. Scenario Three would require 1.2 million square feet of surface parking.

3 If the developer of parcel six decided to pursue the exchange, additional ministorage would likely be added, thus requiring 9,600 additional square feet of building area.

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To conserve space, Scenario Three models a 590,000-square-foot two-level parking garage (1,730 spaces) combined with about 650,000 square feet of surface parking (1,955 spaces). The 10 percent office FAR bonus adds 436 parking spaces and reduces the surface street area by 48 percent (237,500 square feet) from Scenario One. It may be feasible to create two garages, one in proximity of the “business park” intensive land uses of site 1 and another nearby site 3 which is located out-of-site of the highway and adjacent to the park and river. A structure on parcel 3 could also provide weekend parking for the active park and reduce the park’s own surface parking requirements. The land use mix and building envelope for Scenario Three is summarized in Table 2.5 and Figures 2.13-2.14 below.

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Table 2.5: Scenario Three Land Use Mix Parcel SizeTotal Building SF Total Leasable SF*Number of Sites

% of Total Area Size (SF)Land Use MixOpen Space** 35% 1,319,355Building Footprint*** 32% 1,206,267Uncovered Surface Parking 26% 980,092Surface Streets**** 7% 252,562Building CompositionCommercial Mixed Use Component 100% ―


Second Floor ― 233,321 Retail 11% 24,499 Office 78% 181,990 Light Industrial/Warehouse 12% 26,832



3,769,585 SF or 86.54 acres1,309,3301,112,9318

* leasable SF is 85% of gross building area to account for common areas** includes courtyards and planting strips*** area assumption excludes sidewalks and setback requirements**** streets within business park - excludes public streets and driveways to parking spaces Figure 2.13: Scenario Three Land Use Mix Figure 2.14: Scenario Three Building Composition


32%

Open Space**

35%

Surface Streets****

7%Uncovered Surface Parking

26%

Office32%

Retail7%

Light Industrial

68%

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Summary Findings The three scenarios modeled in this analysis reveal some of the development options for the Southwest Fillmore Business Park. The three scenarios can be summarized as:

Scenario 1: The Business Park developed as proposed in the master site plan. Scenario 2: The Business Park developed to maximize leasable floor area. Scenario 3: The Business Park developed to promote open space and permit additional density.

Table 3.1 below reveals the feasibility gap of each scenario and estimates the feasibility gap based on fluctuations in the real estate market. Under strong market conditions, demand for space is high, but so is demand for labor and materials, thus a 2 percent increase is assumed for both construction costs and revenue. In weak market conditions, demand for space decreases but construction costs may still increase, thus the feasibility gap in weak market conditions considers 2 percent less revenue and 2 percent increase in construction costs. Scenarios One and Two reveal current market feasibility gaps of 35.6 million, and 45.6 million, respectively. Scenario Two approaches feasibility under current and strong market conditions with relatively low gaps of $5.3 and $4.6 million.

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Table 3.1: Feasibility Summary for Development Scenarios One through Three

$/sf total $/sf Total Residual Value Expected Gap Strong Market Weak MarketScenario One $22 82,930,870$ $13 47,294,621$ (35,636,249)$ (35,090,242)$ (45,282,383)$ ScenarioTwo $22 82,930,870$ $22 83,139,302$ (5,294,944)$ (4,568,834)$ (18,122,903)$ ScenarioThree $22 82,930,870$ $10 37,334,698$ (45,596,172)$ (44,972,155)$ (56,620,445)$

Current Land Selling Price Residual Land Value Feasibility Gap

Scenario One: Summary Findings Our analysis concludes that a speculative developer paying market rates would not find this scenario economically feasible. The feasibility gap (Figure 3.1) represents the difference between the land’s current market selling price (as determined in the market survey and conversations with developers) and the residual land value as determined in the proforma analysis. The estimated financial gap for the business park modeled under Scenario One conditions is approximately $35.6 million or 16 percent of project costs—a significant barrier to development. Figure 3.1: Scenario One Feasibility Gap

$47,294,621

$82,930,870

$(35,636,249)

$(60,000,000)

$(40,000,000)

$(20,000,000)

$-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

RESIDUAL LAND VALUE CURRENT LAND SELLING PRICE FEASIBILITY GAP

This analysis illustrates no speculative developer would buy 86 acres in Fillmore to build a business park under current conditions. But since the land is already under developer ownership, and the land acquisition costs were incurred at some time in the past, the Business Park can be considered without up-front costs of land acquisition (this is discussed in the final section). However it should be noted that development maximizing land use and market opportunities is optimal; therefore Fillmore, developers and other stakeholders should be interested in reducing the feasibility gap to whatever extent possible. A low or nonexistent feasibility gap is characteristic of a project aligned with market demands.

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Scenario Two: Summary Findings The additional 292,000 square feet of leasable floor space modeled in Scenario Two results in a $5.3 million feasibility gap (Figure 3.2)—much improved from Scenario One’s $35.6 million gap. This is 1.8 percent of project costs compared to 16 percent in Scenario One. This project is more feasible due to economies of scale resulting from comparatively slight additional construction costs, retention of existing building footprints, while increasing leasable area by 27 percent. Figure 3.2: Scenario Two Feasibility Gap

$77,635,953$82,930,870

$(5,294,917)$(10,000,000)

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

RESIDUAL LAND VALUE CURRENT LAND SELLING PRICE FEASIBILITY GAP

A prospective developer would be willing to pay $21 per-square-foot while the land cost is $22 per-square-foot. This expected gap could relatively easily be mitigated considering this project is estimated to net $340 million in project revenue. Furthermore, a sensitivity analysis showed that if office lease rates were increased by $0.09 per square foot, the feasibility gap would be reduced to zero. In strong market conditions the project would be developed if there was enough demand for this much commercial space in Fillmore.

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Scenario Three: Summary Findings Scenario three comes to an estimated feasibility gap of $45.6 million (Figure 3.3). This is $10 million more than the Scenario One gap. Despite adding 131,000 square feet of office the additional parking costs are $25.5 million more than in Scenario One due to the transition to some structured parking. This gap is equal to 14 percent of project costs. Figure 3.3: Scenario Three Feasibility Gap

$37,334,698

$82,930,870

$(45,596,172)$(60,000,000)

$(40,000,000)

$(20,000,000)

$-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

RESIDUAL LAND VALUE CURRENT LAND SELLINGPRICE

FEASIBILITY GAP

A developer would be willing to pay $10 per square foot while the land selling price is over twice that amount at $22 a square foot. The prospective developer would not make any profit on this development and would actually lose an additional $14.4 million.

25

Acquisition Cost Analysis The economic analysis determined that a prospective developer would not pursue the business park as modeled in Scenarios One and Three. But the existing land owners represent an alternative perspective. Assessor data reveals parcels in the site were obtained as early as 1980 and all but one were obtained before the site was rezoned from agricultural to business park use in 2005. Solimar obtained parcel attribute data from the Ventura County assessor in order to estimate the difference between the project’s original acquisition costs and the current market value of the land. We find that the assessor data illustrates an economic advantage privy to the current landowners.4 Figure 3.4 illustrates the appraised value of each parcel at the last sale date adjusted for inflation and aggregated to estimate the real acquisition costs of the site to total about $8.2 million ($2.18 per square foot). The real value was subtracted from the current land selling price ($82.9 million or $22/square foot) to yield a $74.7 million difference between the current land value and the acquisition costs. This appreciation in land value greatly exceeds all three of the expected feasibility gaps. Figure 3.4: Real Value of Business Park Parcel According to Assessor Data and Adjusted for Inflation

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

1;199

8

2; 20

03/04

3; 19

80

4; 19

91

5; 19

87

6; 20

04

7; 20

06

7b; 1

992

8; 20

01

Site Number; Appraised Date

Added Value From Inflation

Assessed Improvement Value

Assessed Land Value

4 The added value as a result of up-zoning should not surprise land owners or Fillmore since the site was designated for industrial business park uses as early as 1972.

26

The actual profit margin for each site would vary for each developer depending on the acquisition cost and the amount of time the respective site land was banked. It is also difficult to determine the private cost to each developer for banking the land for as much as 27 years, and the assessor’s appraised value does not necessarily equal the actual transaction cost. But based on economics of the entire Business Park, the developments modeled would generate, aside from the 12 percent profit margin already assumed in the analysis, an estimated additional $39.0 million in Scenario One, $69.4 million in Scenario Two, and an additional $29.1 million for the current land owners in Scenario Three as illustrated in Figure 3.4. Figure 3.4: Feasibility of Scenarios 1-3 Based on Estimated Acquisition Costs Adjusted for Inflation

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

Residual Land Value Acquisition Costs Additional Profit

Scenario 1Scenario 2Scenario 3

27

Conclusion The large difference in the aggregated acquisition costs versus the current market price for the land permits some leeway for the Southwest Fillmore Business Park. The escalation in land value makes this project pencil for current landowners, but it is not a profitable investment for other developers. The Business Park can be approached from two perspectives. First, from the viewpoint of a speculative developer who would likely perceive the densities required to make the project financially feasible, modeled in Scenario Two, as being too intense when compared to the amount of demand for commercial space within the city. A speculative developer would hold-out on acquiring the site at the current land selling price and not pursue developing the site at this time. The second perspective is that of the current landowners who are looking at significant profits stemming from the choices they made to acquire the properties in the past. The current developers would prefer that Fillmore approach the Business Park from perspective one, but the City should consider perspective two and hold the development to high standards. This includes high-quality architecture and site improvements, application of green building principles, open space allocations in lieu of extensive surface parking, integration of the project into surrounding active parks and natural ecosystems through connective trails and viewsheds, and even some structured parking where appropriate. However, the City should also be cautious and consider that if a current landowner sells a parcel for market price at $22 per square foot, the new owner would have fewer options and would be likely to severely cut costs to make the development pencil. In the unlikely event that a current land owner sells for below market price, a prospective developer could develop the Business Park at a FAR density between 0.35 and 0.45 for a profit.

28

Jobs-Housing Balance In urban areas nationwide, a standard indicator of quality land use planning is the ratio of available jobs to the number of households. It has been well-documented that those areas with a balanced proportion of career and housing opportunities will exhibit a level of economic, lifestyle and environmental equilibrium that is unattainable by areas overly saturated with either jobs or housing units. In Greater Los Angeles, achieving a successful “jobs-housing balance” is particularly resonant. Here, a dynamic demography and ever-changing economy ensures that choices of where to live and where to work are increasingly complex, and increasingly integrated into quality of life. The Southern California Association of Governments (SCAG), in its continuing effort to promote livable communities for area residents, has made balancing local work and home opportunities a regional priority. SCAG defines “jobs-housing balance” as the distribution of employment relative to the distribution of workers (and thus housing) within a given geographic area. Balance is achieved when available housing choices complement the earning potential of available jobs. As will be seen, this compatibility is attended by a number of positive community characteristics. Jobs-Housing Balance and Community Vitality The value of an adequate supply of employment opportunities located within reasonable distance of compatible housing is multi-fold. The following benefits are demonstrated in all Los Angeles communities that have achieved jobs-housing balance.

• Reduced Economic and Fiscal Strain: Decreased congestion demands fewer public resources and mitigation in the form of improvements to the regional transportation system. In addition, less hours spent commuting translates to lower fuel costs, higher productivity to employers and lower business trip costs. The inherent reduction in vehicular mileage results in a lower cost to local governments for providing new facilities and services to new development.

• Improved Quality of Life: Day-to-day benefits to local residents include cleaner air, reduced commuter stress, better health, and more leisure time. The negative impact of strained, lengthy commutes on families is well-documented.

• Increased Diversity: To achieve a jobs-housing balance in a given area is to achieve a significant level of diversity among residents. In job-rich areas there is a widening socio-economic divide between fulltime residents and weekday commuters. A healthy mix of income levels, employment opportunities and housing promotes socio-economic diversity.

• Improved Air Quality: Inherent to similarly located jobs and housing is a net reduction of vehicle miles traveled (VMTs) by daily commuters. As a result, less particulate matter and fewer ozone precursors are emitted.

29

Imbalance in Ventura County SCAG 2% Demonstration Projects afford cities exploration of innovative solutions to growth. Overall, Ventura County is balanced, with a ratio of 1.28 jobs per housing unit (1.0 to 1.29 is considered to be balanced according SCAG), but as figure 1.1 below shows, housing predominates the Santa Clara, Ojai and Simi Valley areas. Fillmore is one of four housing-rich Ventura County cities along with Santa Paula, Ojai and Simi Valley. Figure 1.1: 2003 Ventura County Jobs-Housing Balance by Census Tract

In addition to workforce commuters driving to the job-rich coastal cities and along the 101 Highway Corridor, 100,000 people commute out of Ventura County everyday (Ventura County Civic Alliance). The 126 and 118 State Highways facilitate significant portions of this out-migration and funnel commuters onto the I-5 Freeway corridor and into Los Angeles. Realistically, most Fillmore residents commute to the coast or Santa Clarita, but as housing is built and development radiates from Los Angeles, north along the I-5 corridor, Fillmore could become a quintessential drive-to-qualify scenario with an hour commute from Fillmore to Downtown Los Angeles (without traffic).

30

Balancing Incomes in the East The location and type of employment are critical issues in achieving workforce diversity. While inland regions, such as the Inland Empire, are adding jobs, more high-paying jobs are needed to develop a balanced economic base. Currently, Southern Californians are moving to inland regions in search of affordable housing and home ownership, but many are keeping their high-paying jobs in the coastal regions. A more balanced economic base with high-paying jobs in the inland parts of the region will enable those who live there to find comparable jobs and wages there as well. This will create an alternative to the daily exodus to jobs-rich coastal regions. Economic Development in Fillmore: An Important Step According to the Grub & Ellis Third Quarter Report, North Los Angeles is one of the tightest business park markets in Southern California. The market for industrial condos is the tightest in the country as the Los Angeles real estate market looks to the Inland Empire and North along Interstate 5 for new industrial space. Stellar Microelectronics signed a 10-year lease for 107,000 square feet of space in Valencia and smaller “tech” companies like Stellar would be a good fit for the Business Park in Fillmore. There is also demand for office space as office lease rates are continuing to increase and are pressuring Westside Los Angeles area businesses to consider “split offices” where executives remain at exclusive offices while the rest of the employees are moved to a more affordable area. Despite sagging housing prices, commercial real estate market trends along the I-5 corridor are forecast to remain strong. The Southwest Fillmore Business Park is cognizant of this demand and will provide employment opportunities by attracting clean, business park style development. The City will enhance employment opportunities and reduce commuting outside of the City. The map of jobs/housing balance in Figure 1.2 displays the ratio by traffic analysis zone (TAZ) grids. According to SCAG, acceptable job-center commute sheds consist of a 14-mile radius around the job center. A 14 mile radius around the center of Fillmore yields an estimated 95,465 employees and 86,976 housing units in 2003, a jobs-to-housing ratio of 1.1. Within city boundaries there is a jobs-to-housing ratio of 0.70. Most of the existing jobs are centrally located downtown and along the railroad tracks. Areas of oil extraction characterize significant job nodes in areas peripheral to the city. In order to reach the optimal 1.29 jobs-to-housing ratio, areas inside the 14 mile city commute shed would be required to cease housing unit production and add nearly 17,000 employees. In Fillmore itself, the workforce would need to double in size to obtain the 1.29 ratio within its boundaries.

31

Figure 1.2: Jobs-Housing Balance in Fillmore by TAZ Zones

City Boundary

Roads

Highway

Business Park

Jobs-Housing RatioHousing Only

0-0.5

0.5-1

1-1.5

1.5-2

2+

Jobs Only In Scenario One, the baseline proforma model, the Southwest Fillmore Business Park gross floor area consists of 7 percent retail, 25 percent office and 67 percent industrial development on 86.5 acres. Under the SCAG Compass Strategy, Fregonese Associates developed a method in which growth forecasts are translated into development scenarios. This method can be used to estimate job center employment capacity and estimates job frequencies based on area estimates of development types. The development type assumptions applicable to the Fillmore Business Park are listed below and the employment estimates are summarized in Table 1.1.

32

• Light Industrial: 1000 SF per employee, • Office Park: 350 SF per employee, • Retail: 500 SF per employee.

Table 1.1: Estimate of Jobs Added to City of Fillmore According to Business Park Building Type and Size:

Scenario 1 SF Scenario 2 SF Scenario 3 SF Scenario 1 Jobs Scenario 2 Jobs Scenario 3 JobsRetail 97,111 97,111 96,875 194 194 194 Office 328,973 584,741 459,432 940 1,671 1,313 Industrial 883,246 970,468 883,282 883 970 883 Total 1,309,330 1,652,320 1,439,589 2,017 2,835 2,390 The resulting additional jobs from Scenario One improves Fillmore’s inter-jurisdictional jobs-housing ratio from 0.70 up to 1.20 and marginally increases the commute shed jobs-housing ratio to 1.12. Scenarios Two and Three and more jobs and improve the ratio even more. Development of the Southwest Fillmore Business Park will pivot the City of Fillmore into a much improved jobs-housing equilibrium. As Fillmore’s workforce expands the City will continue to encounter the same challenges as other California jurisdictions pertaining to job quality and housing costs. The industrial component of the Business Park is intended to attract relatively small, high tech research and development firms including bio-tech and computer science industries that provide above-median salaries. Office jobs will consume less space than their industrial cohorts and are projected to be the slight majority of the Business Park jobs in Scenario One. Ventura County will continue its expansion of the already dominant service industries and these offices will accommodate the growth in this sector. The retail component, along with a small fraction of the industrial component planned for mini storage, will probably fall short of providing enough purchasing power for employee home ownership, but will help to improve the Santa Clara Valley’s above-average unemployment rate nonetheless.

33

Appendices Appendix A: Development Assumptions The fixed costs and revenues modeled are described in detail in the notes under each proforma included in Appendix B. However, some important inputs to the proformas that should be mentioned are:

• Assumed Market Value of Land: $22/SF ($82.9 million total for sites 1-8)

• Tilt-up Commercial Construction Costs : o Retail/Office $85/SF o Industrial $75/SF

• Parking Construction Costs : o Above Grade Podium Parking $17,000/space o Uncovered Surface $3,000/space

• Current Parking Requirements : o 1 space / 250 SF retail o 1 space / 300 SF office space

• Financing Costs : o Equity Investor : Lending Agency - 25% / 75%

• Commercial Retail Value: o Lease Rate : $2.50 / SF o Vacancy Rate: 7% o Cap Rate : 5.7%

• Office Value: o Lease Rate : $2.00 / SF o Vacancy Rate: 5% o Cap Rate : 6.2%

• Industrial Value: o Lease Rate : $1.00 / SF o Vacancy Rate: 7% o Cap Rate : 5.9%

34

Appendix B: Proformas Fillmore Business Park-Scenario One

LAND USE MIX SITE CHARACTERISTICS ac sf

Parcel(s) Size 86.54 3,769,585 Total Open Space (1) 942,396 Total Uncovered Surface Parking (1) Total Buildable Footprint (1) 1,206,267 Zoning (2) BP1/BP2

height restriciton (ft above grade) 35

DEVELOPMENT PROGRAM

CommercialTotal Retail Space (1) 97,111

OfficeTotal Office Space (1) 328,973

Light IndustrialTotal Industrial Space (1) 883,246

Parking (3)Retail 389Regular Office 1097Light Industrial 1767

Total Required parking spaces 3253Total parking square footage 1,106,020

# spaces square ftbelow grade parking 0 - above grade podium parking 0 - above grade uncovered surface parking 3253 1,106,020

Streetsstreets 490,046

Development Building envelope height1st Floor Office 152nd Floor Office 15total height (4) 35

FAR 0.35

PROJECT REVENUE Total

Commercial Retail (5)leasable Retail square footage (6) 82,544Lease Rate (7) $2.50Revenue Periods/year 12Gross Annual Income 2,476,334Less Vacancy 7% (173,343) Less Operating Expenses 10% (247,633) Net Operating Income 2,055,358 Capitalized Value cap rate 5.70% 36,058,904

Office (8)Office square footage (6) 279,627Lease Rate (7) $2.00Revenue Periods/year 12Gross Annual Income 6,711,048Less Vacancy 5% (335,552) Less Operating Expenses 10% (671,105) Net Operating Income 5,704,391 Capitalized Value cap rate 6.20% 92,006,307

Light Industrial (9)leasable Retail square footage (6) 750,759Lease Rate (7) $1.00Revenue Periods/year 12Gross Annual Income 9,009,110Less Vacancy 7% (630,638) Less Operating Expenses 10% (900,911) Net Operating Income 7,477,561 Capitalized Value 5.90% 126,738,329

TOTAL PROJECT REVENUE 254,803,541

35

PROJECT COSTS

Pre Development Costsdue diligence (25,000)

0(134,575)

(5,275,959)

land carry (% of raw land cost, see note 8) 0%land entitlement / legal fees (per site, see note 10) $19,225professional fees (see note 11) 4%

RESIDUAL LAND VALUE (12) 13$ (47,294,621)

Development CostsBuilding Construction Costs

Demolition Costs (% of land value) 5%Site Development Costs (see note 13) $2Retail / Office Construction Costs $/sf (see note 14) $85Light Industrial Space Construction Costs $/sf (see note 14) $75Parking Construction (see note 15)Private Street Construction (see note 16) $750,000Common Area Infrastructure enhancement costs (see note 17)

Indirect Costs Standard Impact Fees (see note 18)Building Permit Fees (see note 18)insurance (% of revenue) 2.4%property tax (% raw land, see note 19) 1.1%

Developer Fee (20)

(2,364,731)(7,539,170)

(36,217,149)(66,243,457)(9,759,000)(3,480,441)(6,295,034)

(5,520,708)(510,000)

(3,165,576)(1,040,482)

3%

Contingency (21)

(4,264,072)

6%

Marketing / Advertising Costs

(7,913,939)

2.5%

SUBTOTAL DEVELOPMENT & LAND COSTS

Financing Costs

(3,053,088)

(210,097,001)

Equity (equity interest paid w/ profit sharing, see note 22) 25% 59,499,471Permanent Debt (23) 75% 177,637,015

loan horizon (yrs) 2loan fees 2%average draw 50%interest rate 7%debt service

Commission & Closing Costs

(3,552,740)

(12,434,591)

3.0%

TOTAL PROJECT COSTS

(1,418,839)

(227,503,171)

Project Profit 27,300,369Project Profit less landowner equity payment (% profit) 0% 27,300,369Project Profit (% of total costs) 12.0%

SF TOTALRESIDUAL LAND VALUE 13$ 47,294,621$

CURRENT LAND SELLING PRICE (24) $22 82,930,870$

FEASIBILITY GAP (25) (9)$ (35,636,249)$

Lending Criterialoan to value ratio (LTV) 0.70

NOTES:(1) based on reasonable assumptions and calculations in Land Use Mix (2) based on anticipated general plan amendment, contained in master site plan(3) # parking spaces = each space 340 sf.(4) each level assumed to be 15' with an additional 5' roof pitch (5) area standard commercial retail lease rates, vacancy rates and cap rates as determined in market survey 20 mile radius (6) excludes 15% for non-leasable common space(7) based on monthly lease revenue increments(8) area standard office lease rates, vacancy rates and cap rates as determined in market survey of 20 mile radius(9) area standard light industrial lease rates, vacancy rates and cap rates as determined in market survey of 20 mile radius

(12) Residual land value is the amount of $ the developer is willing to pay for the land after receiving the project profit. (13) % construction costs for grading(14 ) based on market research for tilt-up concrete construction(15) assumes surface parking costs = $3000/stall

(18 )impact fees, transportation improvement fees, and building permit fees as indicated in Development Impact Fee Workshee(19) % of land value taxed each year developer has ownership of land; assumes 2 years(20) % of development costs charged to cover developer overhead(21) % construction costs to buffer against unexpected increases in costs

(23) lent money developer acquires from a bank or other lending institution; the fees and interest costs are also financed(24) as determined in the market survey for vacant land with similar zoning(25) the difference between the current land selling price and the residual land value (i.e. what the developer is willing to pay for the land)

(10) money paid upfront to hold land through the entitlement process; assumes $19,225 for each of 7 development sites (parcels 4 & 5 assumed will be assembled)(11) Professional Fees include architectual design and engineering. Environmental consultants included in Common Area Infrastructure enhancement costs

(16) street construction costs estimated by linear mile ($750,000/LM). Assumes 20 ft wide intersite allys--not public streets such as C, D, E and River Street, master plan notes st construction at will of owner, public st. imporvements included in Common (17) additional infrastructure capacity enhancement costs as indicated by Initial Estimate of Common Area Improvement and Master Plan Costs worksheet, includes levee construction, highway widening etc.

(22) borrowed money from joint equity investors; require returns through a higher 'preferred' rate and profit sharing with developer

36

Fillmore Business Park-Scenario Two


Parcel(s) Size 86.54 3,769,585 Total Open Space (1) 716,221 Total Uncovered Surface Parking (1) Total Buildable Footprint (1) 1,206,267 Zoning (2) BP1/BP2


DEVELOPMENT PROGRAM






# spaces square ftbelow grade parking 0 - above grade podium parking 0 - above grade uncovered surface parking 4280 1,455,200



FAR 0.44



Office (8)Office square footage (6) 497,030Lease Rate (7) $2.00Revenue Periods/year 12Gross Annual Income 11,928,726Less Vacancy 5% (596,436) Less Operating Expenses 10% (1,192,873) Net Operating Income 10,139,417 Capitalized Value cap rate 6.20% 163,538,981



37

PROJECT COSTS


0(134,575)

(6,559,032)




Demolition Costs (% of land value) 5%Site Development Costs (see note 13) $2Retail / Office Construction Costs $/sf (see note 14) $85Light Industrial Space Construction Costs $/sf (note 14) $75Parking Construction (see note 15)Private Street Construction (see note 16) $750,000Common Area Infrastructure enhancement costs (see note 17)


Developer Fee (20)

(3,881,798)(7,539,170)

(57,957,461)(72,785,078)(12,840,000)(2,677,262)(6,295,034)

(5,520,708)(510,000)

(3,935,419)(1,707,991)

3%

Contingency (21)

(5,269,498)

6%


(9,838,548)

2.5%


Financing Costs

(3,875,088)

(278,987,615)




(4,717,681)

(16,511,882)

3.0%

TOTAL PROJECT COSTS

(2,329,079)

(302,546,256)




FEASIBILITY GAP (25) (1)$ (5,294,917)$



(12) Residual land value is the amount of $ the developer is willing to pay for the land after receiving the project profit. (13) % construction costs for grading(14 ) based on market research for tilt-up concrete construction(15) assumes surface parking costs = $3000/stall

(18) impact, transportation improvement, and building permit fees as indicated in Development Impact Fee Worksheet(19) % of land value taxed each year developer has ownership of land; assumes 2 years(20) % of development costs charged to cover developer overhead(21) % construction costs to buffer against unexpected increases in costs

(23) lent money developer acquires from a bank or other lending institution; the fees and interest costs are also financed(24) as determined in the market survey for vacant land with similar zoning

(22) borrowed money from joint equity investors; require returns through a higher 'preferred' rate and profit sharing with

(25) the difference between the current land selling price and the residual land value (i.e. what the developer is willing to pay for the land)


(16) street construction costs estimated by linear mile ($750,000/LM). Assumes 20 ft wide intersite allys--not public streets such as C, D, E and River Street, master plan notes st construction at will of owner, public st. imporvements included in Common (17) additional infrastructure capacity enhancement costs as indicated by Initial Estimate of Common Area Improvement and Master Plan Costs worksheet, includes levee construction, highway widening etc.

38

Fillmore Business Park-Scenario Three


Parcel(s) Size 86.54 3,769,585 Total Open Space (1) 1,319,355 Total Uncovered Surface Parking (1) Total Buildable Footprint (1) 1,206,267 Zoning (2) BP1/BP2


DEVELOPMENT PROGRAM






# spaces square ftbelow grade parking 0 - above grade podium parking 1732 588,880 above grade uncovered surface parking 1955 664,700



FAR 0.3819



Office (8)Office square footage (6) 390,517Lease Rate (7) $2.00Revenue Periods/year 12Gross Annual Income 9,372,409Less Vacancy 5% (468,620) Less Operating Expenses 10% (937,241) Net Operating Income 7,966,548 Capitalized Value cap rate 6.20% 128,492,710



39

PROJECT COSTS


0(134,575)

(6,653,435)




Demolition Costs (% of land value) 5%Site Development Costs (see note 13) $2Retail / Office Construction Costs $/sf (see note 14) $85Light Industrial Space Construction Costs $/sf (see note 14

(1,866,735)(7,539,170)

(47,286,059)) $75

Parking Construction (see note 15)Private Street Construction (see note 16) $750,000Common Area Infrastructure enhancement costs (see note 17)


Developer Fee (20)

(66,246,122)(35,309,000)(1,793,766)(6,295,034)

(5,520,708)(510,000)

(3,992,061)(821,363)

3%

Contingency (21)

(5,315,401)

6%


(9,980,153)

2.5%


Financing Costs

(3,956,177)

(240,579,457)




(4,068,199)

(14,238,695)

3.0%

TOTAL PROJECT COSTS

(1,120,041)

(260,006,392)




FEASIBILITY GAP (25) (12)$ (45,596,172)$



(12) Residual land value is the amount of $ the developer is willing to pay for the land after receiving the project profit. (13) % construction costs for grading(14 ) based on market research for tilt-up concrete construction(15) assumes surface parking costs = $3000/stall, $17000/podium space

(18 )impact fees, transportation improvement fees, and building permit fees as indicated in Development Impact Fee Worksh(19) % of land value taxed each year developer has ownership of land; assumes 2 years(20) % of development costs charged to cover developer overhead(21) % construction costs to buffer against unexpected increases in costs

(23) lent money developer acquires from a bank or other lending institution; the fees and interest costs are also financed(24) as determined in the market survey for vacant land with similar zoning

(22) borrowed money from joint equity investors; require returns through a higher 'preferred' rate and profit sharing with developer

25) the difference between the current land selling price and the residual land value (i.e. what the developer is willing to


(16) street construction costs estimated by linear mile ($750,000/LM). Assumes 20 ft wide private thoroughfares--not public streets such as C, D, E and River Street, master plan notes st construction at will of owner, public st. imporvements included in C(17) additional infrastructure capacity enhancement costs as indicated by Initial Estimate of Common Area Improvement and Master Plan Costs worksheet, includes levee construction, highway widening etc.

(

40

Appendix C: “Green Business Park” Case Studies Port of Bremerton, Washington Kitsap Sustainable Energy and Economic Development (SEED) Project Developers: Sustainable Solutions, Mithum Architects Site Statistics

• Acreage: 75-Acres • Land Uses: Office, R&D • Project Financing: Port of Bremerton donated the land, other public funds and grants cover the

development, including grants from the USDA Rural Development Initiative and the Washington State DOE

Under construction with groundbreaking scheduled for spring 2008, the SEED business park is dedicated to development and management of alternative-energy companies and is expected to provide 1,200 jobs. The sustainable high-technology business park is planned to minimize impacts to natural, energy and infrastructure resources.

www.kitsapseed.com

South Cheshire, England

Crewe Green Business Park Developers: Brownstones Urban Regeneration Ltd, Saviller, HarrisLamb

Site Statistics

• Size: over 200,000 SF • Land Uses: Office • Project Financing: Private

This office park in England features naturally ventilated buildings and natural daylight offices. There are dedicated cycle routes accented with native landscaping.

http://www.crewegreen.com/crewe_green.html

41

San Diego, California Ridgehaven Green Office Building Developers: Platt/Whitelaw Architects, Lynn Froeschle, McParlane & Associates, Turpin & Rattan Engineerinh, Gottfried Technology Site Statistics

• Size: 73,020 SF • Land Uses: Office • Project Financing: City of San Diego The San Diego Environmental Services Department built two identical office buildings and designed one of them, the Ridgehaven building, to be “green” through efficient energy designs and building materials. Ridgehaven uses 65 percent less total energy than its counterpart and saves on average $1 per square foot in energy savings annually.

http://www.sandiego.gov/environmental-services/geninfo/ridgehaven/index.shtml Torrance, California Toyota Motor Sales, South Campus Office Developers: Turner Construction, LPA Inc., Glumac International, CTG Energetics Site Statistics

• Size: 624,000 SF • Land Uses: Office, R&D • Project Financing: Toyota Corp. This corporate headquarters is said to “run like a Prius” with an emphasis on long-term energy savings. The extensive solar panel rooftop is expected to pay for itself within seven years, and with California Edison and the California Public Utilities Commission’s incentive programs, 50 percent of installation costs were covered. In 2003, the building was contructed with tilt-up concrete to reduce costs; these savings were subsequently invested into insulation and energy efficient ventilation. Tilt-up concrete waste from construction was recycled into surface paving.

http://www.usgbc.org/ShowFile.aspx?DocumentID=3382

42

Appendix D: Master Site Plan (Scenario One) Development Assumptions Detail Provided by Rincon Consultants

Fillmore Business Park Master Plan Development Assumptions

June 2007 The following assumptions are utilized in the Environmental Impact Report. Please note that in determining square footage for each of the parcels, the Assessor’s Parcel Maps were utilized, as these are legal descriptions of the land and associated acreages. Applicant KDF Communities Address 1301 Dove Street, Suite 720 Newport Beach, CA 92660 Contact Rod MacDonald email [email protected] phone

Parcel 1 - KDF Communities

Building Footprint (square feet)

Mezzanine Stories Use

1 23,985 1,000 1 Business Park 2 43,955 1,000 1 Business Park 3 24,642 1,000 1 Business Park 4 32,560 1,000 1 Business Park 5 21,202 1,000 1 Business Park 6 40,475 1,000 1 Business Park 7 39,844 0 1 Business Park

8 (a-d) 38,325 0 1 Business Park 9 (a-d) 36,540 0 1 Business Park

10 (a-d) 34,311 0 1 Business Park 11 34,110 0 1 Business Park

12 (a-c) 18,772 0 1 Business Park 13 (a-b) 13,234 0 1 Business Park

15 7,260 0 1 Business Park 16 6,600 0 1 Business Park 17 8,620 0 1 Business Park 18 6,240 0 1 Business Park 19 4,992 0 1 Business Park 20 9,176 0 1 Business Park

Subtotal 444,843 6,000 Total SF 450,843

APN 046-0-050-120, total site area = 31.79 acres. Acreage assumes that WRP is broken out as a separate parcel of 12 acres. Acreage of record for this site is actually 43.79 acres including the WRP site. Business Park is 20-30% office and 70-80% industrial according to ITE

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Applicant KDF Communities Address 1301 Dove Street, Suite 720 Newport Beach, CA 92660 Contact Rod MacDonald email [email protected] phone

Parcel 3 - The Coe Piece


Stories Use

1 19,523 1 Business Park 2 19,176 1 Business Park 3 26,788 1 Business Park 4 15,855 1 Business Park 5 15,564 1 Business Park 6 21,626 1 Business Park 7 11,267 1 Business Park 8 10,277 1 Business Park 9 8,517 1 Business Park 10 13,577 1 Business Park 11 8,000 1 Business Park

Total 170,170 APN 046-0-060-110 10.52 acres Business Park is 20-30% office and 70-80% industrial according to ITE

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Applicant Sespe Creek Properties, LLC Address 1253 Coast Village Road, Suite 105 Santa Barbara, CA 93108 Contact Jack Maxwell email [email protected] phone

Parcel 2 - Sespe Creek Properties


Mezzanine or Second Story

Stories Use

1 25,875 25,875 2 office 2 20,100 3,500 1 Business Park 3 28,800 6,000 1 Business Park 4 20,000 20,000 2 office

5a 16,256 0 1 industrial 5b 16,256 0 1 industrial 6 47,424 7,488 1 Business Park 7 62,976 9,600 1 manufacturing /

warehouse 8a 15,016 0 1 industrial 8b 15,016 0 1 industrial

Subtotal 267,719 72,463 Total 340,182

APN 046-0-060-010 9.79 acres APN 046-0-060-020 10.57 acres 20.36 acres

Buildings were assigned numbers from site plan going clockwise from upper left corner. Business Park is 20-30% office and 70-80% industrial according to ITE

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Applicant No application pending –Phase II Address Contact email phone

Parcel 4 & 5

D Street & HWY 126 Eastern Parcel


Stories Use

1 75,076 1 Business Park Total 75,076

APN 052-0-160-040 0.59 acres APN 052-0-160-050 3.24 acres 3.83 acres Not based on any specific plans, no application at this time, preliminary assumptions are based on a maximum FAR of 0.45. Business Park is 20-30% office and 70-80% industrial according to ITE

46

Applicant Epic Group Address Contact Bill Kendall email [email protected] phone

Parcel 6 - Self Storage



Stories Use

1 92,191 0 1 Self-Storage 2 25,828 0 1 Industrial

Total 118,019 0 APN 052-0-160-080 6.36 acres

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Applicant Address Contact Ken Karasiuk email [email protected] phone

Parcel 7 – The Stop at Fillmore



Stories Use

1 3,000 0 1 Restaurant 2 4,500 0 1 Bank 3 3,500 0 1 Retail 4 17,000 0 1 Retail 5 6,200 0 1 Retail/Restaurant 6 18,000 0 1 Office 7 15,500 0 1 Office 8 12,000 12,000 2 Retail 9 12,600 12,600 2 Bank 10 9,700 0 1 Retail/Restaurant

Subtotal 102,000 24,600 Total 126,600

APN 052-0-160-010 8.35 acres Buildings were assigned numbers from site plan going clockwise from upper left corner, starting with Restaurant Pad B..

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Applicant No application pending Address Contact email phone

Parcel 7 b

Situated within parcel 7 at C Street

Building Area (square feet) Stories Use 1 5,685 1 Business Park

Total 5,685 APN 052-0-160-070 0.29 acres Not based on any specific plans, no application at this time, preliminary assumptions are based on a maximum FAR of 0.45. Business Park is 20-30% office and 70-80% industrial according to ITE

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Applicant No application pending Address Contact email phone

Parcel 8

E Street at River Street Southern Parcel


Stories Use

1 19,602 1 Business Park Total 19,602

APN 046-0-060-600 1 acre Not based on any specific plans, no application at this time, preliminary assumptions are based on a maximum FAR of 0.50. Uses were arbitrarily assigned based on compatibility with proposed surrounding development. Business Park is 20-30% office and 70-80% industrial according to ITE

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Applicant City of Fillmore Address 250 Central Avenue Fillmore, California 93015 Contact Bill Bartels email [email protected] phone 805-524-3701

Parcel 9

Water Reclamation Plant

Development SF not detailed in this analysis

Environmental impacts already analyzed in a previous EIR

12 acres in the southwest corner of the Master Plan Area

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Documents

Economic Feasibility Analysis - Compass · PDF fileTable of Contents Executive Summary ... Economic Feasibility Analysis ... This document reports on the financial feasibility of a