SUPPLEMENTAL MATERIAL - Laserfiche WebLink

Memorandum May29,20.14 EPSP Economic Feasibility Analysis Page 4 • Optimized Land Values: Reflects a 5 to 10 percent increase.in residual land values that might be achievable by optimizing the product mix and densities. The developer is currently evaluating architectural options and the relationship between achieving higher land values on a per unit basis and potential adverse effects on absorption.4 , • Cumulative Effect Reflects a combination of the accelerated absorption with optimized land values. This is the most optimistic outcome out of those tested in this analysis. • Cumulative Effect with no CFD: Given uncertainty about the use of the CFD as a funding source for the Project, this sensitivity tests the cumulative effect of the sensitivity above with no CFD bond proceeds assumed available to the Project. The availability and amount of CFD funding will depend on future policy and market conditions which cannot be predicted with certainty at this time. Key Findings The economic performance of each alternative, given the sensitivities described above, is summarized in Table 1 and described below. • Baseline Findings: As shown, ail of the tested alternatives are unlikely to be economically feasible as a private real estate investment assuming the EPSP area is subject to the City's Growth Management Ordinance at an allocation of 100 units per year. • On-site Affordable Housing: Inclusion of 50 affordable units on site further reduces the Project's feasibility. This is because accommodation of the affordable requirement through \ the provision of single-family units is more costly than even the high end of the tested affordable housing fee. This development alternative reduces the return by approximately 150 to 250 basis points. • Accelerated Absorption: Residential absorption, whether limited by market or City policy, represents the single most important determinant to project performance among the sensitivities evaluated. The 1,300 single-family-unit alternative would appear to be economically feasible:.if the-Growth Management Ordinance allows'an allocation of 200 to 250 units per year for this Project. However, despite this improvement, other development • alternatives tested in this:analysis remain'infeasibie even with accelerated absorption. • Optimized Land Values: Development feasibility can be significantly improved assuming increased residual land values can be achieved through the optimization of the product offerings. However this improvement alone is not likely to be sufficient incentive to the development of any tested alternatives. Based on the financial analysis, the 7.5 percent land value increase improves the return by approximately 200 basis points.'It is worth noting that EPS has not evaluated how or if residual land value appreciation can be achieved. 4EPSP developers report that higher values would likely require a higher percentage of 3 story homes than currently called for in the`Draft EPSP. EPS has not evaluated this product type in detail. e.V1100W]tD➢06a✓IeumOfnlCorreslul090_r_052914.d ce