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MEMORANDUM Date: December 11, 2020 To: Mayor and City Council From: Nelson Fialho, City Manager Brian Dolan, Assistant City Manager Ellen Clark, Director of Community Development Subject: P19-0128/P19-0129 Public Storage: Supplemental Information Regarding Project Valuation Methodology The December 15, 2020 City Council Agenda Report provided a summary evaluation of the estimated value of the requested increase in Floor Area Ratio for the Public Storage Project, as a means for the City Council to more effectively evaluate the appropriate level of community benefits to be provided by the project. This memorandum provides additional information on the methodology and assumptions used to develop the estimate. Attachment 1 summarizes the calculation and specific factors applied, in a spreadsheet format.1 It is noted and acknowledged that there is considerable room for a different valuation to be calculated, simply by adjusting one or more of the inputs in the model. However, staff believes that the valuation reflects a fair and reasonable estimate, incorporating the insight and advice of a consultant, Economic & Planning Systems (EPS) experienced in conducting similar analyses, and selecting inputs that reflect widely available industry-standard factors and data, and incorporating local- and project-specific data wherever possible. Summary of Methodology In very simple terms, the basis for the calculation is an assessment of the value of the property’s additional square footage, minus the cost to construct that same square footage. The difference between those two values indicates the potential contribution of the new square footage to the site’s land value. Increases to land value that result from governmental actions, the additional square footage achieved with the FAR increase in this case, is a well-accepted measure of the “windfall” that accrues to the land owner. The value of the property is established as its “net present value.” Net present value is a relatively standard methodology used to calculate the value, today, of a property based on the future stream of revenue or income it produces. It is useful in real estate transactions and in investment decisions, where the current sales price of a property must be set or the value established based on assumptions about future income. The net present value is shown in Attachment 1 as the “building valuation.” 1 The calculation has been updated to reflect the revised project; this minor change in square footage (minus 153 sq. ft.) does not significantly affect the valuation. DocuSign Envelope ID: E4D0AD6B-3F79-48DA-8B5E-017EB2A6132F