downtown case study: hypothetical new construction fresno … · 2016-12-19 · fresno general plan...

Fresno General Plan Implementation / Infill Development Task Force 1

Downtown Case Study: Hypothetical New Construction

Fresno Street & H Street – “Kidney Bean Plaza”

The “Kidney Bean Lot” at Fresno Street & H Street, outlined in red. There are over 4,000 parking stalls (in

blue) in the immediate vicinity of Fulton Mall (in brown).

Note: This case study is for discussion purposes only. This particular parcel was chosen for this case study because it presents several challenges and

opportunities common to infill projects in Fresno (and elsewhere in California), including:

It is an RDA-owned parcel that does not yet have a disposition plan.

It requires significant infrastructure investment – In this case, reconstruction of the intersection

at H Street and Fresno Street.

Existing utilities and infrastructure are likely insufficient to serve the proposed increased

intensity.

It is within one block of the future High Speed Rail station, and within walking distance of a

number of amenities, including the Cultural Arts District, Chukchansi Park, Civic Center, and

Mariposa Plaza and the Fulton Mall.

Description Fresno’s Successor Agency to the former Redevelopment Agency (dissolved in 2011) retains ownership

of the parcel at Fresno Street and H Street in Downtown Fresno (outlined above, in red). This parcel is

known locally as the “Kidney Bean Lot” because of its rounded lot lines (which are a vestige of the

1960’s revitalization plan by Victor Gruen that also resulted in the “pedestrian-ization” of Fulton Street).

The parcel is currently used as surface parking. It is across the street from the future High Speed Rail

station, which will be located across H Street at Mariposa. A Phase 1 environmental was completed in

July 2013, and no significant environmental issues were found. The Successor Agency will be soliciting an

RFP for “Transit Oriented Development” for the site in late 2013.


Lot Specifications This case study assumes a reconstructed lot with squared corners, per the specifications in the

drawing below.

With a reconstructed intersection at H Street and Fresno, the square lot would be about 145’ x

323’ – about 1.1 acres (~46,800 sf). The existing parcel is 1.36 acres, about 175’ x 320’.

Zoning The Fulton Corridor Specific Plan (which is expected to go before City Council for adoption in March,

2013) identifies a Central Business District-1 Zone for this parcel. This zone is characterized by:

Active streetscapes

Solid massing on the lower floors to generate a consistent street wall

Ground floor commercial, retail, and office activity to support active streetscapes and walking

Flexible use of upper floors and the floor area behind shopfronts for a wide variety of office,

civic, lodging, housing, or additional commercial uses

New buildings are block-scale and between 2 and 15 stories

Site view looking West from the intersection of Fresno and Broadway Streets


Site view looking east from H Street

Proposed Project The case study envisions 65 units of market-rate housing and 10,000 sf of ground-floor retail. The pro

forma assumes no public subsidy in order to illustrate the financing gap.

Financials LAND: The former Redevelopment Agency paid $473,300 for the property (including acquisition

and relocation costs) in 1967. The lot has not been appraised recently, but other nearby parking

lots were appraised late last year at about $10.00 per square foot. At that rate, the lot would be

valued at around $468,000.

INFRASTRUCTURE: The City estimates the cost of reconstructing the intersection at Fresno and

H Street, including regrading and reconstructing the adjacent underpass on the other side of H

Street, to be about $4 million. The City is currently in conversation with the CA High Speed Rail

Authority regarding inclusion of these costs in the construction budget for High Speed Rail.

For the purposes of this exercise, the portion of the work specifically related to the Kidney Bean

Lot is estimated at 10% of that total, or $400,000.

NEW CONSTRUCTION: Construction cost is estimated at $30,210,000 – about $90/sf for

commercial and residential components combined.

TOTAL DEVELOPMENT COST: $31,083,000

EQUITY: Case study assumes 20% equity.

RETURNS: Because of the large debt service required without subsidy (80% TDC), return on total

assets is between 2% and 3% for the first 10 years. Return on equity is negative.


Downtown Area Assets. “Kidney Bean Lot” is circled in red.

SHAGUE

Rectangle

Downtown Area Assets. Hotel Fresno site is circled in red.

46506204T

46840001T

46505219T

46606444T

46510220T

46828444T

46511218T

46612101T

46608401T

46621520T

46828445T

46821617T

46821219T

45932315T

46504033ST

46704020ST

46828443T

46703035ST

46835049T

46835047T

46706508T

46609305T

46620650T

46621417T

46609305T

46609409T

46614501

46835015T

46615419T

46621330T

46821220T

46825515T

46614403

46620654T

46835055T

46829113T

46828223T

46822320T

46707316T

46825511T

46621113T

46614504

46704023ST

4661450846614505

46825311T

46708116T

46707410T

46822216T

46614502

45908235T

46819214T

46614503

46707307T

46621325T

46609301T

46828221T

46621213T

46707103T

46818225T

46614507

46822319T

46708327T

46707306T

46822301T

46707405T46707406T

46825315T

45825029T45825033T45825021T

45825031T

46621115T46835046T

46818228T46818223T

46828205

46515107T

46618101T

46828222T

46707105T

46621417T

45230618T

45908129T

45230319T

46513313T

46513211T

46818206T

46828434T

46621417T 46621118T

46509326T

46509317T

H

G

E

M

F

A

O

P

C

R

FRESNO

OLIVE

TULARE

VAN NESS

180

99

U

Q

BELMONT

ABBY

KERN

L

B

FULTON

VENTURA

PALM

CHINA

TUOLUMNE

-

T

S

41

INYO

N

MODO

C

BROADWAY

STANISLAUS

PLUM

AS

MCKENZIE

TRIN

ITY

MONO

PARK

SAN

PABL

O

EFFI

E

BLAC

KSTO

NE

FARR

IS

DIAN

A

CALA

VERA

S

MAYOR

CLAR

K

POTTLE

DENNETT

CALIFORNIA

HAMMOND

GLEN

N

SANTA FEWI

LSON

LEWIS

WHITE

CLAY

KLETTE

POPL

AR

A/B

HARR

ISON

KEARNEY

COLL

EGE

FAGAN

ILLINOIS

NEVADA

BRALY

TYLER

IRWIN

MARI

POSA

GOLDEN STATE

ANNA

MARY

VALE

RIA

OLEANDER

WATERMAN

ABBY

/EFF

IE

JONES

FRANKLIN

ROOS

EVEL

T

AMADOR

HAWES

DIAN

A/EF

FIE

SAFF

ORD

SARA

H

FRONTAGE

GRANT

WAYT

E

BREMER

ANGU

S

CHER

RY

LOS ANGELES

ONEIL

S TE P

HENS

MARTIN

THES

TA

CLAR

K/DI

ANA

FERG

ER

SAN BENITO

ELIZABETH

D

YOSE

MITE

FERN

B/C

LEMON

MADISON

WOODWARD

ECHO

DUDLEY

EL DORADO

AUGU

STA

EDEN

HAMILTON

TOPEKA

WISH

ON

FRES

NO/U

GLEN

N/SA

N PA

BLO

HARVEY

PICKF

ORD

POPL

AR/S

AN PA

BLO

COLLINS

MERCED

MADDY

STROTHER

VOORMAN

ENGLEWOOD

THOMAS

99/C

WASHINGTON

CAPITOL

HOME RUN

MARI

POSA

/U

COLL

EGE/

VAN

NESS

BLAC

KSTO

NE/C

ALAV

ERAS

ARROYO

DUNN

SNOW

SANTA CLARA

CLAR

K/VA

LERI

A

HUNTINGTON

FULT

ON/VA

N NE

SSGRANT/MADISON

DELP

HIA

THES

TA/VA

LERI

A

LA S IER RA

SAN JOAQUIN

SACRAMENTO

LA SALLE

CALA

VERA

S/GL

ENN

WEBSTER

DIVISADERO

MARO

A

LINDE

N

WHITES BRIDGE

FERG

ER/PA

LM

PRIVATE

FULT

ON/Y

OSEM

ITE

HERW

ALDT

GRANT/WASHINGTON

KASHIAN

ALHAMBRA

IVY

BELMONT/WHITE

PATTERSON

MONTEREY

HOW

ARD

DEL M

AR

DIAM

OND

LUCE

RNE

PARALLEL

BUTLER

LEE

BROA

DWAY

/YOS

E MIT

E

MILDREDA

WEBER

DOON

HEATON

MAIN

COLL

EGE/

PARK

LILY

MYERS

COBB

KLONDIKE

MAUD

ECHO

/ROO

SEVE

LT

THOMAS/WHITE

SMITH

FRES

NO/H

OWAR

D

CLA R

A

HARVEY/THOMAS

T OWNSEND

POPP

Y

LOTU

S

EUNI

CE

ANGU

S/DIA

MOND

DIAM

OND/

MARI

POSA

PARK/POPLAR

BREMER/ELIZABETH

KERN

L

180

PRIVATE

POPL

AR

PRIVA

TE

B

O

ROOS

EVEL

T

LOS ANGELES

CALIFORNIA

BELMONT/WHITE

HARVEY

WHITE

MARIPOSA

MERCED

C

MONO

ANGU

S-

GRANT

DIVISADERO

41

EFFI

E

CLAR

K

TYLER

ALHAMBRA

F

N

COLL

EGE

L

TYLER

VOORMAN

CALIFORNIA

THES

TA

FRONTAGE

SAFF

ORD

MERCED

CLAR

K

DIAM

OND

PARK

FULT

ON/VA

N NE

SSFRANKLIN

AUGU

STA

MILDREDA

EFFI

E

SAN BENITO

CALAVERAS

WHITE

PATTERSON

CALIFORNIA

CALA

VERA

S

MARI

POSA

ALHAMBRA

ELIZABETH

THOMAS

SANTA CLARA

NEVADA

POPL

AR

VOORMAN

POPL

AR

MARIPOSA

THES

TA

EL DORADO

GOLDEN STATE

MONO

GRANT

ENGLEWOOD

MERCED

PLUMAS

-

ECHO

CHER

RY

INYO

FERG

ER

-

WHITE

99

LA SALLE

41

BROADWAY

FAGAN

GRANT

LA SIERRA

GLEN

N

SAN

PABL

O

PR IVATE

MONO

WEBSTER

THES

TA

AMADOR

E

MARIPOSA

CHINA

L

LEWIS

MARIPOSA

DUDLEY

N

ILLINOIS

F

MARIPOSA

BREMER

CLAY

SANTA CLARA

FRONTAGE

YOSE

MITE

HAMMOND

BREMER

MONTEREY

PRIVA

TE

ECHO

FRANKLIN

MILDREDA

ROOS

EVEL

T

YOSE

MITE

WEBSTER

WILS

ON

FERG

ER

SAN BENITO

FULTON

GLEN

N

INYO

PRIVA

TE

DIAN

A

SAN JOAQUIN

SAN JOAQUIN

CLAR

K

CLAY

FERG

ER

BROADWAY

INYO

COLL

EGE

MARI

POSA

ECHO

WHITE

P

THOMAS

FULTON

-

1 80

WHITE

ROOS

EVEL

T

MARIPOSA

COLLINSMONO

DIAN

A

GLEN

N

FAGAN

YOSE

MITE

41

EL DORADO

DIVISADERO

City Of FresnoRedevelopment Agency

City Of Fresno And RDA Owned Properties

ASSUMPTIONS BUILDING-WIDE ASSUMPTIONS PercentOp. Cost Inc./Year 2.00%Reserves Inc./Year 3.00%

RESIDENTIALUnit Type # Units SF $/SF Mo. Rent Ann. Rent

Studio 20 700.00 1.15 805 193,200 RESIDENTIAL1 BR 30 850.00 1.20 1,020 367,200 ASSUMPTIONS Percent2 BR 12 1,050.00 1.15 1,208 173,880 Rent Inc./Year 2.00%3 BR 3 1,400.00 1.08 1,512 54,432 Vac. Year 1 10%

0 0 0 Vac. Year 2 5%0 0 0 Vac. Year 3 & Future 3%

TOTAL 65 788,712

Total Residentail SF 260,000

COMMERCIALDescription Leaseable SF $/SF/Mo $/SF/Year Annual Rent

10,000 1.05 12.60 126,000 COMMERCIAL0 0.00 0 ASSUMPTIONS Percent0 0.00 0 Rent Inc./Year 2.00%

Total Commercial SF 10,000 126,000 Vac. Year 1 25%Leaseable SF $/SF/Mo $/SF/Year Ten. Cont. Vac. Year 2 10%

Tenant Contributions 0 0.00 0 Vac. Year 3 & Future 5%Tenant Contributions 5,000 0.00 0 Other Income Increase 3%Tenant Contributions 0 0.00 0 Weighted Op. Exp. 3%TOTAL TENANT CONTRIBUTIONS 5,000 0 0

Total Building SF 270,000% Residential 96.30%

% Commercial 3.70%

TOTAL INCOMEResidential Income 788,712Commercial Income 126,000Tenant Contributions 0Other Income 0TOTAL INCOME 914,712

OPERATING EXPENSES (COM + RESID)

Ground Floor Retail

Kidney Bean Plaza - No Subsidy

1

Management Fee 13,000Advertise/Market 8,000Legal 2,000Administrative 6,000Utilities 5,000Trash 2,000Maintenance/Repairs 15,000Grounds 8,000Real Estate Property Tax 2,000Insurance 2,000Other 0Total Operating Expenses 63,000 6.89% Percent of RevenueReplacement Reserves 8,000Total Operating Exp. and Reserves 71,000 7.76% Percent of Revenue


2

CAPITAL BUDGET

Land AcquisitionLand Cost 468,000Site Improvements 400,000Site Grading & Preparation 5,000

Total Land Acquisition 873,000

Construction CostsConstruction Cost Per Square Foot 90Total Square Footage 270,000

24,300,000

Contingency 10% 2,430,000Permits & Impact Fees 200,000Architect & Engineer 1,100,000Legal 100,000Developer Fee 2,000,000Construction Finance Fees 80,000

Total Construction Cost 30,210,000

Total Development Cost 31,083,000

FINANCING REQUIRED% Equity invested 20%Less: Equity Invested $6,216,600Total Debt $24,866,400


3

DISCOUNTED CASH FLOW ANALYSIS - 10 Year Period

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10IncomeAnnual Rent - Residential 788,712 804,486 820,576 836,987 853,727 870,802 888,218 905,982 924,102 942,584Vacancies 91,471 47,108 29,113 29,986 30,885 31,812 32,766 33,749 34,762 35,805Residential Income Less Vacancy 697,241 757,379 791,463 807,002 822,842 838,990 855,451 872,233 889,340 906,779

Annual Rent - Commercial 126,000 128,520 131,090 133,712 136,386 139,114 141,896 144,734 147,629 150,582Vacancies 31,500 12,852 6,555 6,686 6,819 6,956 7,095 7,237 7,381 7,529Commercial Income Less Vacancy 94,500 115,668 124,536 127,027 129,567 132,158 134,802 137,498 140,248 143,053

Annual Gross Rent 914,712 942,153 970,418 999,530 1,029,516 1,060,402 1,092,214 1,124,980 1,158,730 1,193,492Effective Gross Income 791,741 815,493 839,958 865,157 891,111 917,845 945,380 973,741 1,002,954 1,033,042

ExpensesAnnual Operating Expenses 63,000 64,260 65,545 66,856 68,193 69,557 70,948 72,367 73,815 75,291Real Estate Taxes 2,000 2,060 2,122 2,185 2,251 2,319 2,388 2,460 2,534 2,610Replacement Reserves 8,000 8,240 8,487 8,742 9,004 9,274 9,552 9,839 10,134 10,438Total Operating Expenses 73,000 75,190 77,446 79,769 82,162 84,627 87,166 89,781 92,474 95,248Sale Price/Year 10Free & Clear / CFBF 718,741 740,303 762,512 785,387 808,949 833,218 858,214 883,961 910,479 937,794

Debt ServiceAnnual Debt Payment -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013

Cash Flow After Financing -667,272 -645,710 -623,501 -600,625 -577,064 -552,795 -527,799 -502,052 -475,533 -448,219

Income Tax Payment -407,673 -393,404 -378,658 -363,418 -347,667 -331,389 -314,564 -297,175 -279,202 -260,625

Cash Flow After Taxes -6,216,600 -259,599 -252,305 -244,842 -237,207 -229,396 -221,407 -213,235 -204,878 -196,332 -187,594

Return on Total Assets 2.31% 2.38% 2.45% 2.53% 2.60% 2.68% 2.76% 2.84% 2.93% 3.02%

Return on Equity -4.18% -4.06% -3.94% -3.82% -3.69% -3.56% -3.43% -3.30% -3.16% -3.02%


4

DEBT PAYMENT CALCULATIONS

Interest Rate 3.80%Term of Loan (years) 30

Total Development Cost 31,083,000Less: Equity Invested 6,216,600Total Debt 24,866,400

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Annual Payment -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013 -1,386,013Total Debt 24,866,400 24,425,310 23,967,459 23,492,210 22,998,901 22,486,847 21,955,334 21,403,624 20,830,949 20,236,512Interest Paid 944,923 928,162 910,763 892,704 873,958 854,500 834,303 813,338 791,576 768,987Amortization -441,090 -457,851 -475,249 -493,309 -512,055 -531,513 -551,710 -572,675 -594,437 -617,025


5

SALE PRICE

Estimated Sale PriceCap Rate (1st Stabilized Year) 10.00%Value (Year of Sale): 9,377,937

Book ValueTotal Development Cost 31,083,000Add: Capital Improvements 91,711Less: Depreciation 8,836,364Net Book Value: 22,338,347

Gain on SaleSelling Price 9,377,937Less: Broker, Lawyer Fees 468,897Net Selling Price: 8,909,040Less: Net Book Value 22,338,347Gain on Sale: -13,429,307

Tax PaymentGain on Sale -13,429,307Capital Gains Tax 15.00%Capital Gains Tax Payment: -2,014,396

Net Cash to SellerNet Selling Price 8,909,040Less: Mortgage Loan Balance 19,619,487Less: Capital Gains Tax Payment: -2,014,396Net Cash From Sale: -8,696,051


6

TAX PAYMENT CALCULATIONS

Calculation of Tax Payment Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Cash Flow After Financing -667,272 -645,710 -623,501 -600,625 -577,064 -552,795 -527,799 -502,052 -475,533 -448,219Add: Replacement Reserves 8,000 8,240 8,487 8,742 9,004 9,274 9,552 9,839 10,134 10,438Add: Mortgage Amortization -441,090 -457,851 -475,249 -493,309 -512,055 -531,513 -551,710 -572,675 -594,437 -617,025Less: Depreciation 883,636 883,636 883,636 883,636 883,636 883,636 883,636 883,636 883,636 883,636Taxable Income -1,101,819 -1,063,255 -1,023,401 -982,211 -939,641 -895,645 -850,173 -803,175 -754,599 -704,392Tax Rate 37.00% 37% 37% 37% 37% 37% 37% 37% 37% 37%Tax Payable: -407,673 -393,404 -378,658 -363,418 -347,667 -331,389 -314,564 -297,175 -279,202 -260,625


7

NET PRESENT VALUE CALCULATIONS

Discount Rate 12.00%

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Total CFAT for Each Year

-252,305 -252,305 -244,842 -237,207 -229,396 -221,407 -213,235 -204,878 -196,332 -8,883,645

Discount Factor (Discount Rate =12%)0.892857143 0.797193878 0.711780248 0.635518078 0.567426856 0.506631121 0.452349215 0.403883228 0.360610025 0.321973237

PV of Each Cash Flow-225,273 -201,136 -174,274 -150,749 -130,166 -112,171 -96,457 -82,747 -70,799 -2,860,296

NPVSum of All PVs: -4,104,068Less: Equity Invested 6,216,600NPV: -10,320,668


8

downtown case study: hypothetical new construction fresno … · 2016-12-19 · fresno general plan...

Documents