reinvent osborn triangle - mitweb.mit.edu/11.303/2008 projects/_reports and... · facilitate...
TRANSCRIPT
REINVENT OSBORN TRIANGLE
AI KONG, CAMILO OTALORA CASTRO, FEIFEI ZHAO, XIN ZHANG REAL ESTATE DEVELOPMENT II, MAY, 2008
CONTENTS
Executive Summary
I. Project Concept
1.1 Mission Statement
1.2 Market Overview
1.3 Community and Public Benefits
1.4 Technology Background
II. Design Proposal
2.1 Uses
2.2 Floor Plan and Circulation Organization
2.3 Design Detail
2.3.1 Hotel Anchor
2.3.2 Theater Anchor
2.3.3 Mini Lifestyle Center
2.3.4 Specially Designed Open Space
III. Project Financing
3.1 Project Phasing
3.2 Financial Result
3.3 Deal Structure
Appendix
1
Executive Summary
MIT NOVA is a comprehensive development project for a 24 acre site, known as Osborn
Triangle that is currently under‐utilized. MIT NOVA plans to revitalize the area and strengthen
the image of MIT as the world’s leading technology institution. The project will reinvent the
long and silent street front of Massachusetts Avenue and re‐energize MIT with vibrant activities.
MIT NOVA will be infused with advanced architectural design and building technologies that will
truly be an icon to be followed by the rest of the world.
The project will be divided into three phases. Upon completion, the project will consist
of 5 % of retail, 10% of hotel, 17% of office, 26% of residential, 19% of institutional facilities, 6%
of entertainment, and 17% of R&D labs, totaling 2.8 million square feet. The total development
project fetches an average residual land value of $435 million given 8% of weighted average cost
of capital and 6% of going‐out cap rate.
MIT NOVA proposes to be the development partner and will offer to sign a ground lease
with MIT for a concession period of 75 years with an additional 25 years of options to renew.
The lease amount is subject to negotiation but the current lease offering rate is $5 million per
year. At the project level, MIT NOVA will get 12% compounded equity return annually. Beyond
12%, the return will be split pari‐parssu between MIT NOVA and MIT Investment Company
based on MIT’s equity value as a result of land contribution.
MIT NOVA awaits for an exciting future.
2
I. Project Concept
1.1 Mission Statement
After accumulating 24 acres of site, currently known as Osborne Triangle, MIT NOVA will
be the re‐birth of Osborn Triangle and will not only alter the image of MIT, but alter the
important architectural and economic reputation of Cambridge with international inspirations.
MIT NOVA will be the new icon that forever captures MIT’s image as the world renowned
institution and a fabulous place for residents, faculty, students, and life science researchers.
Bounded by Massachusetts Avenue, Main Street, and Albany Street, the site is currently
occupied with parking lots and old run‐down offices with exception of a few. After the
transformation, the project will become the center of entertainment and mini life‐style center,
home of MIT institutional facilities and life‐science labs, and the place for vibrant residential
neighborhood.
MIT NOVA will achieve its goal in activating Massachusetts Avenue, Albany Street, and a
green corridor by bringing in retails and creating green spaces and gathering places, therefore
forming a triangle for pedestrian flows. Along with new development of MIT campus, offices,
and labs, the walkable quaint neighborhood will also introduce boutique retail shops and trendy
restaurants and bars. It will reinvent the site as a 24‐hour vibrant place where everyone wants
to be part of and generate much excitement for the area to increase the real estate value. Each
building within MIT NOVA will be expect the highest architectural integrity and efficiency while
embody the lasted technology display and sustainable design to showcase MIT.
1.2 Market Overview
After assessing the office, residential, R&D, hotel, and retail markets within the close
proximity of the site, we have concluded that there is enough demand for all of types of uses.
Each use will be reasonably absorbed within the projected period. In addition to the required
new academic and research facilities for this new campus, we have attempted to design MIT
NOVA to serve the needs of MIT as well as the neighborhood. So the development focus entails
the activation plans for retail, residential, and entertainment. There are a lot of needs for the
food and service retail with mid‐range prices that is consistent with the demographic
characteristic in the area. The retail market report shows the University Park, MIT, Novartis, and
3
Tech Square have the potential to increase the retail demand. Therefore, the phasing in MIT
NOVA will introduce more residents and employees to sustain the critical mass that retails need
along Massachusetts Avenue. This is why we plan to develop the retail mini‐life style center in
the second phase after the critical mass is in place.
1.3 Community and Public Benefits
The birth of MIT NOVA not only will bring great benefits to the city and generate tax
revenues through commercial properties, but also aligns with the City’s growth goal. We are
confident that MIT NOVA will satisfy or surpass City’s expectation at all levels. At the same time,
MIT NOVA would like to petition for a height relief. The two buildings that will be over the
height limit of 120 feet will be the landmark and gateway to MIT and these two buildings play an
important role in defining MIT NOVA and are the presence that certainly cannot be undermined.
Given the benefits that we will elaborate below and the reasonable planned Floor Area Ratio of
3.35, we believe that the City will allow height variance. The process will be collaborative and
iterative at best and contentious and drawn‐out at worst. It is likely in the mutual best interest
of both parties to play well together.
The City of Cambridge is not the only stakeholder, other community groups such as local
space users, advocacy groups, opens space interest groups, historical preservation societies, and
transportation groups can all affect the City’s decision. The great challenge in a large
redevelopment process is to meet with as many constituents as possible to gather input and
then to respond by crafting a master plan that acknowledges constituent concerns without
neutering our ability to create value, meet client needs and turn a profit. By being an attentive
and concerned landowner and developer, the process could be fairly straightforward and we
hope to move the process forward as quickly as possible.
In 1992, the city undertook a process to create a growth policy plan that would analyze
the previous decade of extensive development and provide a framework for managing future
growth. The documents developed objectives such as affordable housing, recreational
programming, and institution al planning. To elaborate more on the objectives, the following is
City’s main objectives and MIT NOVA echoes these objectives in our planning and development
phases.
4
Transportation – The City promotes the use of alternative mobility modes in special permit
conditions, as well as through parking and transportation demand management. MIT NOVA will
provide the City Car system through out campus to demonstrate the effectiveness of this
transportation method. Also the Urban Ring system will be located in the middle of the site to
draw people into Cambridge without personal automobile.
Housing ‐ In older industrial districts, higher density housing is appearing through conversion
and new construction. Remnant industrial uses in neighborhoods may also be converted to
residential use if the housing market remains strong. We are creating approximately 1,000 units
of housing within MIT NOVA to create critical mass and neighborhoods to satisfy the demand
from institutional, students, and residents.
Economic Development and Employment – As has been true throughout the city’s history, a
hall market of its economic health is adaptability to change. For example, the biotechnology
industry was emerging as an economic force a decade ago while today, the life sciences are
central to the Cambridge economy, largely due to the presence of Harvard, MIT, hospitals, and
research centers. Social other services in the community are well‐funded, sustained by taxes
from the private market. MIT NOVA adopts a flexible program in which it develops its research
and development Lab in phases in order to adapt the economic changes. However it’s unique
designed for R&D labs are flexibly so that it can be easily changed to adapt uses for future
economic shifts in the City. The development of MIT NOVA will increase employment in the
area thorough retail, service, entertainment, office, and R&D employees.
Urban Design ‐ City project review is helping the community scrutinize new projects on an
equitable basis with focus on traffic impacts, the urban setting, environmental context, open
space amenities, and housing issues. MIT NOVA strives to bring forth the most innovative
design to make it a focal point for City of Cambridge while creating a walkable neighborhood. It
plans for large open spaces that will benefit the public around the site.
Environment and Sustainability ‐The City has greatly increased its environmental planning and
monitoring for initiatives such as seeking LEED certification for public buildings and encouraging
it for private buildings. MIT NOVA will be a highly sustainable project where it will seek minimal
LEED Silver status for all the buildings. Many of the buildings will have creative building
technologies to save energy. There will be green roofs on many of the buildings.
5
1.4 Technology Background
MIT NOVA will incorporates some of the most exciting digital media developed here at
MIT into everyday aspects of the public realm on site to make places that respond to their users;
accommodate multiple activities; and provide stories, information and services to the people of
the city.
All of the open spaces and buildings in the MIT NOVA include free, public wireless
connectivity as well as open access to the digital systems and responsive media elements
located in MIT NOVA. Digital systems are programmable according to users’ wishes and thus
facilitate experiences at MIT NOVA.
Sample technologies include the following:
1) Green Roof
2) The Memory Walk
(Source: Zaragoza, Digital Mile)
The Memory Walk makes visible the way people travel through the site by recording pedestrians’ steps across a space. Every time a footstep falls on a digital paver, the paver emits
6
an additional increment of light. As people cross the pavement, paths of light are illuminated where people tread the most; untread areas emit no light. Thus, people become aware of the traces their movements leave upon the surface of MIT NOVA
3) The City Car
(Source: MIT Media Lab, Smart City Project)
The City Car is a stackable electric two‐passenger city vehicle. The one‐way sharable
user model is designed to be used in dense urban areas. Vehicle Stacks will be placed
throughout the city to create an urban transportation network that takes advantage of existing
infrastructure such as subway and bus lines. By placing stacks in urban spaces and key points of
convergence, the vehicle allows the citizens the flexibility to combine mass transit effectively
with individualized mobility. The stack receives incoming vehicles and electrically charges them.
Similar to luggage carts at the airport, users simply take the first fully charged vehicle at the
front of the stack. The City Car is not a replacement for personal vehicles, taxis, buses, or trucks;
it is a new vehicle type that promotes a socially responsible and more effective means of urban
mobility.
4) Urban Pixels
(Source: Zaragoza, Digital Mile)
7
The Urban Pixels delineate the edges of MIT NOVA from the rest of the city. When
viewed from the air or from the ground by pedestrians, drivers, and train passengers, this ‘light’
footprint intervention works synchronously or asynchronously to emphasize different moods or
zones in MIT NOVA. Each pixel unit includes a solar charging unit and can be programmed
wirelessly.
5) White Noise White Light
(Source: by Meejin Yu, Department of Architecture, MIT)
The pedestrians will be able to interact with the sonic field of chest high end‐emitting
fiber optic strands located around the open pedestrian spaces at MIT NOVA. The semi‐flexible
fiber optic strands, arranged in a fading grid, respond to touch and the movement of people
through the field. The bending of the fiber optic strands is used to activate a localized light
source and hidden speaker. When activated by the passerby, the strands become brighter when
bent, creating an afterglow effect in the form of a flickering wake of lights, trailing and tracing
visitors as they cross the field.
8
II. Design Proposal
2.1 Uses
Figure 2‐1: Context Map
Figure 2‐2: Site Plan
9
Figure 2‐3: Program Plan
Figure 2‐4: 3D Program Diagram
10
The targeted market for each different uses are listed below:
Uses Targeted Market
Office MIT, Life Science companies, R&D companies, Firms that service MIT and Life‐Science companies
Residential ‐ Rental
Student Housing, Life Science company employees, MIT faculties, People working in the area or close to transportation hubs, Cambridge residents
Residential ‐ Luxury MIT faculties, R&D company employees, Cambridge residents
Hotel Visitors, long‐term stay, short‐term stay, visiting professors and scholars, and business visitors
Institutional MIT R & D Labs MIT, Life Science companies and R & D companies
Retail Mid‐range restaurants and bars to serve students, faculties, residents, and office and lab employees
Of course, for a later on detailed calculation, we have taken both location parameter
and market condition into consideration and come up with the adjusted rent. Our conclusion is
that Hotel, Lab and Office have more income generating ability. Retail and Condo business is
risky as they are more sensitive to location and market situation. A detailed breakdown by use is
as follows:
Development Breakdown
R&D-Lab, 464,880 , 17%
Hotel, 265,251 , 10%
Retail, 124,467 , 5%
Office, 465,360 , 17%
Residential-Rent, 494,928 , 18%
Institutional use, 537,500 , 18%
Theatre, 168,246 , 6%
MIT museum, 34,186 , 1%
Condo-Sale, 210,392 , 8%
Office
Retail
Hotel
R&D-Lab
Residential-Rent
Institutional use
Theatre
MIT museum
Condo-Sale
Figure 2‐5: Project Development Breakdown
The development area of each function is actually decided by three factors: (1) location;
(2) market condition; (3) profitability. Based on the data provided by the financial model, we
have calculated the per square feet income generating ability by using a simple formula:
( ) ateoccupancyrsfopexsfrentk ×−= //
11
We have assigned building numbers to each potential development, making it easier for
the later project phasing. As Table below shows, the area of each function refers to the gross
area. The total development area is 2,765,210 square foot, giving a site FAR equal to 3.35.
Figure 2‐6: Building Numbers
bldg number functionarea per floor
flloor rangenumber of
floortotal area
1--1 retail 13,150 1 1 13,150 1--2 hotel lobby 17,477 1 1 17,477 1--3 retail 15,044 1 1 15,044 1--4 museum 17,093 2--3 2 34,186 1--5 cnference 22,904 2--3 2 45,808 1--6 hotel tower 4--15 12 201,966
2--1 retail 50,630 1 1 50,630 2--2 office 30,000 2--5 4 120,000 2--3 condo 15,028 6--12 7 105,196
3--1 retail 34,985 1 1 34,985 3--2 office 21,000 2--5 4 84,000 3--3 condo 15,028 6--12 7 105,196
4 theater 32,338 1--3 3 97,014 5 performing center 23,744 1--3 3 71,232 6 resi 7,590 1--12 12 91,080 7 resi 33,654 1--12 12 403,848 8 LAB 37,410 1--6 6 224,460 9 office 21,780 1--12 12 261,360 10 retail 8,022 1 1 8,022 11 lab 40,070 1--6 6 240,420 12 institutional 53,750 1--10 10 537,500 13 retail 2,636 1 1 2,636
TOTAL 2,765,210
Table 2‐1: The Total Development Area Breakdown by Use
12
2.2 Floor Plan and Circulation Organization
Figure 2‐6: Floor Plan
Figure 2‐7: Circulation Plan
For better circulation, we will make the Albany Street as a major street on the site. We
will also create a green corridor connecting the western part and eastern part of the site. The
connection with the main campus is also an important consideration. To bridge the new
campus with the old, we will use pedestrian bridges and underground corridors to make access
available in addition to the two bike lanes we will create along the railway.
13
2.3 Design Detail
Figure 2‐8: Key Places
There are five focused areas that are designed in detail. The most important anchor is
located on the northwest corner of Massachusetts Avenue and Albany Street. It is the gateway
of MIT and highly visible from both directions on Massachusetts Avenue. The structure is
consisted of a hotel, a conference center, and the new MIT museum. Another anchor is located
on the other end of the Massachusetts Avenue, which is our entertainment center consisted of a
theater and MIT’s performing art center. In between the two anchors is the mini lifestyle center,
where most of the commercial and entertainment activities happen. There is also a special
designed open space with the urban ring bus stop located on Albany Street. The office tower to
the east of the open space is a landmark of the MIT NOVA R&D and institutional facilities.
14
2.3.1 Hotel Anchor
Figure 2‐9: Hotel Anchor
Considered as the gateway of MIT, this building displays the innovative images of the
world’s leading technology institution. The design of the building embodies the latest building
technology, such as the digital lighting system and digital display technologies. We’d like this
place to be full of activities and especially attractive at night. We have street front retail on the
Massachusetts Avenue. To the south of the retail is the ground floor entrance of the new MIT
museum. The innovative design for the museum is located on the top of the retail space with a
very eye‐catching facade to showcase MIT. The museum will be a tourist center that displays
MIT’s latest inventions.
The conference center is located beside with the MIT museum to accommodate up to
1000 participants in flexible spaces that could be used for teaching or executive education when
conferences are not in session. It also has a separate entrance on the ground floor.
The hotel is located on the top of MIT museum and the conference center. The hotel
accommodates long and short term stay, visiting professor, conferences, and business visitors.
The building is terrace shaped with court yard and green roofs in order to give more sunlight to
the surrounding buildings. The latest digital technologies are applied, which makes the building
a perfect architectural icon.
15
2.3.2 Theater Anchor
Figure 2‐10: Theater Anchor
The theater and performing center of MIT together form an entertainment center
anchor at MIT NOVA. The two functions share one lobby, with public uses such as coffee shop.
The facade of the lobby is transparent; one can see the vivid activities inside when walking along
Massachusetts Avenue.
16
2.3.3 Mini Lifestyle Center
Figure 2‐11: Mini Lifestyle Center
Figure 2‐12: Mini Lifestyle Center Tenants List
17
This portion of the development is one of the most complex mixed‐use buildings on site.
On top of the one level mini life‐style center is class A office space. There are also luxury condo
units on top of the office building, creating a real 24 hour mixed‐use environment. The mini life
style center will be the focal design that will make MIT NOVA a desirable neighborhood. Tenant
selections include a variety of mid‐range restaurants, bars, clubs, coffee shops, bookstore,
convenient store to serve residents and employees working at MIT NOVA. Upon completion,
the retail area will be filled with 24‐hour activities and night life with this being the regular
hangout place for students, residents, employers, and visitors from other parts of the city. Its
architectural design will entice people shop, dine, and enjoy life because it will truly be an icon
and the center of MIT NOVA.
The list of tenants is as follows:
1.Jazz Club 2. Ruth Chris 3. Famima 4.Kinko’s 5.Papyrus 6. Panera Bread
7.Starbucks 8.PF Chang’s 9.Bar / Night Club 10.French 75 11.Barns and Noble
12.Sushi Bar 13.Spa and Hair Salon 14.Pinkberry 15.Samuel Adams 16.Sprinkles Cupcake
17.Cheesecake Factory 18.Juan Valdez 19.Chipotle 20.Au Bon Pains 21.Salad Bar
22.Convenient Store 23.Florist 24.High‐end Bar and restaurant 25.REI 26.Apple Store
27.Urban Outfitters
18
2.3.4 Specially Designed Open Space
Figure 2‐13: Specially Designed Open Space
The Urban Ring stop is located right in front of the green space so that it can transit
more people into MIT NOVA. The bus stop is specially designed with digital interactive and
display technologies. The screen can change the display according to the changes of the sound,
surrounding environment and people’s movements.
The open space is an amenity for public uses. In between the two glass pavilion cafes is
a glass structure, which can be opened up in good weather. The small open space will become a
perfect place to enjoy sunshine during lunch time. The cafes and the retail shops on the first
floor of the office building open late at night to serve students who want to grab food and relax
whiling study late at night.
19
III. Project Financing
3.1 Project Phasing
Figure 3‐1: Phasing Plan
There are three main factors that we have considered when deciding the project phasing:
(1) We tried to avoid the geographical concentration for each phase. We have identified several
uses that need to go first (e.g. institutional use) and several locations that can set up the
total project framework.
(2) We followed the build‐and‐demolish schedule. For example, we will not demolish the old
parking garage unless a substitute one has been built.
(3) We pay more attention on the project cash flow. We would prefer a stable annual cash flow
to a more fluctuated one. As per our current schedule, the project has an outward cash
flow for the first four years ranging between ‐50m to ‐170m. From year five, we will have
positive income cash flow utill the end of project life. We believe that this arrangement can
reduce the project delinquency risk.
20
As per the project phasing rules above, our phasing is as following:
1 2 3 4 5 6 7 8 9 10Office 204,000 261,360 Retail 28,194 85,615 10,658 Hotel 17,477 247,774 R&D-Lab 240,420 224,460 Residential-Rent 269,232 225,696 Institutional use 268,750 268750Theatre 168,246 MIT museum 34,186 Condo-Sale 210,392
1,106,033 1,480,273 178,904
Phase I Phase II Phase IIIYear
Table 3‐1: Project Phasing by Year and by Function
Phase I: 1,106,033 sf 40%
Phase III: 890,420 sf 32%
Phase II: 768,757 sf 28%
Phase I
Phase II
Phase III
Figure 3‐2: Project Phasing by Total Development Square Foot
21
3.2 Financial Result
The present value of total project development by using Discounted Cash Flow method
is summarized in Table 3. The number shown is the value before land cost. So basically it is the
value the developer and MIT investment company will share. As we can see, project value is
highly sensitive to WACC and going‐out cap rate change. If applying an 8.0% WACC and 6.0% cap
rate, we can have a $435m total value.
Table 3‐2: Project Present Value
3.3 Deal Structure
We have arranged the following deal structure:
(1) MIT NOVA, as a developer, will propose to sign a ground lease with MIT for a concession
period of 75 years with a 25 year renewal option. The lease amount is subject to negotiation
once the structure is approved. Our current offering is $5m per year.
(2) At project level, MIT NOVA will get 12% compounded equity return annually.
(3) Beyond 12%, the return will be split pari‐parssu between MIT NOVA and MIT investment
company based on:
(Project market equity value ‐ Committed land value) / Committed land value
In another word, we will acknowledge MIT’s contribution of land as equity and share the
upper level of return.
3503954406.5%
3904354806.0%
4304805505.5%
Going-out
Cap rate
8.5%8.0%7.5%
WACCProject Value$million
3503954406.5%
3904354806.0%
4304805505.5%
Going-out
Cap rate
8.5%8.0%7.5%
WACCProject Value$million