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Critical Factors in Mixed-use Development

Critical Factors in Mixed-use Development. NPH Conference, October 7, 2003 Libby Seifel, Seifel Consulting Rick Jacobus, LISC Oz Erickson, Emerald Fund Michael Covarrubias, TMG Partners . Presentation Overview. Introduction Overview of Mixed Use Development

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Critical Factors in Mixed-use Development

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  1. Critical Factors in Mixed-use Development NPH Conference, October 7, 2003 Libby Seifel, Seifel Consulting Rick Jacobus, LISC Oz Erickson, Emerald Fund Michael Covarrubias, TMG Partners

  2. Presentation Overview • Introduction • Overview of Mixed Use Development • Key Differences between Mixed Use and Housing (only) Development • Case Study Presentations • Leasing and Market Considerations • Financial Feasibility

  3. Mixed Use Development • Mixed-use (MXD) definition: More than one land use that generates project revenues integrated into a single development • Alternative Configurations-Vertically integrated (Stacked)-Horizontally integrated (Side by Side)

  4. MXD Versus Housing? • Significant advanced planning and analysis needed to make sure that uses are well coordinated • Underwriting standards different • Construction/financing/lease-up of all uses most be coordinated in order for MXD to be financially viable • Pre-leasing more critical for MXD

  5. Key Questions to Ask Up Front-Key Trade Offs • What uses will be viable once development is ready for occupancy? • What are the cost trade-offs for vertical vs. horizontal integration? • Are there any tenants who can become anchors? • How can you enhance viability of each use given constraints?

  6. Key Questions to Ask Up Front- Parking • What are the parking requirements (# spaces, access, safety issues)? • If parking is underneath other uses, what happens to column spacing? • Where will parking be located (above, below, partially below grade)? • How do you accommodate ceiling height preferences-retail vs. parking?

  7. Capacity Assessment • Project Management • Construction Management • Financing/Loan Negotiation • Project /Partnership Accounting • Asset Management • Strategic Planning • Leasing/Lease Negotiation • Small Business Tenant Support • Market Analysis Resource: http://www.cdexchange.org/Commercial

  8. Strategic Planner Development Consultant Market Analyst Transportation Planner Architect/Urban Designer Financial Consultant Tax Attorney Realtor/Leasing Agent Insurance Agent Environmental Consultant Historic Preservation Real Estate Attorney General Contractor Property Management Company PR/Marketing Consultant Small Business Technical Assistance Consultants

  9. Case Studies • Vertically IntegratedPetrini Place, San Francisco, Emerald Fund Ocean View, San Francisco, Emerald Fund • Horizontally IntegratedEmery Bay, Emeryville, TMG Partners

  10. Case Study Questions • Why did you decide to do a mixed-use project on this site? • How did you decide how much non-housing space to include in the project? • Did you use the same architect for all elements of the project? • What was initial concept for the commercial space (ideal tenants, etc)? • How did that concept change over time?

  11. Powell Street Plaza 185,000 sq.ft. Retail $20 million Bay Center Apartments Phase 1 424 units $30 million Phase 2 260 units $22 million Market Place 325,000 sq.ft. including 10 screen movie theater $45 million Bay Center Offices 325,000 sq.ft. $50 million Emery Bay, Emeryville

  12. Ocean View Village • 370 residential units (5 phases) • All intended for ownership ($380,000) • 97,000 SqFt retail • Grocery 47,000 SqFt • Drug Store 11,225 SqFt • Restaurant 4,000 SqFt • Gym 25,000 SqFt • Office 1537 SqFt • $110 million development cost

  13. Market Analysis Place DemandSupply What are the physical assets and constraints of the site? Is there consumer ability/willingness to purchase goods and services? Are there unmet community needs? What is the supply of businesses and real estate in the district? What is the supply of businesses and real estate in competitive districts?

  14. Place Methods for Understanding Place • Walking survey • Regulatory research • Parking and accessibility survey

  15. Demand Methods for Understanding Demand • Demographic analysis • Consumer and merchant surveys • Leakage analysis

  16. Supply Methods for Understanding Supply • Business inventory • Business cluster analysis • Competitive supply analysis • Retail real estate inventory • Pipeline projects

  17. Site Requirements GLA Minimum frontage Lot square footage Parking Co-tenants Traffic averages Freeway access Locational Criteria Population density Household density Demographics – including education, lifestyle types, etc. Retailer Requirements

  18. Retailer Requirements Methods for Understanding Tenant Criteria • Retailer interviews • Published requirements

  19. DIY Market Analysis • Review existing market studies • Business inventory – published data and walking tour • Business cluster analysis (can be qualitative) • Merchant survey • Resident and employee surveys Resource: http://www.cdexchange.org/MarketMatrix

  20. Data Sources • U.S. Census - www.census.gov • ESRI – www.esribis.com • Claritas – www.claritas.com • Dun and Bradstreet – www.dnb.com or www.zapdata.com • Trade Dimensions – www.tradedimensions.com • Urban Land Institute – www.uli.org

  21. Case Study-Market Considerations • Did the specific project configuration you ultimately selected require changes in development team or staffing? • Did you do any market analysis prior to committing to the project • Who was responsible for commercial leasing? • Did potential tenants have concerns about the design of the project? • Who handled tenant improvements?

  22. Case Study-Financing Considerations • What were your financing sources? • To what extent did you separate the uses financially? • To what extent was pre-leasing necessary for financing the commercial space? • To what extent, if any, did the selection of specific commercial tenants drive the financing of the project?

  23. DEBT Senior Debt Bank Insurance Company Tax Exempt Bonds Subordinate Debt Community Development Lenders Foundation Program Related Investments EQUITY Traditional Equity Private Partner Tax Credit Equity Historic Tax Credits New Markets Tax Credits Deferred Developer Fees Nonprofit Mixed-Use ProjectsTypes of Financing

  24. SOFT DEBT Deferred Payment/ Residual Receipts Loans Redevelopment Agencies Section 108 Loans GRANTS Federal Grants Dept. of Commerce, Economic Development Administration HHS, Office of Community Services HUD Economic Development Initiative CDBG Foundation Grants Capital Campaigns Nonprofit Mixed-Use ProjectsTypes of Financing

  25. Loan sources Grant sources Equity sources Public Agencies Private Investors Community Development Lenders Financing Sources Directory Resource: http://www.cdexchange.org/FinancingSources

  26. Questions/Comments? Feel free to contact us: Libby Seifel – Libby@seifel.com Rick Jacobus - Rjacobus@liscnet.org

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