HomeMy WebLinkAboutWaterfront Development - Summary Report and Communications o SUMMARY REPORT
This summary report has been prepared for the Huntington Beach
Redevelopment Agency ( "Agency" ) pursuant to Section 33433 of the
California Health and Safety Code. This report sets forth certain
details of a proposed Disposition and Development Agreement
( "Agreement" ) between the Agency and Robert L. Mayer ( "Developer" )
for the development of a multi-phased commercial/residential
project including four first quality hotels, an athletic/tennis
club, a specialty retail center and a medium density residential
subdivision. The proposed project is located in the Main-Pier
Redevelopment Project Area in the City of Huntington Beach. This
report describes and specifies:
1. The cost of the proposed Agreement to the Agency, includ-
ing relocation costs, site clearance costs, infrastruc-
ture costs and the expected interest on any loans or
bonds to finance the Agreement;
2. The estimated value of the interests conveyed and leased,
determined at the highest uses permitted under the
Redevelopment Plan;
3. The purchase and lease payments to be paid by the
Developer.
This report and the proposed Agreement is made available for public
inspection prior to the approval of the Agreement.
A. SALIENT POINTS OF THE AGREEMENT
1. Developer ResRonsibilitkes
Under the proposed Agreement, the Developer agrees to ground
Lease the 20 acre commercial parcel and purchase the 24 acre
residential parcel from the Agency. The developer must
develop and construct, or cause the development and construc-
tion of, a multi-phased commercial and residential development
at a cost of at least two hundred and twenty-five million dol-
lars ($225 million) , exclusive of land value. The project
must be constructed within the prescribed time frame and must
consist of the following uses:
a) A 300 room first quality hotel to be commenced no later
than 30 months after the signing of the DDA.
b) An athletic/tennis club to be commenced no later than
1996.
r
c) A -�50 to 600 room first quality hotel to be commenced no
later than 1996.
Mr. Douglas La Belle
July 29, 1988
Page 4
o In order to insure that the hotels are developed at first
class quality standards the hotels must be built at a
cost, in 1988 dollars, of at least $100,000 per room, ex-
cluding land and infrastructure improvements.
II. Residential Land Sale
o The first residential development (indicated as A on the
map on the facing page) can only occur only after com-
mencement of construction on the second hotel and the ex-
isting motel is demolished. The second and third
residential phases can occur concurrently with the com-
mencement of the third and fourth hotels, respectively.
The boundaries for these land releases are shown as B and
C on the map.
o The residential land will be sold at $33,500 per unit,
escalated at 8% annually until the time of purchase of
each phase.
o The residential land payment will be offset by payment
for the developer's leasehold interest pertaining to both
the existing motel and mobilehome park. However, the
leasehold interest payment will be weighted dispropor-
tionately toward the later development phases as an in-
centive to encourage the developer to complete the full
scope of development within the time schedule previously
delineated. Thus, the developer's residential land pay-
ment is greater in the early phases than in the later
phases even through the existing motel must - be
eliminated. A complete schedule of payments is provided
in Appendix A.
o The developer will receive 38 .5% of the property tax
increment revenues for the 10 years following each
residential phase. In no event will this payment con-
tinue after 2009 .
III. Public Improvements/Mobilehome Park Relocation
o The Agency will incur the responsibility/costs for
relocating the existing mobilehome park residents in two
phases. The developer must advance $4 .5 million to the
Agency as needed to be used in this process . If the
developer wishes to have these residents relocated prior
to the commencement of any phase, he shall advance all
Kcy5crN_1A rstonA smoci-wes Inc.
Mr. Douglas La Belle
July 29, 1988
Page 5
funds necessary to effect such conversion. The funds
provided by the developer in excess of $4 .5 million shall
be repaid, without interest immediately upon the com-
mencement of construction of that phase.
o The Agency will reimburse the developer for rental income
lost as a result of mobilehome park residents choosing to
relocate before the commencement of the relevant phase.
The agreement will provide specific quality/management
controls to ensure that the park continues to be main-
tained at an acceptable level to discourage premature
tenant relocation.
o The Agency will incur the costs associated with the
Walnut Avenue extension, the spur street serving the
project from Pacific Coast Highway, and the reabandonment
of six oil wells on the site. The developer must,
however, advance the funds required to undertake these
activities.
o The developer will be repaid for the mobile home reloca-
tion and public improvement loan, including interest at
market rate, from 38.5% of the property tax increment and
50% of the transient occupancy tax revenues generated by
the entire project. This payment will continue until the
earliest of 1) full repayment, 2) a ten-year period fol-
lowing the completion of each phase, or 3) 2009 for
property tax increment and 2019 for transient occupancy
tax.
o The developer will incur $250,000 in costs associated
with relocating the beach maintenance facility.
o The developer will incur $250, 000 in costs associated
with constructing an overpass across Pacific Coast High-
way.
DEVELOPER LEASEHOLD INTEREST
In determining whether the proposed ground lease and residential
land payment terms are appropriate, it is important to estimate the
landowner (City) acquisition costs to purchase the current lessee' s
leasehold interest in the property. The value attributable to the
leasehold interest was treated as a deduction from the amount to be
paid by the developer to obtain a new ground lease for the co=er-
cial development and to purchase the residential site. For the
he}'ser 1.:rstonAssociiteslne.
TAELE i
DEVELOPER, LEASEHOLD INTEREST
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CAtIFORNIA
ESTIMATED (LESS) ESTIMATED
NET INCOME GROUND LEASE PYMT
1988 $1,740,000 $200,000
1989 1,830,000 200,000
1990 1,920,000 200,000
1991 2,020,000 200,000
1992 2,120,000 200,000
1993 2,220,000 200,000
1994 2,330,000 310,000
1995 2,450,000 310,000
1996 2,570,000 310,000
1997 2,700,000 310,000
1998 2,840,000 310,000
1999 2,980,000 310,000
2000 3,130,000 310,000
2001 3,280,000 310,000
2002 3,450,000 310,000
2003 3,620,000 310,000
2004 3,800,000 640,000
2005 3,990,000 640,000
2006 4,190,000 640,000
2007 4,400,000 640,000
2008 4,620,000 640,000
2009 4,850,000 640,000
2010 51090,000 640,000
2011 5,350,000 640,000
2012 5,620,000 640,000
2013 51900,000 640,000
NET PRESENT VALUE DEVELOPER LEASEHOLD INTEREST
PURCHASE IN 1988 $26,650,000
PURCHASE IN 1992 $22,620,000
SOURCE: KEYSER MARSTON ASSOCIATES, INC.
JULY, 198D
Mr. Douglas La Belle
July 29, 1988
Page 6
purposes this analysis, the leasehold value was assumed to equal
the projected revenues from the existing business operations
through the lease expiration in 2013, less the scheduled ground
lease payments during the same period, as discounted to reflect the
present value. Table 1 presents a projection of the estimated net
income to be generated by the -hotel and mobilehome park assuming
these uses remained in operation through 2013. This projection is
based upon the following assumptions:
1. The net income generated by the motel in 1988 is es-
timated at approximately $950, 000 . This represents a
gross profit margin of 28% on gross income of $3 . 4 mil-
lion. The net income generated by the mobilehome park in
1988 is projected at $790, 000 . The gross income is ap-
proximately $1.1 million, and operating expenses are es-
timated at 30% of gross income. Thus, the combined net
income is $1,740,000.
2. The net income before debt service was projected to in-
crease at the assumed inflation rate of 5% annually.
3. The ground lease payment will remain flat at $200;000 un-
til 1994 when it will be escalated to reflect the infla-
tion between 1984 and 1994 . This lease payment will
remain constant through 2004, when it will be escalated
based on the change in the CPI over the preceding 10
years. These escalation clauses are embodied in the ex-
isting lease.
Based upon the preceding assumptions, the present value of the
developer's leasehold interest (net revenues from business opera-
tions) is approximately $26 . 6 million. Therefore, if the City
wished to replace the existing uses prior to the termination of the
existing lease, the current lessee would be entitled to a payment
of $26. 6 million as compensation for relinquishing the lease 25
years early. However, the developer will continue to earn income
from the majority of the existing uses until the second phase of
development occurs. At that time the existing hotel will be
demolished. Thus, the leasehold interest value must be reduced by
the revenues earned prior to the commencement of the second phase.
This leaves a net leasehold interest value of $22 .8 million.
COMMERCIAL GROUND LEASE ANALYSIS
As described in the suirmary of major DDA terms, the developer will
ground lease 20 acres of the site for a period of 99 years. This
site will be parcelized to allow four separate first quality hotel
h��'s��1�9.i[ti�cmAsu��itti��tilnc
Mr. Douglas La Belle
July 29, 1988
Page 7
developments including ancillary uses, such as an athletic/tennis
club, needed to create a resort environment. A specialty retail
center will also be included. Each use will be subject to a
separate lease based on the same basic terms. These terms are
detailed in Appendix A. However, if development does not occur
within the time frame detailed in Appendix A, the ground lease for
the relevant parcels terminates in 2010.
During the initial 25 year period of the ground lease there are an-
nual escalations in the base ground lease payments tied to an in-
flation index. These increases are capped at 10% on an annual
basis, to a maximum of 25% in any five year period. In the 25th
year of the lease term, the land value is subject to a reappraisal
based on the current use of the property, and the lease payment
will be increased to reflect any land value appreciation. There-
after, the ground lease payment increases annually based on infla-
tion, and is subject to reappraisal based on the current use in the
45th year and the highest and best use in the 65th year.
Based on the phasing schedule required by the proposed DDA, and a
5% annual inflation assumption and 8% annual land appreciation, the
commercial ground lease generates a net present value of over $10
million to the City. This projection is shown in Appendix B-1 .
However, in the proposed DDA the City/Agency has agreed to provide
the developer with a public revenues rebate for 10 years. These
revenues will be provided to the developer on a deferred basis to
be paid upon the commencement of the subsequent commercial develop-
ment phase. The deferred payment will accrue with interest at 8%
until payment begins. However, in no event will the transient oc-
cupancy tax rebate continue after 2019, nor will the property tax
increment rebate continue after 2009 . Appendices Tables B2 through
B5 present the public revenue projections that were used to es-
timate the present value of the net rebate to the developer. Based
on these projections, the present value of the rebate to the
developer, less any unamortized portion of the developer's loan to
the Agency for the construction of public improvements and
mobilehome relocation, is $7 .2 million. Reducing the present value
of the ground lease payments by the present value of the net public
revenues rebate results in a net land payment of $2.8 million.
To determine whether this net land payment represents fair compen-
sation to the landowner (City) , KMA analyzed the cost and income
characteristics of the proposed commercial uses. Given the quality
of development being required, the complexity of the phasing and
that the magnitude of the proposed project is unprecedented in
i�e��se�iant�n 4scc�ciat� �nr
d) A 225 to 250 room all-suite hotel to be commenced no
later than 2001.
e) A 751000 to 99,000 square foot specialty retail center to
be commenced no later than 2004.
f) A 400 to 450 room first quality hotel to be commenced no
later than 2004.
g) Residential development at a maximum density of 35 units
per acre, with total development of 875 to 894 units.
The residential phasing must coincide with the commercial
development.
h) All on-site improvements relating to the development of
the property. These improvements must be constructed in
accordance with the terms and schedules set forth in the
Agreement including, but not limited to, the following:
i. All on-site improvements - sidewalks, street light-
ing, curbs, street trees, street improvements, park-
ing structures, etc. These improvements shall con-
form to the design and materials standards approved
by the Agency.
ii. Sanitary sewers, storm drains, fire hydrants, water
supply, gas lines, telephone and electrical power
facilities must be brought to, modified, or relo-
cated from the perimeter of the property.
iii. Additional improvements required as a result of an
Agency and/or City review of plans, drawings, or en-
vironmental assessments relating to the Developer
improvements or to this Agreement.
i) The costs associated with relocating the beach main-
tenance facility located on the development site, and 1/2
of the costs ($250,000 maximum) associated with con-
structing an overpass across Pacific Coast Highway.
j ) The developer shall be responsible for providing the
Agency with a loan of up to $4.5 million to relocate the
existing mobilehome park residents, plus 100% of the
costs required to extend Walnut Avenue, provide a spur
street from Pacific Coast Highway to the residential
development and the reabandonment of the oil wells lo-
cated on the development site.
2. Agency Responsibil `ti ies
The Agency is responsible for and shall commit to the project
the following:
a) Purchase the development parcel from the City. Ground
lease the 20 acre commercial parcel and sell the 24 acre
residential parcel to the developer.
b) All costs associated with relocating the existing
mobilehome park residents.
c) Repayment to the developer of the costs associated with
the infrastructure improvements detailed in 1-j ) above,
to a maximum of 38.5% of the property tax increment
revenues and 50% of the transient occupancy tax revenues
generated during the first ten operating years of each
development phase.
d) All costs associated with the relocation of the existing
oil pipeline, plus a maximum of $900, 000 in soils test-
ing/clean-up activities.
e) In addition to (b) above, a rebate to the developer of
38 .5% of the property tax increment revenues and 50% of
the transient occupancy tax revenues generated by the
commercial uses during the first ten operating years of
each development phase. These revenues will be deferred
and accumulated with interest until the commencement of
the subsequent development phase.
f) In addition to (b) above, a rebate to the developer of
38.5% of the property tax increment generated during the
first ten operating years of each residential development
phase.
3. Method of Financing
The proposed Agreement provides that the Agency will acquire
the development parcel from the City of Huntington Beach.
However, $16.1 million of the acquisition costs will be offset
by the disposition proceeds received by the Agency from the
developer. The remaining balance will be financed with a
promissory note from the Agency to the City. This note will
be repaid with project area revenues generated in the future.
The Agency will repay the developer loans for regional in-
frastructure improvements and mobilehome park residents
relocation costs from 38 .5% of the property tax increment and
50% of the transient occupancy tax revenues generated by each
development phase for the first 10 years of operation.
The Agency shall finance the mobilehome park residents reloca-
tion costs not advanced by the developer using project area
tax increment funds . The infrastructure improvements not
financed by the developer will also be funded with project
area revenues.
B. COST OF AGREEMENT TO THE AGENCY
The estimated net costs of the Agreement to the Agency, in
present value terms, are as follows:
Costs
Fair market value of City parcel $451200,000
(Less) Developer leasehold interest 22,800,000
Agency cost to acquire City parcel $22,400,000
Direct public improvement and relocation costs 41820,000
Developer loan repayment - including interest 9,280,000
Property tax increment and transient occupancy
tax rebate to developer 9,550,000
Total Costs $46,050,000
Revenues
Land Disposition Proceeds
Commercial ground lease $10,060,000
Residential land sale 61010,000
Total land disposition proceeds $16,070,000
Property tax increment 19, 150,000
Transient occupancy tax transferred
to the Agency per Agreement 6,840,000
Total Revenues $42,060,000
Net Cost to Agency $ 3,990,000
C. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED TO THE
DEVELOPER DETERMINED AT THE HIGHEST USE PERMITTED UNDER THE
REDEVELOPMENT PLAN
The determination of the estimated value of the interests to
be conveyed to the Developer pursuant to the proposed Agree-
ment was made by Keyser Marston Associates, Inc. (KMA) . KMA
concluded that moderate density residential development would
generate the highest value to the land, and that this type of
development would support a land value of approximately $45
million, or $23.50 per square foot. However, the site is cur-
rently encumbered by a lease, which has a value to the lessee
of $22.8 million. Thus, the fair market value of the site at
the highest and best use, and not taking the Agency goals and
objectives into account, is $22 .4 million.
D. PURCHASE PRICE BY DEVELOPER AND REASONS FOR DIFFERENCE IN FAIR
MARKET VALUE FOR THE HIGHEST USE UNDER THE REDEVELOPMENT PLAN
1. The developer shall ground lease the 20 acre commercial
parcel for a 99 year term. The total of these payments
is estimated at approximately $150 million, and the net
present value of these payments is $10.06 million.
2. The Developer shall purchase the 24 acre residential par-
cel in phases. The net present value of the land payment
is $6.01 million
3. The Developer land acquisition payment will be offset by
a public revenues rebate with a net present value of
$9.01 million.
The net acquisition price of the parcel is $7 .06 million, which is
$15.34 million less than the fair market value at the highest and
best use. Given this differential in the actual sales price and
lease payments, versus the fair market value of the site at the
highest and best use consistent with the Redevelopment Plan,
California Health and Safety Code Section 33433, requires an ex-
planation for the Agency accepting a lower price.
As a component of the Main--Pier Redevelopment Project Area Specific
Plan the Agency established the goal of attracting major visitor
serving commercial uses to the project area. The proposed project
achieves this goal with the inclusion of four major hotels and a
specialty retail center, which creates a resort type atmosphere,
and is expected to attract over 150, 000 visitors annually.
However, the magnitude of the project, and the quality level re-
quired by the Agency makes the proposed project a pioneering ven-
ture within the context of the downtown Huntington Beach market
area. Thus, the developer must incur a significant level of risk
to undertake this project. The economic analysis undertaken by KMA
concluded that in order to mitigate the extraordinary developer
risk level, and to allow the project to achieve economic viability,
the Agency must reduce the land costs to the level justified given
the economic characteristics of the proposed development. The KMA
analysis determined that the economic terms embodied in the DDA and
the ground lease are fair and reasonable. However, this conclusion
is inextricably tied to the enforcement of the development scope
and restrictions embodied in the proposed DDA.
Kuse MarstonAssociatesIne.
Richard L.Rotti S{10 Suulh Grail)Awnuc.5uit,:HSO
Cai`vin E.Hollis,11 Los Angeles.California 90071
21.1/622-809-1 Fax 211622.5204
SAN DI£GO 619/942-0380
Heinz A.Schilling
SAN FRANCISCO 4151398-3050
Timothy C.KeIly
A.Jerry Keyser
Kate Earle Funk
Robert J.Wetmore
Michael Conlon
Denise E.ConIey
July 29, 1988
Mr. Douglas La Belle
Deputy City Administrator
Huntington Beach Redevelopment Agency
2000 Main Street
Huntington Beach, California 92648
Dear Mr. La Belle:
In accordance with your request, Keyser Marston Associates, Inc.
(KMA) has analyzed the economic components incorporated into the
proposed Disposition and Development Agreement (DDA) for the
Waterfront Project to be located in Huntington Beach. This letter
summarizes the results of our analysis .
BACKGROUND STATEMENT
The subject site consists of approximately 44 acres currently owned
by the City of Huntington Beach. The site is currently leased to
the Robert L. Mayer Corporation, with lease expiration occurring in
2013. The site is currently improved with a 144 room motel and a
235 space mobilehome park. The Mayer Corporation has proposed to
replace these uses with 4 major first quality hotels, and ancillary
uses such as athletic/tennis club, a specialty retail center, and
894 residential units. The project is to be developed in six
phases between 1989 and 2004 .
To implement this development plan the developer has requested that
the City enter into a new 99 year lease for 20 acres of the site to
be used for commercial development. The remaining 24 acres to be
used for residential development are to be sold on a phased basis
as the proposed commercial development occurs. Additionally, the
developer has requested a 10-year rebate of 50% of the transient
occupancy tax revenues and 38.5% of the property tax increment gen-
erated by these uses . In turn, the Agency has mandated that the
developer pay for the relocation of the beach maintenance facility,
and 1/2 of the costs associated with construction an overpass
across Pacific Coast Highway. Additionally, the developer must
Real Estate PrkMewIn-men t R Eva l ua that&rvicrs
}
! i 1
` � y
Mr. Douglas La Belle
July 29, 1988
Page 2
loan substantial monies to the Agency, to cover the costs of the
mobilehome park relocation and all the costs associated with the
proposed Walnut Avenue expansion and the spur street serving the
project from Pacific Coast Highway. These loans will be repaid
only from the transient occupancy tax and property tax increment
revenues generated by this project.
The purpose of this analysis is to determine whether the proposed
commercial ground lease and residential land sale terms are ap-
propriate given the controls and restrictions contained in the
proposed ground lease and Disposition and Development Agreement.
As summarized herein, the fair market value of the land is based on
the proposed uses, as adjusted to reflect the costs associated with
the extraordinary Agency requirements being imposed and the assis-
tance being provided. The fair market value of the land was deter-
mined based on a review of recent land sales for similar uses and
projections of project costs and income. The extraordinary site
improvement costs were estimated using information provided by the
City. The present value of the Agency assistance was projected on
the basis of a 15 year phasing schedule to achieve the full scope
of development currently proposed.
MAJOR DDA TERMS
The major economic points, as currently proposed in the DDA, can be
summarized as follows:
I. Commercial Ground Lease
o A new 99-year ground lease will be executed for each
development phase occurring on the approximately 20 acres
between Pacific Coast Highway and the proposed Walnut
Avenue extension, and between Beach Boulevard and Hun-
tington street.
o A base-year ground lease payment of $500, 000 per year
will be allocated on a pro rata basis over the 20 acres.
This payment will commence on the earlier of the issuance
of a certificate of occupancy on each commercial develop-
ment phase, or June 30, 1999 . These payments will in-
crease to reflect the market value of the land 25 years
after the commencement of each phase. A summary of the
major lease terms is presented in Appendix A.
o In addition to the ground rent associated with the new
development, ground rent will continue to be paid on a
'eyserNl-.trstonAssociateslnc.
Mr. Douglas La Belle
July 29, 1988
Page 3
pro rats basis for the existing motel and mobilehome
park. This income will decline over time as these uses
are phased out.
o The DDA also contains a strict phasing schedule and
penalties if the development does not proceed on
schedule. The first hotel must commence within 30 months
after executing the DDA, and the fourth hotel must com-
mence by 2004 . No extensions will be provided for the
first or fourth hotels. The second hotel must commence
by 1996 and the third hotel must commence by 2001 .
However, the developer may extend the deadlines for the
second and third hotels by making annual extension pay-
ments. These extension payments must be made in addition
to the ground lease payments. Failure to make the exten-
sion payment precludes the developer from proceeding with
any development on the site in the future. If construc-
tion has not commenced on all commercial phases by 2004,
all undeveloped land reverts to the City in 2010.
o The Huntington Beach Inn must be demolished by the ear-
lier of the commencement of , construction on the second
hotel, or December 31, _ 2000. If the hotel is not
demolished by December 31, 2000, the developer loses all
development rights for future commercial and residential
phases.
a The Agency will pledge 38 .5% of the property tax incre-
ment and 50% of the transient occupancy tax revenues gen-
erated by the project for the first 10 operating years of
each commercial phase. However, to insure construction
of subsequent phases, this payment will be deferred for
each phase until commencement of construction on the sub-
sequent phase. For example, the pledge attributable to
the Phase I commercial development will be accrued, but
not paid, until the commencement of Phase II commercial
construction. Upon the commencement of construction on
Phase II the developer will receive the deferred portion
of the pledge for Phase I . Thereafter, he will receive
the balance of the Phase I pledge on an annual basis
through the end of the tenth year of Phase I operation.
There will be no deferral of the pledge for the final
commercial development phase. However, in no event will
the property tax increment pledge extend past 2009, nor
will the transient occupancy tax pledge extend past 2019.
`1 h , %larstonAssociatesinc.
NOTE: THIS CONCEPTUAL BOUNDARY 5 ALIGNED TOACCOMODATE , ♦ \
RESIDENTIAL RECREATION SPUR STREET ENTRY AND A AMENITY IN [ANION ACENTRALIZED a ,I(� �,��
'%��\ CONCEPTUAL RESIDENTIAL
♦� � �� �� PHASING EXHIBIT
��� 5 �� �r7 ♦ ��,
11,, - NOTE:
PHASE VII
�;�7 y� "�.�J J 1 �J �� ,♦ 'C'f' CONCEPTVALeIDETIAL SITE PLAN ANONS PROVIDED FOR
s
�O INFORMATION PURPOSES ONLY.
i -A71k
f r�
wt�r�'w w w w w MR,w�
Ir S w+ go wor �ON, 1`Jl ; +♦
ar �
ZA�oAI/wAYl. w �wwwlLwwwMMw�IwJww wl�wwww�� n
PACIFIC COAST W WAY— - -
f -PHASE 1 PHASE tl PNASE III PNA6E IY ►NABE Y l.. ........ PHASE YI
............. ......
—' [MIST cuss N T[L T[—,11-MEILTM COMFER[NC[..OT[t ALL-surf MOTEL sMOePMO PLAZA lu.7 MOTE_ QNCENTER
LAA[INO srMOC1VAE
APPROXIMATE LAND AREAS:
NOTE: ACTUAL RE-SIDFNTIAL PHASE BOUNDARIES WILL BE DETERMINED BY COMMERCIAL RESIDENTIAL
A MASTER M PLAN AND PHASING PtANISI TO BE APPROVED BY THE
PLANNING COMMISSION PURSUANT TO PARAGRAPH 4.L o.02 OF THE SECTION AREA [Y�OF TOTAL SECTION AREA %OF TOTAL
DOWNTOWN SPECIFIC PLAN. OTHER LAND PLANNING CONSIDERATIONS AND
CONSTRAINTS MAY ALTER SOMEWHAT THE CONCEPTUAL BOUNDARIES SHOWN. A 10 AC. 50% A 12 AC. 50%
B 5 Ac. 25% B 6 AC. 25%
C _5 AC. 25% C 6 AC. 25%
20 AC. 100% 24 AC. 100%
w I^F[r^
THE WATERFRONT
Mr. Douglas La Belle
July 29, 1988
Page 8
downtown Huntington Beach, the income approach was the sole ap-
proach to valuation used. The adjustments that would have to be
made to recent commercial land sales to reflect the characteristics
of the subject site would have to be so large as to minimize the
value of the market data comparison approach. Therefore, an
analysis of the development economics was performed for each com-
mercial use to determine the residual land value of the total site.
A. Hotel
The estimated costs and revenues associated with the proposed Phase
I hotel development can be summarized as follows. A, complete cost
and income projection can be found in Appendix C-1 through C-4 .
Costs
1. Recognizing the fact that the hotel must be a first
quality hotel, the shell costs are estimated at $55, 000
per room, or approximately $80 per square foot of build-
ing area. The furniture, fixtures and equipment costs
are estimated at $15, 000 per room. The direct develop-
ment costs assume that there are no soil problems that
must be corrected.
2. The density of the proposed project requires that the
majority of the on-site parking be located in a parking
structure. The direct costs of this structure are es-
timated at $5,500 per space.
3. Landscaping and on-site improvement costs are estimated
at $3 per square foot.
4. Architecture and engineering fees are broken down into
two categories. The basic fees attributed to the hotel
are estimated at 4% of direct costs excluding furniture,
fixtures and equipment. The architecture and engineering
fees for the furniture, fixtures and equipment are es-
timated at 8% of the direct costs for these items.
5. Interest during construction was calculated on the basis
of construction financing at 10.25% interest for a 15-
month construction period. It was assumed that the
average loan balance outstanding during this period would
be 60% . Financing fees were estimated at 2 .5% of total
costs.
Kc}v. rN1an-tonAssociates1nc,
Mr. Douglas La Belle
July 29, 1988
Page 9
6. Typically, a hotel development requires an infusion of
cash during the later stages of the development process
and during the initial operating period, to cover pre-
opening expenses such as staff training, working capital
requirements, and franchise fees. These costs are
provided in the form of allowance, which for hotel
development of the size and quality level proposed was
estimated at a total of $600,000.
7. The balance of the costs consist of City permits and
fees; legal, closing, taxes and insurance; development
management and a contingency allowance. These costs are
estimated on the basis of a percentage of direct costs .
The direct costs for the 296 room Phase I hotel are estimated at
$21.5 million and the indirect costs are estimated at $6.8 million.
The total costs excluding land acquisition are estimated at ap-
proximately $28.3 million, or $95,750 per room excluding land and
related soil correction costs.
Revenues
In arriving at the anticipated project revenues, KMA reviewed the
performance of recently constructed coastal hotels in Southern
California, as well as the expected performance of major hotels in
proximity to the ocean currently under construction or proposed for
near term construction. In establishing the average room rate for
the proposed hotels, it must be recognized that while the site is
located on the coast, it is not on the ocean side of Pacific Coast
Highway and thus direct access to the beach is not possible. Fur-
thermore, the site is not located in an established commercial area
nor is it well located to serve the Orange County business com-
munity. It is therefore anticipated that while hotels at the sub-
ject site will obtain high occupancy during the summer months and
on weekends, weekday demand during the off months may be weak.
Thus, in order to market the hotel during weekdays in off peak
periods discounts for corporate and meeting guests will be re-
quired. This will depress the average room rates achievable. Ad-
ditionally, it can be expected that the occupancy level will stabi-
lize at less than the typical hotel occupancy rate of 75%. Based
on these factors, KMA has estimated the revenue stream for the
hotel, as follows:
1. Hotel room rates and occupancy levels will be at the fol-
lowing levels during the stabilization period. These
average rates were based on a rental survey undertaken by
KMA and presented in Appendix C-2 .
KeN scrNlarstonAssockitesinc.
Mr. Douglas La Belle
July 29, 1988
Page 10
Effective Aug.
year Room Rate c u a
1 $ 95.00 60%
2 $100.00 65%
3 $105.00 68%
4 $110.00 70%
5 $115 .00 72%
2. After stabilization the room rates will continue to esca-
late annually at 5%. Occupancy will stabilize at 72% of
capacity.
3. Room sales represent 55% of gross sales. Food and
beverage sales represent 40% of gross sales, and miscel-
laneous revenues including telephone charges represent
the remaining 5% of gross sales.
4. Distributed expenses are estimated at 45% of gross sales,
while the undistributed and fixed expenses are estimated
at 26% of gross sales.
5. Management incentive fees are estimated at 10% of gross
operating profit.
Based on the preceding assumptions, gross income upon stabilization
is estimated at approximately $13.4 million. After subtracting
distributed, undistributed and fixed operating expenses from gross
sales, the gross operating profit before debt service and incentive
management fee is . estimated at $3. 6 million. Assuming a 10%
management incentive fee is applied to the gross operating profit,
the net income before debt service is estimated at approximately
$3.25 million.
Residual Land Value
Based on the estimated development costs of $27.2 million and net
income before debt service of $3 .25 million, KMA determined the
residual land value of the subject site based on the total war-
ranted investment in the project. The estimated warranted invest-
ment was based on the supportable debt and equity contribution to
the project. The maximum warranted investment was then reduced by
the estimated development costs to determine the residual land
value.
KeykLN!ttr,tonAssociates_ 'ins,
Mr. Douglas La Bel..,i
July 29, 1988
Page 11
In determining the residual land value using this approach, the
maximum achievable loan is based on $3.25 million in net income at
an assumed debt coverage ratio of 120%. Assuming a loan at 10 .5%
interest, amortized over a 30-year period, the maximum supportable
mortgage is $24 .7 million. Assuming the developer would require a
10% return at stabilization on any equity investment, the support-
able equity contribution is approximately $5.4 million. Therefore,
the total warranted investment is estimated at $30. 1 million, which
when reduced by the $28. 6 million estimated development costs and
land carrying costs results in a residual land value of ap-
proximately $1.5 million, or approximately $5, 100 per room.
As a crosscheck to this analysis, KMA also compared the value of
the completed project with its development costs. This analysis
indicates that the developer cannot afford to spend $1 .5 million
for the land and obtain a standard developer's profit of 12% of
value. At a land value of $1.5 million, the developer's profit is
closer to 5% of value. While under typical circumstances a
developer would require a higher rate of return, this low land
value is offset by the ability to develop other portions of the
project, primarily the residential uses . Thus, it is our opinion
that the fair reuse value of each hotel site is $1.5 million.
The scope of development in the proposed DDA requires the construc-
tion of four first quality hotels over a period of 15 years. As-
suming that land appreciation keeps pace with the inflation in con-
struction costs, the present value of future land payments should
be commensurate with the value established for the Phase I hotel.
Therefore, the four hotels generate a land value of $6.0 million
The proposed DDA also requires the construction of an athletic club
featuring tennis facilities to be constructed in conjunction with
the second phase hotel. While this facility will be constructed as
part of the second phase hotel, it will provide the recreational/
resort facilities needed to ultimately attract the four hotels to
be constructed. According to the proposed DDA, and in keeping with
the quality standards established for the entire project, this
recreational component must be constructed at a cost of nearly $4.0
million in 1988 dollars. For the purposes of this analysis, it was
assumed that the annual cost of amortizing this facility ($140, 000
per new hotel) would be allocated over the three remaining hotels.
Therefore, these hotels would have to generate higher room rates to
be able to amortize the additional athletic facility costs .
However, given the provision of these resort type amenities, it is
our opinion that not only will higher room rates be achievable, but
higher occupancy rates will result as well. The additional
revenues should produce sufficient income to amortize the costs of
eyy.Kr'
tg!t iA_iatc![roc.
Mr. Douglas La Belle
July 29, 1988
Page 12
the recreational facility including operating losses . Thus, the
requirement to include a recreation facility as an integral part of
the development does not depress the land values assignable to the
hotel. In fact, such a facility is required from a marketing
perspective if the site is to ultimately contain four first quality
hotels.
B. Specialty Retail
As previously mentioned, the subject property does not have the
benefit of being adjacent to quality retail that is often important
in marketing hotels in non-resort locations . Thus, as a DDA
restriction, the proposed development must include a 75,000 square
feet quality specialty retail development to be constructed in the
final development phase. This retail center will be located on a
3.8 acre parcel, which represents a density of 19,700 square feet
of building area per acre. Development at this density will re-
quire the inclusion of structured parking to serve the project.
The full cost and income projections are presented in Tables C-5
through C-7 found in Appendix C. The major assumptions are as fol-
lows:
Costs
1. Shell costs for the center are estimated at $50 per
square foot. Additionally, a fixturization allowance of
$50 per square foot for restaurants and $20 per square
foot for other retail tenants was included in the project
costs.
2. • Structured parking costs are estimated at $5, 500 per
space.
3. On-site and landscaping costs are estimated at $5.00 per
square foot of land area. This will provide for the sur-
face treatment on top of the garage as well as for the
plaza areas .
In addition to the direct costs, the developer will incur upwards
of $4 . 1 million in indirect costs such as architecture and en-
gineering fees; City permits and fees; financing costs (points and
interest); taxes, insurance, legal and closing costs; leasing com-
missions and development management costs. Based on these assump-
tions, the total development costs, excluding land, are estimated
at approximately $13.4 million, or nearly $180 per square foot of
gross building area.
I, ffMamtonAssociatcslnc,
Mr. Douglas La Belle
July 29, 1988
Page 13
Income
1. The average rental rates were estimated at $2.00 per
square foot per month on a triple net basis for the
retail shop space and $2.25 per square foot for the res-
taurants. It was assumed that the space will be absorbed
over a 3 year period, with 30% average occupancy the
first year, 50% average occupancy the second year, 80%
occupancy the third year, reaching stabilization in the
fourth year of operation.
2. Upon stabilization a 5% vacancy and collection allowance
was provided.
3. Expenses consist of 5% management fee, a $50, 000 al-
lowance for marketing and promotion, a $3.00 per square
foot common area maintenance cost on vacant space, and a
$.15 per square foot reserve for capital expenditures.
Based on the preceding assumptions, the gross income is estimated
at $1.86 million, and the net income after allowance for vacancies
and operating expenses is $1. 6 million.
Residual Land Value
The return to equity approach was used to determine the residual
land value supportable by the retail center. It was assumed that
the project financing would require income coverage of 120%, which
based on estimated net income before debt service of $1 . 6 million
supports a loan of approximately $12 .2 million assuming (10.5%,
30-year amortization financing) . Additionally, it was assumed that
the developer would require an 8% return on equity, which supports
a capital contribution of $3.35 million. Therefore, the total war-
ranted investment is estimated at approximately $15.5 million,
which must be reduced by the $13 . 6 million estimated development
costs and land carrying costs to arrive at a residual land value of
$1.93 million, or $11 . 64 per square foot of land area.
As a crosscheck to the land value determined above, the value of
the completed project was also analyzed. Based on a comparison of
the value of the completed project with the anticipated development
costs, the developer could afford to pay approximately $1 .75 mil-
lion and obtain a typical developer's profit.
Ke)•,,cr% rmonAssociateslne.
TABLE 2
ANALYSIS OF COMMERCIAL LAND PAYMENT
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
LAND PAYMENT
------------
ESTIMATED PRESENT VALUE LAND LEASE PAYMENT S10,Ob0,000
(LESS) NET PUBLIC REVENUES REBATE 7,250,000
NET LAND PAYMENT $2,810,000
REUSE VALUE
COMMERCIAL LAND $8,000,000
(LESS) SOILS CORRECTION COSTS 3,000,000
(LESS) PV DEVELOPER CONTRIBUTION TO,REGIONAL
INFRASTRUCTURE IMPROVEMENTS 40,000
(LESS) ALLOCATED DEVELOPER'S LEASEHOLD INTEREST 2,280,000
------------
NET REUSE VALUE COMMERCIAL LAND $2,680,000
NET OVERPAYMENT/(UNDERPAYMENT) 1130,000
SOURCE: KEYSER MARSTON ASSOCIATES, INC.
JULY, 1988
v
Mr. Douglas La Belle
July 29, 1988
Page 14
C. Conclusions - Commercial Ground Lease Analysis
The cost/income analysis performed for each of the proposed commer-
cial uses indicates that the 20 acres of the subject property used
for commercial development has a reuse value, assuming no unusual
soil conditions, of approximately $8 million. Six million dollars
of this value was allocated to the hotels and $2 million was at-
tributable to the retail center. However, soil tests conducted by
professional engineers indicated that to develop the proposed uses
on the site, corrective soils work in the amount of $3 million will
have to be undertaken. Additionally, the reuse value of the site
must be reduced by the developer's leasehold interest, plus the
present value of the developer's contribution to the public im-
provement costs required for this project. As shown in Table 2,
after allocating a pro rate share of the leasehold value based on
the reuse value of the commercial and residential phases, the net
reuse value of the commercial land is $2.68 million. Thus, the es-
timated net developer land payment of $2 . 81 million is $130, 000
greater than the net reuse value of the commercial portion of the
site.
RESIDENTIAL LAND SALE ANALYSIS
As summarized in the major DDA terms section of this letter, the
developer will purchase the 24 acres of the site devoted to
residential use on a phased basis over a 15-year period. The phas-
ing will be tied inextricably to the commercial development, and in
fact no residential development may occur until the commencement of
construction on the second phase of the commercial development, at
which time the existing motel must be demolished.
The proposed agreement has established a residential land price of
$33,500 per unit, or $29 .9 million in 1988 dollars. This price in-
creases at 8% per year throughout the phasing period. It should be
noted that while all of the regional infrastructure will be the
responsibility of the Agency, the developer is responsible for all
typical subdivision costs such as interior streets, utilities, etc.
In addition, a portion of the land sales proceeds must be returned
to the developer as compensation for his leasehold interest in the
property. This leasehold interest payment is weighted dispropor-
tionately toward the later development phases as an incentive to
the developer to complete the full scope of development in a timely
fashion. A complete schedule of the total land payments less the
leasehold interest compensation is presented in Appendix A.
Keyser arstonAssociateslnc=
Mr. Douglas La Belle
July 29, 1988
Page 15
Based on the phasing schedule required by the DDA, and the land
payment schedule presented in Appendix A, the net present value of
the developer' s land payment to the landowner (City) is ap-
proximately $6.0 million (Appendix D-1) . However, in the proposed
DDA, the City/Agency has agreed to provide the developer with a
public revenues rebate for 10 years after . the completion of each
phase or 2009, whichever comes first. Appendix D-2 presents the
public revenue rebate projection, which results in a net rebate to
the developer of nearly $1.8 million in present value terms. This
represents the net value of the rebate less any unamortized portion
of the developer's loan to the Agency for the construction of
public improvements. Thus, the net present value of the residen-
tial land payment is $4 .25 million after the public revenues rebate
is considered. ($6.0 million value less $1 .8 million rebate. )
To determine whether this land payment represents fair compensation
to the landowner (City) , KMA obtained recent land sales to be used
as value indicators for the subject site, on the basis of land cost
per unit constructed. However, the subject site is unique in that
it consists of 24 acres of land, and thus the -proposed project has
a substantially greater number of units than recent development in
downtown Huntington Beach. The proposed project will ultimately
consist of 894 units built in phases ranging in size from 223 units
to 450 units, while the bulk of recent development has consist of
small infill projects. These small projects typically do not in-
clude the costs of providing open space and recreational amenities
found in large projects, nor do these projects have the subdivision
costs associated with providing interior streets, utilities, etc.
Therefore, adjustments must be made to the recent land sales to ac-
curately measure the land value of the subject site.
Table 3 presents five recent land sales for condominium development
on sites within close proximity to the coast. As can be seen in
Table 3, the sites range in size from .75 acres to 4.84 acres, with
densities ranging from 25 to 46 units per acre.
Comparable number 1 is located in close proximity to the subject
site. Moreover, this project is somewhat larger than typically
found in the area and therefore it has similar characteristics to
the proposed development in terms of project quality and amenities
provided. Thus, this land sale represents an excellent value in-
dicator for the subject site. As can be seen in Table 31 this
property was sold for approximately $26, 10D per unit in the Spring
of 1987 . Adjusting this value upward at 1 .5% per month to account
for the passage of time since the sale occurred, results in a cur-
rent value of nearly $32,000 per unit.
KeV trti9arstonAswirates!nc.
I
TABLE 3
I
INDICATORS OF RESIDENTIAL CONDOMINIUM VALUES
RESIDENTIAL PHASE
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
SITE
SALE AREA R OF ------------SALES PRICE-----------
LOCATION DATE (ACRES) UNITS DENSITY/ACRE TOTAL PER UNIT PER SF COMMENTS
--- --------- ---- ------- ----- ------------- ----- -------- ------ --------
1 LAKE ST AND ATLANTA AVE SPRING 4.84 159 33 UNITS $4,145,000 $26,100 $19.66 CURRENTLY UNDER CONSTRUCTION.
5
HUNTINGTON BEACH 1987 ORIGINALLY PLANNED AS APART-
MINTS BUT WILL BE SOLD AS
CONDOS UPON COMPLETION OF
CONSTRUCTION.
2 WARNER AVE, WEST OF SIMS 9/87 2.42 60 25 UNITS $1,650,000 $27,500 $15.65
HUNTINGTON REACH
3 PCH BETWEEN 15TH AND 16TH 1987 0.91 42 46 UNITS $1,350,000 $32,150 $34.06 THIS SITE REQUIRED OIL WELL
HUNTINGTON BEACH REABANDONMENT. PROJECT IS
CURRENTLY UNDER CONSTRUCTION.
i
4 NEC OCEAN AVE AND 20TH 10/87 0.75 36 48 UNITS $1,200,000 $33,300 $36.73 THIS SITE REQUIRED OIL WELL
HUNTINGTON BEACH REABANDONMENT. THIS SALE
COMPLETED ASSEMBLAGE OF THE
PROPERTIES ON THE BLOCK. CON-
SOLIDATED SITE IS CURRENTLY
UNDER CONSTRUCTION.
5 NEC PCH AND LOTH 5/87 0.86 35 41 UNITS $2,100,000 $60,000 $56.06 PROJECT IS CURRENTLY UNDER
HUNTINGTON BEACH CONSTRUCTION. MANY UNITS WILL
HAVE OCEAN VIEWS.
SOURCE: KEYSER MARSTON ASSOCIATES, INC.
JULY, l988
TABLE NAME - 1CONDO
Mr. Douglas La Belle
July 29, 1988
Page 16
Comparable number 2 is located adjacent to Huntington Harbour, and
was sold in September of 1987 for $27,500 per unit. This site is
similar to the subject site in that it is located in close
proximity to the ocean, but it does not have an oceanfront loca-
tion. Additionally, the development is large enough to require the
provision of open space and recreational facilities. Adjusting the
land sale value upward to reflect the passage of time, indicates a
value of slightly over $32,000 per unit.
Comparables number 3 and 4 are located on Pacific Coast Highway,
and development on these sites will provide ocean views from many
of the units. These sites were both sold during 1987 at values of
$32, 150 and $33,300 per unit respectively. However, each of the
sites had oil wells that required reabandonment, which can involve
significant cost premiums. While n1A was unable to verify the ac-
tual costs associated with the required reabandonment of each of
these ' sites, these costs were estimated at $100,000 for each site
based on discussions with developers. This results in net land
costs of approximately $34,500 and $36, 100 per unit respectively.
Adjustments must be made to comparables number 3 and 4 to reflect
their oceanfront locations. While the subject site is located in
close proximity to the ocean, most of the units will have their
ocean views obscured by the hotels proposed as a part of this
project. Adjustments also must be made to account for the fact
that the sites used as value indicators are substantially smaller
than the subject site. Therefore, the developers will not be faced
with the extraordinary costs required to create an integrated sub-
division environment, nor will they face a protracted absorption
period. Each of these factors require significant downward adjust-
ments to allow their use a value indicators for the subject site.
These comparables should be adjusted by 5% to reflect the location
differential, and 15% to reflect the site size differential. Thus,
the adjusted land value for the condominium units before adjust-
ments for the passage of time, is $25,700 to $26, 600 per unit. Ad-
justing these values upward for the passage of time results in a
value range of $31, 100 and $31,600 per unit.
Comparable number 5 is located in the same general vicinity as com-
parable numbers 3 and 4, and is essentially the same size and is
being developed at approximately the same allowable density level.
However, comparable number 5 was purchased for $60,000 per unit, an
80% to 85% premium over these other sites. It is likely that the
developer of this property is of the opinion that this property is
substantially superior to other properties along Pacific Coast
Highway given the existence of superior views . However, while it
he}'seri%l arctonAscociatesi ne.
TABLE 4
ANALYSIS OF RESIDENTIAL LAND PAYMENT
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
LAND PAYMENT
------------
ESTIMATED LAND PAYMENT tb,010,000
(LESS) NET PUBLIC REVENUES REBATE 1,760,000
ESTIMATED NET LAND PAYMENT $4,250,000
REUSE VALUE
RESIDENTIAL LAND $22,260,000
(LESS) SUBDIVISON AND SOILS CORRECTION COSTS 2,700,000
(LESS) PV DEVELOPER CONTRIBUTION TO REGIONAL
INFRASTRUCTURE IMPROVEMENTS 340,000
(LESS) ALLOCATED DEVELOPER'S LEASEHOLD INTEREST 20,550,000
------------
NET REUSE VALUE RESIDENTIAL LAND 14,00,000
NET OVERPAYMENT/(UNDERPAYMENT) 4420,000)
SOURCE: KEYSER MARSTON ASSOCIATES, INC.
JULY, ly8fi
� v
Mr. Douglas La Belle
July 29, 1988
Page 17
is conceivable that a project developed on this site could offer
more view units than provided at either the comparables number 3 or
4 sites, it is unlikely that the addition of these units could
create a value differential of this magnitude. Thus, it is likely
that this property was purchased in anticipation of its potential
future value, rather than the value warranted by today' s market
conditions. Inasmuch as a reuse value is based on the value
created by near-term development, and the fact that this value rep-
resents an anomaly in the marketplace, comparable number 5 has been
disregarded as a value indicator.
The analysis of each of the recent land sales used as value in-
dicators results in land values ranging from $31,000 to $32,000 per
unit. Thus, it was determined that the reuse value of the 894 unit
residential portion of the subject site is $31,500 per unit or
$28.2 million.
In determining fair reuse value of the residential portion of the
property the value determined above must be reduced by the costs
required to construct subdivision infrastructure improvements such
as interior roads, and by soil corrections work required to allow
the development of the proposed project. These costs are currently
estimated at $2 .7 million. Additionally, the reuse value must be
decreased by a pro rate share of the developer's leasehold inter-
est, as well as the developer's contribution to the public improve-
ments serving this project. As illustrated in Table 4, the net
reuse value of the residential portion of the subject site is $4.67
million. Therefore, the developer land payment of $4 .25 million
represents an underpayment of $420,000.
CONCLUSIONS
The preceding sections of this letter analyzed the economic charac-
teristics of the proposed multi-phased Waterfront commercial/resi-
dential project, within the context of the extraordinary restric-
tions required by the Huntington Beach Redevelopment Agency. Based
on the terms contained in the proposed Disposition and Development
Agreement, including the scope of development and phasing schedule,
and considering the expected performance of each of the projects,
it is our opinion that the proposed DDA terms are fair and
reasonable. However, it should be noted that this conclusion is
directly related to the development restrictions embodied in the
proposed DDA. In the event the scope or quality level of the
development is materially altered, the timing schedule is
postponed, or the developer's financial obligations to the Agency
are modified, the findings of this analysis are subject to revalua-
tion.
hey.�rNlarnton ss iwesInc.
Mr. Douglas La Belle
July 29, 1988
Page 18
CERTIFICATION
We hereby certify that neither Keyser Marston Associates, Inc. , nor
any of its officers have any present or prospective interest in the
properties being analyzed; that our employment is not contingent in
any way upon the value reported; that we have personally inspected
the property and the environment; that the statements made and the
information contained in this economic analysis are true, to the
best of our knowledge and belief.
Respectfully submitted,
EYSER MARSTON ASSOCIATES, INC.
Richard L. Botti
Kathleen H. Head
RLB:KHH:lp
88310.HTB
14066.0006
Keyser larstonAssociatesinc.
Key serMarstonAssociateslnc.
Richard L Botti 500 South Grand Acenue,Suite 1-lV
Calvin E.Hollis,I Los Angeles.California 90071
213/622-8095 I'ax 213/622.520a
SAN DISCO 619/942.0380
Heinz A.Schilling
$AN FRANCISCO 4IS/398-3050
Timothy C.Kelly
A.Jerry Keyser
Kate Earle Funk
Robert I Wetmore
Michael Conlon
Denise F_Conley
July 29, 1988
Mr. Douglas La Belle
Deputy City Administrator
City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
Dear Mr. La Belle:
In accordance with your request, Keyser Marston Associates, Inc.
(KMA) has analyzed the potential City/Agency costs and revenues as-
sociated with implementing the proposed Waterfront commercial/
residential project. This letter summarizes our findings.
BACKGROUND STATEMENT
The City owns the 44 acre Waterfront site, and the property is cur-
rently ground leased by the Robert L. Mayer Corporation for use as
a motel and mobilehome park. At the present time the City/Agency
is considering the possibility of entering into a new agreement
with the Mayer Corporation, and allowing the property to be con-
verted to a new commercial and residential project. This project
will be developed in phases over a fifteen year period, and will
consist of four first quality hotels including ancillary facilities
such as an athletic/tennis club, a specialty retail center and 894
residential units. To effect this conversion the City/Agency has
agreed to bear the costs of relocating the existing mobilehome park
residents and to provide the required regional serving infrastruc-
ture improvements for the development. The major public revenues
generated by this project consist of property tax increment
revenues and transient occupancy tax revenues. Additionally, the
City as the landowner will receive commercial ground lease payments
and the residential land sales proceeds. This analysis presents
our findings as to the present value of the net City/Agency
revenues/(costs) generated by the implementation of the proposed
multi-phased project.
Real Estate ert d!nrlopmenut i"yaluat ion 5ttyicts
Mr. Doug La Belle
July 29, 1988
Page 2
CITY/AGENCY COSTS
Table 1 presents a summary of the infrastructure and mobilehome
park relocation costs to be incurred by the City/Agency. As can be
seen in Table 1, the developer must advance the funds for a number
of these improvements and these loans will be repaid solely from a
percentage of the property tax increment and transient occupancy
tax revenues generated by the developments over a ten year period.
The balance of the costs, not advanced by the developer, will be
incurred by the City/Agency throughout the development phasing. As
shown in Table 1, in 1988 dollars, the City/Agency must expend $4 .8
million in addition to borrowing over $11 . 1 million from the
developer, for total estimated expenditures of $15.9 million.
The most substantial costs to be incurred by the City/Agency are
related to the relocation of the existing mobilehome park, with the
first $4.5 million in costs to be loaned to the City/Agency by the
developer. Appendix Al presents a cost/income projection for the
mobilehome park relocation, including the estimated costs to con-
struct a replacement facility, purchase existing coaches and to
physically relocate the tenants. These costs were then compared to
the projected income stream to be generated by the replacement park
to determine the net mobilehome relocation costs. It is estimated
that ultimately the City/Agency will have to fund $3. 17 million in
relocation costs above the amount of the developer loan.
The other major costs include $5.5 million to extend Walnut Avenue
through to Beach Boulevard, and $1 million to construct a spur
street connecting the residential development to Pacific Coast
Highway. However, the developer must advance 100% of these funds
in return for repayment from property tax increment and transient
occupancy tax revenues generated by the project.
In addition to the major costs outlined above, the City/Agency must
finance 1/2 of the costs associated with constructing a Pacific
Coast Highway overpass and relocate an oil pipeline that is cur-
rently located on the development site. These costs are estimated
at $750,000. The City/Agency has also accepted the responsibility
for the costs associated with soils testing and clean-up of the en-
tire site to a maximum of $900,000.
The front-end financial exposure to the City/Agency is minimized,
because the developer must advance over $10 million of the es-
timated $14 .27 million in expenditures required to allow the first
two phases to commence construction. In the event the developer
does not develop the subsequent phases as currently proposed, the
public revenues generated by the project and earmarked for
"gy%crht.irst�nAssociatesl nc.
Mr. Doug La Belle
July 29, 1988
Page 3
developer repayment, will be insufficient to fully amortize the
debt.
CITY/AGENCY REVENUES
The City/Agency revenues consist of property tax increment and
transient occupancy tax revenues . Additionally, the City as the
landowner, will receive the commercial ground lease payments and
the residential land sales proceeds. However, the City/Agency has
agreed to provide the developer with a rebate equal to 38.5% of the
property tax increment revenues and 50% of the transient occupancy
tax revenues for the first 10 years of each phase of development,
on a deferred basis beginning upon commencement of construction of
the subsequent phase. Additionally, the City/Agency must use the
remaining property tax increment and transient occupancy tax
revenues generated during the first ten years of operation of each
phase to repay the developer's mobilehome park relocation and in-
frastructure loans. Table 2 presents a 45 year projection of the
municipal revenues, as reduced by the public revenues rebate and
developer loan payments . As can be seen in Table 2, the net
present value of the property tax increment revenues is ap-
proximately $19 . 15 million, before the developer rebate and loan
repayment. These rebate and loan payments reduce the net present
value to $12.3 million. The net present value of the transient oc-
cupancy tax revenues is estimated at $26.4 million. However, $10
million must be rebated to the developer and used for loan repay-
ment, leaving a net present values of $16.4 million to be received
by the City.
The City will also receive compensation as the landowner of the 44
acre subject site. A 20 acre portion of this site will be ground
leased for commercial development and the remaining 24 acres will
be sold in phases for residential development. To determine the
present value of the land compensation to be received by the City,
KMA performed an economic analysis of the proposed ground lease and
Disposition and Development Agreement (DDA) . As a result of this
analysis it was estimated that the net present value of the ground
lease payments is $10.1 million, and the net present value of the
residential land payment is $6.0 million.
SUMMARY
Table 3 presents a summary of the City/Agency revenues and costs in
net present value terms. As can be seen in Table 3, the land
lease/sale proceeds are estimated at $16 . 1 million, and the
property tax increment and transient occupancy tax revenues are es-
timated at $45.5 million. These revenues are off-set by the costs
Kcy� rhlarstonAssoeiatesInc.
Mr. Doug La Belle
July 29, 1988
Page 4
associated with providing the required infrastructure improvements,
relocating the mobilehome park residents, and providing the public
revenues rebate. These costs are estimated at $23. 6 million,
resulting in net revenues to the City/Agency of approximately $38
million.
We appreciate this opportunity to be of assistance, and are avail-
able to answer any questions you may have.
Yours very truly,
/RfYSER MARSTON ASSOCIATES, INC.
4Rjich=dL. Botti
Kathleen H. Head
RLB:KHH:lp
88314.HTB
14066.0006
-- Keg r arstonAssociltesTM
TABLE 1
PU£LIC IHPROYfHENTS/HGBILENOHf RELOCATION COSTS (1)
S1,VfartOHr coftu RCIAt/RESIDENrfAI PRr31ECr
HUNTINGTON REACH, CALIFORNIA
AMOUNT TIMING
---- ------
CITYIAGENCY COSTS (NO DEVELOPER LOAN)
PACIFIC AND DRIFTWOOD MOBILEHOME RELOCATION
(17.7 MILLION NET ESTIMATED COSTS - SEE APPENDIX A) t 3,170.000 PHASED THROUGH DEVELOPMENT PROCESS
PACIFIC COAST HIGHWAY OVERPASS (1/2 EST COSTS) 1 250,000 PHASE I HOTEL
OIL PIPELINE RELOCATION 1 500,000 PHASE 1 RESIDENTIAL
SOILS TESTING/CLEAN-UP t 900,000 PHASED THROUCH DEVELOPMEHT PROCESS
TOTAL DIRECT CITY/AGENCY COSTS 1 1,920,000
DEVELOPER ADVANCE - REPAYMENT R HARIET RATE INTEREST
PACIFIC AND DRIFTWOOD MOBILEHOME RELOCATION
(17.1 MILLION NET ESTIMATED COSTS - SEE APPENDIX A) 1 1,5C0,000 PHASED THROUGH DEVELOPMENT PROCESS
WALNUT STREET EXTENSION t 5,SOO,000 1/2 WITH PHASE 1, 1/2 WITH PHASE 2
SPUR STREET IETWEEN PHASES 3 1 4 s 110co,00o PHASE 2 HOTEL
REABANDOH OIL WELLS (6 WELLS) 1 125,000 PHASE 1 RESIDENTIAL
TOTAL DEVELOPER ADVANCE 111,125,000 (2)
TOTAL C111/AGENCY COSTS 115,945,00D
1) DASIC COST ESTIMATES PROVIDED BY CITY STAFF IN 1933 DOLLARS
2) ASSUMES FULL AMORTIIATIOH OF DEVELOPER LOAN
SOURCE: KEYSER MARSTON ASSOCIATES, INC.
IULY, 1983
TA1LE 2
C1111ACENCY REVENUES
YATEIFRONT CO MERCIALIRESItENTIAt PROJECT
MUSTINGION 6EAC4, CALIFORNIA
------------------TAX INCREMENT----------------- --------------TRANSIENT OCCUFA.4CY TAX--------------
tP.uFfRTY (LESS) 11E55) Mfl 10 . 1FANSIENI (LESS) (LESS) NET 10
YEAR TAX INC BEY REBATE LOAN REPYMT AGENCY CCC TAX DIV AERATE LOAN REMIT AGEN:l
1 1998 0 0 0 0 0 0 0 0
2 1989 0 0 0 0 0 0 0 0
3 1"0 0 0 0 0 0 0 0 0
4 1991 0 0 0 0 0 0 0 0
5 IM 271.000 0 136,000 13S,000 42S,000 0 213,030 2121000
6 1993 277.000 0 ]-)Moo 139,000 484,000 0 242.000 242,0:0
7 IM 292,000 0 141,000 141,000 S32,000 0 266,000 266.002
8 1995 077,000 0 144,000 713,000 $25.000 0 287,000 2C8,000
9 M 1,224,000 826,000 312,000 06,000 1,138.003 J,52$,000 569,000 (9S6,003)
10 1997 J,249,000 150.000 318,000 781,030 1,?40,000 326,000 620,000 2?4,003
11 1998 1,274,000 1S3,000 324.000 797.030 113:01000 342,000 665,000 323,000
12 1999 1.670.003 2,134.000 331,OD0 WS1000) 1,3M.000 359,000 692,ODO 333.000
13 2000 2,104.000 1,433,000 533,000 72,030 2,132,000 2,213,000 1.069.000 (1,14S.000)
J4 2031 ?,146,000 676,000 549,000 92J,000 21299,000 792,000 1,150,030 357.097
15 2032 2,109.000 524,000 394,090 1.271,000 2,449.000 416,030 009,000 1,224,003
16 2033 7,701,000 J.733,000 402.003 546.000 2,SSS,000 437.000 £41,030 J1277,003
17 2094 3.243,000 2.453,000 654,000 136,000 3,515,000 3,072,000 1.299,000 (856,OC3)
18 2005 31307,000 11119,000 667,000 1,521,000 3.758.000 1,391,000 1.397.030 964,003
la 2006 3,374,000 941.000 479,000 1,954,000 3,938,000 983,000 433,600 2,022,003
20 2002 3,411.000 959,000 4891003 11993,000 4,167,000 1,022,000 1,022,CIAO 2,124,003
21 2008 3,510,000 979.000 499.000 2.032.000 4,458.000 1,115,000 1,115.000 2.?23.003
22 2009 3.S30,000 772,000 509,OL0 2.299,030 4,621,000 1,170,090 1,170,000 2,341,003
23 20I0 3,652.000 0 0 3,652.000 4,91S,000 614,000 614,OCO 3,637,003
24 20!1 3,725,000 0 0 3.725,000 5.111,000 645,000 645,000 3,871,009
25 2012 3,799,000 0 0 31799,000 5,419.000 677,000 671,000 4,065,000
26 2011 3.975,000 0 0 31275,000 5,6",000 711,600 111,000 4,268,069
27 20I4 31953,000 0 0 3,9$3,000 5,974,000 0 0 5,974.090
23 2015 4,032.000 0 0 4,032,000 61273,000 0 0 6,271.00
29 2016 4.112,000 0 0 4,112,003 6,537,000 0 0 6,537,000
30 2017 4.195,000 0 0 4,195,DC0 6.916,090 0 0 619Je,000
31 2013 4.278.000 0 0 4,278,000 7,262,000 0 0 7,262,000
32 2019 4,31.4,000 0 0 4,364,000 7,625,Ooo 0 0 7,625.009
33 2020 41451,000 0 0 4,4S1,000 0.006,000 O 0 8.004,000
34 2021 4,540.000 0 0 41540,000 8.407,000 0 0 8,407,000
3S 2022 4,631,000 0 0 4,63110Go 8,827,600 0 0 0,827.00
36 2023 4,724,DD0 0 0 4,724,000 9120,000 0 0 9,265,003
37 2024 4.019.000 0 0 41013,000 9,732,000 0 0 9,7;2,000
39 2025 4.915,000 0 0 41915,000 10,210,000 0 0 J0,21810DO
39 20:6 5,013,000 0 0 5,013,0co 10,729,000 0 0 10.MOOD
43 2027 51111,000 0 0 5,113,000 11,266,000 0 0 11,2G6,0Do
41 2023 51215,000 0 0 S,21S,000 11,Q29,000 0 0 J1,824,OP0
42 2029 5,320.000 0 0 51320,000 32,420,000 0 0 22,420.009
43 2030 5,421.000 0 0 5,426,000 13,041.000 0 0 13,041.000
44 2031 $1535,000 0 0 5,535.000 13.693,000 0 0 13,693,OLD
45 2072 5,645,000 0 0 S.645,000 14,370.003 0 0 14,373.000
NET FRESFNI VALUE f19,1%000 14,550,000 32,2?0,000 112,310.000 1?6,390,000 :5.010,000 15,010.001 W,370.ODO
SOUR.'E: 1E1SER MARSTON AssociAYEs, INC.
JULY, 19ce
TABLE 3
HET CITYIAGENCY REVENUES/(COSTS) (1)
RATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNIIAGION BEACH, CALIFORNIA
REVENUES
NET WID PAYhENT
COMMERCIAL 110,060,000
RESIDENTIAL 6,010,000
TOTAL LAND PAYMENT 1I6,070,000
TAXES
PROPERTY TAX INCREMENT 119,150.000
IRMSIENT OCCUPANCY TAX REVENUES 26,390,000
------------
TOTAL REVENUES 145,540,000
COSTS
DIRECT PUBLIC IMPS & RELOCATION COSTS $4,820,000
DEVELOPER LOAN REPAYMENT 9.283,000
PUBLIC REVENUES REBATE 9,550,000
TOTAL COSTS V316501000
TOTAL CITY/AGENCY REVENUES/(COSTS} 137,960,000
1) ALL REVENUES ARE IN PRESENT VALUE TERNS
SOURCE: KEYSER NARSTON ASSOCIATES, INC.
DULY, 1923
APPENDIX A
M08ILEHOME RELOCATION COSTS
TABLE Al
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HET MOBILE HOME PARK RELOCATION COSTS
HUNT1NGItIN BEACH, CALIFORNIA
YEAR I YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11
1989 1 1995 1- 1991 1 - 1991)
cOsrsill ---------- ----------------------------------------------------------------------------------------------------- ------------- ------------ -------------
-
COST Of APPRAISAL 1100,000
NET BUY-OUT COSTS
PHASE I i I OPTIONAL 435,000
ADDITIONAL FOR SFO 5,000
PHASE 11 1,800,000 $1,290,000
ADDITIONAL FOR SFO 20,000 15,000
RELOCATION TO OCEAN VIEW
PHASE I i OPTIONAL 75,000
CASH PAYMENT 55,000
PURCHASE NEW COACHES 160.000
PHASE II 517,000
CASH PAYMENT 380,D00
PURCHASE NEW COACHES 1,000,000
RELOCATION TO OTHER PARK
PHASE I i OPTIONAL 25,000
PHASE 11 200,000
RELOCATION WITHIN PARK
PHASE 11 4,000
MOBILEHOME REFURBISHING 15,000
TENANT SUBLESSEE COMPENSATION
PHASE I i OPTIONAL 8,000
PHASE If 50,000
ASSOCIATION REIMBURSEMENT 200,000
OCEAN VIEW DEVELOPMENT COSTS
MOBILEHOME DEVELOPMENT 3,425,000
GOLF COURSE DEVELOFMENT 826,000
PARK DEVELOPMENT 4,707,000
--------- --------- -------- --------- --------- --------- --------- --------- --------- ---------
TOTAL COSTS $6,321,000 $8,985,000 t0 t0 t0 t0 t0 t0 t0 to
INCOME
OCEAN VIEW ESTATES
RENT INCOME POTENTIAL (2) $79,800 1365,100 1694,300 t725,300 $768,800 58151000 1863,900 $915,700 $970,700 $1,028,900 11,090,600
(LESS) VACANCY (3) 18,300 34,200 36,300 38,400 40,800 43,200 45,800 48,500 51,400 54,500
(LESS) EXPENSES (4) 125,000 127,800 239,500 253,900 269,100 285,300 302,400 320,500 339,700 360,100 391,700
(LESS) ABATEMENTS (5) 80,000 85,000
PLUS NET SALES PROCEEDS (6) 7,467,900
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
HET INCOME (1125,200) 1134,000 1410,600 $435,100 $461,300 $488,900 3518,300 1549.400 $582,S00 $8,085,300
i
i
�I
NET AGENCY COSTS $6,452,200 $8,951,000 (t410,600) (1435,100) (t461,300) (1488,900) (5518,300) (049,400) ($582,500) (t8,085,300)
HPY COSTS V 8X $7,660,000
NOTES TO TABLE Al
1. Based on Agency cost breakdown, and the following assumptions:
Phase I
& Phase I
Option Optional Phase II
Immediate Buy-out 10 71
Relocation to Ocean View 19 126
Relocation Elsewhere 1 8
2. Calculated on the basis of $350 per space in year 11 escalated
at 6% per annum thereafter, and the following occupancy
schedule:
Years Occupancy
1 19
2 19 + 126 (July-Dec. )
3-11 145
3. Vacancy set at 5% of gross rental income.
4. Expenses set at 35% of gross rental income.
5. Calculated on the basis of $350 per space in year 1, escalated
at 6% per annum thereafter, for 19 Phase I and Phase I Op-
tional tenants for 24 months.
6. Assumes sale of mobilehome park in 10th year, based on llth
year net income capitalized at an 8.5% rate.
88313.HTB
14066.0006
APPENDIX A
LAND LEASE/PURCHASE SCHEDULES
Table A-1
Commercial Ground Lease Schedule
Waterfront Commercial/Residential Project
Huntington Beach, California
1988 - 1990 $200, 000
1991 - 1994 $500,000 -(pro rata share)
- - - - - - - - - - - - - - EACH PHASE - - - - - - - - - - - - -
Years 1 through 24 Annual CPI increase of base value
Year 25 Base rent to be determined on basis
of Market Value for current use
Years 26 through 44 Annual CPI increase of new base value
Year 45 Base rent to be determined on basis
of Market value for current use
Years 46 through 64 Annual CPI increase of new base value
Year 65 Base rent to be determined on basis
of Market value for highest and best
use unless new construction occurs
between. the 30th and the 40th year
Years 66 through 84 Annual CPI increase of new base value
Year 85 Base rent to be determined on basis
of Market Value for current use
Years 86 through 99 Annual CPI increase of new base value
------------------------------
Source: Keyser Marston Associates, Inc.
July, 1988
�j
Table A-2
Net Residential Release Payments
Waterfront Commercial/Residential Project
Huntington Beach, California
Date of Purchase Net Sales Price -per Unit
(start of construction)
- - - - - - - - - - - - - First 450 Units - - - - - - - - - - -
(Phase A)
1988 $ 9,560
1989 10, 330
1990 11, 160
1991 12,050
1992 13, 010
1993 14,050
1994 15, 170
1995 16, 380
1996 17, 690
1997 19, 110
1998 20, 640
1999 22,290
2000 24,070
- - - - - - - - - - - - - Next 224 Units - - - - - - - - - - - -
(Phase B)
1990 $ 7,530
1991 8, 130
1992 8,780
1993 9, 480
1994 10,240
1995 11,060
1996 11, 940
1997 12, 900
1998 13,930
1999 15,040
2000 16,240
2001 17,540
2002 18,940
2003 20,460
Table A-2 (con't)
Net Residential Release Payments
Waterfront Commercial/Residential Project
Huntington Beach, California
- - - - - - - - - -- - - - Next 223Units - - - - - - - - - - -
(Phase C)
1992 $ 41520
1993 4,880
1994 5,270
1995 5, 690
1996 6gl40
1997 6, 630
1998 7, 160
1999 7,730
2000 8,350
2001 9,020
2002 9,740
2003 10,520
------------------------------
Source: Keyser Marston Associates, Inc.
July, 1988
88081 .HTB
APPENDIX 8
COMMERCIAL REVENUES PROJECTIONES
TABLE 1-1
CITY/AGENCY GROUND LEASE INCOFE PROJECTION
UATERFROIIT COHHERCIAL/RESIDENTIAL PROJECT
NUNTINGTOH BEACH, CALJFOR111A
PHASE I PHASE I PHASE III PHASE IY TOTAL
YEAR
1 1988 34,000 34,000 34,000 34,000 136,000
2 1989 34,000 34,000 34,000 34,000 136,000
3 1990 34,000 34,000 34,000 34,000 136,000
4 1991 34,000 34,DD0 34,000 34,000 136,000
5 1992 125,000 34,000 34,000 34,000 227,000
6 1993 12S,ODO 34,000 34406 34,000 227,000
7 1994 125,000 34,000 34,000 31,000 227,000
8 J995 131,300 35,700 35,700 35,700 232,400
9 199L 137,9CO 137,800 37,500 37,503 350,700
10 1997 144,800 144,700 39,400 39,403 361,300
11 1998 152,000 1S1,900 41,400 41,400 3:.6,700
12 1999 159,600 159,50D 43,500 13,500 406,100
13 2000 167,60D 167,500 167,500 4S,700 548,300
14 2001 176,000 175,900 175,9DO 43,000 575,000
IS 2002 184,800 134,700 184,700 50,400 104,600
16 2003 194,000 193,900 193.900 32,9DO 634,700
17 2004 203,700 203,600 203,600 203,600 814,500
19 200S 213,900 213,800 213,800 213,800 8SS,300
19 2006 224,600 224,500 224,500 224,500 090,100
2D 2007 235,800 235,700 235,700 235,7DO 942.900
21 2008 247.600 247,500 247,500 247,500 990,100
22 2009 260,000 259,900 259,900 259,900 11039.700
23 2010 273,000 272,900 272,90D 272.900 1,091,70D
24 2011 286,200 286.500 286,500 286,500 1,146,200
25 2012 301.000 300.800 300,800 300,E00 1,203,400
26 2013 316,100 3I5,300 315,800 315,80D 1,263,500
27 2014 331,900 331,600 331,600 331,100 1,326,700
?1 2015 349.500 348,200 342,200 348,200 1,393.100
29 2016 36S,900 365,600 36S,600 315,603 1,462,700
30 2017 394,200 333,900 383,900 383,900 1,535,900
31 2018 864,308 403,100 403,100 403,100 2,073,68E
32 2019 907,400 423,300 423,300 423.300 2,177,50E
33 2020 952,980 444,500 444,500 444.500 2,286,48E
34 2021 1,000.630 466,700 466,7CO 466,700 2,00,733
35 2022 1,050.670 1,050.670 490,000 490,000 3,031,339
36 2023 1,103,203 1,103,203 514,500 514,500 3,235,406
37 2024 1,158,363 1,158,363 540,200 540,200 3,397,126
3$ 2025 1,216,291 1,216,281 567,200 567,200 3,566,963
39 2026 1,277,095 1,277,095 1,277,095 595,100 4,426,886
40 2027 1,340,950 1,340,950 1,340.950 62S,400 4,643,2S1
41 2028 1.407,990 1,407,998 1,407,99E 656.700 4,880,693
42 2029 1,478,393 1,473,393 1,473,393 689,500 5,124.693
43 2030 1,552,318 1,552,318 1,552,318 1,552,31E 1,209.270
44 2031 1,629.933 1,629,913 1,0,933 1,629,933 6,519,734
4S 2032 1,711,430 1,711,430 1,711.430 1,711,430 6,845.720
CAPITALIZED VALUE 17,114,301 17,114,301 17,114,301 17,114,301 69,457,202
NPV GROUND LEASE PAYMENT 161 $10,060,GOO
SOURCE: WSER NARSTON ASSOCIATES, INC.
JULY, 195E
TABLE 8-2
SALES 4 PROPERTY TAX PROJECTION- PHASE I COHNEACIAL
MATERFRONT CONNERCIALIRES]DENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
----------ROOM---------- ----FOOD 1, BEVERAGE---- ---------------TOTAL-------------- ----DEVELOPER REBATE----
SALES TOT SALES SALES TAX TI TOT SALES TAX TI TOT
YEAR
i 1988
2 1989
3 1990
4 1991
5 1992 7,091,458 425,487 4,964,021 49,640 271,423 425,487 49,640
6 1991 6,066,533 483,992 5,646,573 56,466 276,851 483.992 56,466
7 1994 6,860,777 53J,647 6,202,544 62,025 282,388 $31.647 62,025
8 1995 9,527.457 574,647 6,704,220 67,042 288,036 524,647 67.042
9 1996 10,343,654 620,619 7,240,558 72,06 293,796 620,619 72,406 826,136 1,524,956
!0 1997 10,860,836 651,650 7,602,586 71,026 299,672 661,650 76,026 149,836 325,825
IJ J990 11,403,070 684,233 7.902,715 79,827 305,666 684,233 79,027 152,833 342016
12 1999 11,974.072 718,444 81381'851 83,619 311,779 718,444 83,819 155,890 359,222
J3 2000 12,572,776 754,367 0,800,943 88,009 318,015 754,367 881009 159,007 377,183
14 2001 MAIMS S 792,085 9.240,990 92,410 324,375 792,085 92.410 162,J88 396,042
15 2002 13,861'485 031,689 9,703.040 97,030 330,863 83J,689 97,030
16 2003 14,554,560 873,274 10.108,192 101,882 337,480 073,274 101,882
Jl 2004 15,202,208 916,932 10.697,601 J06,976 344,229 916,937 106,976
J8 2005 16,046,402 962,784 11,232,481 112.325 351014 962,784 112.325
19 2006 16,040,722 1,OJ0,913 JJ,794,105 117,941 358.136 1,0JO,923 1J7,94J
20 2007 17,691,158 1,061,469 12,303,811 123.038 365,299 1,061,469 123,830
21 2008 J0,575,716 1,1J4,543 13,003,001 J30,030 372,605 1,114,543 130,030
22 2009 19,504,502 1,170,270 13,653.151 136,532 380,057 1,170,270 136,532
23 20JO 20,479,727 1,228,784 14,335,809 143,358 387,658 1,228,784 143,358 '
24 2011 21,503,713 1,290,223 15,052,599 150,526 395,411 1,290,223 150,526
25 2012 22,570,099 J,354,734 15,005,229 158,052 403,320 1,354,734 150,052
26 2013 23,707,644 1,422,471 16,595,491 165,955 411,386 1,422.471 165,955
27 2014 24,893,236 1,493,594 17,425,265 174,253 419,614 1,493,594 174,253
28 2015 26,137,898 1,568,274 18,296,528 182,965 428,006 1,568,274 182,965
29 20J6 27,444,793 1,646,608 J9,211,355 J92,J14 436,566 1,646,180 192,114
30 2017 28,617,032 1,729,022 20,171,923 201,719 445,297 1,)29,022 201,719
31 2018 30,257,804 1,8J5,473 21,180,519 211,805 454,203 J,8J5,473 211,805
32 2019 31,770,778 1,906,247 22,239,545 222,395 463,207 1,906,247 222,395
33 2020 33,359,317 2,001,559 23,351,522 233,515 472,553 2,01,559 233,515
34 2021 35,022,283 2,101,637 24,519,098 245,191 482,004 2,101,137 245,191
35 2022 36,778,647 2,206,719 25,745,053 257,451 491,644 2,206,)19 257,451
36 2023 38,617,579 2,317,055 27,032,306 270,323 501,477 2,317,055 270,323
37 2024 40,549,458 2,432,90B 20,383,921 293,839 511.507 2.432,908 283,839
38 2025 42,575,881 2,554,553 29,803,117 298,031- 521.737 2,554,553 298,031
39 2026 44,204,675 2,6B2,281 31,293.273 312,933 532,172 2,682,281 312,933
40 2027 46,939,909 2,816,395 32,857,936 329,579 542,815 2,816,395 328,529
41 2028 49,286,905 21957,214 34,500,633 345,008 553,671 2,957,214 345,000
42 2029 51,751,250 3.105,075 31,225,075 362,259 564,74S 3,105,075 362,259
43 2030 54,338,812 3,260,329 38,037,169 380,372 576,040 3,260,329 380,372
44 2031 57,055,753 3,423,345 39,939,027 399,390 587,561 3,423,345 399,390
45 2032 59,908,541 3,594,512 41,935,978 419,360 599,312 3,594,5J2 419,31.0
SOURCE: GEYSER MARSTON ASSOCIATES, INC.
JULY, J988
TABLE 6-3
SALES 1 PROPERTY TAX PROJECTION- PHASE 11 COMMERCIAL
MATEBERONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
---------BOON---------- ----EODD L BEVERAGE---- ---------------TOTAL-------------- ----DEVELOPER REBATE----
SALES TOT SALES SALES TAX TI TOT SALES TAX Tl TOT
YEAR
J988
2 1989
3 1990
4 1991
5 1992
6 1993
7 1994
8 1995
9 J996 8,619,7J1 517,183 6,033,798 60,338 329,916 517,193 60,338
10 1997 9,804,922 588,295 6,863,445 68,634 336,514 588,295 68,634
11 1998 10,770,329 641,220 7,539,231 75,392 343,244 646,220 75,392
12 1999 11.087,104 665.226 7.760,973 77,610 350,109 665,226 77,610
13 2000 12,572,776 754,367 8,800,943 69,009 357.111 7$4,367 88,009 1,004,174 1,835,633
14 2001 13,201,415 792,085 9,240,990 92,410 364,254 792,085 92,410 182.127 396,042
15 2002 13,661,485 931,689 9,703,040 97,030 371.539 031,689 97,030 JR5,769 415,845
16 2003 14,554,560 973,274 10,188,192 101,982 370.920 873,274 101,882 189,485 436,631
17 2DO4 15,282,288 916,937 10,697,601 106,976 386,549 916,937 106,976 193,274 458.469
18 2005 16,046,402 962,784 11,232,481 112,325 394,280 962,284 112,325 197,140 481,392
19 2006 16,64B,722 1,010,923 11,794.105 117,941 402,116 1,010,923 117,941
20 2007 17,691,158 1,061,469 12,383,811 123,633 410.209 1,061,469 123,038
21 2009 10,575,716 1,114,543 13,003,001 13D,030 419,413 1,114,543 J30,030
22 2009 19,504,502 1,170,220 13,653,151 136,532 426,781 1,170,270 136,532
23 2010 20,479,727 1.228,784 14,335,809 143,358 435,317 1,228,704 143,358
24 2011 21,503,713 1,290,223 15,052,599 150,526 444,023 1,290,223 150,526
25 2012 22,578,899 1,354,734 15,805,229 158,052 452,904 1,354.734 158,052
26 2013 23,707,644 1,422,471 16,595.491 165,955 461,962 1,422,471 165,955
27 2014 24,893,23E 1.493,594 17,425,265 174.253 471,201 1,493,594 174,253
28 2015 26.137,998 1,568,274 18,296,528 182,965 490,625 1,568,274 182,965
29 2016 27,444,793 1.646.688 19,211,35S 192,114 490,238 1,646,688 192,114
30 2017 28,817,032 1,729.022 20.171,923 201,719 500,042 1,729,022 201,719
31 2018 30,257,884 1,015,473 21,180,519 211,805 510,043 1,915,473 211,805
32 2019 31.770,778 1.906,247 22,239,545 222,395 520,244 1,906,247 222,395
33 2020 33,359,317 2,001,559 23,351,522 233.515 530,649 2,001,559 233,515
34 2021 35,027,283 2,101,637 24,519,093 245,191 541,262 2,101,637 245,191
35 2022 36,778,647 2,206,719 25,745,053 257,451 552,087 2.206.719 257,451
36 2023 38,617,579 2,317,055 22,032,306 270,323 563,129 2,317,055 270,323
37 2024 4D,540,458 2,432,900 28,383,921 283,039 574,391 2,432,908 203,839
36 2025 42,575,881 2,554,553 29,803,117 298,031 585,819 2,554,553 298,031
39 2026 44,704,675 2,682,281 31,293,273 312,933 597,597 2,682,281 312,933
40 2027 46,939,909 2,816,395 32,857,936 320,579 609,549 2,811,395 328,579
41 2028 49,286,905 2,9$7,214 34,500,833 345,00B 621,740 2,957,214 345,008
42 2029 51,751,250 3,105,07S 36,225,875 362,259 634,175 3,105,075 362,259
43 2030 54,330,812 3,260,329 38,037,169 380,372 646,858 3,260,329 380,372
44 2031 57,055,753 3,423.345 39,939.027 399,390 659,795 3,423,345 399,390
45 2032 59,908,541 3,594,512 41,935,97E 419,360 672.991 3,594,512 419,360
SOURCE: GEYSER MARSTON ASSOCIATES, INC.
i JULY, 1988
TABLE 9-4
SALES X PROPERTY TAX PROJECTION- PHASE III COMMERCIAL
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
NUNTINCTON BEACH, CALIFORNIA
---------ROOM---------- ----FOOD X BEVERAGE---- ---------------TOTAL-------------- ----DEVELOPER REkATE----
SALES TOT SALES SALES TAX TI 101 SALES TAX TI TOT
YEAR
1 1986
1 1989
3 J990
4 1991
5 J992
6 1993
7 1994
8 1995
9 1996
10 1997
11 1998
12 J999
13 2000 10,477,313 628,639 7,334,119 73,341 401,015 620,639 73.341
J4 2001 11,917,944 715,072 6,342,511 03,426 409.035 715,077 93,426
15 2002 13,091,403 785.484 9.163,982 91,640 417,216 785,404 91,640
16 2003 13.476,444 809,587 9.433,511 94,335 425,560 808,587 94,335
17 2004 15,282,208 911,937 10,197,601 106.976 434,071 916.937 106,976 1,220,579 2,231,223
18 2005 16,046.402 962,784 11,232,481 112,325 4421753 962.n4 112,325 221.376 481.392
19 2006 16,848,722 1,010,923 11,794,105 J17,941 451,600 1,010,923 117,94J 225,804 505,462
20 2007 17,691,158 1,061,469 12,383,811 123,838 460,640 1,061,469 123,83E 250.320 530,735
21 2008 18,575,7J6 1,114,543 J3,003,081 130,030 469,653 1,114,543 130.030 234.926 557,21J
22 2009 19,504,502 1,170,270 13,653,151 136,532 479,250 1,170.270 136,532 239,625 585,135
23 2010 20,479,727 1,228,784 14,335,809 143.358 488,835 1,228,784 143,358
24 2011 21,503,713 1,290,223 15,052,599 150,526 490,611 1,290.223 150,S26
I 25 2012 22,98,899 J,354,734 15,805,229 J58,052 508,584 1,354,734 158,052
26 2013 23,707,044 1,422,471 16,595,491 165,955 51B,755 1.422,471 165,955
27 2014 24,893,236 J,493,594 17,425,265 174,253 $29,130 1.493,594 124.253
28 2015 26,137.098 1,568.274 18,296,528 192,965 539,713 1,569,274 182,965
29 2016 27,444,793 J,646,6BO 19,211,355 192,114 $50,507 1,646,688 192,114
30 2017 20,817,032 1.729,022 20,171,923 201,719 561,517 1,729,022 201.719
31 2018 30,257,884 1,815.473 21,180,519 211,80S 572,748 1,015,473 211,805
32 2019 31,720.778 1,906,247 22,239,545 222.395 584,203 1,906,247 222,395
33 2020 33,359,3J7 2,001,559 23,35J,522 233,5J5 595,097 2,001,559 233,515
34 2021 35,027,283 2,101,637 24,519,098 245,191 607,805 2,101,637 245,191
35 2022 36,778,647 2,206,719 25,745,053 257,451 619,961 2,206,719 257,451
36 2023 38.S17,579 2,317,055 27,032,306 270,323 632,360 2.317,055 270,323
37 2024 40,548,458 2,432,908 28,383,92J 283,039 645,007 2,432,908 203,039
38 2025 . 42,575,081 2,554,553 29.803.117 298,031 157,907 2,5S4,553 298,031
39 2026 44,704,175 2,682,201 31.293,273 312,933 671,065 2,682,281 312,933
40 2027 46,939,909 2,016,395 32,857,936 328,579 684,487 2,816,395 328,579
41 2028 49,286.905 2,957,214 34,500,833 345,008 698,176 2,957.214 345,008
42 2029 51.751,250 3,105,075 36,225,875 362,259 712,140 3,105,075 362,259
43 2030 54,338,8J2 3,260,329 3B4O37,169 380,372 726,303 3,260,329 380.372
44 2031 57,055,753 3,423,345 39,939,627 399,390 740,910 3.423,345 399,390
45 2032 59,908,541 3,594,512 41,935,970 419,360 755,729 3,594,512 419,360
;
SOURCE: XEYSER MARSTON ASSOCIATES, INC.
JULY, 1988
TABLE B-S
SALES I PROPERTY TAX PROJECTION- PHASE IV COMMERCIAL
RATERFRONT CONMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
----------ROOM---------- ----FOOD B BEVERAGE---- ---------------TOTAL-------------- ----DEVELOPER RE6ATE----
SALES TOT SALES SALES TAX TI TOT SALES TAX TI TUT
YEAR
1 1988
2 1989
3 1990
0 1991
5 1992
6 1993
7 1994
8 199S
9 1996
10 1997
11 J998
12 1999
13 2000
14 2001
15 2002
16 2003
17 2004 12,735.240 764,114 8,9J4,666 89,147 487,436 764,1J4 89,147 243,713 382,057
18 2005 14.486,335 869,180 10,140,435 101,404 497,185 869,180 101,404 20,592 434,590
19 2006 15,912,682 954,761 JJ,138,017 111,389 507,128 954,761 J11,389 253.564 477,380
20 2007 16,380,702 982,042 IJ,466,491 114.665 517,271 $82,842 114,665 258,635 491,421
21 2008 18,575,716 1,114,543 13,003,001 130,030 527,616 1014,543 130,030 263,808 557,27J
22 2009 19,504,502 1,170,270 13,003,001 130.030 538,169 1,170,270 130,030 269,084 585,135
23 2010 20,479,727 1,228,784 13.653,151 136,532 548,932 1,228,784 136,532 614,392
24 2011 21,503,713 1,290.223 14,335,009 143,350 559.911 1,290.223 143,358 645,111
25 2012 22,578,899 J,354,734 15,052,599 ISO.% 57J,109 J,354,734 150,526 677,367
26 2013 23,707,844 J,422,471 15,805,229 159.052 582,531 1,422,471 158.052 711,255
27 2014 24,893,236 1,493,594 J6,595,491 J65,955 594,182 1,493,594 165,955
28 2015 26,137,898 1,568,274 17.425.265 174,253 606,065 1,568,274 174,253
29 2016 27,444,793 J,646,680 18,296,528 182,965 618,187 1,646,108 J82,965
30 2017 28,817,032 1,729,022 19,211,355 192,114 630.550 1,729,022 192,114
31 2018 30,257,884 J,815,473 20,17J,923 201.719 643,161 1,81S,473 201,719
32 2019 31,770,778 1,906.247 21,180,519 211,805 656,025 1,906,247 211,805
33 2020 33,359,317 2,001,559 22,239,545 222,395 669045 45 2,001,559 222,395
34 2021 35,027,283 2.101,637 23,351,522 233,515 682,528 2,101,631 233,515
35 2022 36,778.647 2,206,719 24,519,098 245.191 696,178 2,206,1J9 245,191
36 2023 39,617,579 2,317,055 25,245,053 257,451 210,102 2,317,055 257,451
37 2024 40,548,458 2,432,908 27,032,306 270,323 724.304 2,432,900 270.323
38 2025 42,575,801 21554,553 28,383,921 283,839 738,79D 2,554,553 283,039
39 2026 44,704,175 2,682,281 29,803,117 290,031 753.566 2,682,281 298,031
40 2027 46,939,909 2,816,395 31,293,273 312,933 768,637 2,816,395 312,933
41 2028 49,286,905 2,957,214 32,857,936 320,579 7B4,010 2,957,214 328,579
42 2029 51,751,250 3,105.075 34,500,833 345,008 799,690 3,105,075 345,008
43 2030 54,338,812 3,260,329 36,225,875 362,259 815,6B4 3,260,329 362,259
44 2031 57.055,753 3,423,345 38,037,169 380,372 831,998 3,423,345 390.372
45 2032 59,900,541 3,594,512 39,939.027 399,390 848,638 3,594,512 399,390
SOURCE: GEYSER MARSTON ASSOCIATES, INC.
JULY, 1980
i
U �
APPENDIX C
COMMERCIAL COST/REVENUE PROFORMAS
TABLE C-1 kl/
ESTIMATED DEVELOPMENT COSTS
WAIERFRONT HOTEL
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
DIRECT
OH-SITES 152,000 SF 0 13.00 /SF :456,000
BUILDING SHELL 296 ROOKS 0 S50,Ot'O /ROOM 1418001OUG
FURNITURE, FIXTURES Ie EDUIPHEHT 296 ROOMS 0 $151000 AM 4,440,000
PARKING 326 SPACES 1 iS,500 /SPACE 1,793,ODJ
TOTAL DIRECT COSTS :21,489,000
INDIRECT
ARCHITECTURE AND ENGINEERING
SHELL 4.00Z DIRECT COST LESS FFE'S :402,009
FFE DESIGN 8.001 DIRECT COST FFE'S 355,000
CITY FEES 4.001 DIRECT COSTS 860,003
INTE01 DURING CONSTRUCTION 2,143,000
FINANCING FEES 0.025 POINTS 698,000
LEGAL/CLOSING ].DOS DIRECT COST 215,000
WORKING CAPITAL ALLOWANCE 300,003
PREOPENING EXPENSES ALLOWANCE 250,000
FRANCHISE FEES ALLOWANCE 50,000
TAXES/INSURANCE 1.001 DIRECT COST 215,000
DEVELOPMENT MANAGEMENT 2.0016 DIRECT COST 430,000
CONTINENCY 3.00I DIRECT COST 645,000
TOTAL INDIRECT COSTS $6,843.000
TOTAL DEVELOPMENT COSTS :28,337.000
OR SAY
# EXCLUDES SOIL CORRECTION COSTS
t.B,3a0,003
SOURCE: GEYSER MARSTON ASSOCIATES, INC.
JULY, 1988
TF.EiE C-:
EOTE! E!'RYEf '
9,111PFRONT CCfrnERCIAL/RESIE'EHTIAL PROJECT
RMING70d BEACH, CALIFEMIA
tit
VMEL KMAY kKTE 9EEEEf(C RATE
FOUR SEASONS 1160 - 1230 1119 - 1125
QDEk SAILS 177 Its
l:l
HTAT7 EDGENATER $103 - 1109 359 - 197
12)
HYATT REGENCY 1IN - 1155 10 - WS
(SI
NEWPORT nARRIOTT 1109 - 114S 1.9
NEWPORTER Ills 19s
CdEEh AARY 179 - 1110 179 - 1115
RAMADA REHMIMACE 3120 - 1140 374
ill
rOST IMCATED WEEKEND RATES ARE SUEJEET TO AVAILAM111.
(21
HIGHER RATE INCLUDES BREAKFAST AHO COCyT„ILS.
(3)
INCLUDES BREAKFAST.
SOURCE: KEYSER 1tARSTGN ASSOCIATES, W.
JANUARY, 1983
TABLE C-3
E571MATED NET INCOHE III STABILIZATION
WATERFRONT HOTEL
WATERFRONT COMMERCIALJRESIOENIIAL PROJECT
HUHIINGTON BEACH, CALIFORNIA
INCOFE
HOTEL
ROOMS 296 ROOMS $95.00 /ROOH 17,3E9,900
FOOD I BEVERAGE 4D.00I GROSS SALES 5,374,500
TELEPHONE 3.001 GROSS SALES 403,100
OTHER 2.001 GROSS SALES 268.700
GROSS SALES $I3,436,200
EXPENSES
DISTRIBUIED
ROOK 22.001 ROOM SALES tI,625,800
FOOD t BEVERAGE 75.001 FOOD I BEVERAGE SALES 4,030,900
TELEPHONE 9D.00I TELEPHONE SALES 362,800
OTHER O.00I OTHER SALES 0
TOTAL DISTRIBUIED EXPENSES 16,019,500
UNDISTRIBUTED
ADMINISTRATION 7.50I GROSS SALES 11,007,700
MARIETING 2.701 GROSS SALES 362,800
UTILITIES 5.001 GROSS SALES 671,800
MANAGEMENT 4.001 GROSS SALES 537,400
MAINTENANCE 4.001 GROSS SALES 537,400
TOTAL UNDISTRIBUTED EXPENSES 13,117,100
FIXED EXPENSES
TAXES AND INSURANCE 1.251 DEVELOPMENT COSIS t354,300
CAPITAL RESERVE 2.501 GROSS SALES 335,900
$690,200
TOTAL FIXED EXPENSES
GROSS OPERATING PROFIT 3,609,400
(LESS) MANAGEMENT INCENTIVE FEE 10.001 GROSS OPERATING PROFIT 360,900
53,248,503
OR SAY
13,249,000
SOURCE: GEYSER MARSTON ASSOCIATES, INC.
JULY, 1988
ESTIMATED LAND VALUE
HArEAFRONT HOTEL
NATERFRONT COMKIRCIALJRESIDENTIAL PROJECT
HUNTIHGION BEACH, CALIFORRIA
--------------------------------- -RETURN TO EDUITY-----------------------------------
HET INCOPIE BEFORE DEBT SERVICE t3,219,000
AVAILABLE FOR DEBT SERVICE 1.29 COVERAGE 2,707,SOO
NET INCOME AFTER DEBT SERVICE S541,S00
NAXIMUN DEBT 10.981 CONSTANI t24,08,000
VARRANIED INVESTMENT
EE17 S24,658,00D
EQUITY 10.001 RETURN S1415,D00
TOTAL VARRANTED INVESTRENT t3a,073,000
ESTIMATED LAND VALUE
WARRANTED INVESTMENT t30,073,000
(LESS) DEVELOPMENT COSTS 29,340,000
RESIDUAL LAND VALUE AHD CARRYING COSTS :1,731,000
RESIDUAL LAND VALUE t115001000
-----------------------------------VALUE UPON COMPLETION-----------------------------------
NEI INCOME BEFORE DEBT SERVICE 1312491000
CAPITALIZED VALUE 10.001 32,490,000
(LESS) DEVELOPMENT COSTS 28,340,ODO
(LESS) COST OF SALE 3.001 VALUE 975,000
ILESS) DEVELOPMENT PROFIT 12.001 VALUE 3,899,000
RESIDUAL LAND VALUE AND CARRYING COSTS 4724,000)
RESIDUAL LAND VALUE ($630,000)
SOURCE; IETSER MARSTON ASSOCIATES, INC.
JULY, 1988
�wj �
TABLE C-5
ESTIMATED DEVELOPMENT COSTS
VATERFRONT SPECIALTY RETAIL CENTER,
WATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
DIRECT COSTS
SHELL 75,000 SF B 150.00 /SF 33,750,000
TENANT IMPROVEMENTS
RESTAURANT 20,000 SF B $50.00 /SF I,00D,000
SHOPS 55,000 SF 0 120.00 /SF 1,100.000
LAHQSCAPINC/ON-SITES 165,528 Sf I S5.00 iSF 829,000
STRUCTURED PARKING 475 SPACES a 5,500 /SPACE 2,613,000
TOTAL DIRECT COSTS $9,291.000
INDIRECT
ARCHITECTUFE t ENGINEERING 4.00: DIRECT COSTS 1372,000
CITY PERMITS I FEES 4.001 DIRECT COSTS 3721000
INTEREST DURING CONSTRUCTION
BUILDING 595,200
NPV NEGATIVE CASH FLOWS 1,30,000
FINANCING FEES/CLOSING COSTS 0.025 POINTS 305,000
LEGAL/ACCOUNTING 1.501 DIRECT COSTS 139,000
LEASING FEES 20.001 GROSS INCOME 372,000
TAMES/INSURANCE 1.50: DIRECT COSTS 139,000
DEVELOPMENT MANAGEMENT 2.001 DIRECT COSTS IT6,000
CONTINGENCY 3.001 DIRECT COSTS 279,000
TOTAL INDIRECT COSTS $4,106,200
TOTAL DEVELOPMENT COSTS t131397,200
OR SAY
113,397,000
SOURCE: kEYSER MARSTON ASSOCIATES, INC.
JULY, 19E8
TABLE C-6
ESTIHAIED NET INCOME
NATERFRONT SPECIALTY RETAIL CENTER
VATERFRO111 COHHERCIAL/RESIDENTIAL PROKCI
HUNTIIIGTON BEACH, CALIFORNIA
INCOME
RESTAURANT 20,000 SF 1 $27.00 /SF 540,000
SHOPS 55,000 SF r ;24.00 /SF 1,320,000
GROSS INCOME sl,$60,000
(LESS) VACANCY i COLLECTION 5.001 GROSS INCOME 9;,Op0
GR05S EFFECTIVE INCOME $1,747,000
OPERATING EXPENSES
11„NACEMEHT 5.00: GROSS EFFECTIVE INCOME ieC,40U
HARIETING/PROHOTIOH ALLOWANCE 50,000
CAh REIMBUKEMENTS 3,750 SF O 13.00 /SF 11,300
RESERVES 75,000 SF R 10.15 /SF 11,300
TOTAL EXPENSES 1161,000
NET OPERATING INCOME il,t66,000
OR SAY
tl,606,C00
SOURCE: XEYSER MARSTON ASSOCIATES, INC.
JULY, 1980
TABLE C-7
RESIDUAL LAND VALUE
WATERFRONT SPECIALTY RETAIL CENTER
IIATERFRONI COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON BEACH, CALIFORNIA
-----------------------------------RETURN TO foully-----------------------------------
NET INCOME BEFORE DEBT SERVICE t1,60o,000
AVAILABLE FOR DEBT SERVICE 1.20 COVERAGE 1,3i3,04O
NET INCOME AFTER DEBT SERVICE 1263,000
CONVENTIONAL FINANCING 10.9C: CONSTANT tl2ja6,000
VARRANIED INVESTMENT
DEBT 112,186,000
EQUITY 8.001 RETURN 3,350,000
TOTAL NARRANTED INVESTMENT 115,536,000
ESTIMATED LAND VALUE
HARRAHTFD INVESTMENT SJ5,531,000
(LESS) DEVELOPMENT COSTS 13,392,000
RESIDUAL LAND VALUE AND CARRYING COSIS $2,139,000
RESIDUAL LAND VALUE 11,926,000
111.64 /SF
------------------------------VALUE UPON COMPLETION-----------------------------------
NET INCOME BEFORE DEBT SERVICE 1116061000
CAPITALIZED VALUE 9.001 17,844,000
(LESS) DEVELOPMENT COSTS 13,3911000
(LESS) COST OF SALE 3.001 VALUE 5351000
(LESS) DEVELOPERS PROFIT 11.001 VALUE 1,963,000
RESIDUAL LAND VALUE AND CARRYING COSTS $1,949.000
RESIDUAL LAND VALUE $1,755,000
;10.d0 /SF
SOURCE: GEYSER MARSION ASSOCIATES, IIIC.
JULY, 1908
APPENDIX D
RESIDENTIAL REVENUES PROJECTIONS
• Vr 7I1
TABLE D-1
RESIDENTIAL LAND PAYMENT
NATERFRONT COMMERCIAL/RESIDENTIAL PROJECT
HUNTINGTON HACH. CALIFORNIA
UNITS IN ?RICE (LESS) LSE110 NET
YEAR PHASE PER WIT TOTAL INT/UNIT TOTAL PROCEEDS
1 J989 33,480 0 0
2 1939 36,153 0 0
3 J990 0 39,05J 0 0
4 1991 42,175 0 0
5 1992 45,549 0 0
6 1993 431193 0 0
7 1994 450 53,129 23,907,849 37,954 17,079,433 6,820,366
8 1995 57,379 0 0
9 1996 61,969 0 0
10 1991 66,927 0 0
1J 199E 224 72,231 16090,90J 58,350 0,070,502 3,120,399
12 1999 79,063 0 0
13 2ODO 84,308 0 0
14 2001 91,053 0 0
15 2002 223 98,337 2J,929,205 80,101 19,758,002 2,171,123
16 2003 106,204 0 0
17 2004 J14,701 0 0
13 2005 123,377 0 0
19 200E J33,707 0 0
20 2007 144,490 0 0
21 2003 156,049 0 0
22 2001 168,533 0 0
23 2010
24 2011
25 2012
26 2011
27 2014
23 20IS
29 2016
30 2017
31 2018
32 2019
33 2020
34 2021
35 2022
36 2023
37 2024
33 2025
39 2026
40 2027
Al 2028
42 2029
43 2030
44 2031
45 2032
11PV LARD PAY1{ENT 8 8Y 127,C10,000
NP4 LEASEHOLD INTEREST PAYMENT 8 82 21,000,000
NPY EET LAND PAYMENT R 8: S6,010,000
SOURCE: YEYSER HARS70H ASSOCIATES, 1110.
JULY, 1903
TIME 9-2
F80FEITT TAs IR03fCTIUM-8E5T4ERTII:
VAIUM NI T!r"ERC1A!/FE510eMTlA! P197ECT
KNIINSTR MEN. CA11FORMIA
----------------FAOFEITI TAs------ -- TOME OE9 IFIATE FEMATMIMG
P;1ASE 1 .FFASE 11 PHASE 111 FRASE I9 TI 10 TI FAY EACH T[
TEAR PHASE 01 2009
1 1968
2 1989
3 1"0
4 1991 4 0 0
5 1992 0 0 0
6 1"1 0 0 0
7 5994 0
8 1995 1 590,966 5g8,g 528.W
9 M 0 600.641 i00,613 600.641
IO 1997 0 WAS$ 612.656 61?.656
Al IM 0 621,909 624,909 624 M9
12 1999 0 637,407 370.643 1,008,050 1,977.669 069,6181
13 20M 0 6SO.I56 370.056 1.021,211 325,079 703.134
14 Ml 1 663,159 385,611 1.048,776 331,571 717.196
1S 2002 0 676.422 393.329 1.069,131 339,211 731,540
16 2003 0 689.950 401,191 467,941 1.559.088 1,543.366 15,721
17 2004 0 103.749 409,?20 477,T00 1.5901269 795,135 795,135
18 2005 0 117,824 417,404 MAN 1.622,075 452.125 1.169,950
19 2006 0 732,I81 425,752 496,S83 11654.516 462.168 1,193,349
20 2007 0 706'"1 434.261 SUMS 1.617,607 470,391 1,217,215
21 1008 1 761.761 412,953 $16,645 1,721,359 4T7.799 11241,560
22 2009 0 7761996 451,812 525,978 1.755,796 263,489 11492.297
23 2010 0 192.534 $60.841 537.511 1,790.902 I,7?0,902
24 2011 0 808.387 471,06S 541.269 1.926.720 1,826.720
23 2012 1 070.354 479,466 559.233 1.863.254 1,863,?SI
26 2011 6 041.046 189,056 $70.413 1,900,519 11900.519
27 2014 0 1S1,866 491.137 $91.8616 1.938,530 11930,530
28 2015 0 17S.024 508,113 $13,461 10977.300 11977,300
29 2016 8 M.524 311."0 605,332 2.016,846 2.0T6,866
30 1011 1 910,375 529,369 $17,439 2.857,183 2.057,183 Ir
31 2018 0 921.512 339.951 629,T18 2,098.321 2,048,327
32 2019 0 917,154 WAS 642,313 7.140.293 2.110.291
33 2020 0 966.097 $62.771 655,231 2.213,097 2,113.099
34 MI 0 985.419 573.007 $62.336 2,2:6,761 2,216.761
75 1022 0 1.003,127 584,467 681,102 2,2711296 2,271,?96
36 2021 1 11025.230 596.1% 675,336 21316,122 7.316,727
37 2024 1 11045.734 600,079 7091213 2,363,057 2,:b3,057
38 2025 1 1466.649 621.241 723.121 2,410.119 2,410.318
19 2026 1 LOOM? 632,646 1 ."? 2.451.521 21151.524
40 ?027 0 11109.742 64$.290 752,655 21507,695 2,507.61)5
41 2028 1 1.131,937 i58.204 767.m 2,S57,119 2.557.849
42 2029 1 1.154.57$ 671.368 783,062 2.609.0% 21609,006
41 2030 0 1.177.147 694,716 ?",121 2.661,196 21661.106
44 N3T 1 1.201.220 i91,492 111,697 2,11�,409 2.71014"
45 2032 / 1,225.205 71?,462 130.991 2.168,i91 2.768,698
MPy 1.024.721
S0010E: IIrSF1>+IRSTOI ASSfKTATE7, INC.
All 19"