APA Planning Academy
October 22, 2013
Multi-Family Risk Tolerance
John Campanella
Overview
o
Site availability and cost
o
Allowable multi-family residences
o
Parking requirements
o
Absorption – rental lease-up / sales rate
o
Financial feasibility
Site Availability and Cost
o
Existing Use
Residential, commercial, vacant
o
Neighborhood
Multi-family, commercial, historic resources
o
Ownership
Private owner, professional company
LOWER LAND COST PER RESIDENCE EQUALS LOWER MONTHLY RENTS
Location (Examples)
Comm'l / Manufacturing (C-M)
Land Cost
Land Cost
Per Sf
Per Acre
Land Cost Per Residence
at Various Residences Per Acre
20
40
60
$75
$3,267,000
$163,350
$81,675
$54,450
Multi-Family Residential
$100
$4,356,000
$217,800
$108,900
$72,600
Office / Retail (C-2)
$150
$6,534,000
$326,700
$163,350
$108,900
Location (Examples)
Comm'l / Manufacturing (C-M)
Land Cost
Land Cost
Per Sf
Per Acre
Monthly Rent Example (Two Bedroom Unit)
at Various Residences Per Acre
20
40
60
$75
$3,267,000
$
3,308 $
2,627 $
2,400
Multi-Family Residential
$100
$4,356,000
$
3,761 $
2,854 $
2,551
Office / Retail (C-2)
$150
$6,534,000
$
4,669 $
3,308 $
2,854
Allowable Multi-family Residences
o
Zoning
o
Residences allowed
o
Number of stories allowed
o
Height, set-backs, open space
o
Size of site / ability to merge sites
TOTAL COST SAVING - THREE VERSUS TWO RESIDENTIAL STORIES
Two Residential Stories
ROOF
Living
Living
Living
$200,000
Three Residential Stories
ROOF
Living
Living
Living
Parking
Parking
LAND
LAND
Total
Per Residence
Percent
$650,000
$650,000
Add:
Third Residential Story
$1,300,000
$200,000
$550,000
$500,000
$450,000
$1,500,000
$650,000
$200,000
$500,000
100%
31%
77%
Third Level Added - Cost is for incremental living space (floor and walls) and parking.
Third Level Added - Allows for price differentiation due to desirability of top residential story.
ASSEMBLING UNDERUTILIZED SITES
INCREASING NET SF TO DEVELOP
LOWERING COST PER RESIDENCE
Three Separate
6,000 SF
Underutilized
Sites
50'
10'
30'
Versus
50'
10'
10'
30'
Three Assembled
18,000 SF
Underutilized
Sites
50'
10'
10'
30'
150'
10'
10'
130'
10'
10'
120' 100'
10'
Gross SF
6,000
6,000
6,000
Gross SF
18,000
Net SF
3,000
3,000
3,000
Net SF
13,000
50%
50%
50%
72%
Parking Requirements
o
AUD areas – minimum 1 car per residence
Applicant can request more
o
1 car per residence lowers cost per unit
Reduces structure size, bulk and scale
Reduces structure cost
Allows for more residences in same structure
Allows for more open space
Absorption – Rental Lease-up / Sales Rate
o
Rentals – lease up period (net expense)
Realistic time – rents / number of residences
Construction loan funds prior to mortgage
o
Sales – escrow closings per month
What “market bears” --- in a limited time frame
50% multi-family pre-sales for FNMA approval
Developer guarantees to repay in 18 to 24 months
o
Lenders validate up-front or will not finance
Financial Feasibility – Residences Per Acre
o
Sales – up to 36 residences / acre
o
Rentals – up to 63 / acre
o
Employer sponsored sales – up to 63 / acre
o
Cooperatives – up to 63 / acre
o
At lower density – likely luxury units
Unless owner develops or invest significant equity
Economic Comparison
Existing Variable
Density
Proposed Employer
26 u/a
62 u/a
26
56
30
Sales Price
$573 K
$372 K
($201 K)
Monthly Payment
$3,913
$2,651
($1,262)
Down Payment
10%
10%
10%
Income Needed
$134 K
$91 K
($43 K)
.99 Acre Site
Project C – Cota
Actual Units
Difference
Economic Comparison
.99 Acre Site
Project C – Cota
Actual Units
Cost
Monthly Payment
Down Payment
Income
Employer/Co-op
Apartments
62 u/a
62 u/a
56
56
$305 K
$242 K
$1,847 - $2,513
$1,400 - $2,300
10%
N/A
$63K - $86K
$48K - $79K
Prior Program
Variable Density for Sale
15 - 27 dua
26 Units - Project C
797 Average SF
Sales Price Per Unit
$
600,000
$
575,000
$
550,000
$
525,000
Profits
$
500,000
Cost of Equity
$
475,000
$
450,000
$
425,000
$
400,000
$
375,000
$
350,000
$
325,000
$
300,000
$
275,000
$
250,000
$
225,000
$
200,000
$
175,000
$
150,000
$
125,000
$
100,000
$
75,000
$
50,000
$
25,000
$
573,000
Average Unit Density
Employer for Sale
37 - 63 dua
56 Units - Project C
797 Average SF
Sales Price Per Unit
($719 per SF)
$
Building / Other
372,000
($467 per sf)
Profits
Cost of Equity
$
242,000
Building / Other
Building / Other
Improved Land
Improved Land
0
Average Unit Density
Apartments
37 - 63 dua
56 Units - Project C
797 Average SF
Cost Per Unit
Improved Land
Financial Feasibility – Residence Mix
o
Rentals – considerations
60% of residences in Santa Barbara are rentals
55% of rentals are one-bedrooms
Average number of bedrooms is 1.50
o
Sales – considerations
10% of owned residences are one-bedroom
Average number of bedrooms is 2.50
o
What product do workers want and can afford?
RESIDENCES - 1 BEDROOM AND 2 BEDROOM COMPARISON
REDUCING RENTAL COST PER WORKER
1 Bedroom
Features
Add 2nd
Bedroom
2 Bedroom
Features
1 bedroom
I bedroom
2 bedrooms
1 bath
1 bath
2 baths
1 parking
0
1 parking
1 kitchen
0
1 kitchen
1 living / dining
0
1 living / dining
1 patio
0
1 patio
Interior Size
750 sf
250 sf
1,000 sf
Monthly Rent
$1,600
$2,400
One
Two
$1,600
$1,200
Likely Workers
Per Worker
Financial Feasibility – Property Priority
o
Santa Barbara is a built-out city
Underutilized properties are the opportunity
o
The owners may not want to sell
Cash flow with no debt, avoid development risk
o
Commercial Properties – great opportunity
But are expensive (cap rate) / other uses
Financial Feasibility – Mixed Use
o
AUD allows retention of the commercial SF
Can be rebuilt onsite or sold to others
o
Residential has lower parking requirements
o
Residential more valuable on upper floors
o
Commercial more valuable on ground floor
o
But compatibility issues – usage and size
Financial Feasibility – Horizontal Mixed Use
o
Redevelop a block / zone of scale
o
Housing, work space, retail, other commercial
o
Centralize parking in multi-levels for all uses
o
A “village” –La Entrada horizontal model?
o
Creatives stay in Santa Barbara / spend $$$ locally
Discussion – Horizontal Mixed Use
o
Does this help the production of housing?
o
Does this help economic development?
o
Are there other benefits?
o
Are there similar examples elsewhere?
Cota Street Site
CM Zone
C
D
E
Project C – Cota Rental
Design Team
Detty Peikert
Bob Kupiec
David Black
Cass Ensberg
Bonnie Sangster
Jaime Palencia
Project Statistics
0.99 Acres
56 Units
1,500 s.f. Commercial
59 Surface & Tuck-under Parking
31% Open Space/Landscaping
Lessons
Covered Parking makes Room for
Open Space
56 Units per Acre
Project C - Rental
Elevations/perspectives
$371,702 per unit or $1300-$2100 rent per month
Milpas Site
A
B
Project B1 – Milpas Rental
Design Team
Keith Rivera
Ellen Bildsten
Susanne Tejada
John Moyer
Project Statistics
1.54 Acres
79 Units
10,500 s.f. Commercial
79 Surface & tuck-under Res. Spaces
21 Surface & Tuck-under Comm. Spaces
20% Open Space/Landscaping
Lessons
3-4 stories = 20% on grade open space
2-3 stories = 0% on grade open space
51 Units per Acre
Project B1 – Milpas Rental
$366,400 per unit or
$1200-$1950 rent per month
Hotel Santa Barbara