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HomeMy WebLinkAbout2012-08-21; City Council; Minutes (2)MINUTES SPECIAL MEETING: CITY COUNCIL/CMWD WORKSHOP DATE: August 21, 2012 TIME: 11:00 AM PLACE: CITY ADMINISTRATION BUILDING, ROOM 173A, 1635 FARADAY The Mayor Hall called the meeting to order on August 21, 2012 at 11:00 a.m. Present: Council Members Kulchin, Packard, Blackburn and Douglas. City Attorney Ron Ball explained that the Workshop would begin as a meeting of the City Council only. Items regarding City Properties would be heard at a Joint City Council and Carlsbad Municipal Water District Board. The item regarding Desalination would be heard by the Carlsbad Municipal Water District Board. REGIONAL REPORTS Mayor Pro Tem Kulchin reported on attendance at a Regional Sanitation Agency Workshop. Consent item: On a motion by Mayor Pro Tem Kulchin, Council approved Resolution No. 2012-190, authorizing staff to close escrow and to accept a deed on an affordable condominium unit located within the Laguna Point Development. (5/0) Item: Council Priority Proiects. The following documents were distributed for this item and are on file in the Office of the City Clerk: • City Council Priority Projects, 7-10-12. The item was introduced by City Manager Lisa Hildabrand. Council asked for, and received updates/status on the following topics: • The NRG Power Plant. • Progress on Traffic Signal Synchronization. • Carlsbad Boulevard realignment. • Carlsbad Car Country signage, traffic patterns, and Specific Plan. • Village Improvements such as lighting. (City Manager Lisa Hildabrand noted that Urban Place will update the Council regarding the Village on October 2, 2012). • Alga Norte Park construction, permitting, and grading. special Meeting Workshop, August 21, 2012 • La Costa Avenue traffic. • Recreation Vehicles on Avenida Encinas. At 11:35 a.m. Mayor Hall adjourned the Meeting ofthe City Council to a Joint Meeting ofthe City Council and the Carlsbad Municipal Water District Board. Item: City's Real Estate Holdings The following documents were distributed for this item and are on file in the Office of the City Clerk/Secretary: • Memo: Executive Summary for Underutilized Property Evaluations. From Joe Garuba, Municipal Property Manager. August 14, 2012. A presentation was made to Council/Board regarding the City's Real Estate holdings. Dave Hauser, Director of Property & Environmental Management, Joe Garuba, Property Manager, and Simon Terry- Lloyd, Vice President ofthe Irving Group, La Jolla, spoke. Mr. Terry-Lloyd stated that he would describe the properties and recommendations for moving forward on four properties held by the City: • Golf Course Lot 9. • Foussat/Mission Avenue. • Golf Course Lots 4 & 5. • Buena Vista Reservoir. Council/Board asked about specific ownerships ofthe properties. Questions regarding water rights were discussed regarding the Foussat/Mission Ave. property. The Mayor/Chair called for a short recess at 12:15 p.m. and the Mayor/Chair and Council/Board returned at 12:27 p.m. Mr. Garuba asked Council/Board to direct staff to move forward on possible leases, sales or land swaps on various properties. City Attorney/General Council Ron Ball noted all decisions would return to the City Council and/or the Carlsbad Municipal Water District Board. Public Comment; Diane Nygaard asked that staff and Council/Board take another look at smaller or partial uses such as trails, buffer zones for open space and community gardens. Don Christiansen noted the "highest and best use" of these properties may be for the environment and social uses. Jay Klopfenstein stated that he was in favor of a community garden in each quadrant. Page 2 special Meeting Workshop, August 21, 2012 Gigi Orlowski, speaking on behalf of SaveVillageH.org, asked that the City consider a land swap as an inexpensive way to purchase the Village H property. She asked that Council/Board look at this possibility. Mayor/Chair Hall confirmed with staff that when these parcels return for review other uses will have been identified. City Attorney/General Council Ball confirmed that the Council/Board were clear on the concepts for the four parcels. The Council/Board concurred to direct staff to move forward on the various dispositions ofthe following parcels: • Golf Course Lot 9. • Foussat/Mission Avenue. • Golf Course Lots 4 & 5. • Buena Vista Reservoir. City Attorney/General Council noted that he will clarify the agency language. At 12:45 p.m. the Mayor/Chair adjourned from a Joint Meeting ofthe City Council to a Meeting ofthe Carlsbad Municipal Water District Board. Item: Staff Update on the proposed Carlsbad Desalination Proiect and a Proposal by the San Dlego County Water Authority to purchase desalinated water from the proiect. The following documents were distributed for this item and are on file in the Office of the City Clerk: • Power point presentation entitled "Desal Workshop" August 21, 2012. Director of Utilities Glenn Pruim gave the presentation on the status of the Poseidon Resources and County Water Authority agreement. He gave the details on the Desal Project, the agreement with the County Water Authority, costs, and member agency impacts. He also described the local supply option offered by the agreement. Mr. Pruim then discussed the Desal history in San Diego and the County Water Authority's allocation history. Mr. Pruim emphasized how the drought in the early 1990's led the County Water Authority to diversify its supplies. Mr. Pruim noted that the draft agreement between Poseidon and the Water Authority will be released on August 23. He stated that after review the following questions will be considered: • Does the CMWD Board support a Regional Desalination Project? • Does the CMWD Board want to secure a local water supply from the project? • Does the CMWD Board want to directly connect to the Desal transmission pipeline? The Board accepted the report. At 1:45 p.m. Board Member Blackburn left the Workshop. Page 3 Special Meeting Workshop, August 21, 2012 Chair Hall adjourned the meeting at 1:48 p.m. Cierk to the Council Secretary to the Board / Lorraine1\ilfw/)od, CMC Page 4 City Council Priority Projects July 17,2012 <jjf? CITY OF ^ CARLSBAD CITY OF Table of Contents ^ CARLSBAD Executive Summary 5 Strategic Focus Area: Create Quality Jobs in a New Economy 8 Business Retention 8 Talent Attraction 9 Education Hub 10 Partnerships 11 Strategic Focus Area: Sustainable Organization 12 City Mission, Vision and Values Update , 12 Best Value Services 13 Pay for Performance... 14 City Link/Customer Relationship Management 15 Technology Strategy 16 Strategic Focus Area: Balancing Land Use Policies with a Changing Community 17 General Plan Update 17 Development Standards 18 Proposed Power Plant 19 Plaza Camino Real Redevelopment 20 Strategic Focus Area: Changing Parks and Recreation Needs ......21 Needs Assessment 21 Alga Norte Community Park Construction 22 Lake Calavera Master Plan Implementation 23 Trails Master Plan 24 Open Space Acquisition 25 Carlsbad Boulevard Realignment 26 Strategic Focus Area: Livable Streets 27 State Street Roundabout 27 Pedestrian Crossings 28 Update Policies and Standards 29 CITY OF ^ CARLSBAD strategic Focus Area: Next Generation of Community Leaders 30 Leadership Academy 30 Boards and Commissions 31 Strategic Goals.... 32 Economic Deveiopment 33 Permitting Technology Upgrades 33 Car Country 34 Financial Health 35 Revenue Generation 35 Real Estate Plan 36 Redevelopment Dissolution 37 Fellowships 38 Parks, Open Space and Trails 39 Alga Norte Community Park Operating Plan 39 Transportation and Circulation 40 Traffic Signal Program 40 Resident Connection and Partnership 41 Expanded Wireless Access 41 Barrio Program 42 Water 43 Desalination • 43 Recycled Water 44 Groundwater 45 Safe Community 46 Facility Security 46 Fire Station 3 47 r?^ CITY OF ^ CARLSBAD Environmental Management 48 Agua Hedionda Creek Dredging 48 Hydroelectric Power Generation 49 Vista-Carlsbad Sewer Interceptor 50 Buena VIsta Lagoon Restoration 51 strategic Focus Areas Executive Summary ^CARLSBAD CITY OF Background The City Council held its annual goal setting workshop Jan. 17, 2012. This workshop was the first step in creating the city's action plan and budget for the coming year. The day-long discussion focused on 12 key trends affecting the city in the areas of the economy, changing demographics and technology. From this discussion, Council identified the six most important strategic focus areas for 2012-13. Based on this direction, staff began to develop detailed and measureable action plans for each strategic focus area. This was accomplished through several workshops held with key staff from throughout the organization. Success was defined for each strategic focus area as well as various strategies that could be used achieve that success. Staff then brainstormed and later refined a list of key projects that could be implemented this year to make the vision of each strategic focus area a reality. The projects are listed by strategic focus area. Key projects that are not directly associated with a strategic focus area are listed later in the report by strategic goal. Strategic Focus Areas • Create quality jobs in a new economy - The vision of this strategic focus area is to create quality jobs in the region. This will be accomplished by implementing strategies to retain businesses and help them grow, attracting talent and innovators to the city and partnering with universities and research institutions to become a hub for higher education. In addition, staff will focus on streamlining city processes for companies considering relocating to Carlsbad. Projects Include: • Business retention • Talent attraction • Education hub • Partnerships CARLSBAD •^,1 CITY OF Sustainable organization - The vision of this strategic focus area is to be an adaptable, responsive and efficient city organization that delivers cost effective, high quality services. To accomplish this, the city will retain a motivated, flexible and responsive staff and Incentivize high performance. Projects include: • City mission, vision and values update • Best value services • Pay for performance • City Link/customer relationship management • Technology strategy Balancing land use policies with a changing community - The vision of this strategic focus area is that, through the General Plan update process, the city adapts land use policies to address population and demographic trends. This will ensure that the city maintains its high standards and balances a thriving community with the need for tranquil, natural open spaces. Projects include: • General pian update • Development standards • Proposed power plant • Plaza Camino Real redevelopment Changing parks and recreation needs - The vision of this strategic focus area is to meet the community's changing recreation needs, including more options for active seniors and young people. To accomplish this staff will consider accelerating the schedule for building new parks and community centers. In addition, we will look beyond parks to an expanded trails system and open spaces that encourage a healthy outdoor lifestyle. This will be facilitated by considering opportunities for public-private partnerships to expand offerings in a cost effective manner. Projects include: • Needs assessment • Alga Norte Community Park construction • Lake Calavera Master Plan Implementation • Trails Master Plan • Open space acquisition • Carlsbad Boulevard realignment CITY OF '^CARLSBAD • Livable streets - The vision of this strategic focus area is to begin adapting Carlsbad streets to accommodate and encourage all modes of transportation, not just cars. This will be accomplished by using street design to create a sense of place and community through green spaces, medians and signage. In addition, traffic signal technology upgrades will improve traffic fiow. Projects include: • State Street roundabout • Pedestrian crossing • Updates policies and standards • Next generation of community leaders - The vision of this strategic focus area is to find ways to encourage a broader demographic, which more accurately reflects the population of Carlsbad, to participate in city leadership and governance. Projects include: • Leadership academy • Boards and commissions Other Trends During the workshop, the City Council also recognized several other issues affecting the city's future. City staff will continue to address these trends throughout the year as resources allow: • Aging population • Increased public involvement through technology • New approaches to generating revenue • Libraries in the digital age • Increased access to government services through technology • Aging neighborhoods Create Quality Jobs in a New Economy Business Retention 4^ CITY OF ^CARiSBAD Department Community & Economic Development Description Implement a business retention and expansion program to strengthen the city's strong and diverse economy and its position as an employment hub in San Diego County. This plan will include developing an annual survey of Carlsbad businesses, working with the Carlsbad Chamber of Commerce on a Business Academy, visits with Carlsbad business representatives by city leadership and staff, publishing a newsletter and informational documents, holding a brokers' meeting, developing an economic gardening plan and providing assistance to companies interested in Carlsbad. Project Lead Kathy Dodson, Economic Development Manager^,^^^^^^^,^^.__^^,^,^. Start In progress . - ..„_ Completfon June 2013 4HHHHHBHHIi Funding Included in the 2012-13 operating budget ^ Status Develop and implement an annual survey of Carisbad businesses to ^ measure business climate and determine barriers to growth. This step is expected to be completed in September 2012. Create Quality Jobs in a New Economy Talent Attraction CARLSBAD Department Community & Economic pgvgjQpj^^^^^^^^^^^'*^**'^^^^^'^^*^^*^ Description Develop a strategy focused on helping existing companies attract the talent and innovators they need to grow and compete in a global economy, including entrepreneurial talent that will start and relocate companies to Carlsbad. UPDATE Project Lead Kathy Dodson, Economic Development Manager Start In progress Completion June 2013 Funding Included in the 2012-13 operating budget ptatus Staff is currently working on developing a talent attraction pian. This step is anticipated to be completed by September 2012. s Create Quality Jobs in a New Economy Education Hub CITY OF CARLSB/^ Department Description Project Lead Start Compietion Funding Status Community & Economic Development "'^s^''^^'**'^*''"^^ Studies show that when a city becomes a hub for higher education and research, high quality jobs are created. By partnering with institutions of higher learning and research organizations a community becomes a magnet for new talent and attracts companies looking to parlay local research into marketable products and services. A plan to attract a university, research institution or similar program will be researched and implemented. Kathy Dodson, Economic Development Manager In progress June 2013 Included in the 2012-13 operating budget Determine the interests and needs of universities, research institutions or similar programs with the potential to locate in Carlsbad. This step is expected to be completed by August 2012. 10 Create Quality Jobs in a New Economy Partnerships <4f'^> CITY OF '^CARLSBAD Department CbmrtiunftyS Economic Development Description The City of Carlsbad is one of many organizations involved in local and regional economic development activities. We need to work with other economic development organizations and partner with municipalities to , A • .!•"::••. optimize Carlsbad and North County economic development efforts. Collaboration will lead to cost sharing, decreased duplication and, most Importantly, accelerated economic development in our region. Project i^fiad Kathy Dodson, Economic Development Manager Start July 2012 - :v Completion June 2013 IMH^IIMHIH^ Funding Funding to be determmed Status Work with partners and North County cities to determine whether it is better to revitalize the San Diego North Economic Deveiopment Council or develop a separate, city-led program by September 2012. 11 Sustainable Organization City Mission, Vision and Values Update ^'^N CITY OF ^ CARLSB/^ Department Office of the City Manager Description The city organization is transforming itself to more effectively meet changing community needs and expectations. This transformation will be reflected in an updated organizational mission, vision and values for the future. Project Lead Lisa Hildabrand, City Manager Start In progress Completion June 2013 '.fllljfffi}^^ Funding Included in the 2012-13 operating budget Status Program design and a communication plan will be developed by September 2012. 12 Sustainable Organization Best Value Services J^,C\7\ OF CARLSBAD Department Office ofthe Cit/ Manager Description In September 2011, the City Council accepted a framework for the Best Value Services Program, which involves conducting operational assessments of city services to identify possible opportunities to reduce ^ ; costs while maintaining quality services. The city has hired a consultant, ' . • Baker Tilly, to assist with this process. The first assessments will look at services in the Parks & Recreation and Transportation departments. The assessments will include various recommendations that will be directed to the appropriate group for direction. Project Lead Cynthia Haas, Deputy City Manager Start In progress Completion Ongoing Funding $250,000 for three assessments; funded through the Innovation Fund Status The operational assessment for the Parks & Recreation Department has been completed and will be presented to the City Council in July 2012. 13 Sustainable Organization Pay for Performance <^'^ CITY OF ^ CARLSBAD Department Description Project Lead Start Completion Funding Status Human Resources Design and implement a compensation system for CCEA represented employees that links pay to performance. Cheri Abbott, Human Resources Manager In progress January 2013 $50,000; included in the 2012-13 operating budget • Committee (consisting of CCEA and management representatives) continuing to meet with compensation consultant to discuss alternative methods of compensation delivery that include a performance component. • Options to be presented to the City Council in September 2012. 14 CITY OF '^CARLSBAD Sustainable Organization Ctty Link/Customer Relationship Management Department Office of the City Manager Description in an effort to improve customer service and more efficiently use resources the city will be implementing a centralized non-emergency contact center, known as City Link. The project will provide a single phone number to the general public for all information and government sen/ices along with website and smartphone access. Project Lead John Coates, Assistant City Manager Start in progress Comptetion January 2013 Funding One time: $600,000-$1 million; funding to be determined Ongoing: funding to be determined Status ^ Software review has been completed and a request for qualifications has been issued to determine the feasibility of using an external service provider for contact center staffing and management. The selection of a provider should be complete by September 2012. 15 Sustainable Organization Technology Strategy CITY OF ^CARLSBAD Department Informatton Technology Description An information technology strategic plan will serve as a valuable planning tool and an effective communication vehicle. A strategic plan helps the city implement relevant evolving and emerging technology, ensures that the right service and support model is in place and that the city's technology will support Its strategic business initiatives. The purpose of this plan is not only to do things better, but to make certam we are also focused on the outcomes that have the greatest impact to the city and achieves them in the most efficient way. Project Lead Information Technology Director MKKKM. Start In progress I Completion March 2.01|^^H^^^^^^||^^^^ ^|||||||||||||^^ Funding Estimated $50,O00-$75,000; included in the 2012-13 operating budget Status This project will be delayed pending appointment of an interim IT director in August. 16 Balancing Land Use Policies with a Changing Community General Plan Update Jm CITY OF ^ CARLSBAD Department Gommunity & Economic Development Description Through a comprehensive update to the General Plan and Local Coastal Program Land Use Plan, adapt city land use policies to address population and demographic trends as reflected in the Carisbad Community Vision. Maintain the city's high standards and balance a thriving community with the need for tranquil, natural open spaces. Project Lead Gary Barberio, Community & Economic Development Director Start In progress Completion April 2013 Funding Included in $1,345,000 for Envision Carisbad program; included in the 2012-13 operating budget Status • Three Land Use Concepts presented to community in two workshops in January and February 2012. • EC3 evaluated three land use concepts in March and April 2012 and made recommendation to Planning Commission on a draft Preferred Land Use Plan (Plan) « Planning Commission considered EC3 recommendation on the Plan in series of four meetings: -May 2nd (Public Input) -May 16 (PC deliberation on majority of 11 focus areas) -June 20 (Barrio area deliberation) -July 18 (PC final deliberation and recommendation to CC - PENDING) • City Council to consider Planning Commission's recommendation on the Plan in August/September 2012 17 Balancing Land Use Policies with a Changing Community Development Standards <^ CITY OF iDepartment Community & Economic Development Director Description Prepare updates to the city's Zoning Ordinance and various master/specific plans as necessary to adopt new development standards that fully implement the land use policy changes in the General Plan update. Project Lead Gary Barberio. Community & Economic Development Director Start in progress Completion December 2013, 'WW^^ Funding Induded in $1,345,000 for Envision Carlsbad program; included in the 2012- 13 operating budget Status Following acceptance by the City Council of a Preferred Land Use Plan, the ,| city's Zoning.Ordinance will be reviewed, and options for improving its organizational structure and integration with the General Plan will be ] identified. This step is expected to be complete in September 2012. 18 CITY OF Balancing Land Use Policies with ^ CARLSBAD a Changing Community Proposed Power Plant Department Property & Environmental Management Description Coordinate city's response to the proposed power plant. This includes developing and implementing technical and legal strategies at the local, state and federal level. Project Lead Joe Garuba, Municipal Property Manager Start In progress Completion Ongoing Funding included in the 2012-13 operating budget Status California Energy Commission (CEC) approved NRG's application for certification in May 2012. The city is awaiting California Supreme Court Review. CEC denied city appeal. 19 CITY OF Balancing Land Use Policies with ^ CARLSBAD a Changing Community Plaza Camino Real Redevelopment Departmerit, _ Community & Economic Deveiopment H Property & Environmental IVIanagement iHHIiHH Description Redevelop Plaza Camino Real. The first step in this process is to negotiate lease terms with Westfield for the potential partial development of the Plaza Camino Real parking lot. The second step is to complete the processing of private development applications for the larger renovation of Plaza Camino Real. Project Lead Joe Garuba^ Municipal Property Manager ^jjjjjjj^^ Start in progress Completion Ongoing VHHHB'^ Funding included in the 2012-13 operating budget Status Work with the City Attorney's office to incorporate all negotiated terms into a lease agreement which can be executed at a future date. This step is expected to be completed by May 2012. A revised Screencheck Draft EIR was submitted for staff review in June 2012. The Draft EIR is scheduled to be distributed for public review in the middle of August 2012. Public hearings on the project are expected to 20 Changing Parks and Recreation Needs Needs Assessmen t <A>CITY OF '^CARLSBAD Department Parks & Recreation Description Create an approved road map for the future development of parks and recreation programs and facilities. This will be accomplished by conducting a needs assessment which will analyze current parks and recreation programs and master planned facilities against future needs and take Into consideration the growing and changing needs of seniors. -,. Project Lead Chris Hazeltine, Parks & Recreation Director .^^^iflHHIIil^^W Start June 2012 Completion June 2013 . ^||||||||||||^^ Funding Estimated $150,000; included in the 2012-13 operating budget Status Develop a request for proposals to solicit a consultant to assist staff with analyzing current parks and recreation programs and future needs. This step will be completed in July 2012, 21 Changing Parks and Recreation Needs Alga Norte Community Park Construction CITY OF ^CARLSB/\D Department Property & Environmental Management HHHHMHHH Description Construct Alga Norte Community Park. Project Lead Patrick McGarry, Public Works Superintendent ^....^.JHHHHHi Start In progress Completion December 2013 ^HHHHMHHBIIH Funding $29.3 million; included in the 2012-13 Capital Improvement Program Status Grading and Storm Water permits were issued. Gradmg work has ^ commenced. Project design plan updates have been completed. ........ . 22 <Af>CITY OF CARLSBAD Changing Parks and Recreation Needs Lake Calavera Master Plan Implementation , Department Parks & Recreation ^IHHHHHHBHH Description Implementation of the Lake Calavera Trails Master Plan which was approved in January 2010. This plan, which identifies authorized trails and trail improvements, was developed by the Parks & Recreation Department with input from the San Diego Mountain Biking Association, Preserve Calavera and residents. The plan includes trail directional signage, informational kiosks, fencing, interpretive signage and general Improvements such as erosion repairs, clearing brush and weeds, re- routing of more sustainable trails and boardwalk trails for wetlands and creek crossing. Project Lead Liz Ketabian, Parks Planner .^HMHHHHHHHMHI' Start In progress . :r , Completion December 2013 "^^m^^^^^^^m^^^^^^^^ Funding $131,000; induded in the 2012-13 Capital Improvement Program Status Construction is set to begin for boardwalks contingent upon receiving permits from Army Corp and Regional Water Quality Controi Board. This step is expected to be completed by September 2012. Changing Parks and Recreation Needs Trails Master Plan <Sjf9^ CITY OF ^CARLSBAD Departrtient 'partes&KecrMtfbh - - - . Description Prepare a comprehensive trails master plan. In addition to plans for future developments to the trails system, the master plan will include the identification of policies, guidelines and construction standards, safety and enforcement as well as trail program vision, goals and objectives. A comprehensive trails master plan may also serve to leverage grant funding and other funding sources for continued development ofthe city's trails program. Project Lead Liz Ketabian, Parks Planner Start July 2012 . .. Completion June 2013 Funding $60,000; included in the 2012-13 Capital improvement Program St<it,y§.,., Develop a request for proposals to solicit a consultant to assist staff with Hp preparing the master pian by August 2012. 24 Changing Parks and Recreation Needs Open Space Acquisition ^4^.C\T\ OF '^CARLSBAD Department Parks & Recreation ^^f^pllMi^^iiMliiiiiil^ Description Currently, the city is within 10 percent of reaching the Habitat Management Plan's goal for habitat preservation. The plan calls for the city to set aside 6,478 acres of open space when the city is built out, and Carisbad has succeeded in setting aside 5,821 acres in the seven years since the plan was adopted. Future plans for open space in Carisbad include developing management strategies and conducting outreach to promote the benefits of open space. Project Lead Chris Hazeltine, Parks & Recreation Director Start In progress ,„,i,i,n,„iniin ' • - Completion Ongoing 'IHHHHIKiiiiiMlflH^ Funding Included in the 2012-13 operating budget Status Continue to expand the amount of open space and trails in the city through active monitoring of potential acquisition sites and partnering with others, where possible, to leverage taxpayer funds. Council recently appropriated f $5 million for future open space acquisition. Updating GIS maps to identify 25 Changing Parks and Recreation Needs Carlsbad Boulevard Realignment CITY OF ^CARLSBAD Department Office of the City Manager flHHHHHHHBHi Description The Carlsbad City Council approved an agreement to work with the California State Parks Department on a visionary project that could bring expanded beachfront park areas, trails, bike access, recreational amenities, parking, beach-friendly shops and restaurants, and an expanded state campground to the stretch of coastline south of Palomar Airport Road. Project Lead Cynthia Haas, Deputy City Manager 'ttttftfU^. Start !n progress ' . - Completion Ongoing ^^^^P: Funding Estimated total cost $40-60 million; $3.25 million included in the 2012-13 Capital Improvement Program Status Project corridor concepts are being developed by the City in concert with State Parks for use in the environmental review phase of the project. The need to follow the 6f process has been confirmed. 26 <if'^ClTY OF .. Ul c* *o ^ CARLSBAD Livable Streets State Street Roundabout and Coastal Rail Trail Reach 1 Department Transportation ^m^m^^^^^^^^^m^^^m Description Complete a roundabout at the intersection of Carlsbad Boulevard and State Street to enhance safety and implement livable streets principles. This project will improve traffic circulation for all modes of transportation on Carisbad Blvd. by connecting the two dties of Carlsbad and Oceanside with a trail/path, bike lanes, and sidewalks across the Buena Vista Lagoon by repurposing the existing vehicle lanes. Project Lead Bryan Jones, Deputy Transportation Director Start In progress ^. ..ij;;,,,,!^^^^^^^ Completion June 2014 '"^^^^^^ Funding Estimated $1.3 million for roundabout and other coastal rail trail reach 1 improvements; unfunded 2012-13 Capital Improvement Program Active Transportation Grant Application is being submitted to SANDAG in July for $850,000 with a city match of $450,000 ^ Status Plans and construction documents for roundabout construction are ' ^ currently being completed. These documents wiil be presented to the City Counci! for approval in January 2013. 27 Livable Streets Pedestrian Crossings .^•^x CITY OF ''^ CARLSBAD Department Description Construct median refuge islands and rapid flashing lights at pedestrian crossings on Carisbad Boulevard between Oak Avenue and Tamarack Avenue to improve pedestrian safety and beach access. Project Lead Skip Hammann, Transportation Director Start In progress Completion Concrete medians constructed before Memorial ^^^^^^^^'^^^^n^gj^ Funding $44,000 vyas spent on the concrete medians; $200,000 was included in 2012-13 Capital Improvement Program Status Staff are continuing to evaluate the need for additional signage and/or Rectangular Rapid Flashing Beacons (RRFB). Staff will come back before council by September 2012 on RRFB's as federal standards do not allow for them to only be installed in the median as resolution was adopted in April 2012. RRFB's also have to be installed on sidewalks as originally proposed if Council would like to add lights. 28 Livable Streets Update Policies and Standards <4f'^ClTY OF '^CARLSBAD Department Transportation Description Staff will work with complete streets' professional consultants to review and update existing and propose new standards, policies and performance measures to support complete and livable streets concepts. In addition, the goals, polides and objectives will be updated as part ofthe General Plan update to reflect the community values identified through Envision Carlsbad of walking, biking, active/healthy lifestyles and connectedness. ^P^^TOad Skip Hammann, Transportation Director Start May 2012 Completion January 2013 Funding Estimated $29,000; included in the 2012-13 operating budget Status Consultants were selected and met with all city departments in May 2012 to evaluate current strengths and needs for implementation of Livable Streets. Consultants are evaluating national best practices for implementation of Livable Streets from four perspectives Legal & Policy, Design innovations, Funding, and Maintenance and Operations. This step will be completed January 2013. 29 Next Generation of Community Leaders Leadership Academy CITY OF ^CARLSBAD Department Housing & Neighborhood Services Description Replace the existing Citizen's Academy Graduate Program with a Citizen Leadership Academy focused on recruiting and preparing emerging community leaders for active roles in civic leadership. Project Lead Debbie Fountain, Housing & Neighborhood Services Director ^(m^|.-^j^.. Start July 2012 Compietion June 2013 ^HHHHMH' Funding Included in the 2012-13 operating budget Status Identify leadership roles intended to fill; identify where emerging leaders would be found (target audience); develop Leadership Academy curriculum outline. Additional review with City Council to finalize work psan will occur at the September City Council Workshop. f$ 30 Next Generation of Community Leaders Boards and Commissions y^CiT\ OF ^ CARLSBAD Department Office of the City Manager Description Update the roles of Boards, Commissions and Committees to enhance their impact, make them more exciting and attract a broader demographic of participants to serve on those bodies. Project Lead John Coates, Assistant City Manager Start July 2012 Completion June 2013 Funding Induded in the 2012-13 operating budget Status inventory and review current demographic make-up of Boards, Commissions and Committees; review and assess their goals, objectives, work plans, terms, policies and procedures and recruitment and selection procedures. Additional review with City Council to finalize work plan will occur at the September City Council Workshop. , 31 y/^f, CITY OF ^CARLSBAD Strategic Goals 32 Economic Development Permitting Technology Upgrades m CITY OF CARLSBAD Department Communitv & Economic Development Description Establish a GIS-centric information system platform that utilizes technology to leverage fewer staff while optimizing the development services permitting process, it would also be available to Fire Prevention, Storm Water and Construction Management and Inspection for their permits and inspections. The system would indude a public portal allowing 24/7 access which would help facilitate self-sen^ice by our customers and empowering them with the tools to manage their own projects. Project Lead Glen Van Peski, Engineering Manager flHHHL Start In progress Completion June 2013 ^^^^^^i^SSj^^llS^I^^ Funding One time: estimated $750,000 to $1.5 million; funding to be determined Ongoing: estimated $25,O00-$5O,00O per year; funding to be determined Status 'IH K Develop a needs statement or iist of functionality, based on previous work | B and updated for new technology opportunities; develop and issue a v request for information; hold demonstrations by selected vendors and present project concept to Information Technology Governance Committee . by September 2012. 33 Economic Development Car Country <ir'^ CITY OF ^CARLSB/O Department Description Project Lead Start Compietion Funding Status Community 8t Economic Development ^'PPPWWWIPBPIPiPl Based on the direction received from the City Council in January 2012, on the Car Country Carisbad Working Group Summary Recommendations Report, staff will initiate and complete actions to implement the prioritized improvements. Progress reports will be prepared and distributed to the City Council and to the Car Country Carlsbad improvements Working Group as appropriate throughout the implementation process. Gary Barberio, Community & Economic Development Director In progress June 2013 mmmm^ Included in the 2012-13 operating budget Initiated implementation of the prioritized improvements recommended in the summary report accepted by the City Counci! as follows; • Installation of red curbs, lane narrowing, and bike lanes on Car Country Drive and Paseo dei Norte - COMPLETED • Drafting of Specific Plan updates to address signage and streamlining the approval process ~ UNDERWAY (release of draft for public review expected Aug/Sept) • All other recommended improvements on hold pending direction/decision of the Car Country Dealership Task Force - ON HOLD 34 Financial Health Revenue Generation ^-^CITY OF '^CARLSBAD Department Communications '^^^F Description Public agencies are increasingly looking to develop new revenue streams to support public services. One option is to determine how we may want to use our fadlities, venues, events and other assets for marketing, naming rights or sponsorship programs with businesses and other organizations. Project Lead Kristina Ray, Communications Manager Start July 2012 Completion June 2013 Funding Estimated $40,000; included in the 2012-13 operating budget Status Research what other public agencies have done in this arena and identify an expert in corporate marketing partnerships who couid help the city identify potential opportunities. In addition, staff will initiate an assessment of ail city assets for their potential use in marketing partnerships. This step is expected to be completed by October 2012. .| 35 Financial Health Real Estate Plan <iri^ CITY OF '^^ CARLSBAD Department Property & Environmental Management IHHHMMMMHIV^ ' Description Develop and implement a real estate strategic plan that optimizes the community benefit and revenue generation potential of the city's real property assets. This will create a portfolio of real property assets that maximizes revenue generation for the city while satisfying community use needs. Project Lead Joe Garuba, Municipal Property Manager iflHHHHBHIl Start in progress Completion June 2013 ^^'^"'^ Funding Included in the 2012-13 operating budget Status Highest and best use analysts for top eleven potential sites is complete. The pian wiii be presented to Council for review and direction at the August 2012 City Council workshop. ^HM^H 36 Financial Health Redevelopment Dissolution .A <#««>CITY OF ^CARLSBAD Department Housing & Neighborhood Services Description Complete required activities per State Law to dissolve the Carlsbad Redevelopment Agency and complete all financial obligations set forth in the Recognized Obligation Payment Schedule. Project Lead Debbie Fountain, Housing & Neighborhood Services Director Start In progress Completfon June 2013 Funding Included in the 2012-13 operating budget Status • Completed required reports to County and State for paymient of enforceable (finandal) obligations for dissolved agency. • Submitted an appeal to County and State decisions on the eligibility of certain obligations for funding to repay. • Responding to changing legislation on the activities required to dissolve and unwind the former redevelopment agency. Wm • Coordinating with the Successor Agency Oversight Board as required and obtaining approvals as necessary. PC 37 Financial Health Fellowships <4rm CITY OF ^CARLSBAD Department Description The city will develop and implement a fellowship program to encourage talented individuals to work in local government and to consider the city of Carisbad as a place of employment. This program will give the city access to the latest thinking from bachelors/masters programs throughout the nation and the ability to add high quality talent to our organization for work on special projects. Project Lead Usa Hildabrand, Gty Manager ^lIlMMHI^iil Start July 2012 , . . Completion Funding Estimated $80,000 dependent on number of positions and duration; included in the 2012-13 operating budget Status Research best practices from other fellowship programs and determine if we should implement our own or tap into one that is already available. This step should be completed by September 2012. 38 Parks, Open Space and Trails Alga Norte Community Park Operating Plan <jafa^ CITY OF VCARLSBAD Department Parks & Recreation Description Determine the best, most cost-efficient manner to operate the Alga Norte Community Park. Project Lead Chris Hazeltine, Parks a Recreation Director Start In progress ^sssmmm^^^^^m^^smm Completion June ?m& Funding Included in the 2012-13 operating budget Status Request for proposals to solicit potential partners to operate the entire park or any specific element were received on June 21, 2012. Staff received three proposals and are currently reviewing and evaluating them. | 39 Transportation and Circulation Traffic Signal Program CITY OF ^CARLSBAD Department Transportation ^9^MM|liHIWHMMPffP!^ Description Upgrade deficient or outdated traffic signal equipment and synchronize signals on major roadways to improve traffic flow and provide remote access to traffic signal operations for all major traffic signals through a traffic management center. Project Lead Bryan Jones, Deputy Transportation Director Start In progress Completion July 2014 -iKtt^' jjlMiiil^lllPIIIII^^ Funding $5,510,000; included in the 2012-13 Capital Improvement Program Status Inventory Phase il major roadway intersectionsIW^tall equipment, implement new signal timing plans and evaluate traffic flow. This step is expected to be completed by February 2013. As part of phase II starting to design the Traffic Management Center at Faraday to manage traffic signals that are connected. 40 Resident Connection and Partnership Expanded Wireless Access ^^j^SCITY OF ^ CARLSBAD Department information Technology ^mmmmmmmmmm Description Offer city wireless Internet services, induding both public and staff access, at city facilities where the public gathers. The city currently provides wireless Internet at 15 of its facilities. Additional potential sites for public wireless include: the Monroe Street Pool, Calavera Hills Park, Stagecoach Park, Aviara Park, Poinsettia Park, and the Schulman Auditorium at the Dove Library. Project Lead Bob Fries, Information Technology Manager 'flHHHHHHB Start July 2012 Completion March 2013 '^'IM|||II^^ Funding One time: $234,000; funding to be determined Ongoing: $88,000 per year; funding to be determined Jtatus mill Develop a project scope induding site prioritization by July 2012. 41 Resident Connection and Partnership Barrio Program <4r^x CITY OF '^CARLSBAD Department Description Project Lead Start Completion Funding Status Housing & Neighborhood Services Develop cooperative neighborhood enhancement programs with the Barrio community that will result in improved resident connections, neighborhood dynamics and enhanced sense of community through better private-public liaison efforts and focus on completion of neighborhood desired improvements. These programs will be developed in coordination with the village revitalization project and General Plan update. Debbie Fountain, Housing & Neighborhood Services Director July 2012 June 2013 ,^«.«^.^*>v induded in the 2012-13 operating budget • Report on first "spruce-up" and neighborhood celebration completed, and shared. • Mapping and demographics study of the neighborhood is in draft form, to be completed and reported no later than December 2012. • Planning Commission held an Envision Carlsbad General Pian Update meeting to discuss future land use options specific to the Barrio area on June 20th 2012 • Efforts in the works to develop "connection" plan for implementation of future vision and to address any neighborhood concerns. 42 Water Desalination CITY OF V CARLSBAD Department Utilities Description The Carlsbad Desalination Project is a 50-million gallon a day seawater desalination plant that will supply the San Diego region with approximately 10 percent of its drinking water needs. The project, being developed by ' ' Poseidon Resources Corp., will be the first large scale desalination plant on the West Coast and the largest of its kind in the Western Hemisphere. It will be located next to the Carisbad power plant at the corner of Cartsbad Boulevard and Cannon Road. Project Lead Glenn Pruim, Utilities Director Start In progress Completion June 2013 Funding included in the 2012-13 operating budget Status The timing of the milestones is dependent upon Poseidon's progress with the San Diego County Water Authority, it is anticipated that Poseidon and county water authority will enter into a water purchase agreement sometime this summer, and construction will begin sometime after that. As the water purchase agreement comes closer to completion, city staff wi! work with Poseidon on the required permits for construction within the city. 43 Water Recycled Water CARLSBAD CITY OF Pepartment LItilities 'HHRHHI^^'' Description Develop recycled water phase 111 expansion plan, which will greatiy increase the recycled water system customer base, install new pipelines and bring recycled water sales to the City of Oceanside, Olivenhain Municipal Water District, and Vista Irrigation District. Project Lead Glenn Pruim, Utilities Director Start In progress Completion June 2013 -iiMiWil^^ Funding Estimated $28 million; funding to be determined Status Approach City Councii/Carisbad Municipal Water District Board requesting 1 adoption of Phase III feasibility study, CEOA approval, funding '1 appropriation and permission to apply for grants and loans for Phase ill j expansion. This step is expected to be completed by August 2012. 44 Water Groundwater <A> CITY OF CARLSBAD Department Utilities Description Develop a plan for possible groundwater development including water rights in the San Luis Rey River Mission Basin and the Rancho Carisbad community. The goal of this project is to create two full-functioning groundwater systems that extract, convey, treat, store and distribute groundwater throughout the Carisbad Municipal Water District potable water system. It is estimated that approximately 2,000 acre-feet of potable water could be produced each year from available groundwater supplies. Project Lead Bill Plummer, Engineering Manager Start In progress • • \ ^ Compietion June 2013 ^flMHIIB^ Funding Estimated $15 million; funding to be determined Status Retain an expert in groundwater and subterranean stream determination by August 2012. „ , „ . 45 Safe Community Facility Security CITY OF ^CARLSBAD Department Police '^HHPIiMililMr Description Conduct an environmental security review of the city facilities using the principles of Crime Prevention Through Environmental Design. These principles maintain that the proper design and effective use of a planned environment can lead to a reduction in the fear and incidence of crime as well as an Improvement in quality of life. Issues to be considered are access control, natural and artificial (camera) surveillance and territorial control. Project Lead Kelly Cain, Police Lieutenant 'ItUUtttMKtK^ Start July 2012 " ' • . Completion '""^'013 lljililllilllillllllHIIIII Funding Included in the 2012-13 operating budget Status iH! P Team members are meeting during the month of July to review research ,| • • •••• .•j.'-^i and identify potential funding and/or staffing requirements. Environmental f Security Reviews have already been conducted at several city facilities and ^ those will be discussed in relation to the remaining city facilities. 46 J^C\J\ OF VcARLSBAD Safe Community Fire Station 3 Department Description Project Lead Start Completion Funding Status jiniggjft Property & Environmental Management Complete design and construction of Fire Station No. 3 that meets the functional needs of the Flre Department (present and future), fits in architecturally with the surrounding community, integrates with the future Robertson Ranch, includes proven sustainability features, has optimized lifecycle cost and is completed within budget, on time and without contractor claims. Patrick McGarry, Public Works Superintendent In progress February 2014 $8.6 million; included in the 2012-13 Capital Improvement Program Complete plans and specification documents by November 2012. 47 Environmental Management Agua Hedionda Creek Dredging <^.Z CITYOF ^ CARLSB/\D ^^^^^^^ Description Secure permits for dredging of the Agua Hedionda Creek before the beginning ofthe nesting/breeding season in February 2013. UPDATE. Project lead Glenn Pruim, Utilities l^)r-ectof;||^|||||||^^ Start tn progress Completion To Be Determined Funding Estimated $8.7 million; induded in the 2012-13 Capital improvement Program Status The Resource Agendes have indicated that they will attempt to issue the permits in time for construction in the fall of 2012. Aii permit applications have been submitted. The Regional Water Quality Control Board (RWQCB) has indicated that this may not happen, however, due to their workload and staffing issues. The permit is also needed to obtain the 404 permit from the US Army Corps of Engineers. Construction must occur outside of the nesting/breeding season, which runs from mid-February to mid- September of any year. If the permits do not allow for construction this fall, the project may be delayed until next year. Council has directed staff to obtain aii permits and to return for further direction 48 Environmental Management Hydroelectric Power Generation <A> CITY OF > CARLSBAD Department Description Construct hydroelectric projects to generate electricity using the pressure and flow within the county water authority aqueduct system. Up to two operating in-line, pressure controlled hydroelectric fadlities will be Installed with Carisbad Munidpal Water District turn outs from the county system. These hydroelectric generators will significantly reduce the power costs of Carisbad Municipal Water District operations. „_^.,^..^_.. Project Lead Bill Plummer, Engineering Man3ger||||||||BHHHHHHi^^ Start In progress Completion June 2013 Funding $2,000,000; included in the 2012-13 Capital Improvement Program Status Obtain Coundi direction on how to proceed in August 2012. Assuming direction is to proceed, enter into agreement with power production firm 1 to install hydroelectric equipment by August 2013. | 49 Environmental Management Vista-Carlsbad Sewer Interceptor <4f,J^> CITY OF ^CARLSBAD Department Utilities 'ip^s^Sf- Description Construct ali three phases ofthe Vista-Carlsbad interceptor Sewer, Reaches VCllB through VC15, and the Agua Hedionda Lift Station. Project Lead Glenn Pruim, Utilities Director flHIIHHHIHHHHI Start In progress Completion January 2015 '^^^^^mm^^^^w Funding $46,730,000; included in the 2012-13 Capital Improvement Program Status Obtain resource agency permits, acquire easements, complete construction phase agreement with Vista, complete plans and specifications, enter into agreements with utility companies and solicit proposals for constructio^|||| management and inspection services. The project will go forward as thrS^ construction contracts. Request authorization to bid for the first contract H by December 2012. 50 <^&'C"TY OF '^CARLSBAD Environmental Management Buena Vista Lagoon Restoration Department Description Project Lead Start Completion Funding Status Parks & Recreation The Buena Vista Lagoon currently provides important habitat for plant, fish, birds, and invertebrate species, induding several special status species. Unfortunately, the lagoon has been changing steadily over time with progressive degradation ofthe various benefits to wildlife and humans. Results from recent studies indicated the lagoon would most likely become a vegetated fresh water marsh or riparian woodlands within the next 30-50 years, thereby ceasing to provide wetland function and values. Chris Hazeltine, Parks & Recreation Director In progress Ongoing Induded in the 2012-13 operating budget Carisbad staff has attended working group meetings between the City of Oceanside, California Department of Fish and Game, Federal Department of Fish and Wildlife service, Army Corps of Engineers, Coastal Consen/ancy, SANDAG and Caltrans to develop strategies to re-impiement the environmental impact review process. On June 26, 2012 the cities of Carlsbad and Oceanside sent a letter to the chairman of the SANDAG Board of Directors requesting that SANDAG agree to take the lead to resume and complete the environmental analysis of the Buena Vista Lagoon Restoration Pian. The SANDAG Board of Directors should consider the request at a scheduled meeting in July/August 2012. 51 8/21/2012 Desal Workshop Desal Project Details • 50 MGD desalinated water project (56 TAF) • Developed by Poseidon Resources, Inc. • Project team includes Klewit, Shea and IDE • Poseidon currently negotiating a WPA with the San Diego County Water Authority • Largest fully pernnitted, agency approved, shovel ready, financeable desal project in the U.S. 8/21/2012 8/21/2012 Desal Project Details • Capital Cost of project $870M - $970M - Plant $530-$570 M - Conveyance Pipeline - Financing • Annual Operating Costs $49M - Electricity - Non-Electricity • Indirect Costs $60M - Pipeline 3 Relining - TOVWTP Modifications $140-$150 M $200-$250 M $56M $23-$26 M $26-$30 M $68M $50-$56 M $10-$12 M Financing - Bond Sales & Equity Partners .4% CARLSBAD 8/21/2012 Desal Cost Drivers I Capital Cost I Non-Electricity Operating Electricity CARLSBAD 8/21/2012 CWA/Poseidon WPA 30-year Term 48 TAF - with option for remaining 8 TAF Take or Pay Poseidon to construct, own and operate plant Poseidon to build, CWA to own Pipeline Cost of water-'"$2,350/AF ^ v ^ Risk Sharing c ;i ^r;-^ j« CARLSBAD Cost Allocation $2,350/AF ^ CARLSBADs Collected From Water Rates „ $1,850/AF 8/21/2012 Member Agency Impacts • Costs Blended with other CWA Supplies • Cost allocation to rate categories • No "Free Ridership" • Cost Impacts to Residential Customers - Five Agency Average- "SS/month • Water Delivered Through Existing Connections • Local Supply Purchase Option Local Supply Option • CWA Board Guiding Principles • Decision required within 60 days • 30 Year Term • One-time Commitment • Full Cost Recovery • Uniform Monthly Amounts • Option for Surplus Amounts 8/21/2012 Carlsbad Desalination History • Poseidon contacted Carlsbad in 1998 • CMWD/Poseidon WPA September 2004 • CMWD/CWAMOU April 2005 • Poseidon/CWA Term Sheet July 2010 • Reimbursement Agreement March 2012 • CMWD/CWA Agreement May 2012 CA^ SUMMARY OF CARISBAD'S DESAUNATiON OBJEaiVES OKiKdOulcomi rasaooNvwA Term 301ear% 30 Years Loul Supply 15.100-25, iOOAFV Up to KXOOOAFY, ane-t<mecommitfnent w/ no Changes Pnce No rnont ttun adopted CWA rates Actual Cost ($2,350^ Drect Cotinetti on At anv time latanytime Propertv Tj* Pay taxes or equivalent IDs 10 Vears «v/ provision to address Poseidon defaui t Improvefnent:^ & Dedtoitions Ust of puU ic 1 mprovements and i and ded^iiit on:. Same as in Poseidon Agreement w/ provision to address Poseidon defaift Price Savings Share iMivingi with Poseidon if desiii costsare less than imported Oniy if desai costs are beiow blended CWA rate Atqutre Pipelines Atany bme Not Aiiowed Acquine Plant After 1st 30-year (erm Not Allowed 8/21/2012 Why Desal? 1990 Hydrologic Conditions - Second Year of Severe Drought - Reservoir Levels Dangerously Low - CWA 100% Reliant upon MWD for Imported Water MWD Actions CWA Response - Water Supply Master Plan and Water Supply Diversification Strategy - CWA Funded Projects - Desai was an important component of CWA's plans Reflective wisdom ofthe IID Water Transfers Why Desal? 1990 Hydrologic Conditions - Second Year of Severe Drought - Reservoir Levels Dangerously Low - CWA 100% Reliant upon MWD for Imported Water MWD Actions CWA Response - Water Supply Master Plan and Water Supply Diversification Strategy - CWA Funded Projects - Desal was an important component of CWA's plans Reflective wisdom ofthe IID Water Transfers 8/21/2012 MWD Shortage Allocations 1990-1992 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Non-Firm (e.g. Agricultural) Firm Why Desal? • 1990 Hydrologic Conditions - Second Year of Severe Drought ^ - Reservoir Levels Dangerously Low - CWA 100% Reliant upon MWD for Imported Water • MWD Actions • CWA Response - Water Supply Master Plan and Water Supply Diversification Strategy - CWA Funded Projects - Desal was an important component of CWA's plans • Reflective wisdom of the IID Water Transfers CARLSBAD-* 8/21/2012 Why Desal? 1990 Hydrologic Conditions - Second Year of Severe Drought - Reservoir Levels Dangerously Low - CWA 100% Reliant upon MWD for Imported Water MWD Actions CWA Response - Water Supply Master Plan and Diversification Strategy - CWA CIP-Funded Projects - Desal was an important component of CWA's plans >m ofthe IID Water Transfers CWA Water Supply Diversification » Water Supply - Imperial Irrigation District Water Transfers - Coachella and All American Canal Lining - Increased Conservation & Recycling • Twin Oaks Valley Water Treatment Plant » Storage and Transmission ~ Emergency Storage Project/Olivenhain Dam - Lake Hodges Improvements - San Vicente Dam Raise 10 8/21/2012 Increasing San Diego County's Water Supply Reliability through Supply Diversification 1991 2020 1btal«S94W M«tropol'ib)n Water Distrkt H Imperial Irrigation Dittrict Transfer m AU American & Coachella Canal Uning m Conservation {«iit(«>««nd*tUiCNin«ii CARLSBAD 1btal>7791%F Ea Recvcted Water B StawaterOesaftiation m Groundwater Q local Surface Water Why Desal? 1990 Hydrologic Conditions - Second Year of Severe Drought - Reservoir Levels Dangerously Low - CWA 100% Reliant upon MWD for Imported Water MWD Actions CWA Response - Water Supply Master Plan and Diversification Strategy - CWA CIP-Funded Projects - Desal was an important component of CWA's plans Reflective wisdom ofthe IID Water Transfers CARLSBAD 11 8/21/2012 Why Desal? 1990 Hydrologic Conditions - Second Year of Severe Drought - Reservoir Levels Dangerously Low - CWA 100% Reliant upon MWD for Imported Water MWD Actions CWA Response - Water Supply Master Plan and Water Supply Diversification Strategy - CWA Funded Projects - Desal was an important component of CWA's plans Reflective wisdom of the IID Water Transfers ^ CARLSBAD- What if Water Authority had QSA Transfers in 1991? [Stage 6 ofMWD's Incremental Interruption and Conservation Plan) 800 700 _ 600 ^ 500 I 400 I 300 1 200 2 100 Water Authortty FY90 Base Period Demand {666TAF) Estimated MWD Allocation 333TAF Without SDCWA Transfers Estimated MWO Altocation^ QSA Supplies 280 TAF With SDCWA Transfers CARLSBAD 12 8/21/2012 Upcoming Events • August 23 - Draft WPA Released • September 27 - CWA desal rates and charges • September - CWA Desal Public Meetings - September 13 at CWA offices in Kearny Mesa - September 20 at Carlsbad Senior Center • October 25 - CWA to: - Consider approval of WPA - Authorize Design-Build Agreement for Pipeline - CEQA Actions Public Meeting Locations September 13 Meeting-6:30 p.m. - San Diego County Water Authority 4677 Overland Avenue San Diego, CA September 20 Meeting - 6:30 p.m. - Carlsbad Senior Center 799 Pine Avenue Carlsbad, CA 13 8/21/2012 Items for Consideration • Does the CMWD Board Support a Regional Desalination Project? • Does the CMWD Board Want to Secure a Local Water Supply From the Project? • Does the CMWD Board Want to Directly Connect to the Desal Transmission Pipeline? Questions? 14 . CITY OF V CARLSBAD Memorandum August 14, 2012 To: Cynthia Haas, Deputy City Manager (fe,^.^ From: Joe Garuba, Municipal Property Manager^J'g>'^ r\ .^A^ Via: David Hauser, Property & Environmental MJhagement Director Re: Executive Summary for Underutilized Property Evaluations ?OT2 pTstseveral months the City has been reviewing underutilized properties, both current and projected. The purpose ofthe review is to Identify possible uses which result in increased revenue generation to the Qty and related entities (Carisbad Municipal Water District (CMWD) and Golf Course JPA). Recognizing the varied nature of the properties and the need for specialized skills in evaluating the potential uses and economic values associated with such, staff contracted with The Irving Group to assist and coordinate the analysis. The properties included in this analysis are owned by the City of Carisbad, the CMWD, or the Golf Course JPA and the benefits of any disposition would have to accrue to the appropriate agency, and in some cases, the appropriate fund withm that agency. Based on an initial assessment, staff identified 11 properties which comprise the first phase of this project. The properties and ownership Include: Vacant Golf Course Lots (City) Excess Parking Lot/Water Tank J (Golf Course/CMWD) Calavera Hills Sewer Treatment Plant (City) Southeast Corner of Mission/Foussat (located in Oceanside) (CMWD) Buena Vista Reservoir (CMWD) Current Fire Station #3 (City) Hawthorne Property (City) Las Palmas Building (City) Farmers Building (City) Cole Library Agricultural Land (City) Carey Estate (adjacent to Arts office) (City) It is anticipated that additional properties would be assessed in the future to help ensure that they continue to provide maximum value to the City. Assumptions The assumptions underpinning this analysis are: • City preference for long term revenue stream (leasing vs. selling) • Recommend to sell property where Residential is primary use • Provide use scenarios which limit upfront capital requirements by the City ProoertY & Environmental Management 1635 Faraday Ave. I Carlsbad, CA 92008 I 760-434-2943 I 760-602-8562 fax I www.carlsbadca.gov Subject: Executive Summary for Underutilized Property Evaluations August 14, 2012 Page 2 • Current land use designations are amendable, but potential uses need to be realistic • Maximize value of property through coordination of entitlement process Methodology Due to the myriad potential uses of the different properties, staff conducted the analysis with a single focus; identify the highest and best property use that would generate the greatest degree of financial benefit to the City based on realistic future uses. This highest and best use methodology was specifically chosen by staff so that the City Council and staff would have baseline economic data to use as a framework when analyzing impacts from policy choices and property dispositions. This highest and best use approach is consistent with what is used in the private sector. What is not included in this analysis is the social value of property based on different uses which would not constitute a highest and best use approach or property uses which are geared towards economic development. Finally, due to the time gap between report development and property disposition, economic values called out in this report would be updated during the disposition of the individual properties. FindinRS and Recommendations The report identifies different courses of action for the various properties. These courses of action can generally be categorized into three groups: short term, mid-term, and long term. Staff requests that Council provide authorization to move forward, as identified below, on those properties listed in the Short Term category. Staff will return to Council for additional direction on the mid and long term properties at a future workshop. Short Term Those properties represent assets that can be acted on immediately. These properties are listed below and include the recommended course of action for moving forward. • Excess Parking Lot/Water Tank J (Golf Course Lot US) o Property Disposition: Lease o Action: Develop RFP/RFQ for potential uses and send to market o Timeframe: 3-9 months • Mission/Foussat o Property Disposition: Lease o Action: Develop RFP/RFQ for potential uses and send to market o Timeframe: 3-9 months • Buena Vista Reservoir c Property Disposition: Sell o Action: Market property for potential buyers and send to market o Timeframe: 3-9 months • Vacant Golf Course Lots ) Property Disposition: Lease o Action: Develop RFP/RFQ for potential uses and send to market o Timeframe: 6-12 months Attachment/ Professional Strategic Plan for Real Property Assets prepared by The Irving Group Aug. 10 2012 TH IRVING GROUP August 10, 2012 City of Carisbad Property and Environmental Management 1200 Carisbad Village Drive Carlsbad, CA 92008 Re: Professional Strategic Plan for Real Property Assets The Irving Group is pleased to deliver our recommendations for the properties owned by the City of Carlsbad. We developed our decision for "highest and best use" for each property by comparing the projected income and likely outcomes for both sale and lease scenarios. These findings were initially presented on June 22, 2012. Fluctuations in the real estate market will require updated pricing for each asset up to the time of transaction. The following section summarizes the options for each asset: Fire Station # 3 The City should sell this house if there is no other use for the property. Golf Course Lots 9 Due to a favorable location, these lots could sell or lease at a premium. A sale is not advised because of the depressed market. The City should retain the lots and execute a 30 year ground lease to generate a long term revenue stream. Hawthorne Caterpillar This asset was purchased because of its proximity to the Las Palmas building. Our options are leasing the property with Las Palmas or renovating and leasing to another tenant. Leasing to a tenant that requires secure storage is the most profitable interim use. Combining with Las Palmas for a redevelopment project is the preferred future use. Las Palmas This building would make attractive lab space due to its location, physical characteristics and renovation in 2001. This asset will help meet the current demand for lab space in the City of Carisbad. Combining with Hawthorne Caterpillar for a future redevelopment project is the highest and best use. 4320 La Jolla Village Drive, Suite 250, San Diego, Califomia 92122 j Telephone: 858,999.0333 | Fax: 858.999.0225 j www.ThelrvingGroiip.com IRVING JL JLV. • JL JL ^ X»Ji GROUP Golf Course Lots 4 &5 Due to a favorable location, these lots could sell or lease at a premium. A sale is not advised because of the depressed market. The City should retain the lots and execute a 30 year ground lease to generate a long term revenue stream. Buena Vista Reservoir Our best option is issuing a request for proposal from homebuilders for developing the site. This site will generate attention because of its favorable location. Once the Tentative Map is completed by the homebuilder, the City will sell it to them at a pre- negotiated price. 7 Foussat/Mission Avenue The City should issue requests for proposals for a land swap to see what options are currently available. If the options for land swap aren't desirable, the City should market for a ground lease and retain the water rights. 8 Calavera Wastewater The options for this space are operating a self-storage facility or creating a 30 year ground lease. We recommend the ground lease as it provides steady income over a longer term. A - Farmers Insurance Building Renovate and lease the space to a third party or utilize for City Offices. The site is large enough to develop the Civic Center which should also be considered. B - Farmers Insurance Land Sell to a commercial building developer or offer as a ground lease. If the City chooses to develop a Civic Center on the site, partnering with a commercial building developer may create the best opportunities for maximizing the site. 10 Cole Library Agriculture Our best option is issuing a request for proposal from homebuilders for developing the site. This site will generate attention because of its favorable location. Once the Tentative Map is completed by the homebuilder, the City will sell it to them at a pre- negotiated price. Page 2 of 3 THE I k T r-^ Iv V 1 IN \j" GllOLiP 11 2923 Elwood If the City decides to forego the Community Garden (Carey Estate) use, the best option is to assemble the property with the adjacent lots and issue a request for proposal from homebuilders. Once the Tentative Map Is completed by the homebuilder, the City will sell it to them at a pre- negotiated price. Alternatively, the City can sell this single parcel. The following table shows the expected fiscal benefit of each option: City of Carlsbad - Summary of Strategic Options Lease Revenue Per Year Sale Revenue 12 Month Current Agency 1 Current Fire Station #3 $26,715 $400,000 City/General Fund 2 Golf Course Lot 9 $231,088 $2,047,500 Golf Course JPA & CMWD 3 Hawthorne Caterpillar $90,045 $1,750,000 City/CFDl 4 Las Palmas $337,233 $3,372,328 City/General Fund/CFDl 5 Golf Course Lots4&5 $706,667 $7,500,000 City/General Fund 6 Buena Vista Reservoir n/a $1,750,000 CMWD 7 Foussat/Mission Avenue $138,870 $2,000,000 CMWD 8 Calavera Wastewater $106,167 $1,250,000 City/Sewer Enterprise 9 A - Farmers Insurance Building $3,221,114 $12,782,200 City/CFDl B - Farmers Insurance Land $187,000 $2,805,000 City/CFDl 10 Cole Library Agriculture n/a $1,450,000 City/General Fund 11 2923 Elmwood (Carey Estate) n/a $190,000 City/General Fund We look forward to presenting these options and discussing our findings. Best regards. THE IRVING GROUP Page 3 of 3 Professional Strategic Plan for Real Property Assets Fire Station No. 3 3701 Catalina Drive THE IRVING GROUP Property Overview: Fire Station No. 3 Location 3701 Catalina Drive Carlsbad, CA 92010 APN #: 167-154-20-00 Specific Details Total Sq. Ft. (building): 2,151 Current Lease Rate/Mo. Unknown Total Sq. Ft. (land): 9,200 (0.21 acres) Projected Lease Rate/Mo. $2,151 Min. Divisible Sq. Ft.: 9,200 Lease Type: Gross Floor Size: 1,075 Year Built: 1966 Number of Floors: 2 City Agency: City/General Fund Description This is a two story structure that was converted from a single family home and is located In a residential neighborhood. It has two bedrooms and two and a half bathrooms. There are two large roll-up doors In the front and rear of the property that allow the flre trucks to be driven through the garage. This home is located in the Carisbad Unified School District. The nearest schools are Magnolia Elementary School, Valley Middle School and Carlsbad High School. Highest & Best Use The best use of Fire Station No. 3, if it is no longer going to be used as a fire station or other public use like a police sub-station, is to sell the property and reinvest the capital in another product type. We assume the City would prefer not to retain the residential property as an income property. The timing of the sale needs to be considered due to the depressed market for residential real estate. We evaluated comparabies within a quarter of a mile from the property and the average sale price is $441,000. If the City wants to sell the property this year, we estimate the sales price will be approximately $400,000 - $450,000 in it's as-is condition. This is a profit of $175,000-$200,000. Alternatively, if the City made modest improvements to the property and rented it for twenty- four months while the market improves, the City may benefit from the rental income and an improving property market. An estimated investment of $30,032 for improvement expenses (paint and carpet) will make the property marketable as a rental. At $1.00/SF the monthly rental income is $2,151 which, minus improvements, will net the City $22,496 in rent over the twenty-four month term. During the rental period of twenty-four months, the residential property market is anticipated to improve and we estimate the sales price could be as high as $500,000. Deducting the purchase price and improvement expenses totaling $255,032, the net margin to the City is $244,969. Purchased in 1990, if the building is sold twenty-five years later for $500,000 with only two years of rental income, the Unleveraged Internal Rate of Return will be 3.6 percent. After considering the time, expense, liabilities and risks involved converting Fire Station No. 3 into a residential rental, our recommendation is to list it for sale. There is a strong probability that its value will increase over the next few years but the risks outweigh the potential benefits. Value Based on Highest & Best Use Estimated Sale Price (2012) $400,000 - $450,000 Project: 3701 Catalina Drive I Project Costs (24 Months) Estimated Cost Basis ("Purchase Price") Improvements Carpet & Paint Hard Costs Contingency Hard Costs (Construction Costs) Additional Expenses Legal & Accounting Marketing Property Tax Soft Costs Total Project Costs Interest Component: Loan Amount City's Portion Period Interest Total Development Costs Tenants Portion of Costs Total Development Costs - City 2,151 sqft 2,151 sqft 5% $104.60 $10.00 Total Hard Cost/SF Yr. 1 Total Soft Cost/SF 255,032 0.00% [Development Cost/SF $10.50 $3.46 $118.56^ I Development Cost for City/SF $118.56] $21,510 $1,076 $3,000 $1,000 $3,446 $225,000 $22,586 $7,446 $255,032 $0 $255,032 $0 $255,032 iProforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash Sale Price Total Development Costs - City Margin Investment Indicators Return on Cost - Development Cash-on-Cash Return - Improvements See "Income" Yr. 2 10% Yr. 2 Taxes Net Operating Income (Yr. 2) Total Development Cost - City Net Cash (Yr. 2) Capital Investment (Tl Allowance) $20,598 $255,032 $20,598 $30,032 $26,715 -$2,672 -$3,446 $20,598 0.00% $0 $20,598 Value/SF $232,451 $500,000 -$255,032 Margin/SF $113.89] $244,969 8.1% 68.6% Summary Cashflow Analysis Project: 3701 Catalina Drive Summary Total Value - Lump Sum $22,496 NPV m 5% discount) $20,213 Starting Base Rent $1.00 Effective Rent (Incl. free rent)/RSF $1.02 Operating Expenses / SF $0.00 Average Gross Rent Income/RSF $0.44 Estimated Rent 2012 Rent Type: Plus Utilities $0.44 'Incl. Tl's and Free Rent Assumptions I Rent Assumptions Lease Term (months) Tenant Capital Cost Assumptions Rentable SF 2,151 Load Factor 0.00% Useable SF 2,151 Tl Costs ($/RSF) All In Tl number(or) Equipment FF&E Cabling Physical move Miscellaneous $13.96 Rent Annual increase 3.5% $0.00 Total Cost $13.96 $30,032 year 1 $1.00 years Tl Allowance ($/sf) year 2 $1.04 year? Tl Allowance ($/sf) years years Landlord Tl Allovi/ance $13.96 $30,032 year 4 year 9 How allocated? RSF years year 10 % or $ Cost to Tenant $0.00 $0 % or $ Estimated NNN Expenses Annual increase 0.0% $0.00 year 1 $0.00 years year 2 $0.00 year? years years year 4 year 9 year 5 year 10 Free Rent Base Rent year 1 0 months free months free year 2 0 months free months free Number of Montiis Yearl Year 2 Number of Montiis 12 12 24 Income Total Costs Rent $25,812 $26,715 Rent $52,527 Operating Expenses $0 $0 Operating Expenses $0 Caoital Costs Tenant Improvements -$30,032 Tis -$30,032 Free Rent Free Rent $0 $0 Free rent $0 Total Income •$4,220 $26,715 Grand Totals $22,496 Monthly Rent $0 $2,226 Address Building Class Size (Sq Ft) Sale Price Sale Price/SF Sale Date 3730 Catalina Drive SFR 1,704 $ 440,000 $ 258 8/5/2011 3710 Longview Drive SFR 1,606 $ 485,000 S 302 5/27/2011 2602 Chestnut Avenue SFR 1,414 $ 455,000 $ 322 9/27/2011 3530 Sierra Morena Avenue SFR 1.600 $ 390,000 s 244 8/26/2011 4010 Trieste Drive SFR 1,618 $ 435,000 $ 269 10/14/2011 Average $ 441,000 $ 279 Subject SF 2,151 $ 599,953 $ 279 Possible Sale Price (24 Mo.) $ 500,000 $ 232 Possible Sale Price 2012 *The Price/SF diminishes in relation to the size. Comps Professional Strategic Plan for Real Property Assets Golf Course Lot 9 THE RVING GROUP Property Overview: Golf Course Lot 9 Location Northwest of The Crossings Drive, Carisbad, CA 92009 APN #: 211-023-07-00 & Unassigned Tentative Tract Map #: CT 09-03 Specific Details Parcel Size (acres): East 2.7 (117,612 SF) Current Lease Rate/Mo.: None West 0.45 (19,654 SF) Projected Ground Rate/Mo. $0.14-$0.21/SF Total 3.15 (137,266 SF) Purchase Price: None Applied Number of Floors: 3 or 35 Feet in Height Zoning: 0/P-M/E-A City Agency: Golf Course JPA & Municipal Water District Description In September 2010, CT 09-03 was approved subdividing the golf course property into individual lots and allowing for the separation and possible sale of three individual development lots designated for Office/Planned Industrial. These three parcels (Lot 4: 8.2 gross acres; Lot 5:12.9 gross acres; and Lot 9: 2.7 gross acres) are located along the periphery of the golf course. The focus of this study is Lot 9 and a smaller 0.45 acre adjacent lot to the west. Lot 9 is vacant and subject to the development standards of the Office and/or Planned Industrial zones. The second parcel currently has a water tank located in the center and is zoned E-A, Exclusive Agriculture. The City of Carisbad completed an Environmental Impact Report (EIR 97-01) in January 2010. This report evaluated the potential environmental effects of developing the new building pads including: analysis of traffic circulation, water resources, cultural resources, biological resources and land use. The City of Carisbad Planning Commission approved the Carisbad Municipal Golf Course Mapping (CDP 11-19) on January 4, 2012 establishing development standards for the Planned Industrial (P-M) and Office (0) zoning related to these properties. In order to move forward with developing the site, the party(s) involved would need to satisfy certain , items remaining. The City requires: approval of a Site Development Plan (SDP), compliance with the General Plan and the airport's Land Use Compatibility Plan. A preliminary Geotechnical Investigation for the project has been approved by the California Coastal Commission but the developer will still require approval for a Coastal Development Permit. There is currently a Tentative Tract Map approved by the City. This Tentative Tract Map expires on September 15. 2013. According to the available records, Lot 9 is 2.7 acres and the water tank parcel is .4512 acres for a total assemblage of 3.1512 acres. The site is located at the northwestern corner of The Crossings Drive, north of Palomar Airport Road. It has one of the best views in the City - stretching 360 degrees along the coastline and around to the golf course and natural areas. The surrounding commercial uses are Commercial Tourist Zone and Open Space. The golf course property is located near Legoland and the Sheraton Carlsbad on The Crossings Drive to the north of Palomar Airport Road. Highest & Best Use This site sits on a high point to the west of the golf course, bordered by Open Space, the golf course and the Sheraton Carisbad. It is easily accessed by major arterial roadways providing quick access to freeways. There are a number of potential uses permitted on the 2.7 acre site due to both Office and Planned Industrial zoning. The Exclusive Agriculture zoning for the smaller parcel with the water tank is restrictive and will need to be changed. Considering the spectacular views from the site and the adjacent Commercial Tourist zone, for the Highest and Best Use we recommend the City apply for a zoning change to the Commercial Tourist zone for tourist-oriented commercial uses like hotels and restaurants. Assuming the City is successful in the zone change for the property, the two lots should command a premium price of approximately $3,500,000 total ($25/SF). Comparable land sales in the submarket for the last three years have an average asking price of $711,180 per acre with the average sale price per net acre of $494,407. Given the premium location of this lot and a desire to create future income, this site should be marketed at a premium price of $1,100,000 per acre with the goal to sell it for close to that amount. If the market changes and the City needs capital or the site is required by specific user that will increase the tax base in Carlsbad for an extended period of time, the City could consider lowering this price. A better course of action to consider is a 30 year ground lease. This would create a long-term revenue stream for the City while retaining ownership of the land for a future use or sale. The benefit for the developer or Lessee in this scenario is the reduced capital needed to fund the project since they are not purchasing the land. Comparable leases of this nature aren't available but we can amortize the current estimated value of the land over a given period of time to create a reasonable asking rate. The estimated value of the 3.15 acres is $3,466,320 or $1,100,000 per acre. If this value is divided over a ten year period, or $346,632 per year, the rent rate for the ground lease will be $0.21 per square foot per month. Over a 30 year term, with 3.5 percent annual increases, the Net Present Value is $8,101,281 using a five percent Discount Rate or $5,887,589 with a 7.5 percent Discount Rate. This is worth considerably more than the estimated sales price of $3,500,000 in the current market and provides room to negotiate. Similariy, if we choose to amortize the estimated value over fifteen years, or $231,088 per year, the ground lease rent is $0.14 per square foot per month. Over the same 30 year term, with a 3.5 percent annual increase in rent, the Net Present Value is between $3,925,059 (7.5 percent Discount Rate) and $5,400,854 (5 percent Discount rate). This fifteen year schedule is more in line with the market than the ten year analysis. Applying for the Commercial Tourist zone change and marketing a ground lease for this lot is the preferable course of action for Golf Course Lot 9. It is possible that the process for a ground lease will take longer than a sale but land prices are currently depressed and the City will get a better return over time. Additionally, should the City decide to sell the land in the future when the market improves, you will reserve that option. Value Based on Highest & Best Use 30 Year Ground Lease $3,925,059 - $8,101,281 Alternative Highest & Best Use Sell Vacant Land $3,000,000 - $3,500,000 Cirtebad Municipal Gotf Course - Lot 9 Proposed Land Use PI/0 (I ol 91 OS Carlsbad Mur\jcipal Golf Course - Proposed La Aerials o! Lot f-h. 1^ Ground Lease: Golf Course Vacant Lot 9 Lof 9 Size Estimated Sale Price Est. Sale Price/10 Yrs 137,266 SqFt 3.15 Net acres $3,466,320 Total $1,100,000 Per Acre (Premium) $25.25 Sq Ft $346,632 Per Year $2.53 PerSF $0.21 PerSF/Mo. Estimated Sale Price Est. Sale Price/15 Yrs 137,266 SqFt | 3.15 Net acres $3,466,320 Total $1,100,000 Per Acre (Premium) $25.25 Sq Ft $231,088 Per Year $1.68 PerSF $0.14 PerSF/Mo. Estimated Rental Income Estimated Rental Income Rent Increase 3.50% Annual Rent Increase 3.50% Annual Term 30 Years Term 30 Years NPV @ 5% Discount Rate $8,101,281 NPV @ 5% Discount Rate $5,400,854 NPV @ 7.5% Discount Rate $5,887,589 NPV @ 7.5% Discount Rate $3,925,059 Period Income Period Income Yr. 1 $346,632 Yr 1 $231,088 Yr. 2 $358,764 Yr 2 $239,176 Yr 3 $371,321 Yr 3 $247,547 Yr4 $384,317 Yr 4 $256,211 Yr.5 $397,768 Yr 5 $265,179 Yr 6 $411,690 Yr 6 $274,460 Yr7 $426,099 Yr 7 $284,066 Yr8 $441,013 Yr 8 $294,008 Yr. 9 $456,448 Yr 9 $304,299 Yr 10 $472,424 Yr 10 $314,949 Yr. 11 $488,959 Yr 11 $325,972 Yr 12 $506,072 Yr 12 $337,381 Yr. 13 $523,785 Yr 13 $349,190 Yr. 14 $542,117 Yr 14 $361,411 Yr 15 $561,091 Yr 15 $374,061 Yr 16 $580,730 Yr 16 $387,153 Yr. 17 $601,055 Yr 17 $400,703 Yr. 18 $622,092 Yr 18 $414,728 Yr 19 $643,865 Yr 19 $429,243 Yr 20 $666,400 Yr 20 $444,267 Yr 21 $689,724 Yr 21 $459,816 Yr 22 $713,865 Yr 22 $475,910 Yr 23 $738,850 Yr 23 $492,567 Yr 24 $764,710 ; Yr. 24 $509,807 Yr 25 $791,475 Yr 25 $527,650 Yr 26 $819,176 Yr 26 $546,118 Yr27 $847,848 Yr 27 $565,232 . r Yr28 $877,522 Yr. 28 $585,015 Yr 29 $908,235 Yr 29 $605,490 Yr. 30 $940,024 Yr 30 $626,682 Total $17,894,072 Total $11,929,381 Ground Lease Lot 9 Three Year Comparabies - Carlsbad Submarket Property Address Sale Date Innovation Way Dryden PI Palomar Oalcs Way 3200 Lionshead Ave 3200 Uonshead Ave 3/29/2012 12/29/2011 8/5/2011 5/20/2011 10/21/2010 Land Area AC 9.21 4 73 2.49 3.74 4.82 Asking Price/ Acre $826,741 $653,400 $653,400 Sale Price $4,588,162 51,186,000 $1,300,000 $1,425,501 $2,310,000 Sale Price/ Acre Sale Price/ Net Acre Proposed Use $498,172 $501,480 $522,088 $381,150 $479,253 $588,060 Commercial $501.479 Auto Dealership $522,090 Commercial, Industrial $381,151 Industrial, Industrial Park, Office $479,254 Industrial, Industrial Paric, OfTice Average $711,180 $476,429 $494,407 Subject Meet Market Premium $711,180 $1,100,000 $476,429 155% $494,407 $650,000 131% Comps Professional Strategic Plan for Real Property Assets Hawthorne Caterpillar 2065 Camino Vida Roble THE IRVING GROUP Property Overview: Hawthorne Caterpillar Location 2065 Camino Vida Roble Carlsbad, CA 92008 APN #: 213-061-28-00 Specific Details Total Sq. Ft. (building): 5,000 Current Lease Rate/Mo.: None Total Sq. Ft. (land): 114,409 (2.63 acres) Projected Lease Rate/Mo.: $1.45/SF Min. Divisible Sq. Ft.: 5,000 Purchase Price (2010): $2,500,000 Floor Size: 5,000 Year Built: 1980 Number of Floors: 1 Zoning: • < P-M Planned Industrial City Agency: City/CFDl Description The Hawthorne Caterpillar building is adjacent to the City-owned 2075 Las Palmas Drive property. It is a freestanding 5,000 square foot concrete block building consisting of 1,100 square feet of office and 3,900 square feet of truck bays. This was a strategic acquisition for future use and to provide additional land to service the Las Palmas building. The condition of the property is poor and will require initial capital investments to make marketable. Palomar Airport Business Park Highest & Best Use The top three options are: (1) lease with Las Palmas for additional parking and an ancillary building, (2) combine with Las Palmas as a single development, and (3) renovate and lease as a stand-alone building with storage yard. Leasing the property with Las Palmas for additional parking would require the least amount of capital improvements. If a light manufacturing or biomedical company manufactures products that are labor-intensive this site is perfectly suited for employee or overflow parking. Developing the site is the second option we considered. Given the strategic nature of this purchase, by assembling the two properties the City can build a large facility to occupy or lease to a third party. The Code allows a maximum coverage for the building footprint of 50 percent of the lot, or 67,082 square feet. Although maximizing the site utilization is not part of this study, combining this property with Las Palmas will allow for a 100,000 square foot building with adequate parking and access. Currently there is a 200 foot SDGSiE easement going through the center of this site which will need to be addressed in the site plan. Developing a 100,000 square foot concrete tilt-up building on the assemblage will cost an estimated $18,924,104 or $189 per square foot inclusive of Tenant Improvements. Adding the combined cost-basis of $4,102,160, the total development costs are $23,549,042 or $235 per square foot. Based on Cap Value of 7.0 percent, estimated future rents of $1.65 per square foot and market rate concessions, the Cap Value of this assemblage is $24,884,357 with a return on costs of 7.4 percent. These may be sufficient returns if the project is leased within 24 months but the challenge is vacancy rates in Carisbad for this product type are currently 21 - 24 percent. Although an assemblage is the Highest and Best Use of the property, the current environment makes it too risky to proceed at this time. The best interim use of the site would be to accommodate a single tenant who requires a storage yard. Secure outside storage in a desirable area makes it a unique site for a contractor, towing company or auto dealer needing a small office and secure outside storage. There are no options currently available in the City of Carisbad for a property of this type. The current condition ofthe property will require an estimated $140,427 in renovations. In this scenario, the 3,900 square feet of truck bays would be converted to office space. The major expenses will be the carpet and paint ($50,000) and replacing three of the roll-up doors with glass storefronts ($24,000). Determining comparabies in a two mile radius of the site presented a challenge because there isn't a similar product type in the City. Further complicating the analysis is the large outside storage component which isn't normally priced off the building square footage but rather a lump sum for the outside area. Since there isn't an identical comparable we used Class B Flex sites in our financial analysis. The average asking rent for this product is $0.98 per square foot plus $0.14 per square foot NNN expenses. The average land area for the comparabies is only 0.64 acres or a quarter the size of the subject. Given the unique product and infrastructure in place, it is our opinion that this property will lease for approximately $7,500 per month which is $1.50 per square foot reflected in Year 2. The NNN expenses are estimated to be $0.65 per square foot due to the high property taxes associated with the purchase price and small building size. To induce potential tenants into committing to a lease, the Tenant Improvements will need to be shared by both parties. By providing a $15.00 per square foot Tenant Improvement allowance ($75,000), the Tenant will then need to self-fund the remaining $13.09 per square foot ($65,427). Providing six months of free rent over a 66 month term will give adequate time to amortize the Tenant Improvements. The estimated Net Operating Income in Year 2 is $79,240. Based on a Cap Rate of 8.5 percent, in line with current industry rates, the Cap Value is $932,231. Over the term of the lease, the City will receive $474,699 in rent and $214,746 in Operating Expenses. Using a five percent discount rate, the Net Present Value of the lease over the term is $511,923. Since the property has been vacant for some time, by isolating $75,000 the City will need to invest in improvements, the Cash-on-Cash return dn this investment is a robust 106 percent. A property that has Tenants and is being actively used is more valuable than a vacant property because the systems are maintained and it avoids the stigma attached to buildings that have been vacant for an extended period of time. One final option is an immediate sale. Should the City decide to sell this property without further investing in the asset, the price will be based primarily on the land value. For the 2.63 acre site, we estimate the land is worth $1,253,007 ($476,429 per acre). If we add another $500,000 for the Improvements ($100 per square foot), this property is worth approximately $1,750,000, which is $750,000 less than the purchase price of $2.5 million. Value Based on Highest &. Best Use Net Operating Income (Yr. 2) $1,741,905 Cap Rate 7.0% Combined Value for Las Palmas Assemblage $24,884,357 As-ls Cap Value Net Operating Income (Yr. 2) $79,240 Cap Rate 8.5% Cap Value Outside Storage $932,231 Estimated As-ls Sale Price Land Value (2.63 acres) $1,250,000 Building (5,000 square feet) $500,000 Total As-ls Value $1,750,000 Project: Hawthorne/Las Palmas Assemblage I Project Costs (24 Months) Estimated Cost Basis ("Purchase Price") Improvements Construct Building Shell Complete Buildout (TIA) Demolish Existing Buildings Hard Costs Contingency Hard Costs (Construction Costs) Additional Expenses Permits (City est.) Architecture, MEP, & SE other Consultants Soft Cost Contingency Insurance & Bonds Legal & Accounting Broker Commissions Marketing Property Tax -1 Yr. to Lease Up Soft Costs Total Project Costs Interest Component: Construction Loan Amount City's Portion of Construction Costs Construction Period Interest Points/Fees Total Development Costs (incl. Cost Basis) 233,917 sqft land 27,627 sqft building 5% 7% 5% 3% 5% 0.0% $ 12,300,667 65% Project Cost (excl. Cost Basis) $ 6,623,436 6.50% 1 Yr @ .65 LTC & .5 Use Rate 1 pt Total Hard Cost Land/SF $17.54 Total Hard Cost Building/SF $148.48 sqft $120.00 sq ft $40.00 sq ft $5.00 1 Total Hard Cost/SF $169.45 1 Total Soft Cost/SF $19,791 1 Total Project Cost/SF $189,241 $12,000,000 $4,000,000 $138,135 $806,907 $200,000 $1,186,153 $5,000 $69,558 $508,351 $5,000 $0 $5,000 $0 $4.102,160 $16,945,042 $1,979,062 [Development Cost/SF $235.491 $18,924,104 399,772 123,007 $23,549,042 [Proforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash Cap Value Total Development Costs Margin 7.00% See "Income" Yr. 2 10% 5% NNN 6.50% 25 Yrs $2,049,300 -$204,930 -$102,465 $1,741,905 -$1,310,563 $431,342 Value/SF $248.841 $24,884,357 -$23,549,042 Margin/SF $13.35! $1,335,315 Investment Indicators Loan to Value Total Development Costs Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Leveraged Return 65% Net Operating Income (Yr 2) Total Development Cost - City Net Operating Income Annual Interest Net Cash Capital Investment $16,174,832 $23,549,042 $7,374,210 $1,741,905 $23,549,042 $1,741,905 $1,310,563 $431,342 $7,374,210 7.4% 132.9% S.8% Summary Assemblage Cashflow Analysis Hawthorne/Las Palmas Assemblage Summary Total Value - Lump Sum $20,297,522 NPV (S 5% discount) $14,349,344 Starting Base Rent $1.65 Effective Rent (incl. free rent)/RSF $1.77 Operating Expenses / SF $0.25 Average Gross Rent Income/RSF $1.69 $1.69 'Incl. Tl's and Free Rent Estimated Rent 2012 Rent Type: NNN Assumptions I Rent Assumptions Tenant Improvement Assumptions Rentable SF 100,000 All in Tl number(or) $40.00 Load Factor 12.00% Equipment Useable SF 89,286 FF&E Cabling Lease Term (months) 120.00 Physical nrwve Lease Term (months) % or $ Miscellaneous Rent Annual increase 3.5% $0.00 Total Cost $40.00 $4,000,000 year 1 $1.65 year 6 $1.96 year 2 $1.71 year 7 $2.03 Tl Allowance ($/sf) year 3 $1.77 years $2.10 Landlord Tl Allowance $40.00 $4,000,000 year 4 $1.83 year 9 $2.17 How allocated? RSF year 5 $1.89 year 10 $2.25 Remaining Tl Cost $0.00 $0 % or $ Estimated NNN Expenses Annual increase 0.0% $0.00 year 1 $0.25 year 6 $0.25 year 2 $0.25 year 7 $0.25 years $0.25 years $0.25 year 4 $0.25 year 9 $0.25 years $0.25 year 10 $0.25 Free Rent Base Rent year 1 12 months free year 2 0 months free Yearl Year 2 Year 3 Year 4 Years Year 6 Year 7 Years Year 9 Year 10 Number of Months 12 12 12 12 12 12 12 12 12 12 120 Income Rent Operating Expenses Caoital Costs Tenant Improvements Free Rent Free Rent $1,980,000 $304,936 -$4,000,000 -$1,980,000 $2,049,300 $304,936 $2,121,026 $304,936 $2,195,261 $304,936 $2,272,096 $304,936 $2,351,619 $304,936 $2,433,926 $304,936 $2,519,113 $304,936 $2,607,282 $304,936 $2,698,537 $304,936 Total Costs Rent $23,228,158 Operating Expenses $3,049,364 Tis -$4,000,000 Free rent -$1,980,000 Total Income -$3,695,064 $2,354,236 $2,425,962 $2,500,198 $2,577,032 $2,656,555 $2,738,862 $2,824,049 $2,912,218 $3,003,473 Grand ToUls $20,297,522 Monthly Rent $165,000 $170,775 $176,752 $182,938 $189,341 $195,968 $202,827 $209,926 $217,273 $224,878 Income Assemblage Project: 2065 Camino Vida Roble I Project Costs (24 Months) Hard Costs (Construction Costs) Additional Expenses Permits (est.) Architecture, MEP, & SE Other Consultants Soft Cost Contingency Insurance & Bonds Legal & Accounting Marketing Property Tax -1 Yr. to Lease Up Soft Costs Total Project Costs » Interest Component: s\^\ Loan Amount :'• City's Portion Period Interest Total Development Costs Tenants Portion of Costs Total Development Costs - City Estimated Cost Basis ("Purchase Price") 5,000 sqft $500.00 i — $2,500,000 Improvements ' ' $5,500 Building Area Demo " 1,100 sqft $5.00 ' $5,500 Carpet & Paint (office) 5,000 sqft $10.00 $50,000 Upgrade Lighting (office) 5,000 sqft $2.50 $12,500 HVAC Service and Ducting 5,000 sqft $2.00 $10,000 Replace Roll-Up Doors with Storefront 3 count $8,000.00 $24,000 Hard Costs Contingency 5% $4,825 Total Hard Cost/SF $21.371 7% S% Total Soft Cost/SF $6.72| $ 2,640,427 0.00% •7^ I [Development Cost/SF $S28.09[ [ Development Cost for City/SF $51 S.OO] $10,000 $7,477.75 $5,000 $1,124 $10,000 $0 $0 i $0 $106,825 $33,602 $2,640,427 $0 $2,640,427 -$65,427 $2,575,000 [Proforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash Cap Value Total Development Costs - City Margin Investment Indicators Return on Cost - Development Cash-on-Cash Return - Improvements NPV (@ 5% Discount Rate) See "Income" Yr. 2 10% 2% NNN Net Operating Income (Yr. 2) Total Development Cost - City Net Cash (Yr. 2) Capital Investment (Tl Allowance) Yrs. 1-6 ; $79,240 $2,575,000 $79,240 $75,000 $90,045 -$9,005 -$1,801 $79,240 0.00% $0 $79,240 50% 1 Value/SF $186.45[ $932,231 -$2,575,000 1 Margin/SF -$328.551 -$1,642,769 3.1% 105.7% 8511.923 Summary Contractor Yard Cashflow Analysis Project: 2065 Camino Vida Roble Summary Total Value - Lump Sum $614,445 NPV (@ 5% discount) $511,923 Starting Base Rent $1.45 Effective Rent (incl. free rent)/RSF $1.44 Operating Expenses / SF $0.65 Average Gross Rent Income/RSF $1.86 Estimated Rent 2012 Rent Type: NNN - Contractor Yard 'Incl. Tl's and Free Rent Assumptions I Rent Assumptions Tenant Capital Cost Assumptions Size % or $ Tl Costs ($/RSF) Total Rentable SF 5,000 % or $ All In Tl number(or) $28.09 Load Factor 0.00% % or $ Equipment Useable SF 5,000 % or $ FF&E Lease Term (months) % or $ Cabling Lease Term (months) 66.00 % or $ Physical move Lease Term (months) % or $ Miscellaneous Rent Annual increase 3.5% $0.00 Total Cost $28.09 $140,427 year 1 $1.45 year 6 $1.72 Tl Allowance ($/sf) year 2 $1.50 year 7 Tl Allowance ($/sf) year 3 $1.55 years Landlord Tl Allowance $15.00 $75,000 year 4 $1.61 year 9 How allocated? RSF year 5 $1.66 year 10 Year 4 % or $ Year 4 Cost to Tenant $13.09 $65,427 % or $ Year 4 Years Estimated NNN Expenses Annual increase 0.0% $0.00 Year 4 Years year 1 $0.65 year 6 $0.65 Year 4 Years year 2 $0.65 year 7 Year 4 Years year 3 $0.65 year 8 Year 4 Years year 4 $0.65 year 9 Year 4 Years year 5 $0.65 year 10 Year 4 Years Free Rent Base Rent Year 3 Year 4 Years year 1 6 months free months free Year 3 Year 4 Years year 2 0 months free months free Year 3 Year 4 Years Number of Months Yearl Year 2 Year 3 Year 4 Years Years Number of Months 12 12 12 12 12 6 66 Income Total Costs Rent $87,000 $90,045 $93,197 $96,458 $99,835 $51,664 Rent $518,199 Operating Expenses $39,045 $39,045 $39,045 $39,045 $39,045 $19,522 Operating Expenses $214,746 Capital Costs Tenant Improvements -$75,000 Tis -$75,000 Free Rent Free Rent -$43,500 $0 Free rent -$43,500 Total Income $7,545 $129,090 $132,241 $135,503 $138,879 $71,187 Grand Totals $614,445 Monthly Rent $0 $7,504 $7,766 $8,038 $8,320 $8,611 Income Contractor Yard Estimated Operating Expenses (NNN) Property Tax (1.1% Development Cost) Landscape Maintenance (est.) Insurance (est.) 'NNN per SF is skewed because vaiue is in the yard Per Yr Per SF/Mo.* $2,640,427 $29,045 $0.48 $4,000 $0.07 $6,000 $0.10 $0.65 Worksheet Address Building Class Available SF Est. NNN Asking Rent As Net of Utilities Land Area/Unit (Acre) Building Age (Yrs.) 6354 Corte Del /\beto B Flex (MG)* 4,000 $ 0.08 $ 0.79 $ 0.87 26 2451 Impala Drive B Flex (MG)* 4.170 $ 0 23 S 1.05 $ 1.28 0.21 28 1934 Kellogg Avenue B Flex (MG)* 5.248 $ $ 1.05 $ 1.05 0.38 2738 Loker Ave W. B Flex (MG)* 3,805 $ -$ 1.25 $ 1.25 1.88 22 2236 Rutherford Road BFlex 4,055 $ 0.40 $ 0.99 $ 1.39 0.13 6190 Yarrow Drive BFlex 4,000 $ 0.16 $ 0.76 $ 0.92 0.23 31 Average $ 0.14 $ 0.98 $ 1.13 0.64 Subject: Flex Meet Market $ 0.65 $ 0.48 $ 1.13 % of Market Marketable $ 0.65 $ 0.35 $ 1.00 89% Aggressive $ 0.65 $ 0.30 $ 0.95 84% Subject: Flex/Storage Yard Recommended $ 0.65 $ 1.45 $ 2.10 210% *MG = Modified Gross Three Year Comparabies - Carlsbad Submarket Property Address Sale Date Land Area AC Asking Sale Price Sale Price/ Acre Sale Price/ Net Acre Proposed Use Price/ Acre Innovation Way 3/29/2012 9.21 $826,741 $4,588,162 $498,172 $588,060 Commercial Dryden PI 12/29/2011 4.73 $1,186,000 $501,480 $501,479 Auto Dealership Paiomar Oaks Way 8/5/2011 2.49 $1,300,000 $522,088 $522,090 Commercial, Industrial 3200 Lionshead Ave 5/20/2011 3.74 S653.400 $1,425,501 $381,150 $381,151 Industrial, Industrial Park, Office 3200 Lionshead Ave 10/21/2010 4.82 $653,400 $2,310,000 $479,253 $479,254 Industrial, Industrial Park, Office Average $711,180 $476,429 $494,407 Land Area AC Asking Asking Price Sale Price/ Acre Sale Price (Est.) Price/ Acre Subject 2.63 $711,180 $ 1,870,405 $476,429 $1,253,007 Comps Professional Strategic Plan for Real Property Assets Las Palmas 2075 Las Palmas Drive THE IRVING GROU Property Overview: Las Palmas Location 2075 Las Palmas Drive Carlsbad, CA 92009 APN #: 213-061-19-00 Specific Details Total Sq. Ft. (building): 22,627 Current Lease Rate/Mo.: None Total Sq. Ft. (land): 119,508 (2.74 acres) Projected Lease Rate/Mo.: $1.20/SF Min. Divisible Sq. Ft: 22,627 Purchase Price (1987): $1,602,160 Floor Size: 22,627 Year Built: 1985 Number of Floors: 1 Zoning: ^/ P-M Planned Parking (per 1,000): 5.12 Industrial Parking (# spaces): 116 City Agency: City/General Fund/CFDl Description Freestanding fully-improved office building constructed of concrete tilt-up and glass. Originally built in 1985 and renovated in 2001, the layout requires updating due to inefficiencies. The floor plans currently have 61 offices, three conference rooms, a lab, lunch room, open office area and restrooms with shower facilities. Other notable characteristics of this property are: • HVAC and sprinklers throughout • 12' high acoustic ceilings under 18' truss height • High parking ratio (5/1,000) • 4,000 Amps, 120/208 Volt 3-phase power • Previously had three clean rooms and various gas supply lines • Exempt from CEQA Guidelines per Section 15301 (leasing of existing public facilities) Total Investment (2004): 1988 Purchase Price $1,625,241 1988 Hawthorne Parking Improvement $27,100 2000 Lot Line Adjustment $10,172 2000 Hawthorne Parking Acquisition $165,783 Modetek Tenant Improvements $90,508 Total Investment $1,918,804 Palomar Airport Business Park Highest & Best Use Due to the physical characteristics of the building, including heavy power and prior uses, this facility should be leased as lab space. The close proximity to biomedical leaders in Carlsbad will promote clustering and create additional value for the City. Compared to alternate submarkets like Torrey Pines, Sorrento Valley and Sorrento Mesa, lab space in Carlsbad offers good value to companies as rental rates are significantly lower. For purposes of this evaluation, we assigned 5,000 square feet as wet laboratory. The build out for a wet lab is cost intensive, approximately $100 per square foot. We would seek to utilize the legacy lab infrastructure where possible and increase the lab size to meet the $500,000 budget. There are currently six alternative options within Carlsbad for lab space from 15,000 to 25,000 square feet. The asking rent for these competitive buildings ranges from $0.89 - $1.65 per square foot plus NNN expenses of $0.19 - $0.24 per square foot. Normalizing the asking rates and NNN expenses gives an effective rate, net of utilities, of $1.08 - $1.94 per square foot. Based on this information the average effective rate is $1.55 per square foot. The subject property has estimated NNN expenses of $0.17 per square foot which is low compared to the alternatives. If we price to meet the market, our asking rent will be $1.38 per square foot. Given the amount of time the property has been vacant and its current condition, we recommend an aggressive rate of $1.20 per square foot. Inducements will be an important factor in attracting a qualified credit Tenant due to the anticipated Tenant Improvements for updating the building and constructing lab space which is estimated to total $990,000. A combination of free rent and a City-funded Tenant Improvement budget of $20 per square foot ($452,540) will attract a credit Tenant. The remaining $537,130 in estimated Tenant Improvements should be funded by the Tenant. This can be offset by providing twelve months free rent for the first year worth $325,829. In the proforma budget, we recommend a 72 month term providing sixty months of rental income to the City. Over the 72 month term, the City will receive $1,808,399 in rent with an additional $280,759 in Operating Expenses. Using a five percent discount rate, minus Tenant Improvements, the Net Present Value of the rent over the term is $1,292,841. The estimated cost basis of $1,918,804 ($85 per square foot) for the existing structure, coupled with the Tenant Improvements, increases the total development costs to $2,908,474 ($128 per square foot). Deducting the Tenants portion ($537,130) from the development costs means the City's total development costs are $2,371,344 ($105 per square foot). In the second year of the term, when the Tenant starts paying rent, the Net Operating Income is an estimated $286,648. Assigning a capitalization rate of 8.5 percent, which is in line with Costar's First Quarter 2012 Market Report, yields a total Cap Value of $3,372,328. Deducting the City's total development costs of $2,371,344 gives the City a development margin of $1,000,984. The Return on Cost for the finished product is 12.1 percent. Value Based on Highest & Best Use Net Operating Income (Yr. 2) $286,648 Cap Rate 8.5% Value As Lab Space $3,372,328 ($149.04) A ® FOUND M-1l> 1^ STAMPS) «CE 166 pm MAF 10061 FOUND 2" IP W DISC STAMPID RCE 18673 PER MAP I0OS1 rout® 3/4" P W/ OtSC STAIff^ iCE t8673 PER MAP 1006t DiSTANiCE 1&20' L2 25*87* HUM^ DELTA RADIUS LENGTH a 3ft.2r 02 181.00* mrt 03 7^43" 331.00' 43J9' ADMSTMBfT PLAT-arr OF cmimm Anoilcan t: Approved Bv: AP-N.: City of CGfisbad WMJJSWM Approved Bv: 213-061-19 16J5 Faraday Amnm MmimMMim, ma Uoyd Htm$ City Q*gm<^ RCE 2JdS9 213-061-20 Carlsbod CA 92003 MmimMMim, ma Expirwd t2/3f/200t Det* 5 Project: 2075 Las Palmas I Project Costs (24 Months) Estimated Cost Basis ("Purchase Price" Improvements Carpet & Paint (office) Upgrade Lighting (office) Lab Area Demo Lab - Wetlab Hard Costs Contingency Hard Costs (Construction Costs) Additional Expenses Permits (est.) Architecture, MEP, & SE other Consultants Soft Cost Contingency Insurance & Bonds Legal & Accounting Marketing Commission Property Tax -1 Yr. to Lease Up Soft Costs Total Project Costs Interest Component: Loan Amount • '. City's Portion Period Interest * Total Development Costs Tenants Portion of Costs Total Development Costs - City 22,627 sqft 17,627 sqft 17,627 sqft 5,000 sqft 5,000 sqft 5% $84.80 $10.00 $2.50 $5.00 $100.00 I Total Hard Cost/SF 7% 5% 3.5% Total Soft Cost/SF $ 2,908,474 0.00% I Development Cost/SF $34.591 $9.15| $128.541 $176,270 $44,068 $25,000 $500,000 $37,267 $20,000 $54,782 $5,000 $3,989 $50,000 $5,000 $5,000 $63,294 $0 $1,918,804 $782,604 $207,065 $2,908,474 $0 $2,908,474 -$537,130 [Development Cost for City/SF $104.80 $2,371,344 I Proforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash Cap Value Total Development Costs - City Margin Investment Indicators Return on Cost - Development Cash-on-Cash Return - Improvements NPV (@ 5% Discount Rate) See "Income" Yr. 2 10% 5% NNN Net Operating Income (Yr. 2) Total Development Cost - City Net Cash (Yr. 2) Capital investment (Tl Allowance) Yrs. 1-6 $286,648 $2,371,344 $286,648 $452,540 $337,233 -$33,723 -$16,862 $286,648 0.00% $0 $286,648 .50%! Value/SF $149,041 $3,372,328 -$2,371,344 $3,372,328 -$2,371,344 1 Margin/SF $44.24| $1,000,984 12.1% 6M24 $1.292.841 Summary Cashflow Analysis 2075 Las Palmas Summary Total Value - Lump Sum $1,636,619 NPV (@ 5% discount) $1,292,841 Starting Base Rent $1.20 Effective Rent (Incl. free rent)/RSF $1.11 Operating Expenses / SF $0.17 Average Gross Rent Income/RSF $1.00 Estimated Rent 2012 Rent Type; NNN - Lab $1.00 'Incl. Tl's and Free Rent Assumptions [Rent Assumptions Tenant Improvement Assumptions Tl Costs ($/RSF) Rentable SF 22,627 % or $ All in Tl number(or) $43.74 Load Factor 0.00% % or $ Equipment Useable SF 22,627 % or $ FF&E Lease Term (months) % or $ Cabling Lease Term (months) 72.00 % or $ Physical move Lease Term (months) % or $ Miscellaneous Rent Annual increase 3.5% $0.00 Total Cost $43.74 $989,670 year 1 $1.20 year 6 $1.43 Tl Allowance ($/sf) year 2 $1.24 year 7 Tl Allowance ($/sf) year 3 $1.29 year 8 Landlord Tl Allowance $20.00 $452,540 year 4 $1.33 year 9 How allocated? RSF years $1.38 year 10 Year 4 % or $ Year 4 Cost to Tenant $23.74 $537,130 % or $ Year 4 Years Estimated NNN Expenses Annual increase 0.0% $0.00 Year 4 Years year 1 $0.17 year 6 $0.17 Year 4 Years year 2 $0.17 year 7 Year 4 Years year 3 $0.17 year 8 Year 4 Years year 4 $0.17 year 9 Year 4 Years years $0.17 year 10 Year 4 Years Free Rent Base Rent Year 3 Year 4 Years year 1 12 months free months free Year 3 Year 4 Years year 2 0 months free months free Year 3 Year 4 Years Number of Months Yean Year 2 Year 3 Year 4 Years Year 6 Number of Months 12 12 12 12 12 12 72 Income Total Costs Rent $325,829 $337,233 $349,036 $361,252 $373,896 $386,982 Rent $2,134,228 Operating Expenses $46,793 $46,793 $46,793 $46,793 $46,793 $46,793 Operating Expenses $280,759 Caoital Costs Tenant Improvements -$4S2,S40 Tis -$452,540 Free Rent Free Rent -$32S,829 $0 Free rent -$325,829 Total Income -$405,747 $384,026 $395,829 $408,045 $420,689 $433,776 Grand Totals $1,636,619 Monthly Rent $0 $28,103 $29,086 $30,104 $31,158 $32,249 Estimated Operating Expenses (NNN) Property Tax (1.1% Development Cost) Landscape Maintenance (est.) Insurance (est.) PerYr Per SF/Mo. $2,908,474 $31,993 $0.12 $4,800 $0.02 $10,000 $0.04 $0.17 Worksheet Address Building Class Available SF Est. NNN Asking Rent As Net of Utilities Comment 2320 Camino Vida Roble B Flex/R&D 25,377 $ 0.20 $ 1.25 $ 1.45 5817 Dryden Place BFlex 18,760 $ 0 24 $ 1 25 $ 1 49 1620 Faraday Avenue B Flex/R&D 28,254 $ 0.29 $ 1,65 $ 1.94 Former Life Tech 1911 Palomar Oaks Way B Flex/R&D 23,325 $ 0 19 $ 0 89 $ 1 08 For Sale 1891 Rutherford Road BFlex 24.271 $ 0.24 $ 1.55 $ 1.79 Former Isis Pharma Average $ 0.23 $ 1.32 $ 1.55 Subject Meet Market $ 0.17 $ 1.38 $ 1.55 Marketable $ 0.17 $ 1.25 $ 1.42 92% Aggressive $ 0.17 $ 1.20 $ 1.37 89% Comps Professional Strategic Plan for Real Property Assets Golf Course Lots 4 and 5 TH E IRVING GROU Property Overview: Golf Course Lots 4 & 5 Location College Boulevard & Palomar Point Way Carlsbad, CA 92009 APN #: Unassigned Tentative Tract Map #: CT 09-03 Lot #4 Specific Details Parcel Size (acres): Gross 8.2 (357,192 SF) Current Lease Rate/Mo.: None Net 7.1 (309,276 SF) Projected BIdg. Rate/Mo.: $2.00/SF NNN Per City 5 (217,800 SF) Projected Ground Rate/Mo. $0.12/SF Min. Divisible Sq. Ft.: 10,000 Purchase Price: None Applied Number of Floors: 3 or 35 Feet in Height Zoning: , 0/P-M Parking Requirement: 4 per 1,000 SF City Agency: City/General Fund Description In September 2010, CT 09-03 was approved subdividing the golf course property into individual lots and allowing for the separation and possible sale of three individual development lots designated for Office/Planned Industrial. These three parcels (Lot 4: 8.2 gross acres; Lot 5:12.9 gross acres; and Lot 9: 2.7 gross acres) are located along the periphery of the golf course. Lot 4, the focus of this study, is subject to the development standards of the Office and/or Planned Industrial zones. The City of Carlsbad completed an Environmental Impact Report (EIR 97-01) in January 2010. This report evaluated the potential environmental effects of developing the new building pads including: analysis of traffic circulation, water resources, cultural resources, biological resources and land use. The City of Carlsbad Planning Commission approved the Carlsbad Municipal Golf Course Mapping (CDP 11-19) on January 4, 2012 establishing development standards for the Planned Industrial (P-M) and Office (0) zoning related to these properties. In order to move forward with developing the site, the party(s) involved would need to satisfy certain remaining items. The City requires: approval of a Site Development Plan (SDP), compliance with the General Plan and the airport's Land Use Compatibility Plan. A preliminary Geotechnical Investigation for the project has been approved by the California Coastal Commission but the "developer" will require approval for a Coastal Development Permit. There is currently a Tentative Tract Map approved by the City. This Tentative Tract Map expires on September 15. 2013. According to the available records, Lot 4 is 8.2 gross and 7.1 net acres. The net buildable area is 5.0 acres. The site is located on the south side of College Boulevard, west of Palomar Point Way. It has views of the golf course to the north, south and west and an ocean view to the west. The surrounding commercial uses are Class A Office and Class B/Flex space. The golf course property is located near the McClellan-Palomar Airport on College Boulevard between Palomar Airport Road and Faraday Avenue. Highest 8i Best Use This site is one of the best locations in Carlsbad with both ocean and golf course views and close-proximity to major arterial roadways. It is near the airport and noise pollution would be an issue when considering the potential uses. There are a number of potential uses permitted on the site due to both Office and Planned Industrial zoning. We have considered the possible uses, including a mixed use development with residential apartments located above the ground floor, and determined that a corporate headquarter or multi-tenant office use is the highest and best use. A study to maximize the site area was not in the scope of this assignment and we built our model assuming a three story, 90,000 square foot office building. With five net buildable acres, any remaining space could be utilized In a phased development to maximize the available acreage. We would recommend the City require certain design standards to differentiate the project from existing concrete tilt-up designs in the area and build a LEED Green Building. The Carlsbad submarket for commercial real estate has a vacancy rate of 24 percent for Class A Office space. This will change as both regional and national economies improve over the next few years. Considering an estimated two years to entitle and develop this asset, there is a strong likelihood that this inventory will enter the market at precisely the right time. Comparable land sales in the submarket for the last three years have an average asking price of $711,180 per acre and average sale price per net acre of $494,407. Given the premium location of this lot and a desire to create income in the future, this site should be marketed at a premium price of $950,000 per acre with the goal to sell for a minimum of $650,000 per net acre of buildable ground. For the five net buildable acres on this site, the total sale price is $3,250,000. In our development proforma a potential buyer would use to underwrite the purchase, the total development cost for a 90,000 square foot office building is estimated to be $25,947,861. Utilizing a starting rent rate of $2.00 per square foot NNN, the Net Operating Income in the second year of the term is $1,933,794 giving a Return on Cost for the development of 7.5 percent and a Leveraged Return of six percent. Alternatively, the developer could build using concrete tilt-up construction that meets the City's design criteria. This reduces the hard costs by approximately twenty percent and increases the Return on Costs to 8.5 percent and Leveraged Return to an acceptable 10.1 percent return. Maximizing the site and developing additional buildings in phases would further bolster the investment returns. Alternatively the City of Carlsbad could market the site for a 30 year ground lease. Traditionally ground leases are offered for Retail uses on a specific building pad within a shopping center or mall development. For the previous 36 months, the comparabies for ground leases of Office projects are not available in this submarket. The method we used for determining a reasonable ground lease rate is to amortize the estimated value of $3,250,000 over a ten or fifteen year period to calculate the asking rent. Divided over ten years, the annual rent is $325,000 or approximately $0.12 per square foot per month. Over the 30 year term, with 3.5 percent annual increases, the Net Present Value of the ground lease is between $5,520,167 and $7,595,710 depending on whether we apply a 7.5 percent or 5.0 percent Discount Rate respectively. Dividing the value over a fifteen year period reduces the asking rent to $0.08 per square foot per month. Over the same 30 year term, with 3.5 percent annual increases, the Net Present Value for this ground lease ranges from $3,680,111 to $5,063,807 depending on the Discount Rate. Considering the option of selling in a depressed market or retaining the asset to generate future revenue for the City, the ground lease scenario provides the Highest and Best Use for the City. Value Based on Highest & Best Use 30 Year Ground Lease $3,680,111 - $7,595,710 Alternative Highest 8i Best Use Sell Vacant Land (5 Net Acres) $3,000,000 - $3,500,000 Lot #5 Specific Details Parcel Size (acres): Gross 12.9 (561,924 SF) Current Lease Rate/Mo.: None Net 11.4 (496,584 SF) Projected BIdg. Rate/Mo.: $2.25/SF NNN Per City 7 (304,920 SF) Projected Ground Rate/Mo.: $0.12/SF Min. Divisible Sq. Ft.: 10,000 Purchase Price: None Applied Number of Floors: 3 or 35 Feet in Height Zoning: 0/P-M Parking Requirement: 4 per 1,000 SF City Agency: City/General Fund Description In September 2010, CT 09-03 was approved, subdividing the golf course property into individual lots, allowing for the possible sale of the three individual development lots designated for Office/Planned Industrial. These three parcels (Lot 4: 8.2 gross acres; Lot 5: 12.9 gross acres; and Lot 9: 2.7 gross acres) are located along the periphery of the golf course. Lot 5, the focus of this study, is subject to the development standards of the Office and/or Planned Industrial zones. The City of Carlsbad completed an Environmental Impact Report (EIR 97-01) in January 2010. This report evaluated the potential environmental effects of developing the new building pads including: analysis of traffic circulation, water resources, cultural resources, biological resources and land use. The City of Carlsbad Planning Commission approved the Carlsbad Municipal Golf Course Mapping (CDP 11-19) on January 4, 2012 establishing development standards for the Planned Industrial (P-M) and Office (0) zoning related to these properties. In order to move forward with developing the site, the party(s) involved would need to satisfy certain items remaining. The City requires: review and approval of a Site Development Plan (SDP), compliance with the General Plan, and compatibility with the airport's Land Use Compatibility Plan. A preliminary Geotechnical Investigation for the project has been approved by the California Coastal Commission but the developer still requires approval for a Coastal Development Permit. There is currently a Tentative Tract Map approved by the City. This Tentative Tract Map expires on September 15. 2013. There are no vested rights gained by the developer through the City's approval of this Tentative Map. According to the available records. Lot 5 is 12.9 gross and 11.4 net acres. The net buildable area is seven acres. The site is located on the north side of College Boulevard, west of the Open Space at the end of Aston Avenue. It has views of the golf course to the north and west and an ocean view to the west. The surrounding commercial uses are Class A and Class B/Flex space but this lot would have no immediate neighbors. The golf course property is located on the Crossings Golf Course near the McClellan-Palomar Airport on College Boulevard between Palomar Airport Road and Faraday Avenue. Highest & Best Use This site is arguably the best developable land available in Carlsbad. It is bordered by Open Space and the golf course and has commanding views to the north and west. It is easily accessed by major arterial roadways providing quick access to freeways. There are a number of potential uses permitted on the site due to both Office and Planned Industrial zoning. In addition to the permitted uses a developer could apply for a Conditional Use Permit or change the zoning to CT and build a hotel on the site. Within a five mile radius of the site there are currently 2,347 hotel rooms and over 250 more under construction which is competitive for standard product types. We had several interviews with a successful hotel developer and operator who is active in the region. They previously developed Tower23 in Pacific Beach and are currently redeveloping Lake San Marcos. We feel that the Carlsbad market is currently underserved in the boutique hotel category offering rooms in the $200 to $300 per night range. There is an ample supply of rooms under the $200 per night and above $300 per night. A boutique hotel would need to maximize the site with approximately 300 rooms in order to provide sufficient amenities and income. Alternatively, this location close to the airport would be a desirable location for the global headquarters of a sporting goods or life science corporation. The site has the potential to build a world class facility that would take advantage of the impressive views and "island effect" of having no neighbors on either side. A study to maximize the site was not in the scope of this assignment and we built our model assuming a three story, 120,000 square foot Class A office building. With seven net buildable acres there is sufficient space to build a larger building should the end-user desire it. There are not many companies in the region today who need a 120,000 square foot building but this will change as the market improves. Like Lot 4, we recommend the City require certain design standards to differentiate the project from existing concrete tilt-up designs in the area and build a LEED Green Building. Comparable land sales in the submarket for the last three years have an average asking price of $711,180 per acre with the average sale price per net acre of $494,407. Given the premium location of this lot and a desire to create future income, this site should be marketed at a premium price of $1,050,000 per acre ($7,350,000) with the goal to sell it for close to that amount. If the market changes and the City needs capital or the site is required by specific user that will increase the tax base in Carlsbad for an extended period of time, the City could consider lowering this price to $650,000 per acre or $4,550,000. Reviewing a possible development proforma for a single-user headquarter facility to underwrite the purchase, the development cost for the 120,000 square foot Class A office building is estimated to be $30,088,364. If we factor in the low range of $650,000 per acre for the land, it is an additional $4,550,000 for seven acres bringing the total costs for the development to $34,638,364. Utilizing a starting rent rate of $2.25 per square foot NNN, the Net Operating Income in the second year of the term is $2,850,390 giving a Return on Cost for the development of 8.2 percent. Assigning a 7.0 percent Cap Rate to the Net Operating Income yields a Cap Value of $40,719,857 ($339.33/SF). Deducting the total cost of $34,638,364 provides a margin of $6,081,493 or eighteen percent. A better course of action to consider is a 30 year ground lease. This would create a long-term revenue stream for the City while retaining ownership of the land for a future use or sale. The benefit for the developer or Lessee in this scenario is the reduced capital needed to fund the project because they are not purchasing the land. Comparable leases of this nature aren't available but we can amortize the current estimated value of the land over a given period of time to create a reasonable asking rate. The estimated value of the seven acres is $7,350,000 or $1,050,000 per acre. If this value is amortized over a ten year period, or $735,000 per year, the rent rate for the ground lease will be $0.20 per square foot per month. Over a 30 year term, with 3.5 percent annual increases, the Net Present Value is $17,177,990 using a five percent Discount Rate or $12,484,069 with a 7.5 percent Discount Rate. This is worth considerably more than the estimated sales price of $4,500,000 - $7,000,000 in the current market and provides room to negotiate. Similarly, if we choose to amortize the estimated value over fifteen years, or $490,000 per year, the ground lease rent is $0.13 per square foot per month. Over the same 30 year term, with a 3.5 percent annual increase in rent, the Net Present Value is between $8,322,713 (7.5 percent Discount Rate) and $11,451,994 (five percent Discount rate) which is close to the higher end of the range for current value. Marketing a ground lease for this lot is the preferable course of action in the near future. It is possible that the marketing period of a ground lease will take longer than a sale but land prices are currently depressed and the City will get a better return over time. Additionally, should the City decide to sell the land in the future when the market improves, you have reserved that option. Value Based on Highest & Best Use 30 Year Ground Lease $8,322,713 -$17,177,990 Alternative Highest & Best Use Sell Vacant Land (Net 7 Acres) $4,500,000 - $7,000,000 LCPA OM^ (Zofifiigl Carload Mimicipal Gotf Course Mapping EXISTING «!|OPOSED PI/0 I ot 9) Carlsbad Munfdpat Golf Course - Proposed La (.erials ot rjn^ ^ S 9 10 Ground Lease: Golf Course Vacant Lot 4 Lot 4 Size Estimated Value Value Amortized/10 Yrs Rent Increase Term NPV @ 5% Discount Rate NPV @ 7.5% Discount Rate Period Yr. 1 Yr.2 ' Yr.3 Yr.4 Yr.S Yr.6 , Yr. 7 Yr.S Yr. 9 Yr 10 Yr. 11 Yr. 12 Yr13 • Yr 14 Yr. 15 Yr. 16 Yr. 17 Yr. 18 Yr. 19 Yr. 20 Yr. 21 Yr. 22 Yr 23 Yr. 24 Yr. 25 Yr. 26 Yr. 27 Yr. 28 Yr. 29 Yr. 30 Total 217,800 Sq Ft 5 Net acres $3,250,000 Total $650,000 Per Acre $14.92 Sq Ft $325,000 Per Year $1.49 PerSF $0.12 Per SF/Mo. 3.50% Annual 30 Years $7,595,710 $5,520,167 Income $325,000 $336,375 $348,148 $360,333 $372,945 $385,998 $399,508 $413,491 $427,963 $442,942 $458,445 $474,490 $491,097 $508,286 $526,076 $544,488 $563,545 $583,270 $603,684 $624,813 $646,681 $669,315 $692,741 $716,987 $742,082 $768,055 $794,937 $822,759 $851,556 $881,360 $16,777,370 Size Estimated Value Value Amortized/15 Yrs Rent Increase Term NPV @ 5% Discount Rate NPV @ 7.5% Discount Rate Period Yr. 1 Yr. 2 Yr. 3 Yr4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr 11 Yr. 12 Yr 13 Yr 14 Yr. 15 Yr 16 Yr 17 Yr 18 Yr 19 Yr. 20 Yr 21 Yr 22 Yr. 23 Yr 24 Yr. 25 Yr26 Yr 27 Yr28 Yr 29 Yr30 Total 217,800 Sq Ft 5 Net acres $3,250,000 Total $650,000 Per Acre $14.92 Sq Ft $216,687 Per Year $0.99 PerSF $0.08 Per SF/Mo. 3.50% Annual 30 Years $5,063,807 $3,680,111 Income $216,667 $224,250 $232,099 $240,222 $248,630 $257,332 $266,339 $275,661 $285,309 $295,294 $305,630 $316,327 $327,398 $338,857 $350,717 $362,992 $375,697 $388,846 $402,456 $416,542 $431,121 $446,210 $461,828 $477,991 $494,721 $512,036 $529,958 $548,506 $567,704 $587,574 $11,184,913 Ground Lease Lot 4 Development Project: Golf Course Vacant Lot 4 ^^Hb» Lot 4 ;^ 1 [Project Costs (24 Months) Estimated Land Cost Basis ("Purchase Price") Improvements Construct Building Shell Complete Buildout (TIA) Hard Costs Contingency Hard Costs (Construction Costs) Additional Expenses Permits (City est.) Architecture, MEP, & SE other Consultants Sofl Cost Contingency Insurance & Bonds Legal & Accounting Broker Commissions Marketing Property Tax -1 Yr. to Lease Up Soft Costs Total Project Costs Interest Component: Construction Loan Amount Developer's Portion of Construction Costs Construction Period Interest Points/Fees Total Development Costs 217.800 sqft 90.000 sqft 90,000 sq ft I Total Hard Cost/SF 3% 9% 1.1% Total Soft Cost/SF $150.00 $40.00 14,356,998 65% Project Cost 7,730,691 6.50% 1 Yr @ .65 LTC & .5 Use Rate 1 pt $45.92| None Allocated $13,500,000 $3,600,000 $855,000 $950,000 $1,256,850 $25,000 $111,593 $538,650 $5,000 $1,043,091 $5,000 $197,505 $17,955,000 $4,132,689 $22,087,689 $ 466,602 $ 143,570 [Development Cost/SF $22,697,861 [Proforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash Cap Value Total Development Costs See "Income" Yr. 2 NNN 8.5% Margin $2,235,600 -$190,026 -$111,780 6.50% 25 Yrs -$1,454,936 $478,858 Value/SF $306,951 $27,625,629 -$22,697,861 Margin/SF $54.751 $4,927,767 Investment Indicators: No Cost Basis Land Loan to Value Total Development Costs Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Leveraged Return Net Operating Income (Yr. 2) Total Development Cost - City Net Operating Income Annual Interest Net Cash Capital Investment $17,956,659 $22,697,861 $4,741,203 $1,933,794 $22,697,861 $1,933,794 $1,454,936 $478,858 [Investment Indicators: Including Land Value Land Size Est. Price for "Premium" Land Total Development Costs Total Development Cost with Land Loan to Value Total Development Costs Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Leveraged Return 5 Acres $650,000 per Acre Net Operating Income (Yr. 2) Total Development Cost Net Operating Income Annual Interest Net Cash $3,250,000 $22,697,861 $25,947,861 $17,956,659 $25,947,861 $7,991,203 $1,933,794 $25,947,861 $1,933,794 $1,454,936 $478,858 L5^ Capital Investment Cap Value 7.00% 1 Value/SF $306.951 $27,625,629 Total Development Costs -$25,947,861 Margin 1 Marqin/SF $18.64| $1,677,767 Summary Lot 4 Cashflow Analysis Golf Course Vacant Lot 4 Summary Total Value - Lump Sum $23,336,574 NPV (@ 5% discount) $16,713,280 starting Base Rent $2.00 EfTectlve Rent (incl. free rent)/RSF $2.15 Operating Expenses / SF $0.35 Average Gross Rent Income/RSF $2.16 $2.16 'Incl. Tl's and Free Rent Estinnated Rent 2012 Rent Type; NNN Assumptions [Rent Assumptions Tenant Improvement Assumptions Size Total Rentable SF 90,000 All in Tl number(or) $40.00 Load Factor 12.00% Equipment Useable SF 80,357 FF&E Cabling Lease Term (months) 120.00 Physical move % or $ Miscellaneous Rent Annual Increase 3.5% $0.00 Total Cost $40.00 $3,600,000 year 1 $2.00 year 6 $2.38 year 2 $2.07 year 7 $2.46 Tl Allowance ($/^ years $2.14 years $2.54 Landlord Tl Allowance $40.00 $3,600,000 year 4 $2.22 year 9 $2.63 How allocated? RSF years $2.30 year 10 $2.73 Remaining Tl Cost $0.00 $0 % or $ Estimated NNN Expenses Annual inaease 0.0% $0.00 year 1 $0.35 year 6 $0.35 year 2 $0.SS year 7 $0.35 years $0.35 years $0.35 year 4 $0.SS year 9 $0.35 years $0.35 year 10 $0.35 Free Rent Base Rent year 1 12 months free year 2 0 months free Yearl Year 2 Years Year 4 Years Year 6 Year 7 Years Years Year 10 Number of Months 12 12 12 12 12 12 12 12 12 12 120 Income Rent Operating Expenses Caoital Costs Tenant Improvements Free Rent Free Rent $2,160,000 $375,676 -$3,600,000 -$2,160,000 $2,235,600 $375,676 $2,313,846 $375,676 $2,394,831 $375,676 $2,478,650 $375,676 $2,565,402 $375,676 $2,655,192 $375,676 $2,748,123 $375,676 $2,844,308 $375,676 $2,943,858 $375,676 Total Costs Rent Operating Expenses Tis Free rent $25,339,809 $3,756,765 -$3,600,000 -$2,160,000 Total Income -$3,224,324 $2,611,276 $2,689,522 $2,770,507 $2,854,326 $2,941,079 $3,030,868 $3,123,800 $3,219,984 $3,319,535 Grand Totals $23,336,574 Monthly Rent $180,000 $186,300 $192,821 $199,569 $206,554 $213,784 $221,266 $229,010 $237,026 $245,322 Estimated Operating Expenses (NNN) Golf Course Vacant Lot 4 Property Tax (1.1% Development Cost) Landscape Maintenance (est.) Insurance (est.) $22,697,861 Per Yr $249,676 $26,000 $100,000 Per SF/Mo. $0.23 $0.02 $0.09 $0.35 NNN Lot 4 Ground Lease: Golf Course Vacant Lot 5 Lot 5 Size Estimated Value Value Amortized/10 Yrs Rent Increase Term NPV @ 5% Discount Rate NPV @ 7.5% Discount Rate Period Yr. 1 Yr.2 Yr.3 Yr.4 Vr.5 Yr.« Yir.r yir.» Yr 10 Yr. 11 Yr. 12 - Yr. 13 Yr. 14 Yr. 15 Yr. 16 Yr 17 Yr. 18 Yr. 19 Yr. 20 Yr. 21 Yr. 22 Yr 23 Yr. 24 Yr. 25 Yr. 26 Yr. 27 Yr 28 Yr. 29 Yr. 30 Total 304,920 Sq Ft 7 Net acres $7,350,000 Total $1,050,000 Per Acre $24.10 SqFt $735,000 Per Year $2.41 PerSF $0.20 Per SF/Mo. 3.50% Annual 30 Years $17,177,990 $12,484,069 income $735,000 $760,725 $787,350 $814,908 $843,429 $872,949 $903,503 $935,125 $967,855 $1,001,730 $1,036,790 $1,073,078 $1,110,635 $1,149,508 $1,189,740 $1,231,381 $1,274,480 $1,319,087 $1,365,255 $1,413,038 $1,462,495 $1,513,682 $1,566,661 $1,621,494 $1,678,246 $1,736,985 $1,797,780 $1,860,702 $1,925,826 $1,993,230 $37,942,668 Size Estimated Value Value Amortized/15 Yrs Rent Increase Term NPV (g 5% Discount Rate NPV @ 7.5% Discount Rate ^ Period Yr 1 Yr.2 Yr. 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr. 10 Yr. 11 Yr. 12 Yr 13 Yr 14 Yr. 15 Yr. 16 Yr. 17 Yr 18 Yr19 Yr. 20 Yr. 21 Yr. 22 Yr. 23 Yr. 24 Yr. 25 Yr. 26 Yr. 27 Yr. 28 Yr. 29 Yr. 30 Total 304,920 SqFt 7 Net acres $7,350,000 Total $1,050,000 Per Acre $24.10 Sq Ft $490,000 Per Year $1.61 PerSF $0.13 Per SF/Mo. 3.50% Annual 30 Years $11,451,994 $8,322,713 Income $490,000 $507,150 $524,900 $543,272 $562,286 $581,966 $602,335 $623,417 $645,236 $667,820 $691,193 $715,385 $740,424 $766,338 $793,160 $820,921 $849,653 $879,391 $910,170 $942,026 $974,997 $1,009,121 $1,044,441 $1,080,996 $1,118,831 $1,157,990 $1,198,520 $1,240,468 $1,283,884 $1,328,820 1 $25,295,112 Ground Lease Lot 5 Development Proiect: Golf Course Vacant Lot S Estimated Land Cost Basis ("Purchase Price") 304,920 sqft None Allocated Improvements Construct Building Shell Complete Buildout (TIA) Hard Costs Contingency Hard Costs (Construction Costs) 120,000 sq fl $150.00 120,000 sq ft $40.00 5% $18,000,000 $4,800,000 $1,140,000 $23,940,000 i ' [ Total Hard Cost/SF $199,501 Additional Expenses Permits (City est.) ' c Architecture, MEP, & SE , Other Consultants •; Soft Cost Contingency Insurance & Bonds Legal & Accounting Broker Commissions Marketing Properly Tax -1 Yr. to Lease Up Soft Costs 7% 1.1% $950,000 $1,675,800 $25,000 $132,540 $718,200 $5,000 $1,564,637 $5,000 $263,340 $5,339,517 i i 1 Total Soft Cost/SF $44.501 i i Total Project Costs $29,279,517 •f Interest Component: Construction Loan Amount Developer's Portion of Construction Costs Construction Period Interest Points/Fees $ 19,031,686 65% Project Cost $ 10,247,831 6.50% 1 Yr @ .65 LTC 8. .5 Use Rate 1 pt $ $ 618,530 190,317 ( Total Development Costs [Development Cost/SF $250,741 $30,088,364 Total Development Costs ? [Proforma Operating Budget 1 Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash See "Income" Yr. 2 10% 5% 6.50% 25 Yrs NNN ( . • $3,353,400 -$335,340 -$167,670 $2,850,390 -$2,144,558 $705,832 1 1 1 Cap Value ' Total Development Costs 7.00%! Value/SF $339.33[ $40,719,857 Cap Value ' Total Development Costs -$30,088,364 Margin [ Marqin/SF $88.60| $10,631,493 Margin f [Investment Indicators: No Cost Basis Land 1 Loan to Value Total Development Costs 65% 1: $26,467,907 $30,088,364 I Capital Investment $3,620,457 Return on Cost - Development Net Operatinq Income (Yr. 2) $2,850,390 Return on Cost - Development Total Development Cost - City $30,088,364 9.5% Interest Cover / Debt Service Ratio Net Operatinq Income $2,850,390 I Leveraged Return Annual Interest Net Cash $2,144,558 $705,832 Capital Investment $3,620,457 19.5% [investment Indicators: Including Land Value Est. Price for "Premium" Land Total Development Costs Loan to Value Total Development Costs Leveraged Return Cap Value Total Development Costs 7 Net Acres $650,000 per Acre Total Development Cost with Land Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Net Operating Income (Yr. 2) Total Development Cost Net Operating Income Annual Interest Net Cash Capital Investment $4,550,000 $30,088,364 $26,467,907 $34,638,364 $8,170,457 $2,850,390 $34,638,364 $2,850,390 $2,144,558 $705,832 Margin 8.6% 7.00% 1 Value/SF $339.33! $40,719,857 -$34,638,364 L Margin/SF $50.68 [ $6,081,493 Summary Lot 5 Castifiow Analysis Golf Course Vacant Lot 5 Summary Total Value - Lump Sum $34,539,434 NPV (@ 5% discount) $24,818,655 starting Base Rent $2.25 Effective Rent (incL free rent)/RSF $2.41 Operating Expenses / SF $0.32 Average Gross Rent bicome/RSF $2.40 $2.40 'lnd. Tl's and Free Rent Estinnated Rent 2012 Rent Type: NNN Assumptions [Rent Assumptions Size Tenant Improvement Assumptions Total Rentable SF 120,000 All in Tl number(or) $40.00 Load Factor 12.00% Equipment Useable SF 107,143 FF&E Cabling Lease Term (months) 120.00 Physical move % or $ Miscellaneous Rent Annual inaease 3.5% $0.00 Total Cost $40.00 $4,800,000 year 1 $2.25 years $2.67 year 2 $2.33 year 7 $2.77 Tl Allowance ($/sf) years $2.41 year 8 $2.86 Landlord Tl Allovi/ance $40.00 $4,800,000 year 4 $2.49 year 9 $2.96 How allocated? RSF years $2.58 year 10 $3.07 Remaining Tl Cost $0.00 $0 % or $ Estimated NNN Expenses Annual increase 0.0% $0.00 year 1 $0.32 year 6 $0.32 year 2 $0.32 year 7 $0.32 year 3 $0.32 years $0.32 year 4 $0.32 year 9 $0.32 year S $0.32 year 10 $0.32 Free Rent Base Rent year 1 12 months free year 2 0 months free Yearl Year 2 Years Year 4 Years Year 6 Year 7 Years Year 9 Year 10 Number of Months 12 12 12 12 12 12 12 12 12 12 120 Income Rent Operating Expenses Capital Costs Tenant Improvements Free Rent Free Rent $3,240,000 $456,972 -$4,800,000 -$3,240,000 $3,353,400 $456,972 $3,470,769 $456,972 $3,592,246 $456,972 $3,717,975 $456,972 $3,848,104 $456,972 $3,982,787 $456,972 $4,122,185 $456,972 $4,266,461 $456,972 $4,415,787 $456,972 Total Costs Rent Operating Expenses Tis Free rent $38,009,714 $4,569,720 -$4,800,000 -$3,240,000 Total Income -$4,343,028 $3,810,372 $3,927,741 $4,049,218 $4,174,947 $4,305,076 $4,439,759 $4,579,157 $4,723,433 $4,872,759 Grand Totals $34,539,434 Monthly Rent $270,000 $279,450 $289,231 $299,354 $309,831 $320,675 $331,899 $343,515 $355,538 $367,982 Estimated Operating Expenses (NNN) Golf Course Vacant Lot 5 Property Tax (1.1% Development Cost) Landscape Maintenance (est.) Insurance (est.) $30,088,364 Per Yr $330,972 $26,000 $100,000 Per SF/Mo. $0.23 $0.02 $0.07 $0.32 NNN Lots Comparabies: Rent CLASS A OFFICE Address Building Class Building Size (SF) Est. NNN Asking Rent As Net of Utilities Comment 1910 Palomar Point Wa/ A Office $0.00 $2.25 $2.25 2888 Loker Avenue E A Offi-e 80 658 SO 00 SI 57 $1.57 5901 Priestly Dnve A Office 97.783 $0,00 $2.35 $2.35 Average $0.00 $2.06 $2.06 Subject Meet Market $0.35 $1.71 $2.06 Pre|itj|tim $035 $2.00 $2.35 114% CLASS B FLEX Address Building Class Building Size (SF) Est. NNN Asking Rent As Net of Utilities Comment 1815-1819 Aston Ave BFlex 99,999 $0.00 $1.15 $1.15 25-90% Improved 1905 Aston Ave B Flex 44 902 $0-8 $1.10 $1 28 85% Improved 1920 Paiomar Point Way BFlex 17,288 $0.34 $1.25 $1.59 Freestanding Average $0.17 $1.17 $1.34 Subject Meet Market $0.35 $0.99 $1.34 Premium $0.35 $1^20 $1.55 116% Three Year Comparabies - Carlsbad Submarket Property Address Sale Date Land Area AC Asking Price/ Sale Price Sale Price/ Acre Sale Price/ Net Acre Proposed Use Acre Innovation Way 3/29/^312 9J21 $826,741 $4,588,162 $498,172 $588,060 Commercial Dryden PI 12/29/2011 4.73 $1,186,000 $501,480 $501,479 Auto Dealership Palogpar Oaks Way 8/5/2011 2.49 $1,300,000 $522,088 $522,090 Ccxnmercial, Industrial 3200 Lionshead Ave 5/20/2011 3.74 $653,400 $1,425,501 $381,150 $381,151 Industrial, Industrial Pari<, Office 3200 Lionsliead Ave 10/21/2010 4.82 $653,400 $2,310,000 $479,253 $479,254 Industrial, Industrial PaA, Office Average $711,180 $476,429 $494,407 Subject Meet Market $711,180 $476,429 $494,407 Premium $950,000 134% $650,000 131% Comps Professional Strategic Plan for Real Property Assets Buena Vista Reservoir TH E T U VT h!fZ 1 IvV liN VJ GROU Property Overview: Buena Vista Reservoir Location Buena Vista Way Carlsbad, CA 92009 APN #: 156-200-16-00 Specific Details Parcel Size (acres): 3.16 Desired Entitlement: TM - SFD Zoning Designation: R-l Current Improvements: Former General Plan: RLM Reservoir Min. Req'd Lot Size: 7,500 (5.8/acre) Purchase Price (1958): Assumed $0.00 Achievable Lots: +/-11 to 15 lots School District: Carlsbad Unified View Potential: Ocean City Agency: Municipal Current Entitlement: None Water District Description Former reservoir site with existing concrete basin and frontage south of Buena Vista Way and east of Highland Drive. The subject property features ocean views with a gentle slope to the western property line. ^ Carlsbad West, Old Carlsbad Highest & Best Use Given the surrounding residential use and ocean views to the west, the subject property should be entitled for residential development. The current zoning designation is R-l with a General Plan designation of RLM allowing 7,500 square foot minimum lots. It is anticipated after giving up street area and considering the City's control point, the site will yield approximately fifteen homesites. The City has a control point of 3.2 homes per acre which would reduce the number of homesites to eleven. It should be noted that the scope of this exercise did not include a lot study by a civil engineer, thus the final lot yield should be verified. Based on eleven homesites with an approved Tentative Map (completed by homebuilder, post any and all appeal periods), we valued the site at $1,750,000. If the homebuilder is able to get a variance for the control point restriction of 3.2 homes per acre, with an approved Tentative Map, the site will be valued at approximately $3,160,000. The recommended course of action is to have the City issue a Request for Proposal ("RFP") soliciting homebuilder participation in, facilitating and obtaining Tentative Map Approval. A homebuilder is the "end user" for the subject property, and logically would be able to pay the most for the site should it be entitled. The competitive bid process will determine the agreed upon value for the site with the builder who is then required to post a significant earnest money deposit prior to Tentative Map Approval. The Municipal Water District ("Owner") will be involved throughout the entitlement process to collaborate and help accomplish the approval in an expeditious fashion. As the applicant, the homebuilder will lead the process and generate the most efficient Tentative Map design in addition to providing a bearing on architectural product. The homebuilder will also be responsible for funding the Tentative Map application. As security for the homebuilder's investment throughout this process, we recommend providing them with a Purchase Agreement pending approval of the Tentative Map or an executed Letter of Intent. Value Based on Highest & Best Use Proposed Value: Approved Tentative Map for Eleven Homesites $1,750,000 Proposed Value: Approved Tentative Map for Fifteen Homesites $3,160,000 Summary of Assumptions The static homebuilding proforma is based on the following assumptions: Revenues: Revenues for the subject property are based on the attached new home and resale comparable analysis. Given the ocean views from the property, an average premium of 7.5 percent of the base sales price was given. The subject site will benefit from higher base pricing compared to other new home communities because homeowners will not have to pay for mello-roos or community facilities district. In order to avoid the burden of a home owners association, a private maintenance agreement between the residents would be ideal. Land & Land Development Cost: The residual land value is generated based on the costs to develop the site (both horizontally and vertically). Design and related costs cover civil engineering & staking, geotechnical, architectural, structural, landscape design. Site Development costs are estimated at $100,000 per lot, which includes demolition and removal ofthe existing concrete retention structure. Direct House Costs: The vertical (stick and brick) construction costs are based on an informal survey of production homebuilders operating in the submarket. These are typically based on a livable per square foot basis. Other Costs: Developer overhead is typically in the range of 3.0 to 3.5 percent of revenues depending on the price point and size ofthe community. The higher range was used based on the anticipated lot count. The marketing expenses largely cover the onsite presence and upgrades to showcase the homes. Most of these costs will go unrecovered when the models are disposed of at the end of the sales campaign. The financing cost is an estimate based on how quickly the site is constructed from acquisition; these factors include time to complete the final map, land development and the monthly absorption rate. Profit Margin: Profit margin typically ranges from eight to twelve percent. Given the favorable deal structure and partnership with the City during the entitlement process, the risk profile should be lower than the traditional risk profile on a raw piece of land. A ten percent margin was used to offset the relatively small number of home sites against the low land development and marketing risk associated with the proposed community. Buena Vista Reservoir Carlsbad, CA Residual Land Value Analysis 30000-SALES REVENUE Planl Plan 2 J Total Average Square Feet 2,650 2,875 Bedrooms/Bathrooms 3/3.5 4/4 Garage/Story 1/2 2/2 Type SFD SFD I 2.773 1 39000 Sales and Closing Costs NET SALES REVENUE Base Price Per Square Foot Net Sales Price Per Square Foot 40000 - LAND & LAND DEVELOPMENT COST 31100 Base Sales Price 1 s 804,990 1 $ 829,990 1 S 9,004,890 31100 lnflation/(Deflation) to Sales Price 2013 0.00% s -s -31300 Lot Premiums 7.50% s 60,374 $ 62,249 675,367 31400 Options/Upgrades 3.00% s 24,150 $ 24,900 s-270,147 GROSS SALES REVENUE s 889,514 $ 917,139 $9,950,403 $ 818,626 S $ 61.397 S 24,559 $904,582 39100 On-site Commissions 1.50% $ 13,343 $ 13,757 $ 149,256 39200 Outside Commissions 1.50% $ 13,343 $ 13,757 $ 149,256 39400 Sales Incentives 1.00% $ 8,895 $ 9,171 $ 99,504 39500 Title and Escrow Closing Costs 0.30% $ 2.669 $ 2,751 $ 29,851 TOTAL SALES AND CLOSING COSTS S 38,249 $ 39,437 $427,867 $ 8SU6S $ 877,702 $ 13,569 $ 13,569 $ 9,046 s 2,714 $38,897 $9,522,536 j $865,685 I $303.8 $335.7 $288.7 $319.0 $295.55 I $326581 90.50% 2.71% 100.00% 1.50% 1.00% 4.30% 48000 Lot Level Development Fees (Per Home) TOTAL FINISHED LOT COST 50000 - DIRECT HOUSE COSTS 65,000 65,000 $ 65,000 36M32 $ 361yt32 41000 Residual Land Vaiue $ 1,750,000 $ 159,091 $ 159,091 $ 1,750,000 42000 Land Purchase Costs 0.50% $ 795 $ 795 $ 8,750 43000 Non-applied Purchase Deposits $ $ -$ -$ 44000 Brokerage Commissions 0.00% S -$ $ TOTAL LAND COST $ 159,886 $ 159,886 $ 1,758,750 42000 Design and Related Costs $ 480,000 $ 43,636 $ 43,636 $ 480,000 43000 Site Development Fees (Per Home) $ 2,000 $ 2,000 $ 2,000 $ 22,000 44000 Site Development Costs $ 1,000,000 $ 90,909 S 90,909 $ 1,000,000 45000 Entitlement Period Overhead $ $ -$ $ TOTAL LAND DEVELOPMENT COST $ 136,545 $ 136,545 $ 1,502,000 $ 159,091 $ 795 $ $ $ 159,886 $ 43,636 $ 2,000 $ 90,909 $ $ 136,545 I $ 715,000 I I $ 65,000] ^ I $ 3,975,7501 I $ 36M3n [_ 17.68%! 0.22%l 10.05% 0.00% 39.96%| 51000 Base Construction Cost $ 212,000 $ 224,250 $ 2,405,500 52000 Options/Upgrades Cost 70.00%^ $ 16,905 $ 17,430 $ 189,103 55000 Indirect Construction Cost $ 650,000 $ 59,091 $ 59,091 $ 650,000 TOTAL DIRECT HOUSE COST $ 287,996 $ 300,771 $ 218,682 $ 17,191 $ 59,091 $3,244,603 $294,964 Direct Construction Base Per Square Foot Direct House Costs Per Square Foot $78.91 I $106.46 OTHER COSTS 60000 Other Soft Costs 61000 Professional Fees $ 35,000 $ 3,182 $ 3,182 $ 35,000 62000 Property Taxes and Association Fees 1.10% $ 9,785 $ 10,089 $ 109,454 63000 Insurance 1.25% $ 11,119 $ 11,464 $ 124,380 64000 Administrative Expense $ 25,000 $ 2,273 $ 2,273 $ 25,000 67000 Developer Overhead 3.50% $ 31,133 $ 32,100 $ 348,264 68000 Warranty Expense 1.00% $ 8,895 $ 9,171 $ 99,504 $ 3,182 $ 9,950 $ 11.307 $ 2.273 $ 31,660 $ 9,046 125% 0 25% 3.50% 1.00% 80000 Financing Expense 82000 Construction Loan Expense TOTAL OTHER COSTS TOTAL COSTS TOTAL PROFIT MARGIN Profit Margin by Model 71000 Model Expense 1.75% $ 15,556 $ 16,050 $ 174,132 72000 Sales Center Expense 0.65% $ 5,782 $ 5,961 $ 64,678 73000 Advertising and Promotion 1.90% $ 16,901 $ 17,426 $ 189,058 $ 15,830 $ 5,880 $ 17,187 $ 13,343 $ 13,757 | $ 149,256 | | $ 13,5691 C $ 767,406 11 $ 783,675 $ 83,859 $ 94,027 8.539,079 776,280 $983,457 I I $89,405 9.43% 10.25% $ 117,978 $ , i2W73 | $1,318,7261 | $1193841 | 13.25%] 85.82% 9.88%! Buena Vista Reservoir Carlsbad, CA Residual Land Value Analysis Basis I I Planl ~|l Plan2 | [ Total Average Units 7 1 8 1 15 Mix Percentage 46.67% 53.33% 100.00% Square Feet 2,650 2,875 41,550 1 2,770 Bedrooms/Bathrooms 3/3.5 4/4 Garage/Story 1/2 2/2 Type SFD SFD 30000-SALES REVENUE Percent 31100 Base Sales Price Is 804,990 Is 829,990 1 $ 12,274,850 31100 lnflation/(Deflation) to Sales Price 2013 0.00% s -$ -$ > 31300 Lot Premiums 7.50% $ 60,374 s 62,249 $ 920,614 31400 Options/Upgrades 3.00% $ 24,150 $ 24,900 $ 368,246 GROSS SALES REVENUE $ 889,514 $ 917,139 $13,563,709 $ 818,323 $ $ 61,374 $ 24,550 $904,247 39000 Sales and Closing Costs 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow Closing Costs 1.50% $ S $ S 13,343 13,343 8,895 2,669 $ $ $ $ 13,757 13,757 9,171 2,751 $ 203,456 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow Closing Costs 1.50% $ S $ S 13,343 13,343 8,895 2,669 $ $ $ $ 13,757 13,757 9,171 2,751 $ 203,456 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow Closing Costs 1.00% $ S $ S 13,343 13,343 8,895 2,669 $ $ $ $ 13,757 13,757 9,171 2,751 s 135,637 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow Closing Costs 0.30% $ S $ S 13,343 13,343 8,895 2,669 $ $ $ $ 13,757 13,757 9,171 2,751 S 40,691 TOTAL SALES AND CLOSING COSTS S 38,249 $ 39,437 $583,239 NET SALES REVENUE $ 851,265 $ 877,702 $12,980,470 Base Price Per Square Foot $303.8 $288.7 Net Sales Price Per Square Foot $335.7 $319.0 $ 13,564 $ 13,564 s 9,042 s 2,713 $38,883 $295.73 $326.78 40000 - LAND 8i LAND DEVELOPMENT COST 1.50% 1.00% 95.70%! 41000 Land Cost 41000 Residual Land Value $ 3,160,000 $ 210,667 s 210,667 $ 3,160,000 42000 Land Purchase Costs 0.50% $ 1,053 s 1,053 $ 15,800 43000 Non-appiied Purchase Deposits s $ -s -$ 44000 Brokerage Commissions 0.00% $ -$ -$ TOTAL LAND COST $ 211,720 $ 211,720 $ 3,175,800 $ 210,667 $ 1,053 $ $ $ 211,720 42000 Design and Related Costs $ 480,000 s 32,000 s 32,000 $ 480,000 43000 Site Development Fees (Per Home) $ 2,000 s 2,000 $ 2,000 $ 30,000 44000 Site Development Costs $ 1,000,000 s 66,667 $ 66,667 s 1,000,000 45000 Entitiement Period Overhead $ $ -$ -$ TOTAL UND DEVELOPMENT COST $ 100,667 s 100,667 $ 1,510,000 $ 32,000 $ 2,000 $ 66,667 s $ 100,667 48000 Lot Level Development Fees (Per Home) TOTAL FINISHED LOT COST 50000 - DIRECT HOUSE COSTS 65,000 65,000 $ 65,000 377,387 $ 377387 65,000 ! $ 5,660,ioa1 ! $ 37738r 23.41% 7.19% 41.73%! 51000 Base Construction Cost $ 212,000 $ 224,250 s 3,278,000 52000 Options/Upgrades Cost 70.00% s 16,905 $ 17,430 $ 257,772 55000 indirect Construction Cost s 650,000 $ 43,333 $ 43,333 $ 650,000 $ 218,533 $ 17,185 $ 43,333 TOTAL DIRECT HOUSE COST $ 272,238 $ 285,013 [ $4,185,772 $279,051 ! Direct Construction Base Per Square Foot Direct House Costs Per Square Foot 80 II $ $78.93 $100.81 OTHER COSTS 60000 Other Soft Costs 61000 Professional Fees $ 35,000 s 2,333 $ 2,333 $ 35,000 62000 Property Taxes and Association Fees 1.10% $ 9,785 $ 10,089 $ 149,201 63000 Insurance 1.25% $ 11,119 $ 11,464 $ 169,546 64000 Administrative Expense s 25,000 $ 1,667 $ 1,667 f... 25,000 67000 Developer Overhead 3.50% s 31,133 $ 32,100 474.730 68000 Warranty Expense 1,00% $ 8,895 s 9,171 s 135,637 $ 2,333 $ 9,947 $ 11,303 $ 1,667 $ 31,649 s 9,042 70000 Marketing Expense 71000 Model Expense 1.75% $ 15,566 s 16,050 $ 237,365 72000 Sales Center Expense 0.65% $ 5,782 $ 5,961 $ 88,164 73000 Advertising and Promotion 1.90% $ 16,901 $ 17,426 $ 257,710 s 15,824 $ 5.878 $ 17,181 80000 Financing Expense 82000 Construction Loan Expense TOTAL OTHER COSTS 1.50% I $ $ 13,343 $ 13,757 116,524 $ 120,018 I S 203,4561 ! $ 13,564 | [ TOTAL COSTS TOTAL PROFIT MARGIN Profit Margin by Model $ 766,148 II $ 782,418 85,117 $ 95,284 $1,775;809 I I $11838~ $ 11,622,3811 1 $ 774,82r $1,358,089 $90,539 9.57% 10.39% 3.50% 1,50%! 13.09% 10.01%! Carlsbad Coastai Resale Comparabies Active, Pending, Sold 10/1/11 - Present 1,800 1,950 2,100 2,250 2,400 2,550 2,700 2,850 3,000 3,150 3,300 3,450 Square Feet Resale SFD - Chart New Home Comparabies Carlsbad Coastal $1,165,000 $1,115,000 $1,065,000 $1,015,000 $965,000 $915,000 $865,000 $815,000 Q. (A o $765,000 $715,000 $665,000 $615,000 $565,000 $515,000 $465,000 $415,000 $365,000 Poinsettia Ridge - Warmington Viridian - Taylor Morrison •jr—Mirasol - William Lyon Homes Sandalwood - Colrlcli Si—Westcott - Standard Pacific «-~The Tides - K. Hovnanian iH-Subject Property - Elmwood & Bella Vista •—Subject Property - Cole Library 1,300 1,600 1,900 2,200 2,500 2,800 3,100 Square Feet 3,400 3,700 4,000 4,300 New Home SFD - Chart Professional Strategic Plan for Real Property Assets Foussat Road/Mission Avenue XH E TRVT NG CROUP Property Overview: Foussat Road/Mission Avenue Location Corner of Foussat Road and Mission Avenue APN #: 160-550-01-00 Specific Details Total Sq. Ft. (land): 119,790 (2.75 acres) Zoning: CL Min. Lot Area Sq. Ft.: 10,000 Year Transferred: 1972 Max Lot Coverage: 75% City Agency: Municipal FAR: 1.0 Water District Maximum Height: 50 feet Description The parcel is located at the southeast corner of the Foussat Road and Mission Avenue intersection in the City of Oceanside. The site was purchased in 1972 and is currently vacant with the exception of a well located on the southwest corner of the parcel. Originally used as a well site for the Costa Real Water District, the Municipal Water District owns the land and water rights tied to the property. This parcel is located in a non-coastal area and is zoned Limited Commercial District (CL). The zoning designation permits a limited range of retail and service uses that are not allowed to generate significant amounts of traffic or have high public service demands. Development on this parcel allows for a Floor Area Ratio (FAR) of 1.0 with a maximum height of 50 feet. There are many permitted used but the following uses are not permitted: RV parks, convalescent facilities, emergency health care, heliports, hospitals, park and recreation facilities, adult businesses, ambulance services, communication facilities, drive-through and drive-up services, funeral services, internet services, laboratories, marine sales and services, nurseries, pawn shops, research and development services, swap meets, hotels, warehousing, industry, wholesaling, distribution and storage. The property was previously listed in a study the City of Oceanside conducted to designate sites fdr future affordable housing'. They estimated this site has the capacity, with a rezone to RHU, for 70 housing units. Given Oceanside's affordable housing goals, in the future this site may be most valuable to the City of Oceanside. Southeast corner of Foussat Road and Mission Avenue intersection in Oceanside Highest & Best Use In order to value this asset, we evaluated the best use of the property based on a needs assessment of the surrounding area. They are listed below in order: 1. Gas Station/Car Wash: The zoning does not allow for gas stations to be built on vacant land. In order to open a gas station, there must be an existing building that does not require substantial modifications to accommodate the use. 2. Drive-up/Drive thru: Drive-up or drive-through restaurants or businesses are not a permitted use on this project. 3. Office: The zoning allows for an Office project but there is currently weak Office demand in this area. The adjacent office park located at 3355 Mission Avenue is 47 percent vacant with a discounted asking rent of $1.45 per square foot. The immediate area consists of Residential and Industrial uses and 4. Retail: Retail is a permitted use and well suited for this signaled, corner lot. There is retail shopping center located at 3375 Mission Avenue. This freestanding strip center built in 1982 is approximately 14,000 square feet and currently has over twenty tenants. The vacancy rate is approximately 22 percent with asking rental rates of $0.86. The owners of 3375 Mission Avenue are the recorded owners of seven out of the eleven parcels on the block and may be interested in increasing their holdings for redevelopment. We recommend the Municipal Water District retain the water rights for the entire property and a 20,000 square foot section of land to provide access to the abandoned wells located onsite. This can be accomplished by a permanent easement or a lot split. The quoted fee from the City of Oceanside to split the lot and retain 20,000 square feet is approximately $5,000. If the Municipal Water District decides to sell the property but retain the water rights and the 20,000 square foot section of land along the southern boundary, the size of the property for sale is 2.29 acres. Recent comparabies over the last 36 months have an average asking price of $1,064,052 per acre and sales price of $909,627 per acre. This provides a price range of $2,083,830 to $2,437,598 for this property. One option we considered is the transfer of land with the City of Oceanside. If Oceanside owned property in the City of Carlsbad that is desirable to the Municipal Water District, we would recommend swapping the two properties assuming the values are made equal. We spoke with Doug Eddow, Real Estate Manager with the City of Oceanside to understand what land they own within the City of Carlsbad. The findings were disappointing and provided no reasonable options at this time. The idea of a land swap is not limited to public agencies. Conceivably there are private land owners and developers who own land in the City of Carlsbad that would be interested in transferring their land in Carlsbad for the Foussat Road/Mission Avenue property. The recommended course of action is to have the City issue a Request for Proposal ("RFP") soliciting both public and private participation for a land swap. Should the land swap strategy fail to yield a suitable alternative, the City of Carlsbad could instead market the property as a 30 year ground lease. Based on the current estimated value of $909,627 per acre, we estimate the rent range to be between $0.12 - $0.17 per square foot per month. Over a 30 year term, with 3.5 percent annual increases, the Net Present Value of the ground lease is between $2,358,719 and $4,868,371 depending on the lease rate and discount rate applied. Pursuing a land swap through an RFP has the potential to reveal new property options within the City of Carlsbad, making it our recommended course of action. If the land swap responses are disappointing, the 30 year ground lease is the best alternative strategy. Value Based on Highest & Best Use Land Swap (retain water) $2,000,000 -$2,500,000 + Strategic Asset Alternative to Highest & Best Use 30 Year Ground Lease $2,350,000 -$4,850,000 U S3v Oi CC'^IL 'A' Plat Map i .t, S Zoning IL VIA O m o p \A?ELL NO. 1 ' City of Oceanside: Housing Element 2005-2010 prepared by SourcePoint. http:/Mww.ci.oceanside.ca.us/civica/filebanl</blobdload.asp?BloblD=23102 Comparable Land Sale Data: Foussat/iViission Vacant Land Current Land 119,790 SqFt 2.75 Acres Land Retained for CMWD 20,000 SqFt 0.46 Acres Sales Listings* Land for Sale 99,790 2.29 Sq Ft Acres Property Address Sale Date Land Area AC Asking Price Asking Price/ Acre Sale Price Sale Price/ Acre Proposed Use 555 Airport Rd 2/19/2010 $1,100,000 $763,889 $860,000 $597,222 Industrial, R&D flH 3501 Seagate Way 10/29/2010 2.67 $2,750,000 $1,029,963 $2,750,000 $1,029,963 Hospitality, Hotel 514 Morse St 12/30/2011 2.36 $3,300,000 $1,398,305 $2,600,000 $1,101,695 Single Family Development Average 2.2 $2,383,333 $1,064,052 $909,627 Subject Meet Market 2,437,598 $1,064,052 $2,083,830 $909,627 CL / ' • Subject . Property Address Days Listed Land size (acres) Asking Price/ Acre Zoning Airport Road @ C-76 1 1,828 flHHI 2.1 $914,762 I-L 9HB Douglas Dr @ Village 465 1.36 $735,294 CL-MP2 3721 Maritime Way (Parcel 2) 2,263 $1,004,151 3735 Maritime Way (Parcel 3) 2,263 1.65 $1,007,273 I-L Average 1,705 1.6 $915,370 *Not considered Comparabies but useful data. Oceanside Analysis Ground Lease: Foussat/Mission Foussat/Mission Size Estimated Value Value Amortized/10 Yrs 99,752 SqFt 2.29 Net acres $2,083,045 Total $909,627 Per Acre $20.88 Sq Ft $208,304 Per Year $2.09 PerSF $0.17 Per SF/Mo. Value Amortized/15 Yrs 99,752 SqFt 2.29 Net acres $2,083,045 Total $909,627 Per Acre $20.88 Sq Ft $138,870 Per Year $1.39 PerSF $0.12 Per SF/Mo. Rent Increase 3.50% Annual ' Rent Increase 3.50% Annual Term 30 Years Term 30 Years NPV @ 5% Discount Rate $4,868,371 NPV @ 5% Discount Rate $3,245,580 NPV @ 7.5% Discount Rate $3,538,078 NPV @ 7.5% Discount Rate $2,358,719 Period Income Period Income Yr. 1 $208,304 Yr. 1 $138,870 Yr. 2 $215,595 Yr. 2 $143,730 Yr. 3 $223,141 Yr. 3 $148,761 Yr. 4 $230,951 Yr. 4 $153,967 Yr. 5 $239,034 Yr. 5 $159,356 Yr. 6 $247,400 Yr. 6 $164,934 Yr. 7 $256,059 Yr. 7 $170,706 Yr. 8 $265,021 Yr. 8 $176,681 Yr. 9 ^ $274,297 'f" , , Yr. 9 $182,865 Yr. 10 $283,898 * Yr. 10 $189,265 Yr. 11 $293,834 Yr. 11 $195,889 Yr. 12 $304,118 Yr. 12 $202,745 Yr. 13 $314,762 Yr 13 $209,842 Yr. 14 $325,779 Yr. 14 $217,186 Yr 15 $337,181 Yr. 15 $224,788 Yr. 16 $348,983 Yr. 16 $232,655 Yr. 17 $361,197 Yr. 17 $240,798 Yr. 18 $373,839 Yr. 18 $249,226 Yr. 19 $386,923 Yr. 19 $257,949 Yr. 20 $400,466 Yr. 20 $266,977 Yr. 21 $414,482 Yr. 21 $276,321 Yr. 22 $428,989 Yr. 22 $285,993 Yr. 23 $444,003 Yr. 23 $296,002 Yr. 24 $459,544 Yr. 24 $306,362 Yr. 25 $475,628 Yr. 25 $317,085 Yr. 26 $492,275 Yr. 26 $328,183 Yr. 27 $509,504 Yr. 27 $339,669 Yr. 28 $527,337 Yr. 28 $351,558 Yr. 29 $545,794 Yr. 29 $363,862 Yr. 30 $564,896 Yr. 30 $376,598 Total $10,753,235 Total $7,168,823 Oceanside Ground Lease Professional Strategic Plan for Real Property Assets Calavera Sewage Treatment Facility T H .E IRVING JL. JL\^. W X X ^ GROUP Calavera Sewage Treatment Facility Location Tamarack Avenue East of El Camino Real APN #: 167-101-09 Specific Details Parcel Size (acres): 4.55 (198,198 SF) Current Lease Rate/Mo.: None Projected Ground Rate/Mo. $0.04-$0.07 Purchase Price: None Applied • i- SUlB'i sin ft' Zoning: Public Utilities (P-U) City Agency: City/Sewer Enterprise Description Calavera Sewage Facility was used to dry and store storm drain maintenance debris. Although the land was reclassified from zone P-C to P-U in August 1978, the site currently lacks a Precise Development Plan (as required by 21.36.030 of P-U zone regulations). Future use of this area requires a development plan or a rezoning request. Additionally, the entrance road needs to be widened in orderto meet Fire Department standards. The permitted uses of P-U zones include utility production, storage, transmission and treatment uses, agriculture, and recreation facilities. Despite a recreational vehicle (RV) storage site In the adjacent area, RV storage is not currently allowed on the Calavera site due to its P-U designation. North side of Tamarack Avenue due East of the open space adjacent to Pontiac Drive. Highest & Best Use The best use of Calavera Treatment Facility is for the City to operate, or solicit the business of, self-storage facilities. Storage buildings are in accordance with the current zoning permit (P-U) and are suited for the area. The surrounding area is primarily residential housing with no commercial uses. In addition to area residents, military personnel could be a target audience. According to recent data from the Self-Storage Association, military personnel captures four percent of all storage units rented in the United States. Due to the short distance to Camp Pendleton, the site would likely benefit from the close proximity to the base. For this evaluation, we estimated building a single story 100,000 square foot structure on the 198,198 square foot lot. We estimate the costs for the site work, including paving and landscaping, will be $14 per square foot or $2,774,772. The self-storage structure and small office is estimated to cost $70 per square foot totaling $7,000,000. Adding the soft costs and all other expenses, net of the land value, the total development cost is estimated to be $12,525,916. We conducted a market survey for self-storage facilities in North County San Diego. The three primary product types and their average monthly rents are: 1) 10 X 5 space: $74 per month, 2) 10 X 10 space: $144 per month, and 3) 10 X 20 space: $233 per month. For purposes of projecting future incomes we assumed that there would be a 25 percent vacancy in the second year of operations. Based on this scenario, without considering the land value, the Return on Cost for the Development is 8.4 percent. Assuming a 9.5 percent Cap Value of $11,141,357 and a 65 percent Loan to Value, the Leveraged Return will be 8.9 percent. These are good investment indicators should the City decide to develop and operate a self-storage facility. The value of the land, based on recent comparabies, should be discounted due to the previous use and topography of the site. For purposes of this evaluation we discounted the site and assigned $350,000 per acre which amounts to a $1,592,500 purchase price for 4.55 acres. Ifthe City decides to sell the property for this price and a developer builds the self-storage according to our estimated development costs, the total cost for the development will be $14,118,416. Assigning a Cap Value of 9.5 percent, the value will be $11,141,357. This will require a capital investment of $6,876,534. In this scenario their Return on Costs are 7.5 percent and the Leveraged Return is 6.9 percent. Another method for generating revenue for the City, and our recommendation, is a 30 year Ground Lease with 3.5 percent annual increases. Assigning a value of $1,592,500 to the property, we then assigned a period of either ten or fifteen years for the City to divide the value over in order to calculate the ground lease rate. This yielded a ground lease rate of $0.04 - $0.07 per month per square foot. On an annual basis, the income to the City in Year 1 would be between $106,167 and $159,250 depending on the rate. The Net Present Value of this 30 year lease, depending on lease rate and discount rate is $1,803,254 - $3,721,898. Value Based on Highest & Best Use 30 Year Ground Lease $1,803,254-$3,721,898 Alternative Highest & Best Use Sell Vacant Land $1,250,000-$1,750,000 CALAVERA HILLS MASTER PLAN AMENDMENT MP-1S0I;H) and (J) Propmmti Viags H (Open Spaoe) Main Erttf>' Secondary Entry • Hejg*"tioix)od identily Sign Cc*mRuni!y Ideniily Sig n itlflMlllllll Nois«f Wlall 1 ^ ^ % # • # • PjblicTra'i f LAKXI.MC. Development Project: Calavera Self Storage I Project Costs (24 Months) Estimated Land Cost Basis ("Purchase Price") Improvements Site Work (Paving & Landscaping) Self-Storage Structure and Office Hard Costs Contingency Hard Costs (Construction Costs) Additional Expenses Permits (City est.) Architecture, MEP, & SE other Consultants , Soft Cost Contingency • - Insurance & Bonds Legal & Accounting Broker Commissions T- Marketing Property Tax -1 Yr. to Lease Up Soft Costs Total Project Costs Interest Component: Construction Loan Amount Developer's Portion of Construction Costs Construction Period Interest Points/Fees Total Development Costs 198,198 sqft 198,198 sqft 100,000 sqft 4.55 Net acres $14.00 $70.00 Total Hard Cost/SF $51.781 2% 1.1% Total Soft Cost/SF $9.72| 7,922,973 65% Project Cost 4,266,216 6.50% 1 Yr @ .65 LTC & .5 Use Rate 1 pt None Allocated $2,774,772 $7,000,000 $488,739 $200,000 $205,270 $25,000 $21,514 $307,905 $5,000 $1,043,091 $5,000 $112,899 $0 [Development Cost/SF $63.20 $10,263,511 'ft! $1,925,679 $12,189,190 257,497 79,230 $12,525,916 [Proforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income See "Income" Yr. 2 0.0% 5% NNN Annual Interest Payment Net Cash 6.50% 25 Yrs Cap Value 9.50% 1 Value/SF $56.21 Total Development Costs Margin 1 Margin/SF -$6.99 $1,114,136 $0 -$55,707 $1,058,429 -$586,772 $471,656 $11,141,357 -$12,525,916 -$1,384,559 Investment Indicators: No Cost Basis Land Loan to Value Total Development Costs Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Leveraged Return 65% Net Operating Income (Yr. 2) Total Development Cost - City Net Operating Income Annual Interest Net Cash Capital Investment $7,241,882 $12,525,916 $5,284,034 $1,058,429 $12,525,916 $1,058,429 $586,772 $471,656 $5284,034 8.4% 180.4% 8.9% Summary Development Project: Calavera Self Storage Investment Indicators: Land Value Purchase Land Size Est. Price for "Discount" Land Total Development Costs Total Development Cost with Land Loan to Value Total Development Costs Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Leveraged Return 4.55 Acres $350,000 per Acre 65% Net Operating Income (Yr. 2) Total Development Cost Net Operating Income Annual Interest Net Cash $1,592,500 $12,525,916 $14,118,416 $7,241,882 $14,118,416 $6,876,534 $1,058,429 $14,118,416 $1,058,429 $586,772 $471,656 Capital Investment $6,876,534 7.5% 180.4% 6.9°/ Cap Value Total Development Costs Margin Investment Indicators: Ground Lease Land Size Proforma Operating Budget Scheduled Gross Annual Income Ground Lease (10 Yr) Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash Cap Value Total Development Costs Margin Loan to Value Total Development Costs Leveraged Return 9.50% 1 Value/SF $56.21! $11,141,357 -$14,118,416 I Margin/SF -$15.02| -$2,977,059 4.55 Acres See "Income" Yr 2 0.0% 5% NNN 65% Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Net Operating Income (Yr. 2) Total Development Cost Net Operating Income Annual Interest Net Cash Capital Investment $6,114,141 $12,525,916 $6,411,775 $893,605 $12,525,916 $893,605 $586,772 $306,833 3,411,775 $1,114,136 -$164,824 -$55,707 $893,605 6.50% 25 Yrs -$586,772. $306,833 9.50% 1 Value/SF $47.461 $9,406,370 -$12,525,916 1 Margin/SF -$15.74| -$3,119,546 7.1% 152.3% 4.8^ Summary Ground Lease: Calavera Self Storage Size ^' Estimated Sale Price Est Sale Price/10 Yrs Estimated Rental Income Rent Increase Term NPV @ 5% Discount Rate NPV @ 7.5% Discount Rate Period Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr 11 Yr. 12 Yr 13 Yr. 14 Yr. 15 Yr. 16 Yr. 17 Yr. 18 Yr. 19 Yr. 20 Yr. 21 Yr. 22 Yr. 23 Yr. 24 Yr. 25 Yr. 26 Yr. 27 Yr. 28 Yr. 29 Yr. 30 Total ' 198,198 SqFt 4.55 Net acres $1,592,500 Total $350,000 Per Acre (Premium) $8.03 Sq Ft $159,250 Per Year $0.80 PerSF $0.07 Per SF/Mo. 3.50% Annual 30 Years $3,721,898 $2,704,882 Income $159,250 $164,824 $170,593 $176,563 $182,743 $189,139 $195,759 $202,610 $209,702 $217,041 $224,638 $232,500 $240,638 $249,060 $257,777 $266,799 $276,137 $285,802 $295,805 $306,158 $316,874 $327,964 $339,443 $351,324 $363,620 $376,347 $389,519 $403,152 $417,262 $431,867 $8,220,911 Size 2i>F'l' Estimated Sale Price Est. Sale Price/15 Yrs Estimated Rental Income Rent Increase Term NPV @ 5% Discount Rate NPV @ 7.5% Discount Rate Period Yr. 1 Yr.2 Yr.3 Yr.4 Yr.5 Yr. 6 Yr. 7 Yr.S Yr.9 Yr. 10 Yr.11 Yr. 12 Yr. 1^ Yr. 14 Yr. 15 Yr. 16 Yr. 17 Yr. 18 Yr. 19 Yr. 20 Yr. 21 Yr. 22 Yr. 23 Yr. 24 Yr. 25 Yr. 26 Yr. 27 Yr. 28 Yr. 29 Yr. 30 Total 198,198 SqFt 4.55 Net acres $1,592,500 Total $350,000 Per Acre (Premium) $8.03 Sq Ft $106,167 Per Year $0.54 PerSF $0.04 Per SF/Mo. • 3.50% Annual 30 Years $2,481,265 $1,803,254 Income $106,167 $109,883 $113,728 $117,709 $121,829 $126,093 $130,506 $135,074 $139,801 $144,694 $149,759 $155,000 $160,425 $166,040 $171,851 $177,866 $184,092 $190,535 $197,203 ' $204,106 $211,249 $218,643 $226,295 $234,216 $242,413 $250,898 $259,679 $268,768 $278,175 $287,911 $5,480,608 Ground Lease Income: Calavera Self Storage Number of Units Rentable Square Feet 90,000 Assumptions IVIax# Units # Units #SF Avg. Rent/Unit/IVIo. Total Potential Rent/Mo. 10x5 400 20,000 $74.43 $29,771 10x10 450 45,000 $144.21 $64,896 10 x 20 125 25,000 $233.00 $29,125 975 90,000 $123,793 Projected Income Percent of Potenti; Annua! Income (Est.) $594,206 $1,114,136 Yr. 1 Yr. 2 Percent of Potential 40% 75% Income SELF STORAGE RATES throughout North County 10x5; 1 bed apt Business Address Rate/Mo. Carlsbad Self Storage 2235 Palomar Airport Rd $57 El Camino Self Storage 201 S El Camino $109 Encinitas Self Storage 911 Encinitas Blvd $45 Olivenhain Self Storage 1605 Olivenhain Road $69 Public Storage 3235 Tyler Street $75 Public Storage 6211 Corte Del Abeto $81 StorQuest Self Storage 2500 Campbell Place $85 Average $74 $17.86 /SF 10x10; 2 bed apt or household Business Address Rate/Mo. All Storage 860 Regal Road $150 CA AZ Storage 3560 Mission $167 Carlsbad Airport Storage 1910 Palomar Oaks Way $139 Carlsbad Self Storage 2235 Palomar Airport Rd $139 El Camino Self Storage 201 S El Camino $170 Encinitas Self Storage 911 Encinitas Blvd $124 Extra Space Storage $158 Olivenhain Self Storage 1605 Olivenhain Road $130 Ponto Storage 7290 Ponto Drive $135 Public Storage 3235 Tyler Street $137 Public Storage 6211 Corte Del Abeto $136 Storage West 235 East Carmel Street $154 StorQuest Self Storage 2500 Campbell Place $140 UHaul Storage 6175 Paseo Del Norte $140 Average $144 $17.31 /SF 10x20; 4 bed house (or 1 car garage) Business Address Rate/Mo. Carlsbad Self Storage 2235 Palomar Airport Rd $209 Encinitas Self Storage 911 Encinitas Blvd $239 Olivenhain Self Storage 1605 Olivenhain Road $264 Public Storage 3235 Tyler Street $241 Public Storage 6211 Corte Del Abeto $219 StorQuest Self Storage 2500 Campbell Place $226 Average $233 $13.98 /SF Revenue Comps Three Year Comparabies - Carlsbad Submarket Property Address Sale Date Land Area AC Asking Price/ Acre Sale Price Sale Price/ Acre Sale Price/ Net Acre Proposed Use Innovation Way Dryden PI Patomar Oaks Way 3200 Lionshead Ave 3200 Lionshead Ave 3/29/2012 12/29/2011 8/5/2011 5/20/2011 10/21/2010 9.21 4.73 2.49 3.74 4.82 Average $826,741 $4,588,162 $1,186,000 $1,300,000 $653,400 $1,425,501 $653,400 $2,310,000 $711,180 $498,172 $501,480 $522,088 $381,150 $479,253 $476,429 $588,060 Commercial $501,479 Auto Dealership $522,090 Commercial, Industrial $381,151 Industrial, Industrial Park, Office $479,254 Industrial, Industrial Park, Office $494,407 Subject Meet Market Discount $711,180 $500,000 $476,429 70% $494,407 $350,000 71% Land Comps Professional Strategic Plan for Real Property Assets Farmers Insurance THE IRVING GROUP Property Overview: Farmers Insurance 5815 El Camino Real 2351 Faraday Ave APN #: 213-062-12-00 (Farmers) APN #: 213-062-13-00 (Claim Center) APN #: 213-062-14-00 (Land) Specific Details Total Sq. Ft. (building): Total Sq. Ft. (land): Min. Divisible Sq. Ft.: Floor Size: Number of Floors: Parking (per 1,000): Parking (# spaces): 133,922 588,496 (13.5 acres) 6,100 43,355 3 3.9 529 Current Lease Rate/Mo.: Projected Lease Rate/Mo. Purchase Price (2002): Year Built: Zoning: , -I ^ • • City Agency: None $2.10 NNN $15,700,000 1986/1989 C-M, Heavy Commercial - Light Industrial. Carlsbad Research Center Specific Plan. City/CFDl Description The Farmers Insurance project consists of a 128,846 square foot, three-story office building and a 6,100 square foot single story office building. The 13.51 acre site has ample parking and is made up of three separate parcels. The main building (APN # 213-062-12-00) situated on 6.95 acres is a vacant 128,846 square foot office building currently configured for a single-tenant. The structure was built in two phases (1986 and 1989). The first phase in 1986 included the construction of 81,000 square feet over three floors. In 1989, the building was expanded on its east side by an additional 47,846 square feet. This building is considered functionally obsolete and will require a major capital investment in order to bring it to modern standards. Currently the first floor is bisected by a corridor which extends the length of the building and a corner lobby. The building contains offices, a cafeteria, lunch room, storage areas and a loading dock located on the east end ofthe building. The second and third floors are open office areas accessed via three elevators. The second building consisting of 6,100 square feet (APN # 213-062-13-00) was previously the insurance claims center and is currently being occupied by an incubator on an interim basis. The single story wood frame and stucco structure sits on 1.46 acres of land. In addition to the two parcels mentioned above, there is a third 5.1 acre parcel (APN # 213-062- 14-00). This parcel is primarily raw land with a parking area built to service the adjacent buildings. This additional space provides the flexibility to increase parking to 6.03 spaces per 1,000 square feet of building (809 spaces) or develop an 80,000 - 95,000 square foot office building. Carlsbad Research Center Highest & Best Use The unique zoning of this property provides several usage and development options. The zoning designation is C-M, Heavy Commercial and Light Industrial. It is also designated Planned Industrial (Pl) permitting research and development, light manufacturing, business and professional offices. Finally, there are several conditional uses permitted including: bar and restaurant, hotel/motel, health club, self-storage and limited retail. The Carlsbad submarket for commercial property still suffers from a high vacancy rate. According to Costar Market Data for the first quarter 2012, vacancy rates for Class A Office space in Carlsbad was 24 percent and 22 percent for Class B. As the economy improves and companies expand, the commercial property market tightens and vacancy rates will come down. Carlsbad is fundamentally a good location for businesses and a desirable city to live and work in. This project is located in one of the preeminent locations in Carlsbad. Situated on the corner of Faraday Avenue and El Camino Real, this is arguably the most prominent commercial intersection in the city. It will provide the tenant(s) of the project ample opportunities for valuable signage and name recognition along these arterial roadways. Furthermore, renovating or developing the site presents an opportunity for the City to guide the remodel of a landmark building. Our recommendation is to renovate the Farmers building for Office use, demolishing the claims center to create more parking, and selling the excess land to help offset the costs of the renovation. Under this scenario, the City will need to spend an estimated $8,279,619 ($64.77/SF) for the basic renovation. Including the purchase price of $15,700,000 ($122.83/SF), the total development cost will be $23,979,619 or $187.60 for a Class A space. To validate this expense, we underwrote a development project with a starting rent of $2.10 per square foot NNN plus an estimated NNN expense of $0.25 per square foot, or $2.35 per square foot gross rent. These rates are supported by the First Quarter Market Report conducted by Costar listing the average quoted rate for Class A space in the Carlsbad submarket of $2.32 gross rent. The modest $0.03 premium we assigned to this project is due to its preeminent location in the Research Center. Assuming a single tenant lease over a ten year term with industry standard concessions, the Net Operating Income in the second year is $2,833,775. Assigning a market cap value of 7.0 percent, also validated by Costar, the value of this property would be $40,482,506. This yields a margin of $16,502,887 or $129.11 per foot and a Return on Costs of 11.8 percent. This is a great return and makes the investment fundamentally sound. To help offset the expense of redeveloping the building, we recommend selling the 5.1 acres of excess land. There are few comparabies in Carlsbad but we estimate the land would sell for approximately $500,000 - $650,000 per acre. We conservatively assigned $550,000 per acre, or $2,805,000 for the lot, in line with a nearby listing in an inferior location. The buyer of this excess land will likely develop a Class A Office building that maximizes the density. Under this scenario the structure will be 95,000 square feet. The estimated hard and soft costs of construction for this project are $245.44 per square foot or $23,316,767. Adding the interest component and estimated land cost of $2,805,000, the total development cost is $26,765,893 or $281.75 per square foot. Using the same assumptions in rental rates of $2.35 per square foot, the Net Operating Income will be $2,106,122 in the second year of the term. Assigning a market cap value of 7.0 percent the value of this property would be $30,087,450. The total development cost of $26,765,893 yields a Return on Cost for this development of 7.9 percent. With $521,531 Net Cash on $7,209,050 of Capital Investments, the Leveraged Return is 7.2 percent which is an acceptable return in this market. If the City chooses to partner with a developer and assign the land value of $2,805,000 or more as "equity", the project becomes more viable. In this scenario, where the developer won't have to invest in the land, their Return on Cost is 8.8 percent and the Leveraged Return is a robust 11.8 percent. One reason for partnering with the developer is to include the Council Chambers and other meeting facilities in the new building while accommodating administrative functions in the Farmers Insurance building. There have been numerous studies and evaluations conducted at this site over the last decade. They are well-conceived and relevant to the market needs at the time. The location and proximity to other City services make this property an ideal location for a Civic Center and Council Chambers. Carlsbad has experienced significant growth outside the downtown area over the last decade and this location is central for the population. The challenge in underwriting the redevelopment of this project for a new Civic Center is the undefined scope. The budget could increase by $50,000,000 - $100,000,000 depending on the number of facilities and services provided. For instance, the City of Newport Beach is building an extensive Civic Center with a library, park and parking structure that has a total construction cost estimate of $131,400,000. If the City decides not to partner with a third party to develop the excess land, the recommended course of action is to market the property for a ground lease. It will take a considerable investment to develop the office building so a term of 30 to 50 years will be necessary. To calculate the ground lease rate, the current value of the site was divided over ten or fifteen years. This provided a range for the ground lease of $0.07 to $0.11 per square foot per month. Over the 30 year term, depending on the Discount Rate and amortization schedule utilized, the Net Present Value of this ground lease is between $3,176,219 and $6,555,682. Value Based on Highest & Best Use Farmers Building Renovation & Lease Net Operating Income (Yr. 2) $2,833,775 Cap Rate 7.0% Value As $40,482,506 Vacant Land Ground Lease 30 Year Ground Lease - NPV (5% disc, rate) $4,370,455 - $6,555,682 30 Year Ground Lease - NPV (7.5% disc, rate) $3,176,219-$4,764,328 Alternative to Highest & Best Use Civic Center TBD r Site Plan - Phase I PARCEL MAP MAP mso-cmjsEM) Na m-io MAP 823 -RiStf«>IO «UA HEJlWD^ ROS 10987 Assessor Parcel Map Numbers: 212-062-12, 13 & 14 Project: 5815 El Camino Real (Farmers) I Project Costs (24 Months) Estimated Cost Basis ("Purchase Price") Improvements Carpet, Paint, Ceiling, Lights (Tl Allowance) Replace Glass System & Reskin Building * ; Replace Elevators Renovate Bathrooms HVAC: Replace 125 & 75 Ton Chillers & 3 Air Handlers Demolish Claims Building Hard Costs Contingency Hard Costs (Construction Costs) 127,822 sqft 127,822 sqft 127,822 sqft 9 count 9 banks 5% $122.83 $20.00 $15.00 $50,000 $20,000 $2,556,440 $1,917,330 $450,000 $180,000 $750,000 $30,500 $294,214 $15,700,000 $6,178,484 Total Hard Cost/SF $48.34 Additional Expenses Permits (City est.) Architecture, MEP, & SE other Consultants Soft Cost Contingency Insurance & Bonds Legal & Accounting Broker Commissions Marketing Property Tax -1 Yr. to Lease Up Soft Costs 7% V 4.5% $25,000 $432,494 $5,000 $23,125 $50,000 $5,000 $1,555,517 $5,000 $0 $2,101,136 Total Soft Cost/SF $16.44! Total Project Costs Interest Component: Loan Amount City's Portion Period Interest $ 23,979,619 0.00% $23,979,619 $0 Total Development Costs Tenants Portion of Costs Total Development Costs - City ! Development Cost/SF I Development Cost for City/SF $187.60! $187.60 $23,979,619 $23,979,619 ! Proforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses Net Operating Income Annual Interest Payment Net Cash See "Income" Yr 2 10% 5% NNN 0.00% $3,333,853 -$333,385 -$166,693 $2,833,775 $0_ $2,833,775 Cap Value 7.00%! Value/SF $316,711 $40,482,506 Total Development Costs - City -$23,979,619 Margin ! Margin/SF $129,111 $16,502,887 Investment Indicators 1 Return on Cost - Development Net Operating Income (Yr. 2) $2,833,775 Total Development Cost - City $23,979,619 11.8% Cash-on-Cash Return - Improvement Portion Net Cash (Yr 2) $2,833,775 Capital Investment (Renovation) $8,279,619 34.2% Summary Farmers Cashflow Analysis 5815 El Camino Real (Farmers) Summary Total Value - Lump Sum $35,908,363 NPV (@ 5% discount) $26,285,764 Starting Base Rent $2.10 Effective Rent (incl. free rent)/RSF $2.25 Operating Expenses / SF $0.25 Average Gross Rent Income/RSF $2.34 $2.34 'Incl. Tl's and Free Rent Estimated Rent 2012 Rent Type: NNN Assumptions I Rent Assum ptions Size Tl Costs ($/RSF) Total Rentable SF 127,822 All in Tl number(or) $20.00 Load Factor 4.00% Equipment Useable SF 122,906 FF&E Cabling Lease Term (months) 120.00 Physical move % or $ Miscellaneous Rent Annual increase 3.5% $0.00 Total Cost $20.00 $2,556,440 year 1 $2.10 year 6 $2.49 year 2 $2.17 year 7 $2.58 Tl Allowance ($/sf) years $2.25 years $2.67 Landlord Tl Allowance $20.00 $2,556,440 year 4 $2.33 year 9 $2.77 How allocated? RSF year 5 $2.41 year 10 $2.86 Remaining Tl Cost $0.00 $0 % or $ Estimated NNN Expenses Annual inaease 0.0% $0.00 1000000 year 1 $0.25 year 6 $0.25 22.9568411 year 2 $0.25 year 7 $0.25 year 3 $0.25 years $0.25 year 4 $0.25 year 9 $0.25 year 5 $0.25 year 10 $0.25 Free Rent Base Rent year 1 12 months free year 2 0 months free Yearl Year 2 Years Year 4 Years Years Year? Years Year 9 Year 10 Number of Months 12 12 12 12 12 12 12 12 12 12 120 Income Rent Operating Expenses Capital Costs Tenant Improvements Free Rent Free Rent $3,221,114 $389,776 -$2,556,440 -$3,221,114 $3,333,853 $389,776 $0 $3,450,538 $389,776 $3,571,307 $389,776 $3,696,303 $389,776 $3,825,673 $389,776 $3,959,572 $389,776 $4,098,157 $389,776 $4,241,593 $389,776 $4,390,048 $389,776 Total Costs Rent Operating Expenses Tis Free rent $37,788,159 $3,897,758 -$2,556,440 -$3,221,114 Total Income -$2,166,664 $3,723,629 $3,840,314 $3,961,083 $4,086,079 $4,215,449 $4,349,348 $4,487,933 $4,631,368 $4,779,824 Grand Totals $35,908,363 Monthly Rent $268,426 $277,821 $287,545 $297,609 $308,025 $318,806 $329,964 $341,513 $353,466 $365,837 Income Farmers Estimated Operating Expenses (NNN) Property Tax (1.1% Development Cost) Landscape Maintenance (est.) Insurance (est.) $23,979,619 PerYr $263,776 $26,000 $100,000 Per SF/IVIo. $0.17 $0.02 $0.07 $0.25 NNN Farmers Ground Lease: Faraday/Priestly (Excess) Excess Land Size Estimated Value Value Amortized/10 Yrs Term 222,156 SqFt 5.1 Net acres $2,805,000 Total $550,000 Per Acre $12.63 Sq Ft $280,500 Per Year $1.26 PerSF Size "" Estimated Value Value Amortized/15 Yrs 222,156 SqFt 5.1 Net acres $2,805,000 Total $550,000 Per Acre $12.63 Sq Ft $187,000 Per Year $0.84 Per SF $0.11 Per SF/Mo. C;, ; $0.07 ase 3.50% Annual Rent Increase 3.50% 30 Years Term 30 Years 3 Discount Rate $6,555,682 NPV(g 5 5% Discount Rate $4,370,455 % Discount Rate $4,764,328 NPV (5 5 7.5% Discount Rate $3,176,219 Period Income Period Income Yr. 1 $280,500 Yr. 1 $187,000 Yf.2 $290,318 Yr. 2 $193,545 Yr. 3 $300,479 Yr. 3 $200,319 Yr.4 . ; ; ' $310,995 'Jb.,,,, Yr. 4 $207,330 Yr. 5 $321,880 Yr. 5 $214,587 Yr. 6 $333,146 Yr. 6 $222,097 Yr. 7 : V, $344,806 -.r->"n7«S>?"] Yr. 7 $229,871 Yr. 8 $356,874 Yr. 8 $237,916 Yr. 9 $369,365 Yr. 9 $246,243 Yr. 10 $382,293 ' •• • • " Yr. 10 $254,862 Yr. 11 $395,673 ., , . Yr. 11 ' ' $263,782 Yr. 12 $409,522 ' Yr. 12 $273,014 Yr. 13 $423,855 Yr. 13 $282,570 Yr. 14 $438,690 Yr. 14 $292,460 Yr. 15 ; $454,044 ^ : . V^vyjf Yr. 15 $302,696 Yr. 16 $469,935 Yr. 16 $313,290 Yr. 17 $486,383 Yr. 17 $324,255 Yr. 18 $503,406 Yr. 18 $335,604 Yr. 19 $521,026 Yr. 19 " $347,350 Yr. 20 $539,262 Yr. 20 *• $359,508 Yr. 21 $558,136 Yr. 21 $372,091 Yr. 22 $577,671 Yr. 22 $385,114 Yr. 23 $597,889 -Yr. 23 $398,593 Yr. 24 $618,815 Yr. 24 $412,543 Yr. 25 $640,474 Yr. 25 $426,982 Yr. 26 $662,890 Yr. 26 $441,927 Yr, 27 $686,091 Yr. 27 $457,394 Yr. 28 A ^ $710,105 Yr. 28 $473,403 Yr. 29 $734,958 Yr. 29 $489,972 Yr. 30 $760,682 Yr. 30 $507,121 Total $14,480,161 Total $9,653,441 -3 •:-.:.-JC ^ xjfvoi?IsEtmsK'; Ground Lease Excess ! Project Costs (24 Months) Estimated Land Cost Basis ("Purchase Price") Improvements Construct Building Shell Complete Buildout (TIA) Hard Costs Contingency Hard Costs (Construction Costs) Additional Expenses Permits (City est.) Architecture, MEP, & SE Other Consultants Soft Cost Contingency : Insurance & Bonds Legal & Accounting . Broker Commissions Marketing Property Tax -1 Yr to Lease Up Soft Costs - Project: Faraday/Priestly (Excess) 222,156 sqft 95,000 sqft 95,000 sqft 5% $150.00 $40.00 Total Hard Cost/SF 7% 5% 3% 5% 1.1% Points/Fees Totai Development Costs 1 pt $199.50 None Allocated $14,250,000 $3,800,000 $902,500 $954,155 $1,326,675 $25,000 $115,292 $568,575 $5,000 $1,156,093 $5,000 $208,478 $0 $18,952,500 $4,364,267 ! Total Soft Cost/SF $45.94! Total Project Costs $23,316,767 1 Total Project Cost/SF $245.44| Interest Component: Construction Loan Amount Developer's Portion of Construction Costs Construction Period Interest \ $ 15,155,899 65% Project Cost . " E 8,160,868 6.50% 1 Yr @ .65 LTC & .5 Use Rate $ 492,567 151,559 ! Development Cost/SF $23,960,893 $252.22 ! Proforma Operating Budget Scheduled Gross Annual Income Vacancy Annual Operating Expenses See "Income" Yr. 2 10% 5% $2,477,790 -$247,779 -$123,890 Net Operating Income Annual Interest Payment Net Cash 6.50% 25 Yrs $2,106,122 -$1,584,590 $521,531 Cap Value 7.00%! Vaiue/SF $316.71! $30,087,450 Total Development Costs -$23,960,893 Margin 1 Margin/SF $64.491 $6,126,557 Investment Indicators: No Cost Basis Land 1 Loan to Value Total Development Costs 65% $19,556,843 $23,960,893 Capital Investment $4,404,050 Return on Cost - Development Net Operating Income (Yr. 2) $2,106,122 Total Development Cost - City $23,960,893 8.8% Interest Cover / Debt Service Ratio Net Operating Income $2,106,122 Annual Interest $1,584,590 132.9% Leveraged Return Net Cash $521,531 Capital Investment $4,404,050 11.8% Summary Excess Project: Faraday/Priestly (Excess) investment Indicators: Including Land Value Land Size Est. Price for "Premium" Land Total Development Costs Loan to Value Total Development Costs Scheduled Gross Annual Income Vacancy Annual Operating Expenses Ground Lease Payment (15 Yr. Scenario) Net Operating Income Annual Interest Payment Net Cash Cap Value Total Development Costs Margin Loan to Value Total Development Costs Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Leveraged Return Total Development Cost with Land Capital Investment Return on Cost - Development Interest Cover / Debt Service Ratio Leveraged Return !Investment Indicators: Ground Lease 5.1 Acres $550,000 per Acre Net Operating Income (Yr. 2) Total Development Cost Net Operating Income Annual Interest Net Cash Capital Investment See "Income" Yr. 2 10% 5% See "Ground Lease" Yr. 2 6.50% 25 Yrs $2,805,000 $23,960,893 $26,765,893 $19,556,843 $26,765,893 $7,209,050 $2,106,122 $26,765,893 $2,106,122 $1,584,590 $521,531 $7,209,050 f NNN 7.00% 65% Net Operating Income (Yr 2) Total Development Cost Net Operating Income Annual Interest Net Cash Capital Investment $17,759,639 $23,960,893 $6,201,254 $1,912,577 $23,960,893 $1,912,577 $1,438,972 $473,604 $6,201,254 7.9% 132.9% 7.2% $2,477,790 -$247,779 -$123,890 -$193,545 $1,912,577 -$1,438,972 $473,604 Value/SF $287.611 i $27,322,521 i -$23,960,893 Margin/SF $35,391 ! $3,361,629 8.0% 132.9% 7.6% Summary Excess Cashflow Analysis Faraday/Priestly (Excess) Summary Total Value - Lump Sum $24,787,851 NPV (@ 5% discount) $17,726,609 Starting Base Rent $2.10 Effective Rent (incl. free rent)/RSF $2.25 Operating Expenses / SF $0.25 Average Gross Rent Income/RSF $2.17 $2.17 'Incl. Tl's and Free Rent Estimated Rent 2012 Rent Type: NNN Assumptions [Rent Assumptions Tenant Improvement Assumptions Size Total Rentable SF 95,000 All in Tl number(or) $40.00 Load Factor 12.00% Equipment Useable SF 84,821 FF&E Cabling Lease Term (months) 120.00 Physical move % or $ Miscellaneous Rent Annual increase 3.5% $0.00 Total Cost $40.00 $3,800,000 year 1 $2.10 year 6 $2.49 year 2 $2.17 year 7 $2.58 Tl Allowance ($/sf) years $2.25 years $2.67 Landlord Tl Allowance $40.00 $3,800,000 year 4 $2.33 year 9 $2.77 How allocated? RSF year 5 $2.41 year 10 $2.86 Remaining Tl Cost $0.00 $0 % or $ Estimated NNN Expenses Annual increase 0.0% $0.00 year 1 $0.25 year 6 $0.25 year 2 $0.25 year 7 $0.25 years $0.25 years $0.25 year 4 $0.25 year 9 $0.25 year 5 $0.25 year 10 $0.25 Free Rent Base Rent year 1 12 months free year 2 0 months free Yearl Year 2 Years Year 4 Years Years Year? Years Years Year 10 Number of Months 12 12 12 12 12 12 12 12 12 12 120 Income Rent Operating Expenses Capital Costs Tenant Improvements Free Rent Free Rent $2,394,000 $289,690 -$3,800,000 -$2,394,000 $2,477,790 $289,690 $2,564,513 $289,690 $2,654,271 $289,690 $2,747,170 $289,690 $2,843,321 $289,690 $2,942,837 $289,690 $3,045,837 $289,690 $3,152,441 $289,690 $3,262,776 $289,690 Total Costs Rent Operating Expenses Tis Free rent $28,084,955 $2,896,896 -$3,800,000 -$2,394,000 Total Income -$3,510,310 $2,767,480 $2,854,202 $2,943,960 $3,036,860 $3,133,011 $3,232,527 $3,335,526 $3,442,130 $3,552,466 Grand Totals $24,787,851 Monthly Rent $199,500 $206,483 $213,709 $221,189 $228,931 $236,943 $245,236 $253,820 $262,703 $271,898 Income Excess Estimated Operating Expenses (NNN) Property Tax (1.1% Development Cost) Landscape Maintenance (est.) Insurance (est.) $23,960,893 PerYr $263,570 $26,000 $100,000 Per SF/Mo. $0.17 $0.02 $0.07 $0.25 NNN Excess Comparabies: Rent Address Building Class Building Size (SF) Est NNN Asking Rent As Net of Utilities Comment 1525 Faraday Avenue A Office 80,749 $0.00 $2.40 $2.40 LEED 2888 Lol<er Avenue E A Office 80 658 $0.00 $1.57 $1.57 5901 Priestly Drive A Office 97.783 $0.00 $2.35 $2.35 Across the Street Average $0.00 $2.11 $2.11 Subject Meet Marl<et $ 0.25 $ 1.85 $ 2.11 Premium $ 0.25 $ 2.10 $ 2.35 112% Three Year Comparabies -Carlsbad Submarket Property Address Sale Date Land Area AC Asking Price/ Sale Price Sale Price/ Acre Sale Price/ Net Proposed Use Acre Acre Innovation Way 3/29/2012 9.21 $826,741 $4,588,162 $498,172 $588,060 Commercial Dryden PI 12/29/2011 4.73 31,186,000 $501,480 $501,479 Auto Dealership Palomar Oaks Way 8/5/2011 2.49 $1,300,000 $522,088 $522,090 Commercial, Industriai 3200 Lionshead Ave 5/20/2011 3.74 $653,400 $1,425,501 $381,150 $381,151 Industrial, Industrial Park, Office 3200 Lionshead Ave 10/21/2010 4.82 $653,400 $2,310,000 $479,253 $479,254 Industrial, Industrial Pari<, Office Average $711,180 $476,429 $494,407 Subject Meet Market $711,180 $494,407 Premium $791,149 111% $550,000 111% Comps Site Project Size (SF) Parking # of Floors Item $/SF (est.) Cost/Item 5815 El Camino Real Renovation 127,822 512 3 Replace Glass System & Re-Skin $ 15 $ 1,917,330 4/1,000 New Carpet, Paint, Ceiling & Lights $ 20 $ 2,556,440 Replace Elevators (9 count) $ 50,000 $ 450,000 Renovate Bathrooms (9 banks) s 20,000 $ 180,000 HVAC - Replace 125 & 75 Ton Chillers & 3 Air Handlers $ 750,000 $ 5,853,770 Per SF $ 45.80 Excess Land (5.1 acres) Build Class A Office 95,000 380.0 3 Estimated Cost to Build Shell s 150 $ 14,250,000 4/1,000 Tenant Improvement Allowance $ 40 $ 3,800,000 $ 18,050,000 Per SF $ 190 2351 Faraday Avenue Demolish 6,100 1 s 5.00 S 30,500.00 Construction Notes Professional Strategic Plan for Real Property Assets Cole Library Agriculture THE IRVING GROUP Property Overview: Cole Library Agriculture Location North + South Side of Carlsbad Village Drive Carlsbad, CA 92009 APN #: 156-190-69-00 Specific Details Parcel Size (acres): 4.23 Desired Entitlement: TM, GPA, Zone Zoning Designation: R-l/R-P-Q Change General Plan: RLM/O/G Current Improvements: Agriculture, Min. Req'd Lot Size: 10,000 SF (3.2 du / Library Parking, Min. Req'd Lot Size: acre) & Fire Station Achievable Lots: ^ +/-15 cluster lots Purchase Price: Assume $0.00 View Potential: Partial Ocean School District: Carlsbad Unified Current Entitlement: None City Agency: City/General Fund Description The subject 4.23-acre property consists of two parcels located on each side of Carlsbad Village Drive ("CVD"). The parcel located on the north side of CVD is approximately 3.1 acres and features 1.8 acres used for agriculture operations with the balance of the northern parcel consisting of library parking. The parcel on the south side of CVD is a long and shallow strip with four hundred thirty feet of frontage on approximately 1.13 acres, which includes an active fire station. This parcel could restrict access to a land locked parcel to the south. It is unclear if access to the land locked parcel will need to be granted through the subject property. The parcel on the north side of CVD will drive the majority of the value. Carlsbad West, Old Carlsbad Highest & Best Use The City initiated the acquisition of multiple parcels surrounding the existing civic center in hopes of building a new civic center with all City services in one location. This study will identify the highest and best alternate use should that strategy be abandoned based on the recommendation to use the Farmers Insurance Building for the Civic Center. The larger parcel on the north side of CVD features two zoning overlays on the site R-l & R-P-Q. Contiguous land uses are residential single family homes to the north and east, Elmwood Street and the Library parking lot to the west and south respectively. Given the library parking lot will remain, the current zoning designation allows for 10,000 square foot minimum lots on the R-l portion of the site. In order to achieve the highest and best use, this study recommends a Change of Zone and General Plan Amendment to accommodate single family detached cluster units on the agricultural portion of the northern parcel. We anticipate that after giving up street area, the northern parcel will yield approximately fifteen homesites. Proposing higher density will likely generate a certain degree of discontent with existing homeowners making the zone change and general plan update challenging. The scope of this exercise did not include a lot study by a civil engineer, thus the final lot yield should be verified. The southern parcel could be leased to surrounding owners and tenants as additional parking to accommodate local business uses on the south side of CVD. A produce stand serving locally grown/made items could also serve as a mildly profitable use while accommodating the challenges on the southern parcel. After examining the cost of splitting and the nominal disposition amount of the narrow frontage, the southern parcel is worth more in its current condition. Based on fifteen homesites with an approved Tentative Map (post any and all appeal periods), we valued the site at $1,450,000. The homebuilder or developer is responsible for the Tentative Map and the application will be under their name. The recommended course of action is to have the City issue a Request for Proposal ("RFP") soliciting homebuilder participation in obtaining Tentative Map Approval. A homebuilder is the "end user" for the subject property, and logically would be able to pay the most for the site should it be entitled. The competitive bid process will determine the agreed upon value for the site with the builder who is then required to deposit significant earnest money prior to Tentative Map Approval. Combining the subject site and the Elmwood assemblage in a joint RFP would likely garner the highest value so the selected builder could leverage the unit count and achieve economies of scale with respect to (horizontal and vertical) development costs. The City ("Owner") should be involved throughout the entitlement process to collaborate with the homebuilder and accomplish the approval in an expeditious fashion. As the applicant, the homebuilder will lead the process in order to generate the most efficient Tentative Map design in addition to providing a bearing on architectural product. The homebuilder will also be responsible for funding the Tentative Map application. As security for the homebuilder's investment throughout this process, we recommend providing them with a Purchase Agreement pending approval of the Tentative Map or an executed Letter of Intent. Value Based on [Highest & Best Use Proposed Value: Approved Tentative Map $1,450,000 Summary of Assumptions The static homebuilding proforma is based on the following assumptions: Revenues: Revenues for the subject property are based on the attached new home and resale comparable analysis. Given ocean views from the property, an average premium of three percent of the base sales price was given. The overall density along with proximity to CVD, the Library and existing Civic Center were also taken into consideration. The subject site will benefit from higher base pricing compared to the current new home community as (homeowner) monthly payments will justify higher pricing with no mello-roos or community facilities district. Given the close proximity of the units and common areas associated with the product type, a Homeowners Association is likely. Land & Land Development Cost: The residual land value is generated based on the costs to develop the site (both horizontally and vertically). Design and related costs cover civil engineering & staking, geotechnical, architectural, structural, landscape design. Site Development costs are estimated at $65,000 per lot, which includes demolition and removal ofthe existing parking lot. Direct House Costs: The vertical (stick and brick) construction costs are based on an informal survey of production homebuilders operating in the submarket. These are typically based on a per livable square foot basis. other Costs: Developer overhead is typically in the range of 3.0 to 3.5 percent of revenues depending on the price point and size ofthe community. The higher range was used based on the anticipated lot count. The marketing expenses largely cover the onsite presence and upgrades to showcase the homes. Most of these costs will go unrecovered when the models are disposed of at the end of the sales campaign. The financing cost is an estimate based on how quickly the site is constructed from acquisition; these factors include time to complete the final map, land development and the monthly absorption rate. Profit Margin: Profit margin typically ranges from eight to twelve percent. Given the favorable deal structure and partnership with the City during the entitlement process, the risk profile should be lower than the traditional risk profile on a raw piece of land. A ten percent margin was used to offset the relatively small number of home sites against the low land development and marketing risk associated with the proposed community. Cole Library Agriculture Carlsbad, CA Residual Land Value Analysis Units Mix Percentage Square Feet Bed rooms/Bathrooms Garage/story Type 30000-SALES REVENUE Planl Pian 2 Totai n I Average 1,400 1,650 2/2.5 3/2.5 2/2 2/2 Cluster Cluster 100.00% 31100 Base Sales Price 1$ 499,990 i 1$ 519,990 1 S 7,659,850 31100 lnflation/(Deflation) to Sales Price 2013 0.00% S -s S 31300 Lot Premiums 3.00% s 15,000 $ 15,600 s 229,796 31400 Options/Upgrades 3.00% s 15,000 s 15,600 $ 229,796 GROSS SALES REVENUE s 529,989 $ 551,189 $8,119,441 S 510,657 S s 15,320 s 15,320 $541,296 94.34% 0.00% 2.83% 2.83% 100.00% 39000 Sales and Closing Costs 39100 On-site Commissions 1.50% $ 7,950 $ 8,268 39200 Outside Commissions 1.50% $ 7,950 $ 8,268 39400 Sales Incentives 1.00% s 5,300 $ 5,512 39500 Title and Escrow Closing Costs 0.30% $ 1,590 $ 1,654 TOTAL SALES AND CLOSING COSTS $ 22,790 $ 23,701 NET SALES REVENUE $ 507,200 $ 527,488 Base Price Per Square Foot Net Sales Price Per Square Foot $357.1 $378.6 $315.1 $334.1 $ 121,792 $ 121,792 81,194 s 24,358 $349,136 $7,770,305 $ 8,119 $ 8,119 $ 5,413 $ 1,624 $23,276 $518,020 I $334.74 $354.83 0.30% 4.30% 95.70% I 40000 - LAND & LAND DEVELOPMENT COST 42000 Design and Related Costs 43000 Site Development Fees (Per Home) 44000 Site Development Costs 45000 Entitlement Period Overhead TOTAL LAND DEVELOPMENT COST 48000 Lot Level Development Fees (Per Home) TOTAL FINISHED LOT COST 65,000 65,000 $ 245,817 41000 Residual Land Value $ 1,450,000 $ 96,667 $ 96,667 $ 1,450,000 42000 Land Purchase Costs 0.50% $ 483 $ 483 $ 7,250 43000 Non-applied Purchase Deposits $ $ $ $ 44000 Brokerage Commissions 0.00% $ -$ $ TOTAL LAND COST $ 97,150 $ 97,150 $ 1,457,250 $ 575,000 $ 38,333 $ 38,333 $ 2,000 $ 2,000 $ 43,333 $ 43,333 $ - $ - $ 575,000 $ 2,000 $ 38,333 $ 38,333 $ 2,000 $ 2,000 $ 43,333 $ 43,333 $ - $ - $ 30,000 $ 650,000 $ 38,333 $ 38,333 $ 2,000 $ 2,000 $ 43,333 $ 43,333 $ - $ - $ 650^000 $ $ 38,333 $ 38,333 $ 2,000 $ 2,000 $ 43,333 $ 43,333 $ - $ -$ $ 83,667 $ 83,667 $ 1,255,000 $ 96,667 $ 483 $ $ $ 97,150 $ 38,333 $ 2,000 $ 43,333 $ $ 83,667 245,817 I $ 3,687,2501 j $ 245,817 0.09% 0.00% I $ 975,0001 I $ 65,000~| j 12.01%) 45.41% 50000 - DIREa HOUSE COSTS 51000 Base Construction Cost $ 93,800 $ 107,250 $ 1,514,600 52000 Options/Upgrades Cost 70.00% $ 10,500 $ 10,920 $ 160,857 55000 Indirect Construction Cost $ 500,000 $ 33,333 $ 33,333 $ 500,000 $ 100,973 $ 10,724 5 33,333 TOTAL DIREa HOUSE COST Direct Construction Base Per Square Foot Direct House Costs Per Square Foot 67 $_ 98 $ $65.93 $94.85 6.16% $ 137,633 $ 151303 | $2,175,45?! I $145,0301 I 26.79%] 60000 Other Soft Costs 61000 Professional Fees $ 35,000 $ 2,333 $ 2,333 $ 35,000 62000 Propertv Taxes and Association Fees 1.10% $ 5,830 $ 6,063 ? 89,314 63000 Insurance 1.25% $ 6,625 $ 6,890 $ 101,493 64000 Administrative Expense $ 25,000 $ 1,667 $ 1,667 $ 25,000 67000 Developer Overhead 3.50% $ 18,550 $ 19,292 $ 284,180 68000 Warranty Expense 1,00% $ 5,300 $ 5,512 $ 81,194 $ 2,333 $ 5,954 $ 6,766 $ 1,667 $ 18,945 $ 5,413 1.10% 1.25% 0.31% 80000 Financing Expense 82000 Construction Loan Expense TOTAL OTHER COSTS TOTAL COSTS TOTAL PROFIT MARGIN Profit Margin by Model 1.50% I $ 7,950 $ 71.044 $ 9.94% 8,268 73,725 $ 454,493 II $ 471,045 | $ 52,706 $ 56,443 71000 Model Expense 1.75% $ 9,275 $ 9,646 $ 142,090 72000 Sales Center Expense 0.65% $ 3,445 $ 3,583 $ 52,776 73000 Advertising and Promotion 1.90% $ 10,070 $ 10,473 $ 154,269 10.24% $ 9,473 $ 3,518 $ 10,285 I $ 121,79"2l IX 8,119 $820,489 $54,699 0.65% I $1,087,109] I $72,474") 1 13.39%] I $ 6,949,8161 I $ 463,32ll j 85.59x| 10.11<K $1,165,000 $1,115,000 $1,065,000 $1,015,000 $965,000 $915,000 $865,000 Carlsbad Coastal Resale Comparabies Active, Pending, Sold 10/1/11 - Present rum 4 1,800 1,950 2,100 2,250 2,400 2,550 2,700 2,850 3,000 3,150 3,300 3,450 Square Feet Resale SFD - Chart New Home Comparabies Carlsbad Coastal $1,165,000 $1,115,000 $1,065,000 $1,015,000 $965,000 $915,000 V u Q. (A (0 {fi $365,000 1,300 1,600 1,900 2,200 2,500 2,800 3,100 Square Feet 3,400 3,700 4,000 4,300 New Home SFD - Chart Professional Strategic Plan for Real Property Assets Carey Estate 2923 Elmwood THE T RVT fsTG GROUP Property Overview: 2923 Elmwood (Carey Estate) Location 2923 Elmwood Carlsbad, CA 92009 APN #: 156-164-63-00 Specific Details Parcel Size (acres): .29 acres Current Entitlement: None Zoning Designation: R-1-10000 Desired Entitlement: Use Current General Plan: RLM Zoning Min. Req'd Lot Size: 10,000 SF (4.0 du/ Current Improvements: Vacant Land acre) Purchase Price: Assume $0.00 Achievable Lots: One Lot School District: Carlsbad Unified View Potential: Partial Ocean City Agency: City/General Fund Description The subject .29-acre property consists of a vacant lot contiguous to a community garden concept as well as a single-family home that was converted to house the City's Cultural Arts Office and Sculpture Garden. Highest & Best Use The City initiated the acquisition of multiple parcels surrounding the existing Civic Center in hopes of building a new Civic Center with all City Services in one location. This study will identify the highest and best alternate use should that strategy be abandoned. The subject site is surrounded on three sides with existing single-family homes. It seems appropriate from both a planning and financial standpoint that the site employs the same use. The current zoning designation is R-1-10,000 with a General Plan designation of RLM allowing 10,000 square foot minimum lots. With the current zoning, the site will accommodate one single-family unit. Exploring a higher density could also be considered, however it would likely generate discontent amongst existing homeowners; therefor making a zone change and General Plan update challenging. Based on a residual analysis showing the construction and sale of one single-family unit, we valued the site at $190,000. The recommended course of action is to have the City market the site to a homebuilder. Value Based on Highest & Best Use Proposed Value based on approved TM $190,000 Summary of Assumptions The static homebuilding proforma is based on the following assumptions: Revenues: Revenues for the subject property are based on the attached new home and resale comparable analysis. Given partial ocean views from the property, an average premium of 2.5% of the base sales price was given. Proximity to the Library and existing Civic Center were also taken into consideration. The subject site will benefit from higher base pricing compared to the current new home community as (homeowner) monthly payments will justify higher pricing with no mello-roos, community facilities district, or home owners association. Land & Land Development Cost: The residual land value is generated based on the costs to develop the site (both horizontally and vertically). Design and related costs cover civil engineering & staking, geotechnical, architectural, structural, landscape design. Direct House Costs: The vertical (stick and brick) construction costs are based on an informal survey of production homebuilders operating in the submarket. These are typically based on a livable per square foot basis. A higher cost was used given no economies of scale will be achieved with one unit. Other Costs: Developer overhead is five percent of revenues based on the single unit. Most of the marketing expenses will be covered in sales commissions. The financing cost is an estimate based on how quickly the site is constructed and sold from acquisition; these factors include time to design and process construction drawings. Profit Margin: A ten percent margin was used given the low risk profiles (entitlement, land development and marketing) associated with the site and perfecting the current zoning. Property Overview: 2923 Elmwood (Carey Estate) Location 2923 Elmwood Carlsbad, CA 92009 APN #: 156-164-63-00 Specific Details Parcel Size (acres): 1.87 Current Entitlement: None Zoning Designation: R-1-10000 Desired Entitlement: TM - SFD General Plan: RLM Current Improvements: Existing Office + Min. Req'd Lot Size: 10,000 SF (4.0 du/ Agriculture Use acre) Purchase Price: ,;|{ $266,032 Achievable Lots: u ' ... . +/- 8 lots ?R . School District: Carlsbad Unified View Potential: Partial Ocean City Agency: r -> City/General Fund Description The subject 1.87-acre property consists of existing agriculture operations including a community garden concept as well as a single-family home that was converted to house the City's Cultural Arts Office and Sculpture Garden. Highest & Best Use The City initiated the acquisition of multiple parcels surrounding the existing civic center intending to build a new civic center with all City Services in one location. This study will identify the highest and best alternate use should that strategy be abandoned. The subject site is surrounded on three sides with existing single-family homes. It is appropriate from both a planning and financial standpoint that the site employs this same use. The current zoning designation is R-1-10,000 with a General Plan designation of RLM allowing 10,000 square foot minimum lots. It is anticipated after giving up street area, the site will yield approximately eight homesites. Exploring a higher density could also be considered, however it would generate a certain amount of discontent with existing homeowners making a zone change and general plan update challenging. It should be noted that the scope of this exercise did not include a lot study by a civil engineer, thus the final lot yield should be verified. Based on eight homesites with an approved Tentative Map (post any and all appeal periods), we valued the site at $1,150,000. The recommended course of action is to have the City issue a Request for Proposal ("RFP") soliciting homebuilder participation in obtaining Tentative Map Approval. A homebuilder is the "end user" for the subject property, and logically would be able to pay the most for the site should it be entitled. The competitive bid process will determine the agreed upon value for the site with the builder who is then required to post a significant earnest money deposit prior to Tentative Map Approval. The City ("Owner") will be involved throughout the entitlement process to collaborate and help accomplish the approval in an expeditious fashion. As the applicant, the homebuilder will lead the process and generate the most efficient Tentative Map design in addition to providing a bearing on architectural product. The homebuilder will also be responsible for funding the Tentative Map application. As security for the homebuilder's investment throughout this process, we recommend providing them with a Purchase Agreement pending approval of the Tentative Map or an executed Letter of Intent. Value Based on Highest & Best Use Proposed Value based on approved TM $1,150,000 Summary of Assumptions The static homebuilding proforma is based on the following assumptions: Revenues: Revenues for the subject property are based on the attached new home and resale comparable analysis. Given partial ocean views from the property, an average premium of 2.5 percent of the base sales price was given. Proximity to the Library and existing Civic Center were also taken into consideration. The subject site will benefit from higher base pricing compared to other new home communities because homeowners will not have to pay for mello-roos or community facilities district. In order to avoid the burden of a Home Owners Association, a private maintenance agreement between the residents would be ideal. Land & Land Development Cost: The residual land value is generated based on the costs to develop the site (both horizontally and vertically). Design and related costs cover civil engineering & staking, geotechnical, architectural, structural, landscape design. Site Development costs are estimated at $59,375 per lot, which includes demolition and removal ofthe existing structure. Direct House Costs: The vertical (stick and brick) construction costs are based on an informal survey of production homebuilders operating in the submarket. These are typically based on a livable per square foot basis. Other Costs: Developer overhead is typically in the range of 3.0 to 3.5 percent of revenues depending on the price point and size of the community. The higher range was used based on the lower anticipated lot count. The marketing expenses largely cover the onsite presence and upgrades to showcase the homes. Most of these costs will go unrecovered when the models are disposed of at the end of the sales campaign. The financing cost is an estimate based on how quickly the site is constructed from acquisition; these factors include time to complete the final map, land development and the monthly absorption rate. Profit Margin: Profit margin typically ranges from eight to twelve percent. Given the favorable deal structure and partnership with the City during the entitlement process, the risk profile could be lower than the traditional risk profile on a raw piece of land. A twelve percent margin was used to offset the relatively small number of home sites against the low land development and marketing risk associated with the proposed community. STRATFORD LN i R-1 R-1 LAGUNA m ui fioooa 2923 Elmwood (Carey Estate) Assemblage Carlsbad, CA Residual Land Value Analysis Units Mix Percentage Square Feet Bedrooms/Bathrooms Garage/Story Type 30000-SALES REVENUE Plan 1 1 1 Plan 2 3 1 5 37.50% 62.50% 2,650 2,875 3/3.5 4/4 1/2 2/2 SFD SFD Average 100.00% 22,325 2,791 Percent 31100 Base Sales Price Is 804,990 1$ 829,990 1 $ 6,564,920 31100 lnflation/(Deflation) to Sales Price 2013 0.00% $ $ -$ 31300 Lot Premiums 2,50% $ 20,125 $ 20,750 $ 164,123 31400 Options/Upgrades 3.00% $ 24,150 $ 24,900 $ 196,948 GROSS SALES REVENUE $ 849,264 $ 875,639 $6,925,991 $ 820,615 $ $ 20,515 $ 24,618 $865,749 39000 Sales and Closing Costs 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow/ Closing Costs 1.50% $ $ $ $ 12,739 12,739 8,493 2,548 $ $ $ $ 13,135 13,135 8,756 2,627 $ 103,890 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow/ Closing Costs 1.50% $ $ $ $ 12,739 12,739 8,493 2,548 $ $ $ $ 13,135 13,135 8,756 2,627 $ 103,890 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow/ Closing Costs 1,00% $ $ $ $ 12,739 12,739 8,493 2,548 $ $ $ $ 13,135 13,135 8,756 2,627 $ 69,260 39100 On-site Commissions 39200 Outside Commissions 39400 Sales Incentives 39500 Title and Escrow/ Closing Costs 0.30% $ $ $ $ 12,739 12,739 8,493 2,548 $ $ $ $ 13,135 13,135 8,756 2,627 $ 20,778 TOTAL SALES AND CLOSING COSTS $ 36,518 $ 37,652 $297,818 NET SALES REVENUE $ 812,746 $ 837,987 $6,628,173 Base Price Per Square Foot $303.8 $288.7 Net Sales Price Per Square Foot $320.5 $304.6 $ 12,986 $ 12,986 $ 8,657 $ 2,597 $37,227 I $828,522 I I $294.351 I $310.54] 40000 - LAND 8i LAND DEVELOPMENT COST 0.00% 2.37% 1.50% 100% 95.70%! 41000 Land Cost 41000 Residual Land Value $ 1,150,000 S 143,750 $ 143,750 $ 1,150,000 42000 Land Purchase Costs 0.50% $ 719 $ 719 $ 5,750 43000 Non-applied Purchase Deposits $ $ -$ $ 44000 Brokerage Commissions 0.00% $ $ $ TOTAL LAND COST $ 144,469 $ 144,469 $ 1,155,750 $ 143,750 $ 719 $ $ $ 144,469 42000 Design and Related Costs $ 400,000 $ 50,000 S 50,000 $ 400,000 43000 Site Development Fees (Per Home) $ 2,000 $ 2,000 $ 2,000 $ 16,000 44000 Site Development Costs s 475,000 $ 59,375 $ 59,375 $ 475,000 45000 Entitlement Period Overhead $ $ -$ -$ TOTAL LAND DEVELOPMENT COST $ 111,375 $ 111,375 $ 891,000 $ 50,000 $ 2,000 $ 59,375 $ $ 111,375 48000 Lot Level Development Fees (Per Home) TOTAL FINISHED LOT COST 50000 - DIREa HOUSE COSTS 65,000 65,000 $ 65,000 | $ 520,000 j | $ 65,000^ ^ 320,844 $ 320,844 | $ 2366,7501 | $ 320,844~| [ 0.00% 5 78% 51000 Base Construction Cost $ 212,000 $ 224,250 $ 1,757,250 52000 Options/Upgrades Cost 70.00% $ 16,905 $ 17,430 $ 137,863 55000 Indirect Construction Cost $ 400,000 S 50,000 $ 50,000 S 400,000 TOTAL DIREa HOUSE COST $ 278,905 $ 291^ $ 219,656 $ 17,233 $ 50,000 Direct Construction Base Per Square Foot Direct House Costs Per Square Foot $78.75 $102.88 OTHER COSTS 1.99% $2,295,113 I I $286,8891 I 33.14%] 60000 Other Soft Costs 61000 Professional Fees $ 35,000 $ 4,375 S 4,375 $ 35,000 62000 Property Taxes and Association Fees 1.10% $ 9,342 $ 9,632 $ 76,186 63000 Insurance 1.25% $ 10,616 $ 10,945 $ 86,575 64000 Administrative Expense $ 22,500 $ 2,813 $ 2,813 $ 22,500 67000 Developer Overhead 3.50% $ 29,724 $ 30,647 $ 242,410 68000 Warranty Expense 1.00% $ 8,493 $ 8,756 $ 69,260 $ 4,375 $ 9,523 $ 10,822 $ 2,813 $ 30,301 $ 8,657 70000 Marketing Expense 71000 Model Expense 1.75% $ 14,862 $ 15,324 $ 121,205 72000 Sales Center Expense 0.65% $ 5,520 $ 5,692 $ 45,019 73000 Advertising and Promotion 1.90% $ 16,136 $ 16,637 $ 131,594 $ 15,151 $ 5,627 $ 16,449 80000 Financing Expense 82000 Construction Loan Expense TOTAL OTHER COSTS 12,739 S 13,135 114,619 $ 117,956 TOTAL COSTS TOTAL PROFIT MARGIN Profit Margin by Model $ 98,378 $ 107,508 11.58% 12.28% $832,672 $104,084 0.32% 1.75% 1.90% $ 103,8901 I $ 12,9861 | 1.50%) $933,6381 I $116,705") | 13.48%) $ 714,36811$ 730,479] | $ 5,795,50l1 | $ 724,438") j 83.68x1' 12.02% 2923 Elmwood (Carey Estate) Carlsbad, CA Residual Land Value Analysis PRODUa Units Mix Percentage Square Feet Bedrooms/Bathrooms Garage/Story Type 30000-SALES REVENUE Planl Plan 2 I Total Average 2,650 3/3.5 1/2 SFD 31100 Base Sales Price Is 804,990 II 1 $ 804,990 31100 lnflation/(Deflation) to Sales Price 2013 0.00% s -s 31300 Lot Premiums 2.50% $ 20,125 $ $ 20,125 31400 Options/Upgrades 3.00% s 24,150 $ 24,150 GROSS SALES REVENUE $ 849,264 $849,264 $ 804,990 $ $ 20,125 $ 24,150 $849,264 39000 Sales and Closing Costs NET SALES REVENUE Base Price Per Square Foot Net Sales Price Per Square Foot 40000 - LAND & LAND DEVELOPMENT COST $ 795.761 $303.8 $320.5 39100 On-site Commissions 2.50% $ 21,232 $ 21,232 39200 Outside Commissions 2.50% $ 21,232 $ 21,232 39400 Sales Incentives 1.00% $ 8,493 8,493 39500 Title and Escrow Closing Costs 0.30% $ 2,548 $ 2,548 TOTAL SALES AND CLOSING COSTS $ 53,504 $53,504 $795,761 $ 21,232 $ 21,232 $ 8,493 $ 2,548 $53,504 $795,761 $303.77 $320.48 0.30% 93.70% 48000 Lot Level Development Fees (Per Home) TOTAL FINISHED LOT COST 65,000 I $ 65,000 $ 337,950 50000 - DIREa HOUSE COSTS 41000 Residual Land Value S 190,000 s 190,000 $ 190,000 42000 Land Purchase Costs 0.50% s 950 $ 950 43000 Non-applied Purchase Deposits $ $ -$ 44000 Brokerage Commissions 0.00% $ -$ TOTAL LAND COST $ 190,950 $ 190,950 42000 Design and Related Costs $ 40,000 $ 40,000 $ 40,000 43000 Site Development Fees (Per Home) S 2,000 • $ 2,000 $ 2,000 44000 Site Development Costs $ 40,000 $ 40,000 $ 40,000 45000 Entitlement Period Overhead $ $ -$ TOTAL LAND DEVELOPMENT COST S 82,000 $ 82,000 337,950 s 190,000 $ 950 $ $ $ 190,950 $ 40,000 $ 2,000 s 40,000 s $ 82,000 337,950 0.00% 0.00% 4.71% 65,000 I I $ 65,Oo"o1 [ 7.65%) 39.79% TOTAL DIREa HOUSE COST Direct Construction Base Per Square Foot Direct House Costs Per Square Foot $ 26Sy(05 90 51000 Base Construction Cost $ 238,500 s 238,500 52000 Options/Upgrades Cost 70.00% $ 16,905 $ 16,905 55000 Indirect Construction Cost s 10,000 $ 10,000 s 10,000 s 238,500 $ 16,905 $ 10,000 I $265,405 I I $265,4051 $90.00J $100.15 1.18% 31.25% 60000 Other Soft Costs 70000 Marketing Expense 71000 Model Expense ' 72000 Sales Center Expense 73000 Advertising and Promotion 80000 Financing Expense 82000 Construction Loan Expense TOTAL OTHER COSTS TOTAL COSTS TOTAL PROFIT MARGIN Profit Margin by Model 1.90% 1.50% I $ $ 16,136 12,739 106,289 $ 709,643 $ 86,117 10.14% 61000 Professional Fees $ 5,000 s 5,000 s 5,000 62000 Property Taxes and Association Fees 1.10% $ 9,342 $ 9,342 63000 Insurance 1.25% $ 10,616 $ 10,616 64000 Administrative Expense $ 1,500 $ 1,500 $ 1,500 67000 Developer Overhead 5.00% $ 42,463 $ 42,463 68000 Warrantv Expense 1.00% s 8,493 $ 8,493 $ 5,000 $ 9,342 $ 10,616 $ 1,500 $ 42,463 $ 8,493 $ 16,136 12,739 I I $ 12,73"9l [ 709,643 $86,117 $86,117 1.10% 1.25% 0.18% 5.00% 100% 0.00% 0.00% 1.90% 1.50% $106,289 I I $106,2891 | 12.52%) $ 709,643] ) 83.56X) 10.14%)