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)
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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%)