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Santa Ana Redhill Development <br /> <br /> <br /> <br /> <br />Prepared for: City of Santa Ana <br /> <br />AECOM <br />25 <br /> <br /> <br />Both the Project and the Industrial Prototype yield significant positive RLV under current market conditions. Market <br />demand for new residential, retail, and industrial properties in the regional market of the Site suggest that both <br />projects are financially feasible at buildout. These RLV estimates include costs of demolition of existing land uses but <br />exclude land acquisition costs. <br /> <br />Detailed pro-formas for both the Project and Industrial Prototype are shown in Appendix A and a short explanation of <br />sources and assumptions follows. <br /> <br />Capitalization Rate <br />The capitalization rate (cap rates) is the rate of return on a real estate investment, calculated by dividing the Net <br />Operating Income (NOI) by the current market value. Cap rates for multifamily, retail, and industrial land uses are <br />based on CBRE H1 2019 estimates for the Orange County market. A cap rate of 6.5 was assumed for retail, while a <br />cap rate of 4.0 was assumed for both multifamily and industrial. <br /> <br />Rent <br />Commercial rent was estimated based on comparative analysis of recent lease agreements for comparative new <br />(since 2017) mixed-use residential/retail and industrial properties in Santa Ana and the adjacent areas of Irvine and <br />Tustin. AECOM assumed an annual Triple Net Lease (NNN) Rent per SF of $30 for retail space and $11 for industrial. <br /> <br />Construction Costs <br />Direct costs for the pro-forma models draw from other recent studies of comparable construction in Orange County <br />and comparable areas of Los Angeles including RS Means 2019 construction cost estimates. Indirect costs are <br />largely based on either ratios of direct costs or per square foot allocations typically used in planning-level cost <br />estimation. <br /> <br />To verify the assumptions and market value of the pro-formas, AECOM surveyed recent sales transactions of <br />representative properties to compare the price per SF or unit of The Project and Industrial Prototype. The pro-forma <br />for the Project estimated a market price of $721/SF of Land and approximately $449,000 per unit. The pro-forma for <br />the Industrial Prototype estimated a market price of $117/SF of Land and approximately $234/SF of building area <br />(RBA). Table 16 shows comparable recent transactions of comparable developments. <br /> <br />Table 16: Recent Sales Transactions <br />Recent Sales Transactions for Industrial and Multifamily Properties <br />Industrial <br />Address Acres RBA Price/RBA Price/Land Date <br />9300 Toledo Way, Irvine 75.22 1,193,692 $233 $85 Jul-19 <br />1730 S Anaheim Way, Anaheim 6.93 143,930 $230 $110 May-18 <br />15025 Proctor Ave, Industry 5.91 257,440 $225 $113 Nov-18 <br />4278 N Harbor Blvd, Fullerton 8.66 212,202 $186 $105 Jan-19 <br />Multifamily <br />Address Acres Units Price/Unit Price/Land Date <br />17321 Murphy Ave, Irvine 3.63 280 $423,214 $749.42 Nov-18 <br />251 Orangefair Ave, Fullerton 6.38 323 $405,573 $471.37 Jun-18 <br />1105 E Katella Ave, Anaheim 4.25 386 $341,192 $711.39 Jan-19 <br />1091 E 1st St, Santa Ana 5.07 264 $371,212 $443.74 Jun-19 <br />Source: Costar, AECOM <br /> <br />Comparable transactions reveal that the estimated market prices for both The Project and Industrial Prototype are <br />either within the range of recent transactions or slightly above reported sales prices. For new constr uction in a <br />desirable location, estimated prices represent a reasonable future value of the developments. <br />Images and details of Industrial Prototype are included in Appendix A. <br />3-252