|
11
<br /> SECTION V
<br />RESIDENTIAL PROJECTS PROPOSED IN
<br />THE SPECIFIC PLAN
<br />
<br />
<br />
<br />Related Bristol at 3600 South Bristol Street September 2023
<br />Draft Market Study Report
<br />
<br />www.FinanceDTA.com
<br />A change in cap rate will have a significant impact on the value of a building. Table 2 shows the value of
<br />a unit in the Specific Plan. At a cap rate of 4.5%, the unit value is about $498,000.
<br />Table 2: Value of Unit by Cap Rate
<br />Cap Rate Comparison
<br />Unit
<br />Square
<br />Feet
<br />Monthly
<br />Rent per
<br />SF
<br />Monthly
<br />Rent
<br />Vacancy
<br />Rate
<br />Expense
<br />Factor
<br />Capital
<br />Reserve
<br />Monthly
<br />Expenses
<br />Annual Net
<br />Operating
<br />Income
<br />Cap
<br />Rate
<br />Net Asset
<br />Value
<br />%
<br />Reduction
<br />in Value
<br />Value at 4.5% Cap Rate 900 $3.64 $3,276 5.00% 35.0% 3.00% ($1,409) $22,408 4.50% $498,000
<br />Value at 5.5% Cap Rate 900 $3.64 $3,276 5.00% 35.0% 3.00% ($1,409) $22,408 5.50% $407,000
<br />Value Reduction from 5.5% Cap Rate $91,000
<br />Value at 6.5% Cap Rate 900 $3.64 $3,276 5.00% 35.0% 3.00% ($1,409) $22,408 6.50% $345,000
<br />Value Reduction from 6.5% Cap Rate $153,000 30.72%
<br />If the Specific Plan constructs and rents all units and the program contains 3,750 units, a 1.0% change in
<br />cap rate would reduce Project market value by about $341,000,000 (3,750 units times $91,000). A 2.0%
<br />reduction would result in a loss of $573,000,000 in market value (3,750 units times $153,000).
<br />G Multifamily Market Research
<br />To better understand both the County and City multifamily markets, DTA evaluated an average apartment
<br />based upon observed metrics. These include a vacancy rate of 5.0%, operating expenses of 35%, and a
<br />capital reserve of 3.0% that reduce market rent by 43% to obtain NOI. Dividing NOI by a 4.5% cap rate,
<br />we determined that an average 842 SF unit in the County would have a NAV of $371,000 and an average
<br />883 SF unit in the City would have a value of $456,000. Based upon an estimate of rents for a unit in the
<br />2-Mile Zone of $3.64, applying the same metrics, DTA estimates an average unit would have a value of
<br />$498,000.
<br />The current inventory valuation metrics in the City, County, and 2-Mile Zone, according to CoStar, are
<br />presented below.
<br />Table 3: Current Inventory Summary
<br />Description Inventory
<br />Units
<br />Average
<br />Unit Sze
<br />Monthly
<br />Rent per
<br />SF
<br />Market
<br />Rent per
<br />Unit
<br />Vacancy
<br />Rate
<br />Operating
<br />Expenses
<br />Capital
<br />Reserve
<br />Operating
<br />Exp and
<br />Cap
<br />Reserve
<br />Net
<br />Operating
<br />Income
<br />Market
<br />Cap
<br />Rate
<br />Net Asset
<br />Value Per
<br />Unit
<br /> 5.00% 35.0% 3.00% 43.00% 4.50%
<br />Orange County 313,320 842 SF $2.90 $2,442 ($122) ($855) ($73) ($1,050) $1,392 4.50% $371,000
<br />2-Mile Zone 1 900 SF $3.64 $3,276 ($164) ($1,147) ($98) ($1,409) $1,867 4.50% $498,000
<br />
<br />
<br />Exhibit 10
<br />
<br />
<br />City Council 22 – 534 9/17/2024
|