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SECTION V <br />ta <br />www.FinanceDTA.com <br />RESIDENTIAL PROJECTS PROPOSED IN <br />THE SPECIFIC PLAN <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 />Operatingunit Monthly Monthly Vacancy Expense Capital Monthly AnnualNet Cap <br />Cap Rate Comparison Square Rent per Rent Rate Factor Reserve Expenses <br />Feet SF Income <br />Net Asset % <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% <br />$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% <br />$407,000 <br />Value Reduction from 5.5% Cap Rate <br />$91,000 <br />Value at 6.5% Cap Rate 900 $3.64 <br />$3,276 <br />5.00% <br />35.0% <br />3.00% <br />($1,409) <br />1 $22,408 <br />6.50% <br />$345,000 <br />Value Reduction from 6.5% Cap Rate <br />$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 />Monthly Market <br />Inventory Average Vacancy Operating <br />Description Rent per Rent per <br />Units Unit Sze Rate Expenses <br />SF Unit <br />Operating Net I Market Net Asset <br />Capital Exp and <br />Operating Cap Value Per <br />Reserve Cap <br />Income Rate Unit <br />ReserveOrange <br />County <br />Related Bristol at 3600 South Bristol Street <br />Draft Market Study Report <br />Exhibit 10 <br />September 2023 <br />11 <br />