WHITE FLINT SECTOR PLAN Financial Analysis, Infrastructure Financing & Economic Benefits

WHITE FLINT SECTOR PLAN

Financial Analysis, Infrastructure Financing &

Economic Benefits

Who We Are

Collaborative group of commercial property owners in White Flint.

Federal Realty Investment Trust The JBG Companies Holladay Corporation White Flint Mall (Lerner Enterprises/The Tower

Companies) Combined Properties

Financial Feasibility Study Consultant W-ZHA, LLC

Transportation Consultant Glatting Jackson Kercher Englin

Purpose of Presentation

Economic Benefits of Development within the White Flint Sector Plan Area to Montgomery County

Public-Private Financing Strategy for Critical Transportation Infrastructure

Economic Viability of Development in the Context of the TMX-Zone and White Flint Sector Plan Requirements

Absorption

1.02 FAR

1.71 FAR

2.21 FAR

-

5 M

10 M

15 M

20 M

25 M

30 M

35 M

40 M

Phase I (2010 - 2015) Phase II (2016 - 2020) Phase III (2021 - 2025)

Tota

l Squ

are

Feet

$-

$50 M

$100 M

$150 M

$200 M

$250 M

$300 M

$350 M

Inve

stm

ent (

$)

Other

Retail

Off ice

Residential

Existing

Infrastructure Investment

Infrastructure Investment Grows Along with Absorption. FAR at Full Build Out is Only 2.21

Potential Tax Revenues

Increased Tax Revenues to Montgomery County

$-

$20 M

$40 M

$60 M

$80 M

$100 M

$120 M

$140 M

$160 M

$180 M

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

Tax

Rev

enue

s ($

)

0

0.5

1

1.5

2

2.5

3

FAR

Total Increase in Tax RevenuesBase Line Tax RevenuesFAR

1.4 Billion in Cumulative New Taxes Through 2028

Infrastructure Projects

Montrose

Pkwy

Montrose Rd

Tilden Nicholson

ExecutiveM

Infrastructure Financing

Cumulative Infrastructure Financing by Phase

$40$79

$124$33

$59$48

$107

$67

$133

$200

$-

$50 M

$100 M

$150 M

$200 M

$250 M

$300 M

$350 M

$400 M

$450 M

$500 M

Phase I (2010 - 2015) Phase II (2016 - 2020) Phase III (2021 - 2025)

Infr

astr

uctu

re F

inan

cing

($)

Private Sector On-site Improvements

Public Sector Financing

Residential Transportation Impact Fees

Commercial Special Assessment

$500 Million of Total New Transportation Infrastructure Investment within District

Total Infrastructure - $490 M

25%

12%

22%

41%


PRIVATE SECTOR ON-SITE IMPROVEMENTSRESIDENTIAL TRANSPORATION IMPACT TAXCOMMERCIAL SPECIAL ASSESSMENTS

PUBLIC SECTOR INVESTMENT


Total Infrastructure - $490 M

22%

78%

PRIVATE SECTOR INVESTMENTPUBLIC SECTOR INVESTMENT


Public Bond Debt Service as a Percent of Tax Increment

$-

$20 M

$40 M

$60 M

$80 M

$100 M

$120 M

$140 M

$160 M

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Tax

Reve

nues

($)

Already Pledged to Debt Service Incremental Increase in Tax Revenues

Less than 10% of Net New Tax Revenue Allocated to Service Debt on Infrastructure Bonds

Property Level Financial Analysis

To determine the redevelopment value, we performed a financial analysis on a fictitious 4 acre parcel of land.

We tested the following development scenarios at a 2.0, 3.0 and 4.0 FAR

A rental residential building with retail on the first floor

A for-sale residential building with retail on the first floor

An office building with retail on the first floor The residual land value is the value of the piece of

property after taking into account all development costs plus a reasonable return to the developer

Property Level Financial Analysis

EXISTING LAND VALUE CALCULATION RESIDUAL LAND VALUE at a 3.0 FAR

NET OPERATING INCOME (NOI) Value $/SF Land DEVELOPMENT COST Value $/SF FARExisting Income $5,900,000 $14.75 Hard Costs $203,518,421 $169.60Existing Expenses ($1,475,000) ($3.69) Soft Costs $72,268,422 $60.22

TOTAL EXISTING NOI $4,425,000 $11.06 TOTAL DEVELOMENT COST $275,786,843 $229.82

EXISTING LAND VALUE NET OPERATING INCOME (NOI)Total NOI $4,425,000 $11.06 Projected Income $35,463,789 $29.55Capitalization Rate 6.75% 6.75% Projected Expenses ($11,781,000) ($9.82)

EXISTING LAND VALUE $65,555,556 $163.89 PROJECTED NOI $23,682,789 $19.74

LAND VALUE PER FAR/SF Land Area $/FARsf RESIDUAL LAND VALUE2.0 FAR 800,000 sf $81.94 Development Yield 7.00% 7.00%3.0 FAR 1,200,000 sf $54.63 Value Upon Stabilization 338,325,564$ $281.944.0 FAR 1,600,000 sf $40.97 Minus Construction Costs (275,786,843)$ ($229.82)

RESIDUAL LAND VALUE 62,538,721$ $52.12

Residential Rental

Residential Rental - Residual Land Value

$(40)

$(20)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

1 2 3 4 5

FAR

Land

Val

ue ($

)Existing Land Value


$(40)

$(20)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

1 2 3 4 5

FAR

Land

Val

ue ($

)

Existing Land Value

Residual Land Value afterDevelopment

Residential Rental

Incentive to Redevelop Where Residual Land Value is Greater Than Existing Land Value

Cost of Community Benefits

TABLE 5: COST OF COMMUNITY BENEFITS ($/GROSS SQUARE FOOT (GSF))RESIDENTIAL/RETAIL SCENARIOS CONDO/RETAIL SCENARIOS OFFICE/RETAIL SCENARIOS

2.0 FAR 3.0 FAR 4.0 FAR 2.0 FAR 3.0 FAR 4.0 FAR 2.0 FAR 3.0 FAR 4.0 FAR

Scenario: 1 2 3 4 5 6 7 8 9On-Site Transportation Infrastructure $2.86 $1.90 $1.43 $2.86 $1.90 $1.43 $2.86 $1.90 $1.43Transportation Impact Fee (Retail) $0.84 $0.56 $0.42 $0.84 $0.56 $0.42 $0.84 $0.56 $0.42Transportation Impact Fee (Residential) $2.48 $2.60 $2.66 $2.35 $2.47 $2.53 $0.00 $0.00 $0.00Transportation Impact Fee (Office) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $6.33 $6.64 $6.80TMD Fee $0.19 $0.13 $0.10 $0.19 $0.13 $0.10 $1.44 $1.43 $1.43School Impact Fees $3.21 $3.37 $3.45 $3.05 $3.20 $3.28 $0.00 $0.00 $0.00Building Lot Termination Fees $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $2.86 $3.05 $3.14Moderately Priced Dwelling Units $29.18 $35.87 $36.71 $18.61 $20.63 $21.68 $0.00 $0.00 $0.00Work Force Housing $21.95 $28.29 $28.95 $14.89 $16.50 $17.34 $0.00 $0.00 $0.00Public Open Space & Amenities $3.48 $2.32 $1.74 $3.48 $2.32 $1.74 $3.48 $2.32 $1.74Underground Utilities $3.43 $2.29 $1.72 $3.43 $2.29 $1.72 $3.43 $2.29 $1.72Green Building $3.39 $3.36 $3.32 $3.90 $3.98 $3.95 $3.64 $3.52 $3.38TOTAL COMMUNITY BENEFITS ($71.01) ($80.69) ($80.49) ($53.60) ($53.98) ($54.17) ($24.88) ($21.72) ($20.06)

Below Grade Parking ($21.51) ($13.30) ($12.64) ($20.81) ($15.13) ($14.51) ($45.21) ($25.33) ($22.16)TOTAL BENEFITS INCLUDING PARKING ($92.52) ($93.99) ($93.13) ($74.41) ($69.11) ($68.68) ($70.08) ($47.05) ($42.23)

MPDU’s and WFHU’s Alone Add $67.00 per SF of Cost to New Residential Development


$(40)

$(20)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

1 2 3 4 5

FAR

Land

Val

ue ($

)

Existing Land Value



$(40)

$(20)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

1 2 3 4 5

FAR

Land

Val

ue ($

)

Existing Land Value


Residual Land Value Before ourChanges to Benefits

Residential Rental

$80 per SF Cost of Public Benefits Removes Incentive to Redevelop


$(40)

$(20)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

1 2 3 4 5

FAR

Land

Val

ue ($

)

Existing Land Value

Residual Land Value after Development

Residual Land Value Before our Changes toBenefitsResidual Land Value Including SuggestedChanges to Benefits

Residential Rental

Potential changes to benefits to increase residual land value:

Remove work force housing or revise requirements to be cost neutral Modify MPDU legislation to decrease burden on land owners Publicly finance costs to place utilities underground

Condo


Remove work force housing or revise requirements to be cost neutral Modify MPDU legislation to decrease burden on land owners Publicly finance costs to place utilities underground

Condo - Residual Land Value

($50)

$0

$50

$100

$150

$200

1 2 3 4 5

FAR

Land

Valu

e ($)Existing Land Value



Office


Decrease Building Lot Termination costs by 50% Publicly finance costs to place utilities underground

Office - Residual Land Value

($50)

$0

$50

$100

$150

$200

1 2 3 4 5

FAR

Land

Valu

e ($)Existing Land Value



Total

Residual Land Value Including Benefits

($50)

$0

$50

$100

$150

$200

1 2 3 4 5

FAR

Land

Valu

e ($)

Existing Land Value

Residential - Rental

Condo

Office

Total

Residual Land Value Including Benefits with Changes

($50)

$0

$50

$100

$150

$200

1 2 3 4 5

FAR

Land

Valu

e ($)

Existing Land Value

Residential - Rental

Condo

Office

Planning Suggestions Streamline approval process to be no longer than

one year Alter/remove transfer density concept and increase

FAR’s correspondingly. Transfer can exist above this new base FAR.

Mandate that all utilities must be captured in the ROW of public streets. No PUE’s in addition to the ROW width.

Allow private parking to occur below public ROW where possible

Allow for above grade parking structures Provide density bonuses for excellence in

environmentally sensitive design and green building.

Raise the standard method base for the purchase of BLTs from 0.5 FAR to 1.0, decrease the percentage from 12.5% to 10%, and set price per BLT so that the cost is predictable.

Offset mechanism to credit costs of on site improvements against other public improvements

Legislative Suggestions Cordon Line District Traffic Model to Provide Certainty

of Development Rights in Return for Funding Infrastructure Improvements

Eliminate the payment of Transportation Impact Fees for WHU’s

Reduce or eliminate parking requirement for MPDU and WHU’s

Modify/Eliminate requirement for WHU’s within the Sector Plan Area.

Allow for the consolidation of the MPDU’s into buildings that are 20% affordable so land owners can access federal tax credits

Allow for affordable housing to be provided off-site within Sector Plan Area

Dramatically decrease parking requirements for retail Create a County parking district

Questions & Answers

WHITE FLINT SECTOR PLAN Financial Analysis, Infrastructure Financing & Economic Benefits

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