Final Project
2856 Webster Avenue
Bronx, NY
The New York Botanical Garden purchased the property at 2856 Webster Avenue in 2008. In 2016 they sought RFPs for that and two more adjacent properties they own to take advantage of a change in zoning of the neighborhood.
For reference:
Your assignment is to present the NYBG with a proposal for developing just the site at 2856 Webster as a rental apartment building.
The assumptions are as follows:
Lot dimensions: ~100’ x 170’
Total Lot Size: 15,635 sq ft
FAR permitted for a residential building: 4.2
Height restriction: 100’
Rear setback requirements: 30’
Parking Required: Must be provided for 50% of units. Assuming a parking space needs ~400 sq ft of area for each space.
Typical loss factor for multi-family residential is 15%
Typical unit Sizes for apartments may be estimated as follows:
Studios 500 sq ft
1 BRs 650 sq ft
2 BRs 800 sq ft
3 BRs 1,000 sq ft
You may assume that construction costs/timeframes are generally as follows:
Residential Hard Costs - $300 PSF – 24 months to plan, build and occupy
Soft Costs - ~15% of Hard Costs
Note – while this may be in a Mandatory Inclusionary Housing Zone, you may do simple projections based on market rents in the area. You may also assume that you will be eligible for a 421a tax abatement (which is why the operating expense projection of $8 PSF is given), and that all units would start out as Rent Stabilized.
Your Assignment:
Prepare a report for them of no more than 2 pages of text, plus Addenda A through D, with the following sections:
- Executive Summary: Explain your plan and why you believe it maximizes the value of the development. Talk about your vision of what you intend to build and why you think it is optimal, including basic information about the total capital needed, expected returns, and risks of the project. (1-2 paragraphs)
- Strategy: Explain the steps they must take to realize the plan you have laid out in a clear digestible format, including the team members that will need to be involved, and how you intend to organize them. Include the basic timeline of the project that you anticipate as Addendum A. (1-2 paragraphs)
- Feasibility Analysis: Explain how you arrived at your recommendation using the following analyses:
- Physical Feasibility. Describe what they can build, and what conclusion you have made as to the optimal floor sizes, height and general building layout. Provide a basic sketch for each floor, and an elevation of the building you intend to develop for them (Addendum B).
- Market Analysis. Provide some basic back-up to your rental assumptions. Cite 3 area comps for each option. Insert as a short table within the text of your write-up.
- Budget Projections. Provide a Sources & Uses Table (Addendum C), include interest carrying costs, and your fee to manage the development project.
- Projected Returns. Provide a basic stabilized pro forma to prove how much value your project has created, and what the cash flow will be of the completed project. Analyze the return for the owners. (Addendum D)
Notes:
1 – Market Analysis. You should provide at least 3 comps for each apartment type from publicly available websites to back up your market assumptions.
2 – Operating Expenses upon Completion of Development. You may assume $8 PSF in operating expenses in order to arrive at an NOI (Net Operating Income). Assume a 3% vacancy factor.
3 – Financing. Assume the NYBG would want to finance the project and can obtain a loan with an interest rate of 5% for construction financing. Assume 60% LTC (loan-to-cost) for construction financing, and that banks will value the land at $10 million, the price they paid for it in 2008. You may assume that the interest expense will be based on the construction loan balance being an average of 50% of the total loan amount over the life of the construction period.
4 – Equity. You may assume the NYBG has enough equity to cover the cost of the project after taking debt into account.
5 – Value of Final Building. Assume a 5% cap rate valuation upon completion.