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Mr. John J. Jermanis City of San Leandro May 31, 2000 Page 12 SEDWAY GROUP Real Estate and Urban Economics Based on hotel market parameters and an assumed hotel with 125 to 150 rooms, the annual ground rent potential could range from $150,000 to $250,000. A more specific estimate of revenue potential would depend upon the size and service level of the hotel, as well as lease deal points. Residential. As indicated in the preceding analysis of market conditions, Sedway Group believes there is market potential for apartment product at the Marina. The demand for housing in the Bay Area is well documented, and low vacancy rates indicate that San Leandro is no exception. Furthermore, the Marina offers a rare waterfront location (for the area south of Oakland) with bay views, new golf courses, and parks and trails. Given BCDC restrictions, the only parcel potentially available for development of apartments is the site on Neptune Drive between the golf course and cable television building. Sedway Group recommends additional investigation into potential apartment development from regulatory, political and market standpoints. Based on apartment market parameters, a 2.0-acre site area and an assumed density of 25 dwelling units per acre, the annual ground rent potential could range from $75,000 to $125,000. The low annual ground rent potential is primarily due to the small site area that would yield only about 50 units. A more specific estimate of revenue potential would depend upon the actual deal points of a negotiated lease and the quality of the apartment project. Infrastructure and Amenity Considerations The addition of uses at the Marina will bring additional traffic to the area, most of it along Marina Boulevard. Currently, this arterial is in poor condition, aesthetically unattractive and reportedly insufficient to carry significantly higher than existing loads of traffic from Interstate 880 to the Marina. This road will require upgrades and improvements from both an aesthetic and functional aspect to make the Marina an attractive destination for diners, golfers, hotel guests, and residents. The need for improvements to the Marina's infrastructure in the long-term will be heightened if it is selected to become a terminal in the regional ferry initiative. Sedway Group believes that the regional ferry initiative is a very important issue with respect to the Marina and recommends that San Leandro aggressively participate in the planning process. One of the key assets of the San Leandro Marina relative to many other potential terminals is the availability of ample parking. The presence of the small boat harbor is clearly one of the Marina's greatest assets. It provides an ambience and character that few commercial areas can boast, and one that is unmatched for business traveler lodging near the Oakland airport. An analysis of the viability of the continued dredging of the marina channel versus the conversion to exclusive shallow-draft boat use was beyond the scope of this study. However, based on anecdotal information, Sedway Group believes the loss of the visual activity associated with the Marina would likely negatively affect the performance of the existing and future businesses. Likewise, the aesthetics of the Marina are important in attracting the additional uses needed to create a more dynamic destination. The analysis and conclusions contained in this memorandum are subject to the attached assumptions and limiting conditions. H:\20999\20999ROI.doc