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<br />EJ.!Y of San Leandro Marina Lodging Development <br /> <br />Page 5 <br /> <br />· Ample free parking. <br /> <br />Based on our market research, we are of the opinion that a property of this type <br />would achieve a stabilized occupancy level of approximately 70.0 percent by its third <br />year of operation, with an average daily room rate (ADR) of $180 stated in 2002 <br />value dollars. Our analysis indicates that demand for the conference-center will <br />primarily be generated from the corporate group-meeting and conference segment <br />(approximately 60.0 to 70.0 percent of total demand), with individual commercial and <br />leisure segments representing a secondary source of demand (approximately 30.0 to <br />40.0 percent). <br /> <br />While the conference center hotel has been determined to have market viability, we <br />have also determined that the facility would require City participation to allow financial <br />viability (feasibility). Due to the high development cost of the proposed facility and <br />the projected shortfall in revenues to provide funds for debt service, we estimate that <br />an abatement of land lease costs and City involvement of approximately <br />$13,000,000, in 2002 value dollars, will be required so as to generate an attractive <br />internal rate of return (IRR). The total value of this participation is approximately <br />$16,000,000, comprised of approximately $3,000,000 for the site value and <br />$13,000,000 for the balance. <br /> <br />b. Only One Hotel Facility is Viable <br /> <br />It should be noted that we have determined that no other stand-alone hotel product <br />would be market-supported at the Marina site given the unique location. For <br />example. a hotel designed to cater primarily to transient business travelers would <br />compete not only with the existing Marina Inn and the new Hilton Garden Inn, but <br />such a new property would also compete with a number of existing hotels in the <br />Oakland International Airport area, many of which are more ideally-located for the <br />commercial traveler. A hotel designed to cater primarily to leisure travelers would <br />experience low weekday demand, although weekend demand may be strong. Our <br />research indicates that a conference-center hotel would have the unique amenities <br />and the product characteristics needed to optimize a development site located at the <br />San Leandro Marina. <br /> <br />3. Restaurant and Other Developments <br /> <br />Our findings also indicate that a 225-seat, full-service restaurant with private banquet <br />rooms is also market-justified. This restaurant is envisioned to be a themed- <br />restaurant offering lunch and dinner. and, similar to the conference center hotel. <br />would be noteworthy due to its new construction, fresh theme, and marina location. <br />We estimate that the new restaurant could open as early as mid-2004. <br /> <br />Our findings indicate that the restaurant would be economically feasible and <br />attractive to restaurant developers and operators without any City participation. As <br />