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To: Cynthia Battenberg May 1, 2012 <br />Subject: Village Marketplace Page 3 <br />estimated development costs and revenues provided by the Developer. KMA has <br />evaluated the costs and revenues for reasonableness. <br />Tables 1 and 2 present KMA's residual land value analysis for the proposed Project. <br />There are several important considerations in the analysis, including: <br />1. The Developer is required to construct a first class, signature commercial /retail <br />development that incorporates high quality features, including a public art <br />component, streetscape improvements, and a full service restaurant. <br />2. Development of the Project must occur shortly after conveyance of the Property. <br />Speculation by holding the land and not developing is not allowed. The Project <br />must be completed no later than 24 months after the execution of the Agreement. <br />Development Costs <br />In estimating development costs, KMA reviewed the financial pro forma submitted by the <br />Developer. KMA made various adjustments to the Developer pro forma based on our <br />experience with similarly sized retail projects. As shown in Table 1, the development <br />costs for the Project, excluding land acquisition, are estimated by the Developer to total <br />approximately $6,378,000. These costs include the following: <br />■ Off -site improvement costs of $500,000. <br />■ Site improvement costs of $556,000 or approximately $7.40 per square feet of <br />land area. This figure is net of tenant contribution. The total site improvement <br />costs are approximately $791,000. <br />■ Direct costs, such as building shell, on -site improvements, and builder's <br />overhead and profit, contingency and tenant improvements (see below), are <br />estimated to total approximately $4,171,000. These costs are inclusive of the <br />requirement to pay prevailing wages during construction. <br />■ Direct construction costs include a tenant improvement allowance of <br />approximately $724,000. Tenant improvements range from $10 to $30 per <br />rentable square foot. Tenant improvements of $125 per square foot are assumed <br />for a new full- service restaurant. <br />■ Indirect costs, such as architecture, engineering, public permits and fees, legal <br />and accounting, taxes and insurance, marketing, leasing commissions, developer <br />fee, and contingency are projected to be approximately $1.4 million, or 30% of <br />direct costs, including off site improvement costs. <br />001 -002; jf <br />19096.040 <br />