Agenda - City of Santa Monica

To: Steve Mizokami, City of Santa Monica April 23, 2013
Subject: 1320 2 nd Street: Value Enhancement & Fiscal Impact Analysis Page 8
Estimated Supportable Land Value (Appendix A - Table 3)
The supportable land value is equal to the difference between the estimated value of the
Base Zoning Alternative, and the $7.42 million in estimated construction costs. The
value supported by the Base Zoning Alternative is estimated by capitalizing the project’s
net operating income at a capitalization rate that reflects current market conditions.
To estimate the value supported by the Base Zoning Alternative, KMA capitalized the
project’s net operating income at a 6.13% rate; this rate is derived from a weighted
average of 5.5% for the residential component and 7% for the retail component. The
valuation analysis prepared by KMA is summarized in the following table:
Estimated Net Operating Income $647,800
Capitalization Rate 6.13%
Project Value $10,566,000
The resulting supportable land value derived for the Base Zoning Alternative under the
KMA analysis can be summarized as follows:
Project Value $10,566,000
(Less) Total Construction Costs (7,418,000)
Supportable Land Value $3,148,000
Proposed Project Analysis
Scope of Development
The following summarizes the scope of development for the Proposed Project:
1. The project includes 46,510 square feet of GBA. The space is allocated as
follows:
a. Residential Component – 40,330 square feet; and
b. Retail Component – 6,180 square feet.
2. The project includes 53 residential units at an average size of 618 square feet.
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