the neighborhoods of tustin town center: a new ... - City of Tustin

Financing costs consist of such items as loan fees, interest during construction and
leasing. Total financing costs are estimated at $677,000, or 10% of direct costs.
Net Operating Income
As shown on Table A-3, KMA has estimated that the proposed development scenario will
generate net operating income (NOI) totaling $946,000 annually. The following assumptions
were used in determining this figure:
Gross scheduled income (GSI) of $1.2 million, or an average lease rate of $1.79 per SF
per month.
Overall vacancy factor of 5%.
Unreimbursed retail operating expenses at 5% of retail GSI.
Office expenses of $4 per SF per year.
Residual Land Value
As shown on Table A-4, after assuming the capitalized value of the NOI from the retail, and
office space, this scenario generates a total project value of $12.6 million. After deducting a
cost of sale (3% of value), developer profit (12% of value), and total development costs, KMA
finds the proposed project generates a residual land value of $1.4 million, or $10 per SF of
site area.
It should be noted that while Site 3 generates a positive residual land value, this does not
assume the proposed project is feasible. The residual land value is generally the amount a
developer can feasibly afford to pay for a site after considering the project’s value against
development costs and developer profit. KMA’s analysis has not estimated costs associated
with acquisition, demolition of existing improvements, and/or relocation of existing occupants.
C. Southern Gateway, Site 9 (Alternative B)
Project Description
As shown on Table B-1, Site 9 is comprised of three parcels totaling 3.9 acres. The
development scenario assumes construction of a three-story office building at Newport and
Walnut containing 34,000 SF of office and 12,000 SF of retail space on the ground floor.
The scenario also includes a one-story 22,000-SF freestanding retail building, which allows
potential for a grocery story, drug store, or medium-sized tenant. Retail and office parking is
accommodated in a surface lot with a total of at least 266 parking spaces.
A-32 THE NEIGHBORHOODS OF TUSTIN TOWN CENTER
MARKET ANALYSIS AND NEIGHBORHOOD CONCEPT PLANS
STRATEGIC GUIDE 09.21.2010