Final Inclusionary Housing Financial Evaluation 2021-10-24 — Redondo Beach City Council, May 9, 2023

INCLUSIONARY HOUSING:

FINANCIAL EVALUATION
Prepared for:

City of Redondo Beach
Prepared by:

Keyser Marston Associates, Inc.

October 24, 2021
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TABLE OF CONTENTS
SECTION I: OVERVIEW.......................................................................................................... 1 A. Key Court Cases..................................................................................................................1 B. Key Legislation: AB 1505 ...................................................................................................3 C. Inclusionary Housing Program Characteristics...................................................................4 D. State Density Bonus and Inclusionary Housing Requirements...........................................7 E. Structuring Issues...............................................................................................................8 SECTION II: METHODOLOGY................................................................................................ 10 A. Parameters.......................................................................................................................10 B. Program Foundation ........................................................................................................11 C. Financial Evaluation Structure..........................................................................................15 SECTION III: OWNERSHIP HOUSING ANALYSES..................................................................... 17 A. Prototypes: Ownership Housing Development ................................................................17 B. Projected Market Rate Sales Prices: Ownership Housing Development ..........................18 C. Affordable Sales Price Calculations: Ownership Housing Development...........................18 D. Pro Forma Analyses: Ownership Housing Development ..................................................21 SECTION IV: APARTMENT DEVELOPMENT ANALYSIS ............................................................ 28 A. Caveats.............................................................................................................................28 B. Prototypes: Apartment Development..............................................................................28 C. Projected Market Rents: Apartment Development..........................................................29 D. Affordable Rent Calculations: Apartment Development..................................................30 E. Pro Forma Analyses: Apartment Development................................................................31 SECTION V: IN-LIEU FEE ANALYSES ...................................................................................... 38 A. Ownership Housing Development....................................................................................38 B. Apartment Development .................................................................................................39 SECTION VI: SUMMARY........................................................................................................ 41 A. Residential Development Prototypes...............................................................................41 B. Projected Market Rate Sales Prices and Rents.................................................................41 C. Supportable Inclusionary Housing Requirements ............................................................42 Inclusionary Housing: Financial Evaluation Page ii
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ATTACHMENTS
Attachment 1: Inclusionary Housing Program Surveys
Appendix A: California
Appendix B: Los Angeles, Orange and San Diego Counties
Attachment 2: Ownership Housing Development
Appendix A: Home Sales Survey
Appendix B: Affordability Analyses
Exhibit I Affordable Sales Price Calculations
Exhibit II Value Estimates: Inclusionary Units
Appendix C: Pro Forma Analyses: Base Zoning Prototype
Exhibit I Market Rate Alternative
Exhibit II Moderate Income Alternative – Pro Rata Inclusionary Unit Distribution Exhibit III Moderate Income Alternative – Smallest Units Fulfill the Inclusionary Requirement
Appendix D: Pro Forma Analyses: State Density Bonus Prototype - Very Low Income Rental Unit Alternative
Attachment 3: Apartment Development
Appendix A: Rent Survey
Appendix B: Affordable Rent Calculations
Appendix C: Pro Forma Analyses: Small Project Prototype Exhibit I Market Rate Alternative
Exhibit II Very Low Income Alternative
Exhibit III Low Income Alternative
Exhibit IV Moderate Income Alternative
Exhibit V Density Bonus Alternative
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ATTACHMENTS
Attachment 3: Apartment Development (continued)
Appendix D: Pro Forma Analyses: Large Project Prototype Exhibit I Market Rate Alternative
Exhibit II Very Low Income Alternative
Exhibit III Low Income Alternative
Exhibit IV Moderate Income Alternative
Exhibit V Density Bonus Alternative
Attachment 4: In-Lieu Fee Analysis
Appendix A: Ownership Housing Development
Appendix B: Apartment Development
Exhibit I Small Project Prototype
Exhibit II Large Project Prototype
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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 SECTION I: OVERVIEW
Keyser Marston Associates, Inc. (KMA) was engaged by the City of Redondo Beach (City) to prepare an Inclusionary Housing Program Financial Evaluation (Financial Evaluation). The following report presents the results of the Financial Evaluation, and is focused on the impacts created by the imposition of Inclusionary Housing requirements.

This Overview section describes the basic parameters that guide Inclusionary Housing programs throughout California.

A. KEY COURT CASES
It is important to review the key legal cases that guide the creation and implementation of Inclusionary Housing programs. A chronological summary of the relevant decisions follows.

Palmer Case
In 2009, the California Court of Appeal ruled in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, 175 Cal. App. 4th 1396 (Palmer), that the local affordable housing requirements being imposed by the City of Los Angeles violated the Costa-Hawkins Rental Housing Act (CostaHawkins). Specifically, Costa-Hawkins allows landlords to set the initial monthly rent for a new unit, and then to increase the monthly rent to the market level each time a unit is vacated. The Court found that the imposition of long-term income and affordability restrictions on apartment units is a violation of this provision.

It is commonly believed that the Palmer ruling prohibited jurisdictions from requiring developers to provide affordable apartment units as a part of an Inclusionary Housing program.

In an effort to comply with Palmer, jurisdictions generally took one of the following actions:

1. The jurisdiction eliminated the requirement that market rate apartment projects provide affordable apartment units; or
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2. The jurisdiction replaced affordable housing production models with a linkage or impact fee methodology; or

3. The jurisdiction imposed affordable housing requirements as part of negotiated Development Agreements for apartment projects.

San Jose Case
In 2015, the California Supreme Court ruled in California Building Industry Association v. City of San Jose, 61 Cal 4th 435 (San Jose) that Inclusionary Housing programs should be viewed as use restrictions that are a valid exercise of a jurisdiction’s zoning powers. Specifically, the Court found that Inclusionary Housing requirements are a planning tool rather than an exaction. This is interpreted to mean that an in-lieu fee payment option that is included in an Inclusionary Housing program, that includes an affordable housing production requirement, is not subject to the AB 1600 nexus requirements imposed by the “Mitigation Fee Act”.1 Price controls imposed by Inclusionary Housing programs must meet the following criteria:

1. The requirements cannot be “Confiscatory”; and

2. The requirements cannot deprive a property owner of a fair and reasonable return on their investment.

The San Jose ruling that Inclusionary Housing programs are not an exaction applies to both ownership housing and apartment development. However, the San Jose case did not overturn the limitations Palmer imposed on Inclusionary Housing programs for apartment projects.

The San Jose case is also relevant to apartment projects, because former Governor Brown publicly stated that he would not sign a bill that eliminated the Palmer limitations unless and until the California Supreme Court ruled in favor of the City of San Jose. As such, the San Jose 1 The Mitigation Fee Act is codified in California Government Code §66000 et seq.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 ruling opened the door for the subsequent passage and adoption of Assembly Bill (AB) 1505 in September 2017.

B. KEY LEGISLATION: AB 1505
AB 1505, which is otherwise known as the “Palmer Fix”, was signed into law on September 29, 2017. AB 1505 amended Section 65850 of the California Government Code and adds Section 65850.01. This legislation provides jurisdictions with the ability to adopt programs that impose Inclusionary Housing requirements on apartment projects.

Role of the California Department of Housing and Community Development (HCD) Section 65850.01 does not place a cap on the percentage of units that can be subject to income and affordability restrictions. However, Section 65850.01 (a) gives HCD the authority to review the restrictions imposed by an Inclusionary Housing program on apartment developments if it requires that more than 15% of the units to be restricted to households earning less than 80% of the area median income (AMI), and if one of the following conditions applies:

1. The jurisdiction has failed to meet at least 75% of its Regional Housing Needs Assessment (RHNA) allocation for above moderate income units. This test is measured on a pro-rated basis over the planning period, which is set at a minimum of five years; or

2. HCD finds that the jurisdiction has not submitted their housing element report for at least two consecutive years.

The City has fulfilled the requirements imposed by both of the standards identified above. 2 As
such, HCD does not have authority under Section 65850.01 (a) to review the Inclusionary Housing requirements the City proposes to impose on apartment development. However, in a 2 For the 2013 – 2021 period the RHNA goal for above moderate income units is 564 units. By the end of 2019, 464 building permits issued were issued for above moderate income units. This equals 82% of the RHNA goal.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 technical guidance memorandum dated October 21, 2019, HCD reaffirmed its authority to review Inclusionary Housing ordinances as part of its review of a jurisdiction’s Housing Element.

California Government Code Section 65583 (a) (Section 65583 (a)) requires the City to analyze potential and actual constraints being placed on the development of housing. If the City chooses to impose a greater than 15% affordability requirement and/or deeper affordability standards on apartment development, HCD can potentially extend and complicate the approval process for the City’s upcoming 6th Cycle Housing Element.

Additional AB 1505 Requirements
Section 65850 (g) requires jurisdictions to provide alternative means of fulfilling the affordable housing requirements imposed on apartment projects by an Inclusionary Housing program.

Options that can be provided to developers include, but are not limited to:

1. Off-site construction of “Inclusionary Units”;

2. Payment of a fee in-lieu of producing Inclusionary Units;

3. Land donation; and

4. The acquisition and rehabilitation of existing units.

C. INCLUSIONARY HOUSING PROGRAM CHARACTERISTICS
Over 170 jurisdictions in California currently include an Inclusionary Housing program as a component in their overall affordable housing strategy. While the unifying foundation of these programs is the objective to attract affordable housing development, the characteristics of these programs vary widely from jurisdiction-to-jurisdiction.

To assist the City in evaluating options for creating an Inclusionary Housing program it is useful to identify the elements that are typically included in Inclusionary Housing programs being implemented in California jurisdictions. To that end, KMA compiled information on 74 Inclusionary Housing: Financial Evaluation Page 5
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Inclusionary Housing programs being implemented throughout California. The survey information is presented in Attachment 1:

1. Table 1 presents the survey results for the 74 jurisdictions; and

2. Table 2 provides more in depth information for the jurisdictions located in Los Angeles, Orange and San Diego Counties.

The survey results can be summarized as follows:

1. In California, the majority of Inclusionary Housing programs include a threshold project size below which projects are not subject to the Inclusionary Housing requirements.

Common thresholds fall between three and 10 units. The average threshold project size found in the program survey is eight units.

2. The income and affordability standards imposed by Inclusionary Housing programs vary widely throughout California. The majority of programs have established standards in the range of 10% to 20% of the units in projects that will be subject to the requirements.

However, the following policy variations are commonly found:
a. The threshold standards are varied as a reflection of the depth of the affordability being required.
b. Inclusionary Housing requirements have a disproportionate impact on smaller projects, because there are fewer market rate units available to spread the impact created by the income and affordability standards. A sliding scale requirement is sometimes used to mitigate these impacts. c. The length of the covenant period imposed on Inclusionary Units varies from jurisdiction-to-jurisdiction. California Health and Safety Code (H&SC) Section 33413 applies covenant periods of 45 years for ownership housing units and 55 years for apartment units. These standards are commonly used, but both Inclusionary Housing: Financial Evaluation Page 6
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 shorter and longer covenant periods are imposed throughout Inclusionary Housing programs in California.

Inclusionary Housing programs focus on the production of affordable housing units by imposing specific affordable housing requirements on new development. To comply with the findings in the San Jose case, and the requirements imposed by Sections 65850 and 65850.01, Inclusionary Housing programs must offer developers a range of options for fulfilling the affordable housing requirements. The most common options offered to developers are:

1. Construction of a defined percentage of Inclusionary Unit units within the new market rate residential project;

2. Construction of a defined percentage of Inclusionary Unit units in a project located in an off-site location;

3. Payment of a fee in lieu of producing Inclusionary Units that the jurisdiction will subsequently use to assist in the development of affordable housing units within the community;

4. The donation of land to the jurisdiction that is appropriate for the development of affordable housing; and

5. The acquisition and rehabilitation of existing units.

The key advantages associated with providing off-site and in-lieu fee options are that the Inclusionary Housing requirements can be transferred to developers that have experience in constructing affordable housing projects. This is advantageous for the following reasons:

1. Affordable housing developers have specific expertise in the development and operation of affordable housing projects.

2. Dedicated affordable housing projects have access to public funding sources that provide a more cost-efficient way to achieve deeper affordability than can be supported Inclusionary Housing: Financial Evaluation Page 7
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 by an Inclusionary Housing requirement. A representative sample of programs that are targeted to dedicated affordable housing projects are:
a. Funds that are awarded by the United States Department of Housing and Urban Development (HUD) such as the HOME and Community Development Block Grant programs;
b. The funds allocated to the City by HCD under the Permanent Local Housing Allocation (PLHA) for Senate Bill 2 (Chapter 364, Statutes of 2017); c. The federal and state Low-Income Housing Tax Credits (Tax Credits) offered under Internal Revenue Code Section 42;
d. State funding sources such as the Affordable Housing and Sustainable Communities (AHSC) Program; and
e. Los Angeles County Development Authority (LACDA) funding programs.

D. STATE DENSITY BONUS AND INCLUSIONARY HOUSING REQUIREMENTS A tool that is commonly used to reduce the financial impact associated with the imposition of Inclusionary Housing requirements is the density bonus provided by California Government Code Sections 65915-65918 (Section 65915). Section 65915 requires jurisdictions to provide density bonuses based on a sliding scale ranging from 5% to 50% depending on the magnitude of the income and affordability restrictions being imposed.

Section 65915 requires the City to adopt an ordinance that specifies how it will comply with the State mandated density bonus requirements. The City’s adopted ordinance is included in Redondo Beach Municipal Code Title 10 Chapter 5 Article 9 Section 10-5.2100 (Section 10-

5.2100), and it was last amended in 2003. Section 65915 has been amended by the State Legislature several times since 2003, and Section 10-5.2100 has not been amended to reflect those modifications. Until such time as the modifications are amended into the City’s density Inclusionary Housing: Financial Evaluation Page 8
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 bonus ordinance, State law will automatically prevail over any inconsistencies between State law and Section 10-5.2100.

In July 2013 the First District Court of Appeal held that jurisdictions must agree to count the affordable units used to fulfill the Section 65915 density bonus requirements towards the Inclusionary Housing requirements that will be imposed on a project.3 Based on that ruling, a developer must be allowed to use the same affordable units to fulfill both the Inclusionary Housing requirements and the Section 65915 requirements. However, in order to exercise this option, the developer must apply the more stringent of the two programs’ requirements.

The Section 65915 density bonus can act to materially reduce the financial impacts created by Inclusionary Housing requirements. For that reason, the City should recognize that if Inclusionary Housing requirements are imposed it is highly likely that many developers will request Section 65915 density bonuses. It is also important to understand that the City is required to grant a developer’s request for the statutorily established density bonus along with the requisite number of concessions and incentives, as well as any necessary development standards reductions or waivers.4
E. STRUCTURING ISSUES
As discussed previously, the court in the San Jose case found that the imposition of Inclusionary Housing requirements is a valid exercise of the City’s zoning powers rather than an exaction.

Sections 65850 and 65850.01 amended the California Government Code to expressly allow Inclusionary Housing requirements to be imposed on apartment projects.

It is important for the City to consider the following caveats as part of the Inclusionary Housing program adoption process:
3 Latinos Unidos del Valle de Napa y Solano v. County of Napa, 217 Cal. App. 4th 1160 (Napa). 4 Section 65915 (d) (1) identifies three conditions under which requested incentives or concessions can be denied.

However, this does not relieve the City of the obligation to grant the number of incentives or concessions that the project is entitled to under Section 65915 (d) (2).

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1. Inclusionary Housing requirements cannot be confiscatory or deprive an owner of a fair and reasonable return. However, recognizing that the courts have not defined these terms, the City has some discretion in establishing evaluation parameters.

2. Section 65583 (a) requires the City to analyze potential and actual constraints being placed on the development of housing. Within that context, it is important to recognize that the requirements imposed by the Inclusionary Housing Ordinance can only be expected to fulfill a small portion of the unmet need for affordable housing in Redondo Beach.

In designing an Inclusionary Housing program, it is important to recognize that the imposition of Inclusionary Housing requirements will have an economic impact on residential development. Typically, the result is that over time residential land prices will adjust to reflect the value supported by the market given the restrictions imposed on the property. However, in some cases property owners may determine that it is more financially advantageous to maintain an existing use rather than to sell the property at a lower price. This can potentially reduce the availability of land for residential development.

The following key factors should be considered in creating Inclusionary Housing requirements:

1. The requirements should balance the interests of property owners and developers against the public benefit created by the production of income restricted units; and

2. The Inclusionary Housing requirements cannot be confiscatory or deprive an owner of a fair and reasonable return on their investment.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 SECTION II: METHODOLOGY
The purpose of this Financial Evaluation is to evaluate the financial feasibility of imposing Inclusionary Housing requirements on residential development in Redondo Beach. The financial feasibility analysis is comprised of the following steps:

A. PARAMETERS
As the first step in the evaluation process it is necessary to identify the parameters that will be applied in the analysis. One measurement is the RHNA, which is used as a tool in the Housing Element process. The 5th Cycle RHNA Allocation Plan covers the period between 2013 and 2021. At the end of 2020 the City’s progress towards fulfilling the defined RHNA targets is detailed in the following table:
5th Cycle RHNA Information
City’s Progress as of December 31, 2019
Unfilled RHNA Targets
Income Category
RHNA
Targets –
2013 - 2021
Building
Permits
Issued Total %
Very Low 372 0 372 100%
Low 223 25 198 89%
Moderate 238 0 238 100%
Above Moderate 564 464 100 18%
Totals 1,397 489 908 65%
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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 The RHNA targets will all be reset at the commencement of the 6th RHNA Cycle. 5 The current
projections of the City’s 6th Cycle RHNA allocation are presented in the following table:
6th Cycle RHNA Allocation Projections
October 2021 through October 2029
Income Category Total Obligation % of Total
Very Low 933 38%
Low 507 20%
Moderate 489 20%
Above Moderate 554 22%
Totals 2,483 100%
By far, the largest identified unmet need for affordable housing is in the very low income category. This indicates that the City needs to focus on attracting development that serves these households. However, in creating an Inclusionary Housing program it is also important to evaluate the impact the restrictions will have on the developers of market rate housing projects to ensure that onerous requirements are not imposed.

B. PROGRAM FOUNDATION
The courts have held that affordable housing is a “public benefit,” and that locally imposed Inclusionary Housing programs are a legitimate means of providing this public benefit. The courts have tempered this with the requirement that the Inclusionary Housing obligations cannot be confiscatory, and they cannot deprive a property owner of a fair and reasonable return on their investment.
5 The HCD Housing Element Update Schedule allows a jurisdictions to take one-time RHNA credit for units approved (entitled or permitted) or built since the RHNA Projection Period, which is June 30, 2021.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 To date, the courts have not provided guidance for determining how these requirements should be measured. As a result it has been necessary for KMA to create a methodology for testing the financial impacts associated with a proposed Inclusionary Housing program.

The KMA approach is based on pro forma analyses of prototype projects that reflect the development types exhibited within the jurisdiction. The KMA methodology has been continually evolving over the past 20 years, and each financial evaluation is tailored to reflect the specific characteristics of the jurisdiction in which KMA is performing the evaluation.

Development Prototypes
The pro forma analyses that KMA has prepared are based on prototype residential developments. To assist in creating the development prototypes, KMA reviewed the following:

1. City Staff Reports for proposed projects;

2. Development plans that were submitted to the City’s Planning Department; and

3. The townhomes/condominiums and apartments identified in KMA’s market surveys.

It is important to understand that the prototypes used in the Financial Evaluation do not represent actual projects. Instead, the prototypes represent composites of projects that have recently been developed or proposed in Redondo Beach and the results of KMA market surveys. In some instances the development scope will be at a density that is actually less than the maximum density allowed by the City’s zoning code. This reflects site characteristics and development types being exhibited.

Ownership Housing Development
The prototype ownership housing developments can be described as follows:

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Base Zoning Prototype:

The Base Zoning Prototype can be described as follows:

1. The development site area is set at 2.0 acres.

2. The density is set at 17.5 units per acre.

3. The prototype includes 35 townhouse units in the following bedroom mix:
a. 15% one-bedroom units;
b. 34% two-bedroom units;
c. 34% three-bedroom units; and
d. 17% four-bedroom units.

4. The prototype is based on the assumption that the units are served by attached garages, and that the required guest parking spaces are provided at grade.

State Density Bonus Prototype
The State Density Bonus Prototype is based on the assumption that a developer uses Section 65915 to obtain a 35% density bonus on the 2.0 acre development site. A density increase of this magnitude still allows for a townhouse style project to be developed. The characteristics of the development can be described as follows:

1. The prototype includes 48 units in the following bedroom mix:
a. 17% one-bedroom units;
b. 33% two-bedroom units;
c. 33% three-bedroom units; and
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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 d. 17% four-bedroom units.

2. The prototype is based on the assumption the units are served by attached garages, and that the project utilizes the Section 65915 (p) waiver from the requirement to provide any guest parking spaces.

Apartment Development Prototype
Following KMA’s review of the existing and proposed apartment development in Redondo Beach we noted that the existing inventory is comprised largely of older small apartment projects. However, we were able to identify one newly constructed 12 unit project and two proposed large-scale projects. Using this information along with information derived from our market surveys KMA created a Small Project Prototype and a Large Project Prototype. Section 65915 density bonus analyses were also prepared for the Small and Large Project Prototypes.

Small Project Prototype

1. The development site area is set at 15,000 square feet.

2. The density is set at 35 units per acre.

3. The prototype includes 10 two-bedroom units.

4. The parking is provided in above-ground spaces.

Large Project Prototype

1. The development site area is set at three acres.

2. The density is set at 30 units per acre.

3. The 90 units in the prototype are allocated as follows:
a. 40% one-bedroom units; and
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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 b. 60% two-bedroom units.

4. The parking is provided in above-ground spaces.

Pro Forma Analysis Thresholds
The KMA pro forma analyses test the following factors to assist in identifying Inclusionary Housing requirements that can reasonably be applied:

1. The reduction in property acquisition cost that would need to be achieved to offset the impact created by the proposed income and affordability requirements;

2. The reduction in developer profit that is caused by the proposed requirements; and

3. The increase in market rate sales prices/rents that would be needed to offset the proposed requirements.

KMA evaluates the results of each of these three tests in order to develop a comprehensive perspective on the financial impacts. These analyses collaboratively inform the KMA conclusion as to the Inclusionary Housing requirements that can be supported.

C. FINANCIAL EVALUATION STRUCTURE
The analysis structure applied by KMA can be described as follows:

1. KMA prepared financial analyses to assist in creating recommended Inclusionary Housing requirements that balance the interests of property owners and developers against the public benefit created by the production of affordable housing units.

2. In general terms, the financial impact associated with fulfilling Inclusionary Housing requirements within market rate projects is equal to the difference between the achievable market rate sales prices or rents and the allowable sales prices or rents for the Inclusionary Units. This is known as the “Affordability Gap.” Inclusionary Housing: Financial Evaluation Page 16
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3. The KMA financial analyses identify the range of Inclusionary Housing production requirements that can be supported.

Financial Evaluation Organization
The following sections of this Financial Evaluation describe the assumptions, analysis and findings related to ownership housing and apartment developments. The analyses are supported by the following Attachments and Appendices:

Attachment 2: Ownership Housing Development
Appendix A Home Sales Survey
Appendix B Affordability Analyses
Appendix C Pro Forma Analyses: Base Zoning Prototype
Appendix D Pro Forma Analyses: State Density Bonus Prototype Attachment 3: Apartment Development
Appendix A Rent Survey
Appendix B Affordable Rent Calculations
Appendix C Pro Forma Analyses: Small Project Prototype
Appendix D Pro Forma Analyses: Large Project Prototype
Attachment 4: In-Lieu Fee Analyses
Appendix A Ownership Housing Development
Appendix B Apartment Development
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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 SECTION III: OWNERSHIP HOUSING ANALYSES
As a general rule, Inclusionary Housing programs tend to set the affordability requirements for ownership housing development at the moderate income level. This is done as a reflection of the fact that higher income households are likely to have more discretionary income to devote to the ongoing costs associated with home ownership than that of lower income households.

The following ownership housing development analyses are based on the assumption that the Inclusionary Housing requirements will be set at the moderate income level. Based on this assumption, KMA estimated the supportable Inclusionary Housing production requirements.

A. PROTOTYPES: OWNERSHIP HOUSING DEVELOPMENT
The characteristics of the Ownership Housing development prototypes that were used in the Financial Evaluation are:

Development Scope Summaries
Ownership Housing Development Prototypes
Base Zoning
Section 65915
Density Bonus
Site Area (Acres) 2.0 2.0
Total Number of Units 35 48
Density (Units Per Acre) 17.5 24.0
Unit Mix
One-Bedroom Units 5 8
Two-Bedroom Units 12 16
Three-Bedroom Units 12 16
Four-Bedroom Units 6 8
Parking Attached Garages +
At Grade Spaces
Attached Garages
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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 B. PROJECTED MARKET RATE SALES PRICES: OWNERSHIP HOUSING DEVELOPMENT The prototype analyses reflect average or typical ownership housing projects rather than any specific project. It should be expected that specific projects will vary to some degree from the prototypes.

To assist in projecting the achievable market rate sales prices, KMA compiled sales data for homes in Redondo Beach that were developed within the past 10 years and sold between March 2020 and March 2021 (Attachment 2: Appendix A). This information is used to establish the average sales price per square foot of saleable area for one-bedroom, two-bedroom, threebedroom and four-bedroom homes.

Based on the results of the surveys, the market rate sales prices used in the KMA analysis are presented in the following table:

Projected Market Rate Sales Prices
Ownership Housing Development Prototypes
One-Bedroom Units $800,000
Two-Bedroom Units $1,143,000
Three-Bedroom Units $1,338,000
Four-Bedroom Units $1,493,000
Average Price Per Square Foot
of Saleable Area $709
C. AFFORDABLE SALES PRICE CALCULATIONS: OWNERSHIP HOUSING DEVELOPMENT The Affordable Sales Price calculations are presented in Attachment 2: Appendix B – Exhibit I.

The calculations are based on the following assumptions:

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1. The household income information used in the calculations is based on 2021 income statistics for Los Angeles County as a whole. The household incomes for moderate income households are produced and distributed annually by HCD.

2. The Affordable Sales Price estimates are based on the calculation methodology imposed by H&SC Section 50052.5. The calculations include the elements described in the following sections of this Financial Evaluation.

Household Size
For the sole purposes of calculating Affordable Sales Prices, H&SC Section 50052.5 sets household sizes based on the number of bedrooms in the home plus one.6 H&SC Section 50052.5 refers to this as “the family size appropriate for the unit.” This is not an occupancy cap; it is a benchmark that creates a consistent Affordable Sales Price calculation methodology.

Household Income
For moderate income households, H&SC Section 50052.5 calculates the Affordable Sales Prices based on 110% of AMI for a household size equal to the number of bedrooms in the home plus one. This measurement is only used for setting the Affordable Sales Prices. Households with incomes of up to 120% AMI would qualify to reside in moderate income units.

Income Allocated to Housing-Related Expenses
For moderate income households H&SC Section 50052.5 allocates 35% of the benchmark household income to the payment of housing-related expenses. 6 For example, the imputed household size for a three-bedroom unit is four persons.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Housing-Related Expenses
Based on research undertaken by KMA, the variable housing related expense assumptions used in this analysis are presented in the following table:

Variable Housing Related Expenses
Ownership Housing Development Prototypes
Monthly Utilities
Allowances 7
Monthly HOA,
Insurance &
Maintenance
One-Bedroom Units $138 $350
Two-Bedroom Units $164 $375
Three-Bedroom Units $204 $400
Four-Bedroom Units $252 $425
The property tax expense estimate is based on 1.15% of the home’s estimated Affordable Sales Price. This assumes that the City will impose the income and affordability covenants on an irrevocable basis during the covenant term.

Supportable Mortgage Amount
The mortgage amounts used in the Affordable Sales Price calculations are estimated using the income available after the other housing-related expenses are paid. The mortgage terms used in this Financial Evaluation were based on a 30-year fully amortizing loan at a 3.84% interest rate. 8
7 Utilities allowances are based on utilities costs comprised of gas heating, cooking and water heating; basic electric; air conditioning; water; and trash services. The allowances are based on the LACDA schedule for single family homes effective as of July 1, 2021.
8 Based on a 50 basis points premium applied to the Bankrate site average APR as of July 1, 2021 for a fixed interest rate loan with a 30-year amortization period.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Benchmark Down Payment
KMA set the benchmark down payment at 5% of the estimated Affordable Sales Price. A down payment of this magnitude is commonly allowed by affordable housing programs.

Affordable Sales Prices
The Affordable Sales Price estimates for moderate income households are presented in the following table:

Affordable Sales Price Estimates
Ownership Housing Development Prototypes
One-Bedroom Units $289,500
Two-Bedroom Units $327,500
Three-Bedroom Units $363,000
Four-Bedroom Units $387,400
D. PRO FORMA ANALYSES: OWNERSHIP HOUSING DEVELOPMENT
To assist in establishing the Inclusionary Housing requirements that can be supported, KMA prepared the following pro forma analyses for the ownership housing development analysis:

1. Base Zoning Prototype:
a. A 100% market rate alternative;
b. An alternative that includes a moderate income Inclusionary Housing component with the affordable units spread across the unit mix on a pro rata basis; and c. An alternative that includes an moderate income Inclusionary Housing component in which the moderate income units are allowed to be provided in the smallest units in the project.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021

2. A State Density Bonus Prototype that includes a very low income rental Inclusionary Housing component.

Base Zoning Prototype - Market Rate Development Alternative The 100% market rate alternative provides a baseline against which to measure the impacts associated with Inclusionary Housing requirements. The pro forma analyses for the 100% market rate unit alternative is presented in Attachment 2: Appendix C – Exhibit I.

The pro forma tables are organized as follows:

Pro Forma Analysis – Base Zoning Prototype
100% Market Rate Alternative
Ownership Housing Development Prototypes
Table 1: Estimated Development Costs
Table 2: Projected Net Sales Revenue
Table 3: Projected Developer Profit
The developer profit projected to be generated by the 100% market rate alternatives is used as the threshold profit in the evaluation of potential Inclusionary Housing requirements. This profit threshold is applied in the evaluation of two Inclusionary Housing alternatives for ownership development projects. The financial gaps generated by the alternatives being tested represent the impact created by the Inclusionary Housing requirements.

Base Zoning Prototype - Moderate Income Inclusionary Housing Component As discussed previously, KMA measured the financial impacts created by the imposition of Inclusionary Housing requirements using three different measurement tools. These three tools were used collaboratively to identify the moderate income requirement that could be feasibly imposed on attached ownership housing development.

Inclusionary Housing: Financial Evaluation Page 23
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 The pro forma analyses for the two Moderate Income Alternatives are presented in Attachment 2: Appendix C – Exhibits II and III. The pro forma analysis is organized as follows:

Pro Forma Analysis – Base Zoning Prototype
Moderate Income Inclusionary Housing Component
Ownership Housing Development Prototypes
Table 1: Estimated Development Costs
Table 2: Projected Net Sales Revenue
Table 3: Inclusionary Housing Impacts
The results of these KMA analyses can be summarized as follows:

1. The developer profit for the market rate alternative is estimated at 15.1%.

2. The moderate income requirement that can be supported under the two Base Zoning Prototypes are:
a. A 7% requirement if the affordable units are required to be spread on a pro rata basis throughout the unit mix; or
b. A 9% requirement if the affordable units are allowed to be provided in the smallest units in the project.

The financial impacts estimated in the KMA analyses are summarized in the following table:

Inclusionary Housing: Financial Evaluation Page 24
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Inclusionary Housing Production Impacts – Base Zoning Prototype Moderate Income Inclusionary Housing Component
Ownership Housing Development Prototypes
Pro Rata
Allocation
Small Unit
Allocation
Required Property Acquisition Cost Reduction 12% 12%
Developer Profit as a % of Total Development Cost 10.6% 10.5% Sales Price Increase Required to Offset the Impact 3.9% 4.0% State Density Bonus Prototype - Very Low Income Rental Inclusionary Housing Component The City Council expressed an interest in evaluating an Inclusionary Housing alternative for ownership housing development under which the developer would be allowed to fulfill the affordable housing requirement with rental units. In KMA’s experience developers typically couple this option with the Section 65915 density bonus.

KMA tested this concept with the State Density Bonus Prototype, which is based on the following assumptions:

1. A 35% Section 65915 density bonus is applied to the Base Zoning Prototype. This results in a 48 unit project.9

2. The Napa ruling imposes the following requirements on the City:
a. A developer must be allowed to use the same affordable units to fulfill both the City’s Inclusionary Housing requirements and the Section 65915 affordable housing requirements; and
9 The maximum allowable Section 65915 density bonus is 50%. KMA limited the density bonus to 35% percent in order to allow the prototype project to fulfill the parking requirements with attached garages.

Inclusionary Housing: Financial Evaluation Page 25
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 b. The affordable housing obligation must be calculated against the development site’s base zoning standards.

3. The most efficient way to achieve a 35% density bonus under Section 65915 is to allocate 11% of the units allowed by the site’s base zoning to very low income households (Section 65915 (f) (2):
a. The Affordable Rents must comport with the requirements imposed by H&SC Section 50053.
b. Under the Napa ruling, the City must allow very low income density bonus units to be counted towards the fulfillment of very low, low and/or moderate income Inclusionary Housing production requirements.

4. Parking:
a. At a density of 24 units per acre it is assumed that the parking to serve the units can be provided in attached garages.
b. Section 65915 (p) requires the City to grant a developer’s request to waive the requirement to provide any guest parking spaces.

5. KMA estimated the value of the very low income Inclusionary Housing units in Attachment 2: Appendix B -Exhibit 2. The estimates are based on the following:
a. The Affordable Rents are calculated.
b. The operating costs associated with the units are estimated. c. The resulting stabilized net operating income is capitalized at a 5% rate to establish the values of the very low income rental units.

Inclusionary Housing: Financial Evaluation Page 26
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 The pro forma analyses is presented in Attachment 2: Appendix D, and it is organized as follows:

Pro Forma Analysis – State Density Bonus Prototype
Very Low Income Rental
Inclusionary Housing Component
Ownership Housing Development Prototypes
Table 1: Estimated Development Costs
Table 2: Projected Net Sales Revenue
Table 3: Inclusionary Housing Impacts
KMA measured the Inclusionary Housing impacts against the 15.1% developer profit generated by the Base Zoning Prototype – 100% Market Rate alternative. Based on that analysis KMA concluded that a 16% Inclusionary Housing requirement can be supported when measured against the number of units allowed by a site’s base zoning.

The financial impacts estimated in the KMA analyses are summarized in the following table:

Inclusionary Housing Production Impacts – State Density Bonus Prototype Very Low Income Rental Inclusionary Housing Component
Ownership Housing Development Prototypes
Required Property Acquisition Cost Reduction 0%
Developer Profit as a % of Total Development Cost 16.5% Sales Price Increase Required to Offset the Impact 0%
Summary: Ownership Housing Development
The results of the ownership housing development analysis can be summarized as follows:

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021

1. The Base Zoning Prototype supports the following moderate income Inclusionary Housing requirements:
a. A 7% requirement if the affordable units are distributed throughout the project on a pro rata basis; or
b. A 9% requirement is the units are allocated to the smallest units in the project.

2. Under the Section 65915 Density Bonus alternative the supportable Inclusionary Housing requirement increases to 16% of the units allowed by a site’s base zoning. This conclusion is predicated on the assumption that the developer is allowed to provide rental units to fulfill the Inclusionary Housing obligation, and that the units must be rented to very low income households at an Affordable Rent.

Inclusionary Housing: Financial Evaluation Page 28
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 SECTION IV: APARTMENT DEVELOPMENT ANALYSIS
The City is interested in identifying supportable Inclusionary Housing production requirements for the following income and affordability alternatives:

1. A very low income requirement;

2. A low income requirement; and

3. A moderate income requirement.

The apartment development pro forma analyses are used to estimate the supportable Inclusionary Housing production requirements under each of the identified alternatives.

A. CAVEATS
A variety of tools are available to reduce the financial impact associated with the imposition of income and affordability restrictions on apartment projects. For 100% affordable housing projects, Tax Credit financing is commonly used to fill the financial gap. For mixed income projects, the Section 65915 density bonus is often used.

The prototype analyses are intended to reflect average or typical apartment projects rather than any specific project. It should be expected that specific projects will vary to some degree from the prototype.

B. PROTOTYPES: APARTMENT DEVELOPMENT
The apartment development prototypes used in this analysis were created based on the results of the KMA market surveys, and a review of projects that have recently been proposed or constructed in Redondo Beach. The KMA market surveys were also used to estimate the achievable market rate rents for the prototype units.

The prototypes used in this analysis are described in the following table:

Inclusionary Housing: Financial Evaluation Page 29
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Development Scope Summaries
Apartment Development Prototypes
Small Project Prototype Large Project Prototype
35 Units Per Acre 30 Units Per Acre
Site Area 12,500 square feet 3.0 acres
Total Number of Units 10 90
Unit Mix
One-Bedroom Units N/A 36
Two-Bedroom Units 10 54
Parking Spaces Per Unit 2.33 2.33
C. PROJECTED MARKET RENTS: APARTMENT DEVELOPMENT
In the March 2021, KMA surveyed apartment projects that received three or four stars in the CoStar quality ranking system (Attachment 3: Appendix A). The purpose of this survey was to derive estimates of the currently achievable market rents for the types of projects likely to be constructed in Redondo Beach. However, the characteristics of actual projects will vary to some degree from the prototype being evaluated.

The market rate rent estimates that are used in this Inclusionary Evaluation are as follows:

Projected Average Monthly Market Rate Rents
Apartment Development Prototypes
Small Project Prototype Large Project Prototype
One-Bedroom Units N/A $3,500
Two-Bedroom Units $3,721 $3,908
Average Rent / Sq. Ft. of GLA 10 $3.72 $3.86
10 GLA = gross leasable area.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 D. AFFORDABLE RENT CALCULATIONS: APARTMENT DEVELOPMENT
For the purposes of this Financial Evaluation, the maximum Affordable Rents for the Inclusionary Unit units were calculated based on the standards imposed by H&SC Section 50053. The calculations are presented in Attachment 3: Appendix B, and the assumptions and results can be summarized as follows:

1. The household income information used in the calculations is based on 2021 income statistics for Los Angeles County as a whole. The household incomes are published annually by HUD and are distributed by HCD.

2. The household size appropriate for the unit is based on the H&SC Section 50052.5 standard of the number of bedrooms in the home plus one. As discussed previously, this is a benchmark for calculation purposes only. It is neither an occupancy minimum nor a maximum.

3. For the purposes of setting the Affordable Rents, the household income is set at 50% of AMI for very low income households, 60% of AMI for low income households, and 110% of AMI for moderate income households.

4. Thirty percent (30%) of defined household income is allocated to housing-related expenses.

5. KMA’s calculations are based on the assumption that the tenants will be required to pay for gas heating, cooking and water heating; basic electric services; and air conditioning.

The LACDA utilities allowances for apartments that went into effect on July 1, 2021, were applied to this analysis.

The resulting Affordable Rents are presented in the following table:

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Affordable Rent Calculations
Apartment Development Prototypes
Very-Low
Income Low Income
Moderate
Income
One-Bedroom Units
Maximum Monthly Housing Cost $800 $960 $1,760
(Less) Monthly Utility Allowance (63) (63) (63)
Affordable Rent $737 $897 $1,697
Two-Bedroom Units
Maximum Monthly Housing Cost $900 $1,080 $1,980
(Less) Monthly Utility Allowance (80) (80) (80)
Affordable Rent $820 $1,000 $1,900
E. PRO FORMA ANALYSES: APARTMENT DEVELOPMENT
To assist in establishing the Inclusionary Housing production requirements that can be supported, KMA started with the following basic premises:

1. KMA evaluated a 100% market rate alternative to derive an estimate of the developer return that is generated if no income and affordability requirements are imposed. The return generated from the market rate alternative is used as the threshold return for the various Inclusionary Housing requirements being tested.

2. As discussed previously, this Financial Evaluation is calibrated to establish supportable Inclusionary Housing requirements for each alternative being tested.

Market Rate Development Alternative
The pro forma analyses for the market rate development alternatives are found in Exhibit I of Appendices C and D of Attachment 3, respectively:

Inclusionary Housing: Financial Evaluation Page 32
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 The pro forma tables are organized as follows:

Pro Forma Analysis - 100% Market Rate Alternative
Apartment Development Prototypes
Table 1: Estimated Development Costs
Table 2: Estimated Stabilized Net Operating Income
Table 3: Estimated Developer Return
The estimated stabilized developer returns on total investment derived from the 100% market rate alternatives are estimated as follows:

1. The stabilized developer return is estimated at 4.76% for the Small Project Prototype; and

2. The stabilized developer return is estimated at 4.55% for the Large Project Prototype.

Alternatives Testing – Apartment Development Prototypes The pro forma analyses for the Inclusionary Housing production analyses are presented in the following appendices to Attachment 3:

Inclusionary Housing Production Alternatives
Appendix C – Small Project Prototype
Appendix D – Large Project Prototype
Apartment Development
Exhibit Title
II Very Low Income Alternative
III Low Income Alternative
IV Moderate Income Alternative
V Density Bonus Alternative
Inclusionary Housing: Financial Evaluation Page 33
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 The pro forma analyses are organized as follows:

Pro Forma Analyses
Inclusionary Housing Production Alternatives
Apartment Development Prototypes
Table 1: Estimated Development Costs
Table 2: Estimated Stabilized Net Operating Income
Table 3: Inclusionary Housing Impacts
Zoning Compliant Density Alternatives
Small Project Prototype
The Small Project Prototype consists of 10 Units. As a result, an Inclusionary Housing requirement for one affordable unit equates to a 10% requirement. The pro forma analyses of the Small Project Prototype indicate that only a fractional unit requirement, ranging from .5 to .9 units can be supported at the very low, low and moderate income levels.

The financial impacts associated with the fractional unit requirements are summarized in the following table:

Inclusionary Housing Production Impacts – Small Project Prototype Apartment Development
Income Categories
Very Low Low Moderate
Supportable Inclusionary Unit Requirement .5 .6 .9
Required Property Acquisition Cost Reduction 15% 16% 17% Return on Total Investment 4.6% 4.5% 4.5%
% Rent Increase Required to the Offset Impact 4.0% 4.6% 4.8% Inclusionary Housing: Financial Evaluation Page 34
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Large Project Prototype
The Large Project Prototype consists of 90 units, which provides significantly greater opportunities for imposing Inclusionary Housing requirements at various income levels. Based on the analysis of the Large Project Prototype, KMA concluded that the following affordable housing requirements could be supported at the income levels being evaluated:

Supportable Inclusionary Housing Requirements
Large Project Prototype
Apartment Development
Very Low Income 6%
Low Income 7%
Moderate Income 9%
The financial impacts associated with each of the identified requirements are presented in the following table:

Inclusionary Housing Production Impacts – Large Project Prototype Apartment Development
Income Categories
Very Low Low Moderate
Required Property Acquisition Cost Reduction 15% 17% 16% Return on Total Investment 4.3% 4.3% 4.3%
% Rent Increase Required to Offset the Impact 4.7% 5.3% 5.0% Inclusionary Housing: Financial Evaluation Page 35
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Density Bonus Alternatives
As discussed previously, the Section 65915 density bonus can act to materially reduce the financial impacts created by Inclusionary Housing requirements. For that reason, it should be assumed that if the City enacts an Inclusionary Housing program, many developers will request Section 65915 density bonuses.

To maximize the benefits associated with the Section 65915 density bonus, while minimizing the financial impact created by the affordability requirements, KMA created the following development prototypes:

1. A 50% density bonus is applied. This represents the maximum density bonus allowed under Section 65915.

2. To achieve a 50% Section 65915 density bonus, 15% of the units allowed by the base zoning must be allocated to very low income households (Section 65915 (f) (2)).11 The density bonus alternatives analyses are presented in Exhibit V of Appendices C and D of Attachment 3, respectively. The results of these KMA analyses indicate that the following Inclusionary Housing production requirements can be supported if the Section 65915 density bonus can be used on a financially efficient basis:
11 Under the Napa ruling, the City must also allow these units to be counted towards the fulfillment of low and/or moderate income Inclusionary Housing production requirements.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Supportable Inclusionary Housing Production Requirements Density Bonus Alternatives
Apartment Development Prototypes
Affordable Housing Requirement
as a % of Base Zoning Units
Small Project Prototype Large Project Prototype
49 Units Per Acre 41 Units Per Acre
Density Bonus Requirements 20.0% 12 15.0%
Supportable Inclusionary
Housing Requirements 20% 21%
The financial impacts estimated in the KMA analyses are presented in the following table:

Inclusionary Housing Production Impacts – State Density Bonus Prototypes Apartment Development Prototypes
Small Project Prototype Large Project Prototype
49 Units Per Acre 41 Units Per Acre
Required Property Acquisition
Cost Reduction 0% 0%
Developer Profit as a % of Total
Development Cost 4.8% 4.7%
Rent Increase Required to
Offset the Impact 0% 0%
As can be seen in the preceding tables, the use of the Section 65915 density bonus is projected to materially increase the Inclusionary Housing production requirements that can be supported.

However, this finding is predicated on the assumption that a developer can efficiently make use of the density bonus in terms of both construction type and financial characteristics. 12 The actual requirement imposed by the Section 65915 density bonus is for 15% of the units allowed by the site’s base zoning standards. However, Section 65915 (q) requires all fractional numbers to be rounded up to the next whole number. This results in a requirement for two affordable units when the mathematical result is 1.5 units.

Inclusionary Housing: Financial Evaluation Page 37
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Summary: Apartment Development
The results of the apartment development analysis can be summarized as follows:

1. Small apartment projects are disproportionately impacted by the imposition of affordable housing requirements. The results of the KMA analysis indicate that a 10- unit apartment project can potentially support a one unit Inclusionary Housing requirement if the income threshold is set at the moderate income level. 13 2. There is more flexibility with large scale apartment development. The KMA analysis found that any one of the following Inclusionary Housing requirements could be supported:

Very Low Income 6%
Low Income 7%
Moderate Income 9%

3. The use of the Section 65915 density bonus can potentially support an Inclusionary Housing requirement at 20% to 21% of the units allowed by a site’s base zoning standards. However, given the HCD guidance tied to the adoption of AB 1505 KMA recommends that the standards be set as follows:
a. The requirement should be based on 15% of the units allowed by the site’s base zoning; and
b. The income standard should be set at the low income level. 13 The analysis actually supports a 9% moderate income Inclusionary Housing requirement. This is rounded up to one unit.

Inclusionary Housing: Financial Evaluation Page 38
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 SECTION V: IN-LIEU FEE ANALYSES
At a City Council meeting held on January 19, 2021 there appeared to be consensus among the City Council members that an in-lieu fee payment option should only be provided to developers in limited circumstances. The following in-lieu fee analyses are provided to assist the City in creating specific in-lieu fee policies to be applied as part of the Inclusionary Housing Program.

It is KMA’s opinion that at a minimum the City should allow developers to pay an in-lieu fee if they can demonstrate that the production of the required affordable housing will create an extreme financial hardship. This leads to the following policy questions:

1. Does the City wish to provide an in-lieu fee payment option in any cases other than demonstrated extreme financial hardship?

2. Should an in-lieu fee schedule be created, or should the City establish a calculation methodology that is applied on a case-by-case basis for projects that are entitled to make an in-lieu fee payment?
This section of the Financial Evaluation provides estimates of the in-lieu fees that would need to be charged in order to attract a developer to produce the required number of affordable units in off-site locations. The results can be used to create in-lieu fee schedules, or the format can be used to develop a methodology for calculating the in-lieu fee on a case by case basis.

A. OWNERSHIP HOUSING DEVELOPMENT
KMA estimated the supportable in-lieu fee amounts for ownership housing development based on the Affordability Gap associated with the on-site development of Inclusionary Units within market rate ownership housing projects. The calculations are presented in Attachment 4:

Appendix A.

The pro forma analyses presented in the Ownership Housing Development Analysis section of this Financial Evaluation supported a maximum on-site Inclusionary Housing requirement of Inclusionary Housing: Financial Evaluation Page 39
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 9%. Based on that requirement, KMA estimated the weighted average Affordability Gaps and arrived at the following in-lieu fee estimates:

Maximum Supportable In-Lieu Fees
Affordability Gap Approach
Ownership Housing Development Prototypes
Moderate Income Unit Percentage 9%
In-Lieu Fee Per Inclusionary Unit $867,000
In-Lieu Fee Per Square Foot of Saleable Area $43.10
B. APARTMENT DEVELOPMENT
KMA estimated the supportable in-lieu fee amounts for apartment development based on the Affordability Gaps associated with the on-site development of Inclusionary Units within market rate apartment projects. The Affordability Gaps for apartment units are estimated in Attachment 4: Appendix B – Exhibits I and II using the following methodology:

1. KMA prepared the analyses based on the supportable percentages of Inclusionary Units that were estimated in the Apartment Development Analysis section of this Financial Evaluation.

2. The differences between the estimated achievable market rate rents and the defined Affordable Rents were calculated for one- and two-bedroom units.

3. KMA assumed that the property taxes for projects that include designated affordable housing units would be based on a lower assessed value due to the reduction in net operating income that would be generated by the project. KMA deducted this lower property tax expense from the estimated rent difference.

4. The estimated annual Affordability Gap is equal to the net rent difference minus the property tax savings.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021

5. The total Affordability Gaps were estimated by capitalizing the annual Affordability Gaps at the threshold returns derived from the pro forma analyses for the market rate alternatives. The results of these calculations are defined as the “Net Affordability Gap Per Inclusionary Unit”.

6. The Net Affordability Gap Per Inclusionary Unit were translated into the recommended in-lieu fees per square foot of leasable area.

If a 7% low income Inclusionary Housing production requirement is applied to apartment development projects, the supportable in-lieu fees are:

Maximum Supportable In-Lieu Fees
Affordability Gap Approach
Apartment Development
Low Income Unit Percentage 7%
In-Lieu Fee Per Inclusionary Unit $547,000
Per Square Foot of Leasable Area $39.50
Inclusionary Housing: Financial Evaluation Page 41
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 SECTION VI: SUMMARY
The following section summarizes the results of this Financial Evaluation. The findings provide the basis for KMA’s recommendations for the package of requirements to be imposed by an Inclusionary Housing Ordinance. A detailed set of policy recommendations will be presented in a separate memorandum based on input provided by the City Council.

A. RESIDENTIAL DEVELOPMENT PROTOTYPES
The development scopes for the residential development prototypes that were analyzed in this Financial Evaluation are presented in the following tables:

Ownership Housing Development Prototypes
Base Zoning
Section 65915
Density Bonus
Site Area (Acres) 2.0 2.0
Total Number of Units 35 48
Density (Units Per Acre) 17.5 24.0
Apartment Development Prototypes
Small Project Prototype Large Project Prototype
Site Area (Acres) .29 3.0
Total Number of Units 10 90
Density (Units Per Acre) 35 30
B. PROJECTED MARKET RATE SALES PRICES AND RENTS
The market rate ownership housing sales price and apartment rent estimates applied in this analysis are provided in the following tables:

Inclusionary Housing: Financial Evaluation Page 42
Keyser Marston Associates, Inc. 2104013.RED October 24, 2021 Projected Market Rate Sales Prices
Ownership Housing Development Prototypes
One-Bedroom Units $800,000
Two-Bedroom Units $1,143,000
Three-Bedroom Units $1,338,000
Four-Bedroom Units $1,493,000
Average Price Per Square Foot
of Saleable Area $709
Projected Monthly Market Rate Rents
Apartment Development Prototypes
Small Project Prototype Large Project Prototype
Average Monthly Rent
One-Bedroom Units N/A $3,500
Two-Bedroom Units $3,721 $3,908
Average Monthly Rent Per
Square Foot of GLA $3.72 $3.86
C. SUPPORTABLE INCLUSIONARY HOUSING REQUIREMENTS
Based on the results of the preceding Financial Evaluation, KMA reached the following conclusions:

Inclusionary Housing Requirements:

The supportable Inclusionary Housing requirements are set as percentages of the number of units allowed by a site’s base zoning standards:

1. A 7% to 16% Inclusionary Housing requirement can be supported for ownership housing development.

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Keyser Marston Associates, Inc. 2104013.RED October 24, 2021

2. A 6% to 21% Inclusionary Housing requirement can be supported for apartment development. However, it is advisable to limit the maximum percentage to 15% in compliance with HCD guidance.

It is KMA’s assumption that the Inclusionary Housing requirements will be set at the low end of the range for small projects and then stepped up for larger project. The actual percentage set asides will be determined based on City Council input.

Supportable In-Lieu Fees
The in-lieu fee amounts supported using the Affordability Gap Approach are currently estimated as follows:

Maximum Supportable In-Lieu Fees
Affordability Gap Approach
Ownership
Housing Apartments
In-Lieu Fee Amounts
Per Inclusionary Unit $639,000 $547,000
Per Square Foot of Saleable /
Leasable Area $33.40 $39.50
It is currently anticipated that in-lieu fee payments will only be allowed in cases where extreme financial hardship has been demonstrated. However, this is a policy decision that is subject to additional discussion with the City Council members.

ATTACHMENT 1

INCLUSIONARY HOUSING PROGRAM SURVEYS

REDONDO BEACH, CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Inclusionary Survey Page 1 of 8

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covnenant
Period
Threshold
Project Size % of AMI
Covnenant
Period
I. Inclusionary Requirements: Both Rental and Ownership Projects Albany Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 15% Yes 5 Perpetual 5 Perpetual Alhambra Create on-site units; create off-site units; pay in-lieu fee; donate land 15% No 7
9% at 120%
& 6% at 80% 7
9% at 120%
& 6% at
Avalon Create on-site units; create off-site units; pay in-lieu fee 20% No 4 55 4 55 Brea Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 10% No 20 Not defined 55 20 120% 45 Campbell Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 15% No 55 120% 45 Capitola Create on-site units; pay in-lieu fee 15% Yes 7 120% Life of Bldg Chula Vista Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 10% No 50 80% /120% Life of Bldg 50 80% /120% Life of Bldg Colma Create on-site units; pay in-lieu fee 20% No 5 55 5 45 Concord Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 10% Yes 5 55 5 45
Contra Costa County 1 Create on-site units; create off-site units; pay in-lieu fee; donate land 15% No 5 5 3
Cupertino 1-7 units pays in-lieu fee. Create on-site units; create off-site units; pay impact/linkage fee; donate land 15% No 7 50% /80% 99 7 50% /120% 99 Davis Create on-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 5% to 25% No 5 80% Perpetual 5 120% Perpetual Dublin Create on-site units; create off-site units; pay in-lieu fee; donate land 12.5% No 20 55 20 55
Emeryville Create on-site units; pay impact/linkage fee 12%/20% No 55 10 55 Fremont Has a production option, but the in-lieu fee option is more cost effective
18% to

21.6%
No 2 30% to 110% 2
30% to
110%
Fort Bragg Create on-site units 10% to 20% 5 80% /120% 5 100% /120% 15 Hayward Create on-site units; create off-site units; pay in-lieu fee; pay impact/linkage fee; donate land
6% / 7.5% -
10%
No 2 3% @ 50%/
3% @ 60%
55 2 110% 45
Huntington Beach Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 10% No 3 80% 55 3 120% 45 Rental Development Ownership Development
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Inclusionary Survey; Incl Survey Page 2 of 8

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covnenant
Period
Threshold
Project Size % of AMI
Covnenant
Period
Rental Development Ownership Development
Irvine
Projects with fewer than 50 units can create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land. Projects with 50+ units must
produce the affordable units on site.
15% No 50
50%, 80% &
120%
Defined
credits
30 50
50%, 80% &
120%
Defined
credits
30 La Habra Create on-site units; create off-site units; pay in-lieu fee; acquisition/rehabilitation. 15% No 10 9% Mod / 6% VL & Low 55 10 110% 45 Long Beach Create on-site units; pay in-lieu fee; donate land 11%/10% No 10 50% 55 10 110% 45 Los Altos 1 Create on-site units; create off-site units 10% No 10 30 10 30 Menlo Park Create on-site units; create off-site units; pay in-lieu fee 10% Yes 5 80% /120% 5 80% /120% Mill Valley Create on-site units 25% Yes 4 120% Perpetual 4 120% Perpetual Nevada County 1 Create on-site units; create off-site units No 20 30 20 30 Oxnard Create on-site units; pay in-lieu fee 10% No 10 55 10 Pacifica Create on-site units; create off-site units; pay in-lieu fee; donate land 15% No 8 55 8 45
Palo Alto Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 15% Yes 59 59
Pasadena Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 20% No 1 5% @50%;
5% @ 80%;
10% @ 120%
Perpetual 1 110% 45
Petaluma Create on-site units; pay in-lieu fee; donate land 15% No 30 30 Pleasanton
Create on-site units; create off-site units; pay in-lieu fee; donate land; credit transfers; other alternate methods of compliance
15% Yes 15 15 Perpetual
Pomona Create on-site units; create off-site units; pay in-lieu fee; donate land
13% / 7%-
11%
Yes 3 120% Perpetual 3 120% 45
Redwood City Create on-site units; create off-site units; preserve or rehab units; pay impact/linkage fee; donate land No 5 30 5 30 Sacramento Has a production option, but the in-lieu fee option is more cost effective 10% No 1 80% 1 80%
San Bruno Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 15% No 10 55 10 45 San Diego Create on-site units; create off-site units; pay in-lieu fee; donate land 10% to 15% No 10 60% 55
10% @
100% / 15%
%120%
San Francisco
Create on-site units; create off-site units; pay in-lieu fee. Ful schedule goes into effect in 2023 for rental and 2025 for ownership.
15% to 20%
/ 15% to
26%
Yes 10 55% to 110% 10
80% to
130%
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Inclusionary Survey; Incl Survey Page 3 of 8

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

Create on-site units; off-site units; pay in-lieu fee 15% / 10% No 5 10% @ 50%/ 15% @ 80% 55 5 120% 45
Santa Cruz Create on-site units; create off-site units; pay in-lieu fee; donate land 15% Yes 2 80% Perpetual 2 120% Perpetual
Santa Monica Create on-site units; create off-site units; pay in-lieu fee; donate land 5% to 30% Yes 2
50%, 80% &
120%
Defined
credits
55 2
50%, 80% &
120%
Defined
credits
55 Santa Rosa Has a production option, but the in-lieu fee option is more cost effective
5% to 8% /
10%
No 1 5% @ 50% or
8% @ 60%
2 110%
Sonoma Create on-site units 25% Yes 5 120% 55 5 120% 55 Sonoma County Create on-site units; create off-site units; pay in-lieu fee; donate land 20% Yes 60% 55 80% 30
South San Francisco Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 20% No 4 55 4 55
Sunnyvale Create on-site units; create off-site units; pay in-lieu fee; donate land, unit conversion, other proposals 15.0% No 7 5% @50%; 10% @ 60%
55 7 100% 30
Tiburon Create on-site units; create off-site units; pay in-lieu fee 15% 3 Perpetual 3 Perpetual Union City Create on-site units; create off-site units; pay in-lieu fee 15% No 7 7 West Sacramento Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 10% No 5 5% @50%; 5% @ 60%
55 5 70% 45
West Hollywood Create on-site units; create off-site units; pay in-lieu fee for 2- 10 unit projects 20% No 2 Low / Mod Perpetual 2 Low / Mod Perpetual Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Inclusionary Survey; Incl Survey Page 4 of 8

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

File name: 10 24 21 Inclusionary Survey; Incl Survey Page 5 of 8

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covnenant
Period
Threshold
Project Size % of AMI
Covnenant
Period
Rental Development Ownership Development
III. Inclusionary for Ownership Projects & Impact Fee for Rental Projects Berkeley Create on-site units; pay in-lieu fee 20% No 5 80% Perpetual San Carlos Create on-site units; create off-site units; pay impact/linkage fee 15% Yes 55 2 45
Truckee 2
Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; pay impact/linkage fee; donate land
15% No 7 Perpetual 7 Perpetual
IV. Mandatory Inclusionary for Ownership Projects & Voluntary Inclusionary for Rental Projects Pittsburg Create on-site units; pay in-lieu fee 15% Yes 5 Salinas Create on-site units; create off-site units; donate land 20% No 10 30 San Juan Bautista Create on-site units; pay impact/linkage fee 6% San Luis Obispo Create on-site units; pay in-lieu fee; donate land 3% Yes 55 5 45 San Marcos Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 15% No 55 120% 55 Solana Beach Create on-site units; create off-site units; preserve or rehab existing housing; pay impact/linkage fee 15% No 5 55 5 45 V. Rental Projects Only
Glendale Create on-site units; create off-site units; pay in-lieu fee; donate land 15% No 8 60% 55
1 The program requirements are only applied in designated areas of the jurisdiction. 2 The program requirements are applied in the entire jurisdiction, but the requirements vary by zones, neighborhood, or districts.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Inclusionary Survey; Incl Survey Page 6 of 8

APPENDIX B

INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE AND SAN DIEGO COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covnenant
Period
Threshold
Project Size % of AMI
Covnenant
Period In-Lieu Fee
I. Inclusionary Requirements: Both Rental and Ownership Projects Alhambra On-site or pay in-lieu fee. 15% No 7
9% at 120% &
6% at 80%
7 9% at
120% &
6% at
80%
Rental @ $14.30/SF
Ownership @ $30.00/SF
Brea
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land
10% No 20 55 20 120% 10 Calculated per project. Based on the Affordability Gap
Huntington Beach
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu fee
10% No 3 80% 55 3 120% 45
Sliding scale: 3 Units @
$19,360/Unit - 30 Units @
$60,695/Unit
Irvine
Projects with fewer than 50
units can create on-site units;
create off-site units; preserve
or rehab existing housing; pay
in-lieu fee; donate land.

Projects with 50+ units must
produce the affordable units
on site.
15% No 50
50%, 80% &
120% Defined
credits
30 50
50%, 80%
& 120%
Defined
credits
30 Calculated per project. Based
on an equivalent value
calculation
La Habra
Create on-site units; create offsite units; pay in-lieu fee; acquisition/rehabilitation.
15% No 10 9% Mod / 6%
VL & Low 55 10 110% 45
Calculated per project. Based
on the estimated construction
cost to produce the unit.

Long Beach Create on-site units; pay in-lieu
fee; donate land 11%/10% No 10 50% 55 10 120% 45 Rental @ $38.00/SF Ownership @ $29.10/SF Pasadena
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land
20% No 1
5% @50%;
5% @ 80%;
10% @ 120%
1 110% 45
Sliding scale by sub-area &
project size. Low at $34.19/SF &
High at $73.52/SF
Pomona
Create on-site units; create offsite units; pay in-lieu fee; donate land
13% / 7%-
11%
Yes 3 120% Perpetual 3 120% 45
Rental @ $9.30/SF Single
Family @ $11.40/SF
Condominiums @ $9.30/SF
Rental Development Ownership Development
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Inclusionary Survey; LA_OC_SD Page 7 of 8

APPENDIX B

INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE AND SAN DIEGO COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covnenant
Period
Threshold
Project Size % of AMI
Covnenant
Period In-Lieu Fee
Rental Development Ownership Development
San Diego
Create on-site units; create offsite units; pay in-lieu fee; donate land
10% to 15% No 10 50% or 80% 55
100% or
120%
Increases annually from
$15.18/SF in 2020/21 to $22.55
in 2023/24
San Juan Capistrano
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land
10% No 2 55 2 55
Based on 90% of the
Affordability Gap, which is
updated monthly based on
benchmark market prices
Santa Ana
Only applies to changes in land
use and zoning designations.

Create on-site units; off-site
units; pay in-lieu fee
15% No 5 10% @ 50%/
15% @ 60%
55 5 120% 45 Fewer than 20 Units @ $5/SF
20+ Units @ $15/SF
Santa Monica
Create on-site units; create offsite units; pay in-lieu fee; donate land
5% to 30% Yes 2
50%, 80% &
120% Defined
credits
55 2
50%, 80%
& 120%
Defined
credits
55 Rental @ $35.70/SF
Ownership @ $41.70/SF
West Hollywood
Create on-site units; create offsite units; pay in-lieu fee for 2- 10 units projects
20% No 2 Low / Mod Perpetual 2 Low /
Mod Perpetual
Sliding scale: 2 Units @
$13.63/SF - 10 Units @
$29.23/SF
II. Inclusionary Requirements: Ownership Projects Only
San Clemente
Create on-site units; create offsite units; pay in-lieu fee; donate land; or a combination
recommended by the
Community Development
Director.
4% No 6 50%
Based on the Affordability Gap
associated with a prototype
1,100 SF unit.

III. Inclusionary Requirements: Rental Projects Only
Glendale
Create on-site units; create offsite units; pay in-lieu fee; donate land
15% No 8 60% 55 Sliding scale: 8 Units @
$28.71/SF - 21 Units @ $55/SF
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Inclusionary Survey; LA_OC_SD Page 8 of 8 ATTACHMENT 2

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; ATT 2 Title Page 1 of 26

APPENDIX A

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

HOME SALES SURVEY
Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; App A Titles Page 2 of 26

APPENDIX A
HOME SALES SURVEY 1

TOWNHOME/CONDOMINIUM UNITS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Unit Size (SF) Total Per SF Year Built
1920 Pacific Coast Hwy #206 Redondo Beach 90277 869 $740,000 $852 2019 1920 Pacific Coast Hwy #210 Redondo Beach 90277 869 $689,000 $793 2018 1920 S Pacific Coast Hwy #308 Redondo Beach 90277 885 $825,000 $932 2019 1920 S Pacific Coast Hwy #309 Redondo Beach 90277 885 $835,000 $944 2019 1920 S Pacific Coast Hwy #310 Redondo Beach 90277 885 $815,000 $921 2019 Minimum 869 $689,000 $793 2018
Maximum 885 $835,000 $944 2019
Average 879 $780,800 $889 2019
6152 Pacific Coast Hwy Redondo Beach 90277 1,124 $935,000 $832 2020 6160 Pacific Coast Hwy Redondo Beach 90277 1,198 $970,000 $810 2020 1920 S Pacific Coast Hwy #211 Redondo Beach 90277 1,230 $922,000 $750 2019 1920 S Pacific Coast Hwy #302 Redondo Beach 90277 1,420 $1,060,000 $746 2019 1920 S Pacific Coast Hwy #314 Redondo Beach 90277 1,426 $1,040,000 $729 2019 1920 S Pacific Coast Hwy #313 Redondo Beach 90277 1,526 $1,110,000 $727 2019 Minimum 1,124 $922,000 $727 2019
Maximum 1,526 $1,110,000 $832 2020
Average 1,321 $1,006,167 $762 2019
18510 Grevillea Ave Redondo Beach 90278 1,575 $960,000 $610 2019 2416 Grant Ave Unit A Redondo Beach 90278 1,740 $980,000 $563 2013 1920 S Pacific Coast Hwy #113 Redondo Beach 90277 1,749 $1,150,000 $658 2018 1920 S Pacific Coast Hwy #111 Redondo Beach 90277 1,749 $1,125,000 $643 2019 1920 S Pacific Coast #109 Redondo Beach 90277 1,749 $1,130,000 $646 2018 1920 S Pacific Coast Hwy #102 Redondo Beach 90277 1,749 $1,075,000 $615 2019 1920 S Pacific Coast Hwy #103 Redondo Beach 90277 1,749 $1,040,000 $595 2019 1920 S Pacific Coast Hwy #117 Redondo Beach 90277 1,950 $1,050,000 $538 2019 1920 S Pacific Coast Hwy #121 Redondo Beach 90277 1,950 $1,150,000 $590 2019 1920 S Pacific Coast Hwy #115 Redondo Beach 90277 1,950 $1,050,000 $538 2019 1920 S Pacific Coast Hwy #122 Redondo Beach 90277 1,950 $1,169,000 $599 2019 111 Vista Del Mar Unit C Redondo Beach 90277 2,224 $2,100,000 $944 2019 111 Vista Del Mar Unit D Redondo Beach 90277 2,324 $2,200,000 $947 2019 636 Vincent Park #A Redondo Beach 90277 2,394 $1,750,000 $731 2019 Minimum 1,575 $960,000 $538 2013
Maximum 2,394 $2,200,000 $947 2019
Average 1,914 $1,280,643 $669 2018
Address
Sales Price
One-Bedroom Units
Two-Bedroom Units
Three-Bedroom Units
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Own Inclusionary; Home Sales Page 3 of 26

APPENDIX A
HOME SALES SURVEY 1

TOWNHOME/CONDOMINIUM UNITS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Address Unit Size (SF) Total Per SF Year Built
Sales Price
18228 Grevillea Ave Redondo Beach 90278 1,746 $1,005,000 $576 2018 2207 Rockefeller Ln Unit C Redondo Beach 90278 1,820 $1,100,000 $604 2015 18307 Grevillea Ave Redondo Beach 90278 1,879 $930,000 $495 2017 2505 Grant Ave Unit C Redondo Beach 90278 1,915 $1,100,000 $574 2015 1608 Phelan Ln Redondo Beach 90278 1,915 $1,149,000 $600 2017 1801 Rindge Ln Redondo Beach 90278 2,080 $1,230,000 $591 2016 2707 Rockefeller Ln Unit B Redondo Beach 90278 2,091 $1,090,000 $521 2019 2517 Voorhees Ave Unit A Redondo Beach 90278 2,165 $1,385,000 $640 2020 2112 Carnegie Ln Unit B Redondo Beach 90278 2,207 $1,300,000 $589 2021 2114 Carnegie Ln Unit B Redondo Beach 90278 2,207 $1,290,000 $585 2021 123 S Guadalupe Ave Unit A Redondo Beach 90277 2,220 $1,500,000 $676 2011 2517 Voorhees Ave Unit B Redondo Beach 90278 2,282 $1,415,000 $620 2020 2713 Carnegie Ln Unit C Redondo Beach 90278 2,293 $1,230,000 $536 2505 HUNTINGTON Ln Unit B Redondo Beach 90278 2,300 $1,534,000 $667 2020 2505 Huntington Ln Unit A Redondo Beach 90278 2,300 $1,574,000 $684 2020 2713 Carnegie Ln Unit A Redondo Beach 90278 2,304 $1,125,000 $488 2019 2017 Plant Ave Unit A Redondo Beach 90278 2,390 $1,630,000 $682 2020 2420 Huntington Ln Unit A Redondo Beach 90278 2,390 $1,505,000 $630 2020 2005 Curtis Ave Unit B Redondo Beach 90278 2,390 $1,595,000 $667 2020 2420 Huntington Ln Unit B Redondo Beach 90278 2,390 $1,595,000 $667 2020 2108 Harriman Ln Unit B Redondo Beach 90278 2,400 $1,585,000 $660 2015 2108 Gates Unit A Redondo Beach 90278 2,400 $1,515,000 $631 2017 2019 Morgan Ln Unit B Redondo Beach 90278 2,428 $1,540,000 $634 2016 2227 Dufour Ave Unit B Redondo Beach 90278 2,430 $1,550,000 $638 2017 1917 Farrell Ave Unit A Redondo Beach 90278 2,446 $1,595,000 $652 2021 1917 Farrell Ave Unit B Redondo Beach 90278 2,446 $1,595,000 $652 2021 613 N Lucia Ave Unit B Redondo Beach 90277 2,476 $1,530,000 $618 2015 1806 Speyer Ln Unit A Redondo Beach 90278 2,480 $1,450,000 $585 2014 2419 Huntington Ln Unit A Redondo Beach 90278 2,480 $1,400,000 $565 2012 2202 Voorhees Ave Unit A Redondo Beach 90278 2,500 $1,430,000 $572 2012 2403 Gates Ave Unit B Redondo Beach 90278 2,508 $1,355,000 $540 2014 1712 Harriman Ln Unit B Redondo Beach 90278 2,508 $1,550,000 $618 2018 1926 Ruhland Ave Unit A Redondo Beach 90278 2,526 $1,610,000 $637 2020 1914 Marshallfield Ln Unit A Redondo Beach 90278 2,526 $1,599,000 $633 2020 2203 Ruhland Ave Unit B Redondo Beach 90278 2,540 $1,550,000 $610 2020 2203 Ruhland Ave Unit A Redondo Beach 90278 2,540 $1,559,000 $614 2020 1917 Gates Ave Unit A Redondo Beach 90278 2,585 $1,350,000 $522 2011 2006 Morgan Ln Unit A Redondo Beach 90278 2,587 $1,590,000 $615 2020 2006 Morgan Ln Unit B Redondo Beach 90278 2,587 $1,595,000 $617 2020 1914 Marshallfield Ln Unit B Redondo Beach 90278 2,589 $1,599,000 $618 2020 528 N Francisca Ave Unit B Redondo Beach 90277 2,600 $1,575,000 $606 2016 1905 Speyer Ln Unit A Redondo Beach 90278 2,610 $1,656,000 $634 2012 2017 Huntington Ln Unit B Redondo Beach 90278 2,612 $1,515,000 $580 2013 603 N Juanita Ave Unit A Redondo Beach 90277 2,623 $1,580,000 $602 2014 709 Elvira Ave Unit B Redondo Beach 90277 2,638 $2,050,000 $777 2020 2002 Pullman Ln Unit B Redondo Beach 90278 2,650 $1,405,000 $530 2016 209 S Irena Ave Unit B Redondo Beach 90277 2,670 $1,550,000 $581 2017 Four-Bedroom Units
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Own Inclusionary; Home Sales Page 4 of 26

APPENDIX A
HOME SALES SURVEY 1

TOWNHOME/CONDOMINIUM UNITS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Address Unit Size (SF) Total Per SF Year Built
Sales Price
2019 Farrell Ave Unit B Redondo Beach 90278 2,672 $1,499,000 $561 2015 1104 Vincent St Unit B Redondo Beach 90277 2,688 $1,575,000 $586 2015 2215 A Robinson St Unit A Redondo Beach 90278 2,697 $1,350,000 $501 2020 2215 Robinson St Unit B Redondo Beach 90278 2,714 $1,380,000 $508 2020 2207 Mackay Ln Redondo Beach 90278 2,777 $1,581,000 $569 2014 512 N Irena Unit A Redondo Beach 90277 2,826 $1,699,000 $601 2020 1919 Gates Ave Unit B Redondo Beach 90278 2,830 $1,632,000 $577 2019 709 Elvira Ave Unit A Redondo Beach 90277 2,834 $2,199,000 $776 2020 535 Avenue B Unit B Redondo Beach 90277 2,860 $2,050,000 $717 2016 216 N Prospect Ave Unit A Redondo Beach 90277 2,915 $1,775,000 $609 2016 1921 Ruhland Ave Unit B Redondo Beach 90278 2,927 $1,545,000 $528 2014 223 S Irena Ave Unit A Redondo Beach 90277 2,949 $1,800,000 $610 2020 223 S Irena Ave Unit B Redondo Beach 90277 3,005 $1,800,000 $599 2020 1011 Spencer St Redondo Beach 90277 3,102 $1,875,000 $604 2020 232 S Irena Ave Unit B Redondo Beach 90277 3,356 $1,790,000 $533 2014 Minimum 1,746 $930,000 $488 2011
Maximum 3,356 $2,199,000 $777 2021
Average 2,497 $1,511,452 $605 2017
1 Source: Redfin. Based on homes constructed during the past 10 years and sold between March 2020 and March 2021.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Own Inclusionary; Home Sales Page 5 of 26

APPENDIX B

AFFORDABILITY ANALYSES

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; App B Titles Page 6 of 26

APPENDIX B - EXHIBIT I
AFFORDABLE SALES PRICE CALCULATIONS 1

MODERATE INCOME UNITS
2021 INCOME STANDARDS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
One-Bedroom
Units
Two-Bedroom
Units
ThreeBedroom UnitsFour-Bedroom
Units
I. Income Information
Area Median Income $80,000 $86,400 $72,000 $80,000
Benchmark Household Income @ 110% of AMI $70,400 $79,200 $88,000 $95,040 Income Allotted to Housing @ 35% of Income $24,640 $27,720 $30,800 $33,260 II. Expenses
Annual Utilities Allowance 2 $1,656 $1,968 $2,448 $3,024 HOA, Maintenance & Insurance 3 4,200 4,500 4,800 5,100
Property Taxes @ 1.15% of ASP 3,330 3,770 4,180 4,460
Total Expenses $9,186 $10,238 $11,428 $12,584
III. Income Available for Mortgage $15,454 $17,482 $19,372 $20,676 IV. Affordable Sales Price
Supportable Mtg @ 3.84% Interest 4 $275,000 $311,100 $344,800 $368,000 Home Buyer Down Payment @ 5% of ASP 14,500 16,400 18,200 19,400 Affordable Sales Price $289,500 $327,500 $363,000 $387,400 1 2
3 Based in part on the HOA dues identified in the home sales survey. 4 Based on a 50 basis points premium applied to the Bankrate site average APR as of July 1, 2021 for a fixed-interest rate loan with a 30-year amortization period.

Based on 2021 Los Angeles County household incomes published by the California Housing & Community Development Department (HCD). The Affordable Sales Price calculations are based on the California Health and Safety Code Section 50052.5 methodology.

Utilities allowances are based on the LACDA Single Family Home utility allowance schedule effective as of 7/1/21. Assumes: Gas Heating, Gas Cooking, Gas Water Heater, Basic Electric, Air Conditioning, Water, and Trash.

Prepared by: Keyser Marston Associates
File name: 10 24 21 Own Inclusionary; ASP

APPENDIX B - EXHIBIT II
VALUE ESTIMATES: INCLUSIONARY UNITS

APARTMENT UNITS FULFILL THE INCLUSIONARY HOUSING REQUIREMENTS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
One-Bedroom
Units
Two-Bedroom
Units
ThreeBedroom UnitsFour-Bedroom
Units
I. General Assumptions
Area Median Income (AMI) 1 $64,000 $72,000 $80,000 $86,400 Monthly Utilities Allowance $138 $164 $204 $252
HOA, Maintenance & Insurance $350 $375 $400 $425
II. Very Low Income - Rent Based on 50% AMI
A. Benchmark Annual Household Income $32,000 $36,000 $40,000 $43,200 B. Maximum Monthly Rent @ 30% of Household Income $800 $900 $1,000 $1,080 C. Gross Annual Rent Income Per Unit $9,600 $10,800 $12,000 $12,960 D. Ongoing Expenses
Annual Utilities Allowance, HOA, Maintenance & Insurance 2 $5,856 $6,468 $7,248 $8,124 Management @ 5% Gross Rent Income 480 540 600 648
Property Taxes @ 1.15% of Restricted Value 611 710 776 783 Total Ongoing Expenses $6,947 $7,718 $8,624 $9,555
E. Stabilized Net Operating Income $2,653 $3,082 $3,376 $3,405 F. Capitalization Rate 5.0% 5.0% 5.0% 5.0%
G. Value Per Very Low Income Unit $53,100 $61,600 $67,500 $68,100 III. Low Income - Rent Based on 60% AMI
A. Benchmark Annual Household Income $38,400 $43,200 $48,000 $51,840 B. Maximum Monthly Rent @ 30% of Household Income $960 $1,080 $1,200 $1,296 C. Gross Annual Rent Income Per Unit $11,520 $12,960 $14,400 $15,552 D. Ongoing Expenses
Annual Utilities Allowance, HOA, Maintenance & Insurance 2 $5,856 $6,468 $7,248 $8,124 Management @ 5% Gross Rent Income 576 648 720 778
Property Taxes @ 1.15% of Restricted Value 951 1,093 1,203 1,243 Total Ongoing Expenses $7,383 $8,209 $9,171 $10,145
E. Stabilized Net Operating Income $4,137 $4,751 $5,229 $5,407 F. Capitalization Rate 5.0% 5.0% 5.0% 5.0%
G. Value Per Low Income Unit $82,700 $95,000 $104,600 $108,100 1 2 Assumes the landlord pays the utilities costs. The allowances are based on the LACDA Single Family Home utility allowance schedule effective as of 7/1/21. Assumes: Gas Heating, Gas Cooking, Gas Water Heater, Basic Electric, Air Conditioning, Water, and Trash.

Based on the 2020 Los Angeles County household incomes published by the California Housing & Community Development Department (HCD). The benchmark household size is set at the number of bedrooms in the unit plus one.

Prepared by: Keyser Marston Associates
File name: 10 24 21 Own Inclusionary; Aff Value Ests

APPENDIX C

PRO FORMA ANALYSES

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

BASE ZONING PROTOTYPE
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Own Inclusionary; App C Titles Page 9 of 26

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT I

MARKET RATE ALTERNATIVE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

PRO FORMA ANALYSIS

BASE ZONING PROTOTYPE
Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; PF Base Page 10 of 26 APPENDIX C - EXHIBIT I - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MARKET RATE ALTERNATIVE

BASE ZONING PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 87,120 Sf of Land $150 /Sf of Land $13,068,000 II. Direct Costs 2
On-Site Improvements/Landscaping 87,120 Sf of Land $20 /Sf of Land $1,742,000 Parking
Attached Garages 3 35 Spaces $0 /Space 0
At-Grade Spaces 12 Spaces $5,000 /Space 60,000
Building Costs 60,300 Sf of GBA $185 /Sf of GBA 11,156,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 2,592,000 Total Direct Costs $15,550,000
III. Indirect Costs
Architecture, Engineering & Consulting 8.0% Direct Costs $1,244,000 Public Permits & Fees 5 35 Units $40,000 /Unit 1,400,000 Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 311,000 Marketing 35 Units $5,000 /Unit 175,000
Developer Fee 3.0% Gross Sales Revenue 1,282,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 221,000 Total Indirect Costs $4,633,000
IV. Financing Costs
Interest During Construction 6 $1,340,000
Loan Origination Fees 60.0% Loan to Cost 2.5 Points 499,000 Total Financing Costs $1,839,000
V. Total Construction Cost 35 Units $629,000 /Unit $22,022,000 Total Development Cost 35 Units $1,003,000 /Unit $35,090,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 Assumes that the cost for the attached garages is included in the building costs. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Assumes a 5.0% interest cost for debt; an 18 month construction period; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 2.5 points for loan origination fees.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; PF Base Page 11 of 26 APPENDIX C - EXHIBIT I - TABLE 2

PROJECTED NET SALES REVENUE

MARKET RATE ALTERNATIVE

BASE ZONING PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Sales Revenue 1
One-Bedroom Units 5 Units @ $800,000 /Unit $4,000,000
Two-Bedroom Units 12 Units @ $1,143,000 /Unit 13,716,000 Three-Bedroom Units 12 Units @ $1,338,000 /Unit 16,056,000 Four-Bedroom Units 6 Units @ $1,493,000 /Unit 8,958,000 Total Gross Sales Revenue $42,730,000
II. Cost of Sales
Commissions 3.0% Gross Sales Revenue $1,282,000
Closing 2.0% Gross Sales Revenue 855,000
Warranty 0.5% Gross Sales Revenue 214,000
Total Cost of Sales ($2,351,000)
III. Net Revenue $40,379,000
1 Based in part on a sales survey undertaken by KMA in March 2021. See APPENDIX A. The weighted average sales price equates to $709 per square foot of saleable area.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; PF Base Page 12 of 26 APPENDIX C - EXHIBIT I - TABLE 3

PROJECTED DEVELOPER PROFIT

MARKET RATE ALTERNATIVE

BASE ZONING PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Net Revenue See APPENDIX C - EXHIBIT I - TABLE 2 $40,379,000 II. Total Development Cost See APPENDIX C - EXHIBIT I - TABLE 1 $35,090,000 III. Developer Profit 15.1% Total Development Cost $5,289,000 Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; PF Base Page 13 of 26 INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT II

PRO FORMA ANALYSIS

BASE ZONING PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

PRO RATA INCLUSIONARY UNIT DISTRIBUTION
Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Mod PR Page 14 of 26 APPENDIX C - EXHIBIT II - TABLE 1

ESTIMATED DEVELOPMENT COSTS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 87,120 Sf of Land $150 /Sf of Land $13,068,000 II. Direct Costs 2
On-Site Improvements/Landscaping 87,120 Sf of Land $20 /Sf of Land $1,742,000 Parking
Attached Garages 3 35 Spaces $0 /Space 0
At-Grade Spaces 12 Spaces $5,000 /Space 60,000
Building Costs 60,300 Sf of GBA $185 /Sf of GBA 11,156,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 2,592,000 Total Direct Costs $15,550,000
III. Indirect Costs
Architecture, Engineering & Consulting 8.0% Direct Costs $1,244,000 Public Permits & Fees 5 35 Units $40,000 /Unit 1,400,000 Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 311,000 Marketing 35 Units $5,000 /Unit 175,000
Developer Fee 6 35 Units $36,629 /Unit 1,282,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 221,000 Total Indirect Costs $4,633,000
IV. Financing Costs
Interest During Construction 7 $1,252,000
Loan Origination Fees 60.0% Loan to Cost 2.5 Points 475,000 Total Financing Costs $1,727,000
V. Total Construction Cost 35 Units $626,000 /Unit $21,910,000 Total Development Cost 35 Units $999,000 /Unit $34,978,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 Assumes that the cost for the attached garages is included in the building costs. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on the Developer Fee per unit generated by the MARKET RATE ALTERNATIVE 7 Assumes a 5.0% interest cost for debt; an 18 month construction period; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 2.5 points for loan origination fees.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Mod PR Page 15 of 26 APPENDIX C - EXHIBIT II - TABLE 2

PROJECTED NET SALES REVENUE

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Sales Revenue
Market Rate Units 1
One-Bedroom Units 5 Units @ $800,000 /Unit $4,000,000
Two-Bedroom Units 11 Units @ $1,143,000 /Unit $12,573,000 Three-Bedroom Units 11 Units @ $1,338,000 /Unit 14,718,000 Four-Bedroom Units 6 Units @ $1,493,000 /Unit 8,958,000 Moderate Income Units 2
One-Bedroom Units 0 Units @ $289,500 /Unit 0
Two-Bedroom Units 1 Unit @ $327,500 /Unit 328,000
Three-Bedroom Units 1 Unit @ $363,000 /Unit 363,000
Four-Bedroom Units 0 Units @ $387,400 /Unit 0
Total Gross Sales Revenue $40,940,000
II. Cost of Sales
Commissions 3.0% Gross Sales Revenue $1,228,000
Closing 2.0% Gross Sales Revenue 819,000
Warranty 0.5% Gross Sales Revenue 205,000
Total Cost of Sales ($2,252,000)
III. Net Revenue $38,688,000
1 2 See APPENDIX B - EXHIBIT I.

Based in part on a sales survey undertaken by KMA in March 2021. See APPENDIX A. The weighted average sales price equates to $709 per square foot of saleable area.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Mod PR Page 16 of 26 APPENDIX C - EXHIBIT II - TABLE 3

INCLUSIONARY HOUSING IMPACTS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Funds Available for Development Costs
Net Revenue See APPENDIX C - EXHIBIT II - TABLE 2 $38,688,000 (Less) Threshold Developer Profit 1 15.1% Total Development Cost ($5,272,000) Total Funds Available for Development Costs $33,416,000 II. Total Development Cost See APPENDIX C - EXHIBIT II - TABLE 1 $34,978,000 III. Total Financial Impact ($1,562,000)
Property Acquisition Cost Reduction 12% of Estimated Current Acquisition Prices Developer Profit 10.6% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 3.9% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE ALTERNATIVE.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Mod PR Page 17 of 26 INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT III

PRO FORMA ANALYSIS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT

SMALLEST UNITS FULFILL THE INCLUSIONARY REQUIREMENT
Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Base Mod SM Page 18 of 26 APPENDIX C - EXHIBIT III - TABLE 1

ESTIMATED DEVELOPMENT COSTS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 87,120 Sf of Land $150 /Sf of Land $13,068,000 II. Direct Costs 2
On-Site Improvements/Landscaping 87,120 Sf of Land $20 /Sf of Land $1,742,000 Parking
Attached Garages 3 35 Spaces $0 /Space 0
At-Grade Spaces 12 Spaces $5,000 /Space 60,000
Building Costs 60,300 Sf of GBA $185 /Sf of GBA 11,156,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 2,592,000 Total Direct Costs $15,550,000
III. Indirect Costs
Architecture, Engineering & Consulting 8.0% Direct Costs $1,244,000 Public Permits & Fees 5 35 Units $40,000 /Unit 1,400,000 Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 311,000 Marketing 35 Units $5,000 /Unit 175,000
Developer Fee 6 35 Units $36,629 /Unit 1,282,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 221,000 Total Indirect Costs $4,633,000
IV. Financing Costs
Interest During Construction 7 $1,246,000
Loan Origination Fees 60.0% Loan to Cost 2.5 Points 475,000 Total Financing Costs $1,721,000
V. Total Construction Cost 35 Units $626,000 /Unit $21,904,000 Total Development Cost 35 Units $999,000 /Unit $34,972,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 Assumes that the cost for the attached garages is included in the building costs. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on the Developer Fee per unit generated by the MARKET RATE ALTERNATIVE 7 Assumes a 5.0% interest cost for debt; an 18 month construction period; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 2.5 points for loan origination fees.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Base Mod SM Page 19 of 26 APPENDIX C - EXHIBIT III - TABLE 2

PROJECTED NET SALES REVENUE

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Sales Revenue
Market Rate Units 1
One-Bedroom Units 3 Units @ $800,000 /Unit $2,400,000
Two-Bedroom Units 11 Units @ $1,143,000 /Unit $12,573,000 Three-Bedroom Units 12 Units @ $1,338,000 /Unit 16,056,000 Four-Bedroom Units 6 Units @ $1,493,000 /Unit 8,958,000 Moderate Income Units 2
One-Bedroom Units 2 Units @ $289,500 /Unit 579,000
Two-Bedroom Units 1 Unit @ $327,500 /Unit 328,000
Three-Bedroom Units 0 Units @ $363,000 /Unit 0
Four-Bedroom Units 0 Units @ $387,400 /Unit 0
Total Gross Sales Revenue $40,894,000
II. Cost of Sales
Commissions 3.0% Gross Sales Revenue $1,227,000
Closing 2.0% Gross Sales Revenue 818,000
Warranty 0.5% Gross Sales Revenue 204,000
Total Cost of Sales ($2,249,000)
III. Net Revenue $38,645,000
1 2 See APPENDIX B - EXHIBIT I.

Based in part on a sales survey undertaken by KMA in March 2021. See APPENDIX A. The weighted average sales price equates to $702 per square foot of saleable area.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Base Mod SM Page 20 of 26 APPENDIX C - EXHIBIT III - TABLE 3

INCLUSIONARY HOUSING IMPACTS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Funds Available for Development Costs
Net Revenue See APPENDIX C - EXHIBIT III - TABLE 2 $38,645,000 (Less) Threshold Developer Profit 1 15.1% Total Development Cost ($5,271,000) Total Funds Available for Development Costs $33,374,000 II. Total Development Cost See APPENDIX C - EXHIBIT III - TABLE 1 $34,972,000 III. Total Financial Impact ($1,598,000)
Property Acquisition Cost Reduction 12% of Estimated Current Acquisition Prices Developer Profit 10.5% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 4.0% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE ALTERNATIVE.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf Base Mod SM Page 21 of 26

REDONDO BEACH, CALIFORNIA

APPENDIX D

PRO FORMA ANALYSES

STATE DENSITY BONUS PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 Own Inclusionary; App D Titles Page 22 of 26

OWNERSHIP HOUSING DEVELOPMENT

APPENDIX D

PRO FORMA ANALYSIS

VERY LOW INCOME RENTAL INCLUSIONARY HOUSING COMPONENT

STATE DENSITY BONUS PROTOTYPE
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf DB VL Page 23 of 26 APPENDIX D - TABLE 1

ESTIMATED DEVELOPMENT COSTS

STATE DENSITY BONUS PROTOTYPE

VERY LOW INCOME RENTAL INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 87,120 Sf of Land $150 /Sf of Land $13,068,000 II. Direct Costs 2
On-Site Improvements/Landscaping 87,120 Sf of Land $20 /Sf of Land $1,742,000 Parking 3 48 Spaces $0 /Space 0
Building Costs 81,600 Sf of GBA $185 /Sf of GBA 15,096,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 3,368,000 Total Direct Costs $20,206,000
III. Indirect Costs
Architecture, Engineering & Consulting 8.0% Direct Costs $1,616,000 Public Permits & Fees 5 48 Units $40,000 /Unit 1,920,000 Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 404,000 Marketing 48 Units $5,000 /Unit 240,000
Developer Fee 6 48 Units $36,271 /Unit 1,741,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 296,000 Total Indirect Costs $6,217,000
IV. Financing Costs
Interest During Construction 7 $1,500,000
Loan Origination Fees 60.0% Loan to Cost 2.5 Points 581,000 Total Financing Costs $2,081,000
V. Total Construction Cost 48 Units $594,000 /Unit $28,504,000 Total Development Cost 48 Units $866,000 /Unit $41,572,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on the Developer Fee per unit generated by the MARKET RATE ALTERNATIVE 7 Assumes a 5.0% interest cost for debt; an 18 month construction period; a 6 month absorption period; 30% of the units are presold and close during first month after completion; and 2.5 points for loan origination fees.

Assumes that the cost for the attached garages is included in the building costs. In accordance with Government Code Section 65915 (p) no guest spaces are required.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf DB VL Page 24 of 26 APPENDIX D - TABLE 2

PROJECTED NET SALES REVENUE

STATE DENSITY BONUS PROTOTYPE

VERY LOW INCOME RENTAL INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Sales Revenue
A. Market Rate Units 1
One-Bedroom Units 7 Units @ $800,000 /Unit $5,600,000
Two-Bedroom Units 14 Units @ $1,143,000 /Unit 16,002,000 Three-Bedroom Units 14 Units @ $1,338,000 /Unit 18,732,000 Four-Bedroom Units 7 Units @ $1,493,000 /Unit 10,451,000 B. Inclusionary Units
Very Low Income Density Bonus Units 2
One-Bedroom Units 1 Unit @ $53,100 /Unit 53,000
Two-Bedroom Units 1 Unit @ $61,600 /Unit 62,000
Three-Bedroom Units 1 Unit @ $67,500 /Unit 68,000
Four-Bedroom Units 1 Unit @ $68,100 /Unit 68,000
Inclusionary Units 3
One-Bedroom Units 0 Units @ $82,700 /Unit 0
Two-Bedroom Units 1 Unit @ $95,000 /Unit 95,000
Three-Bedroom Units 1 Unit @ $104,600 /Unit 105,000
Four-Bedroom Units 0 Units @ $108,100 /Unit 0
Total Gross Sales Revenue $51,236,000
II. Cost of Sales
Commissions 3.0% Gross Sales Revenue $1,537,000
Closing 2.0% Gross Sales Revenue 1,025,000
Warranty 0.5% Gross Sales Revenue 256,000
Total Cost of Sales ($2,818,000)
III. Net Revenue $48,418,000
1 2
3 Under Section 65915 (f) (2), 11% of the Base Units are set aside for very-low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B - EXHIBIT II for the valuation estimates.

The balance of the affordable units are set aside for very low income households. Under Section 50053, the very low income rent calculations are based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B - EXHIBIT II for the valuation estimates.

Based in part on a sales survey undertaken by KMA in March 2021. See APPENDIX A. The weighted average sales price equates to $711 per square foot of saleable area.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf DB VL Page 25 of 26 APPENDIX D - TABLE 3

INCLUSIONARY HOUSING IMPACTS

STATE DENSITY BONUS PROTOTYPE

VERY LOW INCOME RENTAL INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Funds Available for Development Costs
Net Revenue See APPENDIX D - TABLE 2 $48,418,000
(Less) Threshold Developer Profit 1 15.1% Total Development Cost ($6,266,000) Total Funds Available for Development Costs $42,152,000 II. Total Development Cost See APPENDIX D - TABLE 1 $41,572,000 III. Total Financial Impact $580,000
Property Acquisition Cost Reduction -4% of Estimated Current Acquisition Prices Developer Profit 16.5% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact -1.1% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the BASE ZONING PROTOTYPE: MARKET RATE ALTERNATIVE.

Prepared by: Keyser Marston Associates, Inc.

File Name: 10 24 21 Own Inclusionary; Pf DB VL Page 26 of 26 ATTACHMENT 3

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; ATT 3 TITLE Page 1 of 48

APPENDIX A

RENT SURVEY
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

APARTMENT DEVELOPMENT
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; App A Titles Page 2 of 48

APPENDIX A
RENT SURVEY - 3 & 4 STAR PROPERTIES

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Name Address City # of Units
Unit Size
(SF) Total Per SF Year Built
Holiday Riviera Apartments 1302 Esplanade Redondo Beach 6 380 $1,304 $3.43 1971 Crystal Cove 211 Yacht Club Way Redondo Beach 73 395 $2,261 $5.72 1969 Ocean Club 300 The Village Dr Redondo Beach 58 517 $2,162 $4.18 1972 Elements 616 616 Esplanade Redondo Beach 16 631 $2,754 $4.36 1971 Minimum 380 $1,304 $3.43
Maximum 631 $2,754 $5.72
Weighted Average 465 $2,237 $4.91
Tallman Apartments 1400 1/2 Esplanade Redondo Beach 3 500 $2,263 $4.53 1954 Ocean Club 300 The Village Dr Redondo Beach 58 680 $2,435 $3.58 Beachbrook Village Apartments 420 S. Catalina Avenue Redondo Beach 9 725 $2,204 $3.04 1971 King Harbor 208 Yacht Club Way Redondo Beach 17 750 $2,564 $3.42 1965 Elements 616 616 Esplanade Redondo Beach 68 759 $3,055 $4.03 Crystal Cove 211 Yacht Club Way Redondo Beach 22 859 $3,184 $3.71 Riviera Coast 129-131 Palos Verdes Redondo Beach 4 1,029 $3,982 $3.87 2009 Minimum 500 $2,204 $3.04
Maximum 1,029 $3,982 $4.53
Weighted Average 745 $2,791 $3.74
Average Effective Rent
Studio Units
One-Bedroom Units
Source: Costar; March 2021
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary Page 3 of 48

APPENDIX A
RENT SURVEY - 3 & 4 STAR PROPERTIES

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Name Address City # of Units
Unit Size
(SF) Total Per SF Year Built
Average Effective Rent
Tallman Apartments 1400 1/2 Esplanade Redondo Beach 2 729 $2,376 $3.26 Crystal Cove 211 Yacht Club Way Redondo Beach 66 765 $3,330 $4.35 Pacific Apartment Homes 312 Calle Miramar Redondo Beach 8 900 $4,418 $4.91 1958 Elements 616 616 Esplanade Redondo Beach 21 947 $3,864 $4.08 Ocean Club 300 The Village Dr Redondo Beach 58 1,067 $3,725 $3.49 Ten Ten 1010 Esplanade Redondo Beach 24 1,078 $2,715 $2.52 1958 Beachbrook Village Apartments 420 S. Catalina Avenue Redondo Beach 86 1,100 $2,744 $2.49 Riviera Coast 129-131 Palos Verdes Redondo Beach 19 1,353 $4,599 $3.40 Minimum 729 $2,376 $2.49
Maximum 1,353 $4,599 $4.91
Weighted Average 1,011 $3,330 $3.38
Two-Bedroom Units
Source: Costar; March 2021
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary Page 4 of 48

APPENDIX B

APARTMENT DEVELOPMENT

AFFORDABLE RENT CALCULATIONS
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; App B Titles Page 5 of 48

APPENDIX B

AFFORDABLE RENT CALCULATIONS
2021 INCOME STANDARDS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
One-Bedroom
Units
Two-Bedroom
Units
I. General Assumptions
Area Median Income (AMI) 1 $64,000 $72,000
Monthly Utilities Allowance 2 $63 $80
II. Affordable Rent Calculations 3
A. Very Low Income - Rent Based on 50% AMI
Benchmark Annual Household Income $32,000 $36,000
Percentage of Income Allotted to Housing Expenses 30% 30% Monthly Income Available for Housing Expenses $800 $900 (Less) Monthly Utilities Allowance (63) (80)
Maximum Allowable Rent $737 $820
B. Low Income - Rent Based on 60% AMI
Benchmark Annual Household Income $38,400 $43,200
Percentage of Income Allotted to Housing Expenses 30% 30% Monthly Income Available for Housing Expenses $960 $1,080 (Less) Monthly Utilities Allowance (63) (80)
Maximum Allowable Rent $897 $1,000
C. Moderate Income - Rent Based on 110% AMI
Benchmark Annual Household Income $70,400 $79,200
Percentage of Income Allotted to Housing Expenses 30% 30% Monthly Income Available for Housing Expenses $1,760 $1,980 (Less) Monthly Utilities Allowance (63) (80)
Maximum Allowable Rent $1,697 $1,900
1 2
3 Based on the California Health & Safety Code Section 50053 calculation methodology.

Based on the 2021 Los Angeles County household incomes published by the California Housing & Community Development Department (HCD). The benchmark household size is set at the number of bedrooms in the unit plus one.

Based on the LACDA Multifamily utility allowance schedule effective as of 7/1/21. Assumes: Gas Heating, Gas Cooking, and Gas Water Heater; Basic Electric; and Air Conditioning.

Prepared by: Keyser Marston Associates
File name: 10 24 21 RB Rent Inclusionary; Aff Rent Page 6 of 48

APPENDIX C

PRO FORMA ANALYSES
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

APARTMENT DEVELOPMENT

SMALL PROJECT PROTOTYPE
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; App C Title Page 7 of 48

REDONDO BEACH, CALIFORNIA

PRO FORMA ANALYSIS

MARKET RATE ALTERNATIVE

APPENDIX C - EXHIBIT I

APARTMENT DEVELOPMENT
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF SM Mkt Page 8 of 48 APPENDIX C - EXHIBIT I - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MARKET RATE ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $150 /Sf of Land $1,875,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $150 /Sf of GBA 2,000,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 546,000 Total Direct Costs 13,333 Sf of GBA $246 /Sf of GBA $3,274,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $196,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 65,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 164,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 42,000 Total Indirect Costs $877,000
IV. Financing Costs
Interest During Construction
Land 6 $1,875,000 Cost 5.0% Avg Rate $117,000
Construction 7 $4,494,000 Cost 5.0% Avg Rate 169,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 57,000 Total Financing Costs $343,000
V. Total Construction Cost 10 Units $449,000 /Unit $4,494,000 Total Development Cost 10 Units $637,000 /Unit $6,369,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on a 15 month construction period and a 60% average outstanding loan balance. 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF SM Mkt Page 9 of 48 APPENDIX C - EXHIBIT I - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MARKET RATE ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 10 Units @ $3,721 /Unit/Month 446,570 B. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $449,570
Vacancy & Collection Allowance 5% Gross Income (22,480) II. Effective Gross Income $427,090
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $7,800 /Unit 77,500
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses ($124,000)
IV. Stabilized Net Operating Income $303,090
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.72 per square foot of leasable area.

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File name: 10 24 21 RB Rent Inclusionary; PF SM Mkt Page 10 of 48 APPENDIX C - EXHIBIT I - TABLE 3

ESTIMATED DEVELOPER RETURN

MARKET RATE ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Stabilized Net Operating Income See APPENDIX C - EXHIBIT I - TABLE 2 $303,090 II. Total Development Cost See APPENDIX C - EXHIBIT I - TABLE 1 $6,369,000 III. Return on Total Investment 4.76%
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REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT II

PRO FORMA ANALYSIS

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

APARTMENT DEVELOPMENT
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF SM VL Page 12 of 48 APPENDIX C - EXHIBIT II - TABLE 1

ESTIMATED DEVELOPMENT COSTS

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $150 /Sf of Land $1,875,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $150 /Sf of GBA 2,000,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 546,000 Total Direct Costs 13,333 Sf of GBA $246 /Sf of GBA $3,274,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $196,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 65,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 164,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 42,000 Total Indirect Costs $877,000
IV. Financing Costs
Interest During Construction
Land 6 $1,857,900 Cost 5.0% Avg Rate $116,000
Construction 7 $4,492,000 Cost 5.0% Avg Rate 168,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 57,000 Total Financing Costs $341,000
V. Total Construction Cost 10 Units $449,000 /Unit $4,492,000 Total Development Cost 10 Units $637,000 /Unit $6,367,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $17,100 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF SM VL Page 13 of 48 APPENDIX C - EXHIBIT II - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 9.5 Units @ $3,721 /Unit/Month 424,250 B. Very Low Income Units 2
One-Bedroom Units 0 Units @ $737 /Unit/Month 0
Two-Bedroom Units 0.5 Units @ $820 /Unit/Month 4,920
C. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $432,170
Vacancy & Collection Allowance 5% Gross Income (21,610) II. Effective Gross Income $410,560
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $7,400 /Unit 74,100
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses 10 Units @ $12,060 /Unit ($120,600) IV. Stabilized Net Operating Income $289,960
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.72 per square foot of leasable area. 2 Under Section 50053, the very low income rent calculations are based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 10 24 21 RB Rent Inclusionary; PF SM VL Page 14 of 48 APPENDIX C - EXHIBIT II - TABLE 3

INCLUSIONARY HOUSING IMPACTS

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT II - TABLE 2 $289,960 Threshold Return on Total Investment 1 4.8%
Total Supportable Investment $6,093,000
II. Total Development Cost See APPENDIX C - EXHIBIT II - TABLE 1 $6,367,000 III. Total Financial Impact ($274,000)
Property Acquisition Cost Reduction 15% of Estimated Current Acquisition Prices Return on Total Investment 4.6% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 10 24 21 RB Rent Inclusionary; PF SM VL Page 15 of 48

APPENDIX C - EXHIBIT III

LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

PRO FORMA ANALYSIS

APARTMENT DEVELOPMENT
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File name: 10 24 21 RB Rent Inclusionary; PF SM Low Page 16 of 48 APPENDIX C - EXHIBIT III - TABLE 1

ESTIMATED DEVELOPMENT COSTS

LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $150 /Sf of Land $1,875,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $150 /Sf of GBA 2,000,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 546,000 Total Direct Costs 13,333 Sf of GBA $246 /Sf of GBA $3,274,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $196,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 65,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 164,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 42,000 Total Indirect Costs $877,000
IV. Financing Costs
Interest During Construction
Land 6 $1,855,700 Cost 5.0% Avg Rate $116,000
Construction 7 $4,492,000 Cost 5.0% Avg Rate 168,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 57,000 Total Financing Costs $341,000
V. Total Construction Cost 10 Units $449,000 /Unit $4,492,000 Total Development Cost 10 Units $637,000 /Unit $6,367,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $19,300 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF SM Low Page 17 of 48 APPENDIX C - EXHIBIT III - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 9 Units @ $3,721 /Unit/Month 419,780
B. Low Income Units 2
One-Bedroom Units 0 Units @ $897 /Unit/Month 0
Two-Bedroom Units 1 Units @ $1,000 /Unit/Month 7,200
C. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $429,980
Vacancy & Collection Allowance 5% Gross Income (21,500) II. Effective Gross Income $408,480
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $7,400 /Unit 73,700
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses 10 Units @ $12,020 /Unit ($120,200) IV. Stabilized Net Operating Income $288,280
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.72 per square foot of leasable area. 2 Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 10 24 21 RB Rent Inclusionary; PF SM Low Page 18 of 48 APPENDIX C - EXHIBIT III - TABLE 3

INCLUSIONARY HOUSING IMPACTS

LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT III - TABLE 2 $288,280 Threshold Return on Total Investment 1 4.8%
Total Supportable Investment $6,058,000
II. Total Development Cost See APPENDIX C - EXHIBIT III - TABLE 1 $6,367,000 III. Total Financial Impact ($309,000)
Property Acquisition Cost Reduction 16% of Estimated Current Acquisition Prices Return on Total Investment 4.5% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.6% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 10 24 21 RB Rent Inclusionary; PF SM Low Page 19 of 48

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT IV

PRO FORMA ANALYSIS

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF SM Mod Page 20 of 48 APPENDIX C - EXHIBIT IV - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $150 /Sf of Land $1,875,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $150 /Sf of GBA 2,000,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 546,000 Total Direct Costs 13,333 Sf of GBA $246 /Sf of GBA $3,274,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $196,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 65,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 164,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 42,000 Total Indirect Costs $877,000
IV. Financing Costs
Interest During Construction
Land 6 $1,855,600 Cost 5.0% Avg Rate $116,000
Construction 7 $4,492,000 Cost 5.0% Avg Rate 168,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 57,000 Total Financing Costs $341,000
V. Total Construction Cost 10 Units $449,000 /Unit $4,492,000 Total Development Cost 10 Units $637,000 /Unit $6,367,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $19,400 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF SM Mod Page 21 of 48 APPENDIX C - EXHIBIT IV - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 9 Units @ $3,721 /Unit/Month 406,380
B. Moderate Income Units 2
One-Bedroom Units 0 Units @ $1,697 /Unit/Month 0
Two-Bedroom Units 1 Units @ $1,900 /Unit/Month 20,520
C. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $429,900
Vacancy & Collection Allowance 5% Gross Income (21,500) II. Effective Gross Income $408,400
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $7,400 /Unit 73,700
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses 10 Units @ $12,020 /Unit ($120,200) IV. Stabilized Net Operating Income $288,200
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.72 per square foot of leasable area. 2 Under Section 50053, the moderate income rent calculations are based on household income at 110% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 10 24 21 RB Rent Inclusionary; PF SM Mod Page 22 of 48 APPENDIX C - EXHIBIT IV - TABLE 3

INCLUSIONARY HOUSING IMPACTS

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT IV - TABLE 2 $288,200 Threshold Return on Total Investment 1 4.8%
Total Supportable Investment $6,056,000
II. Total Development Cost See APPENDIX C - EXHIBIT IV - TABLE 1 $6,367,000 III. Total Financial Impact ($311,000)
Property Acquisition Cost Reduction 17% of Estimated Current Acquisition Prices Return on Total Investment 4.5% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.8% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 10 24 21 RB Rent Inclusionary; PF SM Mod Page 23 of 48

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT V

PRO FORMA ANALYSIS

DENSITY BONUS ALTERNATIVE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS INCLUSIONARY HOUSING: FINANCIAL EVALUATION

APARTMENT DEVELOPMENT
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File name: 10 24 21 RB Rent Inclusionary; PF SM DB Page 24 of 48 APPENDIX C - EXHIBIT V - TABLE 1

ESTIMATED DEVELOPMENT COSTS

DENSITY BONUS ALTERNATIVE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $150 /Sf of Land $1,875,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 0 Spaces $5,000 /Space 0
Above-Ground Spaces 30 Spaces $25,000 /Space 750,000
Building Costs 20,000 Sf of GBA $150 /Sf of GBA 3,000,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 788,000 Total Direct Costs 20,000 Sf of GBA $236 /Sf of GBA $4,726,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $284,000 Public Permits & Fees 5 15 Units $40,000 /Unit 600,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 95,000 Marketing 15 Units $1,000 /Unit 15,000
Developer Fee 5% Direct Costs 236,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 62,000 Total Indirect Costs $1,292,000
IV. Financing Costs
Interest During Construction
Land 6 $1,875,000 Cost 5.0% Avg Rate $117,000
Construction 7 $6,458,000 Cost 5.0% Avg Rate 242,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 75,000 Total Financing Costs $434,000
V. Total Construction Cost 15 Units $430,000 /Unit $6,452,000 Total Development Cost 15 Units $555,000 /Unit $8,327,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

For sites within 1/4 mile of transit stops, Section 65915 (p) sets the parking standards at 1.0 spaces for One-Bedroom Units; 2.0 spaces for TwoBedroom Units; and no guest spaces can be required. This analysis assumes that 2.0 spaces per unit are provided.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $0 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 10 24 21 RB Rent Inclusionary; PF SM DB Page 25 of 48 APPENDIX C - EXHIBIT V - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

DENSITY BONUS ALTERNATIVE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 13 Units @ $3,721 /Unit/Month 580,550 B. Inclusionary Units
Density Bonus Units 2
One-Bedroom Units 0 Units @ $737 /Unit/Month 0
Two-Bedroom Units 2 Units @ $820 /Unit/Month 19,680
Low Income Inclusionary Units 3
One-Bedroom Units 0 Units $897 /Unit/Month 0
Two-Bedroom Units 0 Units $1,000 /Unit/Month 0
C. Laundry & Miscellaneous Income 15 Units @ $25 /Unit/Month 4,500 Total Gross Income $604,730
Vacancy & Collection Allowance 5% Gross Income (30,240) II. Effective Gross Income $574,490
III. Operating Expenses
General Operating Expenses 15 Units @ $4,500 /Unit $67,500 Property Taxes 15 Units @ $6,800 /Unit 102,600
Replacement Reserve Deposits 15 Units @ $150 /Unit 2,300 Total Operating Expenses 15 Units @ $11,493 /Unit ($172,400) IV. Stabilized Net Operating Income $402,090
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.72 per square foot of leasable area. 2 3 The balance of the affordable units are set aside for low income households. Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

Under Section 65915 (f) (2), 15% of the Base Units are set aside for very-low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 10 24 21 RB Rent Inclusionary; PF SM DB Page 26 of 48 APPENDIX C - EXHIBIT V - TABLE 3

INCLUSIONARY HOUSING IMPACTS

DENSITY BONUS ALTERNATIVE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT V - TABLE 2 $402,090 Threshold Return on Total Investment 1 4.8%
Total Supportable Investment $8,449,000
II. Total Development Cost See APPENDIX C - EXHIBIT V - TABLE 1 $8,327,000 III. Total Financial Impact $122,000
Property Acquisition Cost Reduction 0% of Estimated Current Acquisition Prices Return on Total Investment 4.8% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 0.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 10 24 21 RB Rent Inclusionary; PF SM DB Page 27 of 48

REDONDO BEACH, CALIFORNIA

APPENDIX D

PRO FORMA ANALYSES

LARGE PROJECT PROTOTYPE

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
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File name: 10 24 21 RB Rent Inclusionary; App D Title Page 28 of 48

REDONDO BEACH, CALIFORNIA

APPENDIX D - EXHIBIT I

PRO FORMA ANALYSIS

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mkt Page 29 of 48 APPENDIX D - EXHIBIT I - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $150 /Sf of Land $19,602,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 30 Spaces $5,000 /Space 150,000
Above-Ground Spaces 180 Spaces $25,000 /Space 4,500,000 Building Costs 109,125 Sf of GBA $165 /Sf of GBA 18,006,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 4,923,000 Total Direct Costs 109,125 Sf of GBA $271 /Sf of GBA $29,539,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $1,772,000 Public Permits & Fees 5 90 Units $40,000 /Unit 3,600,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 591,000 Marketing 90 Units $1,000 /Unit 90,000
Developer Fee 5% Direct Costs 1,477,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 377,000 Total Indirect Costs $7,907,000
IV. Financing Costs
Interest During Construction
Land 6 $19,602,000 Cost 5.0% Avg Rate $1,225,000
Construction 7 $40,742,000 Cost 5.0% Avg Rate 1,528,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 543,000 Total Financing Costs $3,296,000
V. Total Construction Cost 90 Units $453,000 /Unit $40,742,000 Total Development Cost 90 Units $670,000 /Unit $60,344,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for One-Bedroom Units; 2.0 space for Two-Bedroom Units; and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on a 15 month construction period and a 60% average outstanding loan balance. 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mkt Page 30 of 48 APPENDIX D - EXHIBIT I - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 36 Units @ $3,500 /Unit/Month $1,512,000 Two-Bedroom Units 54 Units @ $3,908 /Unit/Month 2,532,000 B. Laundry & Miscellaneous Income 90 Units @ $25 /Unit/Month 27,000 Total Gross Income $4,071,000
Vacancy & Collection Allowance 5% Gross Income (204,000) II. Effective Gross Income $3,867,000
III. Operating Expenses
General Operating Expenses 90 Units @ $4,500 /Unit $405,000 Property Taxes 90 Units @ $7,800 /Unit 702,000
Replacement Reserve Deposits 90 Units @ $150 /Unit 14,000 Total Operating Expenses ($1,121,000)
IV. Stabilized Net Operating Income $2,746,000
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.86 per square foot of leasable area.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mkt Page 31 of 48 APPENDIX D - EXHIBIT I - TABLE 3

ESTIMATED DEVELOPER RETURN

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Stabilized Net Operating Income See APPENDIX D - EXHIBIT I - TABLE 2 $2,746,000 II. Total Development Cost See APPENDIX D - EXHIBIT I - TABLE 1 $60,344,000 III. Return on Total Investment 4.55%
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mkt Page 32 of 48

REDONDO BEACH, CALIFORNIA

APPENDIX D - EXHIBIT II

PRO FORMA ANALYSIS

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG VL Page 33 of 48 APPENDIX D - EXHIBIT II - TABLE 1

ESTIMATED DEVELOPMENT COSTS

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $150 /Sf of Land $19,602,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 30 Spaces $5,000 /Space 150,000
Above-Ground Spaces 180 Spaces $25,000 /Space 4,500,000 Building Costs 109,125 Sf of GBA $165 /Sf of GBA 18,006,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 4,923,000 Total Direct Costs 109,125 Sf of GBA $271 /Sf of GBA $29,539,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $1,772,000 Public Permits & Fees 5 90 Units $40,000 /Unit 3,600,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 591,000 Marketing 90 Units $1,000 /Unit 90,000
Developer Fee 5% Direct Costs 1,477,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 377,000 Total Indirect Costs $7,907,000
IV. Financing Costs
Interest During Construction
Land 6 $19,418,700 Cost 5.0% Avg Rate $1,214,000
Construction 7 $40,730,000 Cost 5.0% Avg Rate 1,527,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 543,000 Total Financing Costs $3,284,000
V. Total Construction Cost 90 Units $453,000 /Unit $40,730,000 Total Development Cost 90 Units $670,000 /Unit $60,332,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for One-Bedroom Units; 2.0 space for Two-Bedroom Units; and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $183,300 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG VL Page 34 of 48 APPENDIX D - EXHIBIT II - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 34 Units @ $3,500 /Unit/Month $1,428,000 Two-Bedroom Units 51 Units @ $3,908 /Unit/Month 2,391,000 B. Very Low Income Units 2
One-Bedroom Units 2 Units @ $737 /Unit/Month 18,000
Two-Bedroom Units 3 Units @ $820 /Unit/Month 30,000
C. Laundry & Miscellaneous Income 90 Units @ $25 /Unit/Month 27,000 Total Gross Income $3,894,000
Vacancy & Collection Allowance 5% Gross Income (195,000) II. Effective Gross Income $3,699,000
III. Operating Expenses
General Operating Expenses 90 Units @ $4,500 /Unit $405,000 Property Taxes 90 Units @ $7,400 /Unit 668,000
Replacement Reserve Deposits 90 Units @ $150 /Unit 14,000 Total Operating Expenses 90 Units @ $12,078 /Unit ($1,087,000) IV. Stabilized Net Operating Income $2,612,000
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.86 per square foot of leasable area. 2 Under Section 50053, the very low income rent calculations are based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG VL Page 35 of 48 APPENDIX D - EXHIBIT II - TABLE 3

INCLUSIONARY HOUSING IMPACTS

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX D - EXHIBIT II - TABLE 2 $2,612,000 Threshold Return on Total Investment 1 4.6%
Total Supportable Investment $57,399,000
II. Total Development Cost See APPENDIX D - EXHIBIT II - TABLE 1 $60,332,000 III. Total Financial Impact ($2,933,000)
Property Acquisition Cost Reduction 15% of Estimated Current Acquisition Prices Return on Total Investment 4.3% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.7% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG VL Page 36 of 48

REDONDO BEACH, CALIFORNIA

APPENDIX D - EXHIBIT III

PRO FORMA ANALYSIS

LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Low Page 37 of 48 APPENDIX D - EXHIBIT III - TABLE 1

ESTIMATED DEVELOPMENT COSTS

LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $150 /Sf of Land $19,602,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 30 Spaces $5,000 /Space 150,000
Above-Ground Spaces 180 Spaces $25,000 /Space 4,500,000 Building Costs 109,125 Sf of GBA $165 /Sf of GBA 18,006,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 4,923,000 Total Direct Costs 109,125 Sf of GBA $271 /Sf of GBA $29,539,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $1,772,000 Public Permits & Fees 5 90 Units $40,000 /Unit 3,600,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 591,000 Marketing 90 Units $1,000 /Unit 90,000
Developer Fee 5% Direct Costs 1,477,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 377,000 Total Indirect Costs $7,907,000
IV. Financing Costs
Interest During Construction
Land 6 $19,396,900 Cost 5.0% Avg Rate $1,212,000
Construction 7 $40,728,000 Cost 5.0% Avg Rate 1,527,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 543,000 Total Financing Costs $3,282,000
V. Total Construction Cost 90 Units $453,000 /Unit $40,728,000 Total Development Cost 90 Units $670,000 /Unit $60,330,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for One-Bedroom Units; 2.0 space for Two-Bedroom Units; and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on an 15 month construction period and a 60% average outstanding loan balance.

Based on an 15 month construction period and a 100% average outstanding loan balance. Includes a $205,100 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Low Page 38 of 48 APPENDIX D - EXHIBIT III - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 33 Units @ $3,500 /Unit/Month $1,386,000 Two-Bedroom Units 51 Units @ $3,908 /Unit/Month 2,391,000 B. Low Income Units 2
One-Bedroom Units 3 Units @ $897 /Unit/Month 32,000
Two-Bedroom Units 3 Units @ $1,000 /Unit/Month 36,000
C. Laundry & Miscellaneous Income 90 Units @ $25 /Unit/Month 27,000 Total Gross Income $3,872,000
Vacancy & Collection Allowance 5% Gross Income (194,000) II. Effective Gross Income $3,678,000
III. Operating Expenses
General Operating Expenses 90 Units @ $4,500 /Unit $405,000 Property Taxes 90 Units @ $7,400 /Unit 663,000
Replacement Reserve Deposits 90 Units @ $150 /Unit 14,000 Total Operating Expenses 90 Units @ $12,022 /Unit ($1,082,000) IV. Stabilized Net Operating Income $2,596,000
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.86 per square foot of leasable area. 2 Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Low Page 39 of 48 APPENDIX D - EXHIBIT III - TABLE 3

INCLUSIONARY HOUSING IMPACTS

LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX D - EXHIBIT III - TABLE 2 $2,596,000 Threshold Return on Total Investment 1 4.6%
Total Supportable Investment $57,048,000
II. Total Development Cost See APPENDIX D - EXHIBIT III - TABLE 1 $60,330,000 III. Total Financial Impact ($3,282,000)
Property Acquisition Cost Reduction 17% of Estimated Current Acquisition Prices Return on Total Investment 4.3% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 5.3% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Low Page 40 of 48

REDONDO BEACH, CALIFORNIA

APPENDIX D - EXHIBIT IV

PRO FORMA ANALYSIS

MODERATE INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mod Page 41 of 48 APPENDIX D - EXHIBIT IV - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MODERATE INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $150 /Sf of Land $19,602,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 30 Spaces $5,000 /Space 150,000
Above-Ground Spaces 180 Spaces $25,000 /Space 4,500,000 Building Costs 109,125 Sf of GBA $165 /Sf of GBA 18,006,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 4,923,000 Total Direct Costs 109,125 Sf of GBA $271 /Sf of GBA $29,539,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $1,772,000 Public Permits & Fees 5 90 Units $40,000 /Unit 3,600,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 591,000 Marketing 90 Units $1,000 /Unit 90,000
Developer Fee 5% Direct Costs 1,477,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 377,000 Total Indirect Costs $7,907,000
IV. Financing Costs
Interest During Construction
Land 6 $19,411,900 Cost 5.0% Avg Rate $1,213,000
Construction 7 $40,729,000 Cost 5.0% Avg Rate 1,527,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 543,000 Total Financing Costs $3,283,000
V. Total Construction Cost 90 Units $453,000 /Unit $40,729,000 Total Development Cost 90 Units $670,000 /Unit $60,331,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for One-Bedroom Units; 2.0 space for Two-Bedroom Units; and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on an 15 month construction period and a 60% average outstanding loan balance.

Based on an 15 month construction period and a 100% average outstanding loan balance. Includes a $190,100 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mod Page 42 of 48 APPENDIX D - EXHIBIT IV - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MODERATE INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 33 Units @ $3,500 /Unit/Month $1,386,000 Two-Bedroom Units 49 Units @ $3,908 /Unit/Month 2,298,000 B. Moderate Income Units 2
One-Bedroom Units 3 Units @ $1,697 /Unit/Month 61,000
Two-Bedroom Units 5 Units @ $1,900 /Unit/Month 114,000
C. Laundry & Miscellaneous Income 90 Units @ $25 /Unit/Month 27,000 Total Gross Income $3,886,000
Vacancy & Collection Allowance 5% Gross Income (194,000) II. Effective Gross Income $3,692,000
III. Operating Expenses
General Operating Expenses 90 Units @ $4,500 /Unit $405,000 Property Taxes 90 Units @ $7,400 /Unit 666,000
Replacement Reserve Deposits 90 Units @ $150 /Unit 14,000 Total Operating Expenses 90 Units @ $12,056 /Unit ($1,085,000) IV. Stabilized Net Operating Income $2,607,000
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.86 per square foot of leasable area. 2 Under Section 50053, the moderate income rent calculations are based on household income at 110% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mod Page 43 of 48 APPENDIX D - EXHIBIT IV - TABLE 3

INCLUSIONARY HOUSING IMPACTS

MODERATE INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX D - EXHIBIT IV - TABLE 2 $2,607,000 Threshold Return on Total Investment 1 4.6%
Total Supportable Investment $57,289,000
II. Total Development Cost See APPENDIX D - EXHIBIT IV - TABLE 1 $60,331,000 III. Total Financial Impact ($3,042,000)
Property Acquisition Cost Reduction 16% of Estimated Current Acquisition Prices Return on Total Investment 4.3% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 5.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG Mod Page 44 of 48

REDONDO BEACH, CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

APPENDIX D - EXHIBIT V

PRO FORMA ANALYSIS

DENSITY BONUS ALTERNATIVE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG DB Page 45 of 48 APPENDIX D - EXHIBIT V - TABLE 1

ESTIMATED DEVELOPMENT COSTS

DENSITY BONUS ALTERNATIVE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $150 /Sf of Land $19,602,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 0 Spaces $5,000 /Space 0
Above-Ground Spaces 216 Spaces $25,000 /Space 5,400,000 Building Costs 163,688 Sf of GBA $165 /Sf of GBA 27,008,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 6,874,000 Total Direct Costs 163,688 Sf of GBA $252 /Sf of GBA $41,242,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $2,475,000 Public Permits & Fees 5 135 Units $40,000 /Unit 5,400,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 825,000 Marketing 135 Units $1,000 /Unit 135,000
Developer Fee 5% Direct Costs 2,062,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 545,000 Total Indirect Costs $11,442,000
IV. Financing Costs
Interest During Construction
Land 6 $19,602,000 Cost 5.0% Avg Rate $1,225,000
Construction 7 $56,729,000 Cost 5.0% Avg Rate 2,127,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 687,000 Total Financing Costs $4,039,000
V. Total Construction Cost 135 Units $420,000 /Unit $56,723,000 Total Development Cost 135 Units $565,000 /Unit $76,325,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on an 15 month construction period and a 60% average outstanding loan balance.

Based on an 15 month construction period and a 100% average outstanding loan balance. Includes a $0 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG DB Page 46 of 48 APPENDIX D - EXHIBIT V - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

DENSITY BONUS ALTERNATIVE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 46 Units @ $3,500 /Unit/Month $1,932,000 Two-Bedroom Units 70 Units @ $3,908 /Unit/Month 3,282,000 B. Inclusionary Units
Density Bonus Units 2
One-Bedroom Units 6 Units @ $737 /Unit/Month 53,000
Two-Bedroom Units 8 Units @ $820 /Unit/Month 79,000
Low Income Inclusionary Units 3
One-Bedroom Units 2 Units $897 /Unit/Month 22,000
Two-Bedroom Units 3 Units $1,000 /Unit/Month 36,000
C. Laundry & Miscellaneous Income 135 Units @ $25 /Unit/Month 41,000 Total Gross Income $5,445,000
Vacancy & Collection Allowance 5% Gross Income (272,000) II. Effective Gross Income $5,173,000
III. Operating Expenses
General Operating Expenses 135 Units @ $4,500 /Unit $607,500 Property Taxes 135 Units @ $6,900 /Unit 925,000
Replacement Reserve Deposits 135 Units @ $150 /Unit 20,000 Total Operating Expenses 135 Units @ $11,500 /Unit ($1,552,500) IV. Stabilized Net Operating Income $3,620,500
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $3.86 per square foot of leasable area. 2 3
Under Section 65915 (f) (2), 15% of the Base Units are set aside for very-low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

The balance of the affordable units are set aside for low income households. Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG DB Page 47 of 48 APPENDIX D - EXHIBIT V - TABLE 3

INCLUSIONARY HOUSING IMPACTS

DENSITY BONUS ALTERNATIVE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX D - EXHIBIT V - TABLE 2 $3,620,500 Threshold Return on Total Investment 1 4.6%
Total Supportable Investment $79,561,000
II. Total Development Cost See APPENDIX D - EXHIBIT V - TABLE 1 $76,325,000 III. Total Financial Impact $3,236,000
Property Acquisition Cost Reduction 0% of Estimated Current Acquisition Prices Return on Total Investment 4.7% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 0.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

Prepared by: Keyser Marston Associates, Inc.

File name: 10 24 21 RB Rent Inclusionary; PF LG DB Page 48 of 48

Redondo Beach City CouncilMay 9, 2023

Redondo Beach City Council
May 9, 2023