4888-0279-9442.8
June 9, 2023
By Email: [email protected]
Nell Selander
Director of Economic and Community Development
City of South San Francisco
400 Grand Ave.
South San Francisco, CA 94080
Re: Proposed Community Benefits for 800 Dubuque Ave. Project [Updated] Dear Ms. Selander:
On behalf of Dubuque Center, L.P. (“Applicant”), a wholly owned subsidiary of IQHQ, L.P., I am writing to memorialize certain community benefit commitments regarding proposed development of the 800 Dubuque redevelopment project (“Project”) at 800–890 Dubuque Avenue. The Project—an infill, transit-oriented office/R&D development—proposes substantial benefits, including direct funding to support City capital improvement priorities. As described in Part I below, the value of these quantified measures is estimated at over $12.6 million. The Applicant further agrees to support formation of a proposed Community Facilities District for the East of 101 area, subject to certain terms described in Part II. This proposal is intended to form the basis for a Community Benefits Agreement, under Chapter 20.395 of the South San Francisco Zoning Ordinance, to allow the Project to achieve floor area ratio (“FAR”) above 2.5 (proposed FAR is approximately 3.3).
In addition to these direct benefits, and approximately $51 million in estimated impact fees, the Project includes numerous design features that will benefit the community. Although not credited for purposes of community benefits, these features are summarized for informational purposes in Part III.
I. Proposed Direct Community Benefits
A. Funding Contributions. The Applicant proposes to make a monetary contribution to the City, in accordance with the City’s recently adopted Community Benefits Fee, in the amount of $4,742,500. This contribution will be provided prior to issuance of building permits for vertical construction.
B. Publicly Accessible Plazas. The Project includes approximately 35,315 square feet of plaza space that will be publicly accessible during business hours with wellappointed landscaping beyond City code requirements, outdoor furniture, special paving and lighting to enhance the comfort and usability of these spaces. Publicly accessible spaces will be visible from the public right of way and/or signage will be provided to indicate the spaces are available for public use. The City has indicated that it will consider 40% of the cost of these plazas as a public benefit, at a value of approximately $2,620,000.
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C. Enhanced Connectivity and Access. The Applicant proposes to improve public access and connectivity around the Project site by installing new landscaping and sidewalk improvements, as well as facilitating vehicular and pedestrian connections to the Caltrain Station, with ample lighting for safety. We understand that the City will consider 35% of this estimated cost—approximately $3,727,500— as a community benefit, in accordance with the priorities set forth in Zoning Ordinance Section 20.395.004(B). If these improvements are not possible due to external factors that are not within the Applicant’s control, the Applicant will instead submit a proposal for equivalent alternative pedestrian improvements or appropriate replacement, subject to the Chief Planner’s review and approval.
Submittal requirements will include an in-kind valuation, site plan, and specifications for any proposed improvements. A financial contribution may be permitted if equivalent on-site improvements are not possible.
D. Building Electrification. The Applicant has committed to 100% electric buildings, furthering the City’s Climate Action Plan goals by avoiding use of natural gas; we understand that the City will consider 30% of the added upfront cost— approximately $1,530,000—as a community benefit toward mitigating the impacts of sea level rise.
E. Community Benefits Summary.
Funding Contribution $4,742,500
Publicly Accessible Plazas $2,620,000
Enhanced Connectivity & Access $3,727,500
Green Building/Electrification $1,530,000
TOTAL $12,620,000
II. Community Facilities District
The Applicant agrees to support City’s formation of a Community Facilities District (CFD) serving land within the East of 101 area, and generally as established within the parameters described in the City Manager’s presentation of October 2, 2019 on this topic (“2019 Presentation”), provided that (i) the Project’s maximum CFD assessment rate does not exceed one dollar ($1.00) per square foot of assessable real property, and (ii) the Project’s maximum CFD assessment rate does not exceed the rate assessed against other office/R&D properties in the East of 101 area.
Subject to this commitment, Applicant shall not be prohibited from participating in public hearings, negotiations, or other communications regarding the formation of the CFD or the facilities and/or services proposed to be funded by CFD proceeds.
III. Summary of Additional Benefits and Commitments
The Project incorporates additional features and the Applicant has made certain commitments to further benefit the community. Some of these commitments overlap with the community benefits outlined in Part I and are included here for completeness. Others do not qualify as community benefits but are sizable and therefore worth identifying for the record.
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Most notably, we have committed to utilizing union labor, including local hire, for mechanical, plumbing, electrical, shoring/dewatering, and electrical skin. We estimate the total cost is $46,400,000, and that the difference in costs between using labor vs non-union labor is roughly 12–14%.
As outlined above, the Project will be fully electrified to further the City’s Climate Action Plan goals at a total cost of $5,100,000. Additional green building design elements associated with achieving LEED Gold Certification and Fitwel cost a total of $11,100,000.
Additional physical improvements of note include:
• On-site public art installation to satisfy the City’s public art requirement that is valued at approximately $6,500,000.
• Streetscape improvements, consisting of improvements to sidewalks, crosswalks, curb ramps, curbs and gutters, undergrounding existing utility lines, stormwater features, street trees and landscaping along the Project’s Dubuque Avenue frontage, at a cost of $7,100,000.
• Four-level subterranean parking structure, which significantly improves the Project’s aesthetics relative to above-ground parking, at a cost of approximately $190,000,000.
Please see the memorandum titled 800 Dubuque Public Benefits Analysis, prepared by Economic & Planning Systems, Inc. and included as Attachment A, which provides an analysis of the proposed public benefits and other features identified above, in relation to the value created by the proposed FAR increase.
* * *
We look forward to working with you and City staff to finalize agreement on the Project’s proposed community benefits, and documenting them as appropriate through the Community Benefits Agreement. Please let us know of any questions.
Sincerely,
Justine Nielsen
Senior Vice President, Development
cc: Tony Rozzi, Chief Planner
Christopher Espiritu, Senior Planner
Sky Woodruff, City Attorney
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ATTACHMENT A
800 Dubuque Public Benefits Analysis
(Updated June 22, 2023)
221044_Final 800 Dubuque Community Benefits_6.22.2023
F INAL T ECHNICAL M EMORANDUM
To: IQHQ, Inc.
CC: Jason Bredbury and David Hurley, VFR Advisors
From: Jason Moody and Jenny Lin, Economic & Planning
Systems, Inc.
Subject: 800 Dubuque Public Benefits Analysis #221044
Date: June 22, 2023
IQHQ, Inc. (“IQHQ”) retained Economic and Planning Systems, Inc. (“EPS”) to assess project economics and appropriate public benefit contributions for its proposed life science office/research and development project in the City of South San Francisco (“City”). The proposed project (“Project”) includes a 3-tower cluster of varying heights, totaling 857,000 square feet and an expected floor area ratio (FAR) of 3.3.1 Since the Project will exceed the maximum 1.0 FAR allowed “by right” based on the zoning code for the East of 101 Transit Core (“ETC”) district, the city may seek contributions to various public benefits as part of the entitlement process under the City’s Community Benefits Program (“Program”).
Under the Program, projects seeking an increase in FAR greater than 1.0 but not exceeding 2.5 have a choice to pay the City’s community benefits fee, participate in a Community Benefits Agreement, or both. In October 2022, the City adopted a community benefits fee set at $20 per bonus square foot above the base 1.0 FAR to be credited against the value of the development’s public benefits (Section 20.395.003). Projects with FAR exceeding 2.5, such as 800 Dubuque, require a
Valuation Study and City Council approval of a Community Benefits Agreement which may include payment of the
Community Benefits Fee to satisfy part or all the benefit. The Valuation Study should include:
1 The Project is comprised of three buildings interconnected connected by a two-story podium that provides open space and a 7,200 square foot fitness center. The site also contains a plaza with on-site food/beverage and tenant amenity uses totaling 6,600 square feet and a 7,500 square foot event center.
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1. A calculation of the applicable Community Benefit Fee that would apply, against which the value of the development’s public benefits will be credited in accordance with the following:
a. An assessment of the economic and/or intrinsic value of the proposed public benefit as compared with the economic value of the proposed development incentives requested by the applicant. In this case, the benefit provided must be described in Section 20.395.004 (“Community Benefit Priorities”); or b. An assessment of the proposed fee as compared with the economic value of the proposed development incentives requested by the applicant.
EPS has prepared a third-party Valuation Study assessing the additional value created by the proposed increase in project density (i.e., the economic value of the development incentives). The analysis compares the financial performance of IQHQ’s proposed project, against that of a hypothetical “Regulatory Baseline” development at 1.0 FAR, recognizing that there is a community benefits fee that may be paid to satisfy the community benefits requirement for projects with FAR exceeding 1.0 and up to 2.5. Additionally, EPS acknowledges that there are other factors that may motivate IQHQ to pursue a higher density scenario. These factors may include, for example, attracting high caliber tenants, among other considerations. While legitimate, these additional considerations are difficult to quantify and thus outside the scope of this analysis.
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K ey Findings
1. The proposed community benefits package is valued at $12.6 million to the City of South San Francisco.
The applicant proposes to provide on-site 35,300 square feet of publicly accessible plazas, enhanced connectivity and improved access from the Caltrain, and an allelectric building. The estimated costs of these features are approximately $22.3 million and the City has deemed approximately 35.3 percent, or $7.9 million, of the total valuation as eligible as community benefits for the Project. The applicant is also providing $4.7 million of cash contribution bringing the total value of proposed community benefit packages to $12.6 million.
2. If the applicant decided to pay the Community Benefits Fee rather than provide eligible, in-kind Community Benefits, the fee amount would be approximately $12.0 million.
In October 2022, the City adopted a community benefits fee set at $20 per square foot above the base 1.0 FAR to be credited against the value of the development’s public benefits (Section 20.395.003). The net new square footage is approximately 600,250 square feet from the Regulatory Baseline Project of 1.0 FAR to the Proposed Project of 3.3 FAR. Should the applicant decide to pay the Community Benefits fee to satisfy the Program requirements, the applicant would pay the Community Benefits Fee of $12.0 million as compared to the proposed community benefit package of $12.6 million.
3. The pro forma financial analysis presented in this memorandum indicates the increase in land value supported by the proposed Project and attributable to an FAR bonus above 1.0 is estimated to be approximately $23.8 million.
The proposed project adds approximately 600,200 square feet of rentable building area and an additional 142,500 square feet of rentable outdoor and amenity space2 over a hypothetical Regulatory Baseline project that might be developed without community benefits. While the proposed building creates about $975.0 million more in value, development costs (excluding land) are about $951.2 million higher. Thus, the increase in value from the proposed FAR bonus (over the “Regulatory Baseline” project) generates about $23.8 million in new value. Based on EPS experience with community benefit agreements in California, the value creation associated with any discretionary entitlement is typically shared between the developer and the City, with a portion of the new value (i.e., $23.8 million) serving to motivate the developer to 2 Outdoor and amenity area accounts for spaces not internal to the building such as spaces for machinery, outdoor patios, roof areas, etc.
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undertake a larger project. Thus, the applicant will have less financial incentive to develop a larger project as the share of direct community benefit contributions increases. The Applicant’s proposed Community Benefits is approximately 52.9 percent of the economic value created by upzoning.
4. The subterranean parking configuration required for a higher density development increases total development costs by nearly $132 per square foot of rentable building space relative to the “Regulatory Baseline”.
The 385 parking spaces assumed for the Regulatory Baseline scenario can be accommodated in an above-grade parking structure, typically constructed for about $60,000 per space. The proposed development would provide 1,285 underground parking spaces totaling four levels of underground parking.3 Such a configuration would cost approximately $148,000 per space (based on cost estimates provided by third party consultants retained by IQHQ), which moderates the value created by increased density.
5. In addition to any unique community benefits contributed by the Applicant, the proposed project will help South San Francisco absorb un-met demand in the regional life science office market and further establish its position as one of the premier locations in the United States.
South San Francisco is home to one of the most significant life sciences agglomerations in the world, with 11.5-million square feet of life sciences office space. Despite the inventory and pipeline of projects, supply for life science space is not keeping pace with demand, driving rents up to over $7 per square foot per month. Facilitating increased density on sites within the ETC District helps address this local supply constraint, while further cementing South San Francisco’s position at the forefront of biotech innovation.
3 The project includes 1,335 parking spaces that are underground (1,285 for the R&D component and 50 visitor spaces for the event center). The 50 additional spaces are not included as this analysis is based on requirements for R&D uses and not ancillary uses (e.g., the event center) to provide a commensurable comparison.
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Land Use Context
The IQHQ site is in the City of South San Francisco’s East of 101 Transit Core (ETC) zoning district. Per Table 20.090.003 of the Zoning Code, the by-right development intensity in this area is limited to a floor area ratio (FAR) of 1.0 but developers can receive an increase to the maximum FAR of 8.0. Projects seeking an increase in FAR greater than 1.0 but not exceeding 2.5 have a choice to pay the City’s community benefits fee, participate in a Community Benefits Agreement, or both. Projects with FAR exceeding 2.5, such as 800 Dubuque, are subject to a Community Benefits Agreement.
The Community Benefits Agreement may include a payment of Community Benefits Fees to satisfy part or all the benefit requirements. In October 2022, the City adopted a community benefits fee set at $20 per square foot above the base 1.0 FAR to be credited against the value of the development’s public benefits (Section 20.395.003). The code goes on to list specific “Community Benefit Priorities” (Section 20.395.004) including, but not limited to, enhancement of public spaces through public art, funding or construction of certain streetscape improvements for enhanced connectivity, and support for local business through participation in a local hire program.
Given this regulatory context, EPS evaluated the additional development proposed by the IQHQ Project above and beyond what would be allowed “by-right.” Table 1 compares the level of development in IQHQ’s proposed Project with a hypothetical by-right project.
Specifically, EPS formulated a hypothetical office development scenario consistent with zoning requirements for a life-science project located in the ETC district that does not exceed the 1.0 FAR requirement and does not participate in the City’s Community Benefits Program (“Regulatory Baseline Project”).
The 857,000 square foot Project has a total of 1,335 parking spaces accommodated through four levels of below grade parking. The City code has a maximum allowable parking ratio of 1.5 parking spaces per 1,000 square feet of R&D floor area. Based on this allowance, the Project includes 1,285 spaces to serve the 857,000 square feet of R&D area with an additional fifty spaces to serve the 7,500 square foot event center.4 By comparison, the Regulatory Baseline Project (i.e., a project that is consistent with the maximum 1.0 FAR base zoning of the site and does not utilize the City’s Community Benefits Program) is an approximately 256,800 square foot building. Like the proposed project, this scenario also assumes a life science tenant(s) occupies the building. The 4 No parking requirement is specified for the event center; therefore, the Chief Planner is responsible for determining the requirement based upon the requirements for the most similar comparable use, the characteristics of the proposed use, and any other relevant data regarding parking demand (Section
20.330.004D)
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Regulatory Baseline project’s costs reflect this use and include tenant improvements with identical per unit costs as those assumed for the proposed project. Aside from being smaller in size and not having ancillary uses,5 a key component of the Regulatory Baseline Project is that it allows for above-grade structured parking. The scenario assumes the same parking ratio of 1.5 spaces for 1,000 square feet of R&D area with a total of 385 parking spaces. The ability to accommodate the Regulatory Baseline Project’s spaces in an above-grade structure has major implications for the potential value created by an increase in density, which is discussed in the “Cost Assumptions” subsection of this memorandum.
Table 1 Development Scenarios
Item Regulatory Baseline Proposed Project
Floor-to-Area Ratio 1.0 3.3
Gross Floor Area (SF) 256,800 Square Feet 857,000 Square Feet Construction Type 1
Life Science Occupancy
Type 1
Life Science Occupancy
Parking Stalls 385 1,2856
Parking Type Above-Grade Structure / Podium Subterranean 5 EPS analyzes the financial performance of both scenarios based on requirements for R&D uses and not ancillary uses such as the event center to provide a commensurable comparison. 6 The project includes 1,335 parking spaces that are underground (1,285 for the R&D component and 50 visitor spaces for the event center). The 50 additional spaces are not included as this analysis is based on requirements for R&D uses and not ancillary uses (e.g., the event center) to provide a commensurable comparison.
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Development Feasibility Analysis
The EPS pro forma financial analysis relies on a feasibility assessment of both the Regulatory Baseline and proposed project. This analysis uses the common static pro forma financial feasibility framework to estimate a residual land value and supportable community benefit value for each of the development alternatives. The approach compares real estate development value at project stabilization (i.e., after project lease up is complete) with the cost of project development, all in 2023 dollars.
The pro forma financial analysis determines finished real estate value based on assumptions including market-supportable lease rates, operating costs, and a required project yield rate. Development cost assumptions reflect project-specific construction costs, typical project soft costs (e.g., architecture and engineering), City Permits and Fees, and an appropriate developer return on investment. The assumptions reflect EPS research, third-party data, and construction costs prepared by IQHQ’s third-party consultants.
The financial feasibility analysis assumes the minimum return on investment requirement that would be necessary to attract investors to the real estate investment opportunity.
EPS believes speculative real estate development in the current market requires a yield on Project cost of about 6 percent, commensurate with the risk factors associated with such investments.
Cost Assumptions
For analytical purposes, both the Regulatory Baseline and proposed project scenarios assume identical per square foot costs for site preparation and site improvements, direct construction costs for the building (excluding parking), and tenant improvement costs which are shown in Table A-1 and Table A-2. The major difference in direct costs is related to the parking structure. The above-grade structured parking in the Regulatory Baseline scenario is assumed to be $60,000 per space for 385 spaces while the subterranean parking for proposed project is estimated to be around $148,000 per stall.
The higher cost of subterranean parking is due to the excavation and waterproofing necessitated by below-grade construction. Inclusive of the parking costs, the Regulatory Baseline scenario assumes total hard costs of about $1,140 per square foot of gross floor area, while the proposed project assumes approximately $1,200 per square foot of gross floor area. 7
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Regarding soft costs, both scenarios assume a percentage of direct construction costs, with the exception of fees and marketing costs (the latter being on a square foot basis).
EPS estimates that the Regulatory Baseline scenario would pay $9.3 million in development impact fees, excluding public art requirements, versus the $49.1 million anticipated for the proposed project. Gross fee calculations are shown in Table A-3.
Tables A-1 and A-2 net out fee credits expected for existing development on the site.8 The financial pro forma also includes Project contingency costs estimated at 5 percent of total hard and soft costs, excluding impact fees for both scenarios. Based on this assumption the proposed project has a higher contingency cost per square foot at $71, relative to the Regulatory Baseline scenario’s contingency assumption of $68 per square foot. This is attributable to the higher parking cost in the proposed project. When all costs are combined, the Regulatory Baseline scenario is estimated to have total development costs (excluding land) of approximately $1,460 per square foot, versus $1,550 for the proposed project.
Revenue Assumptions
There are two sources of revenue associated with the proposed project. The first is the revenue expected for the 857,000 square feet of leasable area associated with general R&D office uses, while the second source is attributed to the 203,500 square feet of leasable outdoor/ amenity spaces. These areas account for areas not part of the building square footage such as roof space or storage areas used and leased by tenants. EPS assumes a proportionate amount of leasable outdoor/ amenity spaces for the Regulatory Baseline scenario based on the 256,800 square feet of building space for a total of 61,000 square feet. EPS assumes rent of $84.60 per square foot annually, in line with expected steadying rents in the area. The same rent assumption is used in both the Regulatory Baseline and proposed Project scenarios. Project yield is assumed to be 6 percent in both cases.
7 The difference in the gross building area per square foot cost is attributable to the size of the building as site preparation and improvement costs are the same for both scenarios. 8 When a development project changes from a lower impact use to a higher impact use, the fee to be paid is calculated on the net change based on the pre-existing use and corresponding fee requirements of the new use.
There are currently three existing buildings on site that support a mix of office, R&D, and manufacturing/ warehouse/ storage uses that may qualify for fee credits. Final development impact fee credits will be confirmed by the City, although the fee credit applied to the existing development(s) will not alter the outcome of this analysis.
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Results
Table 2 shows the estimated residual land values of both project scenarios, and the “lift” of value from upzoning the Regulatory Baseline Project. The analysis finds that the residual land value for the Regulatory Baseline program is about $43.4 million, versus $67.2 million with the proposed program. The increase in project density from 1.0 to 3.3 FAR results in an estimated increase in residual land value of $23.8 million.
Table 2 Estimated Residual Land Value by Scenario
Additionally, Community Benefit requirements for projects with increases in project density from 1.0 may be satisfied by paying a Community Benefits fee and would be credited from the total community benefits contribution.
Community Benefits
IQHQ’s proposed project include improvements and commitments that provide public benefits to the South San Francisco community including:
• Publicly Accessible Plazas. The project incorporates around 35,300 square feet of publicly accessible plaza space. These spaces exceed code requirements and feature enhanced landscaping, furniture, special paving, and special lighting, all aimed at improving comfort and usability. These areas will be visible from the public right of way or marked with signage to indicate their availability for public use.
• Enhanced Connectivity and Improved Access. The project includes enhanced connectivity and improved access, including landscaping and sidewalk enhancements. It also provides pedestrian connectivity to the Caltrain Station through a new well-lit and landscaped walkway.
• All Electric Building. The building will be designed to be fully electric, incorporating carbon reduction measures and striving for carbon neutrality.
These efforts aim to minimize the project's contribution to environmental impacts, including mitigating the effects of sea level rise. • Cash Contribution to City. IQHQ’s community benefit package includes a $4.7 million cash contribution to the City. The City can use these funds at its discretion.
Item Regulatory
Baseline Project
Proposed
Project Difference
Estimated Building Value $417,054,000 $1,392,064,000 $975,010,000 Estimated Project Cost ($373,659,000) ($1,324,887,000) ($951,228,000) Estimated Land Value $43,395,000 $67,177,000 $23,782,000 Final Technical Memorandum
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Table 3 presents the valuation of these project enhancements.9 Together, including direct and soft costs, the estimated costs of these features is approximately $22.3 million. Per discussions with City Staff, approximately 35 percent, or $7.9 million, of the total valuation is eligible as community benefits for the Project. After accounting for IQHQ $4.7 million cash contribution, the total value of proposed community benefit packages is estimated at $12.6 million to the City of South San Francisco. The additional costs associated with these project enhancements are included within the financial analysis (i.e., factored into the project construction costs summarized in Appendix A). These costs are isolated here for informational purposes, to provide context for the value of the project enhancements.
Table 3 Eligible Community Benefits
Source: IQHQ
9 Based on cost information provided to EPS by IQHQ.
Item Calculation
Proposed Direct Public Benefit Valuation
Publicly Accessible Plazas $6,550,800
Enhanced Connectivity & Improved Access $10,650,000
All Electric Building $5,100,000
Total Valuation of Community Benefits $22,300,800
% Eligible as Project Community Benefits 35%
Valuation of Project Community Benefits $7,877,800
Cash Contribution to Community Benefits $4,742,500
Total Valuation of Project Community Benefits $12,620,300 221044_Final 800 Dubuque Community Benefits_6.22.2023
APPENDIX A
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Table A- 1: Regulatory Baseline Project Pro Forma Financial Analysis Summary
DEVELOPMENT PROGRAM ASSUMPTIONS
Net Development Site (Square Feet) 256,752
FAR 1.00
Gross Building Area (Square Feet) 256,752
Rentable Building Area (Square Feet) 100% of GBA 256,752 Maximum Parking Spaces (Structured) 1.50 per 1,000 SF 385
PROJECT OPERATING INCOME (ANNUAL) PER GBA TOTAL
Gross Potential Rent $7.05 per SF/Month (NNN) $85 $21,721,219 Outdoor/ Amenity Space [1] $5,156,582
Gross Potential Parking Income $0.00 per Space/Month $0 $0 Losses to Vacancy 5.0% of GPR -$5 -$1,343,890
Gross Office Revenue $99 $25,533,911
Operating Expenses 2.00% of Gross Revenue -$2 -$510,678 Net Operating Income $97 $25,023,233
Supportable Development Cost 6.00% Project Yield Rate $1,624 $417,053,881
PROJECT DEVELOPMENT COSTS PER GBA TOTAL
Construction Costs
Site Preparation and Site Improvements $106 Cost/SF (Site Area) $106 $27,089,325 Building Direct Cost $659 Cost/SF (GBA) $659 $169,314,975 Tenant Improvement Costs $286 Cost/SF (RBA) $286 $73,377,744 Surface Parking Direct Cost $60,000 per Space $90 $23,107,680 Total Construction Cost $1,141 $292,889,724
Soft Costs
Impact Fees [2] $36 $9,277,972
Public Art [3] $9 $2,195,120
Permits and Other Fees 0.50% of Construction Cost $6 $1,464,449 Architecture, Engineering, and Other Professional Services 3.00% of Construction Cost $34 $8,786,692 Property Tax and Insurance 1.50% of Construction Cost $17 $4,393,346 Financing 6.50% of Construction Cost $74 $19,037,832
Marketing/Leasing $25.50 Cost/SF (GBA) $26 $6,547,176
Developer Fee 4.00% of Construction Cost $46 $11,715,589 Total Soft Costs $247 $63,418,175
Other Project Costs
Development Contingency [4] 5.0% of Construction & Soft Costs $68 $17,351,496 Total Other Costs $68 $17,351,496
Total Project Cost Excluding Land $1,455 $373,659,395
Residual Land Value $169 $43,394,486
[4] Contingency calculation excludes impact fees.
[1] Accounts for areas not part of the building and used by tenants (e.g. storage of machinery).
Calculated by EPS
[2] Adjusted for fee credits from existing land use.
1.0%
[3] Public art calculation excludes tenant improvement costs.
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Table A- 2: Proposed Development Pro Forma Financial Analysis Summary
DEVELOPMENT PROGRAM ASSUMPTIONS
Net Development Site (Square Feet) 256,752
FAR 3.3
Gross Building Area (Square Feet) 857,000
Rentable Building Area (Square Feet) 100% of GBA 857,000 Parking Spaces (Subterranean) 1.50 per 1,000 SF 1,285
PROJECT OPERATING INCOME (ANNUAL) PER GBA TOTAL
Gross Potential Rent $7.05 per SF/Month (NNN) $85 $72,502,200 Outdoor/ Amenity Space [1] $17,211,904
Gross Potential Parking Income $0.00 per Space/Month $0 $0 Losses to Vacancy 5.0% of GPR -$5 -$4,485,705
Gross Office Revenue $99 $85,228,399
Operating Expenses 2.00% of Gross Revenue -$2 -$1,704,568 Net Operating Income $97 $83,523,831
Supportable Development Cost 6.00% Project Yield Rate $1,624 $1,392,063,845
PROJECT DEVELOPMENT COSTS PER GBA TOTAL
Construction Costs
Site Preparation and Site Improvements $106 Cost/SF (Site Area) $32 $27,089,325 Building Direct Cost $659 Cost/SF (GBA) $659 $565,148,210 Tenant Improvement Costs $286 Cost/SF (RBA) $286 $244,924,000 Subterranean Parking Direct Cost $148,075 per Space $222 $190,276,442 Total Construction Cost $1,199 $1,027,437,977
Soft Costs
Impact Fees [2] $57 $49,090,430
Public Art $8 $6,500,000
Permits and Other Fees 0.50% of Construction Cost $6 $5,137,190 Architecture, Engineering, and Other Professional Services 3.00% of Construction Cost $36 $30,823,139 Property Tax and Insurance 1.50% of Construction Cost $18 $15,411,570 Financing 6.50% of Construction Cost $78 $66,783,469
Marketing/Leasing $25.50 Cost/SF (GBA) $26 $21,853,500
Developer Fee 4.00% of Construction Cost $48 $41,097,519 Total Soft Costs $276 $236,696,816
Other Project Costs
Development Contingency [4] 5.0% of Construction & Soft Costs $71 $60,752,218 Total Other Costs $71 $60,752,218
Total Project Cost Excluding Land $1,546 $1,324,887,012 Residual Land Value $78 $67,176,833
Calculated by EPS
[3] Contingency calculation excludes impact fees.
[2] Adjusted for fee credits from existing land use.
[1] Accounts for areas not part of the building and used by tenants (e.g. storage of machinery).
Provided by IQHQ
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Table A- 3: Preliminary Gross Impact Fee Estimations
per SF Total per SF Total per SF Total
Building Square Feet 113,595 SF 256,752 SF 857,000 SF
Fee Category
Parks and Rec Impact Fee $3.54 $402,126 $3.54 $908,902 $3.54 $3,033,780 Childcare Impact Fee $1.51 $171,528 $1.51 $387,696 $1.51 $1,294,070 Library Impact Fee $0.14 $15,903 $0.14 $35,945 $0.14 $119,980 Public Safety Impact Fee $1.31 $148,809 $1.31 $336,345 $1.31 $1,122,670 School District Fee n/a n/a $0.61 $156,619 $0.61 $522,770 Bicycle and Pedestrian Impact Fee $0.09 $10,224 $0.09 $23,108 $0.09 $77,130 Citywide Transportation Fee $34.85 $3,959,084 $34.85 $8,948,482 $34.85 $29,868,702 Commercial Linkage Fee $17.38 $1,974,281 $17.38 $4,462,350 $17.38 $14,894,660 Oyster Point Overpass Impact Fee $4.43 $503,336 $1.91 $490,212 $1.91 $1,636,251 East of 101 Sewer Impact Fee $2.56 $290,616 $2.56 $656,863 $2.56 $2,192,510 Sewer Capacity Charge $2.43 $275,630 $2.43 $622,989 $2.43 $2,079,446 Public Art Requirements [3] n/a n/a $8.55 $2,195,120 $7.58 $6,500,000 Total Gross Impact Fees $68.24 $7,751,538 $74.88 $19,224,630 $73.91 $63,341,968 [2] Calculations are gross fees, not reflective of the fee credit received from existing uses. [3] Public art requirements for the Proposed Project are provided by IQHQ.
Sources: City of South San Francisco; IQHQ; and Economic & Planning Systems, Inc.
Item
[1] Assumes general office category.
Existing Uses [1] Regulatory Baseline [2] Proposed Project [2]