HomeMy WebLinkAboutTowncrest Redevelopment Study
TOWNCREST URBAN RENEWAL PLAN
REDEVELOPMENT STUDY
May 13, 2013
Prepared by:
Teague Case
Chenyu Fu
Trent Good
Kelsey Hull
Abby Karch
Zachary Leith
Nicholas Melrose
Matthew Mitchell
Brian Mlot
Huyen Pham
Matthew Smego
Zachary Steinhoff
Michael Styler
Mitchell Vogt
Wade Williams
Edited by:
John G. Gallo, Ph.D.,CFA®,CFP®
Department of Finance
University of Iowa
Iowa City, IA 52245
john-gallo@uiowa.edu
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FOREWORD
This study was requested by the Planning and Community Development Department of the City of Iowa
City. We wish to thank the Department staff, in particular Stephen Long and Tracy Hightshoe, for their
assistance and the educational opportunity afforded by the Towncrest project.
This report is submitted by preparers for academic credit in partial fulfillment of the requirements of a
Spring, 2013 University of Iowa course: 6F:109 Topics in Finance. Unless otherwise noted, all
economic and demographic data is obtained from the Esri and SimplyMap databases. With the exception
of property cost and revenue estimates provided by various real estate professionals, all other information
used in the study was obtained from publicly available sources. Any errors are the responsibility of the
editor.
We wish to recognize and acknowledge the material contributions to this study provided by the following
firms and individuals: CG Hanson, Inc (Charlie Graves), Cedar Rapids Assessor (Scott Labus, Ed
Saunders, Beth Weeks), Cook Appraisal (Casey Cook, Rochelle Dietiker, Nick Faselt), Fineline
Diversified Development (Bill Boecker), Frantz-Hobart Investment (Mike Frantz), Iowa City Assessor
(Dennis Baldridge, Brad Comer), Lepic-Kroeger Realtors (Jeff Edberg), MDK Development (Kevin
Digmann), MRS Appraisals (Hal Kleinsmith), National Development Council (Raquel Favela), PFM
Group (Randall Bauer), Skogman Commercial Realty (Scott Olson), Vernon Research Group (Monica
Vernon), UI Hawkinson Institute (Brian Richman), and UI Pomerantz Library (Kim Bloedel). Thanks
also to the University of Iowa Finance Department (Erik Lie, Bev Berg).
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I. STUDY OBJECTIVE
A. Overview
Our initial assignment was to assess the utilization of commercial space in the Towncrest Urban Renewal
Area and to suggest sources of public financial support available for private sector developers. The study
objectives evolved, however, as our analysis progressed. One, we limit our evaluation of commercial
space to retail and office properties. The allocation of residential space in the Area remains an endeavor
of future study. Two, we realized early in the semester a grasp of the myriad of highly specialized public
financial support programs available at the state and federal levels was beyond our resource and time
limitations. Thus, we defer advice of public support sources to community and economic development
specialists.1 We do, notably, address the amount of financial support needed to induce early developers
to undertake potentially risky projects in the Towncrest Area. Our analysis considers the perspectives of
both the public (Iowa City community) and private (property owners and potential redevelopers) sectors.
The Towncrest Urban Area is a 49.3 acre commercial center surrounded by residential
neighborhoods within the Southeast Planning District of Iowa City, Iowa. As shown in the map below,
the Area, which contains a mix of retail, restaurants, services, nonprofits, and housing, is bordered by
Second Avenue to the west, E Street to the north, Baker Street to the east, and Wayne Street to the south.
The commercial center of the Towncrest Area is the intersection of Muscatine Avenue and 1st Avenue
that have daily traffic count of 10,150 and 15,800 cars, respectively, for an intersection average of 12,975.
When the TURP was adopted in 2010 the Area had a tax assessed value of $39.89 million; 2010 Area tax
revenue, which lags the timing of assessed values, was $1.489 million. Currently, the Area tax assessed
value is $37.356 million (2013) with annual tax revenue of $1.274 million (2011). The declining assessed
values and tax revenues are indicative of the need for Towncrest redevelopment.2 Importantly, new 2013
tax assessed property values show an improvement above the 2011 ($36.836 million) level that is the base
year for an important source of public redevelopment funding.
1 One firm, the National Development Council, is currently on retainer by the City of Iowa City. 2 All Iowa City tax assessed values from the Iowa City Assessor and tax revenue from the Johnson County Treasurer. Excludes
properties held by tax exempt owners.
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B. The Towncrest Urban Renewal Plan
The Towncrest Area was founded in the late 1950s and early 1960s as a high-end suburban medical office
park. For many years Towncrest was economically vibrant, spurring growth in its commercial and
residential areas. A lack of physical infrastructure reinvestment in recent decades led to deteriorating
property values that ultimately reduced Towncrest to formal Slum and Blighted Area designation in
2009.3 The Towncrest Urban Renewal Plan (TURP) was approved by the City of Iowa City in 2010 to
redevelop the Area and promote economic growth.4 Through reinvestment in infrastructure, the TURP
intends to stimulate, with public financial support, private investment in Area commercial businesses and
residential properties. A catalyst for the transformation process is provided in the TURP Design Manual,
produced by RDG Planning Design. The Design Manual provides a vision for the desired physical
character and infrastructure of a new Towncrest more conducive to both pedestrian and vehicular
circulation. The broad objective of the comprehensive TURP is to expand Area taxable property values
by revitalizing commercial and residential activity through a diversified mix of office, retail, and
residential properties.
TURP goals will be fostered by financial incentives the City will offer to qualifying projects and
businesses as necessary. According to the Plan, public financial assistance alternatives include tax
3 As defined by Iowa Code 403.17.
4 http://www.icgov.org/site/CMSv2/file/planning/towncrest/TowncrestURP.pdf
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increment financing (TIF), direct grants, loans, advances, indebtedness, bonds, tax abatements, a façade
improvement program, a pre-development assistance program, and gap financing from a forecasted total
budget of $10 to $15 million. The City may also provide direct or indirect financial incentives to
incentivize private persons or businesses to locate in the Area. Other local, state and federal assistance
may be available to support proposed projects depending on their eligibility and demonstrated need.
Technical assistance identifying potential opportunities for the inclusion of funding will also be
considered by the City.
The City intends to use tax increment financing (TIF) as a primary incentive to finance the
development and Area public infrastructure improvements. Infrastructure improvements may include
demolition of existing buildings, site preparation, building design, building construction, paving and
parking, landscaping, and installation of on-site utilities. Other possible forms of public support for
qualifying commercial and/or residential developments include direct grants, loans, and rebates.5 The
City has established the Catalyst Project Gap Financing Loan Program as an additional means of support
for the development of commercial, residential and mixed-use projects in the Towncrest area.6 Gap
financing in the form of forgivable loans up to $300,000 may be available to promote the development of
one or more projects in the Area. City gap financing priority will be given to support the rehabilitation of
existing structures and new construction.
Further economic support is provided by the Towncrest Area Façade Improvement Program that
provides incentives to improve the appearance of existing buildings and promote a positive image for
Towncrest.7 The Improvement Program extends assistance to Towncrest property owners or business
tenants who renovate or restore commercial building façades, including signage and lighting. Approved
projects are eligible for a grant in the amount of 50-75% of the cost of façade improvement.8 The City
5 Qualifying projects will be determined by the City Council on a case by case basis and are subject to design compliance review
by the Staff Design Review Committee.
6 The City of Iowa City: Gap Financing Forgivable Loan and Pre-Development Design Assistance Program.
http://www.icgov.org/site/CMSv2/file/planning/towncrest/TowncrestCatalysProjectRFP.pdf 7 Towncrest Urban Renewal Area Design Plan Manual, 2010, RDG Planning and Design.
http://www.icgov.org/site/CMSv2/file/planning/towncrest/TowncrestRedevelopmentArea.pdf 8 Certain criteria are required for the higher level of support as determined by the City Program Administrator.
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has also established the Pre-Development Design Assistance Program to encourage the development of
projects that have a transformative impact on the Towncrest area. The Assistance Program offers 50%
matching grants of up to $25,000 for pre-development design assistance. Eligible uses include
architectural design, structural engineering and environmental assessment services.
The specific amount of public financial support (TIFs, direct grants, loans, advances,
indebtedness, or bonds) for projects over time has not yet been determined but is estimated in the $10 to
$15 million range. The City Council will consider each request for financial assistance or a project
proposal on a case-by-case basis to determine if it is in the City’s best interest to participate. The
Towncrest Urban Renewal Plan will remain in effect as a plan until it is repealed by the City Council.
C. Plan Implementation Impediments
We identify three impediments to attaining the Plan objectives. One, there is no formal process for
implementing the Plan. The current state of the redevelopment process consists of piecemeal deals with
multiple developers whose interests are not necessarily aligned with the community. For example, there
are 19 health care providers in the Area that account for 23.5% of the 81 businesses and 50% of the Area
service businesses (38).9 There will soon be 14,500 square feet of new medical space added to the Area
with speculation of even more demand for health care services offices.10 This high concentration of
medical offices is an inefficient spatial use distribution inconsistent with the tenant diversity objective of
the Plan. Tenant diversification is a critical factor in determining the sustainability and efficiency of a
revitalized Towncrest. We contend the Area needs to incorporate goods/services that will increase
consumer traffic during traditional non-business hours (evenings and weekends). Some form of
centralized planning is needed to coordinate the revitalization process and diversify the tenant mix.
Second, as often happens with the announcement of publicly supported community projects, Towncrest
commercial property listing prices have been inflated, presumably by the perceived benefits of the
redevelopment (a positive externality). For example, there are currently five commercial properties listed
9 From the 2010 U.S. Census. The Towncrest area is technically defined as the 0.25 mile radius of 1st Avenue and Muscatine. 10 It should be noted the tenants of the new medical building are relocating from other Towncrest locations.
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for sale in the Towncrest Area. The combined asking price of $7.785 million of the listed Towncrest
properties represents an 82% premium above their collective tax assessed values ($4.274 million). In
contrast, a sample of 18 commercial properties currently for sale in Iowa City outside the Towncrest Area
have a combined listing price ($22.821 million) reflecting only a 55.9% premium to their tax assessed
values ($14.639 million).11 Inflated Towncrest prices complicate the land acquisition process needed to
acquire the critical land mass needed to efficiently redevelop the Area. Three, the form and amount of
public financial incentives for developers, a critical and challenging component to incentivize the private
sector, is uncertain. Although a $10 to $15 million dollar budget is referenced in the TURP, the City
currently has only $1.4 million earmarked to Towncrest redevelopment. Additional funding will be
underwritten on a needs basis. Notably, the Towncrest area is TIF eligible and TIFs are a viable option
since 2013 tax assessed property values exceed the 2011 TIF base year tax value.
II. RETAIL MARKET ANALYSIS
We analyze the Towncrest Retail Market Area (RMA) and compare the Area to another local retail
market. The analysis examines the economic potential of the Area and identifies attractive retail niches to
exploit. Each of the markets is measured at 0.25, 0.50, and 1.00 mile radiuses. For brevity, we limit our
discussion to the 1 mile measure we feel is most representative. We also report median, rather than
average, measures when possible.
A. Towncrest RMA
The population and income summary of the Towncrest RMA is provided in Table 1. The Towncrest area
has a 2012 population of 12,369. Little population growth (0.93%) is expected in the next 5 years. The
majority of the 5,487 Area households are families (57.4%) with an average size of 2.25 people. In
contrast to population trends, relatively strong growth in income is expected in area income in the next 5
years. Annual growth in per capita income of $30,282 is expected to be 3.18% ($35,406) and median
household income of $55,191 is forecasted to rise annually by 4.05% to $67,317 by 2017. Two thirds
11 Data from the Iowa City Area Multiple Listing Service and Iowa City Assessor.
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(67.5%) of the households have annual income exceeding $50,000; nearly a quarter of (23.5%) have
incomes exceeding $100,000. Importantly, the Towncrest Area exceeds Iowa and U.S. averages for per
capita income (Iowa = 2.6%; U.S. = 2.5%) and household income (Iowa = 2.96%; U.S. = 2.55%).
Demographic and housing data for the Towncrest RMA is summarized in Table 2. The
population of the Area is largely white (85.3%) with a median age of 37.7 years. Approximately half the
population is married (49.8%). The Area populace is highly educated with over half having either a
bachelor (26.7%) or graduate degree (26.0%). Primary occupations are Sales and Office (22.1%) and
Management, Business, and Financial Operations (11.6%), indicative of a largely white collar workforce.
About two-thirds of the homes are single units (68.4%) that are owner occupied (66.5%), with a median
home value of $156,175. The vacancy rate of 5%, well below the U.S. average of 8.6%, implies a stable
Area housing market.12
Towncrest Area consumer trends are presented in Table 3. An examination of annual
expenditures shows the average Towncrest household spends most on housing (Homes = $15,513),
followed by Transportation ($7,614), Food and Beverage ($7,208) and Financial ($6,072) needs.13
Consumer demand and supply analysis shows three retail categories had a 2010 net surplus factor (where
supply exceeds demand, measured in dollars): General Merchandise Stores (-$3,688,328), Health &
Personal Care Stores (-$546,273), and Food and Beverage Stores (-$274,860). All other retail categories
had a net leakage factor (where dollar demand exceeds dollar supply) lead by Motor Vehicle & Parts
Dealers (+$29,982,391), Gasoline Stations (+$13,162,566), and Food Services & Drinking Places
(+$12,469,327). The remaining retail categories had leakage factors ranging between +$1,588,436 to
+$3,422,088. These measures identify some attractive retail trade opportunities in the Area.14 Based
upon our findings the Area can support many different kinds of retail businesses. However, we contend
preference be given to an upscale restaurant/drinking establishment shown to be in demand by this data
12 U.S. housing data from the U.S. Census Bureau, April 30, 2013. 13 The Homes category consists of mortgage payments, maintenance and remodeling services and materials, and utilities, fuel and
public services. 14 More detailed RMA tables are available from the authors upon request.
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and by an earlier survey conducted by the City of Iowa City. Moreover, upscale restaurants and drinking
establishments are often retail redevelopment catalysts that spur area visibility and increase consumer
traffic, particularly during traditional non-business hours.
B. Westside Iowa City RMA
To assess the relative economic potential of the Towncrest RMA we compare it to another active Iowa
City retail area. We selected the intersection of West Benton Street and Mormon Trek Boulevard as a
commercial center for the Westside Iowa City Retail Market Area. The Westside RMA was selected, in
large part, by the similar average intersectional daily traffic count (Mormon Trek = 19,120, Benton =
5,200, average intersection = 12,160) and proximity to the UI campus (Towncrest = 2.1 miles; Westside =
2.8 miles).
The population and income summary for the Westside RMA is presented in Table 4. The two
Iowa City RMAs share many economic and demographic similarities. The current population of the
Westside RMA is slightly smaller (10,243) but has a higher growth forecast (1.23%). About half
(47.8%) of the 4,700 households are families with an average size of 2.19 people. The Westside income
(per capita = $38,805, median household = $54,053), annual income growth (per capita = 2.74%, median
household = 4.72%) and income distribution measures mirror the Towncrest RMA income profile.
As shown in Table 5, Westside Iowa City is largely white (74.1%), married (48.2%), and well
educated (bachelor degree = 28.4%, graduate degree = 41.0%), like Towncrest. However, there are some
notable demographic differences between the RMAs. One, the Westside median age of 28.7 years reveals
a considerably younger populace. Two, more Westside homes are renter occupied (55.6%). Collectively,
the age and rent measures reflect a higher student concentration in the Westside area. Three, the
Westside workforce appears to be more white collar with the Professional and Other category comprising
about half of jobs (49.4%), followed by Sales and Office (22.0%). Four, the median owner occupied
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home value is $192,594. In sum, the average Westside consumer is comprised of a bivariate distribution
of lower income students and relatively affluent professionals.
Westside RMA consumption trends are provided in Table 6. Like Towncrest, the average
Westside household spends most on Homes ($12,703), Transportation ($7,478), Food and beverage
($7,085), and Financial products ($5,755). In contrast to consumption expenditures, the two RMAs show
notable differences in consumer demand and supply patterns. Only two Westside retail categories had a
2010 net surplus factor: Motor Vehicle and Parts Dealers (-$3,353,481) and Building Materials (-
$989,127). The remaining retail categories all had a net leakage factor led by Food and Beverage Stores
(+$17,906,877), Food Services and Drinking Places (+$14,855,454), General Merchandise Stores
(+$14,683,404), and Gasoline Stations (+$11,983,241). To conclude, consumer trends in the two RMAs
are highly similar but consumption levels in Towncrest are consistently higher. This data further supports
the economic potential of the Towncrest Area.
III. REDEVELOPMENT MODELS
We examine two regional redevelopments that model renewal success. The redevelopments, the New
Bohemian District and the Iowa City Downtown District, provide examples of viable renewal plan
implementation procedures and illustrate the benefits of revitalization.
A. New Bohemia District, Cedar Rapids, IA
The New Bohemia District (NewBo)in Cedar Rapids is an ideal proxy for community redevelopment
success. New Bohemia (originally Oak Hill) was formed by Czech immigrants in 1871 on the east side of
the Cedar River and south of downtown Cedar Rapids. The area thrived for many years but began a
decline in the late 1960s. In the next two decades nearly one-third of housing units were demolished and
industrial plants in the area closed, turning the area into blight.
In 1999 the City of Cedar Rapids and members of the community developed a Neighborhood
Planning Process to revitalize the New Bohemia District. The plan incorporated residential, commercial,
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and community needs to improve living conditions for area residents and to promote commercial
development. The New Bohemia Third Street Arts and Entertainment District Plan was adopted to
redevelop industrial properties and existing commercial spaces. The objective of the Plan was to create a
diverse district to attract artists, entrepreneurs, and new residents. Ultimately, NewBo became a
designated Arts and Cultural District.15 However, with no lead developer and little cooperation among
the existing property owners, the Plan made only marginal progress.
The Great Flood of 2008 heavily damaged almost all properties in NewBo. The flood damage
provided an incentive for many owners to sell their properties and vacate the area. This devastating Act
of God created an opportunity for the City of Cedar Rapids to acquire a critical mass of land needed to
centralize redevelopment planning. The revitalization process was coordinated by public and private
partnerships such as the New Bohemia Main Street District formed in 2009. Another similar
organization, the non-profit Neighborhood Development Corporation, was also created that year to
acquire and redevelop properties (commercial and residential) within the guidelines of established City
plans and policies. The NDC is managed by a nine person board of directors comprised of public
officials and members of the business community.
NewBo redevelopment has benefitted from a diverse array of federal, state, and local funding
sources, including FEMA, Main Street Iowa, I-Jobs, and grants from the City of Cedar Rapids.16 One
project of note invested $3.1 million in façade and other streetscape improvements to the NewBo District
that are included in the TURP. Half of the NewBo streetscape improvements were funded by the City of
Cedar Rapids and the rest through property tax value assessments.17
NewBo redevelopment efforts are showing strong signs of progress as renovated commercial
properties are a diverse mix of new businesses and residents to the District. The early success of the
NewBo redevelopment is documented by recent tax data. Tax assessed values in NewBo have increased
15 http://www.ndccedarrapids.org/new-bohemiaoak-hill-jackson/r
16 Some of these fund resources are flood related and, therefore, inapplicable to Towncrest redevelopment. 17 http://www.kcrg.com/news/local/New-Bohemia-Streetscape-Nearing-Completion-in-Cedar-Rapids-128210638.html
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from $34.24 million in 2011 to $41.29 million in 2013. Tax revenue has also increased significantly from
$389,135 (2009) to $667,289 (2011) in the past three years.18 The NewBo model illustrates the benefits
of successful revitalization and offers important implications to City of Iowa City community planners on
Plan implementation guidelines.
B. Iowa City Downtown District
Organizing downtown Iowa City business owners has roots in the 1970s when 65 business owners
recognized the need to organize to improve the area business environment. In April 2012 the
organization became a Self-Supported Municipal Improvement District (The Iowa City Downtown
District) comprised of 280 businesses with 1.2 million square feet of commercial space in the formal
Downtown district (bordered by Burlington Street to the south, Capitol Street to the west, Bloomington
Street to the north, and Gilbert Street to the east) and the Northside Marketplace.19 The group is a non-
profit organization that receives funds from tax levies paid by business in addition to funding from the
University of Iowa.
The broad objective of the ICDD is to enhance the image of the downtown area and create a
destination area to eat, shop and entertain while promoting a clean, green and safe environment. The
District partners with the business community creating a diverse market that supports educational,
cultural, and entrepreneurial programs. Projects supported by the Iowa City Downtown District include
Taste of Iowa City, Friday Night Concert Series, Iowa Arts Festival, and the Downtown Ambassadors,
individual volunteers who pick up the downtown area and provide a clean safe community center.
Similar to incentives in Towncrest, the City of Iowa City offers a Building Change Program that
provides assistance for downtown owners to enhance buildings. Assistance is provided through economic
development loans, forgivable loans, and grants made available by financial need and the characteristics
of the project.
18 Data from the Cedar Rapids Assessor. 19 http://downtowniowacity.com/pages/the-district/members-service-area.php
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Downtown business and property owners elected in 2012 to impose a tax levy to, in part, hire a
business development manager and assistant manager for the District to market the area and undertake
beautification projects. Owners pay $2 for every $1,000 of assessed tax value in excess of property taxes.
The University of Iowa contributes an additional $100,000 annually. The funding formula currently
produces annual revenue of $282,000.20 It is too early to assess to financial and economic impact of the
SSMID on the Downtown District but tax assessed values in the District increased between 7-12% in
2013.21 Thus, early results for ongoing Downtown Iowa City redevelopment are encouraging.
IV. PUBLIC FINANCIAL INCENTIVES
The TURP recognizes a need for public financial support to revitalize the Area. We evaluate the costs of
a developing a high profile property (“Towncrest Centre”) to assess the amount of public support needed
to incentivize diversified private sector development. Our analysis focuses solely on the unlevered (no
debt) property return and does not address the developer debt financing decision. The reader should note,
however, most developers finance at least 50% of investments with debt, producing a levered return at
least twice the unlevered property returns we report.
Land costs and traffic counts make the 49,000 square foot block (4 lots) on the SW corner of the
intersection of 1st Avenue and Muscatine most suitable for initial development.22 Based on other similar
size properties we assume a one-story commercial building (ideally retail) of 14,000 square feet. We
estimate $2 million to purchase the four lots and $650,000 for site development and preparation.23 At
costs of $150 per square foot, the cost of constructing the building is $2.1 million. Collective
construction costs, therefore, are $4.75 million. The project would commence June 2014 and have a 10-
year investment horizon. Construction costs are summarized in Panel A of Table 7.
20 http://thegazette.com/2011/11/01/downtown-iowa-city-tax-district-gets-initial-city-council-support/ 21 Iowa City Tax Assessor 22 The City of Iowa City currently owns the parcel at 2229 Muscatine. Purchase of the other three parcels at 2221, 2211, and
2203 Muscatine, respectively, would have to be negotiated. 23 The preferred block between Towncrest Drive and Towncrest Lane is currently listed for sale at $6.3 million.
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Market lease rates and operating expenses for tenancy beginning in June 2015 are provided in
Panel B of Table 7. Area lease rates have been estimated in the $16-$18 per square foot per year range;
we settle for a $17 rate with annual rent increases of $0.25.24 Lease terms are presented in Panel C. We
assume tenants have triple net leases with 5 year terms.25 Finally, the market rates used in the analysis
are contained in Panel D. Most notably, we assume a capitalization rate of 7% when the property is
eventually sold in 10 years.
Statements of project cash flows and for the sources and uses of funds are provided in Tables 8
and 9, respectively, for a strictly private sector project.26 A summary of the annual project internal rates
of return (IRR) is presented at the bottom of Table 9 (no public subsidy) and in Panel E of Table 7. As
shown, the project returns only 3.66% annually without any public support. Clearly, this meager return
documents a strong need for a public financial incentive to induce developers to take redevelopment risk
in the Towncrest Area.
We make two subsequent revisions to construction costs to illustrate the impact of a public
subsidy on project return. First, we reduce the land purchase cost to $1, effectively implying an upfront
public subsidy of $2 million to offset land acquisition costs. As reported in Panel E of Table 7, this raises
the annual property return to 11.84%. This level of property return may be acceptable to some investors,
particularly Area medical office building developers with long-term tenant leases. Diversifying away
from the medical office property base, however, will entail more risk and require greater developer
financial incentive. Third, we reduce building construction costs by $500,000 to $1.6 million, creating a
total subsidy of $2.5 million ($2 million land purchase and $500,000 in building construction costs). The
higher subsidy produces an annual property return of 15.09% (Panel E of Table 7). We believe a 15%
annual property return provides a strong incentive for development of a retail building that will diversify
the tenant base per the TURP guidelines. Thus, our analysis implies $2 to $2.5 million in public support
24 We thank various area real estate professionals for providing revenue and costs estimates. 25 Tenants effectively pay operating expenses, taxes and insurance, and maintenance costs. 26 We use the commercial real estate industry standard Argus DCF Valuation software to conduct the analysis. Argus donated to
software to the University of Iowa, restricting use solely for academic purposes such as this project.
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is needed to inventive a keystone project that can begin to diversify the Towncrest tenant mix and
increase Area consumer traffic.
Importantly, our analysis assumes public support is provided in full at the beginning of the project
so our estimates are measured in present value, or current dollar cost, terms.27 The subsidy can be
provided in various forms (e.g., tax increment financing (TIF), direct grants, loans, advances,
indebtedness, bonds, tax abatements) and can also structured over an extended period of time.
V. EXECUTIVE SUMMARY
Successful Towncrest redevelopment will attract a diversity of tenants and amenities, producing a new
synergistic flow of retail traffic and capital in the Area. However, the Plan fails to incorporate four key
issues that complicate the revitalization process of the Towncrest Area. We contend these four issues
must be addressed to successfully implement the TURP. First, there must be centralized planning
coordinated by a lead planner who can acquire and develop the critical mass of land needed to attain Plan
objectives. In the current state the redevelopment process consists of piecemeal deals with multiple
developers whose interests may not align with the community. Land acquisition needed for a critical
mass is also hampered by the unrealistic property values of existing Towncrest property owners. In the
absence of a managed approach Towncrest redevelopment will not produce the stated diversity objectives
of the Plan. The lead can be assumed by the public sector but an experienced private sector developer
with strong ties to the community might be more effective.28 Another alternative is some type of public-
private joint venture between a developer and the City that has been effective in many communities (e.g.,
NewBo). A centralized approach to redevelopment will not only better ensure the main objectives of
tenant diversification and design consistency are implemented efficiently but should also more efficiently
utilize public redevelopment financial assistance.
27 We remain available to revise or update the financial analysis at the City’s request. 28 We thank Bill Boecker of Fineline Diversified Development, Fort Worth, TX, for his suggestion.
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Second, the City needs to coordinate redevelopment with current Area stakeholders (property
owners and residents) to better align the redevelopment interests of the public and private sectors. We
propose some form of organization such as a Self-Supported Municipal Improvement District (SSMID) to
improve business conditions and, thereby, help raise Area property values. A SSMID can also be an
effective means of funding part of the Design Plan streetscape improvements. For example, the excess $2
per $1,000 valuation formula used in Downtown Iowa City would generate almost $56,000 annually that
can be applied to Area infrastructure and streetscape projects. A SSMID can also provide an outlet for
residents to retain influence in the redevelopment process.
Third, the initial site to incubate and stimulate redevelopment must be selected. Per the Design
Plan, the City has indicated a preference for the block bounded by Towncrest Land and Towncrest Drive
as the center of the redevelopment effort. We contend redevelopment should initiate on the full block
bordering the southwest corner of the intersection of 1st Avenue and Muscatine. That intersection has the
highest traffic flow in the Area providing the location visibility desired by developers. Also, since the
City of Iowa City already owns a prime parcel of the block, a critical land mass may be acquired at a
more reasonable cost. We estimate public assistance of at least $2 million to incentivize development of
the block.
Fourth, the total amount and form of public assistance to developers, particularly the initial
investors, must be determined. Successful initial development tends to organically stimulate demand
from the private sector. Thus, we believe the bulk public support should be directed to compensate early
investors who take the largest risk. If managed efficiently, we believe the City can minimize public
funding for the project.
The City of Iowa City is to be commended for their efforts in creating the redevelopment plan
and the design standards for the Towncrest Area. We believe, however, additional steps are needed to
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effectively implement the Plan to attain the desired objectives. We believe our recommendations will
more quickly, efficiently and effectively produce a revitalized Towncrest.
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Table 1
TOWNCREST RETAIL MARKET AREA
POPULATION & INCOME SUMMARY
0.25 MILE 0.50 MILE 1.00 MILE
POPULATION
Census population (2010) 835 2,851 10,159
Estimated population (2012) 847 2,833 12,369
Projected population (2017) 902 2,919 12,964
Projected % change (2012-2017) 1.25% 0.60% 0.93%
PER CAPITA INCOME
Estimated per capita income (2012) $29,721 $29,890 $30,282
Projected per capita income (2017) $34,630 $34,789 $35,406
Projected annual % change (2012-2017) 3.10% 3.08% 3.18%
HOUSEHOLDS
Census households (2010) 410 1,352 5,456
Estimated households (2012) 415 1,343 5,487
Projected households (2017) 440 1,380 5,759
Projected % change (2012-2017) 1.09% 0.4% 0.74%
Average household size (2012) 2.04 2.11 2.25
Households with children (%) 23.9% 23.7% 26.4%
Family households (%) 52.4% 54.5% 57.4%
Non-family households (%) 12.4% 11.9% 11.7%
Average non-family household size 1.24 1.30 1.36
AVERAGE HOUSEHOLD INCOME
Estimated household income (2012) $64,041 $65,025 $68,075
Projected household income (2017) $75,099 $75,772 $79,513
Projected annual % change (2012-2017) 3.24% 3.11% 3.15%
MEDIAN HOUSEHOLD INCOME
Estimated household income (2012) $51,626 $52,511 $55,191
Projected household income (2017) $64,456 $64,635 $67,315
Projected annual % change (2012-2017) 4.54% 4.24% 4.05%
HOUSEHOLD INCOME DISTRIBUTION
HH income $35,000+ 70.9% 79.9% 80.0%
HH income $50,000+ 51.1% 65.0% 67.5%
HH income $75,000+ 32.1% 42.9% 44.8%
HH income $100,000+ 16.0% 20.5% 23.5%
HH income $200,000+ 1.7% 2.0% 2.8%
18
Table 2
TOWNCREST RETAIL MARKET AREA
DEMOGRAPHIC & HOUSING SUMMARY
0.25 MILE 0.50 MILE 1.00 MILE
RACE & ETHNICITY (2010)
White 87.8% 88.1% 85.3%
Black or African American 6.5% 6.3% 7.8%
Asian 1.9% 1.8% 2.1%
Hispanic 3.9% 3.3% 5.1%
MARITAL STATUS
Population 15 years+ 604 2,094 10,159
Never married (men and women) 38.1% 38.4% 34.9%
Now married 46.2% 45.4% 49.8%
Widowed 5.5% 6.1% 4.9%
Divorced 10.3% 10.1% 10.5%
AGE DISTRIBUTION (2012)
Median age (years) 37.6 38.7 37.7
EDUCATIONAL ATTAINMENT
Adult population 25 years+ 480 1,633 8,144
Elementary (0-8) 1.2% 0.8% 1.1%
Some high school (9-11) 2.5% 2.6% 1.6%
High school graduate (12) 15.8% 16.1% 17.6%
Some college (13-16) 16.3% 16.4% 13.4%
Associate degree only 8.3% 7.7% 8.0%
Bachelor degree only 26.0% 25.7% 26.7%
Graduate degree 26.3% 25.7% 26.0%
OCCUPATION (2009)
Population 16 years+ 443 1,526 7,338
Mgmt., Business & Financial Operations 13.1% 14.0% 11.6%
Professional and related 3.4% 4.2% 3.1%
Service 5.6% 4.5% 3.9%
Sales and Office 12.9% 24.0% 22.1%
Farming, Fishery and Forestry 0.0% 0.0% 0.0%
Construction, Extraction & Maintenance 9.4% 9.5% 7.3%
Production, Transport & Material Moving 2.9% 6.6% 6.6%
HOUSING INVENTORY (2010)
Total housing units 431 1,415 5,832
Housing units, occupied 95.1% 96.0% 95.0%
Housing units, owner-occupied 63.6% 68.6% 66.5%
Housing units, renter-occupied 31.6% 27.5% 28.4%
Housing units, vacant 4.9% 4.0% 5.0%
HOUSING UNITS (2010)
Single (1 detached) 66.2% 72.7% 68.4%
HOME VALUES (2010)
Total owner housing units 279 929 4,161
Owner occupied median home value $150,342 $148,153 $156,175
Renter occupied median rent $643 $641 $638
19
Table 3
TOWNCREST RETAIL MARKET AREA
CONSUMPTION TRENDS
0.25 MILE 0.50 MILE 1.00 MILE
CONSUMER EXPENDITURES (2010)
Apparel and Services $ 635,146 $ 2,046,965 $ 8,661,425
Computer $ 84,046 $ 269,683 $ 1,143,656
Entertainment and Recreation $ 1,223,426 $ 3,967,072 $ 16,779,250
Food and beverages $ 2,864,264 $ 9,228,749 $ 39,204,399
Financial $ 2,397,052 $ 7,737,874 $ 33,024,900
Health $ 242,247 $ 787,111 $ 3,368,100
Home $ 6,069,987 $ 20,014,569 $ 84,375,844
Household Finance and Equipment $ 469,619 $ 1,526,448 $ 6,461,282
Household Operations $ 610,012 $ 1,979,152 $ 8,400,834
Insurance $ 1,803,073 $ 5,849,806 $ 24,903,131
Transportation $ 3,011,527 $ 9,690,578 $ 41,413,367
Travel $ 523,270 $ 1,716,277 $ 7,220,139
HOUSEHOLD EXPENDITURES (2010)
Apparel and Services $ 1,510 $ 1,505 $ 1,592
Computer $ 199 $ 198 $ 210
Entertainment and Recreation $ 2,910 $ 2,916 $ 3,085
Food and beverages $ 6,811 $ 6,785 $ 7,208
Financial $ 5,701 $ 5,688 $ 6,072
Health $ 576 $ 579 $ 619
Home $ 14,435 $ 14,715 $ 15,513
Household Finance and Equipment $ 1,118 $ 1,121 $ 1,187
Household Operations $ 1,451 $ 1,455 $ 1,544
Insurance $ 4,752 $ 4,300 $ 4,539
Transportation $ 7,162 $ 7,124 $ 7,614
Travel $ 1,244 $ 1,262 $ 1,327
CONSUMER SUPPLY & DEMAND
(2010)
Motor Vehicle & Parts Dealers $ 1,906,611 $ 6,105,433 $ 29,982,391
General Merchandise Stores $ 1,306,026 $ (3,526,182) $ (3,688,328)
Food Services & Drinking Places $ 355,079 $ 671,036 $ 12,469,327
Bldg Materials, Garden Equip. & Supply Stores $ 316,388 $ 511,683 $ 3,228,367
Clothing & Clothing Accessories Stores $ 281,446 $ 368,984 $ 3,422,088
Electronics & Appliance Stores $ 220,134 $ 554,375 $ 2,390,945
Furniture & Home Furnishings Stores $ 111,341 $ 569,319 $ 3,324,820
Sporting Goods, Hobby, Book & Music Stores $ (36,841) $ 4,246 $ 1,588,436
Gasoline Stations $ (1,337,364) $ (722,129) $ 13,162,566
Health & Personal Care Stores $ (2,739,244) $ (3,244,637) $ (546,273)
Food & Beverage Stores $ (11,564,388) $ (10,784,471) $ (274,860)
20
Table 4
WESTSIDE RETAIL MARKET AREA
POPULATION & INCOME SUMMARY
0.25 MILE 0.50 MILE 1.00 MILE
POPULATION
Census population (2010) 670 4,729 10,243
Estimated population (2012) 638 4,655 10,331
Projected population (2017) 616 4,762 10,983
Projected % change (2012-2017) -0.7% 0.46% 1.23%
PER CAPITA INCOME
Estimated per capita income (2012) $25,903 $28,164 $33,903
Projected per capita income (2017) $30,836 $33,227 $38,805
Projected annual % change (2012-2017) 3.55% 3.36% 2.74%
HOUSEHOLDS
Census households (2010) 331 2,136 4,646
Estimated households (2012) 314 2,101 4,700
Projected households (2017) 302 2,146 5,016
Projected % change (2012-2017) -0.79% 0.42% 1.31%
Average household size (2012) 2.02 2.21 2.19
Households with children (%) 28.1% 25.20% 23.70%
Family households (%) 48.6% 47.80% 47.80%
Non-family households (%) 15.4% 17.30% 17.20%
Average non-family household size 1.28 1.46 1.45
AVERAGE HOUSEHOLD INCOME
Estimated household income (2012) $57,528 $61,060 $73,960
Projected household income (2017) $68,467 $72,004 $84,333
Projected annual % change (2012-2017) 3.54% 3.35% 2.66%
MEDIAN HOUSEHOLD INCOME
Estimated household income (2012) $43,095 $43,537 $54,053
Projected household income (2017) $52,941 $54,176 $68,059
Projected annual % change (2012-2017) 4.20% 4.47% 4.72%
HOUSEHOLD INCOME DISTRIBUTION
HH income $35,000+ 63.8% 62.7% 62.4%
HH income $50,000+ 46.6% 46.0% 46.2%
HH income $75,000+ 31.1% 29.6% 29.7%
HH income $100,000+ 18.1% 19.3% 19.7%
HH income $200,000+ 6.1% 4.3% 4.0%
21
Table 5
WESTSIDE RETAIL MARKET AREA
DEMOGRAPHIC & HOUSING SUMMARY
0.25 MILE 0.50 MILE 1.00 MILE
RACE & ETHNICITY (2010)
White 63.6% 68.2% 74.1%
Black or African American 15.4% 12.1% 8.2%
Asian 15.8% 15.0% 13.4%
Hispanic 3.6% 3.6% 3.6%
MARITAL STATUS
Population 15 years+ 590 3,302 8,496
Never married 36.8% 43.4% 44.4%
Now married 53.9% 49.6% 48.2%
Widowed 3.1% 2.1% 2.4%
Divorced 6.3% 4.9% 5.1%
AGE DISTRIBUTION (2010)
Median age (years) 27.8 27.8 28.7
EDUCATIONAL ATTAINMENT
Adult population 25 years+ 454 2,307 5,845
Elementary (0-8) 2.2% 1.7% 1.6%
Some high school (9-11) 0.9% 1.1% 1.3%
High school graduate (12) 7.3% 7.8% 7.9%
Some college (13-16) 13.0% 12.9% 12.9%
Associate degree only 9.0% 7.6% 7.0%
Bachelor degree only 27.3% 27.5% 28.4%
Graduate degree 40.7% 41.3% 41.0%
OCCUPATION (2010)
Population 16 years+ 411 2,373 6,079
Mgmt., Business & Financial Operations 9.5% 9.7% 9.8%
Professional and related 52.8% 49.6% 49.4%
Service 12.9% 11.8% 12.0%
Sales and Office 16.5% 21.7% 22.0%
Farming, Fishery and Forestry 0.0% 0.0% 0.0%
Construction, Extraction & Maintenance 1.7% 1.9% 1.9%
Production, Transport & Material Moving 6.1% 5.4% 5.0%
HOUSING INVENTORY (2010)
Total housing units 357 2,290 4,929
Housing units, occupied 92.7% 93.3% 94.3%
Housing units, owner-occupied 36.3% 35.3% 44.4%
Housing units, renter-occupied 63.7% 64.7% 55.6%
Housing units, vacant 7.9% 7.2% 6.1%
HOUSING UNITS (2010)
Single (1 detached) 37.4% 35.1% 37.0%
HOME VALUES (2010)
Total owner housing units 111 731 2065
Owner occupied median home value $179,543 $183,403 $192,594
Renter occupied median rent $568.00 $593.00 $602.00
22
Table 6
WESTSIDE RETAIL MARKET AREA
CONSUMPTION TRENDS
0.25 MILE 0.50 MILE 1.00 MILE
CONSUMER EXPENDITURES (2010)
Apparel and Services $ 361,040 $ 2,713,105 $ 7,547,460
Computer $ 48,656 $ 371,989 $ 1,029,477
Entertainment and Recreation $ 653,356 $ 4,816,877 $ 13,478,994
Food and beverages $ 1,597,231 $ 11,973,993 $ 33,363,936
Financial $ 1,323,343 $ 9,708,702 $ 27,099,090
Health $ 117,398 $ 875,114 $ 2,464,300
Home $ 2,985,742 $ 21,176,864 $ 59,820,162
Household Finance and Equipment $ 250,265 $ 1,835,131 $ 5,138,777
Household Operations $ 194,062 $ 1,377,128 $ 3,860,766
Insurance $ 728,287 $ 5,378,424 $ 15,116,908
Transportation $ 1,704,026 $ 12,664,448 $ 35,212,675
Travel $ 264,215 $ 1,903,563 $ 5,371,423
HOUSEHOLD EXPENDITURES (2010)
Apparel and Services $ 1,125 $ 1,267 $ 1,603
Computer $ 152 $ 174 $ 219
Entertainment and Recreation $ 2,035 $ 2,250 $ 2,862
Food and beverages $ 4,976 $ 5,593 $ 7,085
Financial $ 4,123 $ 4,535 $ 5,755
Health $ 366 $ 409 $ 523
Home $ 9,301 $ 9,891 $ 12,703
Household Finance and Equipment $ 780 $ 857 $ 1,091
Household Operations $ 605 $ 643 $ 820
Insurance $ 2,269 $ 2,512 $ 3,210
Transportation $ 5,308 $ 5,915 $ 7,478
Travel $ 823 $ 889 $ 1,141
CONSUMER SUPPLY & DEMAND (2010)
Motor Vehicle & Parts Dealers $ ,738,911 $ ,348,661 $ (3,353,481)
General Merchandise Stores $ 1,157,501 $ 5,500,047 $ 14,683,404
Food Services & Drinking Places $ 1,434,249 $ 6,473,779 $ 14,855,454
Bldg Materials, Garden Equip. & Supply Stores $ 194,545 $ 526,882 $ (989,127)
Clothing & Clothing Accessories Stores $ 399,022 $ 1,846,715 $ 4,596,357
Electronics & Appliance Stores $ 242,156 $ 1,110,579 $ 2,701,614
Furniture & Home Furnishings Stores $ 231,159 $ 1,022,826 $ 2,268,552
Sporting Goods, Hobby, Book & Music Stores $ 213,304 $ 982,092 $ 2,397,294
Gasoline Stations $ 1,351,806 $ 5,826,641 $ 11,983,241
Health & Personal Care Stores $ 230,640 $ 1,138,504 $ 3,350,269
Food & Beverage Stores $ 1,598,718 $ 7,331,375 $ 17,906,877
23
Table 7
TOWNCREST CENTRE DEVELOPMENT FINANCIAL ASSUMPTIONS
Panel A: Building Costs/Dimensions
Building Size: commercial 14,000 SF
Floors 1
Land purchase $2,000,000
Pad Ready Costs $650,000
Building Costs $2,100,000
Panel B: Rent and Operating Expenses
Market Rent Commercial $17/SF/Year
Annual Step Rent Increase $0.25
Second Year Operating Costs: (6/2015-5/2016)
Property Tax $149,387/Year29
Insurance $5,762/Year
Maintentance $21,250/Year
Utilities $5,097/Year
Other/Service/Supplies $4,875/Year
Management Fee 4% EGR
Capital Reserve $.25/SF/Year
Panel C: Market Leasing Assumptions
Tenant Renewal Probability 65%
Vacancy Between Tenants 3 Months
Tenant Improvements $10/New $5/Renewal
Leasing Commissions 3%/New
Lease Type Triple Net
Lease Term: Commercial 5 Years
Panel D: Capital Market Assumptions
General Inflation 3.00%
Rent Growth 4.00%
General Vacancy 3.00%
Credit Loss 4.00%
Exit Cap Rate 7.00%
Discount Rate 7.50%
Investment Horizon 10 Years
Panel E: Project Return Summary (unlevered)
Public Subsidy = $0 3.66%
Public Subsidy = $2.0 million 11.84%
Public Subsidy = $2.5 million 15.09%
29 Tax assessed value is cost of $4.75 million less 15%. Tax levy is $37/$1,000 of assessed value.
Table 8
TOWNCREST CENTRE STATEMENT OF CASH FLOWS
(no public subsidy)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
For the Years Ending May-2015 May-2016 May-2017 May-2018 May-2019 May-2020 May-2021 May-2022 May-2023 May-2024 May-2025
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Potential Gross Revenue
Base Rental Revenue $19,833 $238,000 $238,000 $238,000 $238,000 $238,000 $238,000 $238,000 $238,000 $249,717 $393,745
Absorption & Turnover Vacancy -31,550
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Scheduled Base Rental Revenue 19,833 238,000 238,000 238,000 238,000 238,000 238,000 238,000 238,000 218,167 393,745
Base Rental Step Revenue 292 3,792 7,292 10,792 14,292 17,792 21,292 24,792 25,667
Total Potential Gross Revenue 33,820 410,274 419,670 423,417 427,172 430,927 434,682 438,436 442,475 409,838 579,034
General Vacancy -1,015 -12,308 -12,590 -12,703 -12,815 -12,928 -13,040 -13,153 -13,274 -17,371
Collection Loss -1,353 -16,411 -16,787 -16,937 -17,087 -17,237 -17,387 -17,537 -17,699 -16,394 -23,161
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Effective Gross Revenue 31,452 381,555 390,293 393,777 397,270 400,762 404,255 407,746 411,502 393,444 538,502
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Operating Expenses
Property tax 149,388 149,388 149,388 149,388 149,388 149,388 149,388 149,388 149,388 149,388
Insurance 818 9,920 10,148 10,238 10,329 10,420 10,511 10,601 10,699 10,230 14,001
Maintenance 723 8,776 8,977 9,057 9,137 9,218 9,298 9,378 9,465 9,049 12,386
Utilities 63 763 781 788 795 802 809 815 823 787 1,077
Service, supplies, other 692 8,394 8,586 8,663 8,740 8,817 8,894 8,970 9,053 8,656 11,847
Mgmt fee 1,258 15,262 15,612 15,751 15,891 16,030 16,170 16,310 16,460 15,738 21,540
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Total Operating Expenses 3,554 192,503 193,492 193,885 194,280 194,675 195,070 195,462 195,888 193,848 210,239
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Net Operating Income 27,898 189,052 196,801 199,892 202,990 206,087 209,185 212,284 215,614 199,596 328,263
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Leasing & Capital Costs
Tenant Improvements 127,000
Leasing Commissions 59,062
Site preparation 650,000
Building 2,100,000
reserve 3,605 3,713 3,825 3,939 4,057 4,179 4,305 4,434 4,567 4,704
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Total Leasing & Capital Costs 2,750,000 3,605 3,713 3,825 3,939 4,057 4,179 4,305 4,434 4,567 190,766
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Cash Flow Before Debt Service ($2,722,102)$185,447 $193,088 $196,067 $199,051 $202,030 $205,006 $207,979 $211,180 $195,029 $137,497
& Taxes ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Income Tax -15,096 10,130 12,039 12,782 13,525 14,268 15,010 15,751 16,549 12,509 44,639
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Cash Flow After Taxes ($2,707,006)$175,317 $181,049 $183,285 $185,526 $187,762 $189,996 $192,228 $194,631 $182,520 $92,858
=========== =========== =========== =========== =========== =========== =========== =========== =========== =========== ===========
Table 9
TOWNCREST CENTRE DEVELOPMENT SOURCES & USES OF FUNDS
(no public subsidy)
1
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
For the Years Ending May-2015 May-2016 May-2017 May-2018 May-2019 May-2020 May-2021 May-2022 May-2023 May-2024
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Sources Of Capital
Net Operating Gains $27,898 $189,052 $196,801 $199,892 $202,990 $206,087 $209,185 $212,284 $215,614 $199,596
Initial Equity Contribution 2,000,000
Net Proceeds from Sale 4,548,787
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Defined Sources Of Capital 2,027,898 189,052 196,801 199,892 202,990 206,087 209,185 212,284 215,614 4,748,383
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Required Equity Contributions 2,722,102
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Total Sources Of Capital $4,750,000 $189,052 $196,801 $199,892 $202,990 $206,087 $209,185 $212,284 $215,614 $4,748,383
=========== =========== =========== =========== =========== =========== =========== =========== =========== ===========
Uses Of Capital
Property Purchase Price $2,000,000
Tenant Improvements
Leasing Commissions
Capital Costs & Reserves 2,750,000 3,605 3,713 3,825 3,939 4,057 4,179 4,305 4,434 4,567
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Defined Uses Of Capital 4,750,000 3,605 3,713 3,825 3,939 4,057 4,179 4,305 4,434 4,567
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Cash Flow Distributions 185,447 193,088 196,067 199,051 202,030 205,006 207,979 211,180 4,743,816
___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
Total Uses Of Capital $4,750,000 $189,052 $196,801 $199,892 $202,990 $206,087 $209,185 $212,284 $215,614 $4,748,383
=========== =========== =========== =========== =========== =========== =========== =========== =========== ===========
Unleveraged Cash On Cash Return
Cash to Purchase Price -136.11%9.27%9.65%9.80%9.95%10.10%10.25%10.40%10.56%9.75%
NOI to Book Value 0.59%3.98%4.14%4.20%4.26%4.32%4.38%4.44%4.51%4.17%
Cash to Purchase Price & Costs -136.11%9.27%9.65%9.80%9.95%10.10%10.25%10.40%10.56%9.75%
Unleveraged Annual IRR 3.66%