Tahoe Case Analy Revita Opport Regula and Re Prepared fo Tahoe Regi In Collabor The Region Prepared b Darin Dinsm Andy Plesc Financial Pr C.R. Russe March 8, 20 Regional Pl darin@dari RPP #3650 e Rede Study ysis lization tunities ation an ecomme or: ional Plannin ration with: nal Plan Initia y: more, Region ia, A. Plescia ro-formas pr ll 010 anning Partn ndinsmore.c 0 evelop y: Feas and Re nd Code endation ng Agency ative nal Planning a & Company repared in C ners com pment sibility einvestm Analys ns Partners y ollaboration t y ment sis with
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TahoeCase Analy
RevitaOpportRegulaand Re Prepared fo Tahoe Regi In CollaborThe Region Prepared b Darin DinsmAndy Plesc Financial PrC.R. Russe March 8, 20
Regional Pldarin@dariRPP #3650
e Rede Studyysis
lization tunities ation anecomme
or:
ional Plannin
ration with: nal Plan Initia
y:
more, Regionia, A. Plescia
ro-formas prll
010
anning Partnndinsmore.c
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evelopy: Feas
and Re
nd Codeendation
ng Agency
ative
nal Planning a & Company
repared in C
ners com
pmentsibility
einvestm
Analysns
Partners y
ollaboration
t y
ment
sis
with
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This report was prepared as one in a package of documents collectively referred to as the Regional Plan Initiative (RPI). The analysis and recommendations contained herein were produced as part of a multi-stakeholder effort to inform decision-making involved in the TRPA Regional Plan Update (RPU), Lake Tahoe Environmental Improvement Program (EIP), and the related planning and implementation efforts of Tahoe’s local governments. This report would not have been possible without the participation of Lake Tahoe Basin public and private entities seeking to strengthen the linkage between a strong environmental restoration program and a vibrant economy in the Lake Tahoe Basin, including a more informed set of opportunities for private sector business investment in the Lake Tahoe EIP. The following individuals were among those consulted and who provided input and guidance in the preparation of this report. Patrick Atherton Mike Bradford Jill Bricker Phil Brozek Blaise Carrig Neil Crescenti John Falk Lew Feldman Betty “B” Gorman Susanne Heim Phil Herback John Hitchcock Adam Krivasty Robert Larsen Joanne Marchetta Doug Martin Gary Midkiff Cheryl Murakami Eugene Palazzo Julie Regan Carl Ribaudo C.R. Russell Harold Singer Doug Smith Barrett Spiegel Andrew Strain Steve Teshara Kara Thiel Jerry Wells Patrick Wright Harmon Zuckerman
5
Table of Contents
I. INTRODUCTION ................................................................................................... 6
II. BACKGROUND ..................................................................................................... 6
III. OBJECTIVES ....................................................................................................... 7
IV. SUMMARY OF EXISTING CONDITIONS ................................................................... 7
A. KINGS BEACH ............................................................................................... 9
B. SOUTH LAKE TAHOE .................................................................................... 11
V. CASE STUDY DEVELOPMENT PLAN CONCEPTS ......................................................... 13
A. KINGS BEACH ............................................................................................. 13
B. SOUTH LAKE TAHOE .................................................................................... 18
VI. FINANCIAL ANALYSIS ......................................................................................... 23
VII. FINDINGS ......................................................................................................... 24
VIII. RECOMMENDATIONS ........................................................................................ 27
ATTACHMENT A – KINGS BEACH ........................................................................... 35
ATTACHMENT B – SOUTH LAKE TAHOE .................................................................... 43
IX. Supplemental Suggestion: A Tahoe EcoDistrict Approach………………………………………57
This Page Intentionally Left Blank
6
INTRODUCTION AND BACKGROUND
I . Introduct ion
This report presents a summary of the analysis of the financial feasibility of
redevelopment projects to determine the financial impact current regulations and incentives have
on project financial feasibility in the Lake Tahoe Basin. For the purposes of this effort, the
analysis was developed as an update of the previous financial feasibility analysis prepared for
two case studies in the Lake Tahoe Basin (see Section II. Background below). This updated
analysis is intended to help better understand the projected financial feasibility of the subject
case studies and challenges facing commercial and residential revitalization and reinvestment
opportunities in the urbanized areas of the Lake Tahoe Basin. The report summarizes existing
conditions and the potential benefits of implementing the subject case study projects. Also
examined in this report are conclusions from the financial analysis, policy and project
considerations, and recommendations.
II . Background
During the Lake Tahoe Place-Based Planning process, a component of Pathway 2007
and the Regional Plan Update, an economic analysis of three case studies was completed in
March 2007 – one in each of the three Place-Based planning sub-regions (Placer County,
Washoe County, and South Lake Tahoe, encompassing Douglas and El Dorado Counties). The
initial case studies focused on the impact local codes would have on potential redevelopment
projects. They were intended to specifically address restrictions imposed on the implementation
of redevelopment projects which met the environmental goals of the Basin and the design
elements desired by the local community.
As part of the Regional Plan Initiative (RPI), two of the three case studies (Kings Beach and
South Lake Tahoe) were updated with more focus on financial feasibility, the identification of any
potential financing shortfall (“gap”), and suggested recommendations to try and close the
identified “gap”. The updated analysis included modifying the development program of these two
previous subject case studies in an attempt to achieve financial feasibility.
7
OBJECTIVES OF CASE STUDY ANALYSIS
III . Object ives
The overall objective of updating the subject case studies was to gain a better
understanding of challenges in existing and projected real estate market conditions, and the
combination of TRPA regional and local government codes on the feasibility of implementing
high quality redevelopment or infill development projects. Such projects are those that reflect the
values of the local community and provide a net environmental benefit. Investment in existing
sites currently demonstrating poor environmental and/or economic performance can produce a
“net gain” by reducing environmental impacts of the site and revitalizing its economic
performance.
Specifically, the objectives of this updated economic analysis effort were to: 1) update the
development pro-formas prepared for the two previous case studies (Kings Beach and South
Lake Tahoe) in March 2007, based on updated real estate market conditions, development
costs, sales and rental rates, and other assumptions; and 2) prepare alternative development
program assumptions including incorporation of new factors affecting the pro-formas such as
green building features, streetscape improvements, affordable workforce (employee) housing,
other building types, parking alternatives, etc.; and 3) identify potential solutions to address any
identified financing shortfall (“gap”) of the subject case studies.
IV. Ex ist ing Condit ions
This section describes the existing conditions of the Kings Beach and South Lake Tahoe
case study sites. Of particular interest related to the initial financial feasibility analysis of the two
case studies in March 2007 was:
1. Existing site coverage (square feet of coverage of existing buildings and covered
surfaces, i.e. pavement). Reducing coverage (and/or incorporating water quality improvements)
has been identified as a significant strategy to achieve improved water quality in the Lake Tahoe
Basin.
2. Floor-to-Area Ratio (FAR) because FAR is a standard statistic for measuring
density or the efficiency at which land is being used; the higher the FAR value, the more efficient
8
land is being used in comparison with the total building footprint area of a structure (or building
footprint for a one-story building).
This Page Intentionally Left Blank
EXIST
A. K i
The King
is identifi
proximity
The site
19,000 sq
currently
dilapidate
could be
function a
TING CO
ngs Be
s Beach pro
ied as a hi
to Lake Tah
in Kings Be
quare feet, a
no water q
ed buildings
considered
and are not o
ONDITION
each
oject site is s
gh priority
hoe, raising
each current
almost three
quality impro
. Two of the
“functional”
oriented tow
NS – CA
situated in th
redevelopm
the importan
ly has 64%
e times the
ovements on
e buildings fa
” retail. The
ward the stre
9
ASE STU
he commerci
ent area by
nce of effect
coverage. P
building cov
n the site, w
ace the stre
e remaining
et.
UDY SIT
ial core of do
y Placer Co
tive water qu
Paved surfa
verage (at 6
which is co
eet (State Hi
buildings p
TES
owntown Kin
ounty. The
uality control
aces on the
6,906 square
mprised of
ghway 28) a
rovide little
ngs Beach, w
e site is in
l.
site take up
e feet). Ther
older, some
and provide
commercial
which
close
p over
re are
ewhat
what
/retail
Table 1:
_________
Existing Sit
Existing Sit
Bu
Pa
To
Pe
Existing C
_____________
te Area
te Coverage
uilding
aving
otal
ercentage
Conditions
____________
s – Kings B
_____________
10
Beach Cas
____________
40,470 SF
6,906 SF
19,064 SF
25,970 SF
64%
e Study
______________________________________
______
B. So
The Sout
heavily co
no water
proximity
outh La
th Lake Tah
overed at 71
quality imp
to the Lake
ake Ta
hoe site occ
1% (average
rovements a
, just across
ahoe
upies two b
e of the two
and older bu
s Highway 50
11
blocks bisect
sites) with o
uildings curr
0 in the com
ted by an a
over 136,00
rently under
mmercial core
lleyway. Cu
00 square fe
r-utilized. Th
e of South L
rrently the s
et of paved
he site is in
ake Tahoe.
site is
area,
close
Table 2:
_________
Existing Si
Blo
Blo
To
Existing Si
Blo
Blo
Ov
Existing C
_____________
ite Area
ock 1
ock 2
otal
ite Coverage
ock 1
Building
Paving
ock 2
Building
Paving
verall Percent
Conditions
____________
g
g
tage
s – South L
_____________
12
Lake Tahoe
____________
162,000 SF (3
144,000 SF (3
306,000 SF (7
77.1%
39,300 SF (0
85,600 SF
124,900 SF
64%
41,640 SF (0.2
50,580 SF
92,220 SF
71%
e Case Stu
_____________
.72 A)
.30 A)
.02 A)
.24 FAR)
29 FAR)
udy
_____________
____________
______
CASE
V. De
Th
study site
contribute
case stu
any TRPA
the finan
modified
use of pu
building s
A. K i
The King
(fractiona
on modifi
STUDY
evelop
his section
e and relate
e to the des
dies analyz
A codes. Th
cial feasibil
parking requ
ublic street r
setbacks to c
ngs Be
gs Beach c
al ownership
cations to th
DEVELO
ment
presents in
ed changes
sired “net g
zed in Marc
his was inten
ity of devel
uirements re
rights of way
create an ur
each
case study
p units). The
he initial cas
OPMENT
Plan C
nformation re
in site cove
ain” outcom
ch 2007 re
ntional in or
opment. Th
elated to pot
y to accomm
ban edge al
developme
e updated d
e study deve
13
T PLAN A
Concep
egarding th
erage and F
me of redeve
eflected som
der to demo
e case stud
tential joint u
modate requ
ong public s
ent program
development
elopment pla
AND PRO
pts
e developm
Floor-Area-R
elopment an
me changes
onstrate the
dy developm
use/shared p
uired parking
street rights-
m includes
t pro-forma
an (March 2
OGRAM C
ment program
Ratio (FAR)
nd/or infill d
s to local c
extent loca
ment progra
parking solu
g; and 3) mo
of-way.
retail and
(see Attachm
2007) as an a
CONCEP
m for each
which pote
evelopment
codes, but n
l codes imp
ams assume
utions; 2) pos
ore flexibility
residential
ment A) is b
attempt to tr
PTS
case
ntially
t. The
not to
acted
ed: 1)
ssible
y with
uses
based
ry and
improve t
program.
units from
an additio
the modif
The upda
residentia
fees, inte
building s
likely cha
and local
The follow
the Kings
the overall p
The modific
m 10 to 20 u
onal 10,000
fied develop
ated develo
al units (frac
erest, market
square foota
anges that w
governmen
wing is a pa
s Beach case
projected ec
cations inclu
nits (an add
square feet
ment plan a
pment pro-f
ctional owne
ting etc.), an
age. Howev
would further
t codes.
artial list of is
e study.
conomics an
uded an incre
ditional forty
t of building
nd program
forma takes
ership units)
nd revenue a
ver the estim
r need to oc
ssues related
14
d financial f
ease in the n
(40) fraction
area in a th
includes LE
s into accou
on construc
and project p
mated projec
ccur in the d
d to the mod
feasibility of
number of p
nal ownersh
ird floor to t
EED certifica
unt the pote
ction costs,
profitability a
ct profitabilit
development
dified develo
the case st
proposed frac
ip units). Th
he new build
ation enhanc
ential effect
indirect cost
associated w
y does not t
t plan to me
opment plan
udy develop
ctional owne
his translate
ding. In add
cements.
of the addi
ts (design, p
with the incre
take into ac
eet existing T
n and progra
pment
ership
es into
dition,
itional
permit
eased
ccount
TRPA
am for
15
1. To accommodate the additional ten (10) residential units would require additional
parking. Due to the size of the case study site, any additional on-site parking might have to be in
either above-ground or below ground structures which would be very cost prohibitive.
2. To accommodate the additional ten (10) residential units (fractional ownership units)
would require an additional floor to the proposed new building. Current codes do not allow such
additional building height, therefore there would need to be either a modification to, or a variance
from the existing code to accommodate the additional floor.
3. If permitted, an additional floor to existing building could also accommodate larger units
by utilizing roof spaces for a second level in the additional third-floor units. This would increase
saleable square footage at a relatively inexpensive cost, and increase the marketability of the
residential product.
4. The proposed additional residential square footage could be wholly-owned units (e.g.
condominiums) instead of fractional ownership units, if permitted by existing zoning. This
approach could: a) lower the project sales risk with only ten (10 units to be sold instead of 40
fractional ownership units); b) lower the overall estimated sales commissions from 12% to 6%;
and c) lower estimated indirect costs by not having to furnish the units. However, the market risk
would be the practical ability to sell upper end priced units above commercial space fronting on
State Highway 28.
5. The initial baseline assumptions were that there were already existing TAUs to
accommodate the fractional ownership units. The additional ten (10) residential units (40
fractional ownership units) would require purchase of ten (10) TAUs which could become cost
prohibitive due to the likely purchase price of approximately $650,000 (10 units @ $65,000 per
unit).
6. Additional commercial square footage as an alternative to additional residential square
footage could potentially increase the estimated project profitability but it would increase the
developable footprint (increased site coverage) and required parking.
16
Table 3: Program Description – Kings Beach Case Study
• Shared parking with permeable surfaces • Bio-swales • Ground water infiltration and conveyance to BMPs • Trees and traffic calming • Sidewalks
Restores Historic Buildings
• Two commercial buildings restored • Commercial tenants
BMPs
• Bio-swales • Area-wide water quality improvements
Commercial Uses/Accommodations
• Walking edge along street • Green Construction • Shared Parking
Mixed-mode street
• Bike Lanes • Sidewalks with lighting • Transit – bus shelters
Note: Potential area-wide approach to water quality improvements. It is evident that a solution of this nature would require significant collaboration between local government, TRPA, the developer and multiple property owners.