HomeMy WebLinkAbout13 - City Hall Reuse�EW `Rr CITY OF
NEWPORT BEACH
City Council Staff Report
Agenda Item No. 13
July 9, 2013
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Community Development Department
Kimberly Brandt, AICP, Director
949 - 644 -3226, kbrandt @newportbeachca.gov
PREPARED BY: James Campbell, Principal Planner
APPROVED:,
TITLE: Reuse of Former City Hall Complex
3300 Newport Boulevard & 475 32nd Street
1. Request for Proposals No. 13 -35 (PA2012 -176)
2. City Hall Complex Reuse Project Amendments (PA2012 -031),
General Plan Amendment No. GP2012 -002, Coastal Land Use
Plan Amendment No. LC2012 -001, Zoning Code Amendment
No. CA2012 -003
3. Resolution 2013- 61 Forming an Ad Hoc Committee to
Negotiate an Agreement with the Preferred Proposer for the
Re -use of the City Hall Site.
ABSTRACT:
Review proposals for redevelopment of the former City Hall site and select one
development team to initiate negotiations for further refinement of the project's
components and lease agreement.
RECOMMENDATIONS:
1. Hear presentations from staff and each development team (if the teams wish to
make presentations);
2. Receive public comment;
3. Select one of the following development teams to negotiate lease terms:
• RD Olson Development
• Shopoff Group
• Sonnenblick Development
After an analysis of all the proposals, the City staff's recommendation is that the
Council select RD Olson Development as the proposer with whom the Council
should enter into negotiations;
4. Adopt Resolution No. 2013- 61 forming the City Council Ad Hoc Negotiating
Committee for the Re -Use of the City Hall Site and confirming the Mayor's
appointment of two (2) Council Members to the Committee; and
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5. Direct staff to modify the pending amendments to the General Plan Land Use
Element, Coastal Land Use Plan, and Zoning Code for consistency with City
Council's selection of a development team and take all necessary steps to complete
the processing of the amendments as the project components are refined.
DISCUSSION:
Three proposals were received pursuant to Request for Proposals No. 13 -35 (RFP).
The RFP can be found at the City's website at:
https:// www5 .newportbeachca.gov /osupplier /bid current. asp? path = /RFP 13 -35 - City
Hall Site Re -Use Project. The proposals can also be found at the City's website at
httr):// www. newportbeachca .aov /citvhalIreuse. Each proposer presented their
development team and qualifications, development concept, draft lease terms and
estimates of economic impacts to the City Council at the Study Session on April 23,
2013. As discussed further below, staff has reviewed the three proposals in regards to
the RFP requirements; the proposed development concepts; and the anticipated fiscal
and economic impacts.
A. Compliance with RFP Submittal Requirements
Each team participated in the mandatory pre - proposal meeting and submitted a
complete proposal on time. Staff has compiled a matrix summarizing the RFP's
submittal requirements and the response by each development team in respect to each
requirement. The matrix is contained in Attachment CC -1.
B. Development Concepts
Each of the proposed development concepts would fit within the City's proposed
intensity, density, and height limits for the site. Additionally, each concept is consistent
with the City's proposed setback, open space, and other development standards. It
should be noted that technical compliance with the City's Municipal Code is not required
at this point since a project is not being considered or approved. Any future project will
require submittal of an application containing detailed site and architectural plans for
subsequent review and analysis prior to City approval. Provided below is a discussion of
each conceptual development plan.
1. RD Olson Development ( "RD Olson ") proposes a 130 -room boutique hotel and
spa. The proposal targets an upscale market with an average daily rate of
approximately $279 per room night in the stabilized year (2018). Construction costs
would be approximately $46.6 million. The hotel would be managed by Destination
Hotels, an experienced hotel operator. The project would include meeting rooms,
accessory retail, a restaurant, lobby bar, rooftop bar, and guest pool area.
The proposal indicates that a total of 150 surface parking spaces would be provided
of which approximately 30 spaces would be along 32nd Street and "shared" with the
public. City staff inquired about the shared parking concept, also noting that the plan
does not depict 150 spaces. The proposer clarified that on -site surface parking
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would be provided to meet the entire project's needs and that all parking along 32nd
Street would remain public and not shared with the hotel. A subsequent parking plan
submitted to staff shows 145 off - street parking with the use of some tandem stalls
and 35 on- street public parking stalls. The City's Zoning Code does not include a
specific parking requirement for a hotel project, but rather allows for the evaluation of
the project's parking requirements on a case -by -case basis by the Planning
Commission.
Primary vehicular access would be from Newport Boulevard at the Finley Avenue
intersection. Secondary vehicular access and service access would be taken from
32nd Street at Villa Way.
The proposed site layout has taller buildings located along the northeastern part of
the site. Lower buildings are located closer to Newport Boulevard. Public spaces are
located along Newport Boulevard and to a lesser extent along 32nd Street. Public
pedestrian connections to Via Lido Plaza would continue largely in current locations.
The hotel project would provide public access through overnight stays and the
availability of the hotel's amenities (e.g. restaurant, rooftop bar, retail, spa, meeting
rooms, etc.).
RD Olson Development Site Plan
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Staff believes the development concept is consistent with the Lido Village Design
Guidelines and did not note any deficiencies. The architecture has a nautical flavor
that is compatible with Lido Village, Cannery Village, and the Balboa Peninsula. The
building massing is modulated and the architecture is articulated, creating visual
interest. The project includes taller, iconic architectural features near Finley Avenue,
a unique public pedestrian way along Newport Boulevard, and the public plaza
located at the intersection with 32nd Street provides open space for views of the area
and gathering places. The concept preserves the two large ficus trees in their
current location along Newport Boulevard.
Construction will not require significant excavation since parking would be on grade
and not within a subterranean parking garage. Shading of Newport Boulevard in the
AM and Via Lido Plaza in the PM would be less pronounced than the Sonnenblick
proposal and similar to the Shopoff Group proposal due to the location and height of
the buildings. Although a 130 -room hotel would generate more daily traffic on
average than the former City Hall use, it would generate less peak hour traffic. With
most project traffic accessing the site at the intersection at Finley Avenue, possible
effects to intersection operation at 32nd Street are not anticipated.
2. Shopoff Group ("Shopoff") proposes a 99 -unit, residential mixed use project with
15,000 square feet of commercial space. The proposal targets an upscale market
with stabilized average rents being $5,058 per month. Construction costs would be
approximately $61.3 million. The project would include private recreational areas
including a pool area.
The project provides separate commercial and residential parking within
subterranean parking areas (250 spaces for residents and their guests and 75
spaces for commercial uses). The Zoning Code requires 2.5 parking spaces per
residential unit and 1 parking space for every 250 square feet of retail space;
therefore the project's proposed parking does comply with these requirements. The
proposed subterranean parking will require excavation, shoring, dewatering, and off -
site transport of earth. Commercial vehicles would access the site from Newport
Boulevard at the Finley Avenue intersection. Residents would access the site from
32nd Street.
The proposed site layout has a public plaza located at the corner of the intersection
of Newport Boulevard and 32nd Street extending through a central commercial plaza,
which would provide open space for views of the area and gathering places. Two -
mixed use buildings flank the plaza and taller residential buildings are located to the
east. A public pedestrian pathway along the northeast property line would provide
connections to Via Lido Plaza. The project provides public access through use of the
plaza and retail activity centers — public access would not be provided in the
residential portions of the site.
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Staff believes the development is consistent with the Lido Village Design Guidelines
and did not note any deficiencies. The architectural theme is not detailed in the
proposal and should this proposer be selected, the architecture would be refined
should the City decide to select the Shopoff team. The building massing is broken up
into several separate buildings. The project's iconic impression rests with the
relatively large public plaza at the intersection with 32nd Street, retail plaza, and the
preservation /relocation of the two large ficus trees to areas where they best
complement the proposed site design.
Shopoff Group Site Plan
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Construction will require excavation for the subterranean parking garage (one level
down). Dewatering will likely be necessary. Shading of Newport Boulevard in the AM
would be less pronounced than the Sonnenblick proposal and similar to the RD
Olson proposal due to the location of the buildings. The public plaza and retail plaza
would have good solar exposure. Traffic from the proposed uses would generate
more daily traffic on average than the former City Hall use, but it would generate less
peak hour traffic. With resident vehicular ingress and egress occurring on 32nd
Street, a significant portion of peak hour traffic (more than former uses) will use the
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Newport Boulevard /32nd Street intersection. This change will likely require a longer
left turn pocket in southbound Newport Boulevard and a smaller landscaped median
in the future.
3. Sonnenblick Development ( "Sonnenblick ") proposes a 148 -room boutique hotel
with a spa and fitness center. The proposal targets a luxury market and the proposer
predicts average daily rates of $371 per room night in the stabilized year (2018).
Construction costs would be approximately $81.8 million. The proposal includes 15
townhouse style suites and 12 independent villa units to attract family and group
functions. These units are part of the basis for the proposal's higher average room
rate. The hotel would be operated by Auberge Resorts, an experienced hotel
operator. The project would include meeting rooms, accessory retail, two
restaurants, a lobby bar, a rooftop bar, and guest pool.
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Sonnenblick Development Site Plan
32nd STREET
The project would provide 210 subterranean parking spaces (1.4 parking spaces per
room). As stated previously, the City's Zoning Code does not include a specific
parking requirement for a hotel project, but rather allows for the evaluation of the
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project's parking requirements on a case -by -case basis by the Planning
Commission. The proposed subterranean parking will require excavation, shoring,
dewatering, and off -site transport of earth. Primary access would be from Newport
Boulevard at the Finley Avenue intersection. Secondary vehicular access would be
taken from 32nd Street at Villa Way. Service vehicles would take separate access
from 32nd Street between Newport Boulevard and Villa Way.
The proposed site layout has taller buildings located along both Newport Boulevard
and 32nd Street. Twelve, 3 -level villas would be centrally located in proximity to the
northeast part of the site. Typical rooms would have a private balcony and 15 of the
rooms will be multi - leveled including a private roof -top deck and Jacuzzi. Public
spaces are located within the interior of the of the site and pedestrian connections to
Via Lido Plaza would continue largely in current locations. The hotel project would
provide public access through overnight stays and the availability of the hotel's
amenities (e.g. restaurant, rooftop bar, retail, spa, meeting rooms, etc.).
Staff believes the development concept is consistent with the Lido Village Design
Guidelines and did not note any deficiencies. The architectural theme is not detailed
in the proposal and would be refined should this development team be selected. The
project includes a taller iconic architectural feature and a public plaza at the Newport
Boulevard /32 "d Street intersection, enhanced pedestrian walkways along Newport
Boulevard and 32nd Street, and undefined public spaces within the interior of the site.
The two large ficus trees along Newport Boulevard would be removed in this
concept.
Construction will require excavation for the subterranean parking garage (one level
down). Dewatering will likely be necessary. Shading of Newport Boulevard and
public spaces in the setback area in the AM would be more pronounced than the
other proposals due to the location and height of buildings. Although a 148 -room
hotel would generate more daily traffic on average than the former City Hall use, it
would generate less peak hour traffic. With most project traffic accessing the site at
Finley Avenue, possible impacts to intersection operation at Newport Boulevard /32nd
Street are not anticipated.
Summary
Table 1 on the next page summarizes the key features of each proposal. As stated
previously, staff believes all of the proposals may be found consistent with the Lido
Village Design Guidelines, although additional design refinement would be necessary
for all three plans.
Each proposal provides connectivity along the streets with enhanced pedestrian spaces
and /or plazas and each proposal also provides pedestrian access through the site to
Via Lido Plaza. The Shopoff proposal provides the most distinct public pedestrian path
through the site to Via Lido Plaza.
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Public spaces in the RD Olson and Shopoff proposals are readily accessible to the
public from Newport Boulevard and 32nd Street, and public spaces in the Sonnenblick
proposal are less evident as they are separated from adjacent streets behind the main
buildings.
The RD Olson proposal includes increased setbacks from property lines on all sides
with higher level step backs. The Sonnenblick proposal has more building massing
located closer to Newport Boulevard than either of the other two proposals. The Shopoff
proposal provides distinct building separation and a well defined site plan.
Both the Sonnenblick and Shopoff proposals are less specific in their architectural
theme and detailing than the RD Olson proposal. From an architectural standpoint, staff
believes the RD Olson concept and detailing reflects a better understanding of the Lido
Village /Balboa Peninsula area and thereby compliments and reinforces the overall
coastal and Mediterranean style envisioned by the Lido Village Design Guidelines.
Table 1
Conceptual Project Comparison
Feature
RD Olson
Sonnenblick
Shopoff
Rooms /Units
130 hotel rooms
148 hotel rooms
99 units
Investment
$46.6 million
$81.8 million
$61.3 million
Operator
Destination Hotels &
Resorts
Auberge Resorts
Riverstone Property
Management
Stabilized Room
Rate /Rent
$279/ night (average)
$379/ night (average)
$5,058 /month
Public Plaza &
Pedestrian Paths
0.68 acres
1.3 acres
1.2 acres
Parking
145 spaces
210 spaces
325 spaces
Building Height
4 stories and tower
feature at 58 ft. -5 in.
4 stories at 55 ft. and
tower feature at 65 ft.
4 stories at 55 ft.
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C. Fiscal and Economic Impacts
Prior to the issuance of the RFP, the City contracted with two specialized consulting
firms, Keyser Marston Associates (KMA) and PKF Consulting (PKF) to analyze market
support for an apartment community and /or a hotel project on the City Hall site and to
estimate reasonable fiscal and economic effects of both land uses.
KMA's September 17, 2012, report (Attachment CC -2) analyzed two alternative
apartment development uses and estimated Land Residual Value, Economic Benefits,
and Public Revenues for a 92 -unit and a 99 -unit project. Their analysis included an
estimate of achievable residential unit rents of $3,500 - $4,500 (2012 dollars) per month
for a new apartment development on the site.
PKF performed a similar analysis to determine the market feasibility of a hotel
development on the City Hall site. Their analysis considered 78 -room and 120 -room
hotel projects and included an estimate of achievable Average Daily Rates (ADR) of
$240 and $229 (2015 dollars) respectively. PKF's August 8, 2012, and September 14,
2012, reports are included as Attachments CC -3 and CC -4, respectively.
Staff used these reports to assist in the evaluation of each proposal with respect to their
stated fiscal and economic impacts. Provided below is a brief summary of each
proposal:
1. RD Olson proposes a 99 -year lease with a minimum base rent and percentages of
certain sales to be negotiated. The cost to construct appears correct and feasible.
The proposed stabilized average daily rate for hotel stays is approximately $279
(2018 dollars), which is higher than the $229 and $240 range identified in the 2012
PKF analysis.
2. Shopoff proposes a 99 -year lease with a minimum base rent and percentages of
certain sales to be negotiated. The anticipated stabilized average rent of $5,028 per
month would make it one of the most expensive rental projects in the City. The
proposed rents are significantly higher than the achievable rents of $3,500 - $4,500
identified in the 2012 KMA analysis.
3. Sonnenblick proposes a 99 -year lease with a minimum base rent with a request for
a purchase option. The cost to construct appears correct and feasible, and the
proposed stabilized average daily rate of $371 (2018 dollars) for hotel stays is
significantly higher than the $229 and $240 range identified in the 2012 PKF
analysis.
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Table 2
Estimates of City Revenues Provided in Developer Proposals
Item
RD Olson
Sonnenblick
Shopoff
Representative Year Tax Revenue
$1.13 million
$1.59 million
$0.23 million
Representative Year Lease Revenue
$0.42 million
$0.60 million
$1.01 million
Total Annual Revenue
$1.53 million
$2.19 million
$1.25 million
10 -Year Revenue Estimate
$17.25 million
$19.63 million (1)
Not estimated (2)
Proposal Estimates of Economic Impacts to Community
Estimated Annual Economic Impact
$36.2 million
$56.1 million
Not estimated (3)
Estimated 10 -Year Economic Impact
$402.3 million
$682 million
Not estimated
(1) Does not include ground rent.
(2) Developer provided a 20 -year estimate without ground or percentage rents of $3.35 million.
(3) Developer estimates $102 million from construction and $6 million from resident spending.
In order to analyze the three proposals in respect to their stated fiscal impacts to City
revenues and overall economic impacts to the community, staff consulted with KMA and
Economic Planning Systems (EPS). Both consultants reviewed the financial portion of
the proposals including the pro- formas, construction costs, and market information in
support of room rates or rents. The full KMA and EPS reports are attached to this
report, Attachments CC -5 and CC -6, respectively. It should be noted that the estimates
of financial and economic impacts are based upon the information submitted in the
proposals. The actual revenue and economic impacts of the projects will be dependent
upon the lease terms negotiated and ultimate performance of the development in the
marketplace. The KMA and EPS reports provide estimates of the relative performance
of the proposed developments if each were to perform in the marketplace as suggested
by the proposers.
Based upon the information provided in the proposals, both the KMA and EPS analyses
conclude that the Sonnenblick proposal could potentially generate the highest fiscal and
economic impact with the RD Olson proposal being the next highest. The Shopoff
proposal would provide the smallest revenue and economic impact to the community,
which is largely attributable to the fact that it will not generate any Transient Occupancy
Tax revenues that are generated by both hotel proposals, and the differing spending
habits of residents versus visitors. It should be noted the Shopoff proposals includes the
highest proposed annual lease revenues.
Sonnenblick's projected room rates are significantly higher than the 2012 PKF analysis.
Of the two hotel proposals, the RD Olson proposal is more consistent with the market
range identified in the 2012 PFK analysis.
KMA has identified significant concerns about the room rates projected in the
Sonnenblick proposal because these room rates are significantly higher than the
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amounts supported in the 2012 PKF analysis. The KMA concern is that the premium
room rates being projected by Sonnenblick must be achieved in order to support the
construction costs for the type of hotel being proposed by Sonnenblick. If the room
rates do not meet the projections, the ground rent payment being offered may not be
financially viable. Additionally, the economic benefits actually generated by the hotel
would be commensurately lower than the current projections.
The EPS report concludes that the Sonnenblick townhouse style units and villas — which
account for over 20 percent of the total units proposed — provide support for the higher
room rate projections. These larger units would strengthen the development's ability to
capture the group market (i.e. weddings) and could increase occupancy of other rooms.
The potential success of the Sonnenblick concept may also be enhanced by the
national branding provided by the proposed operator - Auberge Resorts.
D. Land Use Amendments
In 2012, the City Council initiated amendments of the General Plan, Coastal Land Use
Plan, and Zoning Code to facilitate redevelopment of the site. Since the City has been
focusing on a dual track (hotel or mixed -use residential), the amendments would create
new mixed -use designations that would allow either type of project. With the selection of
one proposal and subsequent refinement of the development concept, the amendments
would be refined to reflect the proposed land use selected. Should a hotel proposal be
selected, staff recommends the proposed amendments be changed from mixed -use to
visitor serving commercial. This change was suggested by Coastal Commission staff
during an early consultation meeting to make processing of the CLUP amendment
easier. Should the mixed -use residential project be selected, the amendments will be
modified to allocate only 15,000 square feet of nonresidential development and 99
dwelling units.
E. Conclusion
If successfully developed and operated, any of the three proposals would help foster the
community's goal to revitalize the area. Each would provide significant investment in
Lido Village, which in turn is expected to help spur reinvestment by other property and
business owners in the surrounding area. However, both hotel projects would stimulate
significantly higher economic activity due to greater fiscal and economic impacts when
compared to the mixed -use residential concept.
Staff believes the mixed -use residential development plan provides an excellent
community focal point within its public plazas and shopping area, but both hotel projects
also include enhanced public plazas and pedestrian paths to engage and attract the
public.
The construction costs and stabilized average daily rates proposed by Sonnenblick are
significantly higher than the costs and rates identified in the 2012 PKF analysis. If
successful, the hotel proposed by Sonnenblick would provide higher City revenues and
a greater overall economic impact in the community; however, the significant variance
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from the projected market room rates in the analysis performed prior to the RFP
process raises concerns among some of the City's consultants and staff. Additionally,
staff believes the site layout proposed by Sonnenblick is not as engaging or inviting to
the public, particularly from Newport Boulevard and 32nd Street, when compared to the
other two proposals.
The hotel proposed by RD Olson is not projected to generate the highest revenue to the
City or the largest economic impact to the community. However, the construction costs
and stabilized average daily rates proposed by RD Olson are more similar to the costs
and rates identified in the 2012 PKF analysis and would appear to reduce the risk of the
project's financial under - performance. Additionally, the development concept appears
most compatible with the vision for Lido Village.
For these reasons, staff believes that the RD Olson team and concept would result in a
development that best balances the City's economic and land use priorities for the
former City Hall site.
Significant public correspondence regarding the three development proposals has been
received and is contained in Attachment CC -6.
F. Next Steps
With City Council's selection of a development team, the following steps will be taken:
1. Confirmation of the Mayor's appointment of two (2) Council Members to the City
Council Ad Negotiating Committee.
2. Preparation of a Memorandum of Understanding (MOU) to establish a formal
relationship between the selected developer and the City. The MOU will be brought
back for City Council approval and it will be the initial step in negotiating the lease
and ultimate use of the property.
3. Update of the proposed land use plan and zoning amendments to reflect the land
uses contained in the selected proposal, and any subsequent refinements. The
environmental documents will be finalized and presented to the Planning
Commission at a public hearing. After a recommendation by the Planning
Commission, the amendments and associated environmental document will be
forwarded to the City Council for consideration.
4. Initiation of lease agreement discussions with the selected development team. At the
conclusion of negotiations, staff will present draft terms and conditions to the City
Council in Closed Session for approval. Upon approval, a final lease will be
presented to the City Council at a regular meeting for public input and final approval.
5. Refinement of the development plan concept, facilitation of additional public input,
and process the final development application that will conclude with noticed public
hearings before the Planning Commission.
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ENVIRONMENTAL REVIEW:
The selection of a development team to negotiate a lease agreement to develop the
former City Hall site and updating the project description is not subject to the California
Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will
not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)
of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it
has no potential for resulting in physical change to the environment, directly or
indirectly. Future decisions to authorize redevelopment of the property are subject to
CEQA and will undergo environmental review prior to approval. These future decisions
may include a lease agreement for use of the property and of amendments to the City's
General Plan, Coastal Land Use Plan, and Zoning Ordinance. In addition, on
November 21, 2012, the City published a Notice of Intent to Adopt a Negative
Declaration and subsequently prepared a Mitigated Negative Declaration analyzing the
impacts of the amendments to the City's General Plan, Coastal Land Use Plan and
Zoning Ordinance, if any, pursuant to CEQA and the CEQA Guidelines.
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item). A display advertisement
notifying the public of this meeting appeared in the Daily Pilot a minimum of 10 days in
advance of this meeting. Notice was sent by email to interested individuals, and finally,
notice was mailed to property owners within 400 feet of the property.
Submitted by:
Kimberly Brand AICP
Director
ATTACHMENTS:
Attachment CC -1 — Submittal Compliance Matrix
Attachment CC -2 — Keyser Marston Associates, September 17, 2012
Attachment CC -3 — PKF Consulting, Market Analysis, August 8, 2012
Attachment CC -4 — PKF Consulting, Economic Impact Analysis, September 14, 2012
Attachment CC -5 — Keyser Marston Associates Fiscal /Economic Analysis, June 2013
Attachment CC -6 — Economic Planning Systems fiscal /economic analysis, June 2013
Attachment CC -7 — Correspondence
Attachment CC -8 — Resolution No. 2013 -
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Reference: The RFP No. 13 -35 can be found at the City's website at:
https:// www5 .newportbeachca.gov /osupplier /bid current. asp? path = /RFP
13 -35 - City Hall Site Re -Use Project.
Proposals can be found at the City's website at:
http://www.newportbeachca.gov/citvhalIreuse
Lido Village Design Guidelines can be found at the City's website at:
httr ): / /www.newportbeachca.gov /PLN /MAP DOCUMENTS /DESIGN GUI
DELINES /Lido Village Guidelines.pdf
14
Attachment CC -1
Submittal Compliance Matrix
2,5
10
RFP No. 13 -35 - City Hall Reuse
Submittal Matrix
Prepared by:
James Campbell, Principal Planner
Verified by:
Anthony Nguyen, Phi rkhasing Agent
27
RD Olson
Sonnenblick
Shopoff
Submitted
Reference
Submitted
Reference
Submitted
Reference
Mandatory Pre - proposal meeting
Attended
Purchasing Agent verified
Attended
Purchasing Agent verified
Attended
Purchasing Agent verified
Submitted by 4:OOPM April 18, 2013
✓
Purchasing Agent verified
✓
Purchasing Agent verified
✓
Purchasing Agent verified
3.1 Development Plan
✓
Plan booklet pages 7 -23
✓
Proposal pages 6 -16 & 67 -76
✓
Proposal Appendix A
3.1.1.a
✓
Plan booklet page 24
✓
Proposal page 3
✓
Proposal page 2
3.1.1.b
✓
Proposal booklet page 11
✓
Proposal page 3
✓
none requested
3.1.1.c
✓
Proposal booklet pages 14 -15
✓
Proposal page 4
✓
Proposal page 4
3.1.i.d
✓
Proposal booklet pages 14 -15
✓
Proposal pages 5, 17 -20, Appendix
✓
Proposal pages 5 -7
3.1.1.e
✓
Plan booklet pages 7 -23
✓
Proposal pages 6 -16 & 67 -76
✓
Proposal Appendix A
3.1.1.E
✓
Proposal booklet pages 14 -15
✓
Proposal page 21
✓
Proposal page 8
3.2 Economic Assumptions & Benefits
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.a
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.b
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.c
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.d
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.e
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.f
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.g
✓
Confidential Addendum
✓
Confidential Addendum
✓
Confidential Addendum
3.1.2.h
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Confidential Addendum
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Confidential Addendum
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Confidential Addendum
3.1.2.i
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Confidential Addendum
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Confidential Addendum
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Confidential Addendum
3.1.2.j
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none identified
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none identified
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none identified
3.3 Experience and Qualifications
✓
Proposal booklet pages 16 -24
✓
Proposal Pages 23 -25
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Proposal pages 19 -24
3.1.3.a
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Proposal booklet pages 1 -2
✓
Proposal Page 23
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Proposal page 19
3.1.3.b
✓
Plan booklet page 17
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Proposal Page 24
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Proposal pages 19 -22
3.1.3.c
✓
Proposal booklet pages 18 -24
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Proposal Page 24
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Proposal pages 19 -22
3.1.3.d
✓
Proposal booklet pages 18 -24
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Proposal Page 25
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Proposal pages 23 -24
3.1.3.e
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Plan booklet page 17
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Proposal Page 25
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Proposal page 24
4 Good faith Deposit /Fee
✓
Purchasing Agent verified
✓
Purchasing Agent verified
✓
Purchasing Agent verified
Prepared by:
James Campbell, Principal Planner
Verified by:
Anthony Nguyen, Phi rkhasing Agent
27
12
Attachment CC -2
Keyser Marston Associates
September 17, 2012
19
20
1000
KEYSER MARSTON ASSOCIATES
ADVISORS IN PUBLIC /PRIVATE REAL ESTATE DEVELOPMENT
MEMORANDUM
AnvlsoRS IN:
Kathleen Head
REAL ESTATE To:
Kimberly Brandt, Director of Community Development
REDFVEI.OPMN
City of Newport Beach
P
AFLORDABL[ HOUSING
ECONOMIC DEVELOPMEN'E
From:
Kathleen Head
SAN FRANCIS ,
A. IERRY MYSE'R
Tim Brett:
TIMOTI'IY C W1 I
WE EARII
DEBBIE M. GI 1'.1 Date:
September 17, 2012
REED T. KAWAHARI
DAVID DOFLFMA
Subject: Land Residual, Economic Benefits & Public Revenues Analyses
LOS ANCELE,
KATHLEEN H. HEAD
JAMES A. RABE In accordance with your request, Keyser Marston Associates, Inc. (KMA) prepared the
GREGORY D. Soo -HOO
KEVIN E. ENOSfROM following financial analyses related to the approximately 4.26 -acre site that is currently
IIILIE L RoBSEY occupied by the Newport Beach City Hall (City Hall Site):
SAN DIEGO
GERALD M. TRIMBLE 1. KMA analyzed the following development alternatives:
PALILC. MARRA
a. "Alternative A" is a 92 unit apartment complex with 6,000 square feet of
commercial space and 260 ground -level parking spaces.
b. "Alternative B" is a 99 unit apartment complex with 248 ground -level
parking spaces.
2. KMA prepared land residual analyses to provide the City of Newport Beach (City)
with the following valuation estimates for both development alternatives:
a. The value of the fee interest in the City Hall Site is estimated for the two
alternative development scopes.
b. The City wishes to include an identified mix of public improvements in the
development scope. The costs associated with these improvements will
reduce the land value supported by the City Hall Site. The resulting
"Land Value Offset" is estimated under low and high cost estimates
provided by the City staff.
500 SOUTH GRAND AVENUE, SUITE 148030 LOS ANGELES, CALIFORNIA 90071 > PHON E 213 622 5095 > FAX 213 622 5204
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C. The City may wish to convey the City Hall Site to a developer in the form
of a long -term ground lease. The annual ground lease income that could
potentially be received by the City is estimated under two different ground
lease rate assumptions.
3. KMA prepared a residential expenditures analysis to project the direct, indirect
and induced economic impacts that the two development scenarios could
potentially have on businesses in Newport Beach through the purchases of
goods and services.
KMA prepared a public revenues analysis to project the possessory interest tax
and sales tax revenues that could potentially be received by the City from the two
development scenarios.
EXECUTIVE SUMMARY
Land Residual Analysis
The results of the land residual analysis can be summarized as follows:
Alternative A
The gross land value supported by Alternative A is estimated at $18.17 million, or
approximately $98 per square foot of land area.
2. The Land Value Offsets are estimated by the City staff at $5.57 million under the
low estimate and $8.95 million under the high estimate.
3. When the Land Value Offsets are deducted from the gross land value, the
resulting net supportable land value is estimated at $9.22 million to $12.6 million.
This equates to $50 to $68 per square foot of land area.
4. To project the annual ground lease income that could potentially be received by
the City, KMA applied ground lease rates of 8% and 10% to the net supportable
land value. This generates ground lease payments ranging from $737,800 to
$1.26 million per year.
Alternative B
The gross land value supported by Alternative B is estimated at $19.16 million, or
approximately $103 per square foot of land area.
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2. The $5.57 million and $8.95 million Land Value Offsets are applied to arrive at
estimated net supportable land values.
3. After deducting the Land Value Offsets from the gross land value, the net
supportable land value is estimated at $10.2 million to $13.59 million. This
equates to $55 to $73 per square foot of land area.
4. When the 8% and 10% ground lease rates are applied to the net supportable
land value, the annual ground lease payments fall within the range of $816,400
to $1.36 million per year.
Economic Impact Analysis
KMA estimated the economic impacts that could potentially be generated by the two
alternative development scopes. The economic benefits are defined as the direct,
indirect and induced expenditures that would be generated by the apartment residents.
KMA estimates the annual impacts as follows:
Alternative A Alternative B
Direct Expenditures $2,069,000 $2,227,000
Multiplier 1.3 1.3
Total Direct, Indirect and Induced Impacts $2,690,000 $2,895,000
KMA projected the impacts over a 10 -year period based on increases at a 3% average
annual inflationary rate. Based on this assumption, the total impacts are projected at
$30.84 million for Alternative A and $33.19 million for Alternative B..
Public Revenues Analysis
KMA projected public revenues that could potentially be received by the City from the
two alternative development scopes. KMA estimates the revenues as follows:
Alternative A
Alternative B
Possessory Interest Taxes $117,000
$124,000
Sales Taxes 15,000
16,000
Total Public Revenues $132,000
$140,000
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To arrive at a projection over a 10 -year period, KMA escalated the possessory interest
tax revenue at the statutory maximum of 2% annually, and the sales tax revenue at a 3%
average annual inflationary rate. Based on these assumptions, the public revenues are
projected at $1.45 million under Alternative A and $1.54 million under Alternative B.
LAND RESIDUAL ANALYSIS
KMA prepared pro forma analyses for the City Hall Site to provide order -of- magnitude
estimates of the land value that can be supported by apartment development. This land
value was then adjusted to reflect the costs associated with the public improvements
currently being considered for inclusion on the City Hall Site. The net supportable land
value was converted into annual ground lease payments for the City Hall Site.
The development scopes for Alternatives A and B are very similar. The only differences
are:
1. Alternative A includes 92 apartment units while Alternative B includes 99
apartment units; and
2. Alternative A includes 6,000 square feet of commercial space. Alternative B
does not include a commercial component.
The pro forma analyses are presented in Appendices A and B. The tables included in
the analyses are organized as follows:
Table 1: Estimated Construction Costs
Table 2: Stabilized Net Operating Income
Table 3: Estimated Land Value / Annual Ground Lease Income
The assumptions used in the pro forma analysis are summarized in the following
sections of this memorandum.
Estimated Construction Costs
Direct Construction Costs
The direct construction cost estimates are based on the assumption that prevailing wage
requirements will not be imposed on the private components of the project. The
assumptions are summarized as follows:
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1. The site improvement costs are estimated at $7.00 per square foot of land area.
This estimate does not include the costs associated with the proposed public
improvements.
2. The ground -level parking costs are estimated at $10,000 per space.
3. The building costs are estimated at the high end of the range for apartment
projects reviewed by KMA in the region. These costs are estimated as follows:
a. The residential costs are estimated at $120 per square foot of gross
leasable area; and
b. The commercial costs are estimated at $110 per square foot of gross
building area (GBA).
4. A 10% direct cost contingency allowance is provided.
Indirect Construction Costs
The indirect cost estimates are based on industry standard measurements. The
assumptions applied in this analysis can be summarized as follows:
1. The architecture, engineering and consulting costs; the taxes, legal and
accounting costs; and the developer fee are all based on industry standard
percentages of direct costs.
2. The public permits and fees costs are estimated at $20,000 per residential unit
and $10 per square foot of commercial GBA. The City staff should verify the
accuracy of these estimates.
3. The insurance costs are estimated at $2,500 per residential unit and $5.00 per
square foot of commercial GBA.
4. The marketing and leasing costs are estimated at $500 per residential unit and
$10.00 per square foot of GBA.
5. A an allowance equal to 5% of other indirect costs is provided for soft cost
contingencies.
Financing Costs
The financing cost estimates are based on the following assumptions:
1. The construction period is set at 18 months.
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2. The construction period interest costs are estimated at 7 %.
3. The loan origination fees are set at 2.0 points, and the financing is based on a
70% loan to value ratio.
The total construction costs are estimated as follows:
Alternative A Alternative B
Direct Construction Costs $24,644,000 $25,265,000
Indirect Construction Costs 6,258,000 6,370,000
Financing Costs 3,160,000 3,284,000
Total Construction Costs $34,062,000 $34,919,000
Per Square Foot of GBA $220 $218
Stabilized Net Operating Income
The stabilized net operating income (NO[) estimates are based on the following
assumptions.
Revenue
KMA estimated the achievable residential rents based on the following methodology:
1. KMA performed a survey of Newport Beach apartment that identified average
monthly rents of $1,990 per unit, or $2.10 per square foot of gross leasable area.
2. The pro forma rents used in this analysis are based on a review of high -end
projects in Newport Beach. KMA found that these units are generating rents that
are approximately 12% higher than the citywide average.
3. KMA applied a 15% premium over this average to reflect the premium associated
with new construction.
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The resulting rent estimates are presented in the following table:
The other revenues included in the analysis are:
1. Laundry and miscellaneous income is estimated at $15 per residential unit per
month.
2. The commercial rents are estimated at $3.00 per square foot per month on a
triple -net basis. This rent falls at the approximate midpoint of the rents found in a
survey undertaken by KMA.
Operating Expenses
The residential operating expenses include the following:
1. The general operating expenses are set at $4,000 per unit.
2. An allowance equal to 5% of the residential effective gross income is provided for
property management fees.
3. The possessory interest tax expense is based on the projected assessed value
of the project and a 1.1% possessory interest tax rate.
4. A $150 per unit per year allowance is provided for contributions to a reserve
account for future capital repairs.
KMA assumed that the commercial space will be rented on a triple -net basis, which
means that the residents are responsible for paying for common area maintenance
(CAM) costs. The operating expenses to be incurred by the landlord are:
1. An allowance equal to 5% of the commercial effective gross income is provided
for property management costs.
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Monthly Rent
Per Square
Unit Type
Square Feet
Total
Foot
Townhome
Two - Bedroom Units
1,300
$3,510
$2.70
Three - Bedroom Units
1,500
$3,975
$2.65
Flat
Two - Bedroom Units
1,600
$4,080
$2.55
Three - Bedroom Units
1,800
$4,500
$2.50
The other revenues included in the analysis are:
1. Laundry and miscellaneous income is estimated at $15 per residential unit per
month.
2. The commercial rents are estimated at $3.00 per square foot per month on a
triple -net basis. This rent falls at the approximate midpoint of the rents found in a
survey undertaken by KMA.
Operating Expenses
The residential operating expenses include the following:
1. The general operating expenses are set at $4,000 per unit.
2. An allowance equal to 5% of the residential effective gross income is provided for
property management fees.
3. The possessory interest tax expense is based on the projected assessed value
of the project and a 1.1% possessory interest tax rate.
4. A $150 per unit per year allowance is provided for contributions to a reserve
account for future capital repairs.
KMA assumed that the commercial space will be rented on a triple -net basis, which
means that the residents are responsible for paying for common area maintenance
(CAM) costs. The operating expenses to be incurred by the landlord are:
1. An allowance equal to 5% of the commercial effective gross income is provided
for property management costs.
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2. Annual contributions to a reserve account for future capital repairs are set at $.15
per square foot of commercial gross leasable area.
The stabilized NOI for both alternatives are presented in the following table:
Residential Effective Gross Income
Commercial Effective Gross Income
Operating Expenses
Stabilized NOI
Alternative A Alternative B
$4,354,000 $4,682,600
194,900 NA
(1,347,600) (1,438,100)
$3,201,300 $3,244,500
Estimated Land Value I Annual Ground Lease Income
Supportable Private Investment
The supportable amount of private investment is based on the project's stabilized NOI
and the threshold returns being required by investors in the marketplace. KMA
estimates the threshold returns for the two alternative development scopes based on the
following assumptions:
1. The threshold return for the residential component is set at 6 %; and
2. The threshold return for the commercial component is set at 9 %.
Estimated Gross Land Value
The gross land value that can be supported by the project is equal to the difference
between the estimated construction costs and the amount of private investment that can
be obtained. The gross land values for the two alternatives are estimated as follows:
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Stabilized NO[
Threshold Return on Total Investment
Supportable Private Investment
(Less) Estimated Construction Cost
Estimated Gross Land Value
Per Square Foot of Land Area
Land Value Offsets
$3,201,300 $3,244,500
6.1 %1 6.0%
$52,236,000
(34,062,000)
$54,075,000
(34,919,000)
$18,174,000 $19,156,000
$98 $103
The City has identified a variety of public improvements that will be required to be
constructed on the City Hall Site. The City staff has prepared low and high cost
estimates based on the quality level proposed for the proposed improvements. These
estimates are presented in the following table:
Low Estimate High Estimate
Main Plaza — Newport & 32 "d Street $1,212,000 $2,360,000
Northern Promenade — City Hall Site (65 %) 272,000 576,000
32 "d Street — Newport to Lafayette 1,078,000 2,121,000
Via Malaga Plaza 372,000 773,000
Via Oporto Plaza 523,000 1,008,000
Fire Station Reconstruction (50% of Cost) 2,113,000 2,113,000
Total Land Value Offsets $5,570,000 $8,951,000
Per Square Foot of Land Area $30 $48
Estimated Net Land Value
The net land value for the City Hall Site is equal to the estimated gross land value minus
the Land Value Offsets. The resulting net land values for the two alternative
development scopes are estimated as follows:
I Based on the weighted average of a 6.0% return on the residential component and a 9.0%
return on the commercial component.
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Land Value Offsets — Low Estimates
Gross Land Value
(Less) Land Value Offset
$18,174,000 $19,156,000
(5,570,000) (5,570,000)
Net Land Value $12,604,000 $13,586,000
Per Square Foot of Land Area $68 $73
Land Value Offsets — High Estimates
Alternative A Alternative B
Gross Land Value $18,174,000 $19,156,000
(Less) Land Value Offset (8,951,000) (8,951,000)
Net Land Value $9,223,000 $10,205,000
Per Square Foot of Land Area $50 $55
Annual Ground Lease Income
It is our understanding that the City would like to convey the City Hall site to a private
developer in the form of a long -term ground lease. An analysis prepared for the City by
the Concord Group in January 2011 estimated that the City would be able to apply a
10% ground lease rate to the property. To provide the City with a range of potential
values, KMA applied ground lease rates at 8% and 10 %.
The array of annual ground lease payments associated with the two private development
scopes, and the two land offset scopes, are summarized in the following table:
Alternative A
Land Value Offset — Low Estimates
Net Land Value
Annual Ground Lease Payment
Land Value Offset — High Estimates
Net Land Value
Annual Ground Lease Payment
D Ground 10% Ground
Lease Lease
$12,604,000
$1,008,300
$9,223,000
$737,800
$12,604,000
$1,260,400
$9,233,000
$922,300
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Alternative B
Land Value Offset — Low Estimates
Net Land Value
Annual Ground Lease Payment
Land Value Offset — High Estimates
Net Land Value
Annual Ground Lease Payment
ECONOMIC IMPACT ANALYSIS
D Ground 10% Ground
Lease Lease
$13,586,000
$1,086,900
$10,205,000
$816,400
$13,586,000
$1,358,600
$10,205,000
$1,020,500
KMA prepared residential expenditures analyses to project the direct, indirect and
induced economic impacts that the two development scenarios will have on businesses
in Newport Beach through the purchases of goods and services. The analyses used to
estimate the economic impacts are presented in Appendix C.
Direct, Indirect and Induced Economic Impacts
Direct impacts are defined as the economic output generated by the households residing
in the apartment development. Indirect and induced impacts are defined as the
additional economic activity that is stimulated by those household expenditures.
KMA projects the direct impacts based on the apartment residents' anticipated
household income levels. Indirect and induced economic impacts (multiplier effects) are
estimated based on a KMA review of RIMS II and IMPLAN multipliers for Orange
County.2
Projected Household Income
KMA estimates that the apartment rents will range from $3,510 to $4,500 per unit per
month. Based on the assumption that the residents will spend an average of 35% of
their gross household income on rent, KMA estimates that the residents' household
incomes will range from $120,000 to $154,000. KMA calculated the weighted average of
the projected household incomes at $142,000.
2 RIMS II was developed by the United States Bureau of Economic Analysis. IMPLAN is an
economic analysis software package developed by the Minnesota IMPLAN Group
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Income Spent on Retail Goods
KMA utilized the 2010 Consumer Expenditure Survey (CES) prepared by the United
States Bureau of Labor Statistics (BLS) to estimate the share of household income that
is spent on retail goods. Given that the projected weighted average household income
of the residents is $142,000, KMA utilized the CES data group for households earning
between $120,000 and $149,999.3
KMA aggregated the CES retail expenditure data into the following categories:
1. Food, Grocery and Personal Care Products;
2. Restaurants and Entertainment; and
3. Apparel, Household Operations, Supplies and Furnishings.
To estimate the share of household income that is spent on each of these categories,
KMA divided the CES average household income by the aggregated CES expenditures.
The resulting share of household income spent on each expenditure type is estimated as
follows:
Household
Expenditure Type Income
Food, Grocery & Personal Care Products 5.30%
Restaurants & Entertainment 8.06%
Apparel, Household Operations, Supplies & Furnishings 8.97%
Total Share of Income Spent on Retail Goods 22.33%
As shown in the preceding table, KMA estimates that households earning between
$120,000 and $149,999 will spend approximately 22.33% of their gross income on the
identified retail goods. However, this estimate does not distinguish between
expenditures that will occur within Newport Beach and those that will occur outside of
Newport Beach.
3 For calculation purposes, the CES uses a household income of $132,750 for estimating the
expenditures of the $120,000 to $149,999 group.
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Expenditures within Newport Beach
To estimate the household spending that will occur within Newport Beach, KMA
estimated that Newport Beach businesses will capture the following percentages of the
expenditures in each category:
1. Households will spend 100% of the "Food, Grocery and Personal Care Products"
category expenditures within Newport Beach;
2. Households will spend 75% of the "Restaurants and Entertainment" category
expenditures within Newport Beach; and
3. Households will spend 50% of the "Apparel, Household Operations, Supplies and
Furnishings' expenditures category within Newport Beach.
The capture rate is estimated by multiplying the share of household income spent on
each expenditure category times the percentage of expenditures that are anticipated to
occur in Newport Beach. The capture rates applied in this analysis are:
Newport Beach
Expenditure Type Capture Rate
Food, Grocery & Personal Care Products 5.30%
Restaurants & Entertainment 6.05%
Apparel, Household Operations, Supplies & Furnishings 4.49%
Estimated Direct Expenditures
As noted previously, KMA estimates the residents' weighted average household income
at $142,000. When the Newport Beach capture rates are applied to the household
income, the household expenditures that will occur within Newport Beach each year are
estimated as follows:
Expenditure Type Expenditures
Restaurants & Entertainment $8,591
Apparel, Household Operations, Supplies & Furnishings $6,372
Total Share of Income Spent on Retail Goods $22,493
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The resulting direct annual expenditures are estimated as follows:
Annual Expenditures Per Household
Number of Households
$22,493
92
$22,493
Total Direct Annual Expenditures $2,069,000 $2,227,000
Estimated Indirect and Induced Impacts
The indirect and induced impacts are estimated by utilizing a multiplier against the direct
annual expenditures. Based on RIMS II and IMPLAN multipliers reviewed by KMA, the
multiplier is set at 1.3.
Total Direct, Indirect and Induced Impacts
Alternative A
The total direct, indirect and induced impacts generated annually by the Alternative A
development scope are estimated as follows:
Total Direct Expenditures $2,069,000
Multiplier 1.3
Total Direct, Indirect and Induced Impacts $2,690,000
Alternative 8
The total direct, indirect and induced impacts generated annually by the Alternative B
development scope are estimated as follows:
Total Direct Expenditures $2,227,000
Multiplier 1.3
Total Direct, Indirect and Induced Impacts $2,895,000
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PUBLIC REVENUES ANALYSIS
The KMA public revenues projections are presented in Appendix D. The methodology
applied by KMA can be described as follows:
Possessory Interest Tax Revenue
KMA estimated the possessory interest tax revenue that could potentially be received by
the City based on the following assumptions:
1. The project value is estimated by capitalizing the stabilized net operating income.
The capitalization rate is set at 4.7% for Alternative A and 4.5% for Alternative B.°
2. The possessory interest tax rate is set at 1 % of the project's assessed value.
3. The City receives 17.15% of the possessory interest tax collected.
4. The assessed value is projected to increase at the statutorily set cap of 2% per
year.
Based on the preceding assumptions, the possessory interest tax that could potentially
be received by the City is projected as follows:
Possessory Interest Tax Revenue Alternative A Alternative B
Annual Revenue $117,000 $124,000
10 -Year Projection $1,281,000 $1,358,000
Sales Tax Revenue
KMA used the results of the economics benefits analysis to assist in projecting the sales
tax revenue that could potentially be generated by the residents of the apartment
development. The other assumptions used in the analysis are:
1. KMA estimates that 20% of the food, grocery and personal care products sales
are taxable, and that 100% of the sales in the other categories are taxable.
2. The City receives 1 % of the taxable sales revenue generated in Newport Beach.
° The capitalization rate for Alternative A is based on the weighted average of 4.5% for the
residential component and 7.5% for the commercial component.
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3. The sales tax revenues are projected to increase at a 3% average annual
inflationary rate.
The sales tax revenues projected to be received by the City are presented in the
following table:
Sales Tax Revenue Alternative A Alternative B
Annual Revenue $15,000 $16,000
10 -Year Projection $172,000 $183,000
Total Public Revenue
The total public revenue that could potentially be received by the City is summarized in
the following table:
Total Public Revenue Alternative A Alternative B
Annual Revenue $132,000 $140,000
10 -Year Projection $1,453,000 $1,541,000
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LIMITING CONDITIONS
1. The analyses contained in this document are based, in part, on data provided by
secondary sources such as state and local governments, planning agencies and
third parties. While KMA believes that these sources are reliable; we cannot
guarantee their accuracy.
2. Projections are inherently based on judgment. The projections herein are based
on the best information available at the time this document was prepared.
However, the actual impacts may vary from these projections.
3. If unforeseen changes occur in the economy, the conclusions contained herein
may no longer be valid.
4. The findings are based on economic rather than political considerations.
Therefore, they should be construed neither as a representation nor opinion that
government approvals for development can be secured.
5. The estimates are based on the information available at this time, as well as
KMA's experience with comparable projects. Any changes to costs,
development program, or project performance may render the conclusions herein
invalid.
6. The analysis, opinions, recommendations and conclusions of this document are
KMA's informed judgment based on market and economic conditions as of the
date of this report. Due to the volatility of market conditions and complex
dynamics influencing the economic conditions of the building and development
industry, the conclusions contained herein should not be relied upon as the sole
input for final business decisions regarding current and future development and
planning.
12009002; PKF:KHH:TB
17635.0037 -
MOO
APPENDIX A
At1'I a7:7 *4l alll_1w_1► /_1w&i RI
92 APARTMENT UNITS &
6,000 SQUARE FEET COMMERCIAL SPACE
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
12009002; PKF:KHH:TB
17635.0017
40
APPENDIX A - TABLE 1
ESTIMATED CONSTRUCTION COSTS
92 APARTMENT UNITS & 6,000 SF COMMERCIAL SPACE
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Direct Costs
On -Site Costs
185,718 Sf
$7.00
/Sf of Land
$1,300,000
Surface Parking
Commercial
30 Spaces
$10,000
/Space
300,000
Residential
230 Spaces
$10,000
/Space
2,300,000
Building & TI Allowance Costs
Residential
148,700 Sf of GLA
$120
/Sf
17,844,000
Commercial
6,000 Sf of GBA
$110
/Sf
660,000
Contractor /DC Contingency Allow
10.0% Other Direct Costs
2,240,000
Total Direct Costs
$24,644,000
II. Indirect Costs
Arch, Engineering & Consulting
8.0% Direct Costs
$1,972,000
Public Permits & Fees'
Residential
92 Units
$20,000
/Unit
1,840,000
Commercial
6,000 Sf of GBA
$10
/Unit
60,000
Taxes, Legal & Accounting
2.0% Direct Costs
493,000
Insurance
Residential
92 Units
$2,500
/Unit
230,000
Commercial
6,000 Sf of GBA
$5.00
/Sf
30,000
Marketing / Leasing
Residential
92 Units
$500
/Unit
46,000
Commercial
5,700 Sf of GLA
$10.00
/Sf
57,000
Developer Fee
5.0% Direct Costs
1,232,000
Soft Cost Contingency Allowance
5.0% Other Indirect Casts
298,000
Total Indirect Costs
$6,258,000
Ill. Financing Costs
Interest During Construction z
$34,062,000 Cost
7.00%
Interest
2,146,000
Loan Origination Fees 3
$46,931,000 Loan
2.00
Points
939,000
Reserves
75,000
Total Financing Costs
$3,160,000
IV. ITotal Construction Cost
154,700 Sf
$220
/Sf
$34,062,000
1 The estimate should be verified by the City staff.
2 Assumes a 18 month construction period and a 60% average outstanding balance.
3 Based on a 70% loan to value ratio. The value is calculated based on a 4.5% capitalization rate.
Prepared by: Keyser Marston Associates, Inc. �!�
File name: 9_17_12_CH Apt; 92 Pf '-9e� of 3
APPENDIX A - TABLE 2
STABILIZED NET OPERATING INCOME
92 APARTMENT UNITS & 6,000 SF COMMERCIAL SPACE
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Residential Rental Income i
Townhome:2 -Bdrm @ 1,300 Sf
Townhome: 3 -Bedrm @ 1,500 Sf
Flat: 2 -Bdrm @ 1,600 Sf
Flat: 3 -Bdrm @ 1,800 Sf
Laundry/Miscellaneous Income
Gross Income
(Less) Vacancy & Collection Allowance
Residential Effective Gross Income
11. Commercial Rental Income
Rental Income
(Less) Vacancy & Collection Allowance
Commercial Effective Gross Income
III. Operating Expenses
Residential
General Operating Expenses
Property Management
Property Taxes'
Reserves Deposits
Commercial Space
Management
Reserve for Capital Repairs
Total Operating Expenses
13
Units @
$3,510
/Month
$547,600
12
Units @
$3,975
/Month
572,400
34
Units @
$4,080
/Month
1,664,600
33
Units @
$4,500
/Month
1,782,000
92 Units @ $15 /Month 16,600
$4,583,200
5.0% Gross Income (229,200)
$4,354,000
5,700 /Sf of GLA $3.00 /Sf $205,200
5.0% Gross Income (10,300)
$194,900
92 Units @ $4,000 /Unit
5% Residential Effective Gross Income
92 Units @ $8,016 /Unit
92 Units @ $150 /Unit
5% Commercial Effective Gross Income
5,700 /Sf of GLA $0.15 /Sf
92 Units @ ($12,166) /Unit
$368,000
217,700
737,500
13,800
9,700
900
($1,347,600)
IV. IStabilized Net Operating Income $3,201,300
' Based on KMA market research. Rents range from $2.50 to $2.70 /Sf of GLA.
2 Based on a 4.5% capitalization rate and a 1.1% property tax rate.
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 92 Pf P of 3
APPENDIX A - TABLE 3
ESTIMATED LAND VALUE / ANNUAL GROUND LEASE INCOME
92 APARTMENT UNITS & 6,000 SF COMMERCIAL SPACE
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Supportable Private Investment
Stabilized Net Operating Income See APPENDIX A - TABLE 2 $3,201,300
Threshold Return on Total Investment 6.1%
Total Supportable Private Investment $52,236,000
II. Total Construction Cost See APPENDIX A - TABLE 1
$34,062,000
Ill. jEstimated Gross Land Value 185,718 Sf of Land
$98 /Sf of Land
$18,174,000
IV. Land Value Offsets 2
Low Estimate
High Estimate
Main Plaza - Newport & 32nd Street
$1,212,000
$2,360,000
Northern Promenade - City Hall Site Only (65 %)
272,000
576,000
32nd Street- Newport to Lafayette
1,078,000
2,121,000
Via Malaga Plaza
372,000
773,000
Via Oporto Plaza
523,000
1,008,000
Fire Statation Reconstruction (50% of Cost)
2,113,000
2,113,000
Total Land Value Offsets
$5,570,000
$8,951,000
u
2
Net Land Value
Per Square Foot of Land Area
Ground Lease Income
Annual Ground Lease Rate
Annual Ground Lease Rate
185,718 Sf of Land
8% of Net Land Value
10% of Net Land Value
$12,604,000
$68
$1,008,300
$1,260,400
$9,223,000
$50
$737,800
Based on the weighted average of a 6.0% return on the residential component and a 9.0% return on the commercial component.
Based on preliminary estimates provided by the City. These estimates should only be used on an order -of- magnitude basis.
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 92 Pf
PW of 3
44
APPENDIX B
Iwt1'I all :7 *41b1l1_1w_1► /_1 '696.1
99 APARTMENT UNITS
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
12009002; PKF:KHH:TB
17635.004�
40
APPENDIX B -TABLE 1
ESTIMATED CONSTRUCTION COSTS
99 APARTMENT UNITS
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Direct Costs
On -Site Costs
Residential Surface Parking
Residential Building Costs
Contractor /DC Contingency Allow
Total Direct Costs
II. Indirect Costs
Arch, Engineering & Consulting
Public Permits & Fees'
Taxes, Legal & Accounting
Insurance
Marketing / Leasing
Developer Fee
Soft Cost Contingency Allowance
Total Indirect Costs
111. Financing Costs
Interest During Construction 2
Loan Origination Fees 3
Reserves
Total Financing Costs
185,718
Sf
248
Spaces
159,900
Sf of GLA
10.0%
Other Direct Costs
8.0% Direct Costs
99 Units
2.0% Direct Costs
99 Units
99 Units
5.0% Direct Costs
5.0% Other Indirect Cost
$34,919,000 Cost
$50,470,000 Loan
$7.00 /Sf of Land
$10,000 /Space
$120 /Sf
$1,300,000
2,480,000
19,188,000
2,297,000
$25,265,000
Costs 303,000
$6,370,000
7.00% Interest 2,200,000
2.00 Points 1,009,000
$3,284,000
IV. ITotal Construction Cost 159,900 Sf $218 /Sf $34,919,000
1 The estimate should be verified by the City staff.
2 Assumes a 18 month construction period and a 60% average outstanding balance.
3 Based on a 70% loan to value ratio. The value is calculated based on a 4.5% capitalization rate.
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 99 Pf 49:yl of 3
$2,021,000
$20,000 /
/Unit 1
1,980,000
505,000
$2,500 /
/Unit 2
248,000
$500 /
/Unit 5
50,000
1,263,000
$3,284,000
IV. ITotal Construction Cost 159,900 Sf $218 /Sf $34,919,000
1 The estimate should be verified by the City staff.
2 Assumes a 18 month construction period and a 60% average outstanding balance.
3 Based on a 70% loan to value ratio. The value is calculated based on a 4.5% capitalization rate.
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 99 Pf 49:yl of 3
APPENDIX B - TABLE 2
STABILIZED NET OPERATING INCOME
99 APARTMENT UNITS
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Residential Rental Income i
Townhome:2 -Bdrm @ 1,300 Sf
Townhome: 3 -Bedrm @ 1,500 Sf
Flat: 2 -Bdrm @ 1,600 Sf
Flat: 3 -Bdrm @ 1,800 Sf
Laundry/Miscellaneous Income
Gross Income
(Less) Vacancy & Collection Allowance
Residential Effective Gross Income
II. Operating Expenses
General Operating Expenses
Property Management
Property Taxes
Reserves Deposits
Total Operating Expenses
14
Units @
$3,510
/Month
$589,700
13
Units @
$3,975
/Month
620,100
37
Units @
$4,080
/Month
1,811,500
35
Units @
$4,500
/Month
1,890,000
99 Units @ $15 /Month 17,800
$4,929,100
5.0% Gross Income (246,500)
$4,682,600
99 Units @ $4,000 /Unit
5% Residential Effective Gross Income
99 Units @ $8,011 /Unit
99 Units @ $150 /Unit
99 Units @ ($12,161) /Unit
$396,000
234,100
793,100
14,900
($1,438,100)
IV. I Stabilized Net Operating Income $3,244,500
' Based on KMA market research. Rents range from $2.50 to $2.70 /Sf of GLA.
2 Based on a 4.5% capitalization rate and a 1.1% property tax rate.
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 99 Pf Pggp of 3
APPENDIX B - TABLE 3
ESTIMATED LAND VALUE / ANNUAL GROUND LEASE INCOME
99 APARTMENT UNITS
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Supportable Private Investment
Stabilized Net Operating Income See APPENDIX B - TABLE 2 $3,244,500
Threshold Return on Total Investment 6.0%
Total Supportable Private Investment $54,075,000
II. Total Construction Cost See APPENDIX B
-TABLE 1 $34,919,000
III. I Estimated Gross Land Value 185,718 Sf of Land
$103 /Sf of Land
$19,156,000
IV. Land Value Offsets'
Low Estimate
High Estimate
Main Plaza - Newport & 32nd Street
$1,212,000
$2,360,000
Northern Promenade - City Hall Site Only (65 %)
272,000
576,000
32nd Street - Newport to Lafayette
1,078,000
2,121,000
Via Malaga Plaza
372,000
773,000
Via Oporto Plaza
523,000
1,008,000
Fire Statation Reconstruction (50% of Cost)
2,113,000
2,113,000
Total Land Value Offsets
$5,570,000
$8,951,000
u
Net Land Value
Per Square Foot of Land Area
Ground Lease Income
Annual Ground Lease Rate
Annual Ground Lease Rate
185,718 Sf of Land
8% of Net Land Value
10% of Net Land Value
$13,586,000 $10,205,000
$73 $55
$1,086,900 $816,400
$1,358,600 $1,020,500
1 Based on preliminary estimates provided by the City. These estimates should only be used on an order -of- magnitude basis.
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 99 Pf P4g of 3
50
APPENDIX C
:1010101 I Q L T i ILos h b 1 9_[01 r_1 J_1 W& i 6`
APARTMENT ALTERNATIVES
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
12009002; PKF:KHH:TB
17635Mt%t
152
APPENDIX C - TABLE 1
ECONOMIC IMPACT ANALYSIS
92 APARTMENT UNITS & 6,000 SF COMMERCIAL SPACE
CITY HALL SITE
NEWPORT BEACH. CALIFORNIA
I. Share of Income Spent on Retail Goods - Consumer Expenditure Survey, 2010
Imputed Average Household Income of CES Income Group $132,750
Total $29,660 22.33% 15.84%
II. Estimated Annual Expenditures Per Household
Expenditure
Share of
% Spent in
NB Capture
Expenditure Type
s
HH Income
NB
Rate
Food, Grocery and Personal Care Products
$7,040
5.30%
100%
5.30%
Restaurants and Entertainment
10,706
8.06%
75%
6.05%
Apparel, Household Operations, Supplies & Furnishings
11,914
8.97%
50%
4.49%
Total $29,660 22.33% 15.84%
II. Estimated Annual Expenditures Per Household
Projected Household Income Income 3
$142,000
Household
Projected
NB Capture
Expenditures
Expenditure Type
HH Income
Rate
in NB
Food, Grocery and Personal Care Products
$142,000
5.30%
$7,526
Restaurants and Entertainment
142,000
6.05%
8,591
Apparel, Household Operations, Supplies & Furnishings
142,000
4.49%
6,376
Total Annual Direct Expenditures Per Household
$22,493
Ill. Total Direct Expenditures
Direct Expenditures Per Household
$22,493
Number of Households
92
Total Direct Expenditures
$2,069,000
IV. Direct, Indirect & Induced Impacts
Total Direct Expenditures
Multiplier 4
$2,069,000
1.30
Total Direct, Indirect & Induced Impacts $2,690,000
' KMA utilized Consumer Expenditure Survey (CES) data for household incomes between $120,000 and $149,999.
2 Per the CES. The CES labels households as consumer units.
3 The projected houshold income is based on a weighted average of the estimated household incomes of the apartment
residents. KMA assumes that the residents will spend 35% of their household income on rent.
4 Based on a KMA review of indirect and induced multipliers from IMPLAN and RIMS.
Prepared by: Keyser Marston Associates, Inc.
File name: 91712 CH Apt; 92_EB; trb J5-S
APPENDIX C -TABLE 2
ECONOMIC IMPACT ANALYSIS
99 APARTMENT UNITS
CITY HALL SITE
NEWPORT BEACH. CALIFORNIA
I. Share of Income Spent on Retail Goods - Consumer Expenditure Survey, 2010
Imputed Average Household Income of CES Income Group $132,750
Total $29,660 22.33% 15.84%
II. Estimated Annual Expenditures Per Household
Expenditure
Share of
% Spent in
NB Capture
Expenditure Type
s
HH Income
NB
Rate
Food, Grocery and Personal Care Products
$7,040
5.30%
100%
5.30%
Restaurants and Entertainment
10,706
8.06%
75%
6.05%
Apparel, Household Operations, Supplies & Furnishings
11,914
8.97%
50%
4.49%
Total $29,660 22.33% 15.84%
II. Estimated Annual Expenditures Per Household
Projected Household Income Income 3
$142,000
Household
Projected
NB Capture
Expenditures
Expenditure Type
HH Income
Rate
in NB
Food, Grocery and Personal Care Products
$142,000
5.30%
$7,526
Restaurants and Entertainment
142,000
6.05%
8,591
Apparel, Household Operations, Supplies & Furnishings
142,000
4.49%
6,376
Total Annual Direct Expenditures Per Household
$22,493
Ill. Total Direct Expenditures
Direct Expenditures Per Household
$22,493
Number of Households
99
Total Direct Expenditures
$2,227,000
IV. Direct, Indirect & Induced Impacts
Total Direct Expenditures
Multiplier 4
$2,227,000
1.30
Total Direct, Indirect & Induced Impacts $2,895,000
t KMA utilized Consumer Expenditure Survey (CES) data for household incomes between $120,000 and $149,999.
2 Per the CES. The CES labels households as consumer units.
3 The projected houshold income is based on a weighted average of the estimated household incomes of the apartment
residents. KMA assumes that the residents will spend 35% of their household income on rent.
4 Based on a KMA review of indirect and induced multipliers from IMPLAN and RIMS.
Prepared by: Keyser Marston Associates, Inc.
File name: 91712 CH Apt; 99_EB; trb 54
APPENDIX D
APARTMENT ALTERNATIVES
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
12009002; PKF:KHH:TB
17635Mt4 F
150
APPENDIX D - TABLE 1
ESTIMATED ANNUAL PUBLIC REVENUES
92 APARTMENT UNITS & 6,000 SF COMMERCIAL SPACE
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Possessory Interest Tax Calculation
Total Assessed Value
Possessory Interest Tax Rate (Base Levy)
Total Possessory Interest Tax Revenue
City Share of Base Levy
$68,511,000
1.00%
$685,110
17.15%
Estimated Annual Possessory Interest Tax Revenue $117,000
Il. Sales Tax Calculation
Taxable Sales
Food, Grocery and Personal Care Products
Restaurants and Entertainment
Apparel, Household Operations, Supplies & Furnishings
Total Taxable Sales
City Share of Taxable Sales
Estimated Annual Sales Tax Revenue $15,000
III. Total Estimated Annual Public Revenues $132,000
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 92_REV 57
Taxable
Spending
Number of
Sales
Taxable
Per HH
HHs
Rate
Sales
$7,526
92
20%
$137,000
$8,591
92
100%
$790,000
$6,376
92
100%
$587,000
$1,514,000
1.0%
Estimated Annual Sales Tax Revenue $15,000
III. Total Estimated Annual Public Revenues $132,000
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 92_REV 57
APPENDIX D- TABLE 2
ESTIMATED ANNUAL PUBLIC REVENUES
99 APARTMENT UNITS
CITY HALL SITE
NEWPORT BEACH, CALIFORNIA
I. Possessory Interest Tax Calculation
Total Assessed Value
Possessory Interest Tax Rate (Base Levy)
Total Possessory Interest Tax Revenue
City Share of Base Levy
$72,100,000
1.00%
$721,000
17.15%
Estimated Annual Possessory Interest Tax Revenue $124,000
Il. Sales Tax Calculation
Taxable Sales
Food, Grocery and Personal Care Products
Restaurants and Entertainment
Apparel, Household Operations, Supplies & Furnishings
Total Taxable Sales
City Share of Taxable Sales
Estimated Annual Sales Tax Revenue $16,000
III. Total Estimated Annual Public Revenues $140,000
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 99_REV 52
Taxable
Spending
Number of
Sales
Taxable
Per HH
HHs
Rate
Sales
$7,526
99
20%
$147,000
$8,591
99
100%
$851,000
$6,376
99
100%
$631,000
$1,629,000
1.0%
Estimated Annual Sales Tax Revenue $16,000
III. Total Estimated Annual Public Revenues $140,000
Prepared by: Keyser Marston Associates, Inc.
File name: 9_17_12_CH Apt; 99_REV 52
Attachment CC -3
PKF Consulting
Market Analysis
August 8, 2012
Document can be found at:
http: / /www.newportbeachca.gov /Modules /ShowDocu
ment.aspx ?documentid =14179
159
00
Attachment CC -4
PKF Consulting
Economic Impact Analysis
September 14, 2012
01
02
September 14, 2012
Ms. Kimberly Brandt
Director - Community Development Department
City of Newport Beach
3300 Newport Boulevard
Building B
Newport Beach, CA 92663
Dear Ms. Brandt:
PKF
CONSULTING
USA
Pursuant to your request, we have completed economic impact, fiscal impact, and
residual land value analyses for the proposed hotel to be developed at the current site of
the Newport Beach City Hall. The following summarizes our scope of work followed by a
discussion of our findings:
A. Economic Impact Analysis
Based on 78 -room hotel and 120 -room hotel scenarios, we have projected the estimated
direct and indirect economic impact that each of the hotel development scenarios will
have on businesses in Newport Beach through the purchases of goods and services by
hotel guests.
B. Fiscal Impact Analysis
Based on the abovementioned hotel room count scenarios, we have projected the
estimated fiscal impact of hotel operations on tax revenue to the City of Newport Beach,
including transient occupancy tax, sales tax, and possessory interest tax. Utility, business
license, and parking taxes have not been included.
C. Residual Land Value Analysis
We have prepared land residual analyses for the following development alternatives:
1. 78 -room Hotel and 100 above ground parking spaces; and
2. 120 -room Hotel and 150 above ground parking spaces.
*Both analyses assume existing lot size and dimensions and retention of the fire station in
its current location.
PKF Consulting USA 1 865 S. Figueroa Street, Suite 3500 1 Los Angeles, CA 90017
TEL 213 - 680 -0900 1 FAX: 213- 623 -8240 1 w .pkfc.com
Ms. Kimberly Brandt
Citv ofNewport Beach
The land residual analyses provide the City of Newport Beach (City) with the following
valuation estimates for each development alternative:
The estimated fair market value of the fee interest in the property upon
completion and the estimated value of the land before and after the deduction
of extraordinary costs such as a public plaza and a promenade; and
2. The estimated annual ground lease income that could potentially be received
by the City if the property is conveyed in the form of a long -term ground lease.
SUMMARY OF CONCLUSIONS
The following table presents a summary of conclusions for each hotel development
scenario.
Summary of Conclusions
ANALYSIS
Our analysis follows the outline presented above. The following presents an expanded
discussion of our analysis and conclusions regarding each item in the summary.
A. ECONOMIC IMPACT
The following presents the estimated economic impact of hotel operations on the
Newport Beach economy. We have performed an economic impact analysis for two
development scenarios: 1) 78 -room upscale boutique hotel and 2) 120 -room upscale
boutique hotel.
Page 12
04
78 -Room Hotel
120 -Room Hotel
Economic Impact
Representative Year Direct and Indirect Spending
$20,566,715
$29,408,056
10 -Yr Direct and Indirect Spending
$254,249,861
$362,006,807
Fiscal Impact
Representative Year TOT
$476,000
$680,700
Representative Year Sales Tax
$123,494
$176,583
Representative Year Possessory Interest Tax
$38,759
$54,366
Total Fiscal Impact Representative Year
$638,253
$911,649
10 -Year TOT Revenue
$5,885,200
$8,378,800
10 -Year Sales Tax Revenue
$1,526,662
$2,173,697
10 -Year Sales Possessory Interest Tax
$476,256
$667,307
Total Fiscal Impact 10 -Year Period
$7,888,118
$11,219,804
Residual Land Value
Option A
$3,430,481
$5,530,481
Option B
$49,895
$2,149,895
Annual Ground Rent at 10% of Land Value
Option A
$343,000
$553,000
Option B
$5,000
$215,000
Source: PKF Consulting
ANALYSIS
Our analysis follows the outline presented above. The following presents an expanded
discussion of our analysis and conclusions regarding each item in the summary.
A. ECONOMIC IMPACT
The following presents the estimated economic impact of hotel operations on the
Newport Beach economy. We have performed an economic impact analysis for two
development scenarios: 1) 78 -room upscale boutique hotel and 2) 120 -room upscale
boutique hotel.
Page 12
04
Ms. Kimberly Brandt
Citv ofNewport Beach
The total economic impact of the proposed development in the City of Newport Beach
consists of direct spending by overnight hotel guests, which includes lodging, food and
beverage, souvenirs, attractions, transportation, and incidentals, as well as indirect
spending. Indirect spending is a function of monies spent by visitors in area businesses,
which the businesses then utilize to operate and spend on other items. We have applied
our economic analysis to the operational phase of the development. In addition to this
impact, the project will create additional impact such as jobs and spending during the
construction phase, as well as spending by day guests to the hotel, such as conference,
banquet, and restaurant guests.
Operational Phase Economic Impact
The methodology used to determine the economic impact of the operational phase of the
proposed project to the City of Newport Beach includes an estimation of visitor spending
within the different categories. This allocation of visitor spending is performed by taking
the overall hotel visitor spending data for the City of Newport Beach, as derived by
Horizon Consumer Science', and applying it to the average daily rate and number of
occupied rooms of the property. We have estimated:
• The flow of dollars through the economy into the City of Newport Beach
attributable to hotel guest direct spending
• The indirect spending created by this spending
Assumption
It should be noted that this economic impact study is limited to overnight visitors who stay
in Newport Beach at the subject property and does not assume day visitors that come to
the area due to the new facilities and positioning of the subject property.
Definitions
Hotel /Motel Guests - those overnight visitors who stay at lodging facilities in the City of
Newport Beach. The primary purpose of their visits to Newport Beach varies and includes
business, leisure, and self- contained groups.
Multiplier - a means to determine the indirect economic benefits of visitor expenditures in
a community, such as spending by hotels and restaurants and their employees. The
multiplier is applied to direct spending by visitors to measure the total flow of visitor
dollars through the economy.
The following tables summarize our findings.
I Horizon Consumer Science, Visitor Profile and Economic Fiscal Impacts of Newport Beach Tourvon For FY201012011
Page 13
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Ms. Kimberly Brandt
Citv ofNewport Beach
Scenario 1 — 78 Rooms
Total Annual Economic Impact
(Based Upon a Stabilized Year of Operation, 2012 Dollars)
Hotel Guests
Occupied Hotel Rooms
21,637
Double Occupancy Factor
2.0
Total Hotel Visitor Days
43,274
Total Visitor Spending
$15,820,550
Multiplier
1.3
TOTAL ECONOMIC IMPACT Direct and Indirect*
$20,600,000
Note: Number has been rounded.
Scenario 2 — 120 Rooms
Total Annual Economic Impact
(Based Upon a Stabilized Year of Operation, 2012 Dollars)
120 Rooms
Hotel Guests
Occupied Hotel Rooms 32,412
Double Occupancy Factor 2.0
Total Visitor Spending $22,621,581
Multiplier 1.3
TOTAL ECONOMIC IMPACT Direct and Indirect* $29,400,000
Note: Number has been rounded.
The following text provides summary tables and the assumptions used to reach the
aforementioned conclusions.
Total Hotel Visitors
In order to calculate the visitor impact of the hotel operations, it is first necessary to
estimate total hotel visitors. This has been derived by estimating the stabilized occupancy
level. The projected occupancy is then multiplied by the double occupancy factor. As
previously presented, we estimate a stabilized occupancy of 76 percent for Scenario 1 (78
rooms) and 74 percent for Scenario 2 (120 rooms).
Next, to develop a baseline expenditure that we can extrapolate to total visitor
expenditure, we have utilized daily lodging expenditure per hotel visitor. This is
calculated by taking the average daily rate and dividing it by the occupancy factor. We
have utilized a rate of $220 for Scenario 1 and $210 for Scenario 2.
Page 14
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Ms. Kimberly Brandt
Citv ofNewport Beach
Scenario 1 — 78 Rooms
Total Proposed Newport Beach Hotel
Visitors
and Daily Lodging Expenditure
Meals
78 Rooms
Total Occupied Rooms
21,637
Occupancy Factor
2.0
Total Hotel Visitors
43,274
Average Daily Rate
$220.00
Daily Hotel Spending per Visitor
$110.00
PKF Consulting
13.15
Scenario 2 — 120 Rooms
Total Proposed Newport Beach Hotel Visitor
s and Daily Lodging Expenditure
120 Rooms
Total Occupied Rooms 32,412
Occupancy Factor 2.0
Total Hotel Visitors 64,824
Average Daily Rate $210.00
Daily Hotel Spending per Visitor $105.00
PKF Consultive
Direct Visitor Spending
Based on the daily lodging expenditure, it is now possible to project spending on other
categories. Our estimates of overnight visitors are based upon the projected occupancy
and ADR of the proposed subject. The following table presents the spending by category
for the City of Newport Beach for direct visitor expenditure. The Regional Input- Output
Modeling System (RIMS II) was used to calculate the economic multipliers. The spending
data is for fiscal year 2010 -2011. Please note that we are relying on this data for the
percentage allocations rather than the dollar amounts.
For these segments, our analysis of daily expenditures for overnight stays included the
following categories:
• Lodging
• Meals & Beverages
• Local Transportation
• Non -Food Retail Purchases
• Entertainment
• Other
Daily Hotel Visitor Spending
Spending Category 2010 -11 % of Total
Lodging
$84.60
30.1
Meals
58.93
21.0
Beverages
13.67
4.9
Shopping/gifts
68.50
24.4
Mus./Theater /Clubs Fees
18.23
6.5
Daily Transport/Parking
13.15
4.7
Amen ities/Health Spa
5.89
2.1
Activities
7.30
2.6
Groc. /Conv. /Incidentals
10.90
3.9
Total
$281.17
100.0%
Source: Horizon Consumer Science
Visitor Profile and Economic
Fiscal Impacts of Newport Beach Tourism For FY
201012011
Page 15
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Ms. Kimberly Brandt
Citv ofNewport Beach
Utilizing the average daily expenditure on lodging, we can apply these ratios of spending
to the subject property for each scenario, as presented in the following tables.
Scenario 1 - 78 Rooms
Newport Beach Hotel Visitor Direct Spending Per Day
Spending Category
Basis
Newport Beach Hotel 78 Rooms
Lodging
30.1 %
$110.00
Meals
21.0
76.62
Beverages
4.9
17.77
Shopping/gifts
24.4
89.06
Mus./Fheater /Clubs Fees
6.5
23.71
Daily Transport/Parking
4.7
17.09
Amen ities/Health Spa
2.1
7.67
Activities
2.6
9.49
Groc. /Conv. /Incidentals
3.9
14.17
Total
100.0%
$365.59
Scenario 2 - 120 Rooms
Newport Beach Hotel Visitor Direct Spending Per Day
Spending Category
Basis
Newport Beach Hotel 120 Rooms
Lodging
30.1%
$105.00
Meals
21.0
73.14
Beverages
4.9
16.97
Shopping/gifts
24.4
85.01
Mus./Theater /Clubs Fees
6.5
22.63
Daily TransporUParking
4.7
16.32
Amenities/Health Spa
2.1
7.32
Activities
2.6
9.06
Groc. /Conv. /Incidentals
3.9
13.53
Total
100.0%
$348.97
Next, we will apply this daily expenditure to the number of hotel visitors to calculate total
direct visitor spending. The following table presents our conclusions of total direct visitor
spending in a representative year.
Scenario 1 - 78 Rooms
Newport Beach Hotel Visitor Direct Spending
Spending Category
Newport Beach Hotel 78 Rooms
Lodging
$4,760,184
Meals
3,315,628
Beverages
769,125
Shopping/gifts
3,854,015
Mus./iheater /Clubs Fees
1,026,083
Daily Transport/Parking
739,758
Amenities /Health Spa
331,773
Activities
410,783
Groc. /Conv. /Incidentals
613,202
Total
$15,820,550
Page 16
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Ms. Kimberly Brandt
Citv ofNewport Beach
Scenario 2 — 120 Rooms
Newport Beach Hotel Visitor Direct Spending
Spending Category
Newport Beach Hotel 120 Rooms
Lodging
$6,806,520
Meals
4,740,969
Beverages
1,099,761
Shopping/gifts
5,510,802
Mus./Theater /Clubs Fees
1,467,181
Daily Transport/Parking
1,057,770
Amenities/Health Spa
474,397
Activities
587,372
Groc. /Conv. /Incidentals
876,809
Total
$22,621,581
The Multiplier Effect
The total impact of direct spending related to the introduction of the expanded facilities is
amplified by means of an economic multiplier. A multiplier is used to estimate the impact
that the visitor dollar makes beyond the initial goods /services purchased. The infusion of
new dollars into the local economy also produces additional goods and services. In short,
"direct" visitor spending creates indirect and induced economic benefits for the City. For
example, visitor spending collected "directly" within a hotel restaurant also "indirectly"
supports food and beverage suppliers and delivery services. Moreover, the direct and
indirect spending induces further spending in the community by employees of the
benefiting businesses.
Based upon the RIMS II economic modeling system and as confirmed by the Visitor Profile
and Economic Fiscal Impacts of Newport Beach Tourism For FY 201012011 study
performed by Horizon Consumer Science, we have used an overall economic multiplier
of 1.3. We applied this multiplier to the expenditures related to the visitors to the subject
property to determine the overall economic impact of the subject under each scenario.
Hotel Visitor Direct and Indirect Spending
Newport Beach Hotel 78 Rooms
Direct Spending $15,820,550
Multiplier 1.3
Direct and Indirect Spending $20,566,715
Hotel Visitor Direct and Indirect Spending
Newport Beach Hotel 120 Rooms
Direct Spending $22,621,581
Multiplier 1.3
Direct and Indirect Spending $29,408,056
Page 17
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Ms. Kimberly Brandt
Citv ofNewport Beach
Annual Direct and Indirect Economic Impact
Scenario 1 — 78 Rooms
The project as proposed results in an estimated total direct and indirect economic impact
of $20.6 million in a representative year. The following presents a summary of 10 years of
i m pact.
Annual Direct
and Indirect Economic Impact (78 Rooms)
Direct
Direct
Indirect
Total
2012 Rep
$15,820,550
$4,746,165
$20,566,715
2015
15,442,068
4,632,620
20,074,688
2016
16,895,439
5,068,632
21,964,071
2017
18,337,455
5,501,237
23,838,692
2018
18,912,748
5,673,824
24,586,573
2019
19,488,041
5,846,412
25,334,453
2020
20,063,334
6,019,000
26,082,334
2021
20,638,626
6,191,588
26,830,214
2022
21,285,831
6,385,749
27,671,580
2023
21,933,035
6,579,910
28,512,945
2024
22,580,239
6,774,072
29,354,311
Total 2015 -2024
$195,576,816
$58,673,045
$254,249,861
Scenario 2 — 120 Rooms
The project as proposed results in an estimated total direct and indirect economic impact
of $29.4 million in a representative year. The following presents a summary of 10 years of
impact.
Annual Direct and Indirect Economic Impact (120 Rooms)
Direct
Indirect
Total
2012 Rep
$22,621,581
$6,786,474
$29,408,056
2015
21,668,098
6,500,429
28,168,527
2016
23,703,053
7,110,916
30,813,969
2017
26,174,786
7,852,436
34,027,222
2018
27,036,507
8,110,952
35,147,459
2019
27,790,513
8,337,154
36,127,667
2020
28,652,235
8,595,670
37,247,905
2021
29,513,956
8,854,187
38,368,143
2022
30,375,677
9,112,703
39,488,381
2023
31,345,114
9,403,534
40,748,648
2024
32,206,835
9,662,051
41,868,886
Total 2015 -2024
$278,466,775
$83,540,032
$362,006,807
B. FISCAL IMPACT
This portion of our analysis focuses on providing a fiscal impact of hotel operations on tax
revenue to Newport Beach local agencies. Fiscal impact is the amount of tax revenue
generated directly to Newport Beach local agencies by visitor spending of hotel guests
and hotel operations. Potential government revenues drawn from tourism - related projects
include: sales tax, transient occupancy tax, business tax, property tax, utility tax, and
parking tax. Please note our analysis presents potential revenues to the City from taxes
related to hotel revenues including sales and transient occupancy tax, as well as property
Page 18
70
Ms. Kimberly Brandt
Citv ofNewport Beach
taxes in the form of a possessory interest tax. Utility and parking tax estimates have not
been included. Business tax is a small set amount per year in the City of Newport Beach
and will not represent significant impact to the City.
The current transient occupancy tax rate in the City of Newport Beach is 10.0 percent.
The current retail sales tax that is contributed to the City is 1.0 percent of retail sales. The
City retains 17.15 percent of total property taxes.
Basis for Fiscal Impact
Scenario 1 — 78 Rooms
We have projected 10 years of operational performance. We used comparable data from
hotels with similar average daily rate, occupancy, size, and market positioning from PKF
Consulting's Trends in the Hotel Industry survey (referred to as Comparables "A ", "B ",
"C ", "D ", and "E" in the addenda). All five are full service properties, averaging 102 rooms
at an aggregate 80 percent occupancy rate and ADR of $198.00. The following table
presents a summary of the projected top line performance for the proposed 78 -room hotel.
Summary of Projected
Top Line Performance
(Stabilized Year of Operations, 2012 Dollars)
Scenario 1- 78 Rooms
Room Count
78
Year 1 Occupancy
68%
Year 2 Occupancy
72%
Year 3 Occupancy
76%
Stabilized Occupancy
76%
ADR (2012 rep)
$220
ADR Year 1
$240
Annual ADR growth
3%
PKF Consulting
Percentage of Property Tax to City
The following table presents the incremental tax revenues for the proposed Scenario 1.
Hotel Operations Tax Revenues
(Stabilized Year of Operations, 2012 Dollars)
78 Rooms
Rooms Revenue
$4,760,000
TOT Rate
10%
TOT Generated (rounded)
$476,000
Sales Revenue (Meals & Beverages, Non -Food
Retail, Entertainment, Transportation, Other)
$14,378,476
Sales Tax Rate'
1 %
Sales Tax Generated (rounded)
$123,494
Total Possessory Interest Tax
$226,000
Percentage of Property Tax to City
17.15%
Possessory Interest Tax to City
$38,759
Total Hotel Operations Tax Revenues to City of
Newport Beach local agencies
$638,253
'Sales tax revenue was estimated at 1.0 percent of meals, beverages,
and shopping/gifts spending and 0.05% of other spending
Page 19
7-1
Ms. Kimberly Brandt
Citv ofNewport Beach
Based on the assumptions of occupancy and average daily rate upon
stabilization, we have estimated transient occupancy tax of $476,000 in a
representative year.
• In addition to TOT, the City of Newport Beach is estimated to receive 1.0
percent of the sales tax generated from meals and beverages and non -food retail
as well as one half of 1.0 percent from transportation, entertainment, personal
care, and other activities expenses. We estimate that Scenario 1 will drive
$123,494 in sales tax revenue from expenditures by hotel visitors to the City of
Newport Beach.
• The subject property is in the real estate taxing jurisdiction of Orange County.
In California, Proposition 13 limits property taxes to one percent of the assessed
value plus city, special district, and county bonds. Assessed values are further
limited to a two percent increase per year, except upon sale or major alterations
of the property. Based on our knowledge of typical tax assessments and the
base rate, we have applied a tax rate of 1.1 percent to the value of the property
based on an estimated construction cost of $280,000 per room to derive a
representative property tax base. This figure is then inflated at two percent per
year in accordance with the Jarvis -Gann Amendment. The City of Newport
Beach retains 17.15 percent of total property taxes. We have estimated
possessory interest tax of $38,759 in a representative year.
We have also calculated the tax revenue for a ten -year period beginning in 2015, the
estimated opening date of the lodging facility.
78 -Room Hotel
^^Total ^A $86,252,000 $58,852,000 $177,749,605 $2,777,000 $5,885,200 $1,526,662 $476,256 $7,888,118
'Other Expenditure is based on Direct and Indirect Spending by hotel visitors not including lodging accommodations.
'Sales tax revenue was estimated at 1.0 percent of meals, beverages, and shopping/gifts spending and 0.05% of other
spending
'Based on 17.15% of total orooertv tax to the Citv
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72
Hotel Operations
Taxes
Total
Possessory
Total
Rooms
Other'
Possessory
Interest Tax
Revenue
Expenditure
Expenditure
Interest Tax
TOT
Sales Tax'
to City3
Total
2012 Rep
$6,978,000
$4,760,000
$14,378,476
$226,000
$476,000
$123,494
$38,759
$638,253
2015
6,814,000
4,646,000
14,034,493
240,000
464,600
120,540
41,160
626,300
2016
7,449,000
5,084,000
15,355,386
260,000
508,400
131,885
44,590
684,875
2017
8,089,000
5,518,000
16,665,960
265,000
551,800
143,141
45,448
740,389
2018
8,340,000
5,691,000
17,188,814
271,000
569,100
147,632
46,477
763,208
2019
8,592,000
5,864,000
17,711,668
276,000
586,400
152,123
47,334
785,857
2020
8,848,000
6,038,000
18,234,521
281,000
603,800
156,613
48,192
808,605
2021
9,106,000
6,211,000
18,757,375
287,000
621,100
161,104
49,221
831,425
2022
9,386,000
6,405,000
19,345,585
293,000
640,500
166,156
50,250
856,906
2023
9,670,000
6,600,000
19,933,796
299,000
660,000
171,208
51,279
882,487
2024
9,958,000
6,795,000
20,522,006
305,000
679,500
176,260
52,308
908,068
^^Total ^A $86,252,000 $58,852,000 $177,749,605 $2,777,000 $5,885,200 $1,526,662 $476,256 $7,888,118
'Other Expenditure is based on Direct and Indirect Spending by hotel visitors not including lodging accommodations.
'Sales tax revenue was estimated at 1.0 percent of meals, beverages, and shopping/gifts spending and 0.05% of other
spending
'Based on 17.15% of total orooertv tax to the Citv
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Ms. Kimberly Brandt
Citv ofNewport Beach
Scenario 2 — 120 Rooms
We have projected 10 years of operational performance. We used comparable data from
hotels with similar average daily rate, occupancy, size, and market positioning from PKF
Consulting's Trends in the Hotel Industry survey (referred to as Comparables "A ", "B ",
"C ", "D ", and "E" in the addenda). All five are full service properties, averaging 119 rooms
at an aggregate 78 percent occupancy rate and ADR of $199.00. The following table
presents a summary of the projected top line performance for the proposed 120 -room
hotel.
Summary of Projected
Top Line Performance
Scenario 2- 120 Rooms
Room Count 120
Yearl Occupancy 65%
Year 2 Occupancy 69%
Year3 Occupancy 74%
Stabilized Occupancy 74%
ADR (2012 rep) $210
ADR Year 1 $229
Annual ADR growth 3%
EKE Consulting
The following table presents the incremental tax revenues for the proposed Scenario 2.
Hotel Operations Tax Revenues
(Stabilized Year of Operations, 2012 Dollars)
120 Rooms
Rooms Revenue
$6,807,000
TOT Rate
10%
TOT Generated (rounded)
$680,700
Sales Revenue (Meals &. Beverages, Non -Food Retail,
Entertainment, Transportation, Other)
$20,559,580
Sales Tax Rate
1 %
Sales Tax Generated (rounded)
$176,583
Total Possessory Interest Tax
$317,000
Percentage of Property Tax to City
17.15%
Possessory Interest Tax to City
$54,366
Total Hotel Operations Tax Revenues to City of
Newport Beach local agencies
$911,648
'Sales tax revenue was estimated at 1.0 percent of meals,
beverages,
and shopping/gifts spending and 0.05% of other spending
• Based on the assumptions of occupancy and average daily rate upon
stabilization, we have estimated transient occupancy tax of $680,700 in a
representative year.
• In addition to TOT, the City of Newport Beach is estimated to receive 1.0
percent of the sales tax generated from meals and beverages and non -food retail
as well as one half of 1.0 percent from transportation, entertainment, personal
care, and other activities expenses. We estimate that Scenario 2 will drive
Page 111
Ms. Kimberly Brandt
Citv ofNewport Beach
$176,600 in sales tax revenue from expenditures by hotel visitors to the City of
Newport Beach.
• The subject property is in the real estate taxing jurisdiction of Orange County.
In California, Proposition 13 limits property taxes to one percent of the assessed
value plus city, special district, and county bonds. Assessed values are further
limited to a two percent increase per year, except upon sale or major alterations
of the property. Based on our knowledge of typical tax assessments and the
base rate, we have applied a tax rate of 1.1 percent to the value of the property
based on an estimated construction cost of $255,000 per room to derive a
representative property tax base. This figure is then inflated at two percent per
year in accordance with the Jarvis -Gann Amendment. The City of Newport
Beach retains 17.15 percent of total property taxes. We have estimated
possessory interest tax of $54,366 in a representative year.
We have also calculated the tax revenue for a ten -year period beginning in 2015, the
estimated opening date of the lodging facility.
120 -Room Hotel
Total
2015.2024 $120,953,000 $83,788,000 $253,083,980 $3,891,000 $8,378,800 $2,173,697 $667,307 $11,219,804
'Other Expenditure is based on Direct and Indirect Spending by hotel visitors not including lodging accommodations.
'Sales tax revenue was estimated at 1.0 percent of meals, beverages, and shopping/gifts spending and 0.05% of other spending
'Based on 17.15% of total orooerty tax to the Citv
Fiscal Impact Conclusions
The estimated total tax impact for Newport Beach local agencies of Scenario 1 over a 10
year period is $7.9 million and $638,200 in a representative year, comprising transient
occupancy tax, sales tax, and possessory interest tax. The estimated total impact for
Scenario 2 is $11.2 million over a 10 -year period and $911,600 in a representative year.
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74
Hotel Operations
Taxes
Possessory
Total
Interest
Rooms
Other'
Possessory
Tax
Total Revenue
Expenditure
Expenditure
Interest Tax
TOT
Sales Tax'
to city'
Total
2012 Rep
$9,824,000
$6,807,000
$20,559,580
$317,000
$680,700
$176,583
$54,366
$911,648
2015
9,416,000
6,520,000
19,693,008
337,000
652,000
169,140
57,796
878,936
2016
10,298,000
7,132,000
21,542,473
364,000
713,200
185,025
62,426
960,651
2017
11,374,000
7,876,000
23,788,903
372,000
787,600
204,319
63,798
1,055,717
2018
11,737,000
8,135,000
24,572,076
379,000
813,500
211,046
64,999
1,089,544
2019
12,073,000
8,362,000
25,257,353
387,000
836,200
216,931
66,371
1,119,502
2020
12,443,000
8,621,000
26,040,527
394,000
862,100
223,658
67,571
1,153,329
2021
12,817,000
8,880,000
26,823,701
402,000
888,000
230,384
68,943
1,187,327
2022
13,194,000
9,140,000
27,606,875
410,000
914,000
237,111
70,315
1,221,426
2023
13,608,000
9,431,000
28,487,945
419,000
943,100
244,678
71,859
1,259,637
2024
13,993,000
9,691,000
29,271,119
427,000
969,100
251,405
73,231
1,293,735
Total
2015.2024 $120,953,000 $83,788,000 $253,083,980 $3,891,000 $8,378,800 $2,173,697 $667,307 $11,219,804
'Other Expenditure is based on Direct and Indirect Spending by hotel visitors not including lodging accommodations.
'Sales tax revenue was estimated at 1.0 percent of meals, beverages, and shopping/gifts spending and 0.05% of other spending
'Based on 17.15% of total orooerty tax to the Citv
Fiscal Impact Conclusions
The estimated total tax impact for Newport Beach local agencies of Scenario 1 over a 10
year period is $7.9 million and $638,200 in a representative year, comprising transient
occupancy tax, sales tax, and possessory interest tax. The estimated total impact for
Scenario 2 is $11.2 million over a 10 -year period and $911,600 in a representative year.
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Ms. Kimberly Brandt
Citv ofNewport Beach
C. RESIDUAL LAND VALUE ANALYSIS
We have performed a residual land value analysis for each development scenario. In
preparing this study, we evaluated the proposed development as a 78 -room upscale
boutique hotel and as a 120 -room upscale boutique hotel, including ancillary amenities
and facilities. Our analyses incorporate the following assumptions for both development
scenarios:
• The total land area of the subject site is 4.2 acres, including the land under the
fire station. The hotel will be developed on approximately 0.5 acres. The
existing fire station will be demolished and rebuilt at approximately the same
location, with half of the costs of construction assessed to the hotel.
• There will be 100 surface parking spaces totaling approximately 0.9 acres in
Scenario 1 (78- rooms) and 150 surface parking spaces totaling approximately
1.3 acres in Scenario 2 (120- rooms).
• A public plaza and promenade will be developed on approximately 1.21 acres
of the site. Land value offsets associated with the public plaza and promenade
have been included in the analysis.
METHODOLOGY
In order to derive residual land value estimates, we have performed a development cost
estimate using the Marshall Valuation Service for the cost of constructing the proposed
facility for each development scenario. This includes development of improvements and
soft costs. The next step was then to develop an opinion of value for the completed facility
based on comparable property operations and discounting the projection of revenue and
expenses. The net difference between the total development cost and the value upon
completion yields the gross land value.
PRESENTATION OF ANALYSES
SCENARIO 1 — 78 ROOM HOTEL
We have evaluated the proposed development. We took into consideration the room
count, total floor area calculations, and parking facilities, as well as the cost of
constructing a new fire station. We have penetrated the property into the competitive
market and projected occupancy, ADR, and operating performance. The following table
summarizes the scenario:
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Ms. Kimberly Brandt
Citv ofNewport Beach
Summary of Scenario
Hotel Type:
Upscale Boutique
Keys:
78
Square Feet of Buildings:
58,500
Parking Spaces:
100
Average Daily Rate:
$220.00
Stabilized Occupancy:
76
PKF Consultine
DEVELOPMENT COST ANALYSIS
In order to derive a development cost estimate, we:
• Estimated development costs for the new improvements, including all direct
and indirect costs associated with the building; and
• Added the estimated cost of personal property (furniture, fixtures, and
equipment) and soft costs that may be included in the total property value,
including working capital, and pre- opening marketing expenses.
Direct and Indirect Costs
A development cost estimate was formulated utilizing Marshall & Swift Valuation
Services, a comprehensive cost model. The development cost for the improvements is
supported by comparable property development budgets and actual construction costs, as
presented in the following section. The cost estimate includes all hard and soft
construction costs, including:
• Development of structural improvements;
• Average architects' and engineers' fees, including plans, building permits, and
surveys to establish building lines and grades;
• Normal interest on building funds during periods of construction and associated
processing fees or service charges;
• Sales taxes on materials;
• Normal site preparation, including excavation for foundation and backfill;
• Utilities from the structure to lot -line figured for typical setback;
• Contractors' overhead and profit, including job supervision, workers' compen-
sation, fire and liability insurance, and unemployment insurance; and
• Developer Fee.
Page 114
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Ms. Kimberly Brandt
Citv ofNewport Beach
Building Improvements
Building improvements include all structural improvements, site improvements such as
landscaping, and level of construction quality and facilities. This value of the improve-
ments also takes into account a sprinkler system throughout the project, as well as the
construction type and mechanical systems. Based on a Class D Excellent construction
building, as defined by Marshall and Swift, this cost is estimated at $212.67 per square
foot. We used a square footage of 58,500 square feet per the redevelopment assumptions
provided by the City. We used a basis of $2,000 per space for surface parking.
Personal Property
Personal property, more commonly known as furniture, fixtures, and equipment (FF &E), is
a critical component in the operation of a hotel, and is commonly sold with the building.
FF &E includes the hotel's guest room and public area furnishings, kitchen equipment and
service /maintenance equipment, and other machinery. The subject hotel will be an
upscale hotel. We used a basis of $35,000 per room for FF &E.
Indirect Costs
In addition to the foregoing direct costs, there are indirect costs associated with the
development of a hotel. Typical indirect costs include legal, title and escrow fees, real
estate taxes, financing costs, and working capital.
Legal, title, and escrow fees represent the costs in each of these areas to complete
the development of the property. We have estimated these costs at approximately
$5,000 per room.
Real estate taxes represent the amount of property tax associated with the land and
improvements of the project incurred during the development period, estimated to
be eighteen months. After opening, the property tax would be assessed on the full
value of the land, personal property and improvements. We have estimated these
costs at approximately 1.12 percent of total direct cost.
Contingency Fees represent the costs associated with having a reserve in the case
of unexpected cost overruns, delays, or damages to the on -going construction
process. We have estimated these costs at approximately 5.0 percent of total direct
cost.
Pre - opening and working capital costs include pre- opening marketing, training and
administrative expenditures as well as a working capital reserve to maintain
adequate cash flow until the hotel achieves a break -even point. Also included in
this category are the costs of operating supplies to properly outfit the hotel. We
have estimated these costs at approximately $5,000 per room.
Page Its
77
Ms. Kimberly Brandt
Citv ofNewport Beach
Financing costs represent the costs associated with obtaining construction and
permanent financing for the subject. This cost is primarily composed of "points"
associated with these loans. We have estimated financing costs at 2.5 percent of
total financed amount based on a 60.0 percent loan to value ratio of total
development costs.
Developer Fee represents the cost associated with compensation to the developer
for time and risk involved to develop the project. We have estimated developer fee
at 5.0 percent of direct costs.
Conclusion of Development Costs
Based on the above analysis, the total development costs are estimated to be as follows:
Newport Beach Hotel - 78 Rooms
Development Cost estimate
Direct Costs
Building Improvements and Site Improvements $12,813,911
Personal Property (FF &E) 2,730,000
Total Direct Costs 15,543,911
Indirect Costs
Legal, Title, and Escrow Fees 390,000
Real Estate Taxes 348,184
Contingency Fees 777,000
Pre - Opening Expenses and Working Capital 390,000
Developer Fee (5% OF Direct Costs) 777,196
Total Indirect Costs 2,682,379
Total Development Cost before Financing
18,226,291
Financing Costs
262,000
Total Direct and Indirect Costs with Financing
18,488,291
Round to
$18,500,000
Source: PKF Consulting
$18,500,000
The following table summarizes the development cost estimate:
Summary
of Development Cost
Hotel Type:
Upscale Boutique
Keys:
78
Square Feet:
58,500
Development:
$18,500,000
Per Key:
$237,200
PKF Consulting and Marshall Valuation
In order to test the reasonableness of this cost estimate, the following table presents actual
development cost budgets for four full service hotels, including only hard and soft costs,
but not land value. While these budgets were for actual projects, they may not have all
been constructed for various reasons.
Page 116
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Ms. Kimberly Brandt
Citv ofNewport Beach
and Indirect Costs, not
1
Proposed
Hotel Carlsbad
Jul -06
75
$21,600,150
$288,002
2
Proposed
Hotel San Diego
Jan -07
250
90,000,000
360,000
3
Proposed
Hotel Carlsbad
Feb -06
250
55,566,000
222,264
4
Proposed
Hotel Palm Springs
Oct -06
200
54,525,648
272,628
Note that the lodging facilities present a range in quality and service relative to the
subject's upscale boutique property.
This development estimate is designed to present reasonable cost assumptions for an
upscale boutique hotel property in the City of Newport Beach. Based on current
positioning of comparable lodging facilities within similar markets in Southern California,
and the projected similar quality level of a proposed lodging facility for the subject site,
we find that the development cost estimate is reasonable.
VALUATION OF HOTEL
The next step is to develop an estimate of value of the hotel. A common technique often
used in estimating value by the Income Capitalization Approach is the discounted cash
flow method (DCF). In the DCF, the value of a property is the present value of the net
operating income of the property in each year of a holding period (here assumed to be ten
years) and the value of the property when sold at the end of the holding period (the
reversion). The present value of these elements is obtained by applying a market - derived
discount rate. The value of the reversion is obtained through the capitalization of the
adjusted income in the eleventh year, which should be a normalized or typical year, with
a deduction for the costs of sale. The cash flow projection over the holding period is
based on the stabilized year estimate, adjusted to reflect such factors as change in room
rates, occupancy, inflation, and the fixed and variable components of each revenue and
expense item.
The subject has been valued based on an opening date of January 1, 2015. The valuation
period consists of ten full calendar years. Our projections of revenues and expenses are
based on a review of comparable property financials, presented in the addenda.
Hotel Value Conclusion
For the purposes of our analysis, we have used a going in capitalization rate of 8.0 percent
and a discount rate of 11.0 percent. We have considered investor survey input, published
in PKF Consulting's Hospitality Investment Survey 2012, Korpacz and RERC's Investor
Survey, First Quarter 2012 and Second Quarter 2012, respectively. These surveys present
capitalization rates. Typically, in today's investment environment, there is a 50 basis point
adjustment applied to the going -in capitalization rate to derive the terminal capitalization
rate. This accounts for the 10 -year holding period.
Page 117
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Ms. Kimberly Brandt
Citv ofNewport Beach
The following table presents the 10 -year stream of net operating income (NO]), as well as
the reversion of the property at the end of year 10. Based on the resulting calculations, we
have derived a prospective market value of the proposed subject, as presented in the table
below.
Based on a discounted cash flow analysis, our estimate of the market value of the
proposed hotel upon completion is $27,500,000. This equates to $352,600 per room.
LAND VALUE ESTIMATE
Based on our estimates of development costs and valuation of the proposed facilities, we
arrived at an estimated gross land value of $9,000,000. We then need to deduct the land
value offsets associated with the development of the public plaza and promenade.
According to the City's preliminary development budget, these costs are estimated as
follows:
Public Plaza and Promenade Development Cost Estimates
Newport Beach Hotel Scenario 1 — 78 Rooms
Valuation — Discounted Cash Flow
Option A
Option B
(nice improvements)
(nicer improvements)
Unrounded
$1,212,363
Number of
Projected
11.00%
Present
Period
Months
NO[
PV Factor
Value
2015
12
$ 1,931,000
0.900901
$1,739,640
2016
24
2,208,000
0.811622
1,792,062
2017
36
2,477,000
0.731191
1,811,161
2018
48
2,563,000
0.658731
1,688,327
2019
60
2,643,000
0.593451
1,568,492
2020
72
2,727,000
0.534641
1,457,966
2021
84
2,802,000
0.481658
1,349,607
2022
96
2,897,000
0.433926
1,257,085
2023
108
2,989,000
0.390925
1,168,474
2024
120
3,078,000
0.352184
1,084,024
Reversion
35,675,750
0.352184
12,564,445
$27,481,283
ROUNDED
$27.500.000
Based on a discounted cash flow analysis, our estimate of the market value of the
proposed hotel upon completion is $27,500,000. This equates to $352,600 per room.
LAND VALUE ESTIMATE
Based on our estimates of development costs and valuation of the proposed facilities, we
arrived at an estimated gross land value of $9,000,000. We then need to deduct the land
value offsets associated with the development of the public plaza and promenade.
According to the City's preliminary development budget, these costs are estimated as
follows:
Public Plaza and Promenade Development Cost Estimates
Option A
Option B
(nice improvements)
(nicer improvements)
Main Plaza - Newport & 32nd
$1,212,363
$2,359,743
Northern Promenade - City only (65%)
272,208
575,836
32nd Street- Newport to Lafayette
1,078,055
2,121,237
Via Malaga Plaza
371,534
773,039
Via Oporto Plaza
522,859
1,007,750
Fire Station Reconstruction Allocation
2,112,500
2,112,500
55.569.519
58.950.105
The following tables present our estimated net land value conclusions after incorporating
the above land value offsets.
Page 118
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Ms. Kimberly Brandt
Citv ofNewport Beach
Net Land Value-
OPTION A OPTION B
Hotel Value as Completed
$27,500,000
$27,500,000
Total Construction Cost
(18,500,000)
(18,500,000)
Estimated Gross Land Value
9,000,000
9,000,000
Land Value Offsets
(5,569,519)
(8,950,105)
Net Land Value
$3,430,481
$49,895
Source: PKF Consulting
GROUND RENT
The proposed hotel is to be developed on leased land from the City of Newport Beach. As
such, the City will collect annual ground lease payments from the hotel owner /operator.
We have estimated annual ground lease payments by applying an annual lease rate to the
net land value. Based on our understanding of general commercial and residential multi-
family ground leases, we have applied a 10.0 percent ground lease rate to the property.
This results in annual ground lease payments of $343,000 and $5,000, for Options A and
B, respectively.
SCENARIO 2 — 120 ROOM HOTEL
We have evaluated the proposed development. We took into consideration the room
count, total floor area calculations, and parking facilities. We have penetrated the property
into the competitive market and projected occupancy, ADR, and operating performance.
The following table summarizes the scenario:
Summary
of Scenario
Hotel Type:
Upscale Boutique
Keys:
120
Square Feet of Buildings:
90,000
Parking Spaces:
150
Average Daily Rate:
$210.00
Stabilized Occupancy:
74%
PKF Consulting
DEVELOPMENT COST ANALYSIS
In order to derive a development cost estimate, we:
• Estimated development costs for the new improvements, including all direct
and indirect costs associated with the building; and
• Added the estimated cost of personal property (furniture, fixtures, and
equipment) and soft costs that may be included in the total property value,
including working capital, and pre- opening marketing expenses.
Page 119
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Ms. Kimberly Brandt
City of Newport Beach
Direct and Indirect Costs
A development cost estimate was formulated utilizing Marshall & Swift Valuation
Services, a comprehensive cost model. The development cost for the improvements is
supported by comparable property development budgets and actual construction costs, as
presented in the following section. The cost estimate includes all hard and soft
construction costs, including:
• Development of structural improvements;
• Average architects' and engineers' fees, including plans, building permits, and
surveys to establish building lines and grades;
• Normal interest on building funds during periods of construction and associated
processing fees or service charges;
• Sales taxes on materials;
• Normal site preparation, including excavation for foundation and backfill;
• Utilities from the structure to lot -line figured for typical setback;
• Contractors' overhead and profit, including job supervision, workers' compen-
sation, fire and liability insurance, and unemployment insurance; and
• Developer Fee.
Building Improvements
Building improvements include all structural improvements, site improvements such as
landscaping, and level of construction quality and facilities. This value of the improve-
ments also takes into account a sprinkler system throughout the project, as well as the
construction type and mechanical systems. Based on a Class C Excellent construction
building, as defined by Marshall and Swift, this cost is estimated at $226.70 per square
foot. We used a square footage of 90,000 square feet per the redevelopment assumptions
provided by the City. We used a basis of $2,000 per space for surface parking.
Personal Property
Personal property, more commonly known as furniture, fixtures, and equipment (FF &E), is
a critical component in the operation of a hotel, and is commonly sold with the building.
FF &E includes the hotel's guest room and public area furnishings, kitchen equipment and
service /maintenance equipment, and other machinery. The subject hotel will be an
upscale hotel. We used a basis of $35,000 per room for FF &E.
Indirect Costs
In addition to the foregoing direct costs, there are indirect costs associated with the
development of a hotel. Typical indirect costs include legal, title and escrow fees, real
estate taxes, financing costs, and working capital.
Page 120
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Ms. Kimberly Brandt
Citv ofNewport Beach
Legal, title, and escrow fees represent the costs in each of these areas to complete
the development of the property. We have estimated these costs at approximately
$5,000 per room.
Real estate taxes represent the amount of property tax associated with the land and
improvements of the project incurred during the development period, estimated to
be eighteen months. After opening, the property tax would be assessed on the full
value of the land, personal property and improvements. We have estimated these
costs at approximately 1.12 percent of total direct cost.
Contingency Fees represent the costs associated with having a reserve in the case
of unexpected cost overruns, delays, or damages to the on -going construction
process. We have estimated these costs at approximately 5.0 percent of total direct
cost.
Pre - opening and working capital costs include pre- opening marketing, training and
administrative expenditures as well as a working capital reserve to maintain
adequate cash flow until the hotel achieves a break -even point. Also included in
this category are the costs of operating supplies to properly outfit the hotel. We
have estimated these costs at approximately $5,000 per room.
Financing costs represent the costs associated with obtaining construction and
permanent financing for the subject. This cost is primarily composed of "points"
associated with these loans. We have estimated financing costs at 2.5 percent of
total financed amount based on a 60.0 percent loan to value ratio of total
development costs.
Developer Fee represents the cost associated with compensation to the developer
for time and risk involved to develop the project. We have estimated developer fee
at 5.0 percent of direct costs.
Conclusion of Development Costs
Based on the above analysis, the total development costs are estimated to be as follows:
Page 121
g s�
Ms. Kimberly Brandt
Citv ofNewport Beach
Newport Beach Hotel - 120 Rooms
Development Cost Estimate
Direct Costs
Building Improvements and Site Improvements $20,875,339
Personal Property (FF &F) 4,200,000
Total Direct Costs 25,075,339
Indirect Costs
Legal, Title, and Escrow Fees 600,000
Real Estate Taxes 561,688
Contingency Fees 1,254,000
Pre - Opening Expenses and Working Capital 600,000
Developer Fee (5°/ OF Direct Costs) 1,253,767
Total Indirect Costs 4,269,455
Total Development Cost before Financing
29,344,793
Financing Costs
421,000
Total Direct and Indirect Costs with Financing
$29,765,793
Round to
$29,800,000
Source: PKF Consulting
Per Key:
The following table summarizes the development cost estimate:
Summary of Development Cost
Hotel Type:
Upscale Boutique
Keys:
120
Square Feet:
90,000
Development:
$29,800,000
Per Key:
$248,300
PKF Consulting
and Marshall Valuation
VALUATION OF HOTEL
The next step is to develop an estimate of value of the hotel. A common technique often
used in estimating value by the Income Capitalization Approach is the discounted cash
flow method (DCF). In the DCF, the value of a property is the present value of the net
operating income of the property in each year of a holding period (here assumed to be ten
years) and the value of the property when sold at the end of the holding period (the
reversion). The present value of these elements is obtained by applying a market - derived
discount rate. The value of the reversion is obtained through the capitalization of the
adjusted income in the eleventh year, which should be a normalized or typical year, with
a deduction for the costs of sale. The cash flow projection over the holding period is
based on the stabilized year estimate, adjusted to reflect such factors as change in room
rates, occupancy, inflation, and the fixed and variable components of each revenue and
expense item.
The subject has been valued based on an opening date of January 1, 2015. The valuation
period consists of ten full calendar years. Our projections of revenues and expenses are
based on a review of comparable property financials, presented in the addenda.
Page 122
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Ms. Kimberly Brandt
Citv ofNewport Beach
Hotel Value Conclusion
For the purposes of our analysis, we have used a terminal capitalization rate of 8.0 percent
and a discount rate of 11.0 percent. We have considered investor survey input, published
in PKF Consulting's Hospitality Investment Survey 2012, Korpacz and RERC's Investor
Survey, First Quarter 2012 and Second Quarter 2012, respectively. These surveys present
capitalization rates. Typically, in today's investment environment, there is a 50 basis point
adjustment applied to the going -in capitalization rate to derive the terminal capitalization
rate. This accounts for the 10 -year holding period.
The following table presents the 10 -year stream of net operating income (NO]), as well as
the reversion of the property at the end of year 10. Based on the resulting calculations, we
have derived a prospective market value of the proposed subject, as presented in the table
below.
Newport Beach Hotel Scenario 2 — 120 Rooms
Valuation — Discounted Cash Flow
Period
Number of
Months
Projected
NOI
11.00%
PV Factor
Present
Value
2015
12
$ 2,813,000
0.900901
$2,534,234
2016
24
3,199,000
0.811622
2,596,380
2017
36
3,716,000
0.731191
2,717,107
2018
48
3,852,000
0.658731
2,537,432
2019
60
3,956,000
0.593451
2,347,693
2020
72
4,086,000
0.534641
2,184,542
2021
84
4,213,000
0.481658
2,029,227
2022
96
4,338,000
0.433926
1,882,373
2023
108
4,488,000
0.390925
1,754,470
2024
120
4,605,000
0.352184
1,621,810
Reversion
53,190,000
0.352184
18,732,692
$40,937;962
ROUNDED
$40,900,000
Based on a discounted cash flow analysis, our estimate of the market value of the
proposed hotel upon completion is $40,900,000. This equates to $340,800 per room.
LAND VALUE ESTIMATE
Based on our estimates of development costs and valuation of the proposed facilities, we
arrived at an estimated gross land value of $11,100,000. We then need to deduct the land
value offsets associated with the development of the public plaza and promenade.
According to the City's preliminary development budget, these costs are estimated as
follows:
Page 123
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Ms. Kimberly Brandt
Citv ofNewport Beach
The following tables present our estimated net land value conclusions after incorporating
the above land value offsets.
Net Land Value
(nice improvements)
(nicer improvements)
Main Plaza - Newport & 32nd
$1,212,363
$2,359,743
Northern Promenade - City only (65%)
272,208
575,836
32nd Street- Newport to Lafayette
1,078,055
2,121,237
Via Malaga Plaza
371,534
773,039
Via Oporto Plaza
522,859
1,007,750
Fire Station Reconstruction Allocation
2,112,500
2,112,500
$5.569.519
$8.950.105
The following tables present our estimated net land value conclusions after incorporating
the above land value offsets.
Net Land Value
GROUND RENT
The proposed hotel is to be developed on leased land from the City of Newport Beach. As
such, the City will collect annual ground lease payments from the hotel owner /operator.
We have estimated annual ground lease payments by applying an annual lease rate to the
net land value. Based on our understanding of general commercial and residential multi-
family ground leases, we have applied a 10.0 percent ground lease rate to the property.
This results in annual ground lease payments of $553,000 and $215,000, for Options A
and B, respectively.
We thank you for the opportunity to conduct this study and look forward to discussing our
findings with you.
Sincerely,
PKF Consulting USA
Bruce Baltin
Senior Vice President
Page 124
20
OPTION A
OPTION B
Hotel Value as Completed
$40,900,000
$40,900,000
Total Construction Cost
(29,800,000)
(29,800,000)
Estimated Gross Land Value
11,100,000
11,100,000
Land Value Offsets
(5,569,519)
(8,950,105)
Net Land Value
$5,530,481
$2,149,895
Source: PKF Consulting
GROUND RENT
The proposed hotel is to be developed on leased land from the City of Newport Beach. As
such, the City will collect annual ground lease payments from the hotel owner /operator.
We have estimated annual ground lease payments by applying an annual lease rate to the
net land value. Based on our understanding of general commercial and residential multi-
family ground leases, we have applied a 10.0 percent ground lease rate to the property.
This results in annual ground lease payments of $553,000 and $215,000, for Options A
and B, respectively.
We thank you for the opportunity to conduct this study and look forward to discussing our
findings with you.
Sincerely,
PKF Consulting USA
Bruce Baltin
Senior Vice President
Page 124
20
mT"
A. STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS
B. COMPARABLE HOTEL FINANCIALS
C
Addendum A
Statement of Assumptions and Limiting Conditions
ILI
STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS
This report is made with the following assumptions and limiting conditions.
Economic and Social Trends - The consultant assumes no responsibility for economic, physical or demographic factors
which may affect or alter the opinions in this report if said economic, physical or demographic factors were not present as
of the date of the letter of transmittal accompanying this report. The consultant is not obligated to predict future political,
economic or social trends.
Information Furnished by Others - In preparing this report, the consultant was required to rely on information furnished
by other individuals or found in previously existing records and /or documents. Unless otherwise indicated, such
information is presumed to be reliable. However, no warranty, either express or implied, is given by the consultant for
the accuracy of such information and the consultant assumes no responsibility for information relied upon later found to
have been inaccurate. The consultant reserves the right to make such adjustments to the analyses, opinions and
conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may
become available.
Hidden Conditions - The consultant assumes no responsibility for hidden or unapparent conditions of the property,
subsoil, ground water or structures that render the subject property more or less valuable. No responsibility is assumed
for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or
unapparent conditions.
Hazardous Materials - The consultant has not been provided any information regarding the presence of any material or
substance on or in any portion of the subject property or improvements thereon, which material or substance possesses or
may possess toxic, hazardous and /or other harmful and/or dangerous characteristics. Unless otherwise stated in the
report, the consultant did not become aware of the presence of any such material or substance during the consultant's
inspection of the subject property. However, the consultant is not qualified to investigate or test for the presence of such
materials or substances. The presence of such materials or substances may adversely affect the value of the subject
property. The value estimated in this report is predicated on the assumption that no such material or substance is present
on or in the subject property or in such proximity thereto that it would cause a loss in value. The consultant assumes no
responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or
engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this
report assumes the subject property is in compliance with all federal, state and local environmental laws, regulations and
rules.
Zoning and Land Use - Unless otherwise stated, the projections were formulated assuming the hotel to be in full
compliance with all applicable zoning and land use regulations and restrictions.
Licenses and Permits - Unless otherwise stated, the property is assumed to have all required licenses, permits, certificates,
consents or other legislative and /or administrative authority from any local, state or national government or private entity
or organization have been or can be obtained or renewed for any use on which the value estimate contained in this
report is based.
Engineering Survey - No engineering survey has been made by the consultant. Except as specifically stated, data relative
to size and area of the subject property was taken from sources considered reliable and no encroachment of the subject
property is considered to exist.
Subsurface Rights - No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the
property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated.
Maps, Plats and Exhibits - Maps, plats and exhibits included in this report are for illustration only to serve as an aid in
visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other
purpose, nor should they be removed from, reproduced or used apart from the report.
Legal Matters - No opinion is intended to be expressed for matters which require legal expertise or specialized
investigation or knowledge beyond that customarily employed by real estate consultants.
Right of Publication - Possession of this report, or a copy of it, does not carry with it the right of publication. Without the
written consent of the consultant, this report may not be used for any purpose by any person other than the party to
whom it is addressed. In any event, this report may be used only with proper written qualification and only in its entirety
for its stated purpose.
r •
STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS
(continued)
Testimony in Court - Testimony or attendance in court or at any other hearing is not required by reason of
rendering this report, unless such arrangements are made a reasonable time in advance of said hearing. Further, unless
otherwise indicated, separate arrangements shall be made concerning compensation for the consultant's time to prepare
for and attend any such hearing.
Archeological Significance - No investigation has been made by the consultant and no information has been
provided to the consultant regarding potential archeological significance of the subject property or any portion thereof.
This report assumes no portion of the subject property has archeological significance.
Compliance with the American Disabilities Act - The Americans with Disabilities Act ( "ADA ") became
effective January 26, 1992. We assumed that the property will be in direct compliance with the various detailed
requirements of the ADA.
Definitions and Assumptions - The definitions and assumptions upon which our analyses, opinions and
conclusions are based are set forth in appropriate sections of this report and are to be part of these general assumptions as
if included here in their entirety.
Dissemination of Material - Neither all nor any part of the contents of this report shall be disseminated to the
general public through advertising or sales media, public relations media, news media or other public means of
communication without the prior written consent and approval of the consultant(s).
Distribution and Liability to Third Parties - The parry for whom this report was prepared may distribute
copies of this report only in its entirety to such third parties as may be selected by the party for whom this report was
prepared; however, portions of this report shall not be given to third parties without our written consent. Liability to third
parties will not be accepted.
Use in Offering Materials - This report, including all cash flow forecasts, market surveys and related data,
conclusions, exhibits and supporting documentation, may not be reproduced or references made to the report or to PKF
Consulting in any sale offering, prospectus, public or private placement memorandum, proxy statement or other
document ( "Offering Material ") in connection with a merger, liquidation or other corporate transaction unless PKF
Consulting has approved in writing the text of any such reference or reproduction prior to the distribution and filing
thereof.
Limits to Liability - PKF Consulting cannot be held liable in any cause of action resulting in litigation for any dollar
amount which exceeds the total fees collected from this individual engagement.
Legal Expenses - Any legal expenses incurred in defending or representing ourselves concerning this assignment will
be the responsibility of the client.
Addendum B
Scenario 1(78- Rooms)
Representative Year Operating Statement
and 10 -Year Projected Operating Results
91
Proposed Newport Beach Hotel (78)
Representative Year of Operation
Number of Units:
Number of Annual Rooms Available:
Number of Rooms Occupied:
Annual Occupancy:
Average Daily Rate:
Revenue Per Available Room:
Revenues
Rooms
Food & Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
Stated in 2012 Dollars
9.3%
1,168,000
78
14,974
53.98
Rooms
28,470
234,000
1,435,000
78.0%
21,637
66.32
Other Operated Departments
1,795
76.0%
55.1%
2,295
8.27
$220.00
2,782,000
39.9%
35,667
$167.20
0001
3.6%
Amount
Ratio
Per Room
P.O.R.
$4,760,000
68.2%
$61,026
$219.99
1,839,000
26.4%
23,577
84.99
325,000
4.7%
4,167
15.02
54,000
0.8%
692
2.50
6,978,000
100.0%
89,462
322.50
Departmental Expenses
enses
9.3%
1,168,000
24.5%
14,974
53.98
Rooms
Food & Beverage
234,000
1,435,000
78.0%
18,397
66.32
Other Operated Departments
1,795
179,000
55.1%
2,295
8.27
Total Departmental Expenses
2,782,000
39.9%
35,667
128,57
Departmental Profit 1 4,196,000 1 60.1% 1 53,795 1 193.93
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating g Ex enses
647,000
9.3%
8,295
29.90
296,000
4.2%
3,795
13.68
234,000
3.4%
3,000
10.81
140,000
2.0%
1,795
6.47
1,317,000
18.9%
16,885
60.87
Gross Operating Profit
1 2,879,000 1
41.3% 1
36,910
133.06
Property Taxes
226,000
3.2 %
Base Management Fee
1 209,0001
3.0% 1
2,679
9.66
Fixed Expenses
Property Taxes
226,000
3.2 %
2,897
10.44
Insurance
23,000
295
1.06
Total Fixed Expenses
0001
3.6%
1 3,192
11.51
Net Operating Income Before Reserve 1 2,421,000 1 34.7% 1 31,038 111.89
FF &E Reserve 1 279,0001 4.0% 1 3,577 12.89
Net Operating Income After Reserve 1 $2,142,000 1 30.7% 1 $27,462 $99.00
Source: PKF Consulting USA
92
Proposed Newport Beach Hotel (78)
Projected Operating Results
Calendar Years
Number of Units:
Number of Annual Rooms Available:
Number of Rooms Occupied:
Annual Occupancy:
Average Daily Rate:
Revenue Per Available Room:
Revenues
Rooms
Food & Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
2015
78
28,470
28,470
76.0%
19,360
$205.96
68.0%
Ratio
$240.00
68.2%
$163.20
26.3%
Amount
Ratio
$4,646,000
68.2%
1,798,000
26.4%
317,000
4.7%
53,000
0.8%
6,814,000
100.0%
2016
78
28,470
20,500
72.0%
$248.00
$178.56
Amount Ratio
$5,084,000 68.3%
1,961,000 26.3%
346,000 4.6%
58,000 0.8%
7,449,000 100.0%
2017
78
28,470
28,470
76.0%
21,640
$205.96
76.0%
Ratio
$255.00
68.2%
$193.80
26.3%
Amount
Ratio
$5,518,000
68.2%
2,132,000
26.4%
376,000
4.6%
63 000
0.81.
8,089,000
100.0%
2018
78
28,470
28,470
76.0%
21,640
$205.96
76.0%
Ratio
$263.00
68.2%
$199.88
26.3%
Amount
Ratio
$5,691,000
68.2%
2,196,000
26.3%
388,000
4.7%
65 000
0.8%
8,340,000
100.0%
Departmental Expenses
Rooms 1,210,000 26.0% 1,280,000 25.2% 1,355,000 24.6% 1,395,000 24.5%
Food & Beverage 1,469,000 81.7% 1,564,000 79.8% 1,663,000 78.0% 1,713,000 78.0%
Other Operated Departments 175,000 55.2% 190,000 54.9% 207,000 55.1% 213,000 54.9%
Total Departmental Expenses 2,854,000 41.9% 3,034,000 40.7% 3,225,000 39.9% 3,321,000 39.8%
2019
78
28,470
21,640
76.0%
$271.00
$205.96
Amount
Ratio
$5,864,000
68.2%
2,262,000
26.3%
399,000
4.6%
67,000
0.8%
8,592,000
100.0%
1,437,000
24.5%
1,764,000
78.0%
220,000
55.1%
3,421000
39.8 °A
Departmental Profit 3,960,000 58.1% 4,415,000 59.3% 4,864000 60.1% 5,019000 1 60.2% 1 5,171000 1 60.2%
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating Expenses
GrossOperating Profit 2,537,000 37.2% 2,940,000 39.5% 3,336000 41.2% 3,446000 1 41.3% 1 3,550000 1 41.3%
Base Management Fee 204,000 3.0% 223,000 3.0% 243,000 3.0% 250,000 3.0% 258,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
0,000
0
4,000
L
81.
6,000
3.8 %
3,000
22%
3,000
20.9%
GrossOperating Profit 2,537,000 37.2% 2,940,000 39.5% 3,336000 41.2% 3,446000 1 41.3% 1 3,550000 1 41.3%
Base Management Fee 204,000 3.0% 223,000 3.0% 243,000 3.0% 250,000 3.0% 258,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
720,000
9.7%
334,000
4.5%
263,000
3.5%
158,000
2.1%
1,475,000
19.8%
GrossOperating Profit 2,537,000 37.2% 2,940,000 39.5% 3,336000 41.2% 3,446000 1 41.3% 1 3,550000 1 41.3%
Base Management Fee 204,000 3.0% 223,000 3.0% 243,000 3.0% 250,000 3.0% 258,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
750,000
9.3%
344,000
4.3%
271,000
3.4%
163,000
20%
1,528,000
18.9%
GrossOperating Profit 2,537,000 37.2% 2,940,000 39.5% 3,336000 41.2% 3,446000 1 41.3% 1 3,550000 1 41.3%
Base Management Fee 204,000 3.0% 223,000 3.0% 243,000 3.0% 250,000 3.0% 258,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
772,000
9.3%
354,000
4.2%
279,000
3.3%
168,000
2.0%
1,573,000
18.9%
GrossOperating Profit 2,537,000 37.2% 2,940,000 39.5% 3,336000 41.2% 3,446000 1 41.3% 1 3,550000 1 41.3%
Base Management Fee 204,000 3.0% 223,000 3.0% 243,000 3.0% 250,000 3.0% 258,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
795,000
9.3%
365,000
4.2%
288,000
3.4%
173,000
2.0%
1,621,000
18.9%
GrossOperating Profit 2,537,000 37.2% 2,940,000 39.5% 3,336000 41.2% 3,446000 1 41.3% 1 3,550000 1 41.3%
Base Management Fee 204,000 3.0% 223,000 3.0% 243,000 3.0% 250,000 3.0% 258,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
FF &E Reserve 136,000 2.0 % 223,000 3.0 % 324,000 4.0% 334,000 4.0% 344,000 4.0%
Net Operating Income Aker Reserve $1,931,000 28.3% $2,208,000 29.6% $2,477,000 30.6% $2,563,000 30.7% $2643000 30.8%
Source: PKF Consulting USA I Full Year of Operation
93
240,000
3.5%
26,000
0.4%
266,000
3.9%
FF &E Reserve 136,000 2.0 % 223,000 3.0 % 324,000 4.0% 334,000 4.0% 344,000 4.0%
Net Operating Income Aker Reserve $1,931,000 28.3% $2,208,000 29.6% $2,477,000 30.6% $2,563,000 30.7% $2643000 30.8%
Source: PKF Consulting USA I Full Year of Operation
93
260,000
3.5%
26,000
0.3%
286,000
3.8%
FF &E Reserve 136,000 2.0 % 223,000 3.0 % 324,000 4.0% 334,000 4.0% 344,000 4.0%
Net Operating Income Aker Reserve $1,931,000 28.3% $2,208,000 29.6% $2,477,000 30.6% $2,563,000 30.7% $2643000 30.8%
Source: PKF Consulting USA I Full Year of Operation
93
265,000
3.3%
27,000
0.3%
292,000
3.6%
FF &E Reserve 136,000 2.0 % 223,000 3.0 % 324,000 4.0% 334,000 4.0% 344,000 4.0%
Net Operating Income Aker Reserve $1,931,000 28.3% $2,208,000 29.6% $2,477,000 30.6% $2,563,000 30.7% $2643000 30.8%
Source: PKF Consulting USA I Full Year of Operation
93
271,000
3.2%
28,000
0.3%
299,000
3.6%
FF &E Reserve 136,000 2.0 % 223,000 3.0 % 324,000 4.0% 334,000 4.0% 344,000 4.0%
Net Operating Income Aker Reserve $1,931,000 28.3% $2,208,000 29.6% $2,477,000 30.6% $2,563,000 30.7% $2643000 30.8%
Source: PKF Consulting USA I Full Year of Operation
93
276,000
3.2 °k
29,000
0.3%
305,000
3.5%
FF &E Reserve 136,000 2.0 % 223,000 3.0 % 324,000 4.0% 334,000 4.0% 344,000 4.0%
Net Operating Income Aker Reserve $1,931,000 28.3% $2,208,000 29.6% $2,477,000 30.6% $2,563,000 30.7% $2643000 30.8%
Source: PKF Consulting USA I Full Year of Operation
93
Proposed Newport Beach Hotel (78)
Projected Operating Results
Calendar Years
Number of Units:
Number of Annual Rooms Available:
Number of Rooms Occupied:
Annual Occupancy:
Average Daily Rate:
Revenue Per Available Room:
Revenues
Rooms
Food & Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
2020
78
28,470
28,470
76.0%
21,640
$224.96
76.0%
Ratio
$279.00
68.2%
$212.04
26.3%
Amount
Ratio
$6,038,000
68.2%
2,330,000
26.3%
411,000
4.6%
69000
0.8%
8,848,000
100.0
2021
78
28,470
28,470
76.0%
21,640
$224.96
76.0%
Ratio
$287.00
68.2%
$218.12
26.3%
Amount
Ratio
$6,211,000
68.2%
2,400,000
26.4%
424,000
4.7%
71,000
0.8%
9,106,000
100.0%
Departmental Expenses
Rooms 1,480,000 24.5% 1,525,000 24.6%
Food & Beverage 1,817,000 78.0% 1,872,000 78.0%
Other Operated Departments 226,000 55.0% 233,000 55.0%
Total Departmental Expenses 3523,000 39.8% 3,630,000 39.9%
2022
78
28,470
21,640
76.0%
$296.00
$224.96
Amount
Ratio
$6,405,000
68.2%
2,472,000
26.3%
436,000
4.6%
73,000
0.8%
9,386,000
100.0%
449,000
4.6%
75,000
0.8%
1,570,000
24.5%
1,928,000
78.0%
240,000
55.0%
3,738,000
39.8
Departmental Profit 5,325,000 60.2% 5,476,000 60.1% 5,648,000 1 60.2%
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating Expenses
2023
78
819,000
9.3%
375,000
4.2%
296,000
3.31
178,000
2.0%
1,668,000
18.91
2023
78
844,000
9.3%
387,000
4.2%
305,000
3.3%
783,000
2.0%
1,719,000
18.9%
2023
78
869,000
9.3%
398,000
4.2%
314,000
3.3%
189,000
2.0%
1,770,000
18.9%
2023
78
1,617,000
28,470
1,986,000
21,640
247,000
76.0%
3,850,000
$305.00
1,823,000
$131.80
5,820,000
Amount
Ratio
$6,600,000
68.3%
2,546,000
26.3%
449,000
4.6%
75,000
0.8%
9,670,000
100.0%
2024
78
1,617,000
24.5%
1,986,000
78.0%
247,000
55.0%
3,850,000
39.8%
1,823,000
18.9
5,820,000
60.2
2024
78
895,000
9.3%
410,000
4.2%
324,000
3.4%
194,000
2.0%
1,823,000
18.9
2024
78
28,470
21,640
76.0%
$314.00
$238.64
Amount
Ratio
$6,795,000
68.2%
2,623,000
26.3%
463,000
4.6%
77,000
0.8%
9,958,000
100.0%
66,000
24.5%
45,000
L
78.0%
55,000
j66
55,1%
000
39.8%
5992,000 1 60.2%
GrossOperating Profit 3,657,000 41.3% 3,757,000 41.3% 3,878,000 47.3% 3,997,000 1 41.3% 1 4,113,000 1 41.3%
Base Management Fee 265,000 3.M/. 273,000 3.0% 282,000 3.0%1 290,000 3.0% 299,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
922,000
9.3%
423,000
4.2%
334,000
3.4%
200,000
2.0%
1,879,000
18.9%
GrossOperating Profit 3,657,000 41.3% 3,757,000 41.3% 3,878,000 47.3% 3,997,000 1 41.3% 1 4,113,000 1 41.3%
Base Management Fee 265,000 3.M/. 273,000 3.0% 282,000 3.0%1 290,000 3.0% 299,000 3.0%
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
3166,000 34.8%
FF &E Reserve 354,000 4.0% 364,000 4.0
Net Operating Income Aker Reserve $2,727,000 30.8% $2,802,000 30.8%
Source: PKF Consulting USA
281,000
3.2%
30,000
0.3%
311,000
3.5%
3166,000 34.8%
FF &E Reserve 354,000 4.0% 364,000 4.0
Net Operating Income Aker Reserve $2,727,000 30.8% $2,802,000 30.8%
Source: PKF Consulting USA
287,000
3.2%
31,000
0.3%
318,000
3.5%
3166,000 34.8%
FF &E Reserve 354,000 4.0% 364,000 4.0
Net Operating Income Aker Reserve $2,727,000 30.8% $2,802,000 30.8%
Source: PKF Consulting USA
3,272,000 34.9%
375,000 1 4.0
$2,897,000 1 30.9%
293,000
3.1%
31,000
0.3%
324,000
1 3.5%
3,272,000 34.9%
375,000 1 4.0
$2,897,000 1 30.9%
3,376000 1 34.9%
387,000 4.0
$2,989,000 1 30.9%
299,000
3.1%
32,000
0.3%
331,000
3.4%
3,376000 1 34.9%
387,000 4.0
$2,989,000 1 30.9%
3 476 000 34.9%
398,000 1 4.0%
$3078,000 1 30.9%
94
F305,000
3.1 %
33,000
0.3%
338,000
3.4 %
3 476 000 34.9%
398,000 1 4.0%
$3078,000 1 30.9%
94
Addendum C
Scenario 2 (120- Rooms)
Representative Year Operating Statement
and 10 -Year Projected Operating Results
9,5
Proposed Newport Beach Hotel (120)
Representative Year of Operation
Number of Units:
Number of Annual Rooms Available:
Number of Rooms Occupied:
Annual Occupancy:
Average Daily Rate:
Revenues
Rooms
Food & Beverage
Other Operated Departments
Total Revenues
Departmental Expenses
Rooms
Food & Beverage
Other Operated Departments
Total Departmental Expenses
Departmental Profit
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Gross Operating Profit
Base Management Fee
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
Net operating Income Before Reserve
FF &E Reserve
Net Operating Income After Reserve
Source: PKF Consulting USA
Stated in
2012
13,775
Dollars
E24.3%
120
16,008
59.27
312,000
43,800
1,942
7.19
186,000
32,412
31,725
117.46
1,756,000
74.0%
14,633
54.18
$210.00
$155.40
Per
Amount
Ratio
I
Room
P.O.R.
$6,807,000
69.3%
$56,725
$210.01
2,463,000
25.1%
20,525
75.99
486,000
4.9%
4,050
14.99
9,824,000
100.0%
81,867
303.10
6,017,000 612% 1 50,142 1 185.64
868,000
8.8%
13,775
51.00
E24.3%
78.0%
16,008
59.27
312,000
47.9%
1,942
7.19
186,000
38.8%
31,725
117.46
6,017,000 612% 1 50,142 1 185.64
868,000
8.8%
7,233
26.78
390,000
4.0%
3,250
12.03
312,000
3.2%
2,600
9.63
186,000
1.9%
1,550
5.74
1,756,000
17.9%
14,633
54.18
4,261,000 1 43.4% 1 35,508 131.46
295,000 1 3.0% 1 2,458 1 9.10
317,000
34,000
351,000
3.2%
0.3%
2,642
283
9.78
1.05
3.6%
2,925
10.83
3,615,000 1 36.8% 1 30,125 1 111.53
393,000 1 4.0% 1 3,275 12.13
$3,222,000 1 32.8% 1 $26,850 $99.41
Proposed Newport Beach Hotel (120)
Projected Operating Results
Calendar Years
Number of Units:
Number of Annual Rooms Available:
Number of Rooms Occupied:
Annual Occupancy:
Average Daily Rate:
Revenues
Rooms
Food & Beverage
Other Operated Departments
Total Revenues
Departmental Expenses
Rooms
Food & Beverage
Other Operated Departments
Total Departmental Expenses
Departmental Profit
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
2015
120
1,696,000
43,800
1,946,000
28,470
224,000
65.0%
3,866,000
$229.00
$148.85
74.0%
Amount
Ratio
$6,520,000
69.2%
2,364,000
25.1%
467,000
5.0%
9,416,000
100.0%
2016
120
1,696,000
26.0%
1,946,000
82.3%
224,000
48.0%
3,866,000
41.1%
2016
120
426,000
43,800
341,000
30,220
43,800
69.0%
43,
$236.00
$162.84
74.0%
Amount
Ratio
$7,132,000
69.3%
2,585,000
25.1%
510,000
5.0%
10,298,000
100.0%
2017
9.8%
426,000
120
341,000
3.6%
43,800
2.2%
43,
32,410
32,
74.0%
74
$243.00
$25'
$179.82
$18:
Amount
Ratio
Amoun
$7,876,000
69.2%
$8,135,
2,855,000
25.1%
2,941,
564,000
5.0%
580,
11,374,000
100.0%
1 11,737,
1,798,000 25.2% 1,916,000 24.3% 1,974,
2,075,000 80.3% 2,227,000 78.0% 2,294,
245,000 48.0% 271,000 48.0% 279,
4,118,000 40.0% 4,414,000 38.8% 4,547,
5,550,000 58.9% 1 6,180,000 60.0% 6,960,000 61.2% 7,190,
923,000
9.8%
426,000
4.5%
341,000
3.6%
203,000
2.2%
1,893,000
20.1%
Gross Operating Profit 1 3,657,000 38.8%
Base Management Fee 1 282,000 3.0%
962,000
9.3%
439,000
4.3%
351,000
3.4%
209,000
2.0%
1,961,000
19.0%
1,007,000
8.9%
452,000
4.0%
362,000
3.2%
216,000
1.9%
2,037,000
17.9%
1,037,
466,
373,
222,
2,098,
4,219,000 41.0 % 4,923,000 43.3% 5,092,
309,000 3.0% 1 1 341,000 3.0% 352,
M
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
379,
40,
419,
Net Operating Income Before Reserve 3,001,000 31.9 °% 3,508,000 34.1% 4,171,000 36.7% 4,321,
FF &E Reserve 188,000 2.0% 309,000 3.0% 455,000 4.0% 469,
Net operating Income After Reserve $2,813,000 29.9% $3,199,000 31.1% $3,716,000 32.7%
Source: PKF Consulting USA Full Year of Operation
NO
337,000
3.6%
37,000
0.4%
374,000
4.0%
379,
40,
419,
Net Operating Income Before Reserve 3,001,000 31.9 °% 3,508,000 34.1% 4,171,000 36.7% 4,321,
FF &E Reserve 188,000 2.0% 309,000 3.0% 455,000 4.0% 469,
Net operating Income After Reserve $2,813,000 29.9% $3,199,000 31.1% $3,716,000 32.7%
Source: PKF Consulting USA Full Year of Operation
NO
364,000
3.5%
38,000
0.4%
402,000
3.9%
379,
40,
419,
Net Operating Income Before Reserve 3,001,000 31.9 °% 3,508,000 34.1% 4,171,000 36.7% 4,321,
FF &E Reserve 188,000 2.0% 309,000 3.0% 455,000 4.0% 469,
Net operating Income After Reserve $2,813,000 29.9% $3,199,000 31.1% $3,716,000 32.7%
Source: PKF Consulting USA Full Year of Operation
NO
372,000
3.3%
39,000
0.3%
411,000
3.6%
379,
40,
419,
Net Operating Income Before Reserve 3,001,000 31.9 °% 3,508,000 34.1% 4,171,000 36.7% 4,321,
FF &E Reserve 188,000 2.0% 309,000 3.0% 455,000 4.0% 469,
Net operating Income After Reserve $2,813,000 29.9% $3,199,000 31.1% $3,716,000 32.7%
Source: PKF Consulting USA Full Year of Operation
NO
Proposed Newport Beach Hotel (120)
Projected Operating Results
Calendar Years
Number of Units:
Number of Annual Rooms Available:
Number of Rooms Occupied:
Annual Occupancy:
Average Daily Rate:
Revenues
Rooms
Food & Beverage
Other Operated Departments
Total Revenues
Departmental Expenses
Rooms
Food & Beverage
Other Operated Departments
Total Departmental Expenses
Departmental Profit
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
2020
120
2,094,000
43,800
2,434,000
32,410
296,000
74.0%
4,824,000
$266.00
$196.84
Amount
Ratio
$8,621,000
69.3%
3,120,000
25.1%
616,000
5.0%
12,443,000
100.0%
7,619,000 1 61.2%
1,100,000
8.8%
2,094,000
24.3%
2,434,000
78.0%
296,000
48.1%
4,824,000
38.8%
7,619,000 1 61.2%
1,100,000
8.8%
494,000
4.0%
395,000
3.2%
236,000
1.9%
2,225,000
17.9%
Gross Operating Profit 1 5,394,000 1 43.3%
Base Management Fee 1 373,000 1
2021
120
2,157,000
43,800
2,507,000
32,410
304,000
74.0%
4,968,000
$274.00
$202.76
Amount
Ratio
$8,880,000
69.3%
3,214,000
25.1%
634,000
4.9%
12,817,000
100.0%
7,849,000 1 61.2%
1,133,000
8.8%
2,157,000
24.3%
2,507,000
78.0%
304,000
47.9%
4,968,000
38.8%
7,849,000 1 61.2%
1,133,000
8.8%
509,000
4.0%
407,000
3.2%
243,000
1.9%
2,292,000
17.9%
5,557,000 1 43.4%
385,000 1 3.0%
2022
120
2,221,000
43,800
2,582,000
32,410
314,000
74.0%
5,117,000
$282.00
$208.68
Amount
Ratio
$9,140,000
69.3%
3,310,000
25.1%
653,000
4.9%
13,194,000
100.0%
2,288,
2,660,.
323,
5,271,
8,077,000 61.2% 8,337,
1,167,000
8.8%
2,221,000
24.3%
2,582,000
78.0%
314,000
48.1%
5,117,000
38.8%
2,288,
2,660,.
323,
5,271,
8,077,000 61.2% 8,337,
1,167,000
8.8%
524,000
4.0%
419,000
3.2%
250,000
1.9%
2,360,000
17.9%
5,717,000 1 43.3%
396,000 3.09/6
• I
1,202,.
540,
432,
257,
2,431,
5,906,
408,
Fixed Expenses
Property Taxes
Insurance
Total Fixed Expenses
Net Operating Income Before Reserve 4,584,000 36.8% 4,726,000 36.9% 4,866,000 36.9%
FF &E Reserve 498,000 4.0% 513,000 4.0% 528,000 4.0%
Net operating Income After Reserve $4,086,000 32.8% $4,213,000 32.9% $4,338,000 32.9%
Source: PKF Consulting USA
100
E 419,.
47,
466,
394,000
3.2%
43,000
0.3%
437,000
3.5%
Net Operating Income Before Reserve 4,584,000 36.8% 4,726,000 36.9% 4,866,000 36.9%
FF &E Reserve 498,000 4.0% 513,000 4.0% 528,000 4.0%
Net operating Income After Reserve $4,086,000 32.8% $4,213,000 32.9% $4,338,000 32.9%
Source: PKF Consulting USA
100
E 419,.
47,
466,
402,000
3.1%
44,000
0.3%
446,000
3.5%
Net Operating Income Before Reserve 4,584,000 36.8% 4,726,000 36.9% 4,866,000 36.9%
FF &E Reserve 498,000 4.0% 513,000 4.0% 528,000 4.0%
Net operating Income After Reserve $4,086,000 32.8% $4,213,000 32.9% $4,338,000 32.9%
Source: PKF Consulting USA
100
E 419,.
47,
466,
410,000
3.1%
45,000
0.3%
455,000
3.4%
Net Operating Income Before Reserve 4,584,000 36.8% 4,726,000 36.9% 4,866,000 36.9%
FF &E Reserve 498,000 4.0% 513,000 4.0% 528,000 4.0%
Net operating Income After Reserve $4,086,000 32.8% $4,213,000 32.9% $4,338,000 32.9%
Source: PKF Consulting USA
100
E 419,.
47,
466,
Addendum D
Comparable Hotel Financials
101
Proposed Newport Beach Hotel 176 Rooms)
Operating Results of Comparable Hotels
Revenues
Rooms
Food & Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
Hotel A
Ratio
Per Room
P.O.R.
79.8%
$55,514
$193.46
13.9%
9,661
33.67
6.3%
4,379
1 5.26
0.0%
0
0.00
100.00/6
69,554
242.39
Hotel B
Ratio
Per Room
I P.O.R.
81.3%
$61,208
$210.20
10.1%
7,605
26.12
8.1%
6,129
21.05
0.4%
316
1.08
100.0%
75,258
258.45
Departmental Expenses
Rooms. 26.8% 14,852 51.76 23.6% 14,448 49.62 26.2% 14,852 51.36
Food & Beverage 87.3% 8,430 29.38 95.4% 7,259 24.93 81.6% 15,151 52.40
Other Operated Departments 31.9% 1,399 4.87 20.4% 1,248 4.29 37.0% 1,815 6.28
Total Departmental Expenses 35.5% 24,681 86.01 30.5% 22,955 78.83 39.7% 31,818 110.04
Departmental Profit 1 64.5% 1 44,8741 156.38 1 69.5% 1 52,303 179.621 60.3% 1 48,313 167.09
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating Expenses
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 1 38,307 131.55 40.5% 1 32,422 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 1 2,257 7,751 3.0%1 2,400 8.30
Fixed Expenses
Property Taxes 2.2% 1,515 5.28 2.1% 1,549 5.32 0.8% 679 2.35
Insurance 0.4% 250 0.87 0.4% 326 1.12 1.5 % 1,233 4.27
Total Fixed Expenses 2.5% 1,765 6.15 2.5 % 1,874 6.44 2.4% 1,912 6.61
Net Operating Income Before Reserve 1 37.8% 1 26,271 1 45.4%1 34,176 117.371 35.1% 1 28,110 97.22
Source: PKF Consulting
102
11.2%
7,796
27.17
3.0%
2,052
7.15
4.0%
2,756
9.60
3.1%
2,147
7.48
21.2%
14,752
51.41
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 1 38,307 131.55 40.5% 1 32,422 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 1 2,257 7,751 3.0%1 2,400 8.30
Fixed Expenses
Property Taxes 2.2% 1,515 5.28 2.1% 1,549 5.32 0.8% 679 2.35
Insurance 0.4% 250 0.87 0.4% 326 1.12 1.5 % 1,233 4.27
Total Fixed Expenses 2.5% 1,765 6.15 2.5 % 1,874 6.44 2.4% 1,912 6.61
Net Operating Income Before Reserve 1 37.8% 1 26,271 1 45.4%1 34,176 117.371 35.1% 1 28,110 97.22
Source: PKF Consulting
102
9.0%
6,770
23.25
3.3%
2,504
8.60
4.4%
3,332
11.44
1.8%
1,390
4.77
18.6%
13,996
48.07
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 1 38,307 131.55 40.5% 1 32,422 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 1 2,257 7,751 3.0%1 2,400 8.30
Fixed Expenses
Property Taxes 2.2% 1,515 5.28 2.1% 1,549 5.32 0.8% 679 2.35
Insurance 0.4% 250 0.87 0.4% 326 1.12 1.5 % 1,233 4.27
Total Fixed Expenses 2.5% 1,765 6.15 2.5 % 1,874 6.44 2.4% 1,912 6.61
Net Operating Income Before Reserve 1 37.8% 1 26,271 1 45.4%1 34,176 117.371 35.1% 1 28,110 97.22
Source: PKF Consulting
102
9.3%
7,447
25.76
5.6%
4,485
15.51
3.0%
2,426
8.39
1.9%
1,533
5.30
19.8%
15,891
54.96
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 1 38,307 131.55 40.5% 1 32,422 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 1 2,257 7,751 3.0%1 2,400 8.30
Fixed Expenses
Property Taxes 2.2% 1,515 5.28 2.1% 1,549 5.32 0.8% 679 2.35
Insurance 0.4% 250 0.87 0.4% 326 1.12 1.5 % 1,233 4.27
Total Fixed Expenses 2.5% 1,765 6.15 2.5 % 1,874 6.44 2.4% 1,912 6.61
Net Operating Income Before Reserve 1 37.8% 1 26,271 1 45.4%1 34,176 117.371 35.1% 1 28,110 97.22
Source: PKF Consulting
102
Proposed Newport Beach Hotel 17 Rooms)
Operating Results of Com arable Hotels
Revenues
Rooms
Food & Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
Departmental Expenses
Rooms
Food & Beverage
Other Operated Departments
Total Departmental Expenses
Hotel D
Ratio Per Room P.O.R.
89.7% $56,287 $190.37
7.4% 4,645 15.71
2.6% 1,625 5.50
0.3% 163 0.55
100.0% 62,720 212.13
Hotel E
Ratio Per Room P.O.R.
64.8% $60,407 $196.79
32.8% 30,621 99.75
2.1% 1,958 6.38
0.2% 231 0.75
100.0% 93,216 303.67
Ratio
Per Room
24.7%
13,911
47.05
89.7%
4,166
14.09
31.0%
504
1.70
29.6%
18,581
62.84
Hotel E
Ratio Per Room P.O.R.
64.8% $60,407 $196.79
32.8% 30,621 99.75
2.1% 1,958 6.38
0.2% 231 0.75
100.0% 93,216 303.67
Weighted Average
Ratio
Per Room
23.1%
13,935
45.40
73.9%
22,634
73.73
40.8%
799
2.60
40.10/6
37,368
121.73
Weighted Average
Ratio
Per Room
P.O.R.
76.5%
$57,966
$197.64
18.0%
13,663
46.59
5.2%
3,966
13.52
0.2%
179
0.61
100.0%
75,740
258.25
24.9% 14,434 49.21
81.9% 11,184 38.13
30.1% 1,193 4.07
35.4%
26,811
91.42
Departmental Profit 1 70.4%1 44,1391 149.29 1 59.9%1 55,849 181.94 1 64.6%1 48,929 166.83
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating Expenses
Gross Operating Profit
Base Management Fee
Fixed Expenses
Property Taxes
Insurance
Total Fixed Ex enses
Net Operating Income Before Reserve
Source: PKF Consulting USA
42.2% 1 26,4941 89.61
3.0% 1,870 6.33
13.7%
8,594
29.07
7.0%
4,383
14.82
4.1%
2,567
8.68
3.4%
2,102
7.11
28.1%
17,645
59.68
42.2% 1 26,4941 89.61
3.0% 1,870 6.33
36.6% 1 22,932 1 77.56
2.4%
1,515
5.12
0.3%
177
0.60
2.7%
1,692
5.72
36.6% 1 22,932 1 77.56
35.1% 1 32,750 106.69
3.0% 1 2,786 9.08
12.5%
11,672
38.02
6.1%
5,693
18.55
3.2%
3,024
9.85
2.9%
2,710
8.83
24.8%
23,098
75.25
35.1% 1 32,750 106.69
3.0% 1 2,786 9.08
29.9% 1 27,8771 90.82
2.0%
1,829
5.96
0.3%
257
0.84
2.2%
2,087
6.80
29.9% 1 27,8771 90.82
42.5% 1 32,183 109.73
3.0% 1 2,267 7.73
10.9%
8,264
28.18
5.0%
3,751
12.79
3.7%
2,813
9.59
2.5%
1,918
6.54
22.1%
16,746
57.10
42.5% 1 32,183 109.73
3.0% 1 2,267 7.73
37.0% 1 28,055 1 95.66
103
11.8%
1,378
4.70
0.6°/
482
1.64
2.5%
1,861
6.34
37.0% 1 28,055 1 95.66
103
Proposed Newport Beach Hotel (120 Rooms)
Operating Results of Comparable Hotels
Revenues
Rooms
Food & Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
Hotel A
Ratio
Per Room
P.O.R.
79.8%
$55,514
$.193.46
13.9%
9,661
33.67
6.3%
4,379
15.26
0.0%
0
0.00
100.0%
69,554
242.39
Hotel B
Ratio
Per Room
I P.O.R.
81.3%
$61,208
$210.20
10.1%
7,605
26.12
8.1%
6,129
21.05
0.4%
316
1.08
100.0%
75,258
258.45
Hotel C
Ratio Per Room I P.O.R.
70.7% $56,642 $195.90
23.2% 18,562 64.20
6.1% 4,899 16.94
0.0% 28 0.10
100.0% 80,131 277.13
Departmental Expenses
Rooms 26.8% 14,852 51.76 23.6% 14,448 49.62 26.2% 14,852 51.36
Food & Beverage 87.3% 8,430 29.38 95.4% 7,259 24.93 81.6% 15,151 52.40
Other Operated Departments 31.9% 1,399 4.87 20.4% 1,248 4.29 37.0% 1,815 6.28
Total Departmental Expenses 35.5% 24,681 86.01 30.5% 22,955 78.83 39.7% 31,818 110.04
Departmental Profit 1 64.5% 1 44,8741 156.38 1 69.5% 52,303 1 179.62 1 60.3% 48,3131 167.09
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating Expenses
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 38,3071 131.55 1 40.5% 32,4221 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 2,2571 7.75 3.0% 2,400 8.30
Fixed Expenses
2.2%
0.4%
11.2%
7,796
27.17
3.0%
2,052
7.15
4.0%
2,756
9.60
3.1%
2,147
7.48
21.2%
14,752
51.41
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 38,3071 131.55 1 40.5% 32,4221 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 2,2571 7.75 3.0% 2,400 8.30
Fixed Expenses
2.2%
0.4%
9.0%
6,770
23.25
3.3%
2,504
8.60
4.4%
3,332
11.44
1.8%
1,390
4.77
18.6%
13,996
48.07
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 38,3071 131.55 1 40.5% 32,4221 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 2,2571 7.75 3.0% 2,400 8.30
Fixed Expenses
2.2%
0.4%
9.3%
7,447
25.76
5.6%
4,485
15.51
3.0%
2,426
8.39
1.9%
1,533
5.30
19.8%
15,891
54.96
Gross Operating Profit 1 43.3% 1 30,122 1 104.97 1 50.9% 38,3071 131.55 1 40.5% 32,4221 112.13
Base Management Fee 1 3.0% 1 2,0871 7.27 1 3.0% 2,2571 7.75 3.0% 2,400 8.30
Fixed Expenses
2.2%
0.4%
1,515
250
5.28
0.87
2.1% 1,549 5.32 0.8% 679 2.35
0.4% 326 1.12 1.5% 1,233 4.27
2.5% 1,874 6.44 2.4% 1,912 1 6.61
Property Taxes
Insurance
Total Fixed Expenses
2.5%
1,765
6.151
Net Operating Income Before Reserve 1 37.8% 1 26,271 1 91.55 1 45.4% 34,1761 117.37 35.1 % 28,1101 97.22
Source: PRF Consulting
104
Proposed Newport Beach Hotel (120 Rooms)
Operating Results of Com arable Hotels
Revenues
Rooms
Food & Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
Departmental Expenses
Rooms
Food & Beverage
Other Operated Departments
Total Departmental Expenses
Hotel D
Ratio
Per Room
I P.O.R.
72.5%
$55,249
$186.55
22.4%
17,065
57.62
4.9%
3,720
12.56
0.2%
161
0.54
100.0%
76,194
257.27
Hotel E
Ratio
Per Room
27.9%
15,413
52.04
81.1%
13,844
46.74
37.7%
1,402
4.73
40.2%
30,658.
103.52
Hotel E
Ratio
Per Room
P.O.R.
87.4%
$56,909
$212.09
4.7%
3,054
11.38
7.9%
5,174
19.28
0.0%
0
0.00
100.0%
65,138
242.75
27.0% 15,344 57.18
114.8% 3,507 13.07
42.7% 2,212 8.24
32.3%
21,063
78.50
Weighted Average
Ratio
Per Room
P.O.R.
78.2%
$57,102
$199.94
15.0%
10,969
38.41
6.7%
4,873
17.06
0.1%
165
0.57
100.0%
73,042
255.76
Departmental Profit 1 59.8% 45,5361 153.75 1 67.7% 1 44,0741 164.26 64.2 % 46,915 164.27
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating Expenses
Gross Operating Profit
Base Management Fee
Fixed Expenses
Property Taxes
Insurance
Total Fixed Ex enses
Net Operating Income Before Reserve
Source: PKF Consulting USA
26.31
15,007
52.55
86.3 %
9,470
33.16
33.9 %
1,649
5.78
35.8 %
26,127
91.48
Departmental Profit 1 59.8% 45,5361 153.75 1 67.7% 1 44,0741 164.26 64.2 % 46,915 164.27
Undistributed Expenses
Administrative & General
Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Operating Expenses
Gross Operating Profit
Base Management Fee
Fixed Expenses
Property Taxes
Insurance
Total Fixed Ex enses
Net Operating Income Before Reserve
Source: PKF Consulting USA
33.1% 25,233 1 85.20
3.5% 2,6441 8.93
12.1%
9,194
31.04
7,1%
5,428
18.33
4.2%
3,236
10.92
3.2%
2,445
8.26
26.6%
20,303
68.55
33.1% 25,233 1 85.20
3.5% 2,6441 8.93
25.5% 19,4371 65.63
3.9%
2,946
9.95
0.3%
206
0.70
4.1%
3,152
10.64
25.5% 19,4371 65.63
41.8% 1 27,2071 101.40
2.5% 1 1,6281 6.07
12.0%
7,791
29.03
5.2%
3,359
12.52
5.2%
3,359
12.52
3.6%
2,359
8.79
25.9%
16,867
62.86
41.8% 1 27,2071 101.40
2.5% 1 1,6281 6.07
38.7% 1 25,2401 94.06
0.0%
0
0.00
0.5%
339
1.26
0.5%
339
1.26
38.7% 1 25,2401 94.06
41.7%1 30,4429
3.0% 1 2,1851 7.65
10.7%
7,815
27.36
5.0%
3,625
12.69
4.2%
3,042
10.65
2.7%
1,992
6.97
22.6%
16,473
57.68
41.7%1 30,4429
3.0% 1 2,1851 7.65
36.3% 1 26,502 92.80
105
1.8 %
1,686
5.79
0.6%
473
1.66
2.4%
1,755
6.14
36.3% 1 26,502 92.80
105
100
Attachment CC -5
Keyser Marston Associates
Fiscal /Economic Analysis
June 2013
207
102
AnvisoR IN:
REAL ESTATE
REDFVFLOPMENI
AFFORDAZLE HOUSING
ECONOMIC DEVELOPMEN'E
SAN FMNCISC1
A. IERRY KFYSIIR
TIMOTHYC W1
KATE EARII
DEBBIE M. RI I'.�
REED T. KAWAHARI
DAVID DOFZFMA
LOS ANGELS,
KATHLEEN H. HEAD
JAMES A RARE
GREGORY D. SOO -HOO
KEVIN E. ENGSEROM
IULIE L. ROMEY
SAN DILGO
GI RAI I'M TRIMM I
PMII. C. MARRA
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KEYSER MARSTON ASSOCIATES
ADVISORS IN PUBLIC /PRIVATE REAL ESTATE DEVELOPMENT
MEMORANDUM
To: James Campbell, Principal Planner
City of Newport Beach
From: Kathleen Head
Tim Bretz
Date: June 25, 2013
Subject: City Hall Reuse RFP — Developer Proposal Evaluation
At your request, Keyser Marston Associates, Inc. (KMA) reviewed the proposals
submitted in response to RFP No. 13 — 35 — City Hall Site Reuse (RFP) distributed by
the City of Newport Beach (City) for development of the former City Hall Site (Site). The
purpose of the KMA review can be described as follows:
1. To evaluate the financial and economic impact characteristics of the proposals;
2. To identify potential issues for the City to consider in the selection process; and
3. To recommend a developer for the City to enter into ground lease negotiations
for the Site.
BACKGROUND
In August 2012, the City engaged both KMA and PKF Consulting (PKF) to conduct
financial analyses of potential development options for the Site. For the purposes of
these analyses, PKF analyzed hotel development options and KMA analyzed apartment
development options. The PKF /KMA analyses concluded that the Site is well suited for
an upscale boutique hotel concept or a market -rate apartment concept.
On October 10, 2012, the City issued a request for qualifications (RFQ) for the City Hall
Site Reuse. The City short- listed six teams to respond to the RFP, and three teams
ultimately responded to the RFP. A basic premise of the RFP is that the selected team
must agree to enter into a long -term ground lease with the City for the development of a
mixed -use high -end apartment community or an upscale boutique hotel.
300 SOUTH GRAND AVENUE, SUITE 1480)- LOS ANGELES, CALIFORNIA 90071 )-PHONE 213 622 8095 > FAX 213 622 5204
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To: James Campbell, City of Newport Beach June 24, 2013
Subject: City Hall Reuse RFP — Developer Proposal Evaluation Page 2
The RFP identifies ten evaluation criteria that will be used to evaluate the submittals.
The purpose of the KMA study is to assist the City in evaluating the developer team
responses to the financial feasibility and economic benefit components of the RFP
submission requirements.
DEVELOPER PROPOSALS
Proposals were submitted by the following teams:
R.D. Olson Development (RD Olson)
Sonnenblick Development ( Sonnenblick)
The Shopoff Group / The Wolff Company ( Shopoff)
RD OLSON PROPOSAL
Financial and Economic Summary
The key financial and economic components of the RD Olson Proposal are:
The proposal includes 130 hotel rooms in 99,625 square feet of gross building
area (GBA). The proposal includes 150 surface parking spaces (1.15 spaces per
room). The proposed scope is similar to the PKF study recommendation for a
120 room hotel with surface parking.
2. The proposal estimates the total construction costs at $42.6 million, which
equates to $428 per square foot of GBA, and falls in the middle of the three
proposals. The construction costs translate to $327,900 per hotel room, while
the PKF study estimated the construction costs at $248,300 per hotel room. The
proposal estimate is approximately 32% higher than the PKF estimate.
3. The proposal estimates the stabilized average daily rate (ADR) for the hotel at
$240, and the stabilized occupancy rate is set at 73.5 %. The PKF study
estimated the 2012 ADR at $210, with a 74% stabilized occupancy rate. The
ADR applied in the proposal is approximately 14% higher than the ADR
estimated in the PKF study.
4. RD Olson is proposing to provide annual ground rent payments equal to the
greater of $250,000 or 3% of gross revenues for specific revenue categories.
5. RD Olson estimates the proposed project's total fiscal impact at $1.53 million per
year including the projected ground rent payments.
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To: James Campbell, City of Newport Beach June 24, 2013
Subject: City Hall Reuse RFP — Developer Proposal Evaluation Page 3
6. RD Olson estimates the annual direct and indirect economic impacts at $36.16
million.
Issues for Consideration
The following are issues for consideration regarding the RD Olson Proposal:
1. At $250,000, the RD Olson proposal includes the lowest minimum ground rent
payment of the three proposals.
2. RD Olson proposes to start construction in September 2014 and complete
construction within 13 months. This timeline appears aggressive.
3. The RD Olson proposal did not include the California Coastal Commission
Impact Fee that will be assessed on luxury hotel rooms. This impact fee is
projected to add $975,000 to the construction costs.
4. There appear to be minor miscalculations in the sales tax revenue estimates.
5. The possessory interest tax revenue assumed in the fiscal impact analysis does
not appear to match the property tax payments included in the cash flow
projections.
SONNENBLICK PROPOSAL
Financial and Economic Summary
The following summarizes the key financial and economic components of the
Sonnenblick Proposal:
1. The proposal includes 148 hotel rooms in 99,541 square feet of GBA. The
proposal assumes that the project will be served by 221 subterranean parking
spaces (1.49 spaces per room). The PKF study recommended a hotel concept
with 120 hotel rooms and parking to be provided in a surface parking lot.
2. The proposal estimates the total construction costs at $81.86 million, or $822 per
square foot of GBA, which is the highest of the three proposals. The estimated
costs equate to $553,100 per hotel room, which is more than double the
$248,300 per hotel room estimate applied in the PKF study.
3. The proposal projects a stabilized ADR of $320, and a 75% stabilized occupancy
rate. The PKF study estimated the 2012 ADR at $210 with a 74% stabilized
occupancy rate. The ADR applied in the proposal is approximately 52% higher
than the PKF estimate.
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To: James Campbell, City of Newport Beach June 24, 2013
Subject: City Hall Reuse RFP — Developer Proposal Evaluation Page 4
4. Sonnenblick proposes to provide the City with a ground rent payment of
$600,000 per year. Sonnenblick does not propose a percentage rent structure in
their ground lease proposal.
5. Sonnenblick estimates the annual fiscal impacts at $2.19 million including the
ground rent payments.
6. Sonnenblick estimates the direct and indirect economic impacts at $56.11 million.
Issues for Consideration
The construction cost estimate provided by Sonnenblick is considerably higher
than the other two proposals.
2. The ADR projected by Sonnenblick is substantially higher than the estimate
provided in the PKF study commissioned by the City in 2012.
The Sonnenblick proposal did not include the California Coastal Commission
Impact Fee assessed on luxury hotel rooms. This impact fee is estimated to add
$1.11 million to the construction costs.
4. Sonnenblick projects that the project will generate $76,800 per year in
possessory interest taxes. This translates to an assessed value of $44.77
million, which represents approximately 55% of the estimated total construction
costs.
SHOPOFFPROPOSAL
Financial and Economic Summary
The following summarizes the key financial and economic components of the Shopoff
Proposal:
The proposal includes 99 apartment units at an average unit size of 1,500 square
feet of gross leasable area (GLA). The proposal assumes that the project will be
served by one level of subterranean parking and one level of structured parking
for a total of 325 off - street spaces (3.28 per unit). The KMA study included 99
apartment units at an average size of 1,615 square feet of GLA, and 248 surface
parking spaces (2.5 spaces per unit).
2. The total construction costs are estimated in the proposal at $61.32 million, or
$413 per square foot of GLA. The KMA study estimated the construction costs at
$34.19 million, or $218 per square foot of GLA. The cost estimates applied in the
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Subject: City Hall Reuse RFP — Developer Proposal Evaluation Page 5
proposal are nearly double the KMA estimates, which is largely attributable to the
proposed provision of 77 additional parking spaces in a structured /subterranean
garage rather than in surface level parking.
3. The proposal projected the average apartment rents at approximately $5,050 per
unit per month, or $3.33 per square foot per month. The KMA study estimated
the average apartment rents at approximately $4,100 per unit or $2.60 per
square foot per month. The rents estimates used in the proposal are
approximately 28% higher than the estimates used in the KMA study.
4. Shopoff proposes to provide the City with annual ground rent equal to the greater
of $650,000 or a percentage rent structure that is based on 5% to 15% of gross
revenues for specific revenue categories.
5. Shopoff estimates the fiscal impacts at $1.25 million including the ground rent
payments.
6. Shopoff estimates the annual direct, indirect and induced economic impacts at $6
million. KMA limited the estimate to the direct and indirect expenditures, and
arrived at a $3.5 million estimate.
Issues for Consideration
The minimum ground rent payment of $650,000 per year is the highest of the
three proposals. However, the estimated fiscal impact of the proposed project,
including the ground rent payment, is the lowest of the three proposals at $1.25
million per year.
The estimated annual economic impacts are substantially lower than the other
two proposals.
The Developer did not provide a 10 -year direct and indirect economic impact
estimate.
CONCLUSIONS
Shopoff Proposal
At $650,000 per year, the Shopoff proposal provides the highest base ground rent
payments of the three proposals. However, the combination of the ground rent
payments and the economic impacts projected to be created under the Shopoff proposal
are lower than those projected for the two hotels being proposed in the RFP process.
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To: James Campbell, City of Newport Beach June 24, 2013
Subject: City Hall Reuse RFP — Developer Proposal Evaluation Page 6
It is important to note that the apartment rents projected to be achievable in the Shopoff
proposal are substantially higher than the rents projected in the KMA study. If the
premium rents being projected by Shopoff cannot be achieved, it is likely that the
Shopoff ground rent payment proposal will not be financially viable.
A fiscal analysis based on the assumptions applied in the Shopoff proposal indicates
that apartment development on the Site will generate the lowest amount of benefits to
the City of the three proposals. When that conclusion is combined with the risk that the
Shopoff rent projections may not ultimately be achievable, it is the KMA conclusion that
hotel development on the Site will generate greater fiscal benefits than can be
anticipated to be produced by an apartment development..
Sonnenblick Proposal
The Sonnenblick proposal provides a fixed $600,000 ground rent payment; no
percentage rent payments are included in the proposal. The Sonnenblick ground rent
payment offer is $350,000 greater than the $250,000 base ground rent being offered
under the RD Olson proposal. However, the RD Olson ground rent proposal also
provides a percentage rent formula that is based on the revenues actually generated by
the hotel.
The key issue associated with the Sonnenblick proposal is that the hotel concept is
substantially different from the hotel concept PKF deemed appropriate for the Site. The
construction costs applied in the Sonnenblick proposal are more than double the costs
used in the PKF study, and the room rates are 52% higher than the PKG projections.
If the Sonnenblick financial projections are applied, the Sonnenblick proposal generates
the greatest amount of ground rent and economic impacts of the three proposals.
However, there are multiple levels of financial risk to the City associated with this
proposal. Most notably, if Sonnenblick's proposed hotel concept does not ultimately
achieve the room rates required to support the premium construction costs, the ground
rent payment being offered may not be financially viable. In addition, the economic
benefits actually generated by the hotel would be commensurately lower than the current
projections.
RD Olson Proposal
The $250,000 base ground rent payment being proposed by RD Olson is the lowest of
the three proposals. However, the inclusion of a percentage rent calculation provides
the potential for the actual ground rent to exceed the $250,000 base rent amount, and
the likelihood that percentage rents will be triggered will increase over time.
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To: James Campbell, City of Newport Beach June 24, 2013
Subject: City Hall Reuse RFP — Developer Proposal Evaluation Page 7
The hotel concept being proposed by RD Olson is within the quality and style category
identified in the PKF study. Moreover, the construction cost estimates and revenue
projections are the closest of the three proposals to the assumptions applied in the
PKF /KMA study. As such, it is KMA's opinion that the ground rent payments and
economic impacts projected in the RD Olson proposal fall within the reasonable range.
RECOMMENDATION
Based on our analysis of the three proposals, it is the KMA conclusion that the RD Olson
proposal provides a development concept and revenue projections that comport with the
current market and financial conditions demonstrated on the Site. In turn, this proposal
provides the strongest balance of financial and economic benefits, which reduces the
potential risks to the City after a ground lease agreement is executed. Based on these
financial factors, it is the KMA recommendation that the City select RD Olson to enter
into negotiations for the reuse of the City Hall Site.
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SUMMARY TABLE
NEWPORT BEACH CITY HALL SITE REUSE
NEWPORT BEACH, CALIFORNIA
THE SHOPOFF GROUP / THE WOLFF
RD OLSON SONNENBLICK DEVELOPMENT COMPANY
Scope of Development
Number of Rooms/ Apartments 130 rooms. Including 17 extended stay 148 rooms. Includes: 6 Executive Suites, 99 apartments. Unit sizes averaging
suites. 12 Villas, 15 TH Villas. 1,500 SF.
Total Building Area 99,625 SF GBA 99,541 SF GBA 148,500 SF GLA
Type / Number of Parking Spaces Surface Parking/ 150 spaces (including Subterranean Parking / 221 Spaces One above - ground level & one
shared parking spaces) subterranean level; 325 off - street sps
Financial Feasibility
Total Construction Costs $42,626,000 $81,862,000 $61,316,000
Per SF GBA or GLA $428 $822 $413
Coastal Commission Impact Fee $975,000 $1,110,000 TED
Total Construction Costs With Coastal Fee $43,601,000 $82,972,000 $61,316,000
Per SF GBA or GLA w/ Coastal Fee $438 $834 $413
Stabilized Average Daily Rate / Average Rent
$240
$320
$5,060 /unit /month or $3.33 /sf /mo.
Estimated Stabilized Occupancy Rate
73.5%
75.0%
Not Applicable
Construction Period Months 13 24 20
III. I Proposed Ground Lease Terms
Lease Term 99 years 99 years with an option to purchase 99 years
Lease Commencement The latter of the full execution of the Groundbreaking Upon execution of ground lease
ground lease and unnappealable agreement.
discretionary approvals.
Construction Rent $250,000 /year. The Construction Rent $600,000 $250,000
begins after grading permit.
Minimum Base Rent $250,000 $600,000 $650,000
Percentage Rent Triple net paid on a monthly basis equal None proposed Total rent greater of Base or Percentage
to 3% of the gross revenues for the Rent. Percentage Rent calculated as
following categories: room revenue; follows: 12% for apts; 15% for parking,
food & beverage; banquet sales; retail storage, telephone, vending; 5% for
sales; and rentals. cable, internet, misc.s sales; and 12%
for retail rents.
Prepared by: Keyser Marston Associates, Inc.
File name: NB RFP Evaluation_6 25 13; FINANCIAL COMPARISON; trb 21& Page 1
SUMMARY TABLE
NEWPORT BEACH CITY HALL SITE REUSE
NEWPORT BEACH, CALIFORNIA
RD OLSON
THE SHOPOFF GROUP / THE WOLFF
SONNENBLICK DEVELOPMENT COMPANY
IV. Fiscal Impacts
Transient Occupancy Tax Revenue $837,000 $1,296,480 Not A liable
Sales Tax Revenue Developer Estimate: $217,100. KMA Developer & KMA Estimate: $220,900 Developer & KMA Estimate: $79,000;
Estimate: $142,300 includes $1,300 business license tax
Possessory Interest Tax Revenue $51,622; Equates to an assessed value $76,781; Equates to an assessed value $164,000; Equates to an assessed value
of $30 million. of $45 million. of $97 million.
Estimated Ground Rent - Greater of Base Rent $250,000 Base Rent vs Estimated % $600,000 $650,000 Base Rent vs Estimated %
or Calculated Percentage Rent Rent of $421,000 = $421,000 Rent of $1,007,000 = $1,007,000
Total Annual Fiscal Impact $1,527,000 $2,194,000 $1,250,000
10 -Year Fiscal Impact
Developer & KMA Estimate:
$17,225,000 (Includes ground rent
payments)
Developer Estimate: $19,631,000 (does
not include ground rent payments).
KMA Estimate: $26,510,000 including
ground rent payments escalated at 3%
per year.
The Developer provided a 20 -year fiscal
impact without the ground &
percentage rents. KMA estimates
$14,330,000 for a 10 -year period
assuming a 3% escalation factor each
year for the ground & percentage rents.
V. Economic Im acts
Permanent Jobs 70 -80 201 50
Construction Jobs 150-200 550 614
Direct and Indirect Economic Impacts $36,164,000; assumes $400 daily hotel $56,106,000; assumes $530 daily hotel
visitor spending. visitor spending.
Developer Estimate: $102 million in
output from construction; $6 million
from resident spending (includes direct,
indirect & induced). KMA Estimate: $3.5
million, which only includes direct and
10 -year Direct and Indirect Economic Impacts $402,861,000 $682,687,000 KMA Estimate: $40.12 million. Based on
the annual KMA estimate of $3.5 million
and 3% annual escalations.
Prepared by: Keyser Marston Associates, Inc.
File name: NB RFP Evaluation_6 25 13; FINANCIAL COMPARISON; trb 117 Page 2
112
Attachment CC -6
Economic Planning Systems
Fiscal /Economic Analysis
June 2013
119
120
MEMORANDUM
To: James Campbell, Principal Planner
City of Newport Beach
From: Richard Berkson and Jim Musbach
w .epsys.wm
121
Subject: Review of Responses to RFP for City Hall Site Reuse
EPS #134010
Date: June 24, 2013
As you requested, we have reviewed the proposals submitted by three
The Economics gfLand I se
development teams for the City Hall Site Reuse (RFP No. 13 -35, issued
October 10, 2012). EPS has focused on financial terms and
fiscal /economic measures requested in the RFP.
The following sections summarize key elements of each proposal.
Co
Table 1 provides additional detail regarding each proposal's response to
the various elements of the RFP, and includes a comparison to earlier
CELEBRAM YEARS
reports prepared for the City by its consultants. Attachments 1
through 3 illustrate forecasts of key lease, fiscal and economic terms
annually through 2024 for each proposal.
We have not conducted an independent market analysis of the
proposals, but have drawn upon earlier consultant reports for reference,
as well as our own general knowledge of similar developments. To some
extent, we have extrapolated from the proposals and prior work (which
evaluated slightly different prototype development projects) to generate
the forecasts in the attachments, but generally have tried to remain
consistent with the basic methodologies previously utilized.
Summary
Two of the three submittals propose a boutique hotel with a restaurant,
bar, meeting space, and spa facilities. These proposals do not provide
as much lease revenue as the residential proposal (Shopoff); however,
the sum of lease revenue and City tax revenues are significantly greater
Economic& Planning Systems, Inc.
than the residential proposal as shown on the next page.
2501 Ninth Street, Suite 200
Berkeley, CA 94710 -2257
The hotel proposals generate significantly greater economic benefits to
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the region, including jobs, direct, indirect and induced spending. The
510841 9208 fax
residential proposal provides some benefit from the resident spending
that would occur in the City and the region.
Berkeley
Denver
Los Angeles
Sacramento
w .epsys.wm
121
James Campbell, City of Newport Beach
Review of Responses to RFP for City Hall Site Reuse
tune 24, 2013
Page 2
Following is a summary of the potential lease and City tax revenues upon stabilization in 2018
(in 2018$):
Economic Impacts
Total to 2024
Lease Taxes Total (nominal$)
Sonnenblick
$600,000
$1,846,000
$2,446,000
$602 mill.
R.D. Olson
$492,000
$1,234,000
$1,726,000
$406 mill.
Shopoff Group
$925,000
$ 233,000
$1,158,000
$ 63 mill.
The two hotel proposals (Sonnenblick, R.D. Olson) also generate greater levels of visitation to
the area, and related expenditures that will help to stimulate increased economic development.
While there is some uncertainty regarding future occupancy and room rates, and likely
fluctuations in the event of an economic downturn, the hotel proposals still provide a reasonable
expectation of significantly greater benefits than the residential proposal.
The Sonnenblick proposal offers the greatest lease and tax benefits, of the two competing hotel
proposals. While Sonnenblick's projected room rates are significantly higher than the R.D. Olson
proposal and earlier PKF estimates, the higher average rate is partly supported by above -
average rates achievable by townhouse villas and villas, which account for over 20 percent of the
total units. These villas will strengthen the ability to capture the group market, including
weddings (a target market mentioned in the proposal), and correspondingly increase occupancies
of non -villa units by other members of groups. The potential for success of the Sonnenblick
proposal is also improved by their operator, Auberge Resorts, which provides national branding
and marketing draw.
The following sections describe each proposal in greater detail.
R.D. Olson Development
R.D. Olson Development proposes a 130 - guestroom boutique hotel, including 4,900 square feet
of meeting and event space, 5,200 square feet of restaurant and retail space, and 3,100 square
feet of spa, fitness center, pool and ancillary facilities. Surface parking would be provided for
guests and visitors. Anticipated average room rates of $279 /night (2018$) are about 10% to
20% higher than PKF estimates of $233 -$263.
• Financial Terms - The proposal offers the greater of a $250,000 base rent and a
percentage rent, with the base rent being adjusted by CPI up to 3% annually. In 2018,
the lease is estimated at $492,000 (2018$). Through 2024, lease payments total
approximately $5 million (nominal dollars).
The annual lease payments are below the $1.1 mill. to $1.3 mill. (2018$) estimated by
PKF (9/14/12)1; this difference may be due to higher R.D. Olson construction costs
1 Before deducting any public facility offsets.
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James Campbell, City of Newport Beach tune 24, 2013
Review of Responses to RFP for City Hall Site Reuse Page 3
(about 33% higher per room, including greater management costs), and revenues that
may not support the PKF- assumed lease rate (10% of residual land value).
• Fiscal Benefits - The projected tax revenues (property and possessory tax, sales tax,
and TOT) total $1.2 million annually at stabilization (2018$). This is slightly higher than
the PKF estimates on a per -room basis. TOT is greater due to higher room rates
assumed by R.D. Olson compared to PKF.
• Economic Benefits - R.D. Olson's proposal estimates annual economic impacts of $41.9
million. These represent direct and indirect impacts within the region. On a per -room
basis, the impacts are slightly greater than PKF estimates due to higher room rates and
other visitor spending.
R.D. Olson Development's hotel proposal provides a combined total lease revenues and fiscal
benefits of about $1.7 million annually at stabilization (2018$). The lease, calculated on a base
rent and percentage rent, helps the City to benefit from future growth and success of the
project. The hotel will draw visitors, provide amenities for local residents, and generate
substantial direct, indirect and induced economic benefits.
Sonnenblick Development
Sonnenblick Development proposes a 148 -room Auberge Resorts branded 4 to 4.5 star boutique
hotel. The facility would include a restaurant, bar, meeting space, spa and retail space. A
below -grade garage, with a deck above it, would provide for parking. The program includes
townhouse villas and villas, which consist of two - level, 700 square foot units in a landscaped
setting with water features. Anticipated average room rates of $370 /night (2018$) are about
50% higher than PKF estimates of $233 -$263. A higher room rate is consistent with the large,
luxury villas and national branding.
• Financial Terms - Sonnenblick offers a $600,000 base rent that would be adjusted
every 5 years by 10 %, or the equivalent of 2% per year. No percentage rent is provided.
In 2018, lease revenue is expected to be $600,000 (2018$) but would adjust upwards
the following year to $660,000. Through 2024, lease payments total approximately
$7 million (nominal dollars). Depending on future inflation rates, the 2% annual -
equivalent adjustments may cause the future lease revenues to decline in real value.
The annual lease payments are below the $1.1 mill. to $1.3 mill. (2018$) estimated by
PKF (9/14/12)2; this difference may be due to significantly higher Sonnenblick
construction costs (more than double per room due to the villa configuration and high
amenity level, as well as underground parking not included in PKF), and revenues that
may not support the PKF- assumed lease rate (10% of residual land value).
• Fiscal Benefits - The projected tax revenues (property and possessory tax, sales tax,
and TOT) total $1.8 million annually at stabilization (2018$). This is much higher than
the PKF estimates on a per -room basis. TOT is greater due to significantly higher room
rates compared to PKF. Property taxes appear conservative, based apparently on hard
costs only; at a minimum, FF &E values should be included.
2 Before deducting any public facility offsets.
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tune 24, 2013
Page 4
• Economic Benefits - Sonnenblick's proposal estimates annual economic impacts of $65
million. These represent direct and indirect impacts within the region. On a per -room
basis, the impacts are about 50% greater than PKF estimates due to higher room rates
and other visitor spending.
Sonnenblick Development's proposal targets a high -end clientele, in terms of amenities and
product type which will help it to achieve relatively high room revenues. The ground lease and
potential tax revenues to the City, if the hotel achieves its projections, could reach $2.4 million
annually. As noted for the other hotel proposal, it will draw visitors, provide amenities for local
residents, and generate substantial direct, indirect and induced economic benefits.
The Shopoff Group
The Shopoff Group proposes to develop 99 residential rental units, and up to 15,000 square feet
of retail space. A subterranean garage would provide for parking. Rents are estimated to
average $6,000 per month (2018$) at stabilization, with a 6% vacancy rate (assuming 3 percent
average annual growth in rents from 2013). These rents are about 30% greater than the KMA
estimates. The rents appear to be at the high end of the range for this general market, however,
the value attributable to a new, highly - amenitized mixed -use development could improve
prospects for achieving these rents.
• Financial Terms - The proposal offers the greater of a $650,000 base rent and a
percentage rent. After 10 years, and after every 5 years thereafter, the base rent would
be adjusted to equal 75% of average annual rent for the prior 5 years. In 2018, the
lease is estimated at $925,000 (2018$). Through 2024, lease payments total
approximately $8.5 million (nominal dollars).
The annual lease payments are below the amounts estimated by KMA (9/17/12)3; this
difference may be due to higher Shopoff Group construction costs (about 75% higher per
unit, including parking costs), and revenues that may not support the KMA- assumed
lease rate (8 -10% of residual land value).
• Fiscal Benefits - The projected tax revenues (property and possessory tax, sales tax,
and TOT) total $233,000 annually at stabilization (2018$). This is about 45% greater
than KMA estimates, largely due to higher incomes from renter households, and
correspondingly greater taxable expenditures. The household incomes could be higher
than shown, given the anticipated rents; the household incomes are shown to be
spending over 40 percent of household income on rent, which is not considered
affordable to those households.
• Economic Benefits - The Shopoff Group's proposal estimates annual economic impacts
of $7 million. These represent direct, indirect and induced impacts in the City. The
estimates are higher than earlier KMA estimates largely due to the inclusion of induced
impacts.
The Shopoff Group's residential rental proposal, which includes a base and percentage rent,
potentially offers the greatest ground lease revenue. However, tax revenues to the City are
3 Before deducting any public facility offsets.
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James Campbell, City of Newport Beach
Review of Responses to RFP for City Hall Site Reuse
tune 24, 2013
Page 5
relatively modest, and when combined with the lease revenues, total just under $1.2 million
annually (2018$). New residents to the area will increase local expenditures, however, they will
not generate the level of visitation and related activity as the hotel proposals, which will cater to
residents as well as visitors, businesses and group and social events. Direct, indirect and
induced economic activity is also much lower for a residential project relative to a hotel.
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Table 1
Summary of Proposals
Item
a. Business Plan and Pro Forma
R.D. Olson
Development
Sonnenblick
Development
130 Boutique Hotel Rms,
148 Rms and Villas, mtg.
mtg space, spa, restaurant
space, spa, restaurants
100,000 gross sq.ft. (KM,
101,000 grass sq.ft.
6/5/13)
hotel positioned above
73.5 %occ'y rate
75 %occ'y rate
$279 /night(2018)
$371 /night(2018)
Surface parking Below -grade pkg +deck
PKF KMA
The Shopoff Group (Hotel) (Residential)
99 Res. Rentals avg 1,500 sf 78 -150 Boutique Rms 92 -99 Rental Units
Up to 6,000 sq.ft. Retail
169,000 grass sq.ft. 58,500- 112,500 gross sq.ft.
$5,966 /month(2018) 76% to 72 %occ'y $4,600 /month(2018)
Up to 15,000 sq.ft. Retail $263 - $233 /night (2018)
Subterranean garage Surface Parking Surface Parking
NOI $5.3 mill. (2018, before
NOI $5.8 mill. (2018, before
NOI $5.7 mill. (2018, before NO1 $2.5 - $4.2 mill. (2018, NO] $3.7 mill. (2018, before
lease)
lease)
lease) before lease) lease)
b. Markets and Basis for Market Demand 4 star independent boutique
4 to 4.5 star national luxury
High -end rental units
hotel positioned above
brand, room rates based on
targeting local affluent
other area independents,
other AUberge properties
renters attracted by beach,
but below top coastal luxury
nationwide.
boating, other amenities of
properties.
the area. Priced above aging
institutional waterfront units,
but below other S.Cal luxury
options.
Table 1, page 1 of 4 120
Table 1
Summary of Proposals
R.D. Olson Sonnenblick PKF KMA
Item Development Development The Shopoff Group (Hotel) (Residential)
c. Proposed Lease Terms
Est'd Lease at Stabilization (2018$) $492,000 $600,000 $925,000 $1.3 mill. $1.7 mill.
($1.1 mill. PKF 9/14/12, 120 ($1.45 mill. KMA 9/17/12, Alt B
rms, No Offsets+ 6yrs @ 99 units, 8 %grnd lease, No
3 % /yr) Offsets, + 6yrs @ 3 % /yr)
Est'd total lease through 2024 (nominal) $4,968,000 $7,026,000
c.1 Construction Rent Commencement Receipt of grading permit At groundbreaking
c.2 Rent Commencement
c.3 Term
c.4 Base Rent
c.5 Base Rent During Construction
c.6 Percentage Rent
c.7 Adjustment of Base Rent
Receipt of final Cart. of At groundbreaking
Occ'y
99 yrs
99 yrs
$250,000/yr (greater of base
$600,000 /yr
rent or % rent)
$250,000/yr
$600,000 /yr
3% of gross hotel revenues
None Specified
Every 5 years to LA CPI
(annual rate not to exceed
3 %)
c.8 Fair Market Adjustment of Base Rent None Specified
c.9 Capital Repairs and Replacements Reserve 2% of gross income
yr 1, 3% yr 2, 4% yrs 3+
c.10 Insurance Will keep commercial
insurance for bldg and
operations with Lessor as
add'I insured
c.11 Other
Increase 10% in yr 6, then
10% every 5th yr
None Specified
$8,489,000
Receipt of all regulatory
permits
Completion of
construction /Receipt of Cert.
of Occ'y
99 yrs
$650,000 /yr(greater of base
rent or %rent)
$250,000/yr
12% apts & retail; 15% pkg,
storage, tel., vending; 5%
cable, internet, misc.
Base rent adjusted after 10
yrs, and after every 5 yrs
thereafter, to equal 75% of
avg. annual rent for prior 5
yrs.
In yr 26, Base Rent adjusted
to 75% of appraised fair
market value.
Reserve 2% of gross revenue 1% of annual gross revenues
yr 1, 3% yr 2, 4% yr 3, 5% yrs shall be expended or placed
4+ in reserve.
1.2% of gross revenue /yr Will keep commercial
insurance commensurate
with industry standards, with
Lessor as add'I insured
Not Estimated Not Estimated
Table 1, page 2 of 4 —r 27
Table 1
Summary of Proposals
R.D. Olson Sonnenblick PKF KMA
Item Development Development The Shopoff Group (Hotel) (Residential)
d. Construction Costs
e. City Tax Revenues
e.1 Property Tax
e.2 TOT
e.3 Sales Tax
e.4 Other
Total
per room or unit
Total, through 2024 (nominal$)
f. Direct, Indirect and Induced Economic
Impacts
Annual (2018$)
per room or unit
Total (through 2024, nominal$)
g. General Benefits to the Community
g.1 Jobs
g.2 Retail Services
g.3 Residential Units
9.4 Private Investment
g.5 Visitation
g.6 Other
$29,396,000 Hard Costs
4,740,000 FF &E
975,000 Coastal
Com. Fee
8,490,00 Soft Costs
$43,601,000 Total
$335,400/rm
$436 /sq.ft.
Annual, 2018$
$67,000
$973,000
$194,000
$1,234,000
$9,500
$11,847,000
$8,400,000 Parking
43600000 Other Hard
52,000,000 Total Hard
8,000,000 FF &E
1,110,000 Coastal
Com. Fee
22.000.000 Soft Costs
$83,110,000 Total
$562,000/rm
$823 / sq.ft.
Annual, 2018$
$81,000
$1,503,000
$262,000
$1,846,000
$12,000
$17,112,000
(Direct and indirect, region) (Direct and indirect, region)
$41,924,000 $65,042,000
$322,000 $439,000
$405,960,000 $602,130,000
70 -80 directjobs 200 direct jobs
150 -200 construction jobs 550 construction jobs
5,200 sq.ft. of restaurant 5,300 sci t. restaurant and
and retail space, +spa bar, retail, +spa
na
$42.6 million
70,000 visitor -days
na
$82 million
81,000 visitor -days
$11,000,000 Parking
35146000 Other Hard
46,146,000 Total Hard
15.169.700 Soft Costs
$61,315,700 Total
$619,350 /unit
$360 /sq.ft.
$ 20,900,000 Hard Costs
4,200,000 FF &E
4,700,00 Soft Costs
$ 29,800,000 Total
120 rooms
$248,300/rm
$330 / sq.ft. (750sf /rm)
$ 25,300,000 Hard Costs
9,600,00 Soft Costs
$34,900,000 Total
99 units
$352,500 /unit
Annual, 2018$
Annual, 2018$ (120 -1ms)
Annual, 2018$ (99 units) 6
yrs @2 -3 %/yr
$144,000
$65,000
$140,000
NA
$813,500
na
$89,000
$211,000
$19,100
$233,000
$1,089,500
$159,100
$2,000
$9,100
$1,600
$2,029,000
$11,220,000
not estimated
(direct, indirect and induced
(Direct and indirect only, 120
in City from %of expend)
rms)
(Direct and indirect 99 units)
$6,956,000
$35,147,000
$2,895,000
$70,000
$293,000
$29,000
$63,000,000
41 direct jobs
305 construction jobs
up to 15,000 retail sq.ft.
99 units
$61.3 million
na
Not estimated Not estimated
$29.8 million (120 rooms) $34.9 million (99 units)
65,000 visitor -days (120 rms) na
Table 1, page 3 of 4 122
Table 1
Summary of Proposals
R.D. Olson Sonnenblick PKF KMA
Item Development Development The Shopoff Group (Hotel) (Residential)
h. Sources and Structure of Financing
Construction debt from
nationally recognized banks,
personally guaranteed, 65%
to 70% of value. Equity from
private offerings to qualified
investors; R.D. Olson invests
approx. 10% equity.
Combination of internal
equity and institutional
partners; debt provided by
commercial banks (Wells
Fargo and /or RofA).
100% equity: 90% from Wolff
Company's funds and 10%
from The Shopoff Group.
Table 1, page 4 of 4
James Campbell, City of Newport Beach
Review of Responses to RFP for City Hall Site Reuse
Attachment 1
R.D. Olson Development
tune 24, 2013
Page 6
P: \134000s \1340IONewportBeach \Report\ 134010 _EPSieview_2013- 06- 24.docx
130
Table 1a
Estimate of Proposed Lease Revenues
R.D. Olson Development
Item Factor Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Construction Rent
5 months 8 months
13 months @ $250,000/yr
$270,833
$104,167 $166,667
Operations Rent
4 months
Base Rent
$2,490,219
$83,333
$250,000
$250,000
$250,000
$250,000
$281,377
$281,377
$281,377
$281,377
$281,377
CPI 3%
103.0%
106.1%
109.3%
112.6%
115.9%
119.4%
123.0%
126.7%
130.5%
Percentage Rent
Revenues
$3,788,969
$12,010,409
$14,956,814
$16,415,167
$16,907,622
$17,443,406
$17,937,296
$18,475,415
$19,029,677
$19,600,568
Percentage 3%
$4,696,960
$113,669
$360,312
$448,704
$492,455
$507,229
$523,302
$538,119
$554,262
$570,890
$588,017
Maximum of Base or %
$113,669
$360,312
$448,704
$492,455
$507,229
$523,302
$538,119
$554,262
$570,890
$588,017
Total Rent
$4,967,794
$104,167 $280,336
$360,312
$448,704
$492,455
$507,229
$523,302
$538,119
$554,262
$570,890
$588,017
131
Table 1b
Estimate of City Tax Revenues
R.D. Olson Development
Item Factor Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
TOT
4 months
Room Revenue
$2,108,969
$7,602,464
$8,994,237
$9,727,267
$10,019,085
$10,347,931
$10,629,247
$10,948,125
$11,276,569
$11,614,866
TOT
10.0%
$9,326,876
$210,897
$760,246
$899,424
$972,727
$1,001,909
$1,034,793
$1,062,925
$1,094,813
$1,127,657
$1,161,487
Property and Possessory
Interest Tax
Tax to City
$645,138
$16,121
$64,484
$65,774
$67,089
$68,431
$69,800
$71,196
$72,619
$74,072
$75,553
Sales Tax
Occupancy Rate
130
rooms
65.0%
70.0%
73.5%
73.5%
73.5%
73.5%
73.5%
73.5%
73.5%
Sold Room Nights
9,922
30,927
33,215
34,876
34,876
34,876
34,876
34,876
34,876
34,876
Visitors
2.0
19,844
61,854
66,430
69,752
69,752
69,752
69,752
69,752
69,752
69,752
Visitor Expenditures
Expenditures /visitor
$239.48
exc. Lodging, 50% other
$254.06
$261.69
$269.54
$277.62
$285.95
$294.53
$303.37
$312.47
$321.84
$331.50
Total Expenditures
$5,041,653
$16,186,342
$17,905,333
$19,364,618
$19,945,556
$20,543,923
$21,160,240
$21,795,048
$22,448,899
$23,122,366
Sales Tax to City
1.0%
$1,875,140
$50,417
$161,863
$179,053
$193,646
$199,456
$205,439
$211,602
$217,950
$224,489
$231,224
TOTAL
$11,847,154
$277,434
$986,594
$1,144,251
$1,233,462
$1,269,795
$1,310,032
$1,345,723
$1,385,382
$1,426,218
$1,468,264
132
Table 1c
Estimate of Economic Impacts
R.D. Olson Development
Item Factor Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Visitors
19,844
61,854
66,430
69,752
69,752
69,752
69,752
69,752
69,752
69,752
Visitor Expenditures
Expenditures /visitor $398.82 all expenditures
$423.11
$435.80
$448.88
$462.34
$476.21
$490.50
$505.21
$520.37
$535.98
$552.06
Total Expenditures
$8,396,158
$26,956,059
$29,818,794
$32,249,026
$33,216,497
$34,212,992
$35,239,382
$36,296,563
$37,385,460
$38,507,024
Multiplier Effects 1.3 $405,961,340
$10,915,005
$35,042,876
$38,764,433
$41,923,734
$43,181,446
$44,476,889
$45,811,196
$47,185,532
$48,601,098
$50,059,131
Annual at Stabilized Year 3% to discount to 2013$
$36,163,781
133
James Campbell, City of Newport Beach
Review of Responses to RFP for City Hall Site Reuse
Attachment 2
Sonnenblick Development
tune 24, 2013
Page 7
P: \134000s \134010NewportBeach \Report\ 134010 _EPSieview_2013- 06- 24.docx
Table 2a
Estimate of Proposed Lease Revenues
Sonnenblick Development
Item Factor Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Construction Rent
24 months @ $600,000/yr $1,200,000 $600,000 $600,000
Operations Rent
Base Rent $5,826,000 $600,000 $600,000 $600,000 $660,000 $660,000 $660,000 $660,000 $660,000 $726,000
110.0% 110.0%
Percentage Rent
Revenues
Percentage
Maximum of Base or % $0 $600,000 $600,000 $600,000 $660,000 $660,000 $660,000 $660,000 $660,000 $726,000
Total Rent $7,026,000 $600,000 $600,000 $600,000 $600,000 $600,000 $660,000 $660,000 $660,000 $660,000 $660,000 $726,000
1315
Table 2b
Estimate of City Tax Revenues
Sonnenblick Development
Item Factor Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
TOT
Room Revenue
$11,533,270
$12,480,780
$15,031,065
$15,476,430
$15,962,910
$16,449,090
$16,935,270
$17,421,450
$17,948,145
TOT
10.0%
$13,923,841
$1,153,327
$1,248,078
$1,503,107
$1,547,643
$1,596,291
$1,644,909
$1,693,527
$1,742,145
$1,794,815
Property and Possessory
Interest Tax
Tax to City
$763,943
$78,316
$79,882
$81,480
$83,110
$84,772
$86,467
$88,197
$89,960
$91,760
Sales Tax
Occupancy Rate
148
rooms
61.0%
64.0%
75.0%
75.0%
75.0%
75.0%
75.0%
75.0%
75.0%
Sold Room Nights
32,952
34,573
40,515
40,515
40,515
40,515
40,515
40,515
40,515
Visitors
2.0
65,904
69,146
81,030
81,030
81,030
81,030
81,030
81,030
81,030
Visitor Expenditures
Expenditures /visitor
$278.82
exc. Lodging, 100% other
$304.67
$313.81
$323.23
$332.93
$342.91
$353.20
$363.80
$374.71
$385.95
Total Expenditures
$0
$20,079,367
$21,698,883
$26,191,229
$26,976,966
$27,786,275
$28,619,864
$29,478,459
$30,362,813
$31,273,698
Sales Tax to City
1.0%
$2,424,676
$0
$200,794
$216,989
$261,912
$269,770
$277,863
$286,199
$294,785
$303,628
$312,737
TOTAL
$17,112,460
$0
$1,432,437
$1,544,949
$1,846,499
$1,900,522
$1,958,926
$2,017,575
$2,076,508
$2,135,734
$2,199,311
ISO
Table 2c
Estimate of Economic Impacts
Sonnenblick Development
Item
Factor Total
2014 2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Visitors
-
65,904
69,146
81,030
81,030
81,030
81,030
81,030
81,030
81,030
Visitor Expenditures
Expenditures /visitor
$532.62 all expenditures
$565.06
$582.01
$599.47
$617.45
$635.98
$655.06
$674.71
$694.95
$715.80
$737.27
Total Expenditures
$0
$38,356,905
$41,450,609
$50,032,181
$51,533,146
$53,079,141
$54,671,515
$56,311,660
$58,001,010
$59,741,040
Multiplier Effects
1.3 $602,130,369
$0
$49,863,976
$53,885,792
$65,041,835
$66,993,090
$69,002,883
$71,072,969
$73,205,158
$75,401,313
$77,663,352
Annual at Stabilized Year
3% to discount to 2013$
$56,105,658
ZS7
James Campbell, City of Newport Beach
Review of Responses to RFP for City Hall Site Reuse
Attachment 3
The Shopoff Group
tune 24, 2013
Page 8
P: \134000s \1340IONewportBeach \Report\ 134010 _EPSieview_2013- 06- 24.docx
:LS 2
Table 3a
Estimate of Proposed Lease Revenues
The Shopoff Group
Item Factor
Total
2014 2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Construction Rent
36 months @ $250,000/yr
$375,000
$250,000
$125,000
Operations Rent
Base Rent
$5,416,668
$216,668
$650,000
$650,000
$650,000
$650,000
$650,000
$650,000
$650,000
$650,000
Percentage Rent
45%
94%
94%
94%
94%
94%
94%
94%
94%
Revenues
$273,000
$6,493,425
$7,397,269
$7,619,191
$7,847,763
$8,083,202
$8,325,697
$8,575,462
$8,832,726
Percentage 12.5%
$7,930,967
$0
$34,125
$811,678
$924,659
$952,399
$980,970
$1,010,400
$1,040,712
$1,071,933
$1,104,091
Maximum of Base or %
$0
$216,668
$811,678
$924,659
$952,399
$980,970
$1,010,400
$1,040,712
$1,071,933
$1,104,091
Total Rent
$8,488,510
$0 $250,000
$341,668
$811,678
$924,659
$952,399
$980,970
$1,010,400
$1,040,712
$1,071,933
$1,104,091
i�9
Table 3b
Estimate of City Tax Revenues
The Shopoff Group
Item Factor Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
TOT
Room Revenue
TOT
10.0% $0
Property and Possessory
Interest Tax
Tax to City
$1,220,425
$7,444 $141,325 $144,151 $147,034 $149,975 $152,973
$156,033 $159,153 $162,337
Sales Tax
Sales Tax to City
$0
$77,000
3.0% annual inflation
$37,863 $86,664 $89,264 $91,942 $94,700 $97,541
$100,468 $103,482 $106,586
TOTAL
$2,028,935
$0 $45,307 $227,989 $233,415 $238,976 $244,675 $250,514
$256,501 $262,635 $268,923
140
Table 3c
Estimate of Economic Impacts
The Shopoff Group
Item Factor Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Economic Output (ongoing)
Direct, indirect & induced 3% inflation $2,950,363 $6,753,053 $6,955,644 $7,164,314 $7,379,243 $7,600,620 $7,828,639 $8,063,498 $8,305,403
Total Multiplier Effects $63,000,778 $2,950,363 $6,753,053 $6,955,644 $7,164,314 $7,379,243 $7,600,620 $7,828,639 $8,063,498 $8,305,403
Annual at Stabilized Year 3% to discount to 2013$ $6,000,000
14 2
142
Attachment CC -7
Correspondence
14 3
144
Date: June 24, 2013
To: Mayor Curry, Members of the City Council
Cc: Dave Kiff, City Manager
From: Central Newport Beach Community Association (CNBCA)
Subject: City Hall Re -Use
This is to request that a hotel alternative be chosen for re -use of the city hall site. The Directors of
CNBCA discussed the three alternatives proposed for re -use of the old city hall site on Newport
Boulevard and make this request. Although outside of the boundaries of CNBCA, that site has
always been a landmark to the entry to our community and its re -use will continue to impact the
quality of life to our residents and members.
The hotel alternatives for re -use received unanimous support. A hotel will bring a vibrant presence to
the area that can only add to the sustainability of Lido Village businesses. By their nature, hotels
must continually stay current with the market over the very long term of the proposed ground lease.
The apartment alternative will not be a benefit to our quality of life. A large apartment structure will
be imposing and add residents who likely will not be vested in our community. They likely will shop
elsewhere and vote without knowledge or interest in local concerns. Leasing of land for residential
use is not a good business for this City. Although there are other residential ground leases held by
the City, they are dictated by the tidelands status of the land unlike the city hall site. Landlord /tenant
law has changed substantially over the last 50, not to mention 100, years - -the proposed term for a
ground lease. The City must take into consideration the risk of potential changes to State and
Federal landlord tenant laws and the impact it could have on income projections made by a project
proponents. An example is possible imposition of a State rent control law. Also, apartments and
their grounds are not necessarily refurbished in a timely manner, especially not as a whole, to stay
current, unlike a hotel.
Again, please choose a hotel alternative for re -use of the city hall site. Thank you for your
consideration.
Central Newport Beach Community Association
Board of Directors
Louise Fundenberg, President
145
*' I
President:
Sharon Boles
Superior Ave. Liaison
9491645 -4752
Vice President:
Robert Rush
Riven Neptune
9491645 -1977
Secretary/Membership:
Chris Garber
9491466 -0605
Treasurer:
Mary Bryant
Numbered Streets
9491644 -6266
Historian:
Mike Johnson
West Oceanfront
9491642 -3125
Directors
Craig Batley
Absentee Owners Liaison
9491293 -4630
Jerry Cobb
West Oceanfront
9491646 -6304
Mary Fryer
Numbered Streets
7141832 -8707
Cynthia Koller
RiverlNeptune
9491650 -1815
Larry Leifer
Newport Island
9491650 -7120
Jim Miller
Newport Island
9 49193 3 -9 82 7
Ann O'Flynn
Balboa Coves
949'645 -8233
Everette Phillips
Newport Shores
9491650 -7528
WEST NEWPORT BEACH ASSOCIATION
P.O. BOX 1471
NEWPORT BEACH, CALIFORNIA 92659
www.westnewport.org
May 10, 2013
Via Email
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Re: City Hall Reuse — WNBA Strongly Encourages City to Approve HOTEL
To: Mayor Curry and City Council Members, Dave Kiff, City Manager and Kim Brandt,
Community Development Director.
After careful consideration of the three proposals for the reuse of the Old City Hall site, the West
Newport Beach Association fully supports and strongly encourages that the City move to approve
a HOTEL project on this site.
We have many reasons as a community why we feel an upscale hotel is the best use for this site.
We agree with the studies and reports which have shown an upscale Hotel will:
• Provide a badly needed beautiful landmark destination anchor to drive the re-
vitalization of the long- blighted Lido Village which is the first thing visitors see when
coming over the Lido Bridge;
• Generate ten times the revenue stream for the local businesses and the City coffers.
Visitors, 365 days a year, will be spending at the resort but also in the surrounding
areas promoting our local economy;
• Drive the right mix of uses in the Lido Village while enhancing long term market ability
and success of retail, restaurants and recreational businesses;
• Provide marketability as a destination of choice for those who wish to visit or meet in
an upscale bay /ocean recreational area;
• Work in synergy with the other tourist/visitor areas of the Peninsula /Lido Village area
and meet the demand of needed hotel rooms; and
• Not generate more traffic for our already dense traveled area.
Our City has made a very large, long -term investment in the building of our New City Hall and we
would encourage the City to make the same investment in our community; the historic part of
Newport Beach where it all began.
The West Newport Beach Association fully supports and strongly encourages that the City move
to approve a HOTEL project on this Old City Hall site not only for economic reasons, but for the
long -term vitality of our historic area.
cc: WNBA Board of Directors
S1 ce rely,
Sharon Boles, President
WNBA Board of Directors
I eY
140
June 9, 2013
P.O. BOX 826, BALBOA, CALIFORNIA 92661
Mayor Keith D. Curry
City of Newport Beach
100 Civic Center Drive
Newport Beach, California 92660
Re: Re -use of former City Hall site
Newport Beach, California
Dear Mayor Curry:
Date / /3
Copl&s'Sent To: ;
City Council
City Manager
Et/City Attorney
_ V File _ .7—
I am writing on behalf of the residents of the Balboa Peninsula Point Association
(BPPA). I am the past President of the BPPA and currently reside on its Board of
Directors.
I attended the meeting at City Hall on April 23, 2013, whereby three proposed developers
made their presentations for the re -use of the former City Hall site. Many of our members
were also present for a presentation by RD Olsen Development on May 6, 2013.
Sonninblick Development was also invited to present, but their schedule was crossed so
they could not attend.
As an employee of Irvine Company Retail Properties and having spent 27 years in
commercial development, I have an understanding on what it takes to plan and/or
merchandise a commercial district. In an area such as the Balboa Peninsula, which lacks a
significant commercial draw, it is important to anchor the area with destination facilities.
An iconic hotel would be an ideal use for the City Hall property. A hotel would be
welcomed by local residents and a draw for tourists who will travel to Newport Beach. A
first class hotel is desperately needed along the Balboa Peninsula. A new hotel will also
serve as a catalyst for driving commercial activity along the Peninsula down to the
Balboa Village. As an alternative, an apartment project would not offer any direct benefit
to the community, nor would it provide the amenities and services offered by a hotel. A
majority of local residents have no interest in an apartment project for this site.
I am speaking on behalf of the Balboa Peninsula Point Association and our local
residents. In comparing the two hotel proposals, the RD Olsen project is an
overwhelming favorite, as their project is brilliantly designed with a Newport Nautical
theme that is upscale and fitting with the Newport Beach lifestyle. The project offers a
low profile scale along Newport Boulevard, while providing sufficient open space,
something that the Sonninblick project did not plan well. The proposed price point for the
RD Olsen project is appropriate for the area, appealing to most customer segments,
-T 4
P.O. BOX 826, BALBOA, CALIFORNIA 92661
including business travelers. The Sonninblick project proposes the Auberge Hotel, which
is too upscale and expensive for most guests and business travelers. Bob Olsen is a local
resident, who will be hands on during and after the project's completion. Bob will take
pride in developing a wonderful hotel and will commit to running a first class operation
that all Newport residents can be proud of
I encourage that the City Council vote to develop the City Hall property for a hotel in lieu
of an apartment project. I strongly urge you to vote for the RD Olsen project, as it is the
project that best fits the needs of our community. I thank you for your time and
consideration.
Sincerely,
Dennis M. Borowsky
Vice President
Balboa Peninsula Point Association
(949) 922 -6506
cc: Mr. Rush Hill
Mr. Michael Henn
Mr. Tony Petros
Ms. Leslie Daigle
Ms. Nancy Gardner
Mr. Edward Selich
Jeff Dole, BPPA President
142
From: Al Baldwin [ mailto :abaldwinabaldwinsons.com]
Sent: Thursday, May 23, 2013 1:28 PM
To: Dept - City Council; Kiff, Dave; Brandt, Kim
Subject: Support for Lido House Hotel
Dear Newport Beach City Council,
As a longtime businessman of Newport Beach, I am writing in to voice my support of The Lido House
Hotel. The Lido House Hotel is the perfect fit, it makes sound business sense as it will help revitalize Lido
Village and will provide a great economic benefit as well.
I greatly respect and support RD Olson's vision for this project and urge you to support it.
Sincerely,
Al Baldwin
Baldwin & Sons
i-�
From: Craig Batley <craigka burrwhite.com>
Date: May 11, 2013, 3:41:03 PM PDT
To: 'Chris Garber' <wnbasecretary(a,email.com >, "kbrandt(abnewportbeachca.gov"
<kbrandt(anewportbeachca.gov >, "TPetros(dNewportBeachCa.gov"
<TPetros(a,NewportBeachCa.eov >, "RHill(a newportbeachca.gov"
<RHillknewportbeachca.gov >, Leslie Daigle <lesliejdaiglekaol.com >,
"EdSelichkroadrunner.com" <EdSelichkroadrunner.com >, "NGardnergnewportbeachca.gov"
<NGardncr(a),newportbeachca.goo , "curryk(i�,pfin.com" <curryk(q-),pfm.com >,
"DKiff(a-),city.newport- beach.ca.us" <DKiff(a,city.newport- beach.ca.us>,
"MHenn(aD,NewportBeachCa.gov" <MHenn(a,NewportBeachCa.gov>
Cc: "sharon.boles(a,roadrunner.com" < sharon .boles(c�r�roadrunner.com >,
"rrushgusrealtygroup.com" <rrush(c usrealtygroup.com >, "garberachriskallergan.com"
< garber chrisgallergan.com >, "mike5926nsbcglobal.net" <mike5926nsbcglobal.nev,
"mskabryantAsbcelobal.net" <mskabryant(q),sbcelobal.net >, " jand, c�averizon.net"
<jandycobb ,verizon .net >, "mfryeKi,msn.com" <mfryer ,msn.com >, "gracenblAyahoo.com"
<gracenbI(d),yahoo.com >, "lawrelei(a gmail.com" <lawrelei(&,gmail.com >, Jim Miller
<newportislandjimAgmail.com >, "annofly(cr,gmail.com" <annofly(a,gmail.com >,
"ean(asourceeloballv.com" <eaDCa sourceeloballv.com>
Subject: RE: City Hall Re -Use
I approve the letter ..... I definitely am in favor of a hotel when the alternative is apartment or condo
homes....
CI
L949.243-46.300449.675-4630 F:949-675-2127
LIC #: 00483751
Bwr White Realty www.hurrwhite.o
2961 Newpateauievard, Newport Beach, CA92669
From: Chris Garber [ mailto :wnbasecretary(cbomail.com]
Sent: Friday, May 10, 2013 3:15 PM
To: kbrandt @newoortbeachca.00v; TPetros @NewportBeachCa.gov; RHill @newportbeachca.00v; Leslie
Daigle; EdSelich(alroadrunner.com; NGardnerCla newportbeachca.gov; curryk(61pfm.com;
DKiff(abcitv.newoort- beach.ca.us; MHenn(caNewoortBeachCa.aov
Cc: sharon.boles(a)roadrunner.com; rrush(alusrealtygroup.com; garber chris @alleroan.com;
mike5926(6bsbcolobal.net; mskabryant sbcglobal.net; Craig Batley; landycobbCcbverizon.net;
mfryer(almsn.com; gracenbl(6lyahoo.com; lawrelei(6lgmail.com; Jim Miller; annofly6lamail.com;
ea pOsourcea loballv.com
Subject: City Hall Re -Use
Please consider the attached letter from the West Newport Beach Association.
Chris Garber, Secretary
WNBA Board of Directors
150
From: Jim Ulcickas rmailto: JulcickasCalbluewaterarill.com]
Sent: Thursday, May 09, 2013 12:17 PM
To: Brandt, Kim
Subject: Lido House
We support a hotel /restaurant use for this site! Cannery Village is dying a slow death
OfwAA�
NEAFOOD RESTAURANT
aim Ulcickas
Proprietor
jccickas@bluewatergrilLmm
Bluewater Grill Seafood Restaurant
630 Lido Park Drive
Newport Beach, CA 92663
tel : 949 - 675 -3474
fax: 949- 675 -1367
mobile: 949 - 378 -0845
1151-
From: Brandt, Kim
Sent: Thursday, May 09, 2013 3:22 PM
To: Campbell, James
Subject: FW: Lido House Hotel
For the record.
Kim
- - - -- Original Message---- -
From: Juditha [mailto:judithadane @gmail.com]
Sent: Wednesday, May 08, 2013 3:40 PM
To: Brandt, Kim
Subject: Lido House Hotel
Dear Kim Brandt,
I would like to support the building of the Lido House Hotel on the former
City Hall site. I feel it best suits the neighborhood and the beach area.
It's design is similar to the Pavilion and flows with this area of the city.
It emits a friendly and inviting feeling. The other two designs are rather
stiff and sterile. This is the fun and traditional part of the City of
Newport Beach. Whatever is built on this site should reflect that!
Thank you...
Sincerely,
Mrs. Judi Dane
Corona del Mar Resident
152
From: <tplproperties @sbcgloba1.net>
Date: May 9,2013,5:24:51 PM PDT
To: <kbrandt @newportbeachca.gov>
Subject: Proposed redevelopment on City Hall site
Kim:
I am a 50 year resident of the beach community and I started my boat restoration business in the Lido
Marina back in the early 70's. I was there during the development of the village as it now stands and
have seen the flucation over the years of what's been good and bad. In looking at what would have the
most positive impact on the village and community of Lido, the proposed visitor serving hotel which is
being proposed by the Olson company seems to cover all the bases.
The high end hotel would not have nearly the occupancy as the mid grade hotel proposed and those
clients would only frequent the higher end restaurants of Huntington Beach, Newport and a few in the
Lido area. The apartments /retail proposal would bring more of what's not needed in the area which is
the additional traffic due to residential driving trips and the addition of more retail of which there is
currently an oversupply and always has been. The mid priced hotel would have a higher occupancy, the
local area would be better served by their type of cliental and the residents would have an excellent
meeting spot to congregate. All said, that would equate to a higher tax revenue and residential
enjoyment.
I am happy to offer my opinion to anyone is soliciting residents comments.
Sincerely, Larry Dorn
1966 Port Claridge Place
Newport Beach, Ca 92660
949 - 706 -0314
153
ECONOMIC CONSULTANTS
PLEASE PLACE ERR THE PUBLIC RECORD
May 1, 2013
Keith D. Curry
Mayor, District 7
City of Newport Beach
100 Civic Center Drive r?
SR
Newport Beach, CA 92660
r
Re: Economics of Placing a Hotel on the old City Hall Site
Dear Mayor Curry:
I am writing this letter in support of placing a hotel on the old City Hall site. By way of introduction, I a
a resident of Lido Isle and am a professional economist. I have practiced for 47 years, and 'continue t3'
practice through my economic consulting firm. Among other assignments, I served as professor of
economics at Cal State Fullerton for 15 years and as a research economist in the Division of Research
and Statistics of the Federal Reserve Board.
The growth and prosperity of a local economy is a function of its economic base businesses and
industries. Base industries export a service or a product, and in exchange, import money. Every
prosperous community is characterized by significant economic base industries. The greater the base
industry companies, the greater will be the economic prosperity of the local community. If a local
community has a stagnant or declining economic base, it is destined to an economic future of stagnation
or decline. This is the case on the Balboa Peninsula in the area around the old City Hall. The Lido
Village, once a thriving area with many shops and restaurants, and even a magic club, is now replete
with vacancies and shuttered restaurants. If the area around the old City Hall is going to rejuvenate and
prosper, it must have an injection of a new base industry that exports a service and imports people with
money to spend in the local area. The objective should be to find that opportunity that produces the
greatest positive long -run economic effect. Cities and States routinely court new base industries and
companies to locate In their communities because they enhance the prosperity of the area, including
that of the local governments through additional tax revenues and other fees.
A hotel on the old City Hall property is an excellent example of a new base company in a local
community where tourism represents a substantial part of economic life. Most every hotel guest will
come from areas outside the local community, sometimes from communities hundreds or even
thousands of miles away. This is truly an opportunity to import outside money without experiencing
simply a substitution of local persons increasing spending in one area of Newport Beach while reducing
spending in others. Hotel guests are destined to spend money locally when they go out to shop, enjoy
the harbor, go to the pier, or eat in local restaurants. The historic Lido Theater will enjoy a new
prosperity. New restaurants will come into the boardwalk as hotel guests search out dining options
within walking distance of the hotel and shops will find new customers.
Di
f
`.J
Peter Formuzis • Joyce Pickersgill • Tamorah Hunt • Timothy Lanning • Marilyn Bostick • John Robinson • Sandra White • Robert Donald
1851 E. First Street, Suite 1160, Santa Ana, CA 92705 • FPandH.com • 714- 542 -8853 • Fax 714 -836 -6910
1154
A hotel for tourists is characterized by an ever new influx of guests whose enthusiasm for shopping,
beach, harbor, and dining activities, has not been diminished or dulled by repetitive experience, or
through diminishing marginal utility, to use the language of economics. Moreover, a hotel runs 24
hours a day and 365 days a year. It will provide for many new jobs and employment opportunities and
those employees will also spend some of their income in the immediate area. Local service companies
will also enjoy new business.
Apartments will do little to expand our economic base and create a revitalized economic community in
the area around the old City Hall. The Lido Village will continue its downward spiral. One only has to
look at the almost non - existent new economic infrastructure that has flowed from or attached to even
huge apartment complexes, such as the apartments near Jamboree and the 405 or the Lakes on Avenue
of the Arts. Each of these apartment complexes has undergone significant new construction in the last
decade and are each made up of multiple buildings and hundreds, if not over a thousand units each, and
with resident populations equal to some multiple of the unit numbers. Each of these massive
apartment complexes has barely supported a handful of new businesses, at the most. If one scales
down to the size of the apartment complex proposed for the old City Hall site, the positive economic
effect will be undetectable. Moreover, some apartment dwellers will simply come from some other
apartment in the area, yielding no net gain in new money.
Apartments do not serve as an economic base industry. Tenants pay rent and expenses are paid out of
the rental income. What remains, if anything, is distributed as profits to the investors. The expense
and profit payments represent an export of money and not an import. Moreover, no enhanced
economic activity can be expected from the new apartment dwellers, as evidenced by the almost zero
new business infrastructure associated with even massive new apartment complexes, yet a complex of
the size that would fit on the old City Hall site. In brief, there is no multiplier effect. No improvement in
the economic condition of our local community can be expected by placing apartments on the site of
the old City Hall.
Sincerely,
ter Formuzis
11515
From: Tim Harold [haroldtim @gmail.com]
Sent: Thursday, May 09, 2013 10:48 AM
To: Campbell, James
Subject: Lido House Hotel
Hi James,
I'd like to express my support for the Lido House Hotel. I have a business across the street from
the city hall that is going to be greatly impacted by what goes in and I feel that the Lido House
Hotel is not only a great option for us and but a great option for the peninsula.
A hotel will bring a steady flow of transient consumers to the peninsula which will revive
the surrounding businesses as well as the fun -zone.
The peninsula has nothing like an upscale boutique hotel while upscale live /work areas
are a done and tired idea.
Every local citizen I've talked to is very much in support of the hotel, I do believe it's
what the people want.
You know all of this and more but I just thought I'd throw my two cents in. My opinion is that
we need to look at more than just the bottom line (tax revenue) and look at the impact this
space will have on our community and to make sure that whatever goes in there is a) What the
people want and b) not compromising the integrity of our town. And the Lido House Hotel, to
me, is the best representation of who we are as a city and the most promising prospect for the
future of our town.
Thanks for taking the time to read this!
Tim Harold
Wm. Harold & Sons
949 - 673 -0365
150
Oovra hlo&ellr
June 22, 2013
Honorable Mayer Keith D. Curry and
Members of the Newport Beach City Council
Newport Beach City Hall
100 Civic Center Drive
Newport Beach, CA 92660
Re: Old City Hall Complex Re -Use
Dear Mayor Curry and Members of the City Council:
via e-mail Cit) C uncik gbnewportbeachca.gov
via e-mail lcampbell(�)newoortbeachca.gov
You will soon decide on one of three proposals for what is to be built on the old city hall
property. As a Lido Penninsula resident, I am writing to let you know for the reasons outlined
below, my first choice is for the Lido House Hotel (RD Olson proposal).
The Lido House Hotel seems more in keeping with the style of the neighborhood
architecturally as well as in business plan to integrate into the community.
• The building layout is the best and the one I would prefer to look at every day.
o The tallest part of the project is located away from the street and, therefore, makes
the large building less obtrusive.
o Park -like community area landscaping at the main corner in front benefits locals as
well as hotel guests. The old ficus trees are preserved.
o Though I prefer an uncluttered look, the above - the - water -table parking of Olson's
seems more practical for this location than a subterranean design.
• Olson is a local resident with a good record. (My aunt lives at their Del Mar property.)
• Lower projected room rates at Lido House have a better chance for my business when I
need an extra guest room nearby.
My second choice would be the Sonnenblick Auber eg Hotel project. With more business
patrons possible and city tax revenues, a hotel would improve the neighborhood economy
more than the apartments.
My family has either visited or lived in Newport Beach for 90+ years, and as a third
generation property owner here, I thank you for your efforts to better the community.
Sincerely,
i
�r • . � '
Donna
611 Lido Park Drive #7 -A tel. (949) 673 -5230
Newport Beach, California 92663 -4407 fax (949) 640 -2552
15—
From: cynthia koller [mailto:gracenb1(alyahoo.com]
Sent: Tuesday, June 25, 2013 2:16 PM
To: Petros, Tony; Nancy Gardner; Hill, Rush; Selich, Edward; Daigle, Leslie; Mike Henn; Curry, Keith; Kiff, Dave; Brandt,
Kim; Brown, Leilani
Subject: OC Register /O.C. hotels filling up
City Council, Dave Kiff, Kim Brandt, Leilani Brown:
I am unable to attend the City Council meeting this evening.
Please enter this article from the OC Register in the record for
the "new use" at the old city hall site.
Thank You,
Cindy Koller
152
O.C. hotels filling up
By MARY ANN MILBOURN
2013 -06 -25 06:16:53
a_
w�
1
Hotels in Orange County saw a surge in bookings this spring, with occupancy rates at 77.6 percent in
April, up from 74.1 percent a year ago, according to industry research firm PKF Consulting.
Costa Mesa had the fewest rooms available, with an April occupancy rate of 81.1 percent, up from 74
percent in April 2012.
Anaheim, which has seen a resurgence in visitors since Disney California Adventure's new Cars Land
opened in June, was second with 79.2 percent of the city's hotel rooms occupied — an increase from
75.2 percent last year.
Orange County's most expensive hotel were particularly busy in April, marking a comeback after
suffering steep drops in visitors during the recession. Occupancy in hotel with rooms costing more
than $200 a night jumped to 82.8 percent in April, from 71.3 percent a year ago.
With competition for rooms increasing, hotels also were able to charge higher prices. April's average
room rate countywide was $156.03 a night, up from $143.55 last year.
Huntington Beach had the highest average nightly room rates at $216.03. Last year Surf City rooms
cost an average $211.55. Hotel rooms in North County offered the best bargains, averaging $96.23 a
night, up from $94.75 last year.
Rates for Orange County's most expensive hotels edged up to an average $305.46 nightly from
$302.08 in April 2012.
Contact the writer: 714 - 796 -3646 or mmilbournna ocregister.com
1�9
From: jimmejoe(ftetscape.net rmailto :jimmejoeCalnetscape.net]
Sent: Thursday, May 30, 2013 8:34 AM
To: Brandt, Kim
Subject: Don't Build Another Taj Majal at the site of the Old City Hall ...
Kim --
Keep it small, keep it proportionate, keep it reasonable.
What you folks did over at the site of the new City Hall is outrageous!!
Getting resident (taxpayer) approval to build a $40m building and then spending $140+ million amounts to
nothing short of an outright crime.
I fully support the JD Olson proposal because it is proportionate to the local area. Do NOT allow a hotel
with some 300+ rooms to be built at the bottleneck entrance to the Balboa Peninsula. I favor something
under 150 or perhaps under 100 rooms to minimize traffic congestion.
Be sure that if we end up with another disaster like the new City Hall, I will be taking my views to the
ballot box!!
Jim Moloney
314 Diamond Avenue
Newport Beach, CA 92662
100
From: Cathy Sepulveda [healthcare.cathy @gmail.com]
Sent: Thursday, May 09, 2013 8:09 PM
To: Campbell, James
Subject: City Hall Reuse Projects
Dear Mr. Campbell,
I am simply writing as a local homeowner in regards to the area of which used to be the City
Hall. I would like to ask that you PLEASE consider the overwhelming level of traffic that we
already have coming from Newport Blvd down to our area towards the Lido community. In
addition to the traffic during the seasonal months, the parking is also a matter of concern for
those on the beach/ocean side of the Newport Blvd. It is to this point that I would ask the city to
consider presenting a requirement for whomever is given the award to build at this location, that
mandatory parking considerations be included as contingency. MOST IMPORTANTLY, I would
implore you to keep the charm of Newport Beach. It seems too often new structures arise which
are merely another "new" look lacking the charm to which the beach atmosphere has been and
continues to be. Please do not allow another suburban structure to be built that looks like city
condo's or a big corporate hotel.
Sincerely,
Homeowner and Full Time Resident,
Catherine Moon
101
From: Robin Rogers [mailto: rob! nCalrgrsgrp.com]
Sent: Saturday, May 25, 2013 4:02 PM
To: Selich, Edward; Brandt, Kim
Subject: Lido House Hotel
Dear Mr Selich and Ms Brandt,
My husband and I had the opportunity last night, while attending the Balboa Island Improvement
Association meeting, to hear a presentation from the Olson company team for their proposal for
the former city hall site ....called The Lido House Hotel, we were delighted with all aspects of their
plan and feel it would be a wonderful addition to the Lido Island community as well as the overall
community of Newport Beach.
We are familiar with one of Bob Olson's other properties on the Sonoma coast called the Timber
Cove Lodge, and while entirely different as far as the setting, the attention to detail and
awareness of the community they are serving is very evident. The Lido House Hotel feels right
for the site and for the community. We give it a big thumbs up !!
Thank you
Robin and Bob Rogers
207 Agate Ave, Balboa Island, 92662
robin (c rorsaro.com
102
From: Matt Stewart rmailto :matthewkstewartCalamail.com]
Sent: Wednesday, May 08, 2013 5:39 PM
To: Dept - City Council; Kiff, Dave; Brandt, Kim
Subject: Lido House Hotel
Dear council members, Mr. Kiff, and Ms. Brandt:
I am writing to encourage you to approve the proposal by RD Olson Construction to build the Lido House
Hotel and to add open space to Lido Village. My family and I enjoy our time on the peninsula and in Lido
Village. We feel the RD Olson plan to build a hotel with reasonable rates, appealing design, and
additional quality is sound. We prefer it to a five star hotel or another apartment building.
A hotel like this allows us to comfortably bring employees and family members into the area and gives
us more opportunity to remain on the Peninsula and in Lido Village for our corporate and family dining
and entertainment. Lido Village is not a destination we currently consider, and we would like to add this
option when planning corporate retreats and bringing guests to the area. This plan meets my family and
corporate needs perfectly, and provides a better and different solution to neighboring hotels. It is a
shame the area is not more inviting and useful to my family and my company.
I know and trust the RD Olson brand to accomplish what they are planning to accomplish, and provide
aesthetic improvement, economic benefit, and a more useful and sustainable option for the area.
RD Olson Development has an extensive track record of financing and delivering new build hotels, includ
ing completing four new hotels in the last 16 months alone. Additionally, the RD Olsen company and its
executives are well known for working diligently in the community through their charity and community
outreach programs. Their company is a solid example of how to grow the right way and how to lift the
people and communities around them while they grow.
Thank you for considering my opinion and for your work to approve this proposal.
Sincerely,
Matthew Kennedy Stewart
Matthew K Stewart
Co- Founder, CEO
National Services Group
1682 Langley Avenue
Irvine, CA 92677 USA
T +1.714.564.7900 ext. 222 (office)
F +1.714.564.8725
mstewart(a-)nsomail.com
www.nationalservicesgroup.com
Former Chairman of the Global Board
Entrepreneur's Organization
500 Montgomery Street, suite 500
Zos
Alexandria, VA 22314 -1437 USA
www.eonetwork.org
CONFIDENTIALITY NOTICE:
This message is intended only for the use of the individual or entity to which it is addressed and may contain information that is privileged,
confidential and exempt from disclosure under applicable law. If the reader /recipient of this message is not the intended recipient, or the
employee /agent responsible for delivering this message to the intended party, you are hereby notified that any dissemination, distribution or
copying of this communication is strictly prohibited. If you have received this communication in error, please notify us by telephone,
714.564.8725, or return email and remove this message from your computer.
104
From: Denys Oberman [ mailto :dhoCulobermanassociates.com]
Sent: Tuesday, July 02, 2013 9:23 AM
To: Curry, Keith; Selich, Edward; Mike Henn; Nancy Gardner; Petros, Tony; Daigle, Leslie; Hill, Rush
Cc: Kiff, Dave; Brandt, Kim; Brown, Leilani
Subject: City Hall Site Reuse - -- For the Public Record
Importance: High
Sensitivity: Confidential
Mayor and City Council:
First, I would like to Thank You again for your support of an upscale boutique Hotel at the prior City Hall
Site.
I will be travelling and unable to attend the City Council Meeting of july 9`h at which a Public Hearing
concerning this issue and submitted proposals
Is to occur. Please consider ande accept the following comments, in addition to those already provided
to the Council and placed into the record.
• There can be no doubt that a high quality Destination Anchor is needed in the area to drive
desired and necessary economic revitalization and quality of life in the Lido Village /Balboa
Penninsula area. The city hall site is well- suited for this purpose. A well- designed,well marketed
and well operated Hotel Anchor will benefit Visitors /the public, Residents,Merchants and the
City for many years to come.
• The Economic Benefits Of a well- designed and operated Hotel far outweigh the Total Economic
Benefit of a large apartment.
This was already established by qualified experts and has been proven in our extensive due
diligence.
• A Hotel such as the concept proposed by RDOlson, Destination Hotels & Resorts and WATG has
very high probability of success.
It is marketable and attractive to residents, high quality visitors for Leisure, and niche Corporate
meeting markets.
• The ultimate success, rampup, traction and benefits are highly dependent on the acumen,
infrastructure and resources of the Operating Team. Destination Hotels & Resorts /subsid of
Loews', has Demonstrated Track Record and Performance to develop a Winning, Sustainable,
Financially Successful high end Hotel serving all of the markets above. They will apply the
resources of a 90 asset Hospitality group to complete the initial design and amentity profile,
input for value add and viability of construction, provide strong national /global ongoing
marketing and promotion, and provide the experience to rapidly ramp occupancy and revenue
streams, and maintain them through long term.
• We have more than enough high density Apartment uses in this zone. NO MORE ARE NEEDED
and this use has the least likelihood of realization in the market for which it claims to be
intended.
In summary, we request that the Council:
• Finalize NOW its approval of an Upscale Boutique Hotel as the selected Land Use for the site
• Select the RDOlson, Destination Hotel and Resort, WATG team as the proposer with whom to
proceed
2os
• Make these decisions with confidence that these decisions represent those IN THE BEST
INTERESTS OF THE COMMUNITY AND THE PUBLIC, AND THE CITY.
• Proceed without delay to move forward with this project.
THIS IS THE POSITION RESPONSIVE TO THE WILL OF THE PEOPLE. THANK YOU.
Denys H. Oberman
Resident and stakeholder.
Regards,
Denys H. Oberman, CEO
NOBERMAN
Strategy and Fimmial AWlsen
OBERMAN Strategic Consulting & Transactions
2600 Michelson Drive, Suite 1700
Irvine, CA 92612
Tel (949) 476 -0790
Cell (949) 230 -5868
Fax (949) 752 -8935
Email: dho(a)obermanassociates.com
CONFIDENTIALITY NOTICE: The documents accompanying this transmission contain confidential information belonging to the
sender which is legally privileged. The information is intended only for the use of the individual or entity named above. If you are
not the intended recipient, you are hereby notified that any disclosure, copying, distribution or the taking of any action in reliance
on the contents of this telecopied information is strictly prohibited. If you have received this transmission in error, please notify us
immediately at 9491476.0790 or the electronic address above, to arrange for the return of the document(s) to us.
100
Attachment CC -8
Resolution No. 2013 -
107
102
RESOLUTION NO. 2013-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH ESTABLISHING AN AD HOC
COMMITTEE TO NEGOTIATE THE RE -USE OF THE
CITY HALL SITE
WHEREAS, the City Council has received and reviewed proposals from three
development teams for the redevelopment of the former City Hall site; and
WHEREAS, the City Council has selected one development team with which it
desires to initiate negotiations; and
WHEREAS, the City Council desires to provide City staff with guidance on the
terms and conditions of an agreement with the selected development team so that the
negotiations will provide for the construction of improvements and long -term lease of the
City Hall site.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
Section 1: Establishment
An Ad Hoc Committee is hereby established for the purpose of negotiating for the re-
use of the City Hall Site.
Section 2: Duties of the Committee
The Ad Hoc Negotiating Committee shall have the following duties:
A. Work with City staff and designated representatives of the selected development
team on possible terms and conditions for the lease and the City Hall Site and
construction of improvements.
B. Recommend to the City Council action potential terms and conditions of an
agreement providing for the lease of the City Hall Site and construction of
improvements.
Section 3: Composition of the Committee
The Committee shall consist of City Council Members and
, appointed by, and serving at the pleasure of the Mayor.
Section 4: Duration of the Committee
The Committee shall expire at such time as the Committee completes its negotiations
with the developer and its recommendations of potential course of action are
transmitted to the City Council for consideration.
:Log
This resolution shall take effect immediately upon its adoption by the City Council, and
the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 9th day of July, 2013
20
ATTEST:
Leilani I. Brown,
City Clerk
Keith D. Curry, Mayor
170
I out
_1 wommu-11a
NOTICE IS HEREBY GIVEN that on Tuesday, July 9, 2013, at 7:00 p.m. or soon thereafter as the matter
shall be heard, a public meeting will be conducted in the City Council Chambers at 100 Civic Center Drive,
Newport Beach. The City Council of the City of Newport Beach will consider the following:
Former City Hall Complex Reuse, Request for Proposals No. 13 -35: The former City Hall complex is
located at the northeast corner of Newport Boulevard and 32nd Street at 3300 Newport Boulevard. The
property is approximately 4 acres in size and is currently developed with several governmental office buildings,
parking areas, and the Lido Fire Station. Only the existing fire station will remain after redevelopment of the
site. The City is presently processing an application (PA2012 -031) for General Plan Amendment, Coastal Land
Use Plan Amendment, and Zoning Code Amendment to change the land use and zoning designations for the
site from Public Facilities to Mixed -use to allow for the redevelopment of the site with either a mixed -use
(residential /commercial) project or a hotel. The City issued a request for development proposals (RFP No. 13-
35) in February 2013, and the City received three proposals: one proposal for a mixed -use project, and two
proposals for hotel development. The purpose of this public meeting is to allow City staff to present the results
of its review of the three proposals, and to allow the public an opportunity to provide comments. Lastly, the City
Council will consider selecting one development team to negotiate a lease agreement to develop the former
City Hall complex, and in doing so, it may further define the future use of the site for analysis in the pending
General Plan, Coastal Land Use Plan, and Zoning Amendments. These amendments will be considered at a
future public hearing.
The selection of a developer to negotiate a lease agreement and updating the project description for future
amendments of the General Plan, Coastal Land Use Plan, and Zoning Code is not subject to the California
Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA
Guidelines.
All interested parties may appear and present testimony in regard to this agenda item. If you challenge the
action taken in court, you may be limited to raising only those issues you raised at the public meeting or in
written correspondence delivered to the City, at, or prior to, the public meeting. The action may be continued to
a specific future meeting date, and if such an action occurs additional public notice of the continuance will not
be provided. Prior to the public meeting the agenda, staff report, and documents may be reviewed at the City
Clerk's Office, 100 Civic Center Drive, Newport Beach, California, 92660 or at the City of Newport Beach
website at www.newportbeachca.gov. Individuals not able to attend the meeting may contact the Planning
Division or access the City's website after the meeting to review the action on this application.
For questions regarding this item please contact James Campbell, Principal Planner at 949 - 644 -3210 or
icampbell(a)newportbeachca.gov.
Project File No.: PA2012 -176 for Request for
Proposals No. 13 -35
Zone: PF (Public Facilities)
Location: 3300 Newport Blvd. and 475 32 "d St.
Project File No.: PA2012 -031 for General Plan
Amendment No. GP2012 -002, Coastal Land Use Plan
Amendment No. LC2012 -001, Zoning Code Amendment
No. CA2012 -003
General Plan: Public Facilities
Applicant: City of Newport Beach
PO )11 1�� �I ,, Np��
Leilani Brown, City Clerk
X City of Newport Beach
ILI For-
r
AFFIDAVIT OF POSTING
On - U- --e- 23. 2 2013, 1 posted 3 Site Notice(s) of the Notice of Public
Hearing regarding:
Former City Hall Complex Reuse, Request for Proposals No. 13 -35
PA2012 -176
Location: 3300 Newport Blvd.
Date of City Council Public Hearing:
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047 032 08
31ST STREET -LIDO LLC
4 UPPER NEWPORT PLZ #100
NEWPORT BEACH, CA 92660
423 11104
503 32ND STIR LLC
503 32ND ST #200
NEWPORT BEACH, CA 92663
423 383 17
BANK OF AMERICA
315 32ND ST
NEWPORT BEACH, CA 92663
423 101 18
BELL PAC
3421 NEWPORT BLVD
NEWPORT BEACH, CA 92663
423 102 11
BRUCE ROBERT BECKMAN
304 HELIOTROPE AVE
CORONA DEL MAR, CA 92625
047 041 36
CANVIL LLC
2549 EASTBLUFF DR #321
NEWPORT BEACH, CA 92660
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047 041 31
32ND STREET PARTNERS II
3310 MARCUS AVE
NEWPORT BEACH, CA 92663
423 123 15
ATLANTIS LIDO INC
1640 S SEPULVEDA BLVD #515
LOS ANGELES, CA 90025
047 042 10
BARRYINC
605 VIA LIDO SOUD
NEWPORT BEACH, CA 92663
423 097 05
BELLAVIA SAVOY M
3313 FINLEY AVE
NEWPORT BEACH, CA 92663
047 060 01
CAGNEY ENTS LLC
PO BOX 546
CARDIFF BY THE SEA, CA 92007
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047 042 01
430 31ST STREET LLC
430 31ST ST
NEWPORT BEACH, CA 92663
047 04106
BALBOA CORONA LTD
348 DAHLIA PL
CORONA DEL MAR, CA 92625
423 101 15
BELL
PO BOX 85
TRABUCO CANYON, CA 92678
423 102 07
BRADLEY H SMITH
402 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
047 032 19
CANNERY LLC
1901 BAYADERE TER
CORONA DEL MAR, CA 92625
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CHARLES H ETTENSPERGER
2540 S 10TH AVE
ARCADIA, CA 91006
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'HALL-
Center Drive
3ox 1768
. CA 92658 -8915
047 060 12
CATELLUS NEWPORT LLC
66 FRANKLIN ST #200
OAKLAND, CA 94607
IOTICE
Office of the City Clerk
CITY HALL
100 Civic Center Drive
P.O. Box 1768
dewport Beach, CA 92658 -8915
423 123 17
CHARLES H HOFGAARDEN
3340 VIA LIDO
NEWPORT BEACH, CA 92663
IMPORTANT
HEARING NOTICE
r
Office of the City Clerk
CITY HALL
100 Civic Center Drive
P.O. Box 1768
Newport Beach. CA 92658 -8915
047 032 04
CHARL017E L JACKSON
510 31ST ST
NEWPORT BEACH, CA 92663
IMPORTANT
C HEARING NOTICE
he City Clerk
'HALL
Center Drive
Sox 1768
, CA 92658 -8915
939 840 33
CHRISTINE BRAATHEN
512 35TH ST
NEWPORT BEACH, CA 92663
OTICE
to City Clerk
HALL
enter Drive
ox 1 768
CA 92658 -8915
423 11107
CHURCH RECTOR WARDENS &
3209 VIA LIDO
NEWPORT BEACH, CA 92663
)TICE
Office of the City Clerk
CITY HALL
100 Civic Center Drive
P.O. Box 1768
lewport Beach, CA 92659 -8915
423 10105
WORLD OIL CO
9302 GARFIELD AVE
SOUTH GATE, CA 90280
IMPORTANT
HEARING NOTICE
Office of the City Clerk
CITY HALL
100 Civic Center Drive
P.O. Box 1768
Newport Beach, CA 92658 -8915
047 041 35
CLOSE
1915 BAYADERE TER
CORONA DEL MAR, CA 92625
IMPORTANT
;LIC HEARING NOTICE
423 12310
ENCUMBRANCE CORP OCRC
7 CORPORATE PLAZA DR
NEWPORT BEACH, CA 92660
IMPORTANT
PUBLIC HEARING NOTICE
Q�w` ° " °a� Office of the City Clerk
r 1` n CITY HALL
u ,c s 100 Civic Center Drive
��<,,,,,,r P.O. Box 1768
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423 097 03
ERIK BLOCK
409 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
IMPORTANT
PUBLIC HEARING NOTICE
Office of the City Clerk
a
CITY HALL
100 Civic Center Drive
P.O. Box 1768
Newport Beach, CA 92658 -8915
423 12310
ENCUMBRANCE CORP OCRC
7 CORPORATE PLAZA DR
NEWPORT BEACH, CA 92660
IMPORTANT
PUBLIC HEARING NOTICE
Q�w` ° " °a� Office of the City Clerk
r 1` n CITY HALL
u ,c s 100 Civic Center Drive
��<,,,,,,r P.O. Box 1768
Newport Beach, CA 92658 -8915
423 097 03
ERIK BLOCK
409 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
IMPORTANT
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fthe City Clerk
rY HALL
is Center Drive
. Box 1768
ch, CA 92658 -8915
423 382 01
DONJAC PROPERTIES NO 4
0 PO BOX 477
S U R FSI D E, CA 90743
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NOTICE
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ITY HALL
sic Center Drive
). Box 1768
ach, CA 92658 -8915
933 940 01
DONALD E COLE
3326 VIA LIDO
NEWPORT BEACH, CA 92663
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NOTICE
Office of the City Clerk
CITY HALL
100 Civic Center Drive
P.O. Box 1768
4ewport Beach, CA 92658 -8915
047 042 21
C -SAND LLC
812 VIA LIDO NORD
NEWPORT BEACH, CA 92663
MPORTANT
HEARING NOTICE
Office of the City Clerk
CITY HALL
100 Civic Center Drive
P.O. Box 1768
lewport Beach, CA 92658 -8915
MPORTANT
HEARING NOTICE
047 04124
DANNY CHARLES HILTON
425 31ST STREET
NEWPORT BEACH, CA 92663
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423 112 01
FAINBARG I LP
129 W WILSON ST #100
COSTA MESA, CA 92627
932 840 89
GARY LJARVIS LLC
424 32ND ST #F
NEWPORT BEACH, CA 92663
423 38106
GREGORY WATERS
3302 MARCUS AVE
NEWPORT BEACH, CA 92663
423 10113
H NORENE TIGHE
516 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
423 38104
JACK E MATHER
3306 MARCUS AVE
NEWPORT BEACH, CA 92663
423 383 03
JAMES B BRACHMAN
310 33RD ST
NEWPORT BEACH, CA 92663
047 041 17
JON A SHEPARDSON
0 PO BOX 2971
NEWPORT BEACH, CA 92659
047 03103
KERRAGEOUS I LLC
9701 WILSHIRE BLVD #1115
BEVERLY HILLS, CA 90212
423 102 09
LARRY KIRSCHENBAUM
406 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
932 840 87
FLAPMASTER LLC
2550 5TH AVE #1030
SAN DIEGO, CA 92103
423 097 04
GEE LAN TO- RAASIG
405 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
047 042 25
GUY E MINER
365 VIA LIDO SOLID
NEWPORT BEACH, CA 92663
423 09109
HELEN A CONOVER
501 34TH ST
NEWPORT BEACH, CA 92663
047 042 22
JACKSON
418 31ST ST
NEWPORT BEACH, CA 92663
047 042 23
JENNY M GILCHRIST
410 31ST ST #A
NEWPORT BEACH, CA 92663
423 10122
JULIE S CHAMBERS
500 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
423 102 02
KWON
69 FRANCES CIR
BUENA PARK, CA 90621
047 041 08
LARRY RAM MAR
16585 ENSIGN CIR
HUNTINGTON BEACH, CA 92649
047 032 06 423 10203
LEWIS LIDO PACIFIC LLC
216 VIA DIJON 441 N BEVERLY DR #207
NEWPORT BEACH, CA 92663 BEVERLY HILLS, CA 90210
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423 101 11
FREDERICK L SMITH
512 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
423 38316
GREG SMITH
122 37TH ST
NEWPORT BEACH, CA 92663
423 102 06
GWEN Y HASS
400.5 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
047 031 25
HERMAN GULEZYAN
1630 ANTIGUA WAY
NEWPORT BEACH, CA 92660
423 383 14
JAEWOOK CHUNG
811 MADERA PL
FULLERTON, CA 92835
047 04120
JOHN NEWCOMB
3103 VILLA WAY
NEWPORT BEACH, CA 92663
939 840 34
KENNETH J CATANZARITE
2331 W LINCOLN AVE
ANAHEIM, CA 92801
047 032 03
LADORNA E EICHENBERG
1 COLLINS ISLE
NEWPORT BEACH, CA 92662
423 096 06
LAWSON HUGHES
5316 TOPEKA DR
TARZANA, CA 91356
423 11101
LIDO PARTNERS
3425 VIA LIDO #250
NEWPORT BEACH, CA 92663
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423 123 16
LOS ADOBES INC
180 N MESA HILLS DR
EL PASO, TX 79912
423 09103
MARGARETJ MARTIN
880 MORNINGSIDE DR #M124A
FU LLE RTO N, CA 92835
423 123 18
MICHAEL MATTHEWS
542 HARBOR ISLAND DR
NEWPORT BEACH, CA 92660
423 10112
NEPP
8 MALLARD
IRVINE, CA 92604
423 10103
NEWPORT LIDO LLC
0 PO BOX 17448
ANAHEIM, CA 92817
423 091 11
P H PRATO
505 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
047 041 25
PATRICK CHAMBERLAIN
1080 SALI NAS AVE
COSTA MESA, CA 92626
423 10109
PETER J & CARMEN J BOLLINGER JR
508 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
423 102 01
PORT PROPERTIES INC
0 PO BOX 485
LAGUNA BEACH, CA 92652
423 101 16
M E KOFFORD JR.
105 VIA ORVIETO
NEWPORT BEACH, CA 92663
423 383 01
MAUREEN DOWNEY
314 33RD ST
NEWPORT BEACH, CA 92663
047 041 37
MICHAEL J ROBERTS
1135 SW MYRTLE CT
PORTLAND, OR 97201
047 041 05
NEWPORT BEACH ALANO CLUB
41432ND ST
NEWPORT BEACH, CA 92663
423 091 10
NORMAN C MANZ
2745 SANDPIPER DR
COSTA MESA, CA 92626
423 123 12
PAMELA L WHITESIDES
3322 VIA LIDO
NEWPORT BEACH, CA 92663
423 091 04
PAUL A MARSHALL
1420 KINGS RD
NEWPORT BEACH, CA 92663
423 382 04
PHILIP W CYBURT III
3206 MARCUS AVE
NEWPORT BEACH, CA 92663
047 042 09
RENE BARGE
408 31ST ST
NEWPORT BEACH, CA 92663
423 381 05
423 102 08
RICHARD TAKETA
ROBERT BREWER
3304 MARCUS AVE
404 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92663
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MAE MARIES LLC
415 30TH ST
NEWPORT BEACH, CA 92663
047 041 18
MERIAM BRASELLE
536 POPLAR ST
LAGUNA BEACH, CA 92651
423 38107
MICHAEL MAHONEY
3300 MARCUS AVE
NEWPORT BEACH, CA 92663
423 112 03
NEWPORT BEACH TOWNHOUSE LLP
500 HOGSBACK RD
MASON, MI 48854
423 123 14
NORMAN J REST
736 CANYON VIEW DR
LAGUNA BEACH, CA 92651
423 38103
PATRICK B CUNNINGHAM
11839 BELLAG10 RD
LOS ANGELES, CA 90049
423 383 02
PAUL F BELNA
0 PO BOX 3585
NEWPORT BEACH, CA 92659
047 042 07
POLIQUIN LTD
18951 NEWTON AVE
SANTA ANA, CA 92705
933 940 02
RICHARD C FARRELL
3324 VIA LIDO
NEWPORT BEACH, CA 92663
423 091 12
ROBERT WAYNE BROWN 1R.
507 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
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423 382 02
932 840 84
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ROGER DEAN BEHRENS
RTED IRVINE LLC
RUSSELL E FLUTER
4611 E SOLANO DR
17100 GILLETTE AVE
2025 BALBOA BLVD W
PHOENIX, AZ 85018
IRVINE, CA 92614
NEWPORT BEACH, CA 92663
932 840 85
423 383 13
423 102 12
RUSTY JAMES
SAROJA NAIDU
SCOTT E SMITH
424 32ND ST #B
309 32ND ST
410.5 CLUBHOUSE AVE
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92663
423 101 23
423 101 08
423 097 06
SHERI NINOMIYA
SMITH
STEVEN HUNT
0 PO BOX 1185
2404 CLIFF DR
11321 EAGLE VIEW DR
PLEASANTON, CA 94566
NEWPORT BEACH, CA 92663
SANDY, UT 84092
423 10104
423 10107
047 042 04
STEVEN 1 FLANDERS
STEVEN TAGGART
SURVIVORS MARSHALL
0 PO BOX 3593
504 CLUBHOUSE AVE
810 BAY AVE W
NEWPORT BEACH, CA 92659
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92661
932 840 86
423 102 05
047 041 32
SUSAN J BARLOW
SUZANNE B SCOFIELD
TCCB INVESTORS LLC
453 SANTA ANA AVE
400 CLUBHOUSE AVE #A
3110 NEWPORT BLVD
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92663
047 041 33
423 382 03
047 042 02
THIRTY FIRST STREET LLC
THOMAS A TERICH
THOMAS DIXON
415 30TH ST
201 MIDDLEFIELD RD
428 31ST ST
NEWPORT BEACH, CA 92663
BELLINGHAM, WA 98225
NEWPORT BEACH, CA 92663
047 041 07
047 042 20
423 097 02
TIMOTHY MICHAEL HAROLD
VINCENT C TAORMINA
WALTER C TALLEUR JR.
3116 NEW PORT BLVD
0 PO BOX 485
3311 FINLEY AVE
NEWPORT BEACH, CA 92663
CORONA DEL MAR, CA 92625
NEWPORT BEACH, CA 92663
047 031 23
047 042 26
047 032 07
WARDENS RECTOR
WESTFORK RANCH LLC
WESTREM
3209 VIA LIDO
412 31ST ST
1006 E BALBOA BLVD
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92661
BALBOA COVES COMMUNITY ASSOC.
BALBOA ISLAND IMPROVEMENT
BALBOA PENINSULA POINT
BOYD MANAGEMENT
ASSOCIATION
ASSOCIATION
DEBBIE BOYD
JEFF HERDMAN
DENNIS BOROWSKY
27758 SANTA MARGARITA PKWAY 410
204 CORAL AVE
2037 SEVILLE AVE
MISSION VIEJO, CA 92691
NEWPORT BEACH, CA 92662
NEWPORT BEACH, CA 92661
CENTRAL NEWPORT BEACH
LIDO ISLE COMMUNITY ASSOC.
CANNERY VILLAGE ASSN.
COMMUNITY ASSOC.
PATRICK SANDERS
507 29TH ST A
LOU ISE FUNDENBERG
701 VIA LIDO SOLID
NEWPORT BEACH, CA 92663
808 W BALBOA BLVD
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92661
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LIDO PENINSULA COMPANY
LIDO PENINSULA RESORT
LIDO MARINA VILLAGE
BELLPORT GROUP
BESSIRE& CASENHISER, INC
1400 QUAIL ST 195
ATTN: MANAGEMENT REP
ATTN: RICHARD BESSIRE
NEWPORT BEACH, CA 92660
1S1 SHIPYARD WAY A
430 S SAN DIMAS AVE
NEWPORT BEACH, CA 92663
SAN DIMAS, CA 91773
LIDO SANDS COMMUNITY
MARINERS MILE BUSINESS OWNERS
NEWPORT BEACH CHAMBER OF
ASSOCIATION
ASSOCIATION
COMMERCE
ATTN: NICOLAI GLAZER
NED MCCUNE
RICHARD LUEHRS
5300 RIVER AVE
424 E. 16TH ST
1470 JAMBOREE RD
NEWPORT BEACH, CA 92663
COSTA MESA, CA 92627
NEWPORT BEACH, CA 92660
NEWPORT HEIGHTS COMMUNITY
NEWPORT HEIGHTS IMPROVEMENT
NEWPORT BEACH RESTAURANT
ASSOCIATION
ASSOCIATION
ASSOCIATION
A SS
ATTN: JANINE ALLEN
DON KROTEE
PO BOX 2295
406 SAN BERNARDINO
2916 CLAY ST
NEWPORT BEACH, CA 92659
NEWPORT BEACH, CA 92663
NEWPORT BEACH, CA 92663
VERSAILLES HOA
NEWPORT ISLAND INCORPORATED
PARK LIDO HOA
TSG INDEPENDENT
ATTN: JIM MILLER
DIVERSIFIED ASSOC. MGMT.
ATTN: JACKIE SHRADER
4101 SEASHORE DRIVE
180 E MAIN ST 101
901 CAGNEY LANE
NEWPORT BEACH, CA 92663
TUSTIN, CA 92780
NEWPORT BEACH. CA 92663
VILLA BALBOA COMMUNITY ASSN.
ACTION PROPERTY MANAGEMENT
ATTN:ROBIN ALLEN
2603 MAIN STREET 500
IRVINE, CA 92614
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PA2012 -176
Existing City Hall Complex
Reuse Amendments i
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STATE OF CALIFORNIA)
) SS.
COUNTY OF ORANGE )
I am a citizen of the United States and a
resident of the County of Los Angeles; I
am over the age of eighteen years, and
not a party to or interested in the notice
published. I am a principal clerk of the
NEWPORT BEACH /COSTA MESA
DAILY PILOT, which was adjudged a
newspaper of general circulation on
September 29, 1961, case A6214, and
June 11, 1963, case A24831, for the
City of Costa Mesa, County of Orange,
and the State of California. Attached to
this Affidavit is a true and complete copy
as was printed and published on the
following date(s):
Saturday, June 29, 2013
I certify (or declare) under penalty of
perjury that the foregoing is true and
correct.
Executed on July 3, 2013
at Los Angeles, California
Signature